DAIS Corp - Quarter Report: 2023 September (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

For the quarterly period ended September 30, 2023

For the transition period from _______ to _______

Commission File No. 000-53554

Registrant’s telephone number, including area code:(727) 375-8484

Securities registered pursuant to Section 12(b) of the Act:

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 at least the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large, accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company 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.

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 ☒

There were 68,032,672 shares of the Registrant’s $0.01 par value common stock outstanding as of November 14, 2023.

DAIS CORPORATION

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

DAIS CORPORATION

CONDENSED BALANCE SHEETS

(Unaudited)

See accompanying Notes to Unaudited Condensed Financial Statements

DAIS CORPORATION

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

See accompanying Notes to Unaudited Condensed Financial Statements

See Accompanying Notes to Unaudited Condensed Consolidated Financial Statements.

DAIS CORPORATION

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

See accompanying Notes to Unaudited Condensed Financial Statements

Dais Corporation

Notes to Condensed Financial Statements

September 30, 2023 and 2022

(Unaudited)

Note 1. Background Information

Dais Corporation (“Dais”, “us,” “we,”, the “Company”), a New York corporation, is a nano-structured polymer technology materials company having developed and now commercializing products using its family of nanomaterials called Aqualyte, with Aqualyte itself the first product commercialized. The second commercial product is ConsERV, a fixed plate energy recovery ventilator 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. The Company was incorporated in April 1993 and its corporate headquarters is in Odessa, Florida.

The Company is dependent on third parties to manufacture the key components needed for its nanostructured materials and some portion 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.

Basis of Presentation

The Company’s accompanying condensed financial statements are unaudited, but in the opinion of management reflect all adjustments necessary to fairly state the Company’s financial position, results of operations, stockholders’ deficit and cash flows as of and for the dates and periods presented. The financial statements of the Company are prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information.

The unaudited financial statements and notes are presented as permitted by Form 10-Q. Accordingly, certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted although the Company generally believes that the disclosures are adequate to ensure that the information presented is not misleading. The accompanying financial statements and notes should be read in conjunction with the audited financial statements and notes of the Company for the fiscal year ended December 31, 2022 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on May 30, 2023. The results of operations for the three and nine-month periods ended September 30, 2023 are not necessarily indicative of the results that may be expected for any future quarters or for the entire year ending December 31, 2023.

Note 2. Going Concern and Management’s Plans

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. For the nine months ended September 30, 2023, the Company generated a net loss of $5,931,924 and has incurred significant losses since inception. As of September 30, 2023, the Company has an accumulated deficit of $68,206,589, total stockholders’ deficit of $14,476,479, negative working capital of $14,509,449 and cash and cash equivalents of $19,511. The Company used $1,191,075 and $1,389,768 of cash for operations during the nine months ended September 30, 2023, and 2022, 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 remain good. On a macro level we believe the world-wide market for the equipment type the Company is selling (and developing) has changed for the positive in the last two years reflecting end user awareness of the need to address Climate Change related issues faster, and the changes in buying habits forged by the world-wide pandemic. On more of a micro level 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 throughout North America. We reached agreement (still 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 HVAC and water 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.

Note 3. Significant Accounting Policies

The significant accounting policies followed are:

Use of estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Significant estimates underlying the Company’s reported financial position and results of operations include the allowance for doubtful accounts, fair value of stock-based compensation, fair value of derivative liabilities, valuation allowance on deferred taxes and the warranty reserve.

Revenue recognition - The Company has adopted the new revenue recognition guidelines in accordance with ASC 606, Revenue from Contracts with Customers (ASC 606). 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.

In certain instances, the Company’s ConsERV system product may carry a limited warranty of up to one year for all parts contained therein except for the energy recovery ventilator core produced and sold by the Company. 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. The Company recorded an accrual of $91,531 for future warranty expenses at September 30, 2023 and December 31, 2022, which is included in accrued expenses, other.

Royalty revenue is recognized as earned. The Company recognized royalty revenue of $0 for the three and nine months ended September 30, 2023 and 2022, respectively. 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. The Company recognized license fee revenue of $12,500 and $12,500 for the three months ended September 30, 2023 and 2022, respectively and $37,500 and $37,500 for the nine months ended September 30, 2023 and 2022, respectively.

