10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2013

o  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 000-54137

OXYSURE SYSTEMS, INC.

(Exact name of registrant as specified in its charter)

Delaware	71-0960725
(State or other jurisdiction of	(IRS Employer
incorporation or organization)	Identification No.)

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

(Address of principal executive offices)

(972) 294-6450

(Registrant’s telephone number)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes   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 whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	o	Smaller reporting company	þ
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  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 November 13, 2013, was approximately $3,704,693 based on $.78, 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 November 13, 2013 was 24,217,806.

INDEX

		Page
		Number
PART I - FINANCIAL INFORMATION
Item 1.	Condensed Financial Statements (Unaudited)	1
	Condensed Balance Sheets – September 30, 2013 and December 31, 2012	1
	Condensed Statements of Operations – For the three and nine months ended September 30, 2013 and 2012	2
	Condensed Statements of Cash Flows – For the nine months ended September 30, 2013 and 2012	3
	Condensed Notes to Financial Statements	4 – 21
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	27
Item 4.	Controls and Procedures	27
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	28
Item 1A.	Risk Factors	28
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28
Item 3.	Defaults upon Senior Securities	28
Item 4.	Mine Safety Disclosures	28
Item 5.	Other Information	28
Item 6.	Exhibits	28
SIGNATURES		29

PART I - FINANCIAL INFORMATION

ITEM 1.   CONDENSED FINANCIAL STATEMENTS

OXYSURE SYSTEMS INC.

 CONDENSED BALANCE SHEETS

	September 30,			December 31,
	2013			2012
	(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	4,753		$	13,514
Accounts receivable, net		53,979			18,487
Inventories		271,361			221,345
Prepaid expenses and other current assets		286			-
Total current assets		330,379			253,346
Property and equipment, net		24,308			27,599
Intangible assets, net		399,954			418,479
Other assets		446,662			516,373
TOTAL ASSETS	$	1,201,302		$	1,215,797
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities
Accounts payable and accrued expenses	$	469,481		$	388,183
Related party payable		108,483			207,472
Capital leases - current		308,238			296,116
Notes payable - current		40,897			31,588
Convertible notes payable		503,303			367,001
Deferred revenue		2,976			499,225
Total current liabilities		1,433,377			1,789,585
Long-term liabilities
Capital leases	$	2,304		$	2,265
Notes payable		76,072			76,072
Total long-term liabilities		78,376			78,337
TOTAL LIABILITIES		1,511,753			1,867,922
COMMITMENTS AND CONTINGENCY
STOCKHOLDERS’ DEFICIT
Preferred stock, par value $0.0005 per share; 25,000,000 shares authorized; 743,750 Series A convertible preferred shares issued and outstanding as of September 30, 2013 and 818,750 shares issued and outstanding as of December 31, 2012.		371			409
Common stock, par value $0.0004 per share; 100,000,000 shares authorized; 24,217,806shares of voting common stock issued and outstanding as of September 30, 2013 and 22,548,678 shares issued and outstanding as of December 31, 2012.		9,683			9,016
197,779 shares of voting common stock subscribed but not issued as of September 30, 2013 and 0 shares subscribed but not issued as of December 31, 2012.		79			-
Additional paid-in capital		14,383,110			13,597,117
Accumulated deficit		(14,703,693	)		(14,258,667	)
TOTAL STOCKHOLDERS’ DEFICIT		(310,451	)		(652,125	)
TOTAL LIABILITIES  AND STOCKHOLDERS’ DEFICIT	$	1,201,302		$	1,215,797

See accompanying notes to condensed financial statements

1

OXYSURE SYSTEMS INC.

CONDENSED STATEMENTS OF OPERATIONS

(UNAUDITED)

	For the three months ended September 30,						For the nine months ended September 30,
	2013			2012			2013			2012
Revenues, net	$	545,820		$	103,327		$	1,262,311		$	194,102
Cost of goods sold		111,110		$	50,472			316,763		$	88,331
Gross profit		434,710			52,855			945,548			105,771
Operating expenses
Research and development	$	134,357		$	579		$	354,515		$	1,814
Sales and marketing		77,841			7,234			269,918			27,798
Other general and administrative		266,320			198,997			697,417			717,735
Loss from operating expenses		(43,808	)		(153,955	)		(376,302	)		(641,576	)
Other income (expense)
Other income (expense)		8,375			75,637			27,400			134,353
Interest expense		(47,180	)		(55,461	)		(95,669	)		(170,778	)
Total other income (expense)		(38,805	)		20,176			68,269			(36,425	)
Net loss	$	(82,613	)	$	(133,779	)	$	(444,571	)	$	(678,001	)
Basic net loss per common share	$	(0.00	)	$	(0.01	)	$	(0.02	)	$	(0.03	)
Diluted net loss per common share	$	(0.00	)	$	(0.01	)	$	(0.02	)	$	(0.03	)
Weighted average common shares outstanding:
Basic		24,076,789			20,761,595			23,308,417			19,475,873
Diluted		24,076,789			20,761,595			23,308,417			19,475,873

See accompanying notes to condensed financial statements

2

OXYSURE SYSTEMS INC.

CONDENSED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	For the nine months ended September 30,
	2013			2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(444,571	)	$	(678,001	)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation		14,147			122,718
Amortization of intangible assets		22,487			22,372
Prior period adjustment		(455	)		-
Amortization of debt discount and warrant fair values related to convertible loans		67,683			156,916
Amortization of original issuance and other discounts on notes payable		5,143			-
Amortization of other assets		69,711			-
Changes in deferred rent and leasehold improvement allowance		30,938			86,271
Issuance of common stock options to employees as compensation		12,498			14,037
Issuance of common stock for compensation		1,525			-
Issuance of common stock in exchange for services		39,190			-
Issuance of common stock in connection with research & development arrangements		(14,147	)		-
Changes in current assets and liabilities:
Accounts receivable		(35,493	)		(25,417	)
Inventory		(50,016	)		37,515
Prepaid expenses and other current assets		(286	)		-
Accounts payable and accrued liabilities		(48,629	)		124,522
Deferred revenue		(496,250	)		113,733
NET CASH USED IN OPERATING ACTIVITIES		(834,526	)		(25,334	)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of intangible assets		(3,961	)		(3,172	)
Purchases of property and equipment		(10,856	)		(44,003	)
NET CASH USED IN INVESTING ACTIVITIES		(14,817	)		(47,175	)
CASH FLOWS FROM FINANCING ACTIVITIES
Loan proceeds, net		265,857			47,847
Payment of capital leases		(12,161	)		(19,207	)
Issuance of preferred stock		-			(27	)
Issuance of common stock for cash		558,731			-
Proceeds from exercise of common stock options and warrants		3,833			95,225
NET CASH PROVIDED BY FINANCING ACTIVITIES		840,582			123,837
Net change in cash and cash equivalents		(8,761	)		51,328
Cash and cash equivalents, at beginning of period		13,514			65,118
Cash and cash equivalents, at end of period	$	4,753		$	116,447
Supplemental disclosure of cash flow information:	$	0
Cash paid during the period for:
Interest	$	9,817		$	773
Income taxes	$	-		$	-
Supplemental non-cash investing and financing activities:
Conversion of convertible notes issued in connection with rent agreements to common stock	$	-		$	251,407

See accompanying notes to condensed financial statements

3

OXYSURE® SYSTEMS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

SEPTEMBER 30, 2013

(Unaudited)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of significant accounting policies of OxySure® Systems, Inc. (“OxySure” or the “Company”) is presented to assist in understanding the Company’s financial statements. The accounting policies presented in these footnotes conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the accompanying financial statements. These financial statements and notes are representations of the Company’s management who are responsible for their integrity and objectivity.

OxySure Systems, Inc. (OXYS: OTCQB) (the “Company,” “OxySure,” “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 duration or short duration 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.

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 10, “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.  The interim financial statements include all adjustments which, in the opinion of management, are necessary in order to make the financial statements not misleading.

The accompanying Condensed Financial Statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X promulgated by the Securities and Exchange Commission (“SEC”) and therefore do not contain all of the information and footnotes required by GAAP and the SEC for annual financial statements. The Company's Condensed Financial Statements reflect all adjustments that management believes are necessary for the fair presentation of their financial position, results of operations, comprehensive loss and cash flows for the periods presented. The information at December 31, 2012 in the Company's Condensed Balance Sheet included in this quarterly report was derived from the audited Balance Sheet included in the Company's Annual Report on Form 10-K for the year ended December 31, 2012 filed with the SEC on April 2, 2013. Where applicable, the Company's 2012 Annual Report on Form 10-K is referred to in this quarterly report as the “2012 Annual Report.” This quarterly report should be read in conjunction with the 2012 Annual Report.

4

OXYSURE® SYSTEMS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

SEPTEMBER 30, 2013

(Unaudited)

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 $2,976 and $499,225 as at September 30, 2013 and December 31, 2012, 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, the Company places its 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 September 30, 2013 inventories consisted of the following:

	September 30, 2013
Parts inventory	$	169,880
Work in process		73,200
Finished goods	$	28,282
Total inventories	$	271,361

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.

5

OXYSURE® SYSTEMS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

SEPTEMBER 30, 2013

(Unaudited)

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 $4,593 and $40,899 for the three month periods ended September 30, 2013 and 2012, respectively.

Other Long-Lived Assets – We have two types of intangible assets – patents and trademarks.  Intangible assets are carried at cost, net of accumulated amortization.  Amortization expense for patents and trademarks was $7,508 and $7,489 for the three month periods ended September 30, 2013 and 2012, 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 the Company 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 three month periods ended September 30, 2013 and 2012.

6

OXYSURE® SYSTEMS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

SEPTEMBER 30, 2013

(Unaudited)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Other Assets– We record Other Assets net of accumulated amortization. Amortization expense for Other Assets was $23,237 and $0 for the three month periods ended September 30, 2013 and 2012, 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 $0 for each of the three month periods ended September 30, 2013 and 2012.

Research and Development Costs – Costs associated with the development of our products are charged to expense as incurred.  $134,357 and $579 were incurred in the three month periods ended September 30, 2013 and 2012, respectively.

Income Taxes - In accordance with Accounting 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.

7

OXYSURE® SYSTEMS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

SEPTEMBER 30, 2013

(Unaudited)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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 three month periods ended September 30, 2013 and 2012, stock based compensation expense was approximately $22,038 and $(3,200), respectively, which consisted primarily of stock-based compensation expense related to stock options issued to the employees and recognized under GAAP.

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. The Company recognizes this expense over the period in which the services are provided. For each of the three month periods ended September 30, 2013 and 2012, stock based compensation expense was approximately $0 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 the Company’s stock based compensation expense for employees, consultants and other non-employees:

	Three months ended September 30,
	2013		2012
Common Stock options issued for compensation	$	22,038	$	(3,200	)
Common Stock options and warrants issued for services		-		-
Total	$	22,038	$	(3,200	)

Shipping and Handling Costs - Shipping and handling charges to customers are included in net revenues, and the associated costs incurred are recorded in cost of revenues.

Advertising Costs - Advertising costs are charged to operations when incurred.  We incurred $77,841 and $7,234 in advertising and promotion costs during the three month periods ended September 30, 2013 and 2012, respectively.

8

OXYSURE® SYSTEMS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

SEPTEMBER 30, 2013

(Unaudited)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Litigation and Settlement Costs - Legal costs are expensed as incurred. The Company records 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, when there is no amount within a range that forms a better estimate, the Company will accrue the minimum amount in the range. The Company was not involved in any legal proceedings, litigation or other legal actions during the three months ended September 30, 2013.

