Oryon (ORYN) 10-Q 2013 Q3 Quarterly report

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

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

Commission File number:       001-34212

ORYON TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

Nevada	26-2626737
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

4251 Kellway Circle, Addison, Texas 75001

(Address of principal executive offices)

(214) 267-1321

(Registrant’s telephone number, including area code)

(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.  Yesx   No¨  

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 toRule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yesx   No¨  

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 definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

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

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: As of November 7, 2013, there were 62,660,778 shares of common stock, par value $0.001 per share, outstanding.

INDEX

		Page Number
PART I.	FINANCIAL INFORMATION
ITEM 1.	Financial Statements (Unaudited)	3
	Consolidated Balance Sheets at September 30, 2013 (Unaudited) and December 31, 2012	4
	Consolidated Statements of Operations - for the quarters and nine month periods ended September 30, 2013 and 2012 (Unaudited)	5
	Consolidated Statement of Changes in Shareholders’ Equity (Deficit) - for the nine month periods ended September 30, 2013 and 2012 (Unaudited)	6
	Consolidated Statements of Cash Flows - for the nine month periods ended September 30, 2013 and 2012 (Unaudited)	7
	Notes to the Consolidated Financial Statements	8
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
ITEM 3.	Quantitative and Qualitative Disclosure about Market Risk	34
ITEM 4.	Controls and Procedures	34
PART II.	OTHER INFORMATION
ITEM 1A	Risk Factors	36
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36
ITEM 6.	Exhibits	37
	SIGNATURES.	38

PART 1 – FINANCIAL INFORMATION

ITEM I. FINANCIAL STATEMENTS

The accompanying consolidated balance sheets of Oryon Technologies, Inc. (the “Company”, “Oryon” or the “Registrant”) at September 30, 2013 (with comparative figures at December 31, 2012), the consolidated statements of operations for the quarters and nine month periods ended September 30, 2013 and 2012, the consolidated statements of cash flows for the nine month periods ended September 30, 2013 and 2012, and the consolidated statement of changes in shareholders’ equity (deficit) for the nine month periods ended September 30, 2013 and 2012, have been prepared by the Company’s management in conformity with accounting principles generally accepted in the United States of America(“GAAP”). In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations, financial position and cash flows have been included and all such adjustments are of a normal recurring nature. These unaudited financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K, as amended, filed with the Securities and Exchange Commission (the “SEC”) on March 7, 2013, and in the Company’s other filings with the SEC since that date.

On October 24, 2011, the Company entered into a binding letter of intent (“LOI”) with OryonTechnologies, LLC (“OTLLC”) in connection with a proposed reverse acquisition transaction (the “Merger”) between the Company and OTLLC whereby OTLLC agreed to merge with Oryon Merger Sub, LLC, a Texas limited liability company and wholly-owned subsidiary of the Company (“Merger Sub”) in exchange for the issuance to the members of OTLLC of eight (8) shares of the Company’s common stock for each outstanding membership unit of OTLLC.In accordance with the terms of the LOI, the terms and conditions of the Merger were to be set forth in a formal definitive agreement. To that end, on March 9, 2012, the Company entered into an agreement and plan of merger by and between the Company, OTLLC and Merger Sub (the “Merger Agreement”). Upon the closing of the Merger (the “Closing”) on May 4, 2012(the “Closing Date”), OTLLC became a wholly-owned subsidiary of the Company pursuant to the Merger Agreement, and the Company issued 16,502,121 shares of common stock to the members of OTLLC in exchange for the then outstanding 2,062,765.12 membership units of OTLLC. In addition, OTLLC had outstanding equity equivalents, consisting of convertible notes payable, accrued interest on the notes payable, warrants and unit options, that by their terms required the Company to be prepared to issue common stock in an amount equal to the number of shares (at the 8 to 1 ratio) that would have been issuable at the Closing Date to holders of all of the equity equivalents if they had been converted to membership units before the Closing.

The Merger was accounted for as a reverse-merger and recapitalization in accordance with GAAP. In conjunction with the Merger, OTLLC assumed no liabilities from the Company and all members of the Company’s executive management are from OTLLC. OTLLC is deemed to be the acquirer for financial reporting purposes and the Company is the acquired company. Consequently, the assets and liabilities and the operations that are reflected in the historical financial statements prior to the Merger are those of OTLLC and are recorded at the historical cost basis of OTLLC, and the consolidated financial statements after completion of the Merger include the assets and liabilities of the Company and OTLLC, historical operations of OTLLC and operations of the Company from the Closing Date. Membership units and the corresponding capital amounts of OTLLC pre-Merger have been retroactively restated as shares of common stock reflecting the eight (8) to one exchange ratio in the Merger. All references in this document to equity securities and all equity related historical financial measurements, including weighted average shares outstanding, earnings per share, par value of common stock, additional paid in capital, option exercise prices and warrant exercise prices, have been retroactively restated to reflect the Merger exchange ratio.

Operating results for the interim periods presented herein are not necessarily indicative of the results that can be expected for the entire fiscal year.

3

ORYON TECHNOLOGIES, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

September 30, 2013 and December 31, 2012

	September 30,			December 31,
	2013			2012
	(Unaudited)
ASSETS
CURRENT ASSETS
Cash	$	9,410		$	169,678
Accounts Receivable, net of allowance for
doubtful accounts of $0 and $0, respectively		32,308			10,721
Inventory (see note 2)		104,372			97,456
Other current assets		7,455			8,707
Total current assets		153,545			286,562
PROPERTY AND EQUIPMENT, NET (see note 3)		15,660			21,708
INTANGIBLE ASSETS, NET (see note 4)		120,423			137,736
OTHER LONG-TERM ASSETS (see note 5)		23,344			23,799
TOTAL ASSETS	$	312,972		$	469,805
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable	$	407,177		$	187,047
Deferred revenue		-			6,000
Deferred compensation (see note 6)		337,631			166,667
Current portion of promissory notes and other short-term debt (see note 7)		848,569			401,655
Other current liabilities (see note 8)		24,492			41,537
Total current liabilities		1,617,869			802,906
NOTES PAYABLE, NET (see note 9)		134,714			164,187
Total liabilities		1,752,583			967,093
SHAREHOLDERS' EQUITY
Preferred stock, $0.001 par value, 50,000,000 shares authorized, none
issued and outstanding  (see note 13)		-			-
Common stock, $0.001 par value, 600,000,000 shares authorized, 62,660,778
shares issued and outstanding (see note 13)		62,661			62,661
Paid in capital		10,256,879			10,126,184
Foreign currency translation adjustment		-			-
Accumulated deficit		(11,759,151	)		(10,686,133	)
Non-controlling interest		-			-
Total equity (deficit)		(1,439,611	)		(497,288	)
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	312,972		$	469,805

The accompanying notes are an integral part of these financial statements.

4

ORYON TECHNOLOGIES, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

For the Quarters and Nine Month Periods Ended September 30, 2013 and 2012

(Unaudited)

	For the Quarter Ended September 30,						For the Nine Months Ended September 30,
	2013			2012			2013			2012
REVENUES
Product sales	$	46,576		$	13,494		$	99,559		$	46,504
Cost of goods sold		(38,882	)		(3,370	)		(48,484	)		(26,498	)
Gross profit		7,694			10,124			51,075			20,006
Royalty and license fees		-			-			-			-
Other		-			-			-			-
Total revenues		7,694			10,124			51,075			20,006
OPERATING EXPENSES
Applications development
Wages		31,566			31,971			100,278			130,651
Payroll taxes and benefits		5,170			12,025			17,279			30,984
Materials, equipment, services		25,017			14,492			103,954			40,833
Office and overhead		2,025			2,668			13,660			6,131
Total applications development expense		63,778			61,156			235,171			208,599
Sales and Marketing
Wages		18,000			18,000			54,000			48,000
Payroll taxes and benefits		1,389			3,253			4,185			5,548
Overhead		5,640			2,148			13,561			12,289
Outside services		6,000			12,400			7,000			32,400
Travel and entertainment		-			11,138			8,070			24,327
Total sales and marketing expense		31,029			46,939			86,816			122,564
General and Administrative
Wages		39,540			70,001			179,538			269,395
Payroll taxes and benefits		22,033			73,499			128,885			160,492
Overhead		35,993			31,206			104,477			117,598
Outside services		106,208			149,201			327,387			426,241
Travel and entertainment		8,309			2,989			9,996			5,291
Total general and administrative expense		212,083			326,896			750,283			979,017
Depreciation and Amortization		7,695			8,072			23,362			32,209
Total loss from operations		(306,891	)		(432,939	)		(1,044,557	)		(1,322,383	)
OTHER INCOME (EXPENSE)
Interest income		-			-			-			522
Interest expense		(9,904	)		(68,722	)		(28,461	)		(257,087	)
Change in fair market value of Series A warrants		-			(535,367	)		-			(535,367	)
Net other income (expense)		-			(4,789	)		-			(10,010	)
Total other income (expense)		(9,904	)		(608,878	)		(28,461	)		(801,942	)
NET LOSS BEFORE TAX		(316,795	)		(1,041,817	)		(1,073,018	)		(2,124,325	)
INCOME TAXES   (see note 12)		-			-			-			-
NET LOSS AFTER TAX		(316,795	)		(1,041,817	)		(1,073,018	)		(2,124,325	)
INCOME (LOSS) ATTRIBUTABLE TO
NON-CONTROLLING INTEREST		-			-			-			1,054
NET LOSS ATTRIBUTABLE
TO SHAREHOLDERS	$	(316,795	)	$	(1,041,817	)	$	(1,073,018	)	$	(2,123,271	)
Loss per share: basic and diluted	$	(0.01	)	$	(0.02	)	$	(0.02	)	$	(0.07	)
Weighted average shares outstanding		62,660,778			43,880,789			62,660,778			29,386,382

The accompanying notes are an integral part of these financial statements.

5

ORYON TECHNOLOGIES, INC. AND SUBSIDIARIES

Consolidated Statements of Changes in Shareholders' Equity

For the Nine Month Periods Ended September 30, 2013 and 2012

(Unaudited)

	Shares		Common Stock, $0.001 par value		Paid in Capital			Non-Controlling Interest			Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit			Total
Balances at December 31, 2011		16,502,121	$	16,502	$	5,365,181		$	(3,640	)	$	12,119	$	(8,069,326	)	$	(2,679,164	)
Operating Results for the quarter ended March 31, 2012									(1,054	)				(398,759	)		(399,813	)
Stock-based compensation expense						6,107											6,107
Balances at March 31, 2012		16,502,121	$	16,502	$	5,371,288		$	(4,694	)	$	12,119	$	(8,468,085	)	$	(3,072,870	)
Operating Results for the quarter ended June 30, 2012														(682,695	)		(682,695	)
Foreign currency translation adjustment												141					141
Issuance of common stock, financing transactions, pre-merger		1,450,000		1,450		723,550											725,000
Merger consideration-pre-existing shareholders		15,000,000		15,000		(15,000	)										-
Merger partner capital accounts						10,000								(10,000	)		-
Issuance of common stock, financing transactions, post-merger		1,550,000		1,550		773,450											775,000
Stock-based compensation expense						73,072											73,072
Balances at June 30, 2012		34,502,121	$	34,502	$	6,936,360		$	(4,694	)	$	12,260	$	(9,160,780	)		(2,182,352	)
Operating Results for the quarter ended September 30, 2012														(1,041,817	)		(1,041,817	)
Issuance of common stock, financing transactions, post-merger		1,000,000		1,000		499,000											500,000
Obligation to issue common stock, conversion of indebtedness		27,111,248		27,111		2,004,484											2,031,595
Issuance of warrants						32,565											32,565
Stock-based compensation expense						65,278											65,278
Change in fair market value of Series A warrants due to re-pricing						535,367											535,367
Balances at September 30, 2012		62,613,369	$	62,613	$	10,073,054		$	(4,694	)	$	12,260		(10,202,597	)		(59,364	)
Balances at December 31, 2012		62,660,778	$	62,661	$	10,126,184			-		$	-	$	(10,686,133	)	$	(497,288	)
Operating Results for the quarter ended March 31, 2013														(425,478	)		(425,478	)
Stock-based compensation expense						77,418											77,418
Balances at March 31, 2013		62,660,778	$	62,661	$	10,203,602		$	-		$	-	$	(11,111,611	)	$	(845,348	)
															��
Operating Results for the quarter ended June 30, 2013														(330,745	)		(330,745	)
Stock-based compensation expense						36,120											36,120
Balances at June 30, 2013		62,660,778	$	62,661	$	10,239,722		$	-		$	-	$	(11,442,356	)	$	(1,139,973	)
Operating Results for the quarter ended September 30, 2013														(316,795	)		(316,795	)
Stock-based compensation expense						17,157											17,157
Balances at September 30, 2013		62,660,778	$	62,661	$	10,256,879		$	-		$	-	$	(11,759,151	)	$	(1,439,611	)

The accompanying notes are an integral part of these financial statements.

