The following discussion and analysis of the results of operations of Oryon Technologies, Inc. and its subsidiaries for the six month periods ended June 30, 2012 and 2011 and its financial condition as of June 30, 2012 and December 31, 2011 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 our Current Report on Form 8-K, as amended, dated May 4, 2012. 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, we 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. Our principal executive offices are located at 4251 Kellway Circle, Addison, Texas 75001. Our phone number is (214) 267-1321.

Subsequent to the Closing Date, Oryon has only one direct subsidiary, OTLLC, which is the parent of three wholly-owned companies: OryonTechnologies Licensing, LLC ("OTLIC"), OryonTechnologiesDevelopment, LLC ("OTD"), and OryonTechnologies International Pte. Ltd. ("OTI"). OTLIC and OTD are also Texas limited liability companies. OTI is a Singapore-based corporation. Operations at OTI were suspended in May 2009 and OTI is inactive. 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 is owned by two non-affiliated individuals. Operations of OAPS were suspended in February 2011 and OAPS is inactive. OTLLC is a research and development and applications engineering company that developed multiple patents relating to electroluminescent ("EL") lighting technology, trademarked as Elastolite®. Elastolite® 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.

The following discussion should be read in conjunction with our most recent financial statements and notes appearing elsewhere in this quarterly report and the financial statements of OTLLC including OTLLC's audited consolidated financial statements for the years ended December 31, 2011 and 2010 filed as Exhibit 99.1 to the Company's Current Report on Form 8-K, as amended, dated May 4, 2012 and OTLLC's unaudited consolidated financial statements for the quarters ended March 31, 2012 and 2011 filed as Exhibit 99.3 to the Company's Current Report on Form 8-K/A (Amendment No. 1) filed on May 14, 2012. In addition to the historical financial information, the following discussion contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors.

Our management's discussion and analysis of our 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 our results of operations include revenues, cost of revenues, operating expenses and interest expense.

Comparison of the Quarter ended June 30, 2012 to the Quarter ended June 30, 2011

Total Revenues

Total revenues for the quarter ended June 30, 2012 decreased $29.5 thousand, or 93.2%, to $2.1 thousand for the quarter ended June 30, 2012 from $31.7 thousand for the quarter ended June 30, 2011. The decrease was primarily due to the decline in other revenues, combined with a decrease in the gross profit margin on product sales. In the second quarter of 2011, the Company received $26.3 thousand in revenues for applications design and tooling services, reported as "other revenues".

Our gross profit on product sales revenues decreased $3.3 thousand, or 60.3%, to $2.1 thousand in the second quarterof 2012 from $5.4 thousand in the second quarter of 2011, primarily due to an increase the cost of goods sold as a percentage of product sales revenues. Cost of goods sold represented 62.3% of product sales revenues in the second quarter of 2012 as compared to 13.4% in the second quarter of 2011. 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

Total operating expenses for the quarter ended June 30, 2012, increased $194.4
thousand, or 49.6%, to $586.2 thousand, from $391.8 thousand in the quarter
ended June 30, 2011, as shown in the table below:



                                          For the quarter ended           For the quarter ended
                                              June 30, 2012                   June 30, 2011                     Change
                                              $               %               $               %             $             %
Total applications development exp.     $      84,153         14.4 %    $     106,923         27.3 %    $ (22,770 )      -21.3 %
Total sales and marketing exp.                 54,340          9.3 %           16,621          4.2 %       37,719        226.9 %
Total general and administrative exp.         437,382         74.6 %          254,453         64.9 %      182,929         71.9 %
Depreciation and amortization                  10,308          1.8 %           13,829          3.5 %       (3,521 )      -25.5 %

Total operating expenses                $     586,183        100.0 %    $     391,827        100.0 %    $ 194,356         49.6 %

The primary reason for the increase in total operating expenses is the 71.9% increase in general and administrative expenses, as discussed in the next section below.

Total applications development expenses decreased by $22.8 thousand or 21.3%, due to (a) the $12.4 thousand, or 37.4%, decrease in materials, equipment, services expenses and (b) the $12.1 thousand, or 20.0%, decrease in wages, for the three months ended June 30, 2012 as compared to the three months ended June 30, 2011. Due to capital constraints in 2012, Oryon's applications development personnel reduced their activities to a minimum, significantly decreasing materials purchases. A secondary reason for the decrease is the reduction in personnel that occurred in the second half of 2011.