Net Income (Loss) Per Share - Basic earnings (loss) per share is computed based on the weighted average number of common shares outstanding. However, basic loss per share excludes anti-dilutive securities. Diluted earnings per share is computed based on the weighted average number of common shares outstanding, increased by the number of additional shares that would have been outstanding had the potentially dilutive common shares been issued, and reduced by the number of shares the Company could have repurchased from the proceeds from issuance of the potentially dilutive shares. Potentially dilutive shares of common stock include stock options and other stock-based awards granted under stock-based compensation plans and shares committed to be purchased under the employee stock purchase plan.

The table below sets forth the computation of basic and diluted earnings (loss) per share:

	Three months ended September 30,
	2013			2012
Historical net loss per share:
Numerator
Net loss, as reported		(82,613	)		(133,779	)
Less: Effect of amortization of interest expense on convertible notes		-			-
Net loss attributed to common stockholders (diluted)		(82,613	)		(133,779	)
Denominator
Weighted-average common shares outstanding		24,076,789			20,761,595
Effect of dilutive securities		-			-
Denominator for diluted net loss per share		24,076,789			20,761,595
Basic and diluted net loss per share	$	(0.00	)	$	(0.01	)

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:

	Three months ended September 30,
	2013		2012
Options to purchase common stock		1,570,891		1,532,430
Warrants to purchase common stock		1,894,534		1,822,034
Common shares issuable upon conversion of convertible preferred stock		907,375		1,059,875
Convertible note shares outstanding		810,147		1,696,331

Restatements and Reclassifications - Certain financial statement items have been reclassified to conform to the current periods’ presentation.  These reclassifications had no impact on previously reported net loss. 

Recent Accounting Pronouncements

In February 2013, the Financial Accounting Standards Board (“FASB”) issued guidance and disclosure requirements for reporting amounts reclassified out of accumulated other comprehensive income. The guidance requires that an entity provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under GAAP. The guidance became effective for fiscal years, and interim periods within those years, beginning on or after December 15, 2012. This standard was adopted in the first quarter of 2013.

9

OXYSURE® SYSTEMS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

SEPTEMBER 30, 2013

(Unaudited)

NOTE 2 – 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. Impairment charges for patents were $0 for each of the three month periods ended September 30, 2013 and 2012.

The carrying values of our amortized acquired intangible assets as of the September 30, 2013 are as follows:

	September 30, 2013
	Gross		Accumulated Amortization  and write off			Net
Patents	$	617,651	$	(253,335	)	$	364,316
Trademarks	$	45,723	$	(10,086	)	$	35,637
	$	663,374	$	(263,421	)	$	399,953

Of the net amount of $399,953 in intangible assets as of September 30, 2013, approximately 91% is in patents and approximately 9% is in trademarks.  Included in the $663,374 gross amount for patents and trademarks is $157,000 acquired from entities controlled by the founder of the Company in January 2004. The remaining $506,374 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 3 – 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. 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.

10

OXYSURE® SYSTEMS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

SEPTEMBER 30, 2013

(Unaudited)

NOTE 3 – NOTES PAYABLE (CONTINUED)

The renewed Frisco Note requires varying annual principal payments through December 2015. The face value of the renewed note is $213,000, and the 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. 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 September 30, 2013 was $31,031, and the net amount of the Frisco Note as at September 30, 2013 was $116,969.

Future principal payments of this note payable are as follows:

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

Sinacola Subordinated, Convertible Notes.

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 September 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.

11

OXYSURE® SYSTEMS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

SEPTEMBER 30, 2013

(Unaudited)

NOTE 3 – NOTES PAYABLE (CONTINUED)

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 September 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 to Fifth Landlord Note in the amount of $32,207 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 $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 amount of $0 for each of the three month periods ended September 30, 2013 and September 30, 2012 in connection with the Fifth Landlord Note.  We recorded the relative fair value of the warrant issued to Sixth Landlord Note in the amount of $32,207 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 $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 amount of $0 for the each of the three month periods ended September 30, 2013 and September 30, 2012 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 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.

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 Sixth Landlord Note is convertible at the Company’s option.

12

OXYSURE® SYSTEMS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

SEPTEMBER 30, 2013

(Unaudited)

NOTE 3 – NOTES PAYABLE (CONTINUED)

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 to 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 $5,460 and $5,460 for the three months ended September 30, 2013 and September 30, 2012, 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 we also amortize as interest expense over the life of the note. We recorded interest expense in the amounts of $5,210 and $5,210 for the three months ended September 30, 2013 and September 30, 2012, respectively in connection with the Eighth Landlord Note.

13

OXYSURE® SYSTEMS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

SEPTEMBER 30, 2013

(Unaudited)

NOTE 3 – NOTES PAYABLE (CONTINUED)

The Company issued four additional convertible notes with a face value totaling $245,000 during the three months ended September 30, 2013. The following table reflects the carrying values of our short-term and long-term notes payable as of September 30, 2013:

	Effective Interest Rate			Principal		Discount		September 30, 2013
Current notes payable
Sinacola, Third Landlord Note		0.0	%	$	110,000		-	$	110,000
Sinacola, Fourth Landlord Note		0.0	%		110,715		-		110,715
Sinacola, Fifth Landlord Note		0.0	%		50,000		-		50,000
Sinacola, Sixth Landlord Note		0.0	%		50,000		-		50,000
Sinacola, Seventh Landlord Note		44	%		50,050		5,460		44,590
Sinacola, Eighth Landlord Note		42	%		50,050		5,210		44,840
JMJ Financial Note1		78	%		50,834		31,643		19,191
JMJ Financial Note2		113	%		25,000		18,600		6,400
Tonaquint, Inc. Note		96	%		106,925		52,444		54,481
LG Capital		112	%		51,998		38,912		13,086
Frisco EDC		12.3	%		44,000		3,103		40,897
Total short-term notes payable				$	699,572		155,372	$	544,200
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				$	803,572	$	183,300	$	620,272

14

OXYSURE® SYSTEMS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

SEPTEMBER 30, 2013

(Unaudited)

NOTE 3 – NOTES PAYABLE (CONTINUED)

The following table summarizes our outstanding notes payable as of September 30, 2013 and December 31, 2012:

	September 30, 2013			December 31, 2012
Current portion of notes payable	$	40,897		$	31,588
Current portion of convertible notes payable		503,303			367,001
Current portion of notes payable, net	$	544,200		$	398,589
Long-term portion of notes payable	$	104,000		$	104,000
Less: Unamortized discount		(27,928	)		(27,928	)
		76,072			76,072
Long-term portion of convertible notes payable	$			$	-
Less: Unamortized discount					-
					-
Long-term portion of notes payable, net	$	76,072		$	76,072

15

OXYSURE® SYSTEMS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

SEPTEMBER 30, 2013

(Unaudited)

NOTE 4 - SHAREHOLDERS’ EQUITY

Preferred Shares Rights

On December 31, 2005, the Company’s Board of Directors adopted a Preferred Shares Rights Agreement (the “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 July 2, 2008, 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 743,750 and 818,750 Series A Preferred shares issued and outstanding as of September 30, 2013 and December 31, 2012, respectively.

During the three months ended September 30, 2013 the Company did not issue any shares of the Series A Preferred. During the three months ended September 30, 2013 25,000 shares of the Series A Preferred have been converted into our common stock 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.

16

OXYSURE® SYSTEMS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

SEPTEMBER 30, 2013

(Unaudited)

NOTE 4 - SHAREHOLDERS’ EQUITY (CONTINUED)

Common Stock

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

During the three months ended September 30, 2013 we issued approximately 340,000 shares of common stock valued at approximately $170,000 pursuant to common stock subscribed but not issued in a prior period.

As of September 30, 2013 we had approximately $107,827 in Other stockholder equity recorded pursuant to approximately 197,779 shares of common stock subscribed for but not issued, in accordance with ASC Topic 210-10.

As of September 30, 2013 we had approximately 24,217,806 shares of common stock issued and outstanding.

NOTE 5 - STOCK OPTIONS AND WARRANTS

Equity Incentive Plans

In April 2004, our Board of Directors and the stockholders at that time approved the adoption of a Voting Stock Option Plan (“the Plan”), which provides for the issuance of stock options to eligible employees, consultants, Board members and Advisory Board members of the Company to acquire up to a maximum of 5,000,000 shares of common stock.

Our Board of Directors, which determines the number of options that will be granted, the effective dates of the grants, the option process and the vesting schedules, administers the Plan. In the absence of an established market for the common stock of the Company, the Board of Directors determines the fair market value of our common stock. Options generally expire between five and ten years from the date of grant and automatically terminate 90 days after such optionee ceases to be an eligible individual under the Plan other than by reason of death or disability.

The portion of options granted that is not exercisable on the date the optionee ceases to be an eligible individual under the Plan by reason other than death, shall terminate and be forfeited to the Company on the date of such cessation. An optionee has no right as a stockholder with respect to any shares covered by the options granted to him until a certificate representing such shares is issued to them.

Stock Options

The following table summarizes information about the number and weighted average of the options that were forfeited or expired under the Plan as at September 30, 2013:

	Employee					Non-Employee
				Weighted					Weighted
	Number			Average		Number			Average		Combined
	Of			Exercise		Of			Exercise		Total
	Options			Price		Options			Price		Options
Outstanding at June 30, 2013		1,579,921	*	$	0.36		18,180		$	1.15		1,579,921
Granted		-		$	-		-		$	-		-
Exercised		-		$	-		-		$	-		-
Forfeited/Cancelled		(6,750	)	$	2.00		(2,280	)	$	2.50		(9,030	)
Outstanding at September 30, 2013		1,573,171		$	0.36		15,900		$	0.96		1,570,891

*Corrected from our June 30, 2013 financial statement footnotes.

17

OXYSURE® SYSTEMS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

SEPTEMBER 30, 2013

(Unaudited)

NOTE 5 - STOCK OPTIONS AND WARRANTS (CONTINUED)

We used the following assumptions to estimate the fair value of options granted under the Plan for the three months ended September 30, 2013 and 2012:

	Equity Incentive Plans for Quarter Ended September 30,
	2013			2012
Expected terms (in years)		5-10			5-10
Volatility (weighted ave.)		38	%		26	%
Risk-free interest rate (weighted ave.)		1.39	%		1.04	%
Expected dividend rate		0	%		0	%

Risk-Free Interest Rate	The risk-free interest rate assumption was based on U.S. Treasury instruments with a term that is consistent with the expected term of our stock options.
Expected Volatility	We use historical volatility in deriving our expected volatility assumption because we believe that future volatility over the expected term of the stock options is not likely to differ from the past.
Expected Term	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.
Expected Dividend Yield	The expected dividend yield of 0% is based on our history and expectation of dividend payouts. We have not paid and do not anticipate paying any dividends in the near future.
Forfeitures	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.  We 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. Our estimate for forfeitures may differ from actual forfeitures. If actual results differ significantly from these estimates, stock-based compensation expense and our results of operations could be materially impacted when we record 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.

As of September 30, 2013, there were unrecognized compensation costs of approximately $44,142 related to non-vested stock option awards granted after April 2004 that will be recognized on a straight-line basis over the weighted average remaining vesting period of 0.37 years.

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 (one fifth) 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 three months ended September 30, 2013, stock based compensation expense was approximately $22,038, which consisted primarily of stock-based compensation expense related to stock options recognized under GAAP issued to employees.  For the three months ended September 30, 2013, there were no options exercised.

18

OXYSURE® SYSTEMS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

SEPTEMBER 30, 2013

(Unaudited)

NOTE 5 - STOCK OPTIONS AND WARRANTS (CONTINUED)

Warrants.

The following table summarizes our warrant activities for the three months ended September 30, 2013:

			Weighted
	Number		Average
	Of		Exercise
	Warrants		Price
Outstanding at June 30, 2013		1,519,534	$	0.80
Granted		375,000	$	1.50
Exercised		-	$	-
Forfeited/Cancelled		-	$	-
Outstanding at September 30, 2013		1,894,534	$	0.94

NOTE 6 – RELATED PARTY TRANSACTIONS

A summary of the related party financings and notes as at September 30, 2013 is as follows:

Related party	Julian Ross (1)
Amount		$	108,483
Stated interest rate			0	%
Maturity			n/a

(1) Our CEO, Mr. Ross provides us shareholder cash advances and other consideration from time to time to fund working capital.

