DAIS Corp - Annual Report: 2022 (Form 10-K)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

Commission file number 000-53554

(727) 375-8484

(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐      No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐      No ☒

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒      No ☐

Indicate by check mark whether the registrant has submitted electronically, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that registrant was required to submit such files. Yes ☒      No ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☒

Indicate by check mark whether the registrant is a large, accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large, accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

The aggregate market value of the voting and non-voting common stock held by non-affiliates of the registrant as of December 31, 2022 was $675,068 based on the closing price of $0.098 per share of Dais Corporation common stock as quoted on the OTC Pink Marketplace and a public float of 6,888,445 on that date.

On May 26, 2023, there were 20,149,365 shares of the registrant’s common stock outstanding.

TABLE OF CONTENTS

Introductory Comments

Throughout this Annual Report on Form 10-K, the terms “we,” “us,” “our,” “the Company,” “our Company,” and “DLYT,” refer to Dais Corporation, a New York corporation (formerly known as ‘Dais Analytic Corporation’).

PART I

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In some cases, forward-looking statements are identified by terms such as “may,” “will,” “should,” “could,” “would,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “projects,” “predicts,” “potential” and similar expressions intended to identify forward-looking statements. Such statements include, without limitation, statements regarding:

These forward-looking statements are only predictions and involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance, or achievements, expressed or implied, by such forward-looking statements. Also, these forward-looking statements represent our estimates and assumptions only as of the date of this Annual Report on Form 10-K. Except as otherwise required by law, we expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement contained in this Annual Report on Form 10-K to reflect any change in our expectations or any change in events, conditions or circumstances on which any of our forward-looking statements are based. Factors that could cause or contribute to differences in our future financial and other results include those discussed in the risk factors set forth in Part I, Item 1A of this Annual Report on Form 10-K as well as those discussed elsewhere in this Annual Report on Form 10-K. We qualify all of our forward-looking statements by these cautionary statements.

ITEM 1. BUSINESS.

Throughout this document we may use the following terms: Aqualyte^™, ConsERV^™, NanoClear^™, PolyCool^™ and NanoAir^™ , all of which are unregistered trademarks of the Company.

Overview

Dais Corporation (“Dais”, “us,” “we,”, the “Company”) is a proprietary, nanotechnology polymer materials company. Nanotechnology involves studying and working with matter on an ultra-small scale. Doing this is where the Company built features and properties into its platform of nanomaterial sold under the brand name “Aqualtye™. Aqualyte™ is used to enable new product variants we believe are better than traditional products which use energy consuming and break-able components. Aqualyte™ itself, is marketed to OEMs to create differentiated products, while the second product is a fixed plate energy recovery ventilator called ConsERV, which we believe is useful in meeting building indoor fresh air requirements while saving energy and lowering emissions for most forms of heating, ventilation, and air conditioning (HVAC) equipment. We continue to develop other nano-structured polymer technology applications in HVAC/Refrigeration, energy, food services and wastewater treatment industries.

Corporate History

We were incorporated as a New York corporation on April 8, 1993, as The Dais Corporation. The Company was formed to develop new, cost-effective polymer materials for various applications, including providing a lower cost membrane material for Polymer Electrolyte Membrane fuel cells. We believe our research on materials science has yielded technological advances in the field of selective ion transport polymer materials. In December 1999, the Company purchased the assets of Analytic Power Corporation, in March 2002, the Company sold substantially all its fuel cell assets to Chevron, a large U.S. oil company for a combination of cash and the assumption by such company of certain of the Company’s obligations and began working to commercialize the attributes and features of the nanomaterials developed since formation. In November of 2018, the board of directors unanimously voted to change the name of the Company from Dais Analytic Corporation to Dais Corporation (the “Name Change”). The Name Change took effect with FINRA on February 27, 2019.

On November 2, 2018, the shareholders of the Company approved an increase in the authorized common shares of the company from 240,000,000 shares to 340,000,000 shares. On March 14, 2019, the shareholders approved an increase in authorized common shares from 340,000,000 shares to 1,100,000,000 shares. In July 2019, the shareholders of the Company approved a reverse stock split of the issued and outstanding shares of the Company’s common stock at the ratio ranging from one-for-500 to one-for-2,000. On October 31, 2019, the Company amended its Certificate of Incorporation to reflect a one-for-2,000 reverse stock split of the Company’s common stock. The reverse split was effective December 6, 2019. All share and per share data have been retroactively restated in this annual report and the accompanying financial statements and footnotes to reflect the effects of the reverse split.

Our Technology

We use proprietary nanotechnology to reformulate thermoplastic polymers. Nanotechnology involves studying and working with matter on an ultra-small scale. Polymers are chain-like plastic molecules used in diverse products such as Dacron, Teflon, and polyurethane. Thermoplastic is a plastic (deformable) polymer material that melts to a liquid when heated and solidifies when cooled and is able to transition repeatedly between these states. Our reformulated polymers have properties that allow them to be used in unique ways, and we call the resulting material Aqualyte™.

The Company believes the attributes of its Aqualyte™ platform of nanomaterial create a catalyst for change:

Our Products

The Company uses its knowledge of the Aqualyte nanomaterial to integrate it into traditional or new product form factors. It is management’s belief based on 3^rd party industry or independent test results, the Company’s own testing, or data from customer use, that the benefits address the growing market needs resulting from, but not limited to, the drivers of climate change as well as those needs created by the pandemic.

Nanomaterial Platform - Aqualyte™

The Aqualyte Nanomaterial is made from commercially available polymer resin and industrial grade solvents which are mixed using a proprietary process with traditional industrial equipment. Our process creates a modified resin with key features and attributes that can be used to offer different properties to multiple products.

The Company sells Aqualyte to skilled OEMs using its features and properties to create new and/or improved products in a range of applications. The Company continues to develop next generation versions of its Aqualyte nanomaterial working to increase existing performance, add new features, and improve cost.

ConsERV™

We continue to expand sales channels to drive growth of revenues of our ConsERV product. ConsERV is an HVAC energy conservation product which should, according to various tests, save energy and operating costs on HVAC equipment, lower CO₂ emissions and allow HVAC systems to be 20% - 67% smaller, reducing peak energy usage while simultaneously improving indoor air quality. This product makes most forms of HVAC systems operate more efficiently.  ConsERV generally works in combination with existing HVAC systems, to provide improved ventilation air in buildings. ConsERV uses a fixed-plate enthalpy exchanger (the “core”) constructed with our nanotechnology polymer. When compared to similar competitive products, we believe, based on tests conducted by the Air-conditioning, Heating and Refrigeration Institute (AHRI), a leading industry association, ConsERV maintains an industry leading position in the management of latent heat.

The Company began actively rolling out an updated ConsERV product line in 4Q, 2021. The updated line addresses market requested updates and features.

The sales channels for ConsERV continue to expand across North America and include private labeling efforts. The Company has and continues to negotiate arrangements with independent sales/engineering representatives in multiple regions across North America who in turn target architects and specifying engineers, select OEMs, utility sponsored programs, and sophisticated users of HVAC equipment.

We believe the growth initiatives and what we perceive as changes in the ERV market will allow the company to address well over fifty percent of the addressable North American market for ConsERV.

We continue to have targeted discussions with identified companies in the European Union interested in buying and distributing both Aqualyte nanomaterial for use in their ERV cores as well as selling Dais produced ConsERV cores. To help us expand our capabilities in the reported high growth HVAC markets in Southeast Asia, Dais qualified a Chinese manufacturing company to produce ConsERV cores using Aqualyte membrane to meet the growing demand for ConsERV systems in the Region.

The Company expects this trend of growing ConsERV system, core, and Aqualyte nanomaterial revenues to continue into 2023 and beyond.

Dais continues to respond to market interests by developing additional products that use our nanotechnology to save energy, provide clean water, protect health, and generally promote a more sustainable future.

Strategic Partnerships

Currently the Company is engaged with a multi-national conglomerate developing a line of products within the Company’s defined and proven uses of its nano polymer's capabilities, We expect, if all continues well, an uptick in revenues from this effort no later than the end of the 2^nd quarter of 2024.