Total sales and marketing expenses increased $37.7 thousand, or 226.9%, in the 2012 quarter as compared to the 2011 quarter primarily due to the $20.0 thousand payment to TractorBeam, a brand development firm, recorded as outside services expense in the 2012 quarter. In addition, the Company paid $5.0 thousand as a sponsor fee for a trade show in the first quarter of 2012, representing most of the $6.5 thousand increase in sales and marketing overhead expenses. In January 2012, the Company hired a new vice president of global business development, resulting in increased compensation expense as well as travel expenses in 2012 as compared to 2011.

General and Administrative Expenses

General and administrative expenses increased by $182.9 thousand, or 71.9%, to $437.4 thousand from $254.5 thousand largely due to the increase in payroll taxes/benefits and outside services expenses. Payroll taxes/benefits increased $67.6 thousand, or 478.8%, to $81.7 thousand in the 2012 quarter from $14.1 thousand in the 2011 quarter, due to the $67.9 thousand increase in stock-based compensation expense that was $73.1 thousand in the three months ended June 30, 2012, as compared to $5.2 thousand in the three months ended June 30, 2011. This increase in stock-based compensation expense is a direct result of the closing of the Merger on May 4, 2012, because the Merger accelerated the vesting of virtually all unvested options, thereby changing the fair value of all option grants affected by the change of control. Outside services expenses increased $105.8 thousand, or 92.4%, to $220.3 thousand in the quarter ended June 30, 2012 from $114.5 thousand in the quarter ended June 30, 2011, as shown in the table below.

                                      For the quarter ended           For the quarter ended
                                          June 30, 2012                   June 30, 2011                     Change
                                          $               %               $               %             $             %
Legal expenses                      $     133,044         60.4 %    $      91,502         79.9 %    $  41,542          45.4 %
Accounting and audit expenses              16,194          7.4 %           12,288         10.7 %        3,906          31.8 %
Public relations expenses                   5,000          2.3 %            2,022          1.8 %        2,978         147.3 %
Consulting                                 64,362         29.2 %            4,983          4.4 %       59,379        1191.6 %
Payroll processing expenses                   542          0.3 %            3,584          3.1 %       (3,042 )       -84.9 %
Banking Fees                                1,055          0.5 %              121          0.1 %          934         771.9 %
Stock transfer agent fees                     115          0.1 %               -           0.0 %          115            NM

Total G&A outside services          $     220,312        100.0 %    $     114,500        100.0 %    $ 105,812          92.4 %

NM = Not Meaningful

The primary reason for the increase in general & administrative outside services expenses was the increase in consulting costs. In connection with the Merger, the Company paid an independent financial advisor $37.5 thousand for services. In addition, at the Closing Date, one former senior executive's status changed from being an employee on salary to being an independent consultant to the Company, resulting in $15.0 thousand in payments to the individual during the quarter ended June 30, 2012 being reported as outside services whereas compensation to the executive in the 2011 quarter was reported as wages.

In addition, there was an increase in the legal and accounting expenses related to the Merger, as compared to the expenses related to the failed financing transaction with a private equity firm in 2011. Both transactions required extensive document preparation and review by external legal counsel and accounting services by an independent certified public accounting firm. However, since the Merger closed during the second quarter of 2012, on May 4, 2012, the related legal expenses during the quarter were significantly greater than would have been incurred in a normal quarter, resulting in a 45.4% increase over the quarter ended June 30, 2011. In addition, the failed financing transaction in 2011only required an auditor's compilation report whereas the Merger required Oryon to have fully audited financial statements, resulting in a 31.8% increase in accounting and audit expenses.

Interest Expense

Interest expense increased $40.3 thousand, or 70.4%, to $97.6 thousand for the three months ended June 30, 2012, from $57.3 thousand in the three months ended June 30, 2011. The principal reason for the increase in interest expense was the increase in the amortization of the debt discount for the beneficial conversion feature. The amortization of the debt discount for the beneficial conversion feature related to Oryon's Series C-1 convertible notes payable, which was $53.2 thousand in the three months ended June 30, 2012, an increase of $31.4 thousand, or 144.4%, over the $21.8 thousand in the three months ended June 30, 2011, as shown in the table below. In the three months ended June 30, 2012, Oryon incurred interest expense of $7.3 thousand on short-term debt that did not exist in the prior year comparable quarter. In addition, accrued and unpaid interest on Oryon's convertible notes payable increased $1.2 thousand, or 4.0%, to $32.2 thousand in the three months ended June 30, 2012, from $31.0 thousand in the three months ended June 30, 2011, due to the greater principal amount of convertible notes outstanding in 2012.