During the quarter we purchased a truck from Pearl Ross for an amount of $2,600. We use the truck for local deliveries and other operational purposes. Pearl Ross is the spouse of our CEO, Mr. Julian Ross. Mr. Ross disclaims any ownership in the truck or the proceeds from the sale.

19

OXYSURE® SYSTEMS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

SEPTEMBER 30, 2013

(Unaudited)

NOTE 7 – 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 the Company’s 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 the Company’s 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 September 30, 2013:

	Total		Level 1		Level 2		Level 3
Cash (1)	$	4,753	$	4,753		-		-
Total cash equivalents as of September 30, 2013	$	4,753	$	4,753	$	-	$	-

(1) Included in cash and cash equivalents on the Company's Balance Sheet.

NOTE 8 – OFF BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL OBLIGATIONS

We have not entered into any transactions with unconsolidated entities whereby we have financial guarantees, subordinated retained interests, or other contingent arrangements that expose us to material continuing risks, contingent liabilities, or any other obligation under a variable interest in an unconsolidated entity that provides financing, liquidity, market risk or credit risk support to us.

NOTE 9 – SEGMENT INFORMATION

We are organized as, and operate in, one reportable segment: the development, distribution and sale of specialty respiratory products and related medical products, accessories, and services. Our chief operating decision-maker is our Chief Executive Officer. Our Chief Executive Officer reviews financial information presented for purposes of evaluating financial performance and allocating resources, accompanied by information about revenue by geographic regions. Our assets are primarily located in the United States of America and not allocated to any specific region and we do not measure the performance of our geographic regions based upon asset-based metrics. Therefore, geographic information is presented only for revenue. Revenue by geographic region is based on the ship to address on our customer orders.

20

OXYSURE® SYSTEMS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

SEPTEMBER 30, 2013

(Unaudited)

NOTE 9 – SEGMENT INFORMATION (CONTINUED)

The following presents total revenue by geographic region for the three month periods ended September 30, 2013 and 2012:

	Three months ended September 30,
	2013		2012
Product Revenue:
United States - product sales	$	284,540	$	60,296
ROW - product sales		2,530		41,880
ROW - license fees/service revenue		258,750		-
Totals	$	545,820	$	102,176

NOTE 10 – 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. While we have turned a profit during the three months ended September 30, 2013, historically we have been suffering from recurring loss from operations. We have an accumulated deficit of $14,703,693 and $14,258,667 at September 30, 2013 and December 31, 2012, respectively, and stockholders’ deficits of $310,451 and $652,125 as of September 30, 2013 and December 31, 2012, respectively. We require substantial additional funds to manufacture and commercialize our products. Our management is actively seeking additional sources of equity and/or debt financing; however, there is no assurance that any additional funding will be available.

In view of the matters described above, recoverability of a major portion of the recorded asset amounts shown in the accompanying September 30, 2013 balance sheet is dependent upon continued operations of the Company, which in turn is dependent upon the Company’s ability to meet its financing requirements on a continuing basis, to maintain present financing, and to generate cash from future operations. These factors, among others, raise substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should we be unable to continue in existence.

21

ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis summarizes the significant factors affecting our results of operations, financial conditions and liquidity position for the three months ended September 30, 2013 and 2012, and should be read in conjunction with our financial statements, including the notes thereto, appearing elsewhere in this report.

Forward-Looking Statements

Statements and information included in this Quarterly Report on Form 10-Q that are not purely historical, including, without limitation, statements that relate to the Company's expectations with regard to the future impact on the Company's results from new products in development, are forward-looking statements within the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. When used in this report, words such as “believe,” “expect,” “intend,” “goal,” “plan,” “pursue,” “likely,” “believe,” “project,” “anticipate,” “intend,” “estimate,” “evaluate,” “opinion,” “may,” “could,” “future,” “potential,” “probable,” “if,” “will” and similar expressions generally identify forward-looking statements. These statements are subject to risks and uncertainties.

Forward-looking statements in this Quarterly Report on Form 10-Q represent our beliefs, projections and predictions about future events. These statements are necessarily subjective and involve known and unknown risks, uncertainties and other important factors that could cause our actual results, performance or achievements, or industry results, to differ materially from any future results, performance or achievement described in or implied by such statements. Actual results may differ materially from the expected results described in our forward-looking statements, including with respect to the correct measurement and identification of factors affecting our business or the extent of their likely impact, the accuracy and completeness of publicly available information relating to the factors upon which our business strategy is based, or the success of our business. The factors or uncertainties that could cause actual results, performance or achievement to differ materially from forward-looking statements contained in this report can be found in our filings with the Securities and Exchange Commission, including our filings on Form 10-K.

Highlights

Some of our key financial performance statistics for the three months ended September 30, 2013, as compared to the same metric for the three months ended September 30, 2012, include the following:

● Total revenue increased by approximately 428% to $545,820 as compared to $103,327 for the prior period;

● Net loss declined by approximately 38.25% to $82,613 or $(0.00) per share for the quarter as compared to a loss of $133,779 or $(0.01) per share during the prior period;

● Interest expense declined by approximately 15% to $47,180 as compared to $55,461 for the prior period, offset by an increase in general and administrative expense which increased to $478,518 as compared to $206,810 for the prior period;

● Working capital deficit improved by approximately $2,204,966; and

● Stockholder deficit improved by approximately $2,080,000.

Some of our key non-financial highlights and milestones achieved during the third quarter of 2013 include the following:

● We made significant progress with regard to the CE Marking of our flagship product, the OxySure Model 615;

● We added new distributors in the United States to expand our distribution footprint;

● We made significant progress on our development of the military market in connection with our teaming agreement for the military; and

● We made significant progress on our development of new products.

22

Overview

OxySure Systems, Inc. was formed on January 15, 2004 as a Delaware “C” Corporation for the purpose of developing products with the capability of generating medical grade oxygen “on demand,” without the necessity of storing oxygen in compressed tanks.  Our technology, process and methodologies involve the creation of medically pure (USP) oxygen from two dry, inert powders.  We believe that other available chemical oxygen generating technologies contain hazards that make them commercially unviable for broad-based emergency use by lay rescuers or the general public.  Our launch product is the OxySure Model 615 portable emergency oxygen system.  We believe that the OxySure Model 615 is currently the only product on the market that can be safely pre-positioned in public and private venues for emergency administration of medical oxygen by lay persons, without the need for training.

To date, we have been issued 9 patents and we have other patents pending on this process and technology that we believe is revolutionizing the emergency/short duration oxygen supply marketplace. We believe that OxySure makes the delivery devices lighter, safer, more affordable and easier to use. We believe our products can improve access to emergency oxygen that affects the survival, recovery and safety of individuals in several areas of need: (1) Public and private places and settings where medical emergencies can occur; (2) Individuals at risk for cardiac, respiratory or general medical distress needing immediate help prior to emergency medical care arrival; and (3) Those requiring immediate protection and escape from exposure situations or oxygen-deficient situations in industrial, mining, military, or other “Immediately Dangerous to Life or Health” (IDLH) environments.

The OxySure Model 615 emergency oxygen device was cleared by the Food and Drug Administration (“FDA”) (510k, Class II) for over-the-counter purchase in December 2005. We believe it bridges the gap between the onset of a medical emergency and the time first responders arrive on the scene. We believe it allows a lay rescuer – a bystander or loved one – to administer medical oxygen during those first, critical minutes after an emergency occurs, improving medical outcomes and saving lives in the process.

We have diversified our product portfolio to provide include solutions focused on the emergency medical preparedness and respiratory needs of our education, commercial and government customers. Our solutions include Automated External Defibrillators (AEDs) and accessories, resuscitation equipment, and respiratory and monitoring equipment and supplies.

23

The OxySure Strategy

The following summarizes the principal elements of our strategy:

● We launched the OxySure Model 615 into the K-12 education market in the United States, and we subsequently diversified into other institutional markets, such as colleges, churches and places of worship, manufacturing facilities and other commercial and municipal buildings. We plan to continue to pursue institutional customers in these and other vertical markets, both in the United States and internationally.

● We believe that Model 615 is a natural complement and companion product to an Automated External Defibrillator (AED). We plan to continue to market Model 615 as a companion product to AEDs, and our goal in the foreseeable future is to pursue the placement of the OxySure Model 615 next to as many AEDs as possible, in the United States as well as internationally. We believe in the long term, however, Model 615 has the potential to become a standard issue item for public and private settings, just like a fire extinguisher.

● We plan to continue to leverage our core competencies in oxygen, breathing technologies, research and manufacturing to pursue revenue opportunities in new vertical markets, including the military.

● We plan to continue to build our sales force by recruiting dedicated sales professionals focusing on former first responders, paramedics and firefighters as well individuals from other medical, first aid and safety sales areas to market our products and craft solutions for our customers.

● Our channel strategy includes leveraging distribution partnerships to enhance market penetration, and we plan to increase our efforts to partner with distributors, including distributors of AEDs, safety products and medical devices.  We plan to invest resources in training and tools for our distribution partners’ sales, systems and support organizations, in order to improve the overall efficiency and effectiveness of these partnerships.

● We plan to continue our increasing efforts to promote market awareness and education of our products and their critical need, and our efforts may include partnerships with industry, medical thought leaders, and community and advocacy organizations.

● We plan to pursue market catalysts such as a legislative agenda for state and federal mandates, medical reimbursement for at risk markets, and insurance underwriting benefits and discounts for product users.

● We plan to continue to diversify our product offerings through the addition of complimentary or additive products and solutions that enhance our core product usability, feasibility, appeal or application, or that enhances our ability to access or add value to existing and new customers. In addition, we plan to continue our development efforts focused on developing new products incorporating our core “oxygen from powder” technology for other vertical markets, such as aviation, mining, and sports and recreation as applicable.

● We plan to pursue strategic alliances where applicable to accelerate our growth and access to new customers, sales channels, markets and products.

Results of Operations

You should read the selected financial data set forth below along with our discussion and our financial statements and the related notes. We have derived the financial data from our unaudited financial statements. We believe the financial data shown in the table below include all adjustments consisting only of normal recurring adjustments, that we consider necessary for a fair presentation of such information. Operating results for the period are not necessarily indicative of the results that may be expected in the future.

24

	Three months ended September 30,
	2013			2012
Net income (loss)		(82,613	)		(133,779	)
Shares used in computing basic income (loss) per share amounts (weighted ave.)		24,076,789			20,761,595
Shares used in computing diluted income (loss) per share amounts (weighted ave.)		24,076,789			20,761,595
Net income (loss) per share:
Basic and Diluted	$	(0.00	)	$	(0.01	)

Results for the Three Months Ended September 30, 2013 Compared to the Three Months Ended September 30, 2012 (unaudited)

Revenues

We had $545,820 in revenues from operations for the three months ended September 30, 2013 as compared to revenues of $103,327 for the three months ended September 30, 2012.  The increase in revenues is primarily attributable to an increase in US product sales, an increase in licensing/service revenues and an increase in products developed for the military as part of a teaming agreement.

Expenses

Total expenses for the three months ended September 30, 2013 were $636,808, which amount includes $478,518 of operating expenses, $111,110 in cost of goods sold, and $47,180 in interest expense, as compared to total expenses for the three months ended September 30, 2012 of $312,743, which amount includes $206,810 of operating expenses, $50,472 in cost of goods sold, and $55,461 in interest expense. The increase in total selling, general and administrative expenses is primarily attributable to an increase in advertising and promotional expense, an increase in research and development expense, and an increase in other general and administrative expense, offset by a decrease in interest expense. The decrease in interest expense is primarily attributable to a decrease in interest expense related to convertible notes.