The Company accounts for revenue arrangements with multiple elements under the provisions of the Financial Accounting Standards Boards (FASB) Accounting Standards Codification (ASC) Topic 605-25, “Revenue Recognition-Multiple-Element Arrangements.” To account for these agreements, the Company must identify the deliverables included within the agreement and evaluate which deliverables represent separate units of accounting based on if certain criteria are met, including whether the delivered element has stand-alone value to the licensee. The consideration received is allocated among the separate units of accounting, and the applicable revenue recognition criteria are applied to each of the separate units.

In December 2017, the Company and Zhejiang MENRED Environmental Tech Co, Ltd., Zhejiang Province, China (“Menred”), entered into a License and Supply Agreement (the “Agreement”), effective December 21, 2017. Pursuant to the Agreement, the Company licensed certain intellectual property and improvements to Menred, for use in the manufacture and sale of energy recovery ventilators (“ERV”) and certain other HVAC systems for installation in commercial, residential, or industrial buildings in China. Menred also agreed to purchase its requirements of certain products from the Company for Menred’s use, pursuant to the terms and conditions of the Agreement. Menred will also pay royalties, as defined, to the Company on a quarterly basis, based on price and production volume as provided by Menred. No royalties are due within the first year of the Agreement. Also pursuant to the Agreement, the Company is required to purchase a certain amount of Product from Menred. The Agreement has a ten-year term with mutually agreed upon five-year extensions.

Cash and cash equivalents - For purposes of the Statements of Cash Flows, the Company considers all highly liquid debt instruments with a maturity of three months or less to be cash equivalents. Cash and cash equivalents are maintained at financial institutions, and, at times, balances may exceed federally insured limits. The Company had no uninsured balances at September 30, 2023 and December 31, 2022. The Company has never experienced any losses related to these balances. The Company does not have any cash equivalents at September 30, 2023 and December 31, 2022.

Concentrations - At September 30, 2023, four customers accounted for 78% of accounts receivable. At December 31, 2022, two customers accounted for 76% of accounts receivable. For the nine months ended September 30, 2023, three customers accounted for 60% of total revenue. For the nine months ended September 30, 2022, one customer accounted for 60% of total revenue. 

Fair Value of Financial Instruments - The Company’s financial instruments, including cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, deferred revenue, customer deposits and notes payable are carried at historical cost. At September 30, 2023 and December 31, 2022, the carrying amounts of these instruments approximated their fair values because of the short-term nature of these instruments.

Inventory - Inventory consists of raw materials, work-in-process and finished goods and is stated at the lower of cost, determined by first-in, first-out method, or market. Market is determined based on the net realizable value, with appropriate consideration given to obsolescence, excessive levels, deterioration, and other factors. At September 30, 2023 and December 31, 2022, the Company had $206,958 and $269,083 of raw materials, $4,363 and $5,997 of in-process inventory and $0 and $19,392 of finished goods inventory, respectively. A reserve is recorded for any inventory deemed excessive or obsolete. No reserve is recorded at September 30, 2023 and December 31, 2022, respectively.

Property and equipment - Property and equipment is recorded at cost. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets ranging from 3 to 7 years. Leasehold improvements are amortized over the shorter of their estimated useful lives of 5 years or the related lease term. Depreciation expense was $2,301 and $2,424 for the three months ended September 30, 2023 and 2022, respectively, and $7,420 and $6,591 for the nine months ended September 30, 2023 and 2022, respectively. Gains and losses upon disposition are reflected in the Statement of Operations in the period of disposition. Maintenance and repair expenditures are charged to expense as incurred. There were no dispositions of property and equipment in 2023 or 2022.

Intangible assets - Identified intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The Company’s existing intangible assets consist solely of patents. Patents are amortized over their estimated useful or economic lives of 17 years. Patent amortization expense was $5,229 and $5,078 for the three months ended September 30, 2023 and 2022, respectively and $15,374 and $14,860 for the nine months ended September 30, 2023 and 2022, 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.