6

ORYON TECHNOLOGIES, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

For the Nine Month Periods Ended September 30, 2013 and 2012

(Unaudited)

	For the Nine Months Ended September 30,
	2013			2012
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(1,073,018	)	$	(2,123,271	)
Adjustments to reconcile net loss to net cash used in operating activities:
Change in fair market value of Series A warrants due to re-pricing		-			535,367
Noncash interest expense on short-term notes		21,470			20,646
Noncash interest expense on notes payable		-			86,429
Noncash interest expense on warrants related to convertible notes		-			12,893
Noncash interest expense - beneficial conversion feature		-			136,074
Non-controlling interest		-			(1,054	)
Stock-based compensation expense		130,695			144,457
Issuance of convertible notes in lieu of rent		-			6,597
Issuance of noncash warrants other than convertible notes related		-			32,565
Depreciation and amortization		23,362			32,210
Changes in operating assets and liabilities:
Accounts receivable -decrease (increase)		(21,587	)		355
Inventory - decrease (increase)		(6,916	)		(22,614	)
Other current assets - decrease (increase)		1,252			(58,961	)
Other long-term assets - decrease (increase)		455			-
Accounts payable - increase (decrease)		220,129			(27,408	)
Deferred revenues - increase (decrease)		(6,000	)		-
Deferred compensation - increase		170,964			43,573
Other current liabilities - increase (decrease)		(17,045	)		25,712
Due to affiliates - increase (decrease)		-			(14,487	)
Net cash used in operating activities		(556,239	)		(1,170,917	)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment		-			(6,800	)
Net cash flows used in investing activities		-			(6,800	)
CASH FLOWS FROM FINANCING ACTIVITIES
Short-term advances		418,168			-
Cancellation of intercompany short-term notes due to merger		-			(325,000	)
Repayment of short-term notes payable		(22,197	)		(11,000	)
Proceeds from issuance of equity		-			2,000,000
Net cash provided by financing activities		395,971			1,664,000
Effect of exchange rates on changes in cash		-			141
Net increase (decrease) in cash and cash equivalents		(160,268	)		486,424
Cash and cash equivalents, beginning of period		169,678			86,685
Cash and cash equivalents, end of period	$	9,410		$	573,109
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest	$	5,692		$	351
Debt and accrued interest converted to equity	$	-		$	2,031,594

The accompanying notes are an integral part of these financial statements.

7

ORYON TECHNOLOGIES, INC.

Notes to the Consolidated Financial Statements

September 30, 2013

(Unaudited)

Organization and Basis of Presentation

Oryon Technologies, Inc. (“Oryon” or the “Company”) has only one direct subsidiary, OryonTechnologies, LLC, a Texas limited liability company (“OTLLC”). The Company is a developer of a patented electroluminescent (“EL”) lighting technology, trademarked as Elastolite^® that enables thin, flexible, crushable, water-resistant lighting systems to be incorporated into multiple applications such as safety apparel, sporting goods, consumer goods and membrane switches, among others. OTLLC is the parent of two wholly-owned companies: OryonTechnologies Licensing, LLC (“OTLIC”) and OryonTechnologiesDevelopment, LLC (“OTD”), both of which are also Texas limited liability companies.

OTLLC also previously owned OryonTechnologies International Pte. Ltd. (“OTI”), a Singapore-based corporation. Operations at OTI were suspended in May 2009 and OTI was liquidated in November 2012. The operations of OTI were not material to Oryon. OTI originally owned 51% of Oryon-Asia Pacific Safety, Limited (“OAPS”), which was formed in December 2006 as a Hong Kong limited company. During 2011, the 51% ownership was transferred to OTLLC. The other 49% of OAPS was owned by two non-affiliated individuals. Operations of OAPS were suspended in February 2011 and OAPS is in the final stage of liquidation. The operations of OAPS were not material to Oryon.

The accompanying unaudited financial statements of Oryon have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules of the Securities and Exchange Commission (“SEC”). Because a precise determination of many assets and liabilities is dependent upon future events, the preparation of financial statements for a period necessarily involves the use of estimates, which have been made using careful judgment. Actual results may vary from these estimates.

These financial statements have been prepared in accordance with GAAP applicable to a going concern, which assume that the Company will be able to meet its obligations and continue its operations for its next fiscal year. Realization values may be substantially different from carrying values as shown and these financial statements do not give effect to adjustments that would be necessary to the carrying values and classification of assets and liabilities should the Company be unable to continue as a going concern.

At September 30, 2013, the Company had cash of $9,410 and had not yet achieved profitable operations. The Company has had accumulated losses of $11,759,151 since its inception and expects to incur further losses in the development of its business, all of which raises substantial doubt about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent upon its ability to generate future profitable operations and/or to obtain the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due.

The Company expects to continue to incur substantial losses as it executes its business plan and does not expect to attain profitability in the near future. Since its inception, the Company has funded operations through short-term borrowings and equity investments in order to meet its strategic objectives. The Company's future operations are dependent upon external funding and its ability to execute its business plan, realize sales and control expenses. Management cannot guarantee that sufficient funding will be available from additional borrowings and equity placements to meet its business objectives, including anticipated cash needs for working capital, for a reasonable period of time. There can be no assurance that the Company will be able to obtain sufficient funds to continue the development of its business operation, or if obtained, upon terms acceptable to the Company.

These unaudited financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K, as amended, filed with the Securities and Exchange Commission (the “SEC”) on March 7, 2013, and in the Company’s other filings with the SEC since that date. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year.

Corporate History and the Merger

The Company was incorporated under the laws of the State of Nevada on August 22, 2007 with the name “Eaglecrest Resources, Inc.” and 100,000,000 authorized common shares with a par value of $0.001.On August 6, 2010, the Company amended its Articles of Incorporation to increase its number of authorized shares of common stock to 600,000,000 shares of common stock, par value of $0.006 per share. On November 4, 2011, the Company amended its Articles of Incorporation to decrease the par value of its common stock from $0.006 to $0.001 per share. On November 25, 2011, the Company amended its Articles of Incorporation to change its name from “Eaglecrest Resources, Inc.” to “Oryon Holdings, Inc.” On May 5, 2012, the Company amended its Articles of Incorporation to change its name from “Oryon Holdings, Inc.” to “Oryon Technologies, Inc.”

8

ORYON TECHNOLOGIES, INC.

Notes to the Consolidated Financial Statements (Continued)

September 30, 2013

(Unaudited)

The Company was organized for the purpose of acquiring and developing mineral properties. A mineral claim, with unknown reserves, was acquired in August 2007, became impaired in January 2008 and was written off, and the Company had limited operations subsequently. The Company never established the existence of a commercially minable ore deposit and therefore did not reach the exploration stage.

On October 24, 2011, the Company entered into a binding letter of intent (“LOI”) with OTLLC in connection with a proposed reverse acquisition transaction (the “Merger”) between the Company and OTLLC whereby OTLLC agreed to merge with Oryon Merger Sub, LLC, a Texas limited liability company and wholly-owned subsidiary of the Company (“Merger Sub”), in exchange for the issuance to the members of OTLLC of eight (8) shares of the Company’s common stock for each outstanding membership unit of OTLLC, which was equal to a total of 16,502,121 shares (assuming that none of OTLLC’s existing Series C Notes were converted before the closing of the Merger).

In accordance with the terms of the LOI, the terms and conditions of the Merger were thereafter set forth in a formal definitive agreement. To that end, on March 9, 2012, the Company entered into an agreement and plan of merger by and between the Company, OTLLC and Merger Sub (the “Merger Agreement”). Upon the closing of the Merger on May 4, 2012(the “Closing Date”), OTLLC became a wholly-owned subsidiary of the Company, the Company issued 16,502,121 shares of common stock to the members of OTLLC and the promissory notes receivable from OTLLC became intercompany obligations within the corporate group (and have been cancelled).

In connection with the Merger, the Company received $2.0 million in proceeds from the private equity offering, issuing 4.0 million shares of common stock, par value $0.001 (along with warrants for the purchase an additional 4.0 million shares of common stock at the current exercise price of $0.50 per share and having a term of five (5) years).

As a result of the Merger, the OTLLC members acquired the majority of the Company’s issued and outstanding common stock, OTLLC became a wholly-owned subsidiary, and the Company acquired the business and operations of OTLLC.In conjunction with the Merger, OTLLC assumed no liabilities from the Company and all members of the Company’s executive management are from OTLLC.The Company filed a Current Report on Form 8-K, as amended, dated May 4, 2012, describing the Merger and providing information concerning OTLLC.

The Merger was accounted for as a reverse-merger and recapitalization in accordance with GAAP. OTLLC is deemed to be the acquirer for financial reporting purposes and the Company is the acquired company. Consequently, the assets and liabilities and the operations that are reflected in the historical financial statements prior to the Merger are those of OTLLC and are recorded at the historical cost basis of OTLLC, and the consolidated financial statements after completion of the Merger include the assets and liabilities of the Company and OTLLC, historical operations of OTLLC and operations of the Company from the Closing Date. Membership units and the corresponding capital amounts of OTLLC pre-Merger have been retroactively restated as shares of common stock reflecting the eight (8) to one exchange ratio of the Merger. All references in the financial statements and notes thereto to equity securities and all equity related historical financial measurements including weighted average shares outstanding, earnings per share, par value of common stock, additional paid in capital, option exercise prices and warrant exercise prices have been retroactively restated to reflect the Merger exchange ratio.

The Company’s common stock is quoted on the OTCQB tier of the U.S. OTC Markets under the symbol ORYN.

1.Significant Accounting Policies

Principles of Consolidation and Basis of Presentation

The Company uses the accrual method of accounting and all amounts are denominated in United States dollars. The accounts for OTI, which were maintained in Singapore dollars, were converted from Singapore dollars to United States dollars at historical exchange rates.

All significant intercompany accounts and transactions have been eliminated in the consolidation. “Due to affiliates” represents amounts due to entities that own equity or indebtedness of the Company or a subsidiary but that are not part of the consolidated company presented herein.

9

ORYON TECHNOLOGIES, INC.

Notes to the Consolidated Financial Statements (Continued)

September 30, 2013

(Unaudited)

Revenue Recognition

The Company recognizes revenue from products when the goods are shipped pursuant to a customer’s purchase order. Revenue from royalties is recorded in the period in which the sales of the underlying products are made. Revenue from license fees is recognized in the period in which they are due and payable.

Cost of Goods Sold

The Company recognizes costs of goods sold as including only direct production costs such as direct materials, direct labor and freight and does not include any allocation of production overhead.

Use of Estimates

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates that affect the amounts reported in the consolidated financial statements and the accompanying notes. Accounting estimates and assumptions are those that management considers to be the most critical to an understanding of the consolidated financial statements because they inherently involve significant judgments and uncertainties. All of these estimates reflect management’s judgment about current economic and market conditions and their effects based on information available as of the date of these consolidated financial statements. If such conditions persist longer or deteriorate further than expected, it is reasonably possible that the judgments and estimates could change, which may result in future impairments of assets, among other effects.

Significant estimates include the carrying value of intangible assets and the value of equity instruments, including convertible notes, stock options, warrants, and shares issued in lieu of cash.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash held in bank demand deposits. The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are accounted for at fair value, do not bear interest, and are short-term in nature. The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability to collect on accounts receivable. Based on management’s assessment, the Company provides for estimated uncollectible amounts through a charge to earnings and a credit to the valuation allowance. Balances that remain outstanding after the Company has used reasonable collection efforts are written off through a charge to the valuation allowance and a credit to accounts receivable. The Company does not require collateral.

Concentrations of Credit Risk

Certain balance sheet items that potentially subject the Company to concentrations of credit risk are primarily accounts receivable. Concentrations of credit risk with accounts receivable are generally mitigated by the size of the Company’s customers. The Company performs ongoing credit evaluations of its customers and maintains an allowance for doubtful accounts based upon the expected collectability of all accounts receivable.

Inventory

Inventory is carried at the lower of cost or market. A physical inventory count is taken at the end of each calendar quarter and the accounting records are adjusted to match the physical inventory. Inventory cost does not include any allocation of production overhead.

Property and Equipment

Property, equipment, computer hardware and software, and leasehold improvements are carried at historical cost. Expenditures are capitalized only if the cost of the individual asset exceeds $1,200 and the asset is expected to have a business use for greater than 12 months.

Depreciation is calculated on a straight line basis over the estimated useful life of the property acquired. Equipment and furniture is depreciated over 60 months. Computer software and hardware is depreciated over 36 months. Leasehold improvements are amortized over the life of the lease or the life of the improvement, whichever is shorter.

Inter-company transfers of assets are recorded at depreciated cost, with no change in estimated life or monthly depreciation.

10

ORYON TECHNOLOGIES, INC.