Research and Development

Research and development expenses of $134,357 and $579 were incurred in the three months periods ended September 30, 2013 and 2012, respectively.  The increase in research and development expense is primarily attributable to an increase in research and development expense recognized in connection with products for military markets.

Net Income (Loss)

Net loss for the three months ended September 30, 2013 was $82,613 and diluted net loss per share was $(0.00) as compared to a net loss for the three months ended September 30, 2012 of $133,779 and diluted net loss per share of $0.01. The improvement in net loss during the period ended September 30, 2013 as compared to the three months ended September 30, 2012 is primarily due to the combined effect of an increase in revenues and a decrease in interest expense, offset by an increase in selling, general and administrative expenses.

Results for the Nine Months Ended September 30, 2013 Compared to the Nine Months Ended September 30, 2012 (unaudited)

Revenues

We had $1,262,311 in revenues from operations for the nine months ended September 30, 2013 as compared to revenues of $194,102 for the nine months ended September 30, 2012.  The increase in revenues is primarily attributable to an increase in US product sales, an increase in licensing/service revenues and an increase in products developed for the military as part of a teaming agreement.

Expenses

Total expenses for the nine months ended September 30, 2013 were $1,734,281, which amount includes $1,321,850 of operating expenses, $316,763 in cost of goods sold, and $95,668 in interest expense, as compared to total expenses for the nine months ended September 30, 2012 of $1,006,455, which amount includes $747,347 of operating expenses, $88,331 in cost of goods sold, and $170,778 in interest expense. The increase in total selling, general and administrative expenses is primarily attributable to an increase in advertising and promotional expense and an increase in research and development expense, offset by a decrease in other general and administrative expense.

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Research and Development

Research and development expenses of $354,515 and $1,814 were incurred in the nine months periods ended September 30, 2013 and 2012, respectively.  The increase in research and development expense is primarily attributable to an increase in research and development expense recognized in connection with products for military markets.

Net Income (Loss)

Net loss for the nine months ended September 30, 2013 was $444,571 and diluted net loss per share was $(0.02) as compared to a net loss for the nine months ended September 30, 2012 of $678,001 and diluted net loss per share of $(0.03). The improvement in net loss during the nine months ended September 30, 2013 as compared to the three months ended September 30, 2012 is primarily due to the combined effect of an increase in revenues and a decrease in interest expense, offset by an increase in selling, general and administrative expenses.

Liquidity and Capital Resources

We had a cash balance of approximately $4,753 as of September 30, 2013, as compared to $13,514 as of December 31, 2012.  Our funds are kept in financial institutions located in the United States of America.

We had negative working capital of approximately $1,102,998 as of September 30, 2013 as compared to a negative working capital of $1,536,239 as of December 31, 2012.

We had total notes payable of $620,272 and $474,661 as of September 30, 2013 and December 31, 2012, respectively. The increase in Notes Payable was primarily due to the issuance of four new notes totaling $245,000, offset by the conversion to our common stock of a note with balance outstanding of $29,633, including principal and accrued interest.

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 $53,979 and $18,487 as at September 30, 2013 and December 31, 2012, respectively.

Since inception, we have been engaged primarily in product research and development, obtaining certain regulatory approvals, investigating markets for our products, developing manufacturing and supply chain partners, developing our production capability, and developing distribution, licensing and other channel relationships. In the course of funding research and development activities, we have sustained operating losses since inception and have an accumulated deficit of $14,703,693 at September 30, 2013.

We completed product development of our launch product, the OxySure Model 615 and launched sales thereof in 2008.  We have and will continue to use significant capital to manufacture and commercialize our products.  These factors raise doubt about our ability to continue as a going concern.  In this regard, management is proposing to raise any necessary additional funds not provided by operations through loans or through additional sales of our common stock.

During the remainder of 2013 and 2014, 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.  During the three months ended September 30, 2013 we issued 340,000 shares of common stock valued at approximately $170,000 pursuant to common stock subscribed but not issued in a prior period, and $164,040 in cash for common stock subscribed. We estimate that we will require approximately $2.57 million over the next 12 months to remain viable.  There is no assurance that we will be successful in raising this additional capital or in achieving profitable operations.  The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might result from this uncertainty.  However, there can be no assurance that any additional financing will be available to us.  Additional equity financing may involve substantial dilution to our then existing stockholders.  In the event we are unable to raise additional capital, we may be required to substantially reduce or curtail our activities.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide information under this item.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our President and Chief Financial Officer has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934) as of the end of period covered by this report.  Based upon such evaluation,  the President and Chief Financial Officer concluded that our disclosure controls and procedures were effective to ensure that the information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and is accumulated and communicated to our management, including our President and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company is subject to litigation in the normal course of business. As of September 30, 2013 the Company was not a party to any ongoing litigation matters.

ITEM 1A. RISK FACTORS

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide information under this item.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

During the three months ended September 30, 2013 we issued approximately 340,000 shares of common stock valued at approximately $170,000 pursuant to common stock subscribed but not issued in a prior period.

Proceeds from the sale of common stock were used for working capital and for general corporate purposes. 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.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

The following Exhibits are filed herein:                      

No. Title

31.1 Certification of President Pursuant to the Securities Exchange Act of 1934, Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2	Certification of Chief Financial Officer Pursuant to the Securities Exchange Act of 1934, Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32	Certifications Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

28

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

DATED: November 14, 2013	OXYSURE SYSTEMS, INC.
	/s/ Julian T. Ross
	BY: Julian T. Ross
	ITS: President and Chief Financial Officer
	(Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer)

29 

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 Quarterly Report on Form 10-Q for the period ended September 30, 2013 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: November 14, 2013

/s/ Julian T. Ross

Julian T. Ross,

President

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 Quarterly Report on Form 10-Q for the period ended September 30, 2013 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: November 14, 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 Quarterly Report of OxySure Systems, Inc. (the “Company”) on Form 10-Q for the period ending September 30, 2013 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Julian T. Ross, President 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:

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: November 14, 2013

/s/ Julian T. Ross

Julian T. Ross,

President and Chief Financial Officer

XML

Summary of Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2013

Summary of Significant Accounting Policies [Abstract]

Schedule of inventories

	September 30, 2013
Parts inventory	$	169,880
Work in process		73,200
Finished goods	$	28,282
Total inventories	$	271,361

Schedule of stock based compensation expense

	Three months ended September 30,
	2013		2012
Common Stock options issued for compensation	$	22,038	$	(3,200	)
Common Stock options and warrants issued for services		-		-
Total	$	22,038	$	(3,200	)

Schedule of numerator and denominator used in calculation of basic and diluted net loss per share

	Three months ended September 30,
	2013			2012
Historical net loss per share:
Numerator
Net loss, as reported		(82,613	)		(133,779	)
Less: Effect of amortization of interest expense on convertible notes		-			-
Net loss attributed to common stockholders (diluted)		(82,613	)		(133,779	)
Denominator
Weighted-average common shares outstanding		24,076,789			20,761,595
Effect of dilutive securities		-			-
Denominator for diluted net loss per share		24,076,789			20,761,595
Basic and diluted net loss per share	$	(0.00	)	$	(0.01	)

Schedule of antidilutive securities excluded from computation of earnings per share

	Three months ended September 30,
	2013		2012
Options to purchase common stock		1,570,891		1,532,430
Warrants to purchase common stock		1,894,534		1,822,034
Common shares issuable upon conversion of convertible preferred stock		907,375		1,059,875
Convertible note shares outstanding		810,147		1,696,331

XML

Condensed Statements of Operations (Unaudited) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Income Statement [Abstract]
Revenues, net	$ 545,820	$ 103,327	$ 1,262,311	$ 194,102
Cost of goods sold	111,110	50,472	316,763	88,331
Gross profit	434,710	52,855	945,548	105,771
Operating expenses
Research and development	134,357	579	354,515	1,814
Sales and marketing	77,841	7,234	269,918	27,798
Other general and administrative	266,320	198,997	697,417	717,735
Loss from operating expenses	(43,808)	(153,955)	(376,302)	(641,576)
Other income (expense)
Other income (expense)	8,375	75,637	27,400	134,353
Interest expense	(47,180)	(55,461)	(95,669)	(170,778)
Total other income (expense)	(38,805)	20,176	68,269	(36,425)
Net loss	$ (82,613)	$ (133,779)	$ (444,571)	$ (678,001)
Basic net loss per common share	$ 0.00	$ (0.01)	$ (0.02)	$ (0.03)
Diluted net loss per common share	$ 0.00	$ (0.01)	$ (0.02)	$ (0.03)
Weighted average common shares outstanding:
Basic	24,076,789	20,761,595	23,308,417	19,475,873
Diluted	24,076,789	20,761,595	23,308,417	19,475,873

XML

Stock Options and Warrants

9 Months Ended

Sep. 30, 2013

Stock Options and Warrants [Abstract]

STOCK OPTIONS AND WARRANTS

NOTE 5 - STOCK OPTIONS AND WARRANTS

Equity Incentive Plans

In April 2004, our Board of Directors and the stockholders at that time approved the adoption of a Voting Stock Option Plan (“the Plan”), which provides for the issuance of stock options to eligible employees, consultants, Board members and Advisory Board members of the Company to acquire up to a maximum of 5,000,000 shares of common stock.

Our Board of Directors, which determines the number of options that will be granted, the effective dates of the grants, the option process and the vesting schedules, administers the Plan. In the absence of an established market for the common stock of the Company, the Board of Directors determines the fair market value of our common stock. Options generally expire between five and ten years from the date of grant and automatically terminate 90 days after such optionee ceases to be an eligible individual under the Plan other than by reason of death or disability.

The portion of options granted that is not exercisable on the date the optionee ceases to be an eligible individual under the Plan by reason other than death, shall terminate and be forfeited to the Company on the date of such cessation. An optionee has no right as a stockholder with respect to any shares covered by the options granted to him until a certificate representing such shares is issued to them.

Stock Options

The following table summarizes information about the number and weighted average of the options that were forfeited or expired under the Plan as at September 30, 2013:

	Employee					Non-Employee
				Weighted					Weighted
	Number			Average		Number			Average		Combined
	Of			Exercise		Of			Exercise		Total
	Options			Price		Options			Price		Options
Outstanding at June 30, 2013		1,579,921	*	$	0.36		18,180		$	1.15		1,579,921
Granted		-		$	-		-		$	-		-
Exercised		-		$	-		-		$	-		-
Forfeited/Cancelled		(6,750	)	$	2.00		(2,280	)	$	2.50		(9,030	)
Outstanding at September 30, 2013		1,573,171		$	0.36		15,900		$	0.96		1,570,891

*Corrected from our June 30, 2013 financial statement footnotes.

We used the following assumptions to estimate the fair value of options granted under the Plan for the three months ended September 30, 2013 and 2012:

	Equity Incentive Plans for Quarter Ended September 30,
	2013			2012
Expected terms (in years)		5-10			5-10
Volatility (weighted ave.)		38	%		26	%
Risk-free interest rate (weighted ave.)		1.39	%		1.04	%
Expected dividend rate		0	%		0	%

Risk-Free Interest Rate	The risk-free interest rate assumption was based on U.S. Treasury instruments with a term that is consistent with the expected term of our stock options.
Expected Volatility	We use historical volatility in deriving our expected volatility assumption because we believe that future volatility over the expected term of the stock options is not likely to differ from the past.
Expected Term	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.
Expected Dividend Yield	The expected dividend yield of 0% is based on our history and expectation of dividend payouts. We have not paid and do not anticipate paying any dividends in the near future.
Forfeitures	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.  We 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. Our estimate for forfeitures may differ from actual forfeitures. If actual results differ significantly from these estimates, stock-based compensation expense and our results of operations could be materially impacted when we record 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.