Our Patents

Dais has owned 25 granted patents over its corporate history, some of which have reached the end of their enforceable term. As of December 31, 2022, Dais owns the active, enforceable rights to eleven U.S. patents, five Chinese patents, two Hong Kong patents, and three Patent Cooperation Treaty (“PCT”) applications that are still being examined. These patents relate to, or are applications of, our nano-structured polymer materials that perform functions such as ion exchange and modification of surface properties. 

The company also owns multiple utility patents that cover inventions that are new, improvements and useful processes including the design and fabrication of devices or approaches that use properties of the polymers described above for HVAC, energy, food preservation, and water treatment applications. Dais owns the rights to a new US Patent issued in 2022:

Dais has been notified that the following Application will be granted full US patent status in 2022:

Additional patent applications are being examined that are not yet publicly visible in the patent system and will be revealed at the appropriate time. Patents may or may not be granted on any of the above applications. We also seek to protect our proprietary intellectual property, including intellectual property that may not be patented or patentable, in part by entering into confidentiality agreements with our current and prospective strategic partners and employees.

Manufacturing

The Company currently uses a mix of in-house and outsourced assembles for its nanomaterial and product (ConsERV) needs.

For future expansion and high-volume scale-up, the Company is actively looking at the costs and merits of organically scaling v. moving to a ‘near 100% outsourced’ model at the most optimum way to grow.  Nonetheless, the Company continues to strengthen its existing supply chain with strategic partners having existing multiple channel access to the ERV or OEM Aqualyte markets – or with qualified outsourced firms.

The Company has continued to establish a robust supply chain with strategic partners having existing multiple channel access to markets – or with qualified outsourced firms. We do not have long-term contractual relationships with any of our manufacturers or vendors. There are no subassemblies or components that could not be purchased from alternative suppliers. Purchases to date of raw materials and related services have been on a purchase order basis using non-disclosure agreements.

OEM Customers, and Suppliers

Using the properties and features of its Aqualyte nanomaterial the Company has proven results in a variety of cross-industry markets. We look to provide Original Equipment Manufacturers (OEMs) with Aqualyte membrane. Then sharing how to use the options and features found in Aqualyte, for the OEM to offer better or even new products in consumer, commercial, and industrial applications having what we believe to be better lifetimes, and efficiencies.

We are dependent on third parties to manufacture the key components needed for our nano-structured based materials and of the value-added products made with these materials.

We require our suppliers to provide components in a timely manner, and to meet the Company’s quality, quantity and cost requirements or technical specifications with acceptable terms. Certain of the components or the processes of the Company’s suppliers are proprietary. If the Company were ever required to replace any of its suppliers, it should be able to obtain comparable components from alternative suppliers at comparable costs, but this would create delays in production.

Research and Development

Expenditures for research, development and engineering of products are expensed as incurred. We incurred research and development costs of $328,480 and $223,425 for the years ended December 31, 2022 and 2021, respectively. We account for proceeds received from government funding for research as a reduction in research and development costs. We recorded proceeds against research and development expenses on the Statements of Operations of $0 and $89,617 for the years ended December 31, 2022 and 2021, respectively.

Sales and Marketing Strategies

We have secured and continue to discuss relationships with leading industry HVAC manufacturers, HVAC product distributors, energy service companies, and ERV manufacturers outside of North and South America. In addition, we are discussing relationships for use of our ConsERV products in other applications outside of energy recovery ventilation world-wide.

The Company is focused on creating alliances with companies having strong, existing channel presence or expertise in the target industries, notably for ConsERV and Aqualyte OEM uses. We are using the data and experience of past sales in a variety of markets, adding newer features and functions, working to increase revenues. We intend to bring industry seasoned talent into the Company at the appropriate time to further drive market development, revenue growth and guide future product feature improvement needs.

Competition and Barriers to Entry

We believe the efficacy of our value-added products and technology can capture increased market share, thus taking business away from more established firms using older technology. We believe our ConsERV product may become a functional component of newer, more efficient OEM products. A key challenge is to educate decision makers of the benefits derived from products using our materials and processes, and have qualified people and certified products which out-perform other products, diminishing the value proposition of competitive products in the various sales channels. As we continue to grow the base of operational and third-party data this education process will become routine.

There are several companies located in the U.S., Canada, Europe, and Asia that have been developing and selling technologies and products in the energy recovery industry as listed below. We will experience significant competition regarding our products because certain competing companies possess greater financial and personnel resources. Future product competitors include, but are not limited to:

We believe the combination of our nanomaterial characteristics and growing patent positions form competitive advantages, which may allow us time to execute our business plan. Many of our competitors may experience barriers to entry in these markets primarily related to the lack of similarly performing proprietary materials and processes.

Government Regulation

We do not believe the sale, installation or use of our current nano-structured products will be subject to any government regulation, other than perhaps adherence to building codes and water safety regulations. We do not believe that the cost of complying with such codes and regulations, to the extent applicable to our products, will be prohibitive.

We do not know the extent to which any existing or new regulations may affect our ability to distribute, install and service any of our products. Once our other products reach the commercialization stage and we begin distributing them to our target markets, federal, state, or local governmental entities may seek to impose regulations.

We are also subject to various international, federal, state, and local laws and regulations relating to, among other things, land use, safe working conditions, and environmental regulations regarding handling and disposal of hazardous and potentially hazardous substances and emissions of pollutants into the atmosphere. The process of manufacturing the solutions which are used to produce Aqualyte may expose us to the risk of harmful substances escaping into the environment, resulting in potential injury or loss of life, damage to property and natural resources. Depending on the nature of any claim, our current insurance policies may not adequately reimburse us for costs incurred in settling environmental damage claims and, in some instances, we may not be reimbursed at all. To date, we are not aware of any claims or liabilities under these existing laws and regulations that would materially affect our results of operations or financial condition. The completed products which use the Aqualyte material may have regulatory requirements relating to a variety of local or federal regulatory agencies, however, this type of exposure would be minimal.

Employees

As of December 31, 2022, we employed 21 full-time employees and one independent contractor. None of the employees are subject to a collective bargaining agreement. We consider our relations with our employees to be good. As of the date of filing the number of employees of the Company has increased to 23.

Principal Offices

Our principal office is located at 11552 Prosperous Drive, Odessa, FL 33556.

ITEM 1A. RISK FACTORS.

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

ITEM 1B. UNRESOLVED STAFF COMMENTS.

Not Applicable.

ITEM 2. PROPERTIES.

We currently lease 7,200 square feet of combined office and production space located at 11552 Prosperous Drive, Odessa, FL 33556. We lease the site from Ethos Business Ventures, LLC, a limited liability company in which our Chief Executive Officer, Tim Tangredi, has a controlling financial interest (see Item 13, Certain Relationships and Related Transactions and Director Independence).

The lease for our corporate headquarters began on March 18, 2005. The lease term will terminate upon 30 days’ written notice from landlord or 90 days written termination from us. The current monthly rent is $4,066 and includes sales tax. We also pay all taxes and utilities as well as most repairs relating to the building. Most of our functions are performed at this site including corporate, marketing, administration, on-going product and nano-structured polymer development and product assembly and shipping. Key polymer synthesis and casting is outsourced and not done at this facility.

We do not anticipate investing in real estate or interests in real estate, real estate mortgages, or securities of or interests in persons primarily engaged in real estate activities. We currently have no formal investment policy and do not intend to undertake investments in real estate as a part of our normal operations.

ITEM 3. LEGAL PROCEEDINGS.