Notes to the Consolidated Financial Statements (Continued)

September 30, 2013

(Unaudited)

Research and Development

The Company expenses all costs associated with the development of applications for the Company’s technology as the costs are incurred.

Intangible Assets

Amortization is computed based on the straight line method over the life of the patent, which is 180 months beginning with the month when the patent is granted. The amortization is based on the historical cost of each individual patent. Costs incurred to renew or extend the terms of patents are expensed as incurred.

The Company annually assesses whether the carrying value of its intangible assets exceeds their fair value and records an impairment loss equal to any excess.

Income Taxes

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

The Company accounts for uncertain tax positions in accordance with ASC 740-10. ASC 740-10 provides several clarifications related to uncertain tax positions. Most notably, a “more likely-than-not” standard for initial recognition of tax positions, a presumption of audit detection and a measurement of recognized tax benefits based on the largest amount that has a greater than 50 percent likelihood of realization. ASC 740-10 applies a two-step process to determine the amount of tax benefit to be recognized in the financial statements. First, the Company must determine whether any amount of the tax benefit may be recognized. Second, the Company determines how much of the tax benefit should be recognized (this would only apply to tax positions that qualify for recognition.) No additional liabilities have been recognized as a result of the implementation. Accordingly, the Company has not recognized any penalty, interest or tax impact related to uncertain tax positions. Federal returns for tax years ended December 31, 2009 and after remain open to examination as of December 31, 2012. The statute of limitations differ from state to state; however, generally tax years ended December 31, 2009 and after remain open to state examination as of December 31, 2012.

OTI and OAPS are not consolidated into the Company for purposes of United States tax filings and computations. OTLLC, OTD and OTLIC are limited liability companies and, as such, do not pay federal or state income taxes. Accordingly, no taxes have been accrued on the Company’s records for periods prior to the Merger.

Stock-Based Compensation

The Company utilizes equity based awards as a form of compensation for employees, officers and directors. The Company records compensation expense for all awards granted. After assessing alternative valuation models and amortization methods, the Company uses the Black-Scholes valuation model and straight-line amortization of compensation expense over the requisite service period for each grant. The Company will reconsider use of this model if additional information becomes available in the future that indicates another model would be more appropriate or if grants issued in future periods have characteristics that cannot be reasonably estimated using this model.

Leases

The Company leases office facilities under a non-cancelable operating lease. The Company recognizes rent on a straight-line basis over the lease term.

11

ORYON TECHNOLOGIES, INC.

Notes to the Consolidated Financial Statements (Continued)

September 30, 2013

(Unaudited)

2.Inventory

Inventory consists of the following:

	September 30,		December 31,
	2013		2012
Raw materials	$	94,816	$	95,732
Work in process		3,472		-
Finished goods		5,722		884
Customer projects in process		362		840
Total Inventory	$	104,372	$	97,456

3.Property and Equipment

Property and equipment consist of the following:

	September 30,			December 31,
	2013			2012
Leasehold improvements	$	7,279		$	7,279
Furniture and equipment		195,927			195,927
Property and equipment, gross		203,206			203,206
Accumulated depreciation		(187,546	)		(181,498	)
Net property and equipment	$	15,660		$	21,708

Depreciation expense was $1,924 and $2,301 for the three month periods ended September 30, 2013 and 2012, respectively, and $6,050 and $14,897 for the nine month periods ended September 30, 2013 and 2012, respectively

4.Intangible Assets

As of September 30, 2013 and December 31, 2012, the Company’s only intangible assets consisted of patents with a gross carrying cost of $320,795 and accumulated amortization of $200,372 and $183,059, respectively. The remaining weighted average amortization period was 7.6 years at December 31, 2012. The estimated aggregate amortization expense in each of the years ending December 31, 2013 through December 31, 2016, is $23,084 per year.

The balances as of September 30, 2013, including intangible assets and accumulated amortization, are detailed as follows:

As of September 30, 2013
Finite-Lived Intangible Assets	Amortization Period (Years)		Gross Carrying Amount		Accumulated Amortization		Net
Patents	15	$	320,795	$	(200,372)	$	120,423

The balances as of December 31, 2012, including intangible assets and accumulated amortization, are detailed as follows:

As of December 31, 2012
Finite-Lived Intangible Assets	Amortization Period (Years)		Gross Carrying Amount		Accumulated Amortization		Net
Patents	15	$	320,795	$	(183,059)	$	137,736

Amortization expense was $5,771 for each of the three month periods ended September 30, 2013 and 2012 and $17,312 for each of the nine month periods ended September 30, 2013 and 2012.

12

ORYON TECHNOLOGIES, INC.

Notes to the Consolidated Financial Statements (Continued)

September 30, 2013

(Unaudited)

5.Other Long Term Assets

Other long term assets consist of the following:

	September 30,		December 31,
	2013		2012
Investment in subsidiaries	$	100	$	100
Other receivables		6,647		7,102
Security deposits		6,597		6,597
Licenses		10,000		10,000
Total other assets	$	23,344	$	23,799

6.Deferred Compensation

Deferred compensation consists of the following:

	September 30,		December 31,
	2013		2012
Deferred wages	$	200,854	$	112,979
Deferred directors' fees		99,375		45,000
Accrued unpaid wages		21,635		-
Accrued taxes on deferred wages		15,767		8,688
Total deferred compensation	$	337,631	$	166,667

Prior to August 31, 2011, the Company was obligated to issue shares to certain senior level employees in lieu of cash wages in connection with employment agreements with those employees. The employment agreements provided that the employees would receive shares in lieu of cash compensation until such time as the Company obtains sufficient capital (as defined in the agreements) to begin paying their agreed-upon compensation in cash. The obligation for additional issuances was accrued each pay period and the Company was obligated to issue the shares at the beginning of each calendar quarter, provided that the employee was still employed by the Company.

As of December 31, 2010, the Company was obligated to issue shares in lieu of $99,094 in wages for the year ended December 31, 2010, (issuable on the first day of the subsequent quarter) and $13,613 in wages for the year ended December 31, 2009. Accordingly, a total of 898,056 shares were issued on January 1, 2011 at a value of $0.125 per share. An additional 1,553,776 shares were issued on October 1, 2011 at a value of $0.125 per share under the employment agreements in lieu of compensation earned between January 1, 2011 and August 31, 2011, for a total of 2,451,832 shares issued in 2011 in lieu of cash wages.

Effective September 1, 2011, the agreements were revised to provide for the indefinite deferral of unpaid wages until sufficient external funding was obtained. Deferred wages at September 30, 2013 and December 31, 2012 were $200,854 and $112,979, respectively. An accrual equal to 7.85% of the deferred wages has been established for the employer’s Social Security and Medicare tax obligations that would be required to be paid at the time the deferred wages are paid.

In November 2012, the Compensation Committee of the Board of Directors and the Board of Directors both approved a program of compensation for independent directors to compensate non-management directors for their services. Management directors receive no compensation for board service. Compensation for independent director services was established as $5,000 per calendar quarter, due at the end of each calendar quarter for services rendered during such period. In addition, the chairman of the Audit Committee receives extra compensation of $1,875 per calendar quarter and the chairman of the Compensation Committee receives extra compensation of $1,250 per calendar quarter. However, payment of cash compensation for director services has been deferred by the Board of Directors through December 31, 2013. Directors are not paid for meetings attended.

13

ORYON TECHNOLOGIES, INC.

Notes to the Consolidated Financial Statements (Continued)

September 30, 2013

(Unaudited)

7.Current Portion of Promissory Notes and Other Short-Term Debt

Other short-term debt consists of the following:

	September 30,		December 31,
	2013		2012
Current portion, promissory notes payable	$	48,526	$	37,500
Other short-term debt		318,395		322,145
Short-term advances		418,168		-
Accrued interest		63,480		42,010
Total	$	848,569	$	401,655

“Current portion, promissory notes payable”

In December 2012, the Company executed a promissory note (the “Note”) payable to a former executive and current shareholder in order to consolidate its various obligations to such individual into a single instrument. The Note had an original balance of $211,418 and matures on September 16, 2016. Interest on the Note is incurred at WSJPrime plus one percent per annum, which has resulted in a constant interest rate of 4.25% through September 30, 2013. The Note requires monthly principal and interest payments of (a) $3,000 through September 30, 2013, (b) $4,500 from October 1, 2013 through September 30, 2014, (c) $6,000 from October 1, 2014 through September 30, 2015, (d) $7,500 from October 1, 2015 through September 30, 2016 and (e) all remaining principal on September 30, 2016. Through September 30, 2013, the Company has made $36,000 in payments, consisting of $28,178 in principal (principal repayments of $9,731 in the last quarter of 2012, $6,881 in the first quarter of 2013, $6,932 in the second quarter of 2013 and $4,633 in the third quarter of 2013) and $7,822 in interest (interest expense of $2,268 in the last quarter of 2012, $2,119 in the first quarter of 2013, $2,068 in the second quarter of 2013 and $1,367 in the third quarter of 2013). At September 30, 2013, accrued but unpaid interest was $649. The remaining Note principal balance is $183,240 and $201,687 at September 30, 2013, and December 31, 2012, respectively, of which $48,526 and $37,500 is expected to be paid in the twelve months ending September 30, 2014 and December 31, 2013, respectively, and is classified as current. The remaining $134,714 and $164,187 principal has been classified as long term as of September 30, 2013 and December 31, 2012, respectively.

“Other short-term debt” and “Accrued interest”

During the year ended December 31, 2011, OTLLC was unable to complete a financing deal with a private equity firm that had been expected to provide OTLLC with adequate capital. To fund continuing operations at a reduced level of expenditures, OTLLC received temporary funding from several sources. The Company has since repaid one source in full and the Company’s remaining obligation is included in the table above. During the first and second quarters of 2013, the Company made payments totaling $3,000 and, as of September 30, 2013, $32,000 remained payable. In addition, a vendor previously required that the outstanding accounts payable balance of $287,145 be converted to a promissory note. Such note accrues interest at 10% annually ($63,480 and $42,010 accrued through September 30, 2013, and December 31, 2012, respectively) and is payable upon demand. This note matured on December 15, 2011 and management has engaged in negotiations with the vendor to extend the note or replace it with a new promissory note.

“Short-term advances”

In connection with the Merger, the Company received $2.0 million in proceeds from the private equity offering, issuing 4.0 million shares of common stock, par value $0.001 (along with warrants for the purchase an additional 4.0 million shares of common stock at the current exercise price of $0.50 per share and having a term of five (5) years). In the first nine months of 2013, investors holding certain of the warrants provided the Company with $390,000 in financial support by providing short-term advances to the Company against the exercise of their warrants at a future time of the investors’ choice. The balance of the short-term advances was $390,000 and $0 as of September 30, 2013, and December 31, 2012, respectively. No timing for the exercise of the warrants has been determined.

14

ORYON TECHNOLOGIES, INC.

Notes to the Consolidated Financial Statements (Continued)

September 30, 2013

(Unaudited)

Information regarding historical indebtedness

In October 2011, OTLLC signed a binding letter of intent to negotiate a merger agreement with the Company. Through December 31, 2011, in connection with the letter of intent, OTLLC issued promissory notes to the Company in the amount of $325,000 in connection with the advance by the Company to OTLLC of $325,000. The funds for this advance were obtained by the Company pursuant to a private offering whereby for each dollar invested, the investor(s) making such investment would be issued two (2) shares of common stock of the Company and a warrant to purchase two (2) shares of common stock of the Company with a current exercise price of $0.50 per share and a term of five (5) years. The proceeds of the private offering through December 31, 2011, resulted in the obligation to issue 650,000 shares of common stock (along with warrants for the purchase of an additional 650,000 shares of common stock at a current exercise price of $0.50 per share).

During the three months ended March 31, 2012, OTLLC issued additional promissory notes to the Company in the amount of $200,000 in connection with the advance by the Company to OTLLC of $200,000, for a total cumulative amount of $525,000 of promissory notes as of March 31, 2012. In April 2012, OTLLC issued additional promissory notes to the Company in the amount of $200,000 in connection with the advance by the Company to OTLLC of an additional $200,000, for a total cumulative amount of $725,000 of promissory notes as of April 30, 2012, and the Closing Date. The funds for these advances were obtained by OTLLC pursuant to the private offering described above. At the Closing Date and April 30, 2012, $725,000 was included on the Company’s balance sheet as notes receivable from OTLLC. Subsequent to April 30, 2012, upon the closing of the Merger on May 4, 2012, all of the promissory notes receivable became intercompany transactions within the consolidated corporate group and were cancelled.