As of September 30, 2013, there were unrecognized compensation costs of approximately $44,142 related to non-vested stock option awards granted after April 2004 that will be recognized on a straight-line basis over the weighted average remaining vesting period of 0.37 years.

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 (one fifth) 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 three months ended September 30, 2013, stock based compensation expense was approximately $22,038, which consisted primarily of stock-based compensation expense related to stock options recognized under GAAP issued to employees.  For the three months ended September 30, 2013, there were no options exercised.

Warrants.

The following table summarizes our warrant activities for the three months ended September 30, 2013:

			Weighted
	Number		Average
	Of		Exercise
	Warrants		Price
Outstanding at June 30, 2013		1,519,534	$	0.80
Granted		375,000	$	1.50
Exercised		-	$	-
Forfeited/Cancelled		-	$	-
Outstanding at September 30, 2013		1,894,534	$	0.94

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Summary of Significant Accounting Policies (Details) (USD $)	Sep. 30, 2013	Dec. 31, 2012
Summary of Inventories
Parts inventory	$ 169,880
Work in process	73,200
Finished goods	28,282
Total inventories	$ 271,361	$ 221,345

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Intangible Assets (Tables)

9 Months Ended

Sep. 30, 2013

Intangible Assets [Abstract]

Schedule of carrying values of amortized acquired intangible assets

	September 30, 2013
	Gross		Accumulated Amortization  and write off			Net
Patents	$	617,651	$	(253,335	)	$	364,316
Trademarks	$	45,723	$	(10,086	)	$	35,637
	$	663,374	$	(263,421	)	$	399,953

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Stock Options and Warrants (Details 2) (Warrants to purchase common stock, USD $)	3 Months Ended
	Sep. 30, 2013
Warrants to purchase common stock
Summary of warrants activity
Outstanding Options/Warrants, beginning balance	1,519,534
Outstanding options/Warrants, Weighted Average Exercise Price, beginning balance	$ 0.80
Granted	375,000
Granted, Weighted Average Exercise Price	$ 1.50
Exercised
Exercised, Weighted Average Exercise Price
Forfeited/Cancelled
Forfeited/Cancelled, Weighted Average Exercise Price
Outstanding Options/Warrants, ending balance	1,894,534
Outstanding Options, Weighted Average Exercise Price, ending balance	$ 0.94

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Summary of Significant Accounting Policies (Details 3)	3 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Options to purchase common stock
Schedule of antidilutive securities excluded from computation of earnings per share
Antidilutive securities excluded from computation of earnings per share	1,570,891	1,532,430
Warrants to purchase common stock
Schedule of antidilutive securities excluded from computation of earnings per share
Antidilutive securities excluded from computation of earnings per share	1,894,534	1,822,034
Convertible Preferred Stock
Schedule of antidilutive securities excluded from computation of earnings per share
Antidilutive securities excluded from computation of earnings per share	907,375	1,059,875
Convertible note shares outstanding
Schedule of antidilutive securities excluded from computation of earnings per share
Antidilutive securities excluded from computation of earnings per share	810,147	1,696,331

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Summary of Significant Accounting Policies (Details 2) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Numerator
Net income (loss)	$ (82,613)	$ (133,779)	$ (444,571)	$ (678,001)
Less: Effect of amortization of interest expense on convertible notes
Net loss attributed to common stockholders (diluted)	$ (82,613)	$ (133,779)
Denominator
Basic-Weighted-average common shares outstanding	24,076,789	20,761,595	23,308,417	19,475,873
Effect of dilutive securities
Denominator for diluted net loss per share	24,076,789	20,761,595	23,308,417	19,475,873
Earnings Per Share, Basic and Diluted	$ 0.00	$ (0.01)

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Notes Payable (Details Textual) (USD $)			0 Months Ended					0 Months Ended	3 Months Ended		0 Months Ended	3 Months Ended		0 Months Ended	3 Months Ended		0 Months Ended	3 Months Ended		0 Months Ended
	Sep. 30, 2013	Dec. 31, 2012	Mar. 22, 2011 Frisco Promissory Note [Member]	Sep. 30, 2013 Frisco Promissory Note [Member]	Dec. 01, 2012 Frisco Promissory Note [Member]	Dec. 01, 2011 Frisco Promissory Note [Member]	Apr. 03, 2007 Frisco Promissory Note [Member]	Mar. 23, 2011 Fifth Landlord Note [Member]	Sep. 30, 2013 Fifth Landlord Note [Member]	Sep. 30, 2012 Fifth Landlord Note [Member]	Mar. 23, 2011 Sixth Landlord Note [Member]	Sep. 30, 2013 Sixth Landlord Note [Member]	Sep. 30, 2012 Sixth Landlord Note [Member]	Aug. 15, 2011 Seventh Landlord Note [Member]	Sep. 30, 2013 Seventh Landlord Note [Member]	Sep. 30, 2012 Seventh Landlord Note [Member]	Aug. 15, 2011 Eighth Landlord Note [Member]	Sep. 30, 2013 Eighth Landlord Note [Member]	Sep. 30, 2012 Eighth Landlord Note [Member]	Aug. 15, 2011 Sinacola Subordinated, Convertible Notes [Member]	Mar. 23, 2011 Sinacola Subordinated, Convertible Notes [Member]	Dec. 31, 2010 Sinacola Subordinated, Convertible Notes [Member]
Notes Payable (Textual)
Debt instrument, face amount							$ 243,000
Stated interest							12.18%
Unamortized discount related to notes payable	27,928	27,928
Amount of outstanding forgivable loan			213,000
Debt instrument, payment terms			(i) the full payment of the economic incentives; or (ii) March 31, 2016.
Period of performance for debt			5 years
Face value of renewed note			213,000
Renewed debt instrument interest rate			12.34%
Proceed from performance credit of the FEDC					39,000	26,000
Unamortized discount	183,300			31,031
Debt instrument outstanding amount				116,969
Warrants issued																				65,065	65,065	143,465
Debt instrument, maturity date								Sep. 30, 2013			Sep. 30, 2013			Nov. 30, 2013			Nov. 30, 2013					Dec. 31, 2015
Increased amount of draw down provision, maximum								1.00
Conversion price of note(s) (aggregate)											$ 1.50			$ 1.00			$ 1.50
Fair value of warrant issued								32,207			32,207			32,223			32,223
Amount of beneficial conversion feature recorded as debt discount								17,793			15,540			17,827			15,540
Interest expenses									0	0		0	0		5,460	5,460		5,210	5,210
Principal amount of convertible note								$ 50,000			$ 50,000			$ 50,050			$ 50,050
Warrants, aggregate exercise price																					$ 0.01	$ 0.01
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 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 Sixth Landlord Note is convertible at the Company's option.
Warrant exercisable date, description																					On or before March 23, 2016
Shares issuable on conversion of warrants																				65,065	65,000	143,465

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Related Party Transactions (Details) (Julian Ross [Member], USD $)	9 Months Ended
	Sep. 30, 2013
Julian Ross [Member]
Summary of related party financings and notes
Amount	$ 108,483
Stated interest rate	0.00%
Maturity	n/a

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Notes Payable (Details) (Frisco Note payable [Member], USD $)	Sep. 30, 2013
Frisco Note payable [Member]
Summary of 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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Segment Information (Details) (USD $)	3 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Schedule of revenue and segment reporting
Total revenues	$ 545,820	$ 102,176
United States - product sales [Member]
Schedule of revenue and segment reporting
Total revenues	284,540	60,296
ROW - product sales [Member]
Schedule of revenue and segment reporting
Total revenues	2,530	41,880
ROW - license fees/service revenue [Member]
Schedule of revenue and segment reporting
Total revenues	$ 258,750

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Summary of Significant Accounting Policies (Details 1) (USD $)	3 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Schedule of stock based compensation expense
Common Stock options issued for compensation	$ 22,038	$ 3,200
Common stock options and warrants issued for services
Total	$ 22,038	$ 3,200

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Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2013

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,” “OxySure,” “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 duration or short duration 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.

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 10, “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.  The interim financial statements include all adjustments which, in the opinion of management, are necessary in order to make the financial statements not misleading.

The accompanying Condensed Financial Statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X promulgated by the Securities and Exchange Commission (“SEC”) and therefore do not contain all of the information and footnotes required by GAAP and the SEC for annual financial statements. The Company's Condensed Financial Statements reflect all adjustments that management believes are necessary for the fair presentation of their financial position, results of operations, comprehensive loss and cash flows for the periods presented. The information at December 31, 2012 in the Company's Condensed Balance Sheet included in this quarterly report was derived from the audited Balance Sheet included in the Company's Annual Report on Form 10-K for the year ended December 31, 2012 filed with the SEC on April 2, 2013. Where applicable, the Company's 2012 Annual Report on Form 10-K is referred to in this quarterly report as the “2012 Annual Report.” This quarterly report should be read in conjunction with the 2012 Annual Report.

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 $2,976 and $499,225 as at September 30, 2013 and December 31, 2012, 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, the Company places its 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 September 30, 2013 inventories consisted of the following:

	September 30, 2013
Parts inventory	$	169,880
Work in process		73,200
Finished goods	$	28,282
Total inventories	$	271,361

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 $4,593 and $40,899 for the three month periods ended September 30, 2013 and 2012, respectively.

Other Long-Lived Assets – We have two types of intangible assets – patents and trademarks.  Intangible assets are carried at cost, net of accumulated amortization.  Amortization expense for patents and trademarks was $7,508 and $7,489 for the three month periods ended September 30, 2013 and 2012, 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 the Company 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 three month periods ended September 30, 2013 and 2012.

Other Assets– We record Other Assets net of accumulated amortization. Amortization expense for Other Assets was $23,237 and $0 for the three month periods ended September 30, 2013 and 2012, 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 $0 for each of the three month periods ended September 30, 2013 and 2012.

Research and Development Costs – Costs associated with the development of our products are charged to expense as incurred.  $134,357 and $579 were incurred in the three month periods ended September 30, 2013 and 2012, respectively.

Income Taxes - In accordance with Accounting 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.

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 three month periods ended September 30, 2013 and 2012, stock based compensation expense was approximately $22,038 and $(3,200), respectively, which consisted primarily of stock-based compensation expense related to stock options issued to the employees and recognized under GAAP.

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. The Company recognizes this expense over the period in which the services are provided. For each of the three month periods ended September 30, 2013 and 2012, stock based compensation expense was approximately $0 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 the Company’s stock based compensation expense for employees, consultants and other non-employees:

 

	Three months ended September 30,
	2013		2012
Common Stock options issued for compensation	$	22,038	$	(3,200	)
Common Stock options and warrants issued for services		-		-
Total	$	22,038	$	(3,200	)

Shipping and Handling Costs - Shipping and handling charges to customers are included in net revenues, and the associated costs incurred are recorded in cost of revenues.

Advertising Costs - Advertising costs are charged to operations when incurred.  We incurred $77,841 and $7,234 in advertising and promotion costs during the three month periods ended September 30, 2013 and 2012, respectively.

Litigation and Settlement Costs - Legal costs are expensed as incurred. The Company records 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, when there is no amount within a range that forms a better estimate, the Company will accrue the minimum amount in the range. The Company was not involved in any legal proceedings, litigation or other legal actions during the three months ended September 30, 2013.

Net Income (Loss) Per Share - Basic earnings (loss) per share is computed based on the weighted average number of common shares outstanding. However, basic loss per share excludes anti-dilutive securities. Diluted earnings per share is computed based on the weighted average number of common shares outstanding, increased by the number of additional shares that would have been outstanding had the potentially dilutive common shares been issued, and reduced by the number of shares the Company could have repurchased from the proceeds from issuance of the potentially dilutive shares. Potentially dilutive shares of common stock include stock options and other stock-based awards granted under stock-based compensation plans and shares committed to be purchased under the employee stock purchase plan.