From time to time, claims are made against us in the ordinary course of our business, which could result in litigation. Claims and associated litigation are subject to inherent uncertainties and unfavorable outcomes could occur, such as monetary damages, fines, penalties, or injunctions prohibiting us from selling one or more products or engaging in other activities. The occurrence of an unfavorable outcome in any specific period could have a material adverse effect on our results of operations for that period or future periods. There are two items to disclose:

On April 24, 2014, the Company entered into a Distribution Agreement (the “Soex Distribution Agreement”) with SOEX (Hong Kong) Industry & Investment Co., Ltd., a Hong Kong corporation (“SOEX”). In 2015 the Company commenced an action (the “Soex Litigation) for the cancellation of the 37,500,000 shares issued to Soex (the “Soex Shares”) in connection with the Soex Securities Purchase Agreement, and for the cancellation of the 3,750,000 shares (the “Zan Shares”) issued to Zan Investment Advisory Limited (“Zan”), In June of 2017 the Litigation was moved to the U.S. District Court for the Middle District of Florida where SOEX instituted a counterclaim (Civil Docket Case #: 8:15-CV-02362-MSS-EAJ. The jury in the October of 2018 trial did not award monetary damages to either party for claims or counterclaims. On October 24, 2018, the Company initiated a third lawsuit against an affiliate of Soex, Zhongshan Trans-Tech New Material Technology Co. Ltd. Zhongshan, China, (“Transtech”), and the Chairperson of the affiliate and Soex, based on new information learned by the Company during the trial. The Company is appealing this award, in which management and the Board feel we will prevail.  In January of 2021 the Company learned the Transtech entity merged with another entity in China, and that entity (“new entity”) sold under fifty percent  off its interests to a large Swiss firm. In August 2021, the Company was notified the judge in the case in the October 2018 event, despite the recommendations of the jury to award no damages or court costs, overturned the ruling and assessed Dais $481,192 in court costs and fees. In early 2022 the remainder of the new entity’s assets to the large Swiss firm.

The firms below have pursued legal action against the Company to collect overdue accounts payable sums. The Company is working with each to enter into a settlement plan, or “pay over a period of time” payment plan. To date the Company has one agreement in place with SoftinWay.

Footnotes for Accounts Payable Table

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES.

Our stock is currently trading on the OTC Pink Marketplace operated by OTC Markets Group Inc. under the symbol “DLYT”.

Authorized Capital.

On March 5, 2015, the Company amended its Certificate of Incorporation to increase the number of authorized shares to 250,000,000, consisting of 240,000,000 shares of common stock and 10,000,000 shares of preferred stock (the “Increase in Authorized Shares”) and to cancel the designated but unissued Series A-D Preferred Stock and create a new series of preferred stock designated as the Class a Preferred Stock (the “Class A Preferred Stock”). There are no shares of Class A Preferred Stock currently issued by the Company.

On November 1, 2018, the Company issued ten (10) shares of Class B Redeemable Preferred Stock par value $0.01 per share (“Class B Stock”) having a stated value of $1.50 per share to Tim N. Tangredi, the Company’s Chief Executive Officer, in exchange for $15, pursuant to approval of the Board of Directors of the Company.

There are currently (10) shares of Class B Stock of the Company issued and outstanding.

On November 2, 2018, the shareholders of the Company approved an increase in the authorized common shares of the company from 240,000,000 shares to 340,000,000 shares. On March 14, 2019, the shareholders approved an increase in authorized common shares from 340,000,000 shares to 1,100,000,000 shares. In July 2019, the shareholders of the Company approved a reverse stock split of the issued and outstanding shares of the Company’s common stock at the ratio ranging from one-for-500 to one-for-2,000. On October 31, 2019, the Company amended its Certificate of Incorporation to reflect a one-for-2,000 reverse stock split of the Company’s common stock. The reverse split was effective December 6, 2019. All share and per share data have been retroactively restated in this annual report and the accompanying financial statements and footnotes to reflect the effects of the reverse split.

Approved by the Board on December 31, 2021, and approved on March 23, 2022, by the NY Division of Corporations four new classes Convertible Preferred Stock were created; Series C, D, E, and F. Series C and E are for investors, Series D is for consultants, and Series F is for company employees, board members, and those contractually owned equity previously forfeited gratuitously in January of 2021. Series C and E are issued. Series D is on-hold pending need, and Series F is in process of being issued.

Approximate Number of Equity Security Holders

As of May 26, 2023, there were approximately 121 shareholders of record of our common stock.

Dividends

We have not declared or paid any dividends and do not intend to pay any dividends in the foreseeable future to the holders of our common stock. We intend to retain future earnings, if any, for use in the operation and expansion of our business. Any future decision to pay dividends on common stock will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements and other factors our board of directors may deem relevant.

Transfer Agent

Our transfer agent is Clear Trust Transfer located at 16540 Point Village Drive #210, Lutz, FL 33558, telephone (813) 235-4490.

Equity Compensation Plan Information

The following table sets forth information regarding our 2000 Incentive Compensation Plan (the “2000 Plan”), 2009 Long-Term Incentive Plan (the “2009 Plan”) and 2015 Stock Incentive Plan (the “2015 Plan”) under which our securities are authorized for issuance as of December 31, 2022:

Unregistered Sales of Equity Securities and Use of Proceeds

There were no unregistered sales of equity securities in 2022 or 2021.

Recent Repurchases of Common Stock

There were no repurchases of our common stock during 2022 or 2021.

ITEM 6. SELECTED FINANCIAL DATA.

Not Applicable.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations includes a number of forward-looking statements that reflect Management’s current views with respect to current and future events and financial performance. You can identify these statements by forward-looking words such as “may”, “will”, “expect”, “anticipate”, “believe”, “estimate” and “continue”, or similar words. Those statements include statements regarding the intent, belief or current expectations of the management team as well as the assumptions on which such statements are based. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risk and uncertainties, and that actual results may differ materially from those contemplated by such forward-looking statements.

Readers are urged to carefully review and consider the various disclosures made by us in this report and in our other reports filed with the Securities and Exchange Commission. Important factors currently known to us could cause actual results to differ materially from those in forward-looking statements. We undertake no obligation to update or revise forward-looking statements to reflect changed assumptions, the occurrence of unanticipated events or changes in the future operating results over time. We believe that its assumptions are based upon reasonable data derived from and known about our business and operations and the business and operations of the Company. No assurances are made that actual results of operations or the results of our future activities will not differ materially from its assumptions. Factors that could cause differences include, but are not limited to, expected market demand for the Company’s services, fluctuations in pricing for materials, and competition.

Unless otherwise indicated or the context requires otherwise, the words “we”, “us”, “our”, the “Company” or “our Company” refer to Dais Corporation, a New York corporation, and its subsidiaries.

OVERVIEW

Overview

Dais Corporation (“Dais”, “us,” “we,”, the “Company”) is a nanomaterial technology company developing and commercializing products using the nanomaterial called Aqualyte. The first commercial product is the Aqualyte nanomaterial itself. It is useful in managing moisture and key gases in a variety of cross-industry products. The second commercial product is called ConsERV, a fixed plate energy recovery ventilator which is useful in meeting building indoor fresh air requirements while saving energy and lowering emissions for most forms of heating, ventilation, and air conditioning (HVAC) equipment. We continue to develop other Aqualyte uses in cross-industry applications, HVAC/Refrigeration, energy, etc. One area of focused attention has been development work on a variant of Aqualyte targeting surface treatments to potentially create a protective layer designed to inactivate human coronaviruses.

RESULTS OF OPERATIONS

Year Ended December 31, 2022 as compared with December 31, 2021

The following table sets forth, for the periods indicated, certain data derived from our Statements of Operations:

Revenue

We generate our revenues primarily from the sale of our ConsERV cores and systems, and our Aqualyte membrane. Product sales were $1,077,058 and $372,506 for the years ended December 31, 2022 and 2021, respectively, an increase of $704,552 or 189%. This increase in product sales was primarily driven by an increase in sales of our ConsERV product line, offset by a decrease in Aqualyte only OEM sales.

Revenues from royalty and license fees were $50,000 and $50,000 for the years ended December 31, 2022 and 2021, respectively.

Cost of Sales

Our cost of sales consists primarily of materials (including freight), direct labor, and outsourced manufacturing expenses incurred to produce our ConsERV cores and systems and Aqualyte membrane. Cost of goods sold were $977,518 and $267,837 for the years ended December 31, 2022 and 2021, respectively, an increase of $709,681 or 265%. The increased cost is primarily due to increased product sales, labor costs, materials, and normal variances in costs between our product lines..

Supply Chain (Availability and Increased prices) and Tightening labor market (money and people)

Current world-wide supply chain issues are impacting many industries, including those of the Company. The lead time for materials and components is increasing, resulting in longer delivery dates. Management is working with existing partners to identify multiple sources of materials and components so as not to rely heavily on one or two suppliers.