Research and development expenses and funding proceeds - Expenditures for research, development and engineering of products are expensed as incurred. The Company incurred research and development costs of $75,135 and $85,887 for the three months ended September 30, 2023 and 2022, respectively and $307,894 and $212,508 for the nine months ended September 30, 2023 and 2022, respectively. The Company accounts for proceeds received from government funding for research as a reduction in research and development costs. The Company recorded no proceeds against research and development expenses for the three and nine months ended September 30, 2023 and 2022.

Derivative Liability - The Company has financial instruments that are considered derivatives or contain embedded features subject to derivative accounting. Embedded derivatives are valued separately from the host instrument and are recognized as derivative liabilities in the Company’s balance sheet. The Company measures these instruments at their estimated fair value and recognizes changes in their estimated fair value in results of operations during the period of change.

Fair Value Measurements - The Company accounts for financial instruments in accordance with ASC 820 “Fair value Measurement and Disclosures”. ASC 820 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs).

The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:

The reconciliation of the derivative liability measured at fair value on a recurring basis using unobservable inputs (Level 3) is as follows for the nine months ended September 30, 2023:

Earnings (loss) per share - Basic income (loss) per share is computed by dividing net income (loss) attributable to common stockholders by the weighted average common shares outstanding for the period. Diluted income (loss) per share is computed giving effect to all potentially dilutive common shares. Potentially dilutive common shares may consist of incremental shares issuable upon the exercise of stock options and warrants and upon the conversion of notes. In periods in which a net loss has been incurred, all potentially dilutive common shares are considered anti-dilutive and thus are excluded from the calculation. Common share equivalents of 299,779,207 and 29,996,165 shares were excluded from the computation of diluted earnings per share for the three and nine months ended September 30, 2023 and 2022, respectively, because their effect is anti-dilutive.

Recent Accounting Pronouncements - Recent accounting pronouncements issued by the FASB and the SEC did not or are not believed by management to have a material impact on the Company’s present or future consolidated financial statements.

Note 4. Accrued Expenses, Other

Accrued expenses, other consists of the following:

Note 5. Related Party Transactions

The Company rents a building that is owned by two stockholders of the Company, one of which is the Chief Executive Officer. The rent expense for this building is $4,066 per month, including sales tax. The Company recognized rent expense related to this lease of $12,198 and $12,198 for the three months ended September 30, 2023 and 2022, respectively and $36,594 and $36,594 for the nine months ended September 30, 2023 and 2022, respectively. The lease term will terminate upon 30 days’ written notice from landlord or 90 days written termination from us. The lease is considered to be short term or month to month.

The Company has accrued compensation due to the Chief Executive Officer as of September 30, 2023 and December 31, 2022 of $2,197,717and $2,140,687, 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 the entity known as PKT -- Strategic Assets, LLC (the “Holder”) pursuant to which the Company issued a Senior Secured Promissory Note for $150,000 (the “Note”). The Note has an interest rate is 12% per annum compounded daily with a minimum interest payment of $2,000. The Note grants the Holder a secure interest in all the assets of the Company. During 2016 to the period ended September 30, 2023, the Holder extended the Note pursuant to various amendments. Pursuant to the amendments, the principal amount and interest totaled $7,219,871 and $5,429,661 (including fees and other expenses) at September 30, 2023 and December 31, 2022, respectively. We received advances aggregating $884,960 during the nine months ended September 30, 2023, and repaid $32,000 and $154,398 during the nine months ended September 30, 2023 and 2022, respectively. Financing cost of $38,050 was deducted from the 2023 advances. The Holder’s corporation is controlled by Ms. Tangredi, related to Tim Tangredi: the Company’s CEO and stockholder, and therefore, is a Related Party of the Company. The Company is to pay the Holder the principal, plus all interest and fees due in accordance with terms and conditions of the Security Agreement on the earlier of:

Of the 2023 advances, funds in the amount of $592,960 originally came from Ethos Business Ventures. It was a last-minute change of plan to assist the Company meet its obligations in a timely manner. This last-minute change was made necessary by an administrative error at the bank of PKT Strategic Assets, LLC. who was to have been the lender of record and is the lender of the Company’s senior secured promissory note and security agreement. To correct this error, management of Dais (with BOD approval), Ethos, and PKT agreed on April 3, 2023, that effective immediately, the ownership of the $592,960 sum will be transferred to PKT Strategic Assets, LLC at no cost or term and condition alteration except as it pertains to relevant language to effect the change in ownership. Dais is to pay a minimum of $6,000 per month in interest only to PKT Strategic Assets, LLC.