The proceeds of the private offering between December 31, 2011 and the Closing Date resulted in the obligation to issue 800,000 shares of common stock (along with warrants for the purchase of an additional 800,000 shares of common stock at the current exercise price of $0.50 per share and a term of five (5) years) in addition to the obligation to issue 650,000 shares of common stock (along with warrants for the purchase of an additional 650,000 shares of common stock at the current exercise price of $0.50 per share) that existed at December 31, 2011. Of the resulting cumulative total of 1,450,000 shares that the Company was obligated to issue pursuant to the private offering through April 30, 2012 and the Closing Date, 800,000 shares (along with the warrants for the purchase of 800,000 additional shares at the current exercise price of $0.50 per share and a term of five (5) years) were issued on March 12, 2012, so that as of April 30, 2012 and the Closing Date, the net amount of 650,000 shares (along with warrants for the purchase of an additional 650,000 shares at the current exercise price of $0.50 per share) remained to be issued by the Company to fulfill subscriptions in an aggregate amount of $325,000.

8.Other Current Liabilities

Other liabilities at September 30, 2013, and December 31, 2012, consist of accrued corporate operating expenses as estimated by management, including accruals for legal, tax preparation and accounting expenses.

9.Notes Payable, Net

At September 30, 2013, notes payable consist entirely of the current portion of the promissory note discussed above in Note 7, “Current Portion of Promissory Notes and Other Short-Term Debt”.

The Company, through its wholly-owned subsidiary OTLLC, had three outstanding series of convertible notes (the Series C-1 notes, the Series C-2 notes, and the Series C-3 notes, collectively the “Notes”). Each series of Notes was convertible under certain circumstances into the Company’s common stock at different conversion rates. On August 31, 2012, as a result of the completion of a “Qualified Financing” as defined in the Notes and as modified by the Group Modification Agreement approved by the holders of the Notes in March 2012, the Notes and accumulated accrued interest through August 31, 2012, were converted into 27,158,657 shares of the Company’s common stock (the “Conversion”).

15

Following the Conversion on August 31, 2012, none of the principal and interest of the Notes remained outstanding, but the holders of the Notes retained the detachable warrants to purchase common stock at $0.3125 per share that they had received in connection with their investment in the Notes. The following table shows the number of shares of common stock that would have been issued if all the warrants related to the Notes were exercised as of September 30, 2013 and as of December 31, 2012:

As of September 30, 2013 and December 31, 2012
Convertible Debt	Conversion Price	Principal and Interest   Amounts		Potential Shares Issued if Notes Converted		Shares Issued if Series C Warrants Exercised @ $0.3125
Series C-1 Notes	N/A	$	-		-		2,841,440
Series C-2 Notes	N/A		-		-		3,200,000
Series C-3 Notes	N/A		-		-		1,972,000
		$	-		-		8,013,440

The Company has not included these share equivalents in earnings per share calculations as they are anti-dilutive.

Interest on the Notes accrued at the rate of 5% per annum, compounded annually, and was payable at the election of the Company on the last day of each calendar quarter. Accrued but unpaid interest was added to the principal. Accrued and unpaid interest was converted to shares of common stock when the related Note principal was converted to common stock effective August 31, 2012. The Notes were secured by substantially all assets of OTLLC, and, as a result of the Conversion, the lien on such assets was automatically removed.

The previously outstanding Series A convertible notes payable were determined to have an embedded beneficial conversion feature under the provisions of FASB ASC 470-20, “Debt with Conversion and Other Options” based on the 2008 and 2009 issuances at market value of $2 per share and an exercise price of $1.00 per share.  In accordance with ASC 470-20, an embedded conversion feature present in a convertible instrument shall be recognized separately at issuance by allocating a portion of the proceeds equal to the intrinsic value of that feature to additional paid-in capital.   A discount of $887,950 was recorded for Series A convertible note issuances during 2008 through 2009 and amortization expense recognized in the amounts of $0 and $180,826 for the years ended December 31, 2011 and December 31, 2010, respectively.

In November 2010, OTLLC issued the Series C-1 notes as payoff of the previously outstanding Series A convertible notes and the Series C-2 notes for the previously outstanding Series B convertible notes. As a result of this transaction, a gain on extinguishment of debt was recognized in the amount of $264,676 under the provisions of ASC 470-50, “Modifications and Extinguishments”.

The Series C-1 convertible notes, issued in exchange for the Series A convertible notes, were also determined to have an embedded beneficial conversion feature under the provisions of ASC 470-20, “Debt with Conversion and Other Options” based on the November 2010 market value of $1 per share and an exercise price of $.50 per share.  In accordance with ASC470-20, an embedded conversion feature present in a convertible instrument shall be recognized separately at issuance by allocating a portion of the proceeds equal to the intrinsic value of that feature to additional paid-in capital.   A discount of $972,070 was recorded at November 2010 for the Series C-1 convertible note issuances.

10.Leases

The Company’s only lease is for its office and production facility, consisting of approximately 9,957 square feet in a building located at 4251 Kellway Circle in Addison Texas. The Company is obligated to pay $6,597 per month through March 31, 2016. The Company began leasing its current facilities in April 2010 under an operating lease that extends through March 2016.

In August 2011 the Company reached an agreement with the lessor to issue Series C-3 notes as payment for the July 2011 through January 2012 rent. The Company also agreed to issue an additional $30,000 Series C-3 convertible note in exchange for the lessor’s acceptance of such agreement. This payment was amortized over the seven months of rent paid by the note, increasing rent expense by $4,300 for the three month period ended March 31, 2012 (for the January 2012 amortization).

Rent expense relating to the operating lease agreement was $17,777 and $19,791 for the three month periods ended September 30, 2013 and 2012, respectively, and $57,359 and $63,673 for the nine month periods ended September 30, 2013 and 2012, respectively.

16

ORYON TECHNOLOGIES, INC.

Notes to the Consolidated Financial Statements (Continued)

September 30, 2013

(Unaudited)

As of December 31, 2012, the future minimum payments required under all operating leases with terms in excess of one year were as follows:

For the year ending December 31,		Amount
	2013		79,164
	2014		79,164
	2015		79,164
	2016		19,791
	2017		-
		$	257,283

11.Commitments and Contingencies

From time to time, the Company is engaged in various legal proceedings that are routine in nature and incidental to its business. At this time, there are no legal proceedings to which the Company is a party nor, to management’s knowledge, are any material legal proceedings contemplated.

As of September 30, 2013, only one of the Company’s employees was covered by employment agreements. In general, the employment agreement contains non-compete provisions ranging from three months to one year following the term of the applicable agreement.

12.Income Taxes

The tax effects of significant items comprising the Company’s net deferred tax assets and liabilities at September 30, 2013 are as follows:

Net operating loss carryforwards	$	739,557
Depreciation		(2,375	)
Amortization		4,471
Accrued miscellaneous		50,389
FMV warrants adjustment		182,025
Stock option compensation expense		63,468
Interest amortization		33,178
Total current deferred tax asset		1,070,713
Less: Valuation allowance		(1,070,713	)
Net current deferred tax asset	$	-

The Company has net operating loss carry forwards of approximately $2,175,168 at September 30, 2013, which begin expiring in 2030. In assessing the reliability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Management has recorded a valuation allowance for all deferred tax assets at September 30, 2013.

The Company has filed its tax returns as a corporation since inception. OTLLC is a limited liability company and, as such, does not pay income taxes. Prior to the Merger, OTLLC filed separate tax returns for each subsidiary that is a limited liability company and provided the applicable investors with appropriate personally individualized documentation. All returns for OTLLC, OTD and OTLIC are current through the 2011 tax year. The partial year return for OTLLC for operations through the date of the Merger was completed on a timely basis.

17

ORYON TECHNOLOGIES, INC.

Notes to the Consolidated Financial Statements (Continued)

September 30, 2013

(Unaudited)

OTI was taxed in Singapore. All returns for OTI are current. OTI generated substantial tax losses during its existence and therefore received a tax refund of $5,181 in 2011 for estimated taxes paid prior to 2009. No anticipated tax liability existed at September 30, 2013, or December 31, 2012.

OAPS was taxed in Hong Kong. All returns for OAPS are current. OAPS generated substantial tax losses during its existence and no anticipated tax liability existed at September 30, 2013, or December 31, 2012.

13.Capital

The Company was incorporated under the laws of the State of Nevada on August 22, 2007 with 100,000,000 authorized common shares with a par value of $0.001. On August 6, 2010, the Company effected a forward split of its shares of common stock on the basis of six new shares for one existing share, and amended its Articles of Incorporation to increase its number of authorized shares of common stock to 600,000,000 shares of common stock, with a par value of $0.006 per share. On October 31, 2011, certain shareholders, including two executive officers, surrendered, in aggregate, 30,000,000 shares of the Company’s common stock for cancellation. On November 17, 2011, an additional 1,000,000 shares were surrendered for cancellation. On November 4, 2011, the Board of Directors reduced the par value of the common shares from $0.006 to $0.001 per share. As of December 31, 2011 and January 31, 2012, 29,000,000 post-split common shares were issued and outstanding. The post-split common shares are shown as split from the date of inception. On April 19 and 30, 2012, certain shareholders surrendered for cancellation, in aggregate, an additional 14,000,000 shares of the Company’s common stock, leaving the remaining number of 15,000,000 post-split common shares.

During the year ended December 31, 2011, the Company entered into subscription agreements for units of the Company, at $0.50 per unit. The subscription agreements were in connection with the financing agreement (the “Financing Agreement”) that the Company signed on November 2, 2011, with Maxum Overseas Fund (“Maxum”) under which Maxum agreed to: (i) invest $100,000 in the common equity of the Company and (ii) either invest an additional amount up to $1,900,000 in the common equity of the Company or assist the Company in securing all or a portion of such $1,900,000 investment from alternate sources. Under the terms of the Financing Agreement, for each dollar invested, the investor(s) making such investment will be issued two (2) shares of common stock of the Company and a warrant to purchase two (2) shares of common stock of the Company with a current exercise price of $0.50 per share and a term of five (5) years.

At both December 31, 2011 and January 31, 2012, the Company had received $325,000 for subscriptions representing the obligation to issue 650,000 shares (along with warrants having the right to purchase an additional 650,000 shares, each with the current exercise price of $0.50 per share and a term of five years).

During the three months ended March 31, 2012, the Company received an additional $200,000 in subscriptions pursuant to the Financing Agreement representing the obligation to issue 400,000 shares (along with warrants having the right to purchase an additional 400,000 shares, each with the current exercise price of $0.50 per share and a term of five years). In April 2012, the Company received an additional $200,000 in subscriptions pursuant to the Financing Agreement representing the obligation to issue an additional 400,000 shares (along with warrants having the right to purchase an additional 400,000 shares, each with the current exercise price of $0.50 per share and a term of five years). The cumulative result of the subscriptions through April 30, 2012 and the Closing Date was the obligation to issue 1,450,000 shares (650,000 for subscriptions prior to December 31, 2011 plus 800,000 for subscriptions between January 1 and April 30, 2012) along with warrants having a five (5) year term to purchase 1,450,000 shares at the current exercise price of $0.50 per share. On March 12, 2012, the Company fulfilled subscription agreements in the aggregate amount of $400,000 resulting in the issuance of 800,000 shares of common stock (along with warrants having a five (5) year term to purchase an additional 800,000 shares at the current exercise price of $0.50 per share). As a result, as of April 30, 2012, the Company had the remaining obligation to fulfill $325,000 in subscriptions to issue the 650,000 shares (along with warrants having the right to purchase an additional 650,000 shares, each with a current exercise price of $0.50 per share and a five (5) year term). Using the Black-Scholes stock price valuation model, $90,535 of the $400,000 proceeds related to the issued equity securities was allocated to the issuance of the warrants to purchase 800,000 shares.

On May 10, 2012 and May 15, 2012, the Company received a total of $775,000 from subscriptions resulting in the obligation to issue an aggregate of an additional 1,550,000 shares of common stock (along with warrants having the right to purchase 1,550,000 additional common shares, each with a current exercise price of at $0.50 per share).

18

ORYON TECHNOLOGIES, INC.

Notes to the Consolidated Financial Statements (Continued)

September 30, 2013

(Unaudited)

At April 30, 2012, 15,800,000 shares of common stock were issued and outstanding, consisting of the 15,000,000 post-split common shares plus the 800,000 shares issued in the fulfillment of the $400,000 in subscriptions on March 12, 2012. At the Closing of the Merger on May 4, 2012, the Company issued 16,502,121 additional common shares to the former OTLLC members.

In June 2012, an additional 2,200,000 shares were issued in the fulfillment of the $1,100,000 in the remaining subscriptions received but that had not yet been fulfilled. On August 31, 2012, the Conversion of the Notes (see Note 9) required the Company to issue 27,111,248 shares of common stock to the holders of the Notes. In September 2012, an additional 1,000,000 shares were issued in the fulfillment of the $500,000 in subscriptions received during July and August. In summary, there are 62,660,778 common shares outstanding as of the date of this filing.