Increasing crude oil prices is influencing the cost of resins, plastics and fuel. Shipping and trucking costs have increased while capacity has contracted. These issues are creating increased costs across industries and Management is evaluating its’ pricing and lead times regularly.

The labor market is having an impact across industries as competition for workers is increasing. Management is working to anticipate workforce needs and planning accordingly.

The Company is dependent on third parties to manufacture the key components needed for its nanostructured materials and some portions of the value-added products made with these materials. Accordingly, a suppliers’ failure to supply components in a timely manner, or to supply components that meet the Company’s quality, quantity and cost requirements or technical specifications, or the inability to obtain alternative sources of these components on a timely basis or on acceptable terms, would create delays in production of the Company’s products and/or increase its unit costs of production. Certain of the components or the processes of the Company’s suppliers are proprietary. If the Company was ever required to replace any of its suppliers, it should be able to obtain comparable components from alternative suppliers at comparable costs, but this would create a delay in production and may briefly affect the Company’s operations.

Covid-19 World-wide Pandemic

Management continues to monitor the after effects the pandemic across the globe. As creative solutions to protect us from future infections the Company hasdeveloped what we believe using our technology is a uniquely positioned product designed to provide a positive health supporting solution to the existing or similar possible future pandemics (virus or bacteria).

We believe the integration of this newer solution, once development is complete, fits well to support even higher emphasis on the need for high efficiency  ventilation which itself appears to management to be a lesson learned from the COVID19 pandemic Management is developing and plans to soon execute crease a program to focus on the integration of high efficiency ventilation and a industry-setting use of the company’s known features/benefits using its platform of nanomaterial. The plan is being formulated, will use, at a minimum, the existing sales channels to create what we believe is yet another benefit which finds ConsERV the best ventilation product in most instances.

Climate Change and Carbon Reduction

Countries and corporations around the world are adopting aggressive plans to achieve newly established Carbon Neutral goals by 2030 and 2050. This worldwide effort is attracting attention to innovative technologies which reduce carbon emissions. Management is confident in the successful track record of current products, with a history of increasing the efficiency of HVAC systems and reducing CO₂ emissions should drive increased business activity.

Dais is actively involved in preparing its existing and planned products and those products we are working on with partners, to fully participate in the decarbonization of business.

The Company’s goal is to incorporate novel features of its nanomaterial platform to enable evolutionary or industry changing products. This is accomplished by replacing energy consuming, emissions creating product components (pumps, motors, gases, ‘forever chemical’ laden items, etc.) with products made using an architecture best managing the features of the Company’s platform of nanomaterial having higher efficiencies, lower emissions, longer life, fewer breakdown, gentle on the environment, good for your health and productivity.

Research and Development

Expenditures for research, development and engineering of products are expensed as incurred. We incurred research and development costs of $328,480 and $223,425 for the years ended December 31, 2022 and 2021, respectively, an increase of $105,055 or 47%. We account for proceeds received from government funding for research as a reduction in research and development costs. We recorded proceeds against research and development expenses on the Statements of Operations of $0 and $89,617 for the years ended December 31, 2022 and 2021, respectively, a decrease of $89,617 or 100%. The decrease in proceeds from government funding was due to the completion of U.S. Army Corps of Engineers, $1,000,000, Phase II Small Business Innovation Research (SBIR) award ending in the third quarter of 2021. 

Selling, General and Administrative

Our selling, general and administrative expenses consist primarily of payroll and related benefits, share-based compensation, professional fees, marketing and channel support costs, and other infrastructure costs such as insurance, information technology and occupancy expenses. Selling, general and administrative expenses were $1,668,389 and $1,958,560 for the years ended December 31, 2022 and 2021, respectively, a decrease of $290,171 or 15%.

Our selling, general and administrative expenses may fluctuate due to a variety of factors, including, but not limited to:

The 15% decrease in selling general and administrative expenses in the year ended December 31, 2022 compared to the same period in 2021 resulted primarily from a decrease in stock-based compensation offset by increased payroll costs.

Other Income (Expense)

Interest expense for the year ended December 31, 2022 was $2,728,360 compared to an expense of $2,065,593 for the year ended December 31, 2021. Change in fair value of derivative was $0 in 2022 compared to a gain of $2,241,678 in 2021 and there was a decrease in gain on extinguishing debt from $1,148,554 in 2021 to $0 in 2022. The gain on extinguishing debt in 2021 was due to the settlement of our convertible notes payable.

Net Loss

Net loss for the year ended December 31, 2022 was $4,451,563 compared to a net loss of $849,039 for the year ended December 31, 2021. The increased net loss in 2022 was primarily due to the change in fair value of derivatives and the settlement of our convertible notes payable in 2021.

Liquidity and Capital Resources

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. For the year ended December 31, 2022, the Company generated a net loss of $4,451,563 and has incurred significant losses since inception. As of December 31, 2022, the Company has an accumulated deficit of $62,274,665, total stockholders’ deficit of $12,430,988, negative working capital of $12,468,216 and cash and cash equivalents of $27,412. The Company used $1,451,315 and $1,283,772 of cash for operations during the years ended December 31, 2022, and 2021, respectively, which was funded primarily by proceeds from loans from related parties and others. There is no assurance that any such financing will be available in the future. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The Company is currently pursuing the following sources of short and long-term working capital:

Management believes:

We believe the Company’s prospects to secure growth funding are good. The company has shown solid progress over the last three quarters, removed a serious impediment to growth by completing a ‘debt to equity’ program where the convertible noteholders debt positions were converted into equity (common stock and warrants). The company introduced a popular new line of our ConsERV equipment  having improved performance and pricing to a growing independent sales channel through-out  North America. We reached agreement (now moving to contract stage) in late 4Q 2022 between the company and its Senior Secured Note Holder (having deep rights with the assets of the Company which are pledged as security for repayment of the Note). The company is continuing to develop the basis of a long term business relationship  with a well-known, multi-national corporation interested in using the Company’s products for its own and third-party use. 

There are no assurances we will be able to obtain the financing and planned product development commercialization. Accordingly, we may not have the ability to continue as a going concern. The financial statements of the Company do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classifications of liabilities that might be necessary should we be unable to continue as a going concern.

Statements of Cash Flows

Cash and cash equivalents as of December 31, 2022 were $27,412 compared to $773,423 as of December 31, 2021. Cash is primarily used to fund our working capital requirements.

Net cash used in operating activities was $1,451,315and $1,283,772  for the years ended December 31, 2022 and 2021, respectively. The increase in net cash used in operations was primarily due to a decrease in cash from net working capital accounts partially offset by a decrease in net loss (after adjusting for non-cash items). For the year ended December 31, 2022, net loss (after adjusting for non-cash items) was $2,874,557. Accounts receivable, inventory and other assets together increased by $422,430. Accounts payable, accrued liabilities, customer deposits and deferred revenue increased in total by $1,845,672. For the year ended December 31, 2021, net loss (after adjusting for non-cash items) was $3,162,483. Accounts receivable, inventory and other assets together decreased by $53,624. Accounts payable, accrued liabilities, customer deposits and deferred revenue increased in total by $1,932,335.

Net cash used by investing activities was $45,148 and $29,758 for the year ended December 31, 2022 compared to the same period in 2021.The increase was driven primarily by equipment purchases in 2022.

Net cash provided by financing activities was $750,452 and $2,050,437 for the years ended December 31, 2022 and 2021. respectively. The decrease resulted from decreased proceeds from notes payable offset by an increase in proceeds from notes payable to related parties.

Material Financing Transactions

Debt to Equity Exchange Program

In the period from June 2017 through the end of December 2019, the Company entered eight Convertible Note Holder agreements with eight Note Holders totaling, with all fees, interest, and principal, $2,008,812 as of December 31, 2020. The notes were not considered to be in default and were being renegotiated at March 31, 2021. Subsequently, as of May 31, 2021, each Convertible Noteholder received their fees, interest, and principal totaling $2,107,414 in shares of Common stock of the Company (at $0.030 per share) with 50% warrant coverage (1 year cash warrant with a strike price of 0.30). All documents were executed by June 30, 2021, with all equity/warrants issued by July 31, 2021. The Company issued 7,036,668 Common shares, and 3,576,733 Warrant shares in this transaction. All unexercised warrants expired as of May 15, 2022 per the terms and conditions of the Warrant document.

