OxySure Systems Inc. (OTCPK:OXYS) Q4 2012 Earnings Call April 1, 2013 4:45 PM ET
Julian Ross – Chairman & Chief Executive Officer
Ted Haberfield – MZ Group (Investor Relations)
Fong Lee – Unidentified Firm
Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the OxySure Systems, Inc. Q4 2012 Earnings Call. (Operator instructions.) This conference is being recorded today, April 1, 2013. I’d now like to turn the conference call over to Ted Haberfield of MZ Group. Please go ahead, sir.
Thank you and good morning, everyone. Joining us today for OxySure Systems’ Q4 2012 earnings conference call is the company’s CEO, Mr. Julian Ross. Mr. Ross will review and comment on financial and operational results for the fiscal year and he will be available to answer questions after the presentation.
I’d like to remind our listeners that on this call our prepared remarks may contain forward-looking statements which are subject to risks and uncertainties and that management may make additional statements in response to your questions. Therefore the company claims the protection from the Safe Harbor for forward-looking statements that is contained in the Private Securities Litigation Reform Act of 1995.
Forward-looking statements related to the business of OxySure Systems and its subsidiaries can be identified by commonly-used forward-looking terminology and those statements involve unknown risks and uncertainties including all business-related risks that are more detailed in the company’s filings with the SEC on Forms 10(k), 10(q), and 8(k).
For those who are unable to listen to the entire call we’ll have an audio replay that will be available and the call is also being webcast so you can log into it via the internet, and all that information was provided on the conference call announcement and the earnings release that just went out prior to the call. At this time I’d like to turn the call over to Julian Ross, the CEO of the company, and he’ll provide opening remarks. Julian, the floor is yours.
Good afternoon. Thanks for your interest in OxySure Systems. Before I discuss our financial and operating results for 2012 I’d like to take a few minutes to provide you with an overview of our company. I founded OxySure Systems in 2004. We have several issued and patents pending and a proprietary process and technology that is revolutionizing the emergency or short-duration oxygen supply marketplace.
OxySure’s emergency duration oxygen is a unique technology. Medical-grade oxygen is created instantly when needed from two dry inert powders inside specially-designed containers made of lightweight thermoplastic materials. This technology allows us to create much needed solutions for mass markets, both consumer and business.
Our launch product is the OxySure Model 615 which bridges the gap between the onset of a medical emergency and the time that first responders arrive in the scene. It allows a layperson, a bystander, friend, colleague or loved one to administer medical oxygen during those first critical minutes after an emergency occurs, improving medical outcome and sometimes saving lives in the process. Since its launch into the marketplace, the product is already being used in thousands of (inaudible) of people in various types of medical emergencies, real people – someone’s child, someone’s brother, sister, mother and so on.
Model 615 was cleared by the FDA in a 510(k) Class II for over the counter sales in December of 2005 and we launched it into the K-12 education market initially. As a result, our product is currently installed in schools and school districts in over 42 states. Then we expanded into colleges, manufacturing facilities, commercial buildings, and so on. We are proud of the fact that our products are already positioned in companies like Halliburton, Oshkosh, Kinder Morgan, Four Seasons and others as well as key early adopters, the City of Frisco.
We also started diversifying our product portfolio to be a single source solution for all of our customers’ medical emergency preparedness needs. Our solutions include all the major AED brands, display wall boxes and wall signage, CPR solutions, pulse oximeters, thermal bags, and so forth.
Now that you have a better understanding of our company we’ll go right into the results. We made significant progress in 2012 both operationally and in our financial results. We were able to refocus on building the business, coming out of the 2011 phase during which we were substantially absorbed in our go public process. So during 2012 we expanded our distribution footprint and presence significantly in the US and internationally by adding new distributors such as Global Industrial, which is a division of Systemax, Amazon, and AED Professionals. We also recently announced the appointment of Aero Healthcare to represent us in Australia, New Zealand, and the United Kingdon.