On October 12, 2019, the Company entered a promissory note with an entity controlled by our Chief Executive Officer in the amount of $10,000. The note bears interest at 10% per year and matured on October 12, 2021. Interest expense on the note was $150 for each of the three-month periods ended September 30, 2023 and 2022, respectively, and was $450 for each of the nine-month periods ended September 30, 2023 and 2022, respectively. Accrued interest was $2,400 and $1,950 at September 30, 2023 and December 31, 2022, respectively. The Holder has not declared the Note in Default or extended the Maturity Date.

On April 29, 2022, the Company received a loan of $100,000 from its Chief Executive Officer. This was repaid in full on May 17, 2022.

On February 27, 2015, the Company, and Tim N. Tangredi, the Company’s Chief Executive Officer entered an amendment (the “Tangredi Employment Agreement Amendment”) to Mr. Tangredi’s Amended and Restated Employment Agreement. Currently, the Company has non-interest-bearing accrued compensation due to the Chief Executive Officer for deferred salaries earned and unpaid as described above. The Tangredi Employment Agreement Amendment provides that, 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 the Company’s common stock during such calendar year. The conversion rate shall be equal to 75% of the average closing price for the Company’s common stock for the 30 trading days prior to the date of conversion. The Company shall also pay to Mr. Tangredi a cash payment equal to 20% of the compensation income incurred because of the change. The Company has waived the conversion requirement from 2015 to the present.

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 of the Company or a person or group initiate a tender offer for the Company’s common stock, Mr. Tangredi may convert unpaid compensation into Class A Convertible Preferred Stock (“Class A Preferred Stock”) of the Company at a conversion price of $1.50 per share. The Board of Directors waived the requirement to convert $100,000 of unpaid compensation into common stock during 2016. No amounts have been converted under the terms of the Tangredi Employment Agreement Amendment to date.

On January 27, 2022, the Board approved 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. These new Series were approved by NYS Division of Corporations on March 23, 2022.

The above terms and amounts are not necessarily indicative of the terms and amounts that would have been incurred had comparable transactions been entered into with independent parties.

Note 6. Equity Transactions

Preferred Stock

At September 30, 2023 and December 31, 2022, the Company’s Board of Directors authorized 10,000,000 shares of preferred stock with a par value of $0.01 to be issued in series with terms and conditions to be determined by the Board of Directors.

2,000,000 of the shares of preferred stock has been designated as Class A Preferred Stock. The Class A Preferred Stock shall entitle the holder thereof to 150 votes on all matters submitted to a vote of the stockholders of the Company.

10,000 of the shares of preferred stock has been designated as Class B Preferred Stock. The Class A Preferred Stock shall entitle the holder thereof to 150 votes on all matters submitted to a vote of the stockholders of the Company. The Class B Stock includes the right to vote in an amount equal to 51% of the votes to approve certain corporate actions, including, without limitation, changing the name of the Company and increasing the number of authorized shares.

Upon any liquidation, dissolution or winding up of the Company, no distribution shall be made to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Class A or Class B Preferred Stock unless, prior thereto, the holders of shares of Class A or Class B Preferred Stock shall have received $1.50 per share (the “Stated Amount”). The Class A and Class B Preferred Stock shall rank, with respect to the payment of liquidation, dividends and the distribution of assets, senior to the Company’s Common Stock.

The Holder (as defined in the Class A Preferred Stock certificate of designations) of the Class A Preferred Stock may convert all or part of the outstanding and unpaid Stated Amount (as defined in the Class A Preferred Stock certificate of designations) into fully paid and non-assessable shares of the Company’s common stock at the Conversion Price (as defined in the Class A Preferred Stock certificate of designations). The number of shares receivable upon conversion equals the Stated Amount divided by the Conversion Price. The Conversion Price shall be equal to 75% of the average closing price for the 30 trading days prior to the election to convert. At no time will the Company convert any of the Stated Amount into common stock if that would result in the Holder beneficially owning more than 49% of the sum of the voting power of the Company’s outstanding shares of common stock plus the voting power of the Class A Preferred Stock. No shares of Class A Preferred Stock have been issued. 