2022 Convertible Notes

On December 12, 2022, the Company entered a convertible promissory note in the amount of $40,000. The note matures on the earlier of June 12, 2023 or 5 days after demand and bears interest at 10% per year. The note is convertible into shares of common stock at a fixed conversion price of $0.30 per share.

On November 4, 2022, the Company entered a convertible promissory note in the amount of $25,000. The note matures on the earlier of May 4, 2023 or 5 days after demand and bears interest at 10% per year. The note is convertible into shares of common stock at a fixed conversion price of $0.30 per share.

On September 7, 2022, the Company entered a convertible promissory note in the amount of $100,000. The note matures on September 7, 2023 and bears interest at 8% per year. In connection with this note, the Company has issued a warrant to purchase 1,000,000 shares of common stock to the lender. The warrant has an exercise price of $0.30 per share and expires on September 7, 2027. The relative fair value of the warrant was $59,998, determined using the Black Scholes Model with the following assumptions: (1) risk free interest rate of 3.37%; (2) dividend yield of 0%; (3) volatility factor of the expected market price of the Company’s common stock of 360%; and (4) an expected life of 5 years. The note is convertible into shares of common stock at a fixed conversion price of $0.10 per share. The company has recorded a beneficial conversion feature of $40,002. Amortization of discount was $31,781 for the year ended December 31, 2022.

On August 20, 2022, the Company entered a convertible promissory note in the amount of $49,850. The note matures on the earlier of February 20, 2023 or 10 days after demand and bears interest at 8% per year. The note is convertible into shares of common stock at a fixed conversion price of $0.30 per share.

On June 15, 2022, the Company entered two convertible promissory notes aggregating $300,000. The notes mature on the earlier of December 15, 2022 or 10 days after demand and bear interest at 8% per year. The Company received proceeds of $300,000. The notes are convertible into shares of common stock at a fixed conversion price of $0.30 per share. The Company has recorded debt discount of $200,000, related to the beneficial conversion feature of the notes. The discount will be amortized to interest expense over the six-month term of the notes, and $200,000 was amortized during the year ended December 31, 2022, respectively.

2021 Convertible Notes

On September 20, 2021, the Company entered a convertible promissory note with GS Capital Partners, LLC. The note matured on September 20, 2022 and bears interest at 8% per year. The Company received proceeds of $197,000, after deduction of $20,000 of original issue discount and $3,000 of costs. In connection with this note, the Company has issued a warrant to purchase 1,466,666 shares of common stock to the lender. The warrant has an exercise price of $0.15 per share and expires on September 21, 2026. The relative fair value of the warrant was $110,000, determined using the Black Scholes Model with the following assumptions: (1) risk free interest rate of 0.84%; (2) dividend yield of 0%; (3) volatility factor of the expected market price of the Company’s common stock of 389%; and (4) an expected life of 5 years. The note is convertible into shares of common stock at a fixed conversion price of $0.10 per share. The company has recorded a beneficial conversion feature of $90,000. Amortization of discount and costs was $160,071 and $62,929 for the years ended December 31, 2022 and 2021, respectively. The note matured on September 20, 2022. The lender has not declared a default as both parties are actively discussing a mutually beneficial path forward.  It is expected an agreement will be reached in the fourth quarter of 2022.

During the fourth quarter of 2021, the Company entered twenty convertible promissory notes with various holders aggregating $1,412,000. The notes mature one year from issuance and bear interest at 8% per year. The Company received proceeds of $1,287,000, after deduction of $117,000 of original issue discount and $8,000 of costs. In connection with the notes, the Company has issued warrants to purchase 10,463,332 shares of common stock to the lenders. The warrants have an exercise price of $0.15 per share and expire five years from the date of issuance. The relative fair value of the warrants was $1,366,127, determined using the Black Scholes Model with the following assumptions: (1) risk free interest rate of 0.84% - 1.33%; (2) dividend yield of 0%; (3) volatility factor of the expected market price of the Company’s common stock of 386% - 389%; and (4) an expected life of 5 years. The notes are convertible into shares of common stock at a fixed conversion price of $0.10 per share. A total of $1,412,000 has been recorded as debt discount, and 8,000 has been recorded as deferred debt costs. The discount and costs will be amortized to interest expense over the term of the notes Amortization of discount and costs was $1,236,089 and $142,233 for the years ended December 31, 2022 and 2021, respectively.

COVID-19 Disclosure

The Company’s operations continue to be impacted by the aftermath of the outbreak of the coronavirus disease (COVID-19) which was declared a pandemic by the World Health Organization in March 2020. The ongoing disruption relating to the availability of certain components and parts is impacting lead times causing delays in order fulfillment. Further the lasting impacts resulted in an adverse impact on the Company’s operations, as ur third-party manufacturers, and distributors work through the lasting impacts of shortages in the supply and availability of component and parts. Awareness of research relating to the need for increased ventilation, which aides in the fight against viruses and other allergens in our indoor spaces, is changing buying habits. This change in attitudes is driving an increase in the markets for our nano-based products.

Economy and Inflation

Except as disclosed herein, we have not experienced any significant cancellation of orders due to the downturn in the economy. Our management believes that inflation will have an effect on our cost of goods and shipping, however sales inquiries continue to be strong through 2022.

Contractual Obligations

We do not have any liabilities related to long-term contractual obligations as of December 31, 2022.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, revenues, and results of operations, liquidity, or capital expenditures.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of the accompanying financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires us to make judgments, assumptions and estimates that affect the amounts reported in the accompanying financial statements and the accompanying notes. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. When making these estimates and assumptions, we consider our historical experience, our knowledge of economic and market factors and various other factors that we believe to be reasonable under the circumstances. Actual results could differ from these estimates. Management has discussed the selection of critical accounting policies and estimates with our Board of Directors, and the Board of Directors has reviewed our disclosure relating to critical accounting policies and estimates in this annual report on Form 10-K. The following critical accounting policies are significantly affected by judgments, assumptions and estimates used in the preparation of the financial statements:

Revenue Recognition

Generally, we recognize revenue for products upon shipment to customers, provided no significant obligations remain and collection is probable.

In certain instances, our ConsERV system product may carry a limited warranty of up to two years for all parts contained therein except for the energy recovery ventilator core produced and sold by us. The distributor of the ConsERV system may carry a limited warranty of up to ten years. The limited warranty includes replacement of defective parts for the ConsERV system and includes workmanship and material failure for the ConsERV core. We have recorded an accrual of $91,531 for future warranty expenses on December 31, 2022, which is included in accrued expenses, other.

Revenue derived from the sale of licenses is deferred and recognized as license fee revenue on a straight-line basis over the life of the license, or until the license arrangement is terminated. We recognized license fee revenue of $50,000 and $50,000 for the years ended December 31, 2022 and 2021, respectively. Royalties are recognized as earned. We did not recognize any revenue from royalties for the years ended December 31, 2022 and 2021.

The Company has adopted the new revenue recognition guidelines in accordance with ASC 606, Revenue from Contracts with Customers (ASC 606), commencing from the period under this report. The Company analyzes its contracts to assess that they are within the scope and in accordance with ASC 606. In determining the appropriate amount of revenue to be recognized as the Company fulfills its obligations under each of its agreements, whether for goods and services or licensing, the Company performs the following steps: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations based on estimated selling prices; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation. The Company acts as a principal in its revenue transactions as the Company is the primary obligor in the transactions. Generally, the Company recognizes revenue for its products upon shipment to customers, provided no significant obligations remain and collection is probable.

Accounts Receivable

Accounts receivable consist primarily of receivables from the sale of our ERV products and Aqualyte membrane. We regularly review accounts receivables for any bad debts based on an analysis of our collection experience, customer credit worthiness and current economic trends. After all attempts to collect a receivable have failed, the receivable is written off against the allowance. Based on management’s review of accounts receivable, an allowance for doubtful accounts of $0 and $0 has been recorded on December 31, 2022 and 2021, respectively.