The table below sets forth the computation of basic and diluted earnings (loss) per share:

 

	Three months ended September 30,
	2013			2012
Historical net loss per share:
Numerator
Net loss, as reported		(82,613	)		(133,779	)
Less: Effect of amortization of interest expense on convertible notes		-			-
Net loss attributed to common stockholders (diluted)		(82,613	)		(133,779	)
Denominator
Weighted-average common shares outstanding		24,076,789			20,761,595
Effect of dilutive securities		-			-
Denominator for diluted net loss per share		24,076,789			20,761,595
Basic and diluted net loss per share	$	(0.00	)	$	(0.01	)

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:

	Three months ended September 30,
	2013		2012
Options to purchase common stock		1,570,891		1,532,430
Warrants to purchase common stock		1,894,534		1,822,034
Common shares issuable upon conversion of convertible preferred stock		907,375		1,059,875
Convertible note shares outstanding		810,147		1,696,331

Restatements and Reclassifications - Certain financial statement items have been reclassified to conform to the current periods’ presentation.  These reclassifications had no impact on previously reported net loss. 

Recent Accounting Pronouncements

In February 2013, the Financial Accounting Standards Board (“FASB”) issued guidance and disclosure requirements for reporting amounts reclassified out of accumulated other comprehensive income. The guidance requires that an entity provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under GAAP. The guidance became effective for fiscal years, and interim periods within those years, beginning on or after December 15, 2012. This standard was adopted in the first quarter of 2013.

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Notes Payable

9 Months Ended

Sep. 30, 2013

Notes Payable [Abstract]

NOTES PAYABLE

NOTE 3 – 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. 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 face value of the renewed note is $213,000, and the 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. 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 September 30, 2013 was $31,031, and the net amount of the Frisco Note as at September 30, 2013 was $116,969.

Future principal payments of this note payable are as follows:

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

Sinacola Subordinated, Convertible Notes.

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 September 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 September 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 to Fifth Landlord Note in the amount of $32,207 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 $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 amount of $0 for each of the three month periods ended September 30, 2013 and September 30, 2012 in connection with the Fifth Landlord Note.  We recorded the relative fair value of the warrant issued to Sixth Landlord Note in the amount of $32,207 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 $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 amount of $0 for the each of the three month periods ended September 30, 2013 and September 30, 2012 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 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.

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 Sixth 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 to 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 $5,460 and $5,460 for the three months ended September 30, 2013 and September 30, 2012, 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 we also amortize as interest expense over the life of the note. We recorded interest expense in the amounts of $5,210 and $5,210 for the three months ended September 30, 2013 and September 30, 2012, respectively in connection with the Eighth Landlord Note.

The Company issued four additional convertible notes with a face value totaling $245,000 during the three months ended September 30, 2013. The following table reflects the carrying values of our short-term and long-term notes payable as of September 30, 2013:

	Effective Interest Rate			Principal		Discount		September 30, 2013
Current notes payable
Sinacola, Third Landlord Note		0.0	%	$	110,000		-	$	110,000
Sinacola, Fourth Landlord Note		0.0	%		110,715		-		110,715
Sinacola, Fifth Landlord Note		0.0	%		50,000		-		50,000
Sinacola, Sixth Landlord Note		0.0	%		50,000		-		50,000
Sinacola, Seventh Landlord Note		44	%		50,050		5,460		44,590
Sinacola, Eighth Landlord Note		42	%		50,050		5,210		44,840
JMJ Financial Note1		78	%		50,834		31,643		19,191
JMJ Financial Note2		113	%		25,000		18,600		6,400
Tonaquint, Inc. Note		96	%		106,925		52,444		54,481
LG Capital		112	%		51,998		38,912		13,086
Frisco EDC		12.3	%		44,000		3,103		40,897
Total short-term notes payable				$	699,572		155,372	$	544,200
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				$	803,572	$	183,300	$	620,272

The following table summarizes our outstanding notes payable as of September 30, 2013 and December 31, 2012:

	September 30, 2013			December 31, 2012
Current portion of notes payable	$	40,897		$	31,588
Current portion of convertible notes payable		503,303			367,001
Current portion of notes payable, net	$	544,200		$	398,589
Long-term portion of notes payable	$	104,000		$	104,000
Less: Unamortized discount		(27,928	)		(27,928	)
		76,072			76,072
Long-term portion of convertible notes payable	$			$	-
Less: Unamortized discount					-
					-
Long-term portion of notes payable, net	$	76,072		$	76,072

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Related Party Transactions

9 Months Ended

Sep. 30, 2013

Related Party Transactions [Abstract]

RELATED PARTY TRANSACTIONS

NOTE 6 – RELATED PARTY TRANSACTIONS

A summary of the related party financings and notes as at September 30, 2013 is as follows:

Related party	Julian Ross (1)
Amount		$	108,483
Stated interest rate			0	%
Maturity			n/a

(1) Our CEO, Mr. Ross provides us shareholder cash advances and other consideration from time to time to fund working capital.

During the quarter we purchased a truck from Pearl Ross for an amount of $2,600. We use the truck for local deliveries and other operational purposes. Pearl Ross is the spouse of our CEO, Mr. Julian Ross. Mr. Ross disclaims any ownership in the truck or the proceeds from the sale.

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Shareholders' Equity

9 Months Ended

Sep. 30, 2013

Shareholders' Equity [Abstract]

SHAREHOLDERS' EQUITY

NOTE 4 - SHAREHOLDERS’ EQUITY

Preferred Shares Rights

On December 31, 2005, the Company’s Board of Directors adopted a Preferred Shares Rights Agreement (the “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 July 2, 2008, 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 743,750 and 818,750 Series A Preferred shares issued and outstanding as of September 30, 2013 and December 31, 2012, respectively.

During the three months ended September 30, 2013 the Company did not issue any shares of the Series A Preferred. During the three months ended September 30, 2013 25,000 shares of the Series A Preferred have been converted into our common stock 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 three months ended September 30, 2013 we issued approximately 340,000 shares of common stock valued at approximately $170,000 pursuant to common stock subscribed but not issued in a prior period.

As of September 30, 2013 we had approximately $107,827 in Other stockholder equity recorded pursuant to approximately 197,779 shares of common stock subscribed for but not issued, in accordance with ASC Topic 210-10.

As of September 30, 2013 we had approximately 24,217,806 shares of common stock issued and outstanding.

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Related Party Transactions (Details 1) (USD $)	3 Months Ended
	Sep. 30, 2013
Related Party Transactions [Abstract]
Truck purchased	$ 2,600

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Summary of Significant Accounting Policies (Details Textual) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2013 Patent	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012	Dec. 31, 2012
Summary of Significant Accounting Policies (Textual)
Expected term of the stock options	5 years
Number of issued patents owned by company	9
Deferred revenue	$ 2,976		$ 2,976		$ 499,225
Credit period granted to recurring customers on sales			30 months
Depreciation	4,593	40,899	14,147	122,718
Amortization of intangible assets	7,508	7,489	22,487	22,372
Impairment charges for patents	0	0
Amortization expense of other assets	23,237	0
Bad debts expenses	0	0
Research and development expense	134,357	579	354,515	1,814
Stock-based compensation expense related to stock options issued to the employees	22,038	3,200
Common stock options and warrants issued for services
Advertising and promotion costs	$ 77,841	$ 7,234
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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Notes Payable (Details 1) (USD $)	Sep. 30, 2013	Dec. 31, 2012
Carrying values of short-term and long-term notes payable
Total short-term notes payable, Principal	$ 699,572
Total short-term notes payable, Discount	155,372
Total short-term notes payable	40,897	31,588
Total long-term notes payable, Principal	104,000
Total long-term notes payable, Discount	27,928
Total long-term notes payable	76,072	76,072
Total short-term and long-term notes payable, Principal	803,572
Total short-term and long-term notes payable, Discount	183,300
Total short-term and long-term notes payable	620,272
Sinacola, Third Landlord Note [Member]
Carrying values of short-term and long-term notes payable
Effective Interest Rate	0.00%
Total short-term notes payable, Principal	110,000
Total short-term notes payable, Discount
Total short-term notes payable	110,000
Sinacola, Fourth Landlord Note [Member]
Carrying values of short-term and long-term notes payable
Effective Interest Rate	0.00%
Total short-term notes payable, Principal	110,715
Total short-term notes payable, Discount
Total short-term notes payable	110,715
Sinacola, Fifth Landlord Note [Member]
Carrying values of short-term and long-term notes payable
Effective Interest Rate	0.00%
Total short-term notes payable, Principal	50,000
Total short-term notes payable, Discount
Total short-term notes payable	50,000
Sinacola, Sixth Landlord Note [Member]
Carrying values of short-term and long-term notes payable
Effective Interest Rate	0.00%
Total short-term notes payable, Principal	50,000
Total short-term notes payable, Discount
Total short-term notes payable	50,000
Sinacola, Seventh Landlord Note [Member]
Carrying values of short-term and long-term notes payable
Effective Interest Rate	44.00%
Total short-term notes payable, Principal	50,050
Total short-term notes payable, Discount	5,460
Total short-term notes payable	44,590
Sinacola, Eighth Landlord Note [Member]
Carrying values of short-term and long-term notes payable
Effective Interest Rate	42.00%
Total short-term notes payable, Principal	50,050
Total short-term notes payable, Discount	5,210
Total short-term notes payable	44,840
JMJ Financial Note1 [Member]
Carrying values of short-term and long-term notes payable
Effective Interest Rate	78.00%
Total short-term notes payable, Principal	50,834
Total short-term notes payable, Discount	31,643
Total short-term notes payable	19,191
JMJ Financial Note2 [Member]
Carrying values of short-term and long-term notes payable
Effective Interest Rate	113.00%
Total short-term notes payable, Principal	25,000
Total short-term notes payable, Discount	18,600
Total short-term notes payable	6,400
Tonaquint Inc Note [Member]
Carrying values of short-term and long-term notes payable
Effective Interest Rate	96.00%
Total short-term notes payable, Principal	106,925
Total short-term notes payable, Discount	52,444
Total short-term notes payable	54,481
LG Capital [Member]
Carrying values of short-term and long-term notes payable
Effective Interest Rate	112.00%
Total short-term notes payable, Principal	51,998
Total short-term notes payable, Discount	38,912
Total short-term notes payable	13,086
Frisco EDC [Member]
Carrying values of short-term and long-term notes payable
Effective Interest Rate	12.30%
Total short-term notes payable, Principal	44,000
Total short-term notes payable, Discount	3,103
Total short-term notes payable	40,897
Frisco EDC, Long-term [Member]
Carrying values of short-term and long-term notes payable
Effective Interest Rate	12.34%
Total long-term notes payable, Principal	104,000
Total long-term notes payable, Discount	27,928
Total long-term notes payable	$ 76,072

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Stock Options and Warrants (Details 1)	3 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Summary of fair value of options granted were estimated at the date of grant using the Black-Scholes model
Volatility (weighted ave.)	38.00%	26.00%
Risk-free interest rate (weighted ave.)	1.39%	1.04%
Expected dividend rate	0.00%	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
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

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Going Concern (Details) (USD $)	Sep. 30, 2013	Dec. 31, 2012
Going Concern (Textual)
Accumulated deficit	$ (14,703,693)	$ (14,258,667)
Stockholders' deficits	$ (310,451)	$ (652,125)

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Condensed Balance Sheets (Parenthetical) (USD $)	Sep. 30, 2013	Dec. 31, 2012
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	743,750	818,750
Series A convertible preferred stock, shares outstanding	743,750	818,750
Common stock, par value	$ 0.0004	$ 0.0004
Common stock, shares authorized	100,000,000	100,000,000
Voting common stock, shares issued	24,217,806	22,548,678
Voting common stock, shares outstanding	24,217,806	22,548,678
Common stock subscribed but not issued, shares	197,779	0

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Segment Information

9 Months Ended

Sep. 30, 2013

Segment Information [Abstract]

SEGMENT INFORMATION

NOTE 9 – SEGMENT INFORMATION

We are organized as, and operate in, one reportable segment: the development, distribution and sale of specialty respiratory products and related medical products, accessories, and services. Our chief operating decision-maker is our Chief Executive Officer. Our Chief Executive Officer reviews financial information presented for purposes of evaluating financial performance and allocating resources, accompanied by information about revenue by geographic regions. Our assets are primarily located in the United States of America and not allocated to any specific region and we do not measure the performance of our geographic regions based upon asset-based metrics. Therefore, geographic information is presented only for revenue. Revenue by geographic region is based on the ship to address on our customer orders.