On March 19, 2012, the Company amended its Articles of Incorporation to authorize 50,000,000 shares of preferred stock, par value $0.001 per share. The Company’s shareholders approved the Restated Articles at a special meeting of shareholders held on March 19, 2012. No preferred stock has been subscribed for or issued as of the date hereof.

14.Equity Options and Warrants

OTLLC adopted the 2004 Unit Option Plan under which officers, employees, advisors and managers could be awarded membership unit option grants.Under the 2004 Unit Option Plan, OTLLC’s board could fix the term and vesting schedule of each option. Vested options generally could remain exercisable for up to three months after a participant's termination of service or up to 12 months after a participant's death or disability. Typically, the exercise price of a nonqualified option must not be less than the fair market value of the units on the grant date. The exercise price of each unit option granted under the 2004 Plan must be paid in cash when the option is exercised. Generally, options are not transferable except by will or the laws of descent and distribution.

In connection with the Merger, the Company’s Board of Directors adopted the 2012 Equity Incentive Plan, previously filed as Exhibit 99.1 to the Company’s Current Report on Form 8-K filed on March 21, 2012. In connection with the Merger, each currently outstanding option to purchase an OTLLC unit was converted into an option to purchase eight (8) shares of the Company’s common stock under the Company’s 2012 Equity Incentive Plan. Immediately prior to Closing, there were 345,388 options to purchase OTLLC units outstanding, which, if exercised could result in the issuance of 2,763,104 shares of the Company’s common stock at prices ranging from $0.13 per share to $0.63 per share.

On May 4, 2012, the date of the closing of the Merger, all (except 400,000) of the unvested options became fully vested since the Merger was a “change of control” as defined in the 2004 Unit Option Plan.

In September2012, an option for 500,000 shares, exercisable at $0.745 per share, with 50% vested immediately and 50% vested on the first anniversary of the grant date, was granted to the Company’s chief executive officer under the 2012 Equity Incentive Plan. The grant date fair market value of this option grant was $114,534 of which $77,838 was expensed in 2012.

On November 6, 2012, non-executive directors were issued options for 266,667 shares, exercisable at $0.395 per share, 100% vested on the grant date, as compensation for such independent directors’ prior service. The grant date fair market value of these option grants was $33,765, all of which was expensed in 2012.

On January 16, 2013, options for 423,796 shares were granted to employees and consultants for past services rendered, exercisable at $0.3425 per share and 100% vested on the grant date. The expense related to these option grants was $44,320 in the first nine months of 2013.

On May 2, 2013, non-executive directors were issued options for 300,000 shares, exercisable at $0.21 per share, 100% vested on the grant date, as compensation for such independent directors’ past service. The $19,590 grant date fair market value of these option grants was expensed in the second quarter of 2013.

On May 6, 2013, a consultant was issued an option for 81,081 shares, exercisable at $0.185 per share, 100% vested on the grant date, as compensation for such consultant’s past service. The $8,205 grant date fair market value of these option grants was expensed in the second quarter of 2013. Also, on June 28, 2013, the consultant was issued an option for 53,922 shares, exercisable at $0.153 per share, 100% vested on the grant date, as compensation for such consultant’s service in the second quarter. The $6,334 grant date fair market value of these option grants was expensed in the second quarter of 2013.

19

ORYON TECHNOLOGIES, INC.

Notes to the Consolidated Financial Statements (Continued)

September 30, 2013

(Unaudited)

At September 30, 2013, there were 4,472,274 options outstanding at an average exercise price of $0.268 per share, consisting of 4,172,274 fully vested options outstanding at an average exercise price of $0.278 per share and 300,000 unvested options outstanding with an average exercise price of $0.125 per share.

Stock Options

The Company has used the modified Black-Scholes model to estimate the fair value of employee options on the date of grant utilizing the assumptions noted below. The risk-free rate is based on the U.S. Treasury bill yield curve in effect at the time of grant for the expected term of the option. The expected term of options granted represents the period of time that the options are expected to be outstanding. Expected volatilities are based on historical volatilities of selected technology stock mutual funds. The dividend yield was zero since the Company will not be paying dividends for the foreseeable future. For stock option grants in 2012, the following assumptions were used:

Range of risk-free interest rates 0.669% - 2.812%

Expected term of options in years 5.003 – 6.256

Range of expected volatility 34.70% – 38.42%

A summary of option activity for the years ended December 31, 2012 and 2011 follows:

	For the year ended December 31,
	2012				2011
	Shares		Weighted Average Exercise Price		Shares			Weighted Average Exercise Price
Outstanding at the beginning of the year		2,363,104	$	0.188		2,803,104		$	0.209
Granted		1,166,667	$	0.452		-		$	-
Exercised		-	$	-		-		$	-
Forfeited and expired		-	$	-		(440,000	)	$	0.324
Outstanding at the end of the year		3,529,771	$	0.275		2,363,104		$	0.188
Exercisable at the end of the year		2,879,771	$	0.255		1,153,104		$	0.225

The Company recognized total compensation expense related to the stock options of $17,157 and $65,278 during the three month periods ended September 30, 2013 and 2012, respectively and $130,695 and $144,457 during the nine month periods ended September 30, 2013 and 2012, respectively. Compensation expense related to stock options is included in selling, general and administrative expenses in the consolidated statement of operations. Total unrecognized compensation expense related to unvested unit options was $10,142 and $46,143 at September 30, 2013, and December 31, 2012, respectively. 

The weighted average grant date fair value of share options granted during the three month period ended September 30, 2013 was $0.080 per share.

20

Common stock options outstanding and exercisable at December 31, 2012 were as follows:

As of December 31, 2012
		Options Outstanding				Options Exercisable
Exercise Prices		Number Outstanding		Weighted Average Years of Remaining Contractual Life		Number Outstanding
$	0.125		2,023,104		7.82		1,623,104
$	0.250		240,000		6.01		240,000
$	0.325		340,000		1.32		340,000
$	0.375		120,000		7.61		120,000
$	0.395		266,667		9.85		266,667
$	0.625		40,000		2.42		40,000
$	0.745		500,000		9.68		250,000
	Total		3,529,771		7.42		2,879,771

The Company has not included these common stock equivalents in earnings per share calculations as they are anti-dilutive.

Warrants

On March 12, 2012, as discussed in Note 13 above, the Company fulfilled subscriptions for the issuance of 800,000 shares along with warrants having the right to purchase 800,000 shares of common stock at the current exercise price of $0.50 per share, expiring in 5 years from the date of issuance. In June 2012, the Company fulfilled subscriptions for the issuance of 2,200,000 shares along with warrants having the right to purchase 2,200,000 shares of common stock at the current exercise price of $0.50 per share, expiring in 5 years from the date of issuance. In September 2012, the Company fulfilled subscriptions for the issuance of 1,000,000 shares along with warrants having the right to purchase 1,000,000 shares of common stock at the current exercise price of $0.50 per share, expiring in 5 years from the date of issuance. Also in September 2012, the Company issued to a consultant warrants having the right to purchase 133,335 shares of common stock at the current exercise price of $0.50 per share, expiring in 5 years from the date of issuance. Therefore, shares that may potentially be issued upon the exercise of warrants as a result of subscriptions received by the Company and issued to consultants through September 30, 2013 are as follows: 

	Number of shares potentially issuable		Weighted average exercise price
Balance, December 31, 2012		-	$	-
Issued in fulfillment of subscriptions		4,000,000		0.50
Issued to consultant		133,335		0.50
Exercised		-		-
Balance, September 30, 2013		4,133,335		0.50

When subscriptions are fulfilled by the Company, the warrants related to each individual subscription are dated as of the date the subscription funds were received by the Company, regardless of the date on which the obligation is ultimately fulfilled. Therefore, all warrants have a term of five years from date the subscription funds were received.

21

ORYON TECHNOLOGIES, INC.

Notes to the Consolidated Financial Statements (Continued)

September 30, 2013

(Unaudited)

At September 30, 2013, the remaining number of years to expiration and the weighted average term to expiration for the 4,133,335 outstanding warrants related to subscriptions that had been fulfilled through that date were as follows:

Expiration Date	Number of shares potentially issuable		Remaining years to expiration and weighted average		Fair Value of Warrants (at $0.50 exercise price)
October 26, 2016		200,000		3.07	$	107,446
November 1, 2016		50,000		3.09		26,862
December 4, 2016		200,000		3.18		107,446
December 27, 2016		200,000		3.24		107,446
February 13, 2017		50,000		3.38		26,862
February 27, 2017		100,000		3.41		53,723
March 12, 2017		250,000		3.45		134,308
April 4, 2017		150,000		3.51		80,585
April 22, 2017		250,000		3.56		134,308
May 9, 2017		500,000		3.61		268,616
May 14, 2017		1,050,000		3.62		564,094
July 22, 2017		500,000		3.81		268,616
August 30, 2017		500,000		3.92		268,616
August 30, 2017		133,335		3.92		71,632
		4,133,335			$	2,220,560

Using the Black-Scholes stock price valuation model, $561,194 of the $2,000,000 proceeds related to the fulfillment of the subscriptions during the year ended December 31, 2012, was originally attributed to the warrants to purchase 4,133,335 shares. However, in September 2012, the board of directors authorized the re-pricing of the warrants’ exercise price from the original $0.75 per share to the current $0.50 per share. This resulted in an increase of $535,367 in allocation of the proceeds to paid-in capital and a matching expense on the income statement.

The following assumptions were used for the Black-Scholes valuation of the warrants issued:

	Assumption
Dividend rate	0%
Annualized volatility	39.00%
Risk free interest rate	0.59%- 1.20%
Expected life of warrants (years)	5.00

At both September 30, 2013 and December 31, 2012, the Company had issued warrants for 8,013,440 shares of common stock to the holders of the Notes (see note 9) and additional warrants for 107,672 shares of common stock to other individuals for a total of 8,121,112 warrants outstanding. Of the warrants outstanding, 42,672 were issued in 2009, exercisable at $0.375 per share and had a weighted average grant date fair value of $0.009. In 2010, 7,768,440 warrants were issued, exercisable at $0.3125 per share, having a weighted average grant date fair value of $0.01. The remaining 310,000 warrants were issued in 2011, also exercisable at $0.3125 per share, having a weighted average grant date fair value of $0.008. The Company uses the modified Black-Scholes model to estimate the fair value of warrants on the date of issuance. Noncash interest expense reflecting the amortization of debt discount related to the warrant issuances of $-0- and $9,599 was recorded for the nine month periods ended September 30, 2013 and 2012, respectively.

The Company has not included these common stock equivalents in earnings per share calculations as they are anti-dilutive.

22

ORYON TECHNOLOGIES, INC.

Notes to the Consolidated Financial Statements (Continued)

September 30, 2013

(Unaudited)

15.Benefit Plans

The Company established a 401(k) Plan (the “Plan”) for eligible employees of the Company, but in December 2012, the Company announced the termination of the Plan, primarily due to the high cost relative to the inadequate employee participation. Generally, all employees of the Company who are at least twenty-one years of age and who have completed one-half year of service were eligible to participate in the Plan. The Plan was a defined contribution plan that provides that participants may make voluntary salary deferral contributions, on a pretax basis, between 1% and 15% of their compensation in the form of voluntary payroll deductions, up to a maximum amount as indexed for cost of living adjustments. The Company was permitted to make discretionary contributions but no Company contributions had been made since 2009.

16.Going Concern

The Company has accumulated losses from inception through September 30, 2013 of $11,759,151, has minimal assets, and has negative working capital.  These factors raise substantial doubt about the Company’s ability to continue as a going concern.  These factors may have potential adverse effects on the Company including the ceasing of operations.

The Company is currently seeking additional capital to fund its operations through the foreseeable future. If capital raising efforts are unsuccessful, discontinuance of operations is likely. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

17.Subsequent Events

The Company has evaluated subsequent events that occurred after September 30, 2013 through November 7, 2013, the date this report was available to be issued. Any material subsequent events that occurred during that time period have been properly recognized or disclosed in the Company’s financial statements.

23

ITEM 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of the results of operations of Oryon Technologies, Inc. and its subsidiaries for the three and nine month periods ended September 30, 2013 and 2012 and its financial condition as of September 30, 2013 and December 31, 2012, should be read in conjunction with the consolidated financial statements and the notes to those financial statements that are included elsewhere in this Quarterly Report on Form 10-Q. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under the caption “Risk Factors” in the Company’s Annual Report on Form 10-K, as amended, filed with the Securities and Exchange Commission (the “SEC”) on March 7, 2013. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements.