Impairment of Long-Lived and Intangible Assets

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the book value of the asset may not be recoverable. We periodically evaluate whether events and circumstances have occurred that indicate possible impairment. When impairment indicators exist, we use market quotes, if available, or an estimate of the future undiscounted net cash flows of the related asset or asset group over the remaining life in measuring whether the asset values are recoverable. We did not recognize impairment on its long-lived assets during the years ended December 31, 2022 or 2021.

Identified intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Our existing intangible assets consist solely of patents. Patents are amortized over their estimated useful or economic lives of 17 years. Patent amortization expense was $19,989and $18,885 for the years ended December 31, 2022 and 2021, respectively. Based on current capitalized costs, total patent amortization expense is estimated to be approximately $20,000 per year for the next five years and thereafter.

Stock-Based Compensation

We recognize all share-based payments to employees, including grants of employee stock options, as compensation expense in the financial statements based on their fair values. That expense will be recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period) or immediately if the share-based payments vest immediately.

There were no stock options issued during the year ended December 31, 2022 and 2021.

Derivative Financial Instruments

We do not use derivative instruments to hedge exposure to cash flow, market, or foreign currency risk. Terms of convertible promissory note instruments are reviewed to determine whether they contain embedded derivative instruments that are required under ASC 815 “Derivative and Hedging” (ASC 815) to be accounted for separately from the host contract and recorded on the balance sheet at fair value. The fair value of derivative liabilities, if any, is required to be revalued at each reporting date, with corresponding changes in fair value recorded in current period operating results.

Freestanding warrants issued by us in connection with the issuance or sale of debt and equity instruments are considered to be derivative instruments and are evaluated and accounted for in accordance with the provisions of ASC 815. Pursuant to ASC 815, an evaluation of specifically identified conditions is made to determine whether fair value of warrants issued is required to be classified as equity or as a derivative liability.

Income Taxes

Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due plus deferred taxes resulting from temporary differences. Such temporary differences result from differences in the carrying value of assets and liabilities for tax and financial reporting purposes. The deferred tax assets and liabilities represent the future tax consequences of those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

We identify and evaluate uncertain tax positions, if any, and recognize the impact of uncertain tax positions for which there is a less than more-likely-than-not probability of the position being upheld when reviewed by the relevant taxing authority. Such positions are deemed to be unrecognized tax benefits and a corresponding liability is established on the balance sheet. We have not recognized a liability for uncertain tax positions. If there were an unrecognized tax benefit, we would recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. The Company’s 2018-2021 tax years remain open and subject to examination by the Internal Revenue Service.

RECENT ACCOUNTING PRONOUNCEMENTS

For a description of recent accounting standards, including the expected dates of adoption and estimated effects, if any, on our financial statements, see Part II, Item 8 Note 3 Significant Accounting Policies: Recent Accounting Pronouncements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not Applicable

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Our financial statements and the related notes begin on Page F-1 which are included in this Annual Report on Form 10-K.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the Exchange Act)). Management has assessed the effectiveness of our internal control over financial reporting as of December 31, 2022. Management’s assessment was based on criteria set forth in Internal Control Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure.

Limitations on the Effectiveness of Controls

Our disclosure controls and procedures are designed to provide reasonable, not absolute, assurance that the objectives of our disclosure control system are met. Because of inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within a company have been detected. Based on their evaluation as of the end of the period covered by this report, management concluded that our disclosure controls and procedures were not effective to provide reasonable assurance that the objectives of our disclosure control system were met as a result of limited resources, and a lack of segregation of duties.

Management’s Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Internal control over financial reporting is a process, including policies and procedures, designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles. Based on the results of this assessment, our management concluded that the Company’s existing internal controls over financial reporting were not effective as defined in Rule 12a-15(f) under the Exchange act as of December 31, 2022 as a result of limited resources, and a lack of segregation of duties.

Auditor’s Report on Internal Control over Financial Reporting

This Annual Report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this Annual Report.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting identified in connection with our evaluation that occurred during the quarter ended December 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION.

None.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The following table sets forth the names and ages of all our directors and executive officers as of the date of this Annual Report. Also, provided herein is a brief description of the business experience of each director and executive officer during the past five years and an indication of directorships held by each director in other companies subject to the reporting requirements under the Federal securities laws. All the directors will serve until the next annual meeting of shareholders and until their successors are elected and qualified, or until their earlier death, retirement, resignation, or removal. There are no arrangements or understandings between any director or executive officer and any other person pursuant to which the director or executive officer was selected.

Directors and Executive Officers

The following are our key executive officers:

Tim Tangredi has been our Chief Executive Officer since 1996. Mr. Tangredi joined us part time in 1996 and was appointed a member of our board of directors in 1998. In 1999 and 2000, respectively, Mr. Tangredi initiated and executed the strategic purchases of assets of other companies, created serval joint ventures, and sold company assets in his tenure with the Company. From 1979 to 1990, Mr. Tangredi worked for AT&T working in technical marketing, network operations, and project management. From 1991 – 1998 Tangredi started/purchased/sold two companies. Mr. Tangredi earned his BS from Siena College and MBA from Rensselaer Polytechnic Institute. He is a founder and member of the board of directors of Aegis Biosciences, LLC (“Aegis”). Aegis, created in 1995, is a licensee of our nano-structured intellectual property and materials in the biomedical and healthcare fields.

Brian Johnson is our Chief Technology Officer and joined us in 1999. Mr. Johnson was the lead engineer responsible for developing our successful ConsERV product line and has served as Principal Investigator on multiple development efforts involving NanoClear and NanoAir. He holds patents in both the U.S. and China and brings 20 years of advanced product development experience and knowledge of every aspect of Dais’ nanotechnology. Mr. Johnson earned degrees in Mechanical Engineering (Thermal Science emphasis) from the University of Florida (BSME 1995, MSME 1997).

Rasool Isfahani, PhD. is our Chief Innovation Officer.  Dr. Isfahani joined Dais in 2015 after earning his doctorate degree from University of Florida in Mechanical Engineering. Dr. Isfahani is responsible for bringing new revenue generating ideas from ‘concept to product”, and the continued innovation of the Aqualyte material platform. He has more than 12 years’ experience in membrane-based technologies resulting with 20+ reviewed journal/conference articles and patents.  

Kailey Humpel has been added as a secretary for the Company by the Board of Directors during its December 17, 2021 meeting.

The following are our Board of Directors:

Eliza Xuan Wang joined our board of directors on April 1, 2015. Ms. Wang has been the Managing Attorney of The Meridian Law, a Professional Law Corporation, since 2009. Her legal practice includes venture capital, general civil and commercial litigation, and immigration matters. Ms. Wang is licensed to practice law in the states of California and New York. She has a Bachelor of Law degree from China University of Political Science and Law (Beijing, China) and L.L.M. degree from Hastings College of The Law, University of California. Ms. Wang’s expertise in commercial and legal matters in both the United States and China will be an asset to us as we conduct further business in China.

Robert W. Schwartz was appointed to our board of directors in 2001. Mr. Schwartz founded the Schwartz-Heslin Group (“SHG”) in 1985 and serves as its chairman. Mr. Schwartz specializes in corporate planning, finance, and development. Prior to starting SHG, he was a founder, President and Chief Executive Officer of a venture-funded high-tech telecommunications company (Windsource, Inc.). In addition, he was the President and Chief Operating Officer of an AMEX listed company (Coradian Corporation). He was also the Chief Financial Officer of a major manufacturer of outdoor power equipment (Troy Built Products). His earlier experience was with KPMG and IBM as a management consultant. Mr. Schwartz received a Bachelor of Science from Cornell University and attended graduate courses at the University of New York at Albany. He currently serves on the boards of five corporations, including ours. Mr. Schwartz’s experience in financial planning and reporting provides assistance to us in these areas and he is considered to be a financial expert to us.