                                            For the quarter ended           For the quarter ended
                                                June 30, 2012                   June 30, 2011                    Change
                                               $                %              $                %            $            %
Interest expense on convertible notes
payable                                   $     32,234          33.0 %    $     30,993          54.1 %    $  1,241         4.0 %
Interest expense on short-term debt              7,334           7.5 %              -            0.0 %       7,334          -
Amortization of debt discount related
to warrants                                      4,835           5.0 %           4,527           7.9 %         308         6.8 %
Amortization of debt
discount-beneficial conversion feature
on the Series C-1 convertible notes
payable                                         53,204          54.5 %          21,769          38.0 %      31,435       144.4 %

Total interest expense                    $     97,607         100.0 %    $     57,289         100.0 %    $ 40,317        70.4 %

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 June 30, 2012, 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 Six Months ended June 30, 2012 to the Six Months ended June 30, 2011

Total Revenues

Total revenues for the six months ended June 30, 2012 decreased $60.8 thousand, or 86.0%, to $9.9 thousand for the six months ended June 30, 2012 from $70.6 thousand for the six months ended June 30, 2011. The decrease was primarily due to the decline in other revenues, combined with a decrease in the gross profit margin on product sales. In the first half of 2011, the Company received $36.0 thousand in revenues for applications design and tooling services, reported as "other revenues".

Our gross profit on product sales revenues decreased $24.4 thousand, or 71.2%, to $9.9 thousand in the first half of 2012 from $34.3 thousand in the first half of 2011, primarily due to the 49.5% decrease in product sales. Cost of goods sold represented 70.1% of product sales revenues in the first half of 2012 as compared to 47.5% in the first half of 2011. 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

Total operating expenses for the six months ended June 30, 2012, increased $97.6
thousand, or 12.2%, to $899.3 thousand in the first six months of 2012 from
$801.8 thousand in the first six months of 2011, as shown in the table below:



                                           For the six months ended           For the six months ended
                                                 June 30, 2012                      June 30, 2011                      Change
                                               $                 %                $                 %              $             %
Total applications development exp.      $      147,443           16.4 %    $      239,477           29.9 %    $ (92,034 )      -38.4 %
Total sales and marketing exp.                   75,625            8.4 %            55,587            6.9 %       20,038         36.1 %
Total general and administrative exp.           652,121           72.5 %           475,496           59.3 %      176,625         37.2 %
Depreciation and amortization                    24,137            2.7 %            31,196            3.9 %       (7,059 )      -22.6 %

Total operating expenses                 $      899,326          100.0 %    $      801,757          100.0 %    $  97,569         12.2 %

The primary reason for the increase in total operating expenses is the 37.2% increase in general and administrative expenses, as discussed in the next section below.

Total applications development expenses decreased by $92.0 thousand, or 38.4%, due to (a) the $47.0 thousand, or 64.1%, decrease in materials, equipment, services expenses and (b) the $27.0 thousand, or 21.5%, decrease in wages, for the six months ended June 30, 2012 as compared to the six months ended June 30, 2011. Due to greater capital constraints in 2012 than in 2011, Oryon's applications development personnel reduced their activities to a minimum, significantly decreasing materials purchases. A secondary reason for the decrease is the reduction in personnel that occurred in the second half of 2011.

Total sales and marketing expenses increased $20.0 thousand, or 36.0%, in the first half of 2012 as compared to the first half of 2011 primarily due to the $20.0 thousand payment to TractorBeam, a brand development firm, recorded as outside services expense in the first half of 2012. In addition, the Company paid $5.0 thousand as a sponsor fee for a trade show in the first half of 2012, increasing sales and marketing overhead expenses. Wages and payroll taxes and benefits were greater in the first half of 2011, as compared to the first half of 2012, due to a larger number of sales personnel in 2011, all of whom were subsequently terminated in the second half of 2011 when the Company experienced greater capital limitations.

General and Administrative Expenses

General and administrative expenses increased by $176.6 thousand, or 37.2%, to $652.1 thousand from $475.5 thousand largely due to the increase in payroll taxes/benefits and outside services expenses. Payroll taxes/benefits increased $59.6, or 217.9%, to $87.0 thousand in the first half of 2012 from $27.4 thousand in the first half of 2011, due to the $68.3 thousand increase in stock-based compensation expense that was $79.2 thousand in the six months ended June 30, 2012, as compared to $10.8 thousand in the first half of 2011. This increase in stock-based compensation expense is a direct result of the closing of the Merger on May 4, 2012, because the Merger accelerated the vesting of virtually all unvested options, thereby changing the fair value of all option grants affected by the change of control. Outside services expenses increased $82.5 thousand, or 42.5%, to $277.0 thousand in the first half of 2012 from $194.5 thousand in the first half of 2011, as shown in the table below.