Overview

Oryon Technologies, Inc. (“Oryon”, the “Registrant” or the “Company” and “we,” “us”, “our” or similar terms) was organized under the laws of the State of Nevada on August 22, 2007 to explore mineral properties.On May 4, 2012 (the “Closing Date”), Oryon closed a merger transaction (the “Merger”) with Oryon Merger Sub, LLC, a Texas limited liability company and wholly-owned subsidiary of the Company (“Merger Sub”), and OryonTechnologies, LLC (“OTLLC”), a Texas limited liability company, pursuant to an Agreement and Plan of Merger dated March 9, 2012 (the “Merger Agreement”). As a result of the Merger, the Company ceased to explore mineral properties and became a technology company with certain valuable products and intellectual property rights related to a three-dimensional, elastomeric, membranous, flexible electroluminescent lamp. The Company’s principal executive offices are located at 4251 Kellway Circle, Addison, Texas 75001, and its phone number is (214) 267-1321.

Oryon Technologies, Inc. (“Oryon” or the “Company”) has only one direct subsidiary, OryonTechnologies, LLC, a Texas limited liability company (“OTLLC”). The Company is a developer of a patented electroluminescent (“EL”) lighting technology, trademarked as Elastolite^® that enables thin, flexible, crushable, water-resistant lighting systems to be incorporated into multiple applications such as safety apparel, sporting goods, consumer goods and membrane switches, among others. OTLLC is the parent of two wholly-owned companies: OryonTechnologies Licensing, LLC (“OTLIC”) and OryonTechnologiesDevelopment, LLC (“OTD”), both of which are also Texas limited liability companies.

OTLLC also previously owned OryonTechnologies International Pte. Ltd. (“OTI”), a Singapore-based corporation. Operations at OTI were suspended in May 2009 and OTI was liquidated in November 2012. The operations of OTI were not material to Oryon. OTI originally owned 51% of Oryon-Asia Pacific Safety, Limited (“OAPS”), which was formed in December 2006 as a Hong Kong limited company. During 2011, the 51% ownership was transferred to OTLLC. The other 49% of OAPS was owned by two non-affiliated individuals. Operations of OAPS were suspended in February 2011 and OAPS is in the final stage of liquidation. The operations of OAPS were not material to Oryon.

The following discussion should be read in conjunction with our most recent financial statements and notes appearing elsewhere in this quarterly report. In addition to the historical financial information, the following discussion contains forward-looking statements that involve risks and uncertainties. The Company’s actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors.

Management’s discussion and analysis of the Company’s financial condition and results of operations are only based on the current business and operations of OTLLC and its subsidiaries, on a consolidated basis. Key factors affecting the Company’s results of operations include revenues, cost of revenues, operating expenses and interest expense.

Operating results for the interim periods presented herein are not necessarily indicative of the results that can be expected for the entire fiscal year.

24

Comparison of the Quarter ended September 30, 2013 to the Quarter ended September 30, 2012

Gross Profit and Other Revenues

	For the Quarter Ended September 30,
	2013			2012			Change from 2012 to 2013
Revenues	$			$			$			%
Product sales		46,576			13,494			33,082			245.2	%
Cost of goods sold		(38,882	)		(3,370	)		(35,512	)		1053.8	%
Gross profit		7,694			10,124			(2,430	)		-24.0	%
Royalty and license fees		-			-			-
Other		-			-			-
Total revenues		7,694			10,124			(2,430	)		-24.0	%
Gross profit margin		16.5	%		75.0	%

Product sales for the quarter ended September 30, 2013, increased $33.1 thousand, or 245.2%, to $46.6 thousand for the quarter ended September 30, 2013 from $13.5 thousand for the quarter ended September 30, 2012. Gross profit and total revenues decreased $2.4 thousand to $7.7 thousand, or 24.0%, from $10.1 thousand in the quarter ended September 30, 2012, due to the increase in the cost of goods sold.

Cost of goods sold represented 83.5% of product sales revenues in the third quarter of 2013 as compared to 25.0% in the third quarter of 2012. Each of the Company’s sales is separately negotiated with the specific customer. The Company endeavors to obtain the highest sales price for its products that can be negotiated with the customer and does not establish sales prices based on a “cost plus” analysis. Therefore, the cost of goods sold as a percentage of product sales revenue can be expected to vary significantly from period to period depending on the specific customers’ product orders.

Operating Expenses-Overview

Total operating expenses for the quarter ended September 30, 2013, decreased $128.5 thousand, or 29.0%, to $314.6 thousand, from $443.1 thousand in the quarter ended September 30, 2012, as shown in the table below: 

	For the quarter ended					For the quarter ended
	September 30, 2013					September 30, 2012					Change
	9/30/2013		%			$		%			$			%
Total applications development exp.		63,778		20.3	%		61,156		13.8	%		2,622			4.3	%
Total sales and marketing exp.		31,029		9.9	%		46,939		10.6	%		(15,910	)		-33.9	%
Total general and administrative exp.		212,083		67.4	%		326,896		73.8	%		(114,813	)		-35.1	%
Depreciation and amortization		7,695		2.5	%		8,072		1.8	%		(377	)		-4.7	%
Total operating expenses		314,585		100.0	%		443,063		100.0	%		(128,478	)		-29.0	%

The primary reasons for the decrease in total operating expenses are the 35.1% decrease in general and administrative expense and the 33.9% decrease in sales and marketing expense, as discussed below.

Applications Development Expense 

	For the Quarter Ended September 30,
	2013		2012		Change from 2012 to 2013
Applications Development Expense	$		$		$			%
Wages		31,566		31,971		(405	)		-1.3	%
Payroll taxes and benefits		5,170		12,025		(6,855	)		-57.0	%
Materials, equipment, services		25,017		14,492		10,525			72.6	%
Office and overhead		2,025		2,668		(643	)		-24.1	%
Travel and entertainment		-		-		-
Total applications development exp.		63,778		61,156		2,622			4.3	%
NM = Not Meaningful

25

Total applications development expense increased by $2.6 thousand or 4.3% for the three months ended September 30, 2013 as compared to the three months ended September 30, 2012, due to the $10.5 thousand increase in materials, equipment and services, partially offset by the $7.3 thousand decrease in wages and the related payroll taxes and benefits. Due to the low level of customer activity in the third quarter of 2012, the materials, equipment, services expenses were very low in that period. By comparison, in 2013, applications activities on behalf of prospective customers increased significantly, resulting in greater expenditures on applications development projects.

Sales and Marketing Expense

	For the Quarter Ended September 30,
	2013		2012		Change from 2012 to 2013
Sales and Marketing Expense	$		$		$			%
Wages		18,000		18,000		-			NM
Payroll taxes and benefits		1,389		3,253		(1,864	)		-57.3	%
Overhead		5,640		2,148		3,492			162.6	%
Outside services		6,000		12,400		(6,400	)		-51.6	%
Travel and entertainment		-		11,138		(11,138	)		-100.0	%
Total sales and marketing exp.		31,029		46,939		(15,910	)		-33.9	%
NM = Not Meaningful

Total sales and marketing expense decreased by $15.9 thousand, or 33.9%, to $31.0 thousand in the 2013 third quarter from $46.9 thousand in the 2012 third quarter, largely due to the reduction of outside public relations services below the level incurred in during 2012.

General and Administrative Expense 

	For the Quarter Ended September 30,
	2013		2012		Change from 2012 to 2013
General and Administrative Expense	$		$		$			%
Wages		39,540		70,001		(30,461	)		-43.5	%
Payroll taxes and benefits		22,033		73,499		(51,466	)		-70.0	%
Overhead		35,993		31,206		4,787			15.3	%
Outside services		106,208		149,201		(42,993	)		-28.8	%
Travel and entertainment		8,309		2,989		5,320			178.0	%
Total general and administrative exp.		212,083		326,896		(114,813	)		-35.1	%
NM = Not Meaningful

General and administrative expense decreased by $114.8 thousand, or 35.1%, to $212.1 thousand from $326.9 thousand largely due to (a) the $43.0 thousand decrease in outside services expenses, as discussed below, and (b) the decrease in payroll taxes/benefits expense, which decreased $51.5 thousand to $22.0 thousand in the 2013 third quarter from $73.5 thousand in the 2012 third quarter. Most of the decrease in payroll taxes and benefits is attributable to the $48.1 thousand decrease in stock-based compensation expense that was $17.2 thousand in the three months ended September 30, 2013, as compared to $65.3 thousand in the three months ended September 30, 2012.

26

Outside services expenses decreased $43.0 thousand, or 28.8%, to $106.2 thousand in the quarter ended September 30, 2013 from $149.2 thousand in the quarter ended September 30, 2012, as shown in the table below.

	For the quarter ended					For the quarter ended
	September 30, 2013					September 30, 2012					Change
	$		%			$		%			$			%
Legal expenses		30,159		28.4	%		32,481		21.8	%		(2,322	)		-7.2	%
Accounting and audit expenses		21,048		19.8	%		26,892		18.0	%		(5,844	)		-21.7	%
Directors' fees and expenses		18,125		17.1	%		-		0.0	%		18,125			NM
Public relations expenses		3,115		2.9	%		-		0.0	%		3,115			NM
Consulting		25,433		24.0	%		76,847		51.5	%		(51,414	)		-66.9	%
Payroll processing expenses		595		0.6	%		564		0.4	%		31			5.5	%
Banking Fees		118		0.1	%		515		0.4	%		(397	)		-77.1	%
Stock transfer agent and filing fees		7,615		7.2	%		11,902		8.0	%		(4,287	)		-36.0	%
Total G&A outside services		106,208		100.0	%		149,201		100.0	%		(42,993	)		-28.8	%
NM = Not Meaningful

One large component of general and administrative outside services expense is the cost of being a public company, including legal, accounting, SEC filing related costs and stock transfer agent fees. For example, the Company paid no directors’ fees prior to the Merger but initiated the incurrence of directors’ compensation in the last quarter of 2012. In consequence, general and administrative outside services expense for the third quarter of 2013 included $18.1 thousand in directors’ fees and expenses as compared to no such costs in the comparable quarter of the prior year. Since the Closing of the Merger on May 4, 2012, the legal expenses have increased over the pre-Merger period due to the regulatory filings that the Company has made in connection with its current operational and financing activities. In the third quarter of 2012, the Company incurred somewhat higher accounting costs as staff and management made the Company’s initial public company filings. The accounting and audit expenses incurred in the third quarter of 2013 are more representative of the costs related to the regular quarterly review by independent public accountants.

An additional reason for the decrease in outside services in the third quarter of 2013 as compared to the third quarter of 2012 is the $51.4 thousand decrease in consulting costs. In connection with the Closing of the Merger, the Company paid an independent financial advisor $45.1 thousand for services in the third quarter of 2012. Excluding this cost, other consulting costs of $31.8 thousand for the three months ended September 30, 2012 were $6.3 thousand greater than in the comparable period in 2013. At the Closing Date, one former senior executive’s status changed from being an employee to being an independent consultant to the Company, resulting in $13.3 thousand in expense for the consulting compensation to the individual during the three months ended September 30, 2013 (the contract expired August 31, 2013, so only there were only two months of expense), whereas his consulting compensation was $22.5 thousand for the three months included in the period ended September 30, 2012.

27

Other Income (Expense)

Interest Expense: Interest expense decreased $58.8 thousand, or 85.6%, to $9.9 thousand for the three months ended September 30, 2013, from $68.7 thousand in the three months ended September 30, 2012. The principal reason for the decrease in interest expense was the conversion of the convertible notes payable on August 31, 2012, so that in the third quarter of 2013 the Company incurred no interest expense or amortization of debt discount on the convertible notes as compared to two full months of such expenses incurred in the third quarter of 2012. 

	For the quarter ended					For the quarter ended
	September 30, 2013					September 30, 2012					Change
	$		%			$		%			$			%
Interest expense on convertible notes payable		-					21,962		32.0	%		(21,962	)		NM
Interest expense on promissory notes and short-term debt		9,904		100.0	%		7,217		10.5	%		2,687			37.2	%
Amortization of debt discount related to warrants		-					3,294		4.8	%		(3,294	)		NM
Amortization of debt discount-beneficial conversion feature
on the Series C-1 convertible notes payable		-					36,249		52.8	%		(36,249	)		NM
Total interest expense		9,904		100.0	%		68,722		100.0	%		(58,818	)		-85.6	%
NM = Not Meaningful

Taxes

Since the Company’s operating subsidiary, OTLLC, is a limited liability company and, as such, does not accrue or pay income taxes, the Company has not reported income taxes for periods prior to the Closing Date. For the quarter ended September 30, 2013, the Company incurred substantial losses and subsequently has no tax obligation. Although the incurred losses can be carried forward to offset future taxable income, within certain limitations, the Company cannot reliably forecast when profitable operations will occur. Accordingly, the Company has not recorded any deferred tax assets related to the losses incurred subsequent to the Merger.