Ira William McCollum, Jr. joined our board of directors on March 25, 2013. In 2011, Mr. McCollum joined as a partner in Denton’s Public Policy and Regulation practice in 2012. He joined the firm following his term as the 36th attorney general of the state of Florida. Mr. McCollum served as attorney general from 2007 to 2011. Prior to becoming the Florida Attorney General in 2007, Mr. McCollum was a partner with Baker & Hostetler’s Government Policy practice from 2001 to 2007. Between 1981 and 2001, Mr. McCollum was a Member of the U.S. House of Representatives representing Florida’s 8th District where he served on the Judiciary, Banking and Financial Services and Intelligence Committees. He also held a number of leadership positions, including Chairman of the Judiciary Subcommittee on Crime, Vice Chairman for six years at the Banking and Financial Services Committee, ranking Member of the subcommittee overseeing the Federal Reserve, and Vice Chairman of the House of Republican Conference for three terms (one of eight House GOP leadership positions). Mr. McCollum’s expertise in federal and state government and regulations is an asset to the board.

The Board members serve for the latter of a period of one year or until the next annual meeting of Company’s shareholders.

Significant Employees

John Walsh is the Company’s General Manager. Mr. Walsh started as General Manager in June of 2021. John is responsible for the operational effectiveness of the Dais team and business. John’s prior positions included counseling CEO’s and entrepreneurs in the development of internal systems and business growth strategies creating high powered teams bringing new, innovative, and disruptive technologies to market. John joined Dais after a long and successful economic development career in the Tampa Bay region of Florida.

Proceedings

During the last ten years, none of our officers, directors, promoters, or control persons have been involved in any legal proceedings as described in Item 401(f) of Regulation S-K.

Director Independence

We have determined that our board of directors currently has two members who qualify as “independent” as the term is used in Item 407 of Regulation S-K as promulgated by the SEC and as that term is defined under NASDAQ Rule 4200(a)(15). As of the date of this report, Robert W. Schwartz and Eliza Wang are our independent directors. Based on information solicited from Mr. Schwartz, and Ms. Wang, none of them has a material relationship with us and is independent within the meaning of such rules.

Board Meetings and Committees; Annual Meeting Attendance

Although we intend to establish an audit committee and compensation committee, our board of directors has not adopted any committees to the board of directors. Our board of directors held six formal meetings during the most recently completed fiscal year. Other proceedings of the board of directors were conducted by resolutions consented to in writing by all the directors and filed with the minutes of the proceedings of the directors. Such resolutions consented to in writing by the directors entitled to vote on that resolution at a meeting of the directors are, according to the corporate laws of the State of New York and our bylaws, as valid and effective as if they had been passed at a meeting of the directors duly called and held.

At annual meetings of shareholders, Directors are elected by the holders of common stock to succeed those directors whose terms are expiring. Directors will be elected annually and will serve until successors are duly elected and qualified or until a director’s earlier death, resignation, or removal. Our bylaws provide that the authorized number of directors may be changed by action of most of the board of directors or by a vote of the shareholders of our Company. Vacancies in our board of directors may be filled by a majority vote of the board of directors with such a newly appointed director to serve until the next annual meeting of shareholders, unless sooner removed or replaced. We currently do not have a policy regarding the attendance of board members at the annual meeting of shareholders.

Code of Ethics

We have adopted a code of ethics that applies to our officers, directors, and employees in accordance with applicable federal securities laws. We have filed a copy of our code of ethics as an exhibit to our Annual Report on Form 10-K as filed on March 31, 2009. This document may be reviewed by accessing our public filings at the SEC’s web site at www.sec.gov. In addition, a copy of the code of ethics will be provided without charge upon request to us. We intend to disclose any amendments to or waivers of certain provisions of our code of ethics in a Current Report on Form 8-K.

Compliance with Section 16(a) of the Exchange Act

Section 16(a) of the Exchange Act requires our executive officers and directors, and persons who own more than 10% of any publicly traded class of our equity securities, to file reports of ownership and changes in ownership of our equity securities with the SEC. Officers, directors, and greater than ten percent stockholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms that they file. Based solely on the reports received and on the representations of the reporting persons, we believe that these persons have complied with all applicable filing requirements of Section 16(a) of the Exchange Act during fiscal year 2018.

ITEM 11. EXECUTIVE COMPENSATION

Executive Officer Compensation

The Summary Compensation Table below sets forth the total compensation paid or earned for the fiscal years ended December 31, 2022 and 2021 for: (i) each individual serving as our chief executive officer (“ CEO ”) or acting in a similar capacity during any part of fiscal 2022; and (ii) the other two most highly paid executive officers (collectively, the “Named Executive Officers”) who were serving as executive officers at the end of fiscal 2022.

_____________ 

Narrative Disclosure to Summary Compensation Table

Tim N. Tangredi. The Company entered into an employment agreement with Mr. Tangredi, our President, Chief Executive Officer, and Director, which was amended and restated on September 14, 2011 and subsequently on February 27, 2015 (the “Tangredi Employment Agreement”). The Tangredi Employment Agreement provides for an initial term of three years commencing on September 14, 2011 with the term extending on the second anniversary thereof for an additional two-year period and on each subsequent anniversary of the commencement date for an additional year period. Mr. Tangredi’s initial base salary is $200,000. Mr. Tangredi’s base salary shall be increased annually, if applicable, by a sum equal to his current base salary multiplied by one third of the percentage increase in our yearly revenue compared to our prior fiscal year revenue; provided however any annual increase in Mr. Tangredi’s base salary shall not exceed a maximum of 50% for any given year. Any further increase in Mr. Tangredi’s base salary shall be at the sole discretion of our board of directors or compensation committee (if applicable). In addition, Mr. Tangredi will be eligible for bonus compensation at the discretion of the Board, as well as option-based compensation under our equity compensation plans. Under the Tangredi Employment Agreement, Mr. Tangredi is eligible to receive a grant to purchase up to 520,000 shares of common stock from the Company upon the successful completion of a secondary public offering. For a full description of the Tangredi Employment Agreement please refer to Item 13. Certain Relationships and Related Party Transactions —Employment Agreements below.

Outstanding Equity Awards at Fiscal Year End

The following table sets forth certain information regarding outstanding stock options awards for each of the Named Executive Officers as of December 31, 2022.

Note: In January of 2021 any previous Company issued Options or Warrant to employees, or Board members had been voluntarily returned to the Company.  On January 27, 2022,  the  Board approved the issuance of Series C, D, E, and F convertible preferred warrants, and once approved,  Board further authorized the distribution of Series F Convertible Preferred Warrants to Board members, the Dais Team, and those contractually bound to receive these warrants on January 27, 2022. The four new Series were   approved  by NYS Division of Corporations on March 23, 2022. Series C, and E have been issued to investors as previously reported. Series D, and F are pending issuance. See Subsequent Events for an update.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

Beneficial Ownership Information

The following table sets forth information as of the date of May 26, 2023, as to each person or group who is known to us to be the beneficial owner of more than 5% of our outstanding voting securities and as to the security and percentage ownership of each of our executive officers and directors and of all of our officers and directors as a group.

____________

Applicable percentage ownership in the preceding table is based on approximately 20,149,365 shares of common stock outstanding as of May 26, 2023 plus, for everyone, any securities that individual has the right to acquire within 60 days of May 26, 2023. Beneficial ownership is determined under the rules of the SEC and generally includes voting or investment power over securities. The number of shares shown as beneficially owned in the tables below are calculated pursuant to Rule 13d-3(d)(1) of the Exchange Act. Under Rule 13d-3(d)(1), shares not outstanding that are subject to options, warrants, rights or conversion privileges exercisable within 60 days are deemed outstanding for the purpose of calculating the number and percentage owned by such person, but not deemed outstanding for the purpose of calculating the percentage owned by each other person listed.

Securities Authorized for Issuance under Equity Compensation Plans

The following table sets forth information regarding our 2000 Incentive Compensation Plan (the “2000 Plan”), 2009 Long-Term Incentive Plan (the “2009 Plan”) and 2015 Stock Incentive Plan (the “2015 Plan”) under which our securities are authorized for issuance as of December 31, 2021:

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS; AND DIRECTOR INDEPENDENCE.