The shares of the Class B Preferred Stock shall be automatically redeemed by the Company at $0.01 per share on the date that Tim N. Tangredi ceases, for any reason, to serve as an officer, director, or consultant of the Company.

During January and February 2022, after the Company’s fiscal year ended December 31, 2021, the Company’s Board of Directors, with input from the Company’s financial advisors, completed its reevaluation of the Company’s capital structure, including the advisability of authorizing addition series of preferred stock, par value $0.01 (“Preferred Stock”). The Board of Directors determined that it was in the best interests of the Company and its stockholders to authorize four new series of Preferred Stock (sometimes referred to as “New Series of Preferred Stock”).

As a result, the Board of Directors and management with the assistance of its outside financial advisors prepared a Certificate of Amendment to its Certificate of Incorporation for the purpose authorizing the four New Series of Preferred Stock, which was subject to the filing by the Company of a Certificate of Amendment with the Department of State of the State of New York (“Certificate of Amendment”).

To implement the authorization of the four New Series of Preferred Stock, the Certificate of Amendment was submitted to the Department of State on March 17, 2022, and was accepted for filing on March 22, 2022. The recently authorized New Series of Preferred Stock included: (i) Series C Convertible Preferred Stock, consisting of 100,000 shares, all of which were to be issued following acceptance of the Certificate of Amendment by the Department of State, to two (2) third-party accredited investors who had provided bona fide financial consulting services to the Company; (ii) Series D Convertible Preferred Stock, consisting of 10,000 shares, which shares may be issued, at the sole discretion of the Board of Directors, from time to time, to consultants and other third parties for, among other purposes, new services to the Company and for other good and valuable consideration, none of which shares have been issued; (iii) and Series E Convertible Preferred Stock, consisting of 250,000 shares, all of which were to be issued following final acceptance of the Certificate of Amendment by the Department of State, being issued to three (3) “accredited investors” including the Company’s financial advisors in consideration for their capital contributions to the Company. Series F Convertible Preferred Stock consisting of 1,500,000 shares which were approved in the first quarter of 2023 and held pending the closing. These shares are intended to be issued to several long-tenured key employees and the Company’s Board of Directors in consideration for previously rendered services to the Company as well as to certain noteholders and others under agreements and arrangements that have been authorized by the Board of Directors. Issuances within Series C, and E were completed earlier in 2023, and there has been no need to issue any Series D. Stock purchase warrants for Series F have been issued during the third quarter of 2023.

Common Stock

At September 30, 2023 and December 31, 2022, the Company’s Board of Directors authorized 1,100,000,000 shares of common stock with a par value of $0.01 to be issued in series with terms and conditions to be determined by the Board of Directors.

2023 Common Stock Transactions

During the three months ended September 30, 2023, an aggregate of 1,015,200 shares of common stock were issued upon the conversion of $47,000 of notes payable and $3,760 of related accrued interest. The value of the shares issued was $40,608, and we recorded a gain on conversion of $10,152.

During the three months ended June 30, 2023, an aggregate of 1,202,595 shares of common stock were issued upon the conversion of $23,250 of notes payable, $1,385 of related accrued interest, and $1,500 of fees. The value of the shares issued was $100,072, and we recorded a loss on conversion of $73,937.

During the three months ended March 31, 2023, an aggregate of 5,344,939 shares of common stock were issued upon the conversion of $143,752 of notes payable, $8,610 of related accrued interest, and $5,250 of fees. The value of the shares issued was $1,004,853, and we recorded a loss on conversion of $847,241.

During 2023, the Company reissued 1,000,000 shares of common stock that had been cancelled in 2022.

In connection with a loan received in January 2023, the Company agreed to issue 2,000,000 shares of common stock valued at $196,000, calculated by the open market share value on the date of the grant. As of September 30, 2023, 500,000 shares have been issued and the remaining 1,500,000 shares, valued at $147,000, are classified as Common Stock To Be Issued.

During March of 2023, the Company issued 577,500 shares of common stock upon the cashless exercise of 733,333 warrants.

During March of 2023, the Company issued 450,000 shares of common stock, valued at $13,500, for services, calculated by the open market share value on the date of the grant.

During March of 2023, the Company issued 200,000 shares of common stock for cash. The proceeds had been advanced to the Company in December 2021.

