OxySure Systems' CEO Discusses Q2 2013 Results - Earnings Call Transcript

Aug.13.13 | About: OxySure Therapeutics, (OXYS)

OxySure Systems, Inc. (OTCPK:OXYS) Q2 2013 Results - Earnings Call Transcript August 13, 2013 9:00 AM ET


Andrew Barwicki - President, Investor Relations

Julian Ross - Chairman and CEO


Jason Napodano - Zacks Investment Research

David Elias - DME Securities


Welcome to the OxySure 2Q13 earnings call. My name is Vanessa and I'll be your operator for today’s call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session. Please note that this conference is being recorded. And I'll now turn the call over to Julian Ross, you may begin.

Andrew Barwicki

Thank you. Good morning, everyone. This is Andrew Barwicki, Investor Relations for OxySure Systems. Joining us today for OxySure Systems second quarter 2013 earnings conference call is the company’s Chairman and CEO, Mr. Julian Ross. Mr. Ross will review and comment on financial and operational results for the second quarter and he will be available to answer questions after the presentation.

I would like to remind our listeners that on this call 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 statement 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 common-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 Securities and Exchange Commission on Form 10-K, 10-Q and 8-Q.

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 in via the internet, and all that information was provided on the conference call announcement and the earnings release this morning.

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.

Julian Ross

Thank you, Andrew. Good morning, everyone and welcome. Before I begin I’d like to point out that this presentation is already posted to the Investor Relations section of our website for your convenience.

Now to the results. We are pleased to report that we have sustained the positive momentum from Q1 into Q2 and we are pleased to report that our financial results continue to show rapidly improving fundamentals.

Our growth has been that of aggressive growth, and while we were managing our burn rate. Our growth in second quarter represents yet another record as the benefits of prior and current research and development and marketing initiatives have begun to materialize. This is our second consecutive quarter of triple digit revenue growth rates as compared to year earlier quarters.

To give you an idea of the sequential quarterly growth, this slide shows our revenues and gross profit for the last few quarters sequentially. As regards revenues we went from about $76,000 in Q4 ’12 to about $240,000 in Q1 ’13, a 216% jump from there reached about $476,000 in Q2 13 a 98% increase.

Gross profits went from $68,000 to $187,000, $324,000 in the last three sequential quarters. We are very pleased with this trend. So for the second quarter of 2013 some of the quarter-over-quarter highlights include the following.

For the three months ended June 30, 2013 revenues increased to $476,071 representing an increase of approximately $413,180 or 657% as compared to $62,891 for the three months ended June 30, 2012.

The increase was driven by a $344,731 or over 1,900% increase from product sales in the U.S. and a $112,500 in revenues from licensing and service agreements. Gross profit was $323,599 for the three months ended June 30, 2013 an increase of $285,864 or 758% from the $37,735 in the same period last year. This increase was primarily due to significantly higher product and services as margin was 68%, up from 60%.

SG&A was $511,980 compared to $256,754 for the three prior months in 2012. We increased our sales marketing expense from about $18,000 to about $$133,000 as we expanded our sales and marketing and branding efforts.

We also recorded an increase in R&D expense primarily attributable to an increase in research and development expense recognized in connection with products for military markets,

these increases approximately offset by a decrease in other G&A expense which were 18% to about $195,000 as compared to approximately $237,000 for the prior period.

The decrease in other G&A expense was primarily as a result of a decrease in depreciation and amortization expense and decrease in employee stock option expense and a decrease in professional fees. Interest expense was 60% and $23,254 for the second quarter of 2013 from $57,462 during the second quarter of 2012.

Finally, net loss increased by about 12% and to a $192,609 and just $0.18 to $0.01 per share as compared to $218,472 or $0.01 per share for the second quarter of 2012. Other financial items of note include, working capital deficit improved by approximately $1.9 million stockholder with deficit

improved by approximately $2.4 million, (inaudible) number of derivative securities outstanding reduced by approximately 2 million or 31% and our weighted average shares outstanding during the quarter was just over 23 million.

Our key business of milestones achieve during the quarter include the following, first we signed a distribution agreement with Dutch conglomerate, Medizon to distribute products into Netherlands, Belgium and Luxembourg.

Second, we launched a new product, a double wall cabinet to house a combination AED OxySure system. Third, we added new distributors in U.S. to expand our distribution footprint and fourth our Model 615 Emergency Oxygen device continues to be used in saving people in various medical emergency situations.

We've also added numerous educational and commercial customers during the quarter including key customers acquisitions, such of division of Mercedes Benz and the new Cleveland Global Center for Health Innovation.