Tim Tangredi, our Chief Executive Officer and Chairman, is a founder and a member of the board of directors of Aegis Biosciences, LLC (“Aegis”). Mr. Tangredi currently owns 52% of Aegis’ outstanding equity and spends approximately one week per year on Aegis business for which he is compensated by Aegis. Aegis has two exclusive, world-wide licenses from us under which it has the right to use and sell products containing our polymer technologies in biomedical and health care applications. Pursuant to the second license, Aegis is required to make royalty payments of 1.5% of the net sales price it receives with respect to any personal hygiene product, surgical drape or clothing products (the latter when employed in medical and animal related fields) and license revenue it receives should Aegis grant a sublicense to a third party. Aegis sold no such products, nor has it received any licensing fees requiring a royalty payment be made to us. All obligations for such payments ended on June 2, 2015.

The Company rents a building that is owned by two stockholders of the Company, one of which is the Chief Executive Officer. Rent expense for this building is $4,066 per month, including sales tax. The Company recognized rent expense (including property tax charges) related to this lease of $58,333 and $58,015 for the years ended December 31, 2022 and 2021, respectively. The lease term will terminate upon 30 days’ written notice from landlord or 90 days written termination from us.

The Company has accrued compensation due to the Chief Executive Officer as of December 31, 2022 and 2021 of $2,140,687 and $2,071,380, respectively, included in accrued compensation and related benefits in the accompanying balance sheets.

On June 24, 2016, the Company entered into a Loan and Security Agreement (“Security Agreement”) with Patricia Tangredi (the “Holder”) pursuant to which the Company issued a Senior Secured Promissory Note for $150,000 (the “Note”). The interest rate is 12% per annum compounded daily with a minimum interest payment of $2,000. The Note grants the Holder a secured interest in the assets of the Company. Ms. Tangredi is the wife of Tim N. Tangredi, the Company’s CEO and stockholder, and therefore is a related party of the Company. Pursuant to the Note, the Company is to pay the Holder the principal amount of $150,000 plus all interest due thereon in accordance with terms and conditions of the Security Agreement on the earlier of: (i) the date upon which the Company secures funds, regardless of source, equal to or exceeding, in the aggregate, $1,000,000 or (ii) October 31, 2016 (the “Maturity Date”).

During 2016 to the period ended December 31, 2022, the Holder extended the Note pursuant to various amendments. Pursuant to the amendments, the principal amount due was increased to $2,400,499 and interest owed of $3,029,162 with an extension of the   maturity date in negations between the Company and the Secured Noteholder.

Employment Agreements

We entered into the following employment agreements with our officers and significant employees:

Tim Tangredi - President, Chief Executive Officer, and Director, which was amended and restated on September 14, 2011, and subsequently on February 27, 2015. The documents and any amendments were filed in Form 10-K on March 31, 2016 and in Attachment 10.18.

Currently, we have non-interest-bearing accrued compensation due to Mr. Tangredi for deferred salaries earned and unpaid as described above. Pursuant to the February 27, 2015 amendment to the Tangredi Employment Agreement if at any time during a calendar year, the unpaid compensation is greater than $500,000, Mr. Tangredi must convert $100,000 of unpaid compensation into shares of common stock of the Company during such calendar year. The conversion rate shall be equal to 75% of the average closing price for the common stock for the 30 trading days prior to the date of conversion. We shall also pay to Mr. Tangredi a cash payment equal to 20% of the compensation income incurred because of the conversion. Further, at any time any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934) becomes the “beneficial owner” (as defined in Rules 13(d)-3 and 13(d)-5 under such Act) of greater of 40% of the then-outstanding voting power of the voting equity interests or a person or group initiate a tender offer for our common stock, Mr. Tangredi may convert unpaid compensation to Class A Convertible Preferred Stock at $1.50 per share. The Board of Directors did not require Mr. Tangredi to convert $100,000 of unpaid compensation into common stock during 2015-2022.

Brian Johnson – Chief Technology Officer. The documents and any amendments were filed in the 2019 10-K Fiscal Year ending December 31, 2018 and in Attachment 10.15.

Rasool Nasr Isfahani – Chief Innovation Officer. On March 15, 2021 (the “Effective Date”), the Company entered into an employment agreement with Mr. Rasool Nasr Isfahani, pursuant to which Isfahani was appointed as Chief Innovation Officer of the Company. Isfahani’s initial base salary pursuant to the Employment Agreement was $135,000. Isfahani may receive a performance bonus at the discretion of the Board. Isfahani is entitled to participate in any benefits programs offered by the Company and shall be reimbursed for reasonably incurred expenses incurred in the performance of the functions and duties under the Employment Agreement. The initial term of the Employment Agreement was from the Effective Date through March 15, 2022 (the “Initial Term”). Upon expiration of the Initial Term, the Employment Agreement will be automatically extended for additional one-year terms unless Isfahani or the Company shall, upon 30 days written notice to the other, elect not to extend this Employment Agreement for an additional one-year term. Isfahani’s base salary as of December 31, 2022 is $147,000

John Walsh – General Manager. On June 15, 2021 (the “Effective Date”), the Company entered into an employment agreement with Mr. Walsh, pursuant to which Walsh was appointed as General Manager of the Company. Walsh’s initial base salary pursuant to the Employment Agreement was $140,000. Walsh may receive a performance bonus at the discretion of the Board. Walsh is entitled to participate in any benefits programs offered by the Company and shall be reimbursed for reasonably incurred expenses incurred in the performance of the functions and duties under the Employment Agreement. The initial term of the Employment Agreement was from the Effective Date through, June 15, 2022, (the “Initial Term”). Upon expiration of the Initial Term, the Employment Agreement will be automatically extended for additional one-year terms unless Walsh or the Company shall, upon 30 days written notice to the other, elect not to extend this Employment Agreement for an additional one-year term.

On August 17, 2015 (the “Effective Date”), the Company entered into an employment agreement (the “Johnson Employment Agreement”) with Mr. Brian Johnson (“Johnson”), pursuant to which Johnson was appointed as Chief Technology Officer of the Company. Johnson’s initial base salary pursuant to the Johnson Employment Agreement was $135,000. Johnson may receive a performance bonus at the discretion of the Board. Johnson is entitled to participate in any benefits programs offered by the Company and shall be reimbursed for reasonably incurred expenses incurred in the performance of the functions and duties under the Johnson Employment Agreement. The initial term of the Johnson Employment Agreement was from the Effective Date through February 29, 2016 (the “Initial Term”). Upon expiration of the Initial Term, the Johnson Employment Agreement will be automatically extended for additional one-year terms unless Johnson or the Company shall, upon 30 days written notice to the other, elect not to extend this Agreement for an additional one-year term.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

Audit Fees

The aggregate audit fees billed for the years ended December 31, 2022 and 2021 was $36,000 and $54,750, respectively. Audit services include the audits of the financial statements included in our annual reports on Form 10-K and reviews of interim financial statements included in our quarterly reports on Form 10-Q.

Audit-Related Fees

None.

Tax Fees

None

All Other Fees

None

Audit Committee Pre-Approval Policies and Procedures

The Board has completed a competitive process to review the appointment of the Company's independent registered public accounting firm for the year ending December 31, 2021. As a result of this process, on September 27, 2021, the Board elected to engage Hudgens CPA, PLLC as the Company's independent registered public accounting firm for the fiscal year ending December 31, 2021 and dismissed RBSM LLP from that role.

We do not have an audit committee and, as a result, our Board of Directors evaluates the scope and cost of the engagement before the auditor renders audit or non-audit services. The Board of Directors has considered the services provided by Hudgens CPA, PLLC as disclosed above in the captions audit fees and all other fees and has concluded that such services are compatible with the independence of Hudgens CPA, PLLC as our principal accountant.

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacity and on the dates indicated.

Dais Corporation

(Formerly Dais Analytic Corporation)

Financial Statements

Years Ended December 31, 2022 and 2021

Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and

Stockholders of Dais Corporation

Opinion on the Financial Statements

We have audited the accompanying balance sheets of Dais Corporation (the Company) as of December 31, 2022 and 2021, and the related statements of operations, stockholders’ deficit, and cash flows for each of the years in the two year period ended December 31, 2022, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the two year period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency that raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. We have determined that there were no critical audit matters.

 DAIS CORPORATION

BALANCE SHEETS

See accompanying Notes to Financial Statements

DAIS CORPORATION

STATEMENTS OF OPERATIONS

See accompanying Notes to Financial Statements