The following presents total revenue by geographic region for the three month periods ended September 30, 2013 and 2012:

	Three months ended September 30,
	2013		2012
Product Revenue:
United States - product sales	$	284,540	$	60,296
ROW - product sales		2,530		41,880
ROW - license fees/service revenue		258,750		-
Totals	$	545,820	$	102,176

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Condensed Statements of Cash Flows (Unaudited) (USD $)	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$ (444,571)	$ (678,001)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation	14,147	122,718
Amortization of intangible assets	22,487	22,372
Prior period adjustment	(455)
Amortization of debt discount and warrant fair values related to convertible loans	67,683	156,916
Amortization of original issuance and other discounts on notes payable	5,143
Amortization of other assets	69,711
Changes in deferred rent and leasehold improvement allowance	30,938	86,271
Issuance of common stock options to employees as compensation	12,498	14,037
Issuance of common stock for compensation	1,525
Issuance of common stock in exchange for services	39,190
Issuance of common stock in connection with research & development arrangements	(14,147)
Changes in current assets and liabilities:
Accounts receivable	(35,493)	(25,417)
Inventory	(50,016)	37,515
Prepaid expenses and other current assets	(286)
Accounts payable and accrued liabilities	(48,629)	124,522
Deferred revenue	(496,250)	113,733
NET CASH USED IN OPERATING ACTIVITIES	(834,526)	(25,334)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of intangible assets	(3,961)	(3,172)
Purchases of property and equipment	(10,856)	(44,003)
NET CASH USED IN INVESTING ACTIVITIES	(14,817)	(47,175)
CASH FLOWS FROM FINANCING ACTIVITIES
Loan proceeds, net	265,857	47,847
Payment of capital leases	(12,161)	(19,207)
Issuance of preferred stock		(27)
Issuance of common stock for cash	558,731
Proceeds from exercise of common stock options and warrants	3,833	95,225
NET CASH PROVIDED BY FINANCING ACTIVITIES	840,582	123,837
Net change in cash and cash equivalents	(8,761)	51,328
Cash and cash equivalents, at beginning of period	13,514	65,118
Cash and cash equivalents, at end of period	4,753	116,447
Cash paid during the period for:
Interest	9,817	773
Income taxes
Supplemental non-cash investing and financing activities:
Conversion of convertible notes issued in connection with rent agreements to common stock		$ 251,407

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Condensed Balance Sheets (USD $)	Sep. 30, 2013	Dec. 31, 2012
Current assets
Cash and cash equivalents	$ 4,753	$ 13,514
Accounts receivable, net	53,979	18,487
Inventories	271,361	221,345
Prepaid expenses and other current assets	286
Total current assets	330,379	253,346
Total property and equipment, net	24,308	27,599
Intangible assets, net	399,954	418,479
Other assets	446,662	516,373
TOTAL ASSETS	1,201,302	1,215,797
Current liabilities
Accounts payable and accrued expenses	469,481	388,183
Related party payable	108,483	207,472
Capital leases - current	308,238	296,116
Notes payable - current	40,897	31,588
Convertible notes payable	503,303	367,001
Deferred revenue	2,976	499,225
Total current liabilities	1,433,377	1,789,585
Long-term liabilities
Capital leases	2,304	2,265
Notes payable	76,072	76,072
Total long-term liabilities	78,376	78,337
TOTAL LIABILITIES	1,511,753	1,867,922
COMMITMENTS AND CONTINGENCY
STOCKHOLDERS' EQUITY
Preferred stock, par value $0.0005 per share; 25,000,000 shares authorized; 743,750 Series A convertible preferred shares issued and outstanding as of September 30, 2013 and 818,750 shares issued and outstanding as of December 31, 2012.	371	409
Common stock, par value $0.0004 per share; 100,000,000 shares authorized; 24,217,806 shares of voting common stock issued and outstanding as of September 30, 2013 and 22,548,678 shares issued and outstanding as of December 31, 2012.	9,683	9,016
197,779 shares of voting common stock subscribed but not issued as of September 30, 2013 and 0 shares subscribed but not issued as of December 31, 2012.	79
Additional paid-in capital	14,383,110	13,597,117
Accumulated deficit	(14,703,693)	(14,258,667)
TOTAL STOCKHOLDERS' DEFICIT	(310,451)	(652,125)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	$ 1,201,302	$ 1,215,797

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Intangible Assets (Details) (USD $)	Sep. 30, 2013
Summary of carrying values of amortized acquired intangible assets
Intangible assets, Gross	$ 663,374
Intangible Assets, Accumulated Amortization	(263,421)
Intangible assets, Net	399,953
Patents [Member]
Summary of carrying values of amortized acquired intangible assets
Intangible assets, Gross	617,651
Intangible Assets, Accumulated Amortization	(253,335)
Intangible assets, Net	364,316
Trademarks [Member]
Summary of carrying values of amortized acquired intangible assets
Intangible assets, Gross	45,723
Intangible Assets, Accumulated Amortization	(10,086)
Intangible assets, Net	$ 35,637

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Segment Information (Tables)

9 Months Ended

Sep. 30, 2013

Segment Information [Abstract]

Revenue by geographic region

	Three months ended September 30,
	2013		2012
Product Revenue:
United States - product sales	$	284,540	$	60,296
ROW - product sales		2,530		41,880
ROW - license fees/service revenue		258,750		-
Totals	$	545,820	$	102,176

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Segment Information (Details Textual)	9 Months Ended
	Sep. 30, 2013 Segments
Segment Information (Textual)
Number of reportable segments	1

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Stock Options and Warrants (Details Textual) (USD $)	1 Months Ended	3 Months Ended		9 Months Ended
	Apr. 30, 2004	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
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
Expected dividend rate		0.00%	0.00%
Unrecognized compensation costs related to non-vested stock option		$ 44,142		$ 44,142
Unrecognized compensation costs will be recognized over the weighted average remaining vesting period				4 months 13 days
Stock based compensation cost recognition description		Each tranche (one fifth) of shares is earned (zero, one, two, three, and four years).
Stock based compensation expense		$ 22,038		$ 1,525

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Shareholders' Equity (Details) (USD $)			3 Months Ended	9 Months Ended
	Sep. 30, 2013	Dec. 31, 2012	Sep. 30, 2013 Series A Convertible Preferred Stock [Member]	Sep. 30, 2013 Series A Convertible Preferred Stock [Member]	Jul. 02, 2008 Series A Convertible Preferred Stock [Member]	Dec. 31, 2005 Original Rights Agreement [Member]	Sep. 30, 2013 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	743,750	818,750
Series A convertible preferred stock, shares outstanding	743,750	818,750
Preferred stock, par value	$ 0.0005	$ 0.0005				$ 0.0005
Original issue price of preferred stock			$ 1.00	$ 1.00
Series A preferred converted into common stock			25,000
Convertible preferred stock, conversion ratio			1.22:1
Dividend payable on Series A preferred stock, quarterly, non-cumulative			$ 0.01	$ 0.01
Percentage of claim upon liquidation			100.00%	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.
Common stock subscribed for but not issued, shares	197,779	0					340,000
Common stock subscribed for but not issued, value							170,000
Common stock, par value	$ 0.0004	$ 0.0004
Common stock, shares authorized	100,000,000	100,000,000
Common stock, Shares issued	24,217,806	22,548,678
Common stock, Shares outstanding	24,217,806	22,548,678
Other Stockholder Equity	$ 107,827

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Stock Options and Warrants (Details) (Stock Options [Member], USD $)	3 Months Ended
	Sep. 30, 2013
Summary of option activity
Outstanding Options/Warrants, beginning balance	1,579,921
Granted
Stock option/warrant exercised
Forfeited/Cancelled	(9,030)
Outstanding Options/Warrants, ending balance	1,570,891
Outstanding Options, Weighted Average Exercise Price, ending balance	$ 0.80
Non-Employee [Member]
Summary of option activity
Outstanding Options/Warrants, beginning balance	18,180
Outstanding options/Warrants, Weighted Average Exercise Price, beginning balance	$ 1.15
Granted
Granted, Weighted Average Exercise Price
Stock option/warrant exercised
Exercised, Weighted Average Exercise Price
Forfeited/Cancelled	(2,280)
Forfeited/Cancelled, Weighted Average Exercise Price	$ 2.50
Outstanding Options/Warrants, ending balance	15,900
Outstanding Options, Weighted Average Exercise Price, ending balance	$ 0.96
Employee [Member]
Summary of option activity
Outstanding Options/Warrants, beginning balance	1,579,921	[1]
Outstanding options/Warrants, Weighted Average Exercise Price, beginning balance	$ 0.36
Granted
Granted, Weighted Average Exercise Price
Stock option/warrant exercised
Exercised, Weighted Average Exercise Price
Forfeited/Cancelled	(6,750)
Forfeited/Cancelled, Weighted Average Exercise Price	$ 2.00
Outstanding Options/Warrants, ending balance	1,573,171
Outstanding Options, Weighted Average Exercise Price, ending balance	$ 0.36

[1] *Corrected from our June 30, 2013 financial statement footnotes.

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Off Balance Sheet Arrangements and Contractual Obligations

9 Months Ended

Sep. 30, 2013

Off Balance Sheet Arrangements and Contractual Obligations [Abstract]

OFF BALANCE SHEET ARRANGEMENTS AND CONTRACTUAL OBLIGATIONS

NOTE 8 – 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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Intangible Assets (Details Textual) (USD $)	3 Months Ended		9 Months Ended		3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013 Intangible_Assets	Dec. 31, 2012	Sep. 30, 2013 Patents [Member]	Sep. 30, 2012 Patents [Member]	Sep. 30, 2013 Patents [Member]	Sep. 30, 2013 Trademarks [Member]	Jan. 15, 2004 Patents and Trademarks [Member]
Intangible Assets (Textual)
Impairment of intangible assets	$ 0	$ 0			$ 0	$ 0
Aggregate intangible assets, Asset percentage							91.00%	9.00%
Gross amount of acquired intangible assets	663,374		663,374		617,651		617,651	45,723	157,000
Amounts paid to third parties for legal fees, application fees and other direct costs			506,374
Number of intangible assets			2
Intangible assets, net	$ 399,954		$ 399,954	$ 418,479

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Fair Value Measurements (Details) (USD $)	Sep. 30, 2013	Dec. 31, 2012	Sep. 30, 2012	Dec. 30, 2011
Summary of financial assets and liabilities measured at fair value on a recurring basis
Total cash equivalents	$ 4,753	$ 13,514	$ 116,447	$ 65,118
Fair Value, Measurements, Recurring [Member]
Summary of financial assets and liabilities measured at fair value on a recurring basis
Total cash equivalents	4,753
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	4,753
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	4,753
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 (Policies)

9 Months Ended

Sep. 30, 2013

Summary of Significant Accounting Policies [Abstract]

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.  The interim financial statements include all adjustments which, in the opinion of management, are necessary in order to make the financial statements not misleading.