The Cleveland Global Center for Health Innovation combines a new state-of-the-art convention facility and one of a kind marketplace to the medical industry that is expected to see over 4 million visitors every year.

So, as to the remainder of 2013, our focus will continue to be to grow revenue as aggressively as we can while managing burn rates, pursue new regulatory approvals, add new distribution partners, build out our strategic accounts teams, add new products and achieve additional

operational efficiencies.

We are also forging some new areas related to oxygen technologies. In this regard, we expect to continue to ship kits for the military under our [teaming] agreement. These portable oxygen kits are used by the military, special operations and their mobility command in high pressure, high altitude situations for airdrops, including personnel and supplies.

In addition, we are working to expand our oxygen platform to offer solutions for the military combat battlefields. We hope to report further progress on this in the next couple of quarters.

And that concludes the financial results of the portion of my prepared remarks. Please note I'm only covering the financial results portion of the presentation on the [web link]. The rest of the presentation for those of you who are new to the company and I would like to remind everyone that this presentation, the audio file of this call and our 10-Q filing will be available on the Investor Relations section of our website later on today.

So at this time, I will hand the call back to the operator for Q&A. Operator?

Question-and-Answer Session


Thank you. (Operator Instructions) And I see we have our first question from Jason Napodano with Zacks Investment Research. Please go ahead.

Jason Napodano - Zacks Investment Research

Great quarter Julian really solid revenue growth. Wonder if you could maybe just give us a little bit more color on the revenues, just may be provide a breakdown of where the growth is coming from internationally or in the U.S. and may be if you can just kind of touch on the product mix between the OxySure products developed in-house and some of the external AED that you guide, began promoting earlier in the year?

Julian Ross

Thanks Jason and thank you for the question. Our revenue mix is still evolving, but at this time the contributions through the different line items or allowing us to create a smooth growth lying on the topline so that’s the good news for us. As far as the contribution themselves, we have seen a boost from military business in this past quarter, a significant amount of that came from the [things] that we are shipping in connection with our teaming agreement.

The revenues from third party products such as AEDs and the likes are still catching up. We treat those as secondary products, as part of our solution and of course our primary product is always going to be the amount of different [site] for the moment. So while I am not giving sort of specific numbers, allow me to give you a sense of where the bulk of the competition is coming from as this revenue mix is evolving.

Jason Napodano - Zacks Investment Research

In terms of the distribution, by the teaming agreement with the military was there any kind of one time upfront orders that took place in the second quarter and then kind of to build off that. Where do you see sales with the military going in the future, and I know you are still working on that kind of the portable battlefield model. But I suppose if you could provide some maybe some timelines on that and just some thoughts on how the military orders persisted. If I am correct about this, they tend to place some large orders upfront and I am just trying to get a sense of what we could see if that happens?

Julian Ross

Certainly. So the answer is actually no to the question of upfront orders. We did work on developing this line of business with some during that time, quite a long time actually and as it came to fruition we saw some shipments in the first quarter and then we saw some increase in those shipments in the second quarter and we expect some of those shipments to continue in the third quarter and beyond. There is a five year contract in place between the military and the prime contractor, and we do believe we will see some additional business from that particular segment.

As far as the new project that we are working on, we think we will see some evidence of this coming together in the next couple of quarters. We believe conservatively by the fourth quarter we will start seeing business coming in from that. In our case these things do take a while in the incubation period in putting all together, but then there seems to be a steady program of ordering by the governments once the program is up and running.

Jason Napodano - Zacks Investment Research

I guess that’s a great quarter guys in [personnel] revenue growth and keeps up the good work.


And our next question comes from David Elias with DME Securities. Please go ahead.

David Elias - DME Securities

It seems that the first half of the year has shown significant growth, and the expenses it seems you are managing them very well. What can we expect in the second half of the year and will it be safe to assume as part of the overall plan expenses will go up to support further growth?

Julian Ross

As I mentioned before our goal is to pursue aggressive growth, while managing the burn rate. In simple terms of course you want to make sure you don’t grow yourself out of business and we are not going to do that. So as far as the second half of the year, we expect a continuation of the trends you’ve seen, and we expect to see a continuation of the improvement in the fundamentals. The markets have always liked our story that of course now it’s up to us to grow the fundamentals in the company. So we are pleased to see that happen, and we expect that to continue. So hopefully that answers your question David.

David Elias - DME Securities

Yes, it does, thank you very much. And again congratulations on a great quarter.


And we have no further questions. I will now turn the call back over to Julian Ross for closing remarks.

Julian Ross

Thank you and that concludes our Q2 ‘13 earnings call. Thank you everyone for participating, we will talk again next time. Have a great week and good bye


And thank you ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.

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