Comparison of the Nine months ended September 30, 2013 to the Nine months ended September 30, 2012

Gross Profit and Other Revenues 

	For the Nine Months Ended September 30,
	2013			2012			Change from 2012 to 2013
Revenues	$			$			$			%
Product sales		99,559			46,504			53,055			114.1	%
Cost of goods sold		(48,484	)		(26,498	)		(21,986	)		83.0	%
Gross profit		51,075			20,006			31,069			155.3	%
Royalty and license fees		-			-			-
Other		-			-			-
Total revenues		51,075			20,006			31,069			155.3	%
Gross profit margin		51.3	%		43.0	%

Product sales increased $53.1 thousand, or 114.1%, to $99.6 thousand for the nine months ended September 30, 2013 from $46.5 thousand for the nine months ended September 30, 2012. Gross profit and total revenues increased $31.1 thousand to $51.1 thousand, or 155.3%, from $20.0 thousand in the nine months ended September 30, 2012, due to both the increase in product sales and the increase in gross profit on product sales resulting from a decrease in the cost of goods sold as a percentage of product sales.

Cost of goods sold represented 48.7% of product sales revenues in the first nine months of 2013 as compared to 57.0% in the first nine months of 2012. Each of the Company’s sales is separately negotiated with the specific customer. The Company endeavors to obtain the highest sales price for its products that can be negotiated with the customer and does not establish sales prices based on a “cost plus” analysis. Therefore, the cost of goods sold as a percentage of product sales revenue can be expected to vary significantly from period to period depending on the specific customers’ product orders.

28

Operating Expenses-Overview

Total operating expenses for the nine months ended September 30, 2013, decreased $246.8 thousand, or 18.4%, to $1,095.6 thousand, from $1,342.4 thousand in the nine months ended September 30, 2012, as shown in the table below:

	For the nine months ended					For the nine months ended
	September 30, 2013					September 30, 2012					Change
	$		%			$		%			$			%
Total applications development exp.		235,171		21.5	%		208,599		15.5	%		26,572			12.7	%
Total sales and marketing exp.		86,816		7.9	%		122,564		9.1	%		(35,748	)		-29.2	%
Total general and administrative exp.		750,283		68.5	%		979,017		72.9	%		(228,734	)		-23.4	%
Depreciation and amortization		23,362		2.1	%		32,209		2.4	%		(8,847	)		-27.5	%
Total operating expenses		1,095,632		100.0	%		1,342,389		100.0	%		(246,757	)		-18.4	%

The primary reason for the decrease in total operating expenses is the 23.4% decrease in general and administrative expense, as discussed below.

Applications Development Expense

	For the Nine Months Ended September 30,
	2013		2012		Change from 2012 to 2013
Applications Development Expense	$		$		$			%
Wages		100,278		130,651		(30,373	)		-23.2	%
Payroll taxes and benefits		17,279		30,984		(13,705	)		-44.2	%
Materials, equipment, services		103,954		40,833		63,121			154.6	%
Office and overhead		13,660		6,131		7,529			122.8	%
Travel and entertainment		-		-		-
Total applications development exp.		235,171		208,599		26,572			12.7	%

Total applications development expense increased by $26.6 thousand or 12.7% for the nine months ended September 30, 2013 as compared to the nine months ended September 30, 2012, due to (a) the $63.1 thousand increase in materials, equipment, services expenses partially offset by (b) the $30.4 thousand decrease in wages along with the related $13.7 thousand decrease in payroll taxes and benefits. Due to the low level of customer activity in the first nine months of 2012, the materials, equipment, services expenses were very low in that period. By comparison, in 2013, applications activities on behalf of prospective customers increased significantly, resulting in greater expenditures on applications development projects.

Sales and Marketing Expense

	For the Nine Months Ended September 30,
	2013		2012		Change from 2012 to 2013
Sales and Marketing Expense	$		$		$			%
Wages		54,000		48,000		6,000			12.5	%
Payroll taxes and benefits		4,185		5,548		(1,363	)		-24.6	%
Overhead		13,561		12,289		1,272			10.4	%
Outside services		7,000		32,400		(25,400	)		-78.4	%
Travel and entertainment		8,070		24,327		(16,257	)		-66.8	%
Total sales and marketing exp.		86,816		122,564		(35,748	)		-29.2	%

Total sales and marketing expense decreased to $86.8 thousand in the first nine months of 2013 from $122.6 thousand in the first nine months of 2012. The decrease of $35.7 thousand or 29.2% is largely due to the $25.4 thousand decrease in outside services expenses. The $6.0 increase in wages is the result of increased pay for sales personnel in the first nine months of 2013.

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General and Administrative Expense

	For the Nine Months Ended September 30,
	2013		2012		Change from 2012 to 2013
General and Administrative Expense	$		$		$			%
Wages		179,538		269,395		(89,857	)		-33.4	%
Payroll taxes and benefits		128,885		160,492		(31,607	)		-19.7	%
Overhead		104,477		117,598		(13,121	)		-11.2	%
Outside services		327,387		426,241		(98,854	)		-23.2	%
Travel and entertainment		9,996		5,291		4,705			88.9	%
Total general and administrative exp.		750,283		979,017		(228,734	)		-23.4	%

General and administrative expense for the first nine months of the year decreased by $228.7 thousand, or 23.4%, to $750.3 thousand from $979.0 thousand largely due to (a) the $98.9 thousand decrease in outside services expenses, as discussed below, and (b) the $89.9 decrease in wages along with the related $31.6 decrease in payroll taxes and benefits.

Outside services expenses decreased $98.9 thousand, or 23.2%, to $327.4 thousand in the nine months ended September 30, 2013 from $426.2 thousand in the nine months ended September 30, 2012, as shown in the table below.

	For the nine months ended					For the nine months ended
	September 30, 2013					September 30, 2012					Change
	$		%			$		%			$			%
Legal expenses		72,998		22.3	%		175,069		41.1	%		(102,071	)		-58.3	%
Accounting and audit expenses		45,432		13.9	%		76,440		17.9	%		(31,008	)		-40.6	%
Directors' fees and expenses		74,176		22.7	%		-		0.0	%		74,176			NM
Public relations expenses		3,115		1.0	%		5,000		1.2	%		(1,885	)		-37.7	%
Consulting		82,758		25.3	%		149,559		35.1	%		(66,801	)		-44.7	%
Payroll processing expenses		1,813		0.6	%		2,083		0.5	%		(270	)		-13.0	%
Banking Fees		632		0.2	%		1,920		0.5	%		(1,288	)		-67.1	%
Stock transfer agent and filing fees		46,462		14.2	%		16,170		3.8	%		30,292			187.3	%
Total G&A outside services		327,386		100.0	%		426,241		100.0	%		(98,855	)		-23.2	%
NM = Not Meaningful

One primary component of general and administrative outside services expense is the cost of being a public company, including legal, accounting, directors’ fees, SEC filing related costs and stock transfer agent fees. For example, the Company paid no directors’ fees prior to the Merger but initiated the incurrence of directors’ compensation in the last quarter of 2012. In consequence, general and administrative outside services expense for the first nine months of 2013 included $74.2 thousand in directors’ fees and expenses as compared to no such costs in the first nine months of 2012. In the first nine months of 2012, significant legal expenses were incurred in the process of the Merger and the Closing. As a result, the legal expenses in the first nine months of 2012 were of $175.1 thousand, an amount $102.1 thousand greater than the $73.0 thousand in legal expenses incurred in the first nine months of 2013. Also, in the first nine months of 2012, the Company incurred unusually high accounting costs related to the completion of the audit of fiscal years 2010 and 2011 that was necessary to consummate the Merger. The accounting and audit expenses incurred in the first nine months of 2013 are more representative of the costs related to the regular quarterly review by independent public accountants. Stock transfer agent fees and SEC regulatory filing costs were $46.5 thousand in 2013 as compared to $16.2 thousand incurred in 2012. In 2013 the Company incurred the cost preparing and filing both a Form 10-K (for the year ended 2012) and a Form 10-Q (for the quarter ended March 31, 2013), but incurred no comparable costs in 2012 because in 2012 those costs were incurred prior to the Merger and therefore not reportable by the Company.

An additional reason for the decrease in outside services in the first nine months of 2013 as compared to the first nine months of 2012 is the $66.8 thousand decrease in consulting costs. In connection with the Closing of the Merger, the Company paid an independent financial advisor $82.6 thousand for services during the nine months ended September 30, 2012. Excluding this cost, the other consulting costs of $67.0 thousand incurred during the nine months ended September 30, 2012 were relatively unchanged at $69.4 thousand for the comparable period in 2013. At the Closing Date, one former senior executive’s status changed from being an employee to being an independent consultant to the Company, resulting in $53.3 thousand in expense (consisting of both paid and accrued amounts) for the consulting compensation to the individual during the nine months ended September 30, 2013 (the contract expired August 31, 2013), whereas his consulting compensation was $37.5 thousand for the five months in the period between the Closing and September 30, 2012. Prior to the Closing, his compensation was reported as general and administrative wages expense.

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Other Income (Expense)

Interest Expense: Interest expense decreased $228.6 thousand, or 88.9%, to $28.5 thousand for the nine months ended September 30, 2013, from $257.1 thousand in the nine months ended September 30, 2012. The principal reason for the decrease in interest expense was the conversion of the convertible notes payable on August 31, 2012, so that in the first nine months of 2013 the Company incurred no interest expense or amortization of debt discount on the convertible notes as compared to eight full months of such expenses incurred in the first nine months of 2012 (through August 31, 2012). 

	For the nine months ended					For the nine months ended
	September 30, 2013					September 30, 2012					Change
	$		%			$		%			$			%
Interest expense on convertible notes payable		-					86,429		33.6	%		(86,429	)		NM
Interest expense on promissory notes and short-term debt		28,461		100.0	%		21,691		8.4	%		6,770			31.2	%
Amortization of debt discount related to warrants		-					12,893		5.0	%		(12,893	)		NM
Amortization of debt discount-beneficial conversion feature
on the Series C-1 convertible notes payable		-					136,074		52.9	%		(136,074	)		NM
Total interest expense		28,461		100.0	%		257,087		100.0	%		(228,626	)		-88.9	%
NM = Not Meaningful

Taxes

Since the Company’s operating subsidiary, OTLLC, is a limited liability company and, as such, does not accrue or pay income taxes, the Company has not reported income taxes for periods prior to the Closing Date. For the nine months ended September 30, 2013, the Company incurred substantial losses and subsequently has no tax obligation. Although the incurred losses can be carried forward to offset future taxable income, within certain limitations, the Company cannot reliably forecast when profitable operations will occur. Accordingly, the Company has not recorded any deferred tax assets related to the losses incurred subsequent to the Merger.

Liquidity and Capital Resources

The Company does not have sufficient cash on hand to meet its current obligations and anticipated cash requirements. See Notes 13, 16 and 17 to Notes to the Consolidated Financial Statements. Not including capital expenditures and costs directly related to revenue generating projects, operating expenditures are expected to range between $125,000.00 and $150,000.00 per month. Management anticipates that an additional $1,500,000 to $4,000,000 will be necessary to fund operations and provide adequate working capital for the next twelve to twenty-four month period subsequent to the date of this report.The Company does not currently have any material commitments for capital expenditures as of the end of the current period.

To meet management’s future objectives, the Company will need to sell additional equity and/or debt securities, which could result in dilution to current shareholders, or seek additional loans. The incurrence of indebtedness would result in increased debt service obligations and could require the Company to agree to operating and financial covenants that would restrict its operations. The Company does not have any lending arrangements in place with banking or financial institutions and management does not anticipate that it will be able to secure these funding arrangements in the near future.Financing may not be available in amounts or on terms acceptable to the Company, if at all. Any failure by the Company to raise additional funds on terms acceptable to it, or at all, could limit its ability to continue operations and terminate its overall business prospects.

Our current cash requirements are significant due to planned applications development and marketing of our current technology, and we anticipate generating additional operating monthly losses at least through the end of 2013. In order to execute on our business strategy, we will require additional working capital, commensurate with the operational needs of our planned marketing, development and production efforts. Our management cannot guarantee that we will be able to raise sufficient amounts of working capital through debt or equity offerings, as may be required to meet our short-term obligations. Moreover, changes in our operating plans, increased expenses, acquisitions, or other events, may cause us to seek additional equity or debt financing in the future. We anticipate continued and additional marketing, development and production expenses. Accordingly, we expect to continue to use debt and equity financing to fund operations for the next twelve to twenty-four months, as we look to expand our asset base and fund marketing, development and production of our technology.

31

There are no assurances that we will be able to raise the required working capital on terms favorable to us, or that such working capital will be available on any terms when needed. Any failure to secure additional financing would limit our ability to continue as a going concern and force us to modify our business strategy. In addition, we cannot be assured of profitability in the future.

We are not aware of any unusual or infrequent events or transactions or any significant economic changes that materially affected or could materially affect the amount of our reported income from operations.

Sources and uses of funds

As of September 30, 2013, Oryon had cash and equivalents on hand of $9.4 thousand, and negative working capital of $1,464.3 thousand. Management of the Company recognizes that its cash on hand and working capital will not be sufficient to meet its anticipated cash requirements in the near term and is actively seeking additional capital funding. Any failure to secure additional financing would limit the Company’s ability to continue as a going concern and force management to modify the business strategy.