The accompanying Condensed Financial Statements have been prepared in accordance with United States generally accepted accounting principles (“GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X promulgated by the Securities and Exchange Commission (“SEC”) and therefore do not contain all of the information and footnotes required by GAAP and the SEC for annual financial statements. The Company's Condensed Financial Statements reflect all adjustments that management believes are necessary for the fair presentation of their financial position, results of operations, comprehensive loss and cash flows for the periods presented. The information at December 31, 2012 in the Company's Condensed Balance Sheet included in this quarterly report was derived from the audited Balance Sheet included in the Company's Annual Report on Form 10-K for the year ended December 31, 2012 filed with the SEC on April 2, 2013. Where applicable, the Company's 2012 Annual Report on Form 10-K is referred to in this quarterly report as the “2012 Annual Report.” This quarterly report should be read in conjunction with the 2012 Annual Report.

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 $2,976 and $499,225 as at September 30, 2013 and December 31, 2012, 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, the Company places its 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 September 30, 2013 inventories consisted of the following:

	September 30, 2013
Parts inventory	$	169,880
Work in process		73,200
Finished goods	$	28,282
Total inventories	$	271,361

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 $4,593 and $40,899 for the three month periods ended September 30, 2013 and 2012, 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 $7,508 and $7,489 for the three month periods ended September 30, 2013 and 2012, 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 the Company 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 three month periods ended September 30, 2013 and 2012.

Other Assets

Other Assets – We record Other Assets net of accumulated amortization. Amortization expense for Other Assets was $23,237 and $0 for the three month periods ended September 30, 2013 and 2012, 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

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 $0 for each of the three month periods ended September 30, 2013 and 2012.

Research and Development Costs

Research and Development Costs – Costs associated with the development of our products are charged to expense as incurred.  $134,357 and $579 were incurred in the three month periods ended September 30, 2013 and 2012, respectively.

Income Taxes

Income Taxes - In accordance with Accounting 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.

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 three month periods ended September 30, 2013 and 2012, stock based compensation expense was approximately $22,038 and $(3,200), respectively, which consisted primarily of stock-based compensation expense related to stock options issued to the employees and recognized under GAAP.

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. The Company recognizes this expense over the period in which the services are provided. For each of the three month periods ended September 30, 2013 and 2012, stock based compensation expense was approximately $0 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 the Company’s stock based compensation expense for employees, consultants and other non-employees:

2012

	Three months ended September 30,
	2013
Common Stock options issued for compensation	$	22,038	$	(3,200	)
Common Stock options and warrants issued for services		-		-
Total	$	22,038	$	(3,200	)

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.  We incurred $77,841 and $7,234 in advertising and promotion costs during the three month periods ended September 30, 2013 and 2012, respectively.

Litigation and Settlement Costs

Litigation and Settlement Costs - Legal costs are expensed as incurred. The Company records 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, when there is no amount within a range that forms a better estimate, the Company will accrue the minimum amount in the range. The Company was not involved in any legal proceedings, litigation or other legal actions during the three months ended September 30, 2013.

Net Income (Loss) Per Share

Net Income (Loss) Per Share - Basic earnings (loss) per share is computed based on the weighted average number of common shares outstanding. However, basic loss per share excludes anti-dilutive securities. Diluted earnings per share is computed based on the weighted average number of common shares outstanding, increased by the number of additional shares that would have been outstanding had the potentially dilutive common shares been issued, and reduced by the number of shares the Company could have repurchased from the proceeds from issuance of the potentially dilutive shares. Potentially dilutive shares of common stock include stock options and other stock-based awards granted under stock-based compensation plans and shares committed to be purchased under the employee stock purchase plan.

The table below sets forth the computation of basic and diluted earnings (loss) per share:

	Three months ended September 30,
	2013			2012
Historical net loss per share:
Numerator
Net loss, as reported		(82,613	)		(133,779	)
Less: Effect of amortization of interest expense on convertible notes		-			-
Net loss attributed to common stockholders (diluted)		(82,613	)		(133,779	)
Denominator
Weighted-average common shares outstanding		24,076,789			20,761,595
Effect of dilutive securities		-			-
Denominator for diluted net loss per share		24,076,789			20,761,595
Basic and diluted net loss per share	$	(0.00	)	$	(0.01	)

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:

	Three months ended September 30,
	2013		2012
Options to purchase common stock		1,570,891		1,532,430
Warrants to purchase common stock		1,894,534		1,822,034
Common shares issuable upon conversion of convertible preferred stock		907,375		1,059,875
Convertible note shares outstanding		810,147		1,696,331

Restatements and Reclassifications

Restatements and Reclassifications - Certain financial statement items have been reclassified to conform to the current periods’ presentation.  These reclassifications had no impact on previously reported net loss.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In February 2013, the Financial Accounting Standards Board (“FASB”) issued guidance and disclosure requirements for reporting amounts reclassified out of accumulated other comprehensive income. The guidance requires that an entity provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under GAAP. The guidance became effective for fiscal years, and interim periods within those years, beginning on or after December 15, 2012. This standard was adopted in the first quarter of 2013.

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Fair Value Measurements

9 Months Ended

Sep. 30, 2013

Fair Value Measurements [Abstract]

FAIR VALUE MEASUREMENTS

NOTE 7 – 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 the Company’s 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 the Company’s 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 September 30, 2013:

	Total		Level 1		Level 2		Level 3
Cash (1)	$	4,753	$	4,753		-		-
Total cash equivalents as of September 30, 2013	$	4,753	$	4,753	$	-	$	-

(1) Included in cash and cash equivalents on the Company's Balance Sheet.

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Intangible Assets

9 Months Ended

Sep. 30, 2013

Intangible Assets [Abstract]

INTANGIBLE ASSETS

NOTE 2 – 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. Impairment charges for patents were $0 for each of the three month periods ended September 30, 2013 and 2012.

The carrying values of our amortized acquired intangible assets as of September 30, 2013 are as follows:

	September 30, 2013
	Gross		Accumulated Amortization  and write off			Net
Patents	$	617,651	$	(253,335	)	$	364,316
Trademarks	$	45,723	$	(10,086	)	$	35,637
	$	663,374	$	(263,421	)	$	399,953

Of the net amount of $399,953 in intangible assets as of September 30, 2013, approximately 91% is in patents and approximately 9% is in trademarks.  Included in the $663,374 gross amount for patents and trademarks is $157,000 acquired from entities controlled by the founder of the Company in January 2004. The remaining $506,374 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.

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Notes Payable (Details 2) (USD $)	Sep. 30, 2013	Dec. 31, 2012
Summary of notes payable outstanding
Current portion of notes payable	$ 40,897	$ 31,588
Current portion of convertible notes payable	503,303	367,001
Total short-term notes payable	40,897	31,588
Long-term portion of notes payable	104,000	104,000
Less: Unamortized discount	(27,928)	(27,928)
Long-term portion of notes payable, net	76,072	76,072
Long-term portion of convertible notes payable
Less: Unamortized discount
Long-term convertible notes payable net of unamortized discount
Total long-term notes payable	$ 76,072	$ 76,072

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Notes Payable (Tables)

9 Months Ended

Sep. 30, 2013

Debt Instrument [Line Items]

Carrying values of short-term and long-term notes payable

	Effective Interest Rate			Principal		Discount		September 30, 2013
Current notes payable
Sinacola, Third Landlord Note		0.0	%	$	110,000		-	$	110,000
Sinacola, Fourth Landlord Note		0.0	%		110,715		-		110,715
Sinacola, Fifth Landlord Note		0.0	%		50,000		-		50,000
Sinacola, Sixth Landlord Note		0.0	%		50,000		-		50,000
Sinacola, Seventh Landlord Note		44	%		50,050		5,460		44,590
Sinacola, Eighth Landlord Note		42	%		50,050		5,210		44,840
JMJ Financial Note1		78	%		50,834		31,643		19,191
JMJ Financial Note2		113	%		25,000		18,600		6,400
Tonaquint, Inc. Note		96	%		106,925		52,444		54,481
LG Capital		112	%		51,998		38,912		13,086
Frisco EDC		12.3	%		44,000		3,103		40,897
Total short-term notes payable				$	699,572		155,372	$	544,200
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				$	803,572	$	183,300	$	620,272

Summary of notes payable outstanding

	September 30, 2013			December 31, 2012
Current portion of notes payable	$	40,897		$	31,588
Current portion of convertible notes payable		503,303			367,001
Current portion of notes payable, net	$	544,200		$	398,589
Long-term portion of notes payable	$	104,000		$	104,000
Less: Unamortized discount		(27,928	)		(27,928	)
		76,072			76,072
Long-term portion of convertible notes payable	$			$	-
Less: Unamortized discount					-
					-
Long-term portion of notes payable, net	$	76,072		$	76,072

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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Going Concern

9 Months Ended

Sep. 30, 2013

Going Concern [Abstract]

GOING CONCERN

NOTE 10 – 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.  While we have turned a profit during the three months ended September 30, 2013, historically we have been suffering from recurring loss from operations. We have an accumulated deficit of $14,703,693 and $14,258,667 at September 30, 2013 and December 31, 2012, respectively, and stockholders’ deficits of $310,451 and $652,125 as of September 30, 2013 and December 31, 2012, respectively. We require substantial additional funds to manufacture and commercialize our products. Our management is actively seeking additional sources of equity and/or debt financing; however, there is no assurance that any additional funding will be available.

In view of the matters described above, recoverability of a major portion of the recorded asset amounts shown in the accompanying September 30, 2013 balance sheet is dependent upon continued operations of the Company, which in turn is dependent upon the Company’s ability to meet its financing requirements on a continuing basis, to maintain present financing, and to generate cash from future operations. These factors, among others, raise substantial doubt about our ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should we be unable to continue in existence.

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Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2013

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)	$	4,753	$	4,753		-		-
Total cash equivalents as of September 30, 2013	$	4,753	$	4,753	$	-	$	-

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Stock Options and Warrants (Tables)

9 Months Ended

Sep. 30, 2013

Stock Options and Warrants [Abstract]

Summary of option activity

 -

	Employee					Non-Employee
				Weighted					Weighted
	Number			Average		Number			Average		Combined
	Of			Exercise		Of			Exercise		Total
	Options			Price		Options			Price		Options
Outstanding at June 30, 2013		1,579,921	*	$	0.36		18,180		$	1.15		1,579,921
Granted		-		$	-		-		$	-
Exercised		-		$	-		-		$	-		-
Forfeited/Cancelled		(6,750	)	$	2.00		(2,280	)	$	2.50		(9,030	)
Outstanding at September 30, 2013		1,573,171		$	0.36		15,900		$	0.96		1,570,891

*Corrected from our June 30, 2013 financial statement footnotes.

Summary of assumptions to estimate the fair value of options granted

	Equity Incentive Plans for Quarter Ended September 30,
	2013			2012
Expected terms (in years)		5-10			5-10
Volatility (weighted ave.)		38	%		26	%
Risk-free interest rate (weighted ave.)		1.39	%		1.04	%
Expected dividend rate		0	%		0	%

Summary of warrant activity

			Weighted
	Number		Average
	Of		Exercise
	Warrants		Price
Outstanding at June 30, 2013		1,519,534	$	0.80
Granted		375,000	$	1.50
Exercised		-	$	-
Forfeited/Cancelled		-	$	-
Outstanding at September 30, 2013		1,894,534	$	0.94

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Document and Entity Information	9 Months Ended
	Sep. 30, 2013	Nov. 13, 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-Q
Document Period End Date	Sep. 30, 2013
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2013
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		24,217,806

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Related Party Transactions (Tables)

9 Months Ended

Sep. 30, 2013

Related Party Transactions [Abstract]

Summary of the related party financings and notes payable

Related party	Julian Ross (1)
Amount		$	108,483
Stated interest rate			0	%
Maturity			n/a