We opportunistically invested in operational efficiencies and we significantly reduced our debt to allow for more financial flexibility. For example, one of the more significant transactions we announced is that certain of our (inaudible) have converted a total of $2.02 million in convertible notes to our common stock at an aggregate conversion price of $1.50 per share. At the time, the conversion of $1.50 per share represented a premium of approximately 53% to our stock price.
Also, on December 12, 2012 we announced that sterling Investment Services, Inc. has initiated coverage of OxySure with the “buy” recommendation, and on January 3, 2013, we announced that Zacks initiated coverage on OxySure with an “outperform” with a target price of $1.75 per share.
All of the above-mentioned accomplishments helped drive solid financial results for the year 2012. Please be aware that all of the growth triggers that I will reference reflect year-over-year growth compared to 2011. Total revenue increased by 46% to $269,697 from $185,209 in 2011. This was a result of additions of new customers, expanded distribution, and repeat orders from existing customers. Well revenues from our K-12 education markets remain stable revenues from international customers were strong, increasing by approximately 49% compared to 2011. The number of Model 615 units shipped grew by approximately 190% year-over-year.
Gross profit margin increased by 113% for the twelve months ended December 31, 2012, and the primary reason for the year-over-year increase in gross margin is the combined effect of an increase in service revenues and an increase in product gross margins. Gross margin was 64.6%, up significantly from 44.2% in 2011.
SG&A was down 14% to $1,020,298 as compared to $1,150,786 for 2011. This was primarily due to a decrease in depreciation expense and a decrease in employee stock option expense which was offset by a slight increase in amortization and a slight increase in [sales and] marketing expense. Also interest expense fell 66% from $608,316 during 2011 to $206,722 during 2012. As a result, GAAP net loss attributable to OxySure’s stockholders for the year ended December 31, 2012, decreased to $828,272 or $0.04 a share compared to $1,532,399 or $0.10 a share for 2011.
We further strengthened our balance sheet with improvements in notes payable and stockholder equity. Notes payable decreased by $2,252,789 and stockholder equity increased by $2,125,014. Also we have a deferred tax asset of approximately $4.6 million that is offset in full via a valuation allowance.
So we carried our strong momentum from 2012 into 2013. In Q1 2013 we have announced the expansion of our product offerings to include the main six AED brands – Cardiac Science, Philips, Zoll, Physio Control, Defibtech and Heartsine as well as all related AED accessories. We announced the completion of the second year of installations in our five-year project in the city of Frisco.
We announced the strengthening of our corporate governance structure and the expansion of our Board’s depth and breadth with the addition of Mr. Jeremy M. Jones, former Chairman and CEO of Apria Healthcare and current Chairman of On Assignment. We also announced the Aero agreement. We remain on track and we believe we will be picking up the pace. Our focus in 2013 will be to grow revenue, to pursue new regulatory approvals, add new distribution partners, add new products, and achieve additional operational efficiencies.
That concludes my prepared remarks. On behalf of the entire OxySure team and Board of Directors we want to thank you for your interest in participating on this call. Please visit our website at www.oxysure.com for more information regarding our company. We will now take your questions. Operator?
At this time we’ll begin the question-and-answer session. (Operator instructions.) We do have a question from Fong Lee. Please go ahead with your question.
Fong Lee – Unidentified Firm
Thank you. Julian, congratulations again on an amazing job of how to get these [newly] product bundled in with other AED products to get to the market. I’m just curious in moving forward to the future, has the team identified any additional products that could benefit from a bundle with the OxySure unit?
Thank you for the question. The answer is yes. We have some projects in the works, multiple projects actually. Some are related to the military which involves unique products customized for military applications. These projects are well advanced and we expect will contribute to sales during this year.
Fong Lee – Unidentified Firm
(Operator instructions.) And sir, at this time I’m showing no additional questions. I’d like to turn the conference call back over for any closing remarks.
Well thank you all again for participating on the call today. We appreciate your continued interest and support of OxySure. We will be in touch soon regarding our next conference call and stockholder updates. Have a great week and goodbye.
Ladies and gentlemen, that does conclude today’s conference call.
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