Oryon’s sales cycle timing varies depending on the type of customer being served. It can range from three months for certain specialty promotions to 12-18 months for certain branded products from first contact with a prospective customer until product sales revenues can be reported. During that period, Oryon works with the customer’s designers to cooperatively engineer an application of its patented technology into the customer’s final product. This requires substantial co-development with the customer’s personnel to meet the needs of the customer. Accordingly, Oryon must have sufficient capital to fund administrative overhead, sales and marketing efforts and staffing expenses for an extended period of time before cash is received from customers.

In 2010, OTLLC completed an exchange of the then existing Series A and Series B convertible notes payable for the newly issued Series C-1 and Series C-2 convertible notes payable, respectively. Each holder of a Series A or Series B note also received detachable warrants in connection with the exchange. This exchange was necessary to obtain a modification of the terms of the notes payable to enable OTLLC to secure additional funding. In 2010, after the completion of the exchange, OTLLC began issuing Series C-3 convertible notes payable, with detachable warrants, obtaining additional funding of $418.0 thousand in 2010 and $75.0 thousand in 2011. In addition, during the second half of 2011, OTLLC issued $69.6 thousand in Series C-3 convertible notes payable, but without attached warrants, to the lessor of OTLLC’s office space in lieu of cash rent payments for the period of July 1 through December 31. In January 2012, OTLLC issued an additional $6.6 thousand in Series C-3 convertible notes payable, without attached warrants, to the same lessor in lieu of cash rent for the month of January 2012.

In early 2010, OTLLC began negotiations with a private equity firm regarding an investment of $4.5 million into OTLLC. In late summer 2010, OTLLC and the private equity firm executed a term sheet. In November 2010, OTLLC and the private equity firm executed an agreement titled “Draft Securities Purchase Agreement” based on the transaction proposed in the term sheet that would have provided OTLLC with sufficient capital to fund its business plan for the foreseeable future. The letter of intent and the “Draft Securities Purchase Agreement” included a “no-shop” clause that effectively prevented OTLLC from negotiating with any other potential source of funding until negotiations were terminated with the private equity firm. However, the private equity firm did not act in good faith, in management’s opinion, changing certain terms of the proposed transaction, failing to respond to OTLLC’s communications and ultimately terminating the transaction without finalizing the contemplated “Series A Convertible Preferred Stock Purchase Agreement”. In attempting to complete the financing, OTLLC incurred substantial legal expenses and accounting costs to meet the requirements of the private equity firm and to document the proposed transaction. By September 2011, it was evident that OTLLC would not be able to obtain funding from the private equity firm and management took further steps to conserve cash and reduce overhead. In July 2011, OTLLC terminated the services of all but two employees, cancelled consulting agreements and began contacting interested parties concerning short-term loans to continue funding a reduced level of operations. Several existing investors provided a total of $114.0 thousand in exchange for unsecured promissory notes. In addition, OTLLC’s then chief executive officer provided additional financing of approximately $90.0 thousand by personally paying certain OTLLC expenses and filing an expense reimbursement request that was recorded as an accounts payable obligation.

In October 2011, OTLLC began discussions with another investment firm concerning a merger with a publicly-traded company and a financing plan that would raise $2 million in new equity capital for OTLLC. A letter of intent was signed that same month and OTLLC began working on a definitive merger agreement and on meeting the related requirements, including the completion of audited financial statements. The investment firm arranged for the Company to advance $725.0 thousand (prior to the Closing Date) to OTLLC in exchange for promissory notes. The funding for the advances to OTLLC was generated by the equity financing. Without this advance, OTLLC would not have been able to complete the Merger. Between the Closing Date and August 31, 2012, the Company received an additional $1,275.0 thousand in exchange for the issuance of equity (consisting of 2,550,000 shares of common stock along with warrants having the right to purchase an additional 2,550,000 shares at the current exercise price of $0.50 per share and a term of five years). In total, the Company received $2.0 million in subscriptions in connection with the Merger

32

Net cash provided by (used in) operating activities

Net cash used in operating activities for the nine months ended September 30, 2013 decreased by $614.7 thousand to a use of $556.2 thousand, as compared to a use of $1,170.9 thousand for the nine months ended September 30, 2012. The primary reason for the reduced cost was the improvement in operating results with a net loss of $1,073.0 thousand in the first nine months of 2013 as compared to a net loss of $2,123.3 thousand in the first nine months of 2012, an improvement of $1,050.3 thousand. The conversion of the Series C Notes in August 2012 eliminated noncash interest expense subsequent to that date, so the noncash interest expense in the first nine months of 2012 was $234.6 thousand higher than the $21.5 thousand noncash interest expense in the first nine months of 2013. In addition, the combined net change in operating assets and liabilities provided cash of $341.3 thousand in the nine months ended September 30, 2013 as compared to using cash of $39.3 thousand in the nine months ended September 30, 2012, an increase in operational cash provided of $380.6 thousand. This increase is primarily due to (a) the comparative net increase of $127.4 thousand in deferred compensation, including directors’ fees, and (b) the comparative net increase of $247.5 thousand in accounts payable. In the nine months ended September 30, 2013, the accounts payable increased by $220.1 thousand as compared to a reduction of $27.4 thousand during the comparable period in 2012, a comparative net change of $247.5 thousand in cash provided. The increase in accounts payable in the first nine months of 2013 was largely due to legal and accounting costs related to meeting the year-end regulatory requirements and to an increase in inventory related to customer projects in progress.

Net cash provided by (used in) investing activities

There was no net cash provided by (used in) investing activities in the first nine months of 2013 and only $6.8 thousand used in the first nine months of 2012 for the purchase of equipment.

Net cash provided by financing activities

Net cash provided by financing activities in the first nine months of 2013 was $396.0 thousand as compared to $1,664.0 thousand in the first nine months of 2012.In connection with the Merger in 2012, the Company received $2.0 million in proceeds from the private equity offering, issuing 4.0 million shares of common stock, par value $0.001 (along with warrants for the purchase an additional 4.0 million shares of common stock at the current exercise price of $0.50 per share and having a term of five (5) years). A total of $2,000.0 thousand was received in the first nine months of 2012. In the first nine months of 2013, investors holding certain of the warrants provided the Company with short-term advances of $390.0 thousand in financial support against the exercise of their warrants at a future time of the investors’ choice. Such investors have not determined the timing for the exercise of the warrants.

Contractual Obligations and Off-Balance Sheet Arrangements

Contractual Obligations

The following table outlines payments due under the Company’s significant contractual obligations over the periods shown, exclusive of interest, as of September 30, 2013: 

	Payments Due by Period
Contractual Obligations at September 30, 2013	Less than One Year		One to Three years		Three to Five Years		More Than Five Years		Total
	($)		($)		($)		($)		($)
Operating lease obligations		79,164		118,746		-		-		197,910
Long-term debt obligations		-		134,714		-		-		134,714
Capital expenditure obligations		-		-		-		-		-
Purchase obligations		-		-		-		-		-
Other long-term obligations		-		-		-		-		-

The above table outlines our obligations as of the date noted above and does not reflect any changes in obligations that have occurred after that date.

33

Off-Balance Sheet Arrangements

The Company has not entered into any other financial guarantees or other commitments to guarantee the payment obligations of any third parties. We have not entered into any derivative contracts that are indexed to our shares and classified as shareholder’s equity or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to it or engages in leasing, hedging or research and development services with it.

Critical Accounting Estimates

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates that affect the amounts reported in the consolidated financial statements and the accompanying notes. Accounting estimates and assumptions are those that management considers to be the most critical to an understanding of the consolidated financial statements because they inherently involve significant judgments and uncertainties. All of these estimates reflect management’s judgment about current economic and market conditions and their effects based on information available as of the date of these consolidated financial statements. If such conditions persist longer or deteriorate further than expected, it is reasonably possible that the judgments and estimates could change, which may result in future impairments of assets, among other effects.

Significant estimates for Oryon include the carrying value of intangible assets and the value of equity instruments, including convertible notes, stock options, warrants, and shares of equity issued in lieu of cash.

Recently Issued Accounting Pronouncements

There have been no new accounting rules or pronouncements introduced in 2013 or 2012 that have had an effect on our financial condition or results of operations.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE OF MARKET RISK

The Company does not have any market risk sensitive instruments.

ITEM 4. CONTROLS AND PROCEDURES

Our management, under the supervision and with the participation of our CEO and CFO, evaluated the effectiveness of our disclosure controls and procedures (as defined under the Exchange Act and the Sarbanes-Oxley Act of 2002 (“SOX”) Section 404(a). Based on this evaluation, we concluded that, as of September 30, 2013, our disclosure controls and procedures were not effective. This conclusion was based on the existence of material weakness as discussed below. Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control system was designed 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. Because of inherent limitations, a system of internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate due to change in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

As of December 31, 2012, the Company’s management assessed the effectiveness of the Company’s internal control over financial reporting based on the criteria for effective internal control over financial reporting established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and SEC guidance on conducting such assessments and concluded in our Annual Report on Form 10-K for the year ended December 31, 2012 that there is a material weakness in our internal control over financial reporting.   Management determined that there are deficiencies in the design or operation of the Company’s internal control that adversely affected the Company’s internal controls that management considers being material weaknesses.

In the light of management’s review of internal control procedures as they relate to COSO and the SEC the following were identified:

34

● The Company has limited segregation of duties, which is not consistent with good internal control procedures.

● The Company does not have a written internal control procedures manual that outlines the duties and reporting requirements of the Directors and any staff to be hired in the future.  This lack of a written internal control procedures manual does not meet the requirements of the SEC or for good internal control.

● There are no effective controls instituted over financial disclosure and the reporting processes.

Management determined that the weaknesses identified above have not affected the financial results of the Company due to management’s additional review and analysis.

The Company will endeavor to correct the above noted weaknesses in internal control once it has adequate funds to do so. With the planned increase in administrative staff, the segregation of duties issue will be addressed in part and internal control will be significantly improved. The Audit Committee appointed subsequent to the Closing of the Merger has directed management to develop a written policy manual outlining the duties of each of the officers and staff of the Company to facilitate better internal control procedures.

Management will continue to monitor and evaluate the effectiveness of the Company’s internal controls and procedures and its internal controls over financial reporting on an ongoing basis and is committed to taking further action and implementing additional enhancements or improvements, as necessary and as funds allow.

Changes in Internal Control over Financial Reporting

No changes occurred during the quarter ended September 30, 2013 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

35

PART II – OTHER INFORMATION

ITEM 1A RISK FACTORS

As a result of the Merger, on May 4, 2012, the (“Closing Date”), the Registrant ceased to be in the business of acquiring and developing mineral properties, as it had been since inception. Although a mineral claim, with unknown reserves was acquired in August 2007, it was determined to be impaired in January 2008 and written off, and the Registrant had limited operations subsequently. Effective on the Closing Date, the Registrant acquired the business and operations of OTLLC, a technology company with certain valuable products and intellectual property rights related to a three-dimensional, elastomeric, membranous, flexible electroluminescent lamp. Accordingly, the risk factors are related to the operations of the Registrant as it is presently constituted, subsequent to May 4, 2012.

An investment in our securities involves a high degree of risk.  In evaluating our business and its future expectations, one should consider carefully the risk factors includedthe Company’s Annual Report on Form 10-K, as amended, filed with the Securities and Exchange Commission (the “SEC”) on March 7, 2013.  Any of such risk factors, if they occur, could seriously harm our business and our operations. There may be risk factors we do not know exist, or that we have deemed to be immaterial, at this time. Even if they are deemed immaterial at this time, they could develop whereby they could adversely affect our business. Our shares are speculative by nature and therefore the risk of purchasing or holding our shares is high. Investors should consider whether they can assume a loss of their entire investment.

ITEM 2 UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

36

ITEM 6 EXHIBITS

The following exhibits are included as part of this report and are filed herewith:

Exhibit No.	Description
31.1	Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Principal Financial Officer and Principal Accounting Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Principal Financial and Principal Accounting Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	XBRL Instance Document*
101.SCH	XBRL Taxonomy Extension Schema*
101.CAL	XBRL Taxonomy Extension Calculation Linkbase*
101.DEF	XBRL Taxonomy Extension Definition Linkbase*
101.LAB	XBRL Taxonomy Extension Label Linkbase*
101.PRE	XBRL Taxonomy Extension Presentation Linkbase*

___________

· Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement of prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability.

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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.

	ORYON TECHNOLOGIES, INC.
	(Registrant)
Date:  November 7, 2013	By: /s/ Thomas P. Schaeffer
	Thomas P. Schaeffer Chief Executive Officer and Director
Date:  November 7, 2013	By:  /s/ Mark E. Pape
	Mark E. Pape Chief Financial Officer, Chief Accounting Officer, Secretary and Director

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