                                        For the six months ended           For the six months ended
                                              June 30, 2012                      June 30, 2011                     Change
                                            $                 %                $                 %             $             %
Legal expenses                        $      146,740           53.0 %    $      150,913           77.6 %    $ (4,173 )       -2.8 %
Accounting and audit expenses                 49,548           17.9 %            22,708           11.7 %      26,840        118.2 %
Public relations expenses                      5,000            1.8 %             8,022            4.1 %      (3,022 )      -37.7 %
Consulting                                    72,713           26.3 %             8,083            4.2 %      64,630        799.6 %
Payroll processing expenses                    1,519            0.6 %             4,256            2.2 %      (2,737 )      -64.3 %
Banking Fees                                   1,405            0.5 %               499            0.3 %         906        181.6 %
Stock transfer agent fees                        115            0.0 %                -             0.0 %         115           NM

Total G&A outside services            $      277,040          100.0 %    $      194,481          100.0 %    $ 82,559         42.5 %

NM = Not Meaningful

The primary reason for the increase in outside services expenses was the increase in consulting costs. In connection with the Merger, the Company paid an independent financial advisor $37.5 thousand for services. In addition, at the Closing Date, one former senior executive's status changed from being an employee on salary to being an independent consultant to the Company, resulting in $15.0 thousand in payments to the individual in the first half of 2012 being reported as outside services whereas compensation to the executive in 2011was reported as wages.

In addition, there was an increase in the accounting expenses related to the Merger, as compared to the expenses related to the failed financing transaction with a private equity firm in 2011. Both transactions required extensive document preparation and review by an independent certified public accounting firm. However, the failed financing transaction only required an auditor's compilation report whereas the Merger required Oryon to have fully audited financial statement resulting in a 118.2% increase in accounting and audit expenses.

Interest Expense

Interest expense increased $84.6 thousand, or 81.6%, to $188.4 thousand for the six months ended June 30, 2012, from $103.7 thousand in the six months ended June 30, 2011. The principal reason for the increase in interest expense was the increase in the amortization of the debt discount for the beneficial conversion feature. The amortization of the debt discount for the beneficial conversion feature related to Oryon's Series C-1 convertible notes payable, which was $99.8 thousand in the first half of 2012, an increase of $66.6 thousand, or 200.4%, over the $33.2 thousand in the first half of 2011, as shown in the table below. In the first half of 2012, Oryon incurred interest expense of $14.5 thousand on short-term debt that did not exist in the prior year comparable period. In addition, accrued and unpaid interest on Oryon's convertible notes payable increased $3.0 thousand, or 4.9%, to $64.5 thousand in the six months ended June 30, 2012, from $61.5 thousand in the first half of 2011, due to the greater principal amount of convertible notes outstanding in 2012.

                                             For the six months ended           For the six months ended
                                                   June 30, 2012                      June 30, 2011                     Change
                                                 $                 %                $                 %             $            %
Interest expense on convertible notes
payable                                    $       64,467           34.2 %    $       61,462           59.3 %    $  3,006         4.9 %
Interest expense on short-term debt                14,473            7.7 %                -             0.0 %      14,473          -
Amortization of debt discount related to
warrants                                            9,599            5.1 %             9,033            8.7 %         566         6.3 %
Amortization of debt discount-beneficial
conversion feature on the Series C-1
convertible notes payable                          99,825           53.0 %            33,229           32.0 %      66,596       200.4 %

Total interest expense                     $      188,365          100.0 %    $      103,723          100.0 %    $ 84,641        81.6 %

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 six month period ended June 30, 2012, 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 believes that its cash on hand and working capital will be sufficient to meet its anticipated cash requirements through 2012 provided that the additional financing of $250.0 thousand remaining under the Financing Agreement is successfully raised. See Notes 13 and 18 to Notes to the Consolidated Financial Statements. Not including capital expenditures and costs directly related to revenues, monthly operating expenditures are expected to range between $125,000.00 and $150,000.00 per month. Management anticipates that an additional $1,000,000 to $3,000,000 in excess of the financing provided by the Financing Agreement will be necessary to fund operations over the next twelve to twenty-four month period subsequent to the Closing Date. We do not currently have any material commitments for capital expenditures as of the end of the current period.

To meet our future objectives, we will need to meet our revenue objectives and . . .