During April of 2023, the Company issued 570,000 shares of common stock, valued at $67,400, for services, calculated by the open market share value on the date of the grant.

2022 Common Stock Transactions

During May 2022, the Company issued 457,500 shares of common stock upon the conversion of $45,000 of notes payable, plus $750 of costs.

During July 2022, the Company issued 470,000 shares of common stock upon the conversion of $47,000 of notes payable.

The company issued 1,276,406 shares of common stock upon the cashless exercise of 1,510,000 common stock warrants.

The Company cancelled 1,000,000 shares of common stock, which were reissued in 2023 (see above).

Options and Warrants

2023 Transactions

In January 2023, the Company issued a warrant to purchase 800,000 shares of common stock, in connection with the amendment of a convertible note. The warrant has a term of five years and has a cash exercise price of $0.10 per share or a cashless exercise price of $0.20 per share. The fair value of the warrant was $78,395, determined using the Black Scholes Model with the following assumptions: (1) risk free interest rate of 3.9% - 1.33%; (2) dividend yield of 0%; (3) volatility factor of the expected market price of the Company’s common stock of 362%; and (4) an expected life of 5 years.

During March of 2023, 733,333 warrants were exercised on a cashless basis into 577,500 shares of common stock.

In April of 2023, the Company issued a warrant to purchase 555,556 shares of common stock, in connection with the issuance of a convertible note. The warrant has a term of five years and has a cash exercise price of $0.10 per share. The relative fair value of the warrant was $29,100, determined using the Black Scholes Model with the following assumptions: (1) risk free interest rate of 3.6%; (2) dividend yield of 0%; (3) volatility factor of the expected market price of the Company’s common stock of 371%; and (4) an expected life of 5 years. The value of the warrant has been recorded as debt discount.

In April of 2023, the Company issued a warrant to purchase 500,000 shares of common stock, in connection with the issuance of a convertible note. The warrant expires January 5, 2028, and has a cash exercise price of $0.10 per share or a cashless exercise price of $0.20 per share. The relative fair value of the warrant was $16,935, determined using the Black Scholes Model with the following assumptions: (1) risk free interest rate of 3.6%; (2) dividend yield of 0%; (3) volatility factor of the expected market price of the Company’s common stock of 376%; and (4) an expected life of 4.75 years. The value of the warrant has been recorded as debt discount.

In April of 2023, the Company issued a warrant to purchase 2,000,000 shares of common stock, in connection with the issuance of a convertible note. The warrant has a term of five years and has a cash exercise price of $0.10 per share or a cashless exercise price of $0.20 per share. The relative fair value of the warrant was $67,741, determined using the Black Scholes Model with the following assumptions: (1) risk free interest rate of 3.51%; (2) dividend yield of 0%; (3) volatility factor of the expected market price of the Company’s common stock of 376%; and (4) an expected life of 5 years. The value of the warrant has been recorded as debt discount.

In August of 2023, the Company issued a warrant to purchase 500,000 shares of common stock, in connection with the issuance of a convertible note. The warrant has a term of five years and has a cash exercise price of $0.10 per share or a cashless exercise price of $0.20 per share. The relative fair value of the warrant was $12,722, determined using the Black Scholes Model with the following assumptions: (1) risk free interest rate of 4.24%; (2) dividend yield of 0%; (3) volatility factor of the expected market price of the Company’s common stock of 406%; and (4) an expected life of 5 years. The value of the warrant has been recorded as debt discount.

In July 2023, the Company granted to thirteen officers and employees an aggregate of 1,500,000 warrants to purchase Series F preferred stock. The warrants have a $0 exercise price and a term of five years. The warrants vest one third thirty days after grant, one third on the first grant date anniversary and one third on the second grant date anniversary, subject to continued service by the officers and employees of the Company in their respective capacities as of each applicable vesting date. The awards have been valued at $4,687,500 using the Black Sholes model and compensation expense will be recorded over the vesting periods. We have recorded compensation expense of $2,148,438 related to the options during the three and nine months ended September 30, 2023. The assumptions used in the Black Scholes model are as follows: (1) dividend yield of 0%; (2) expected volatility of 391%, (3) risk-free interest rate of 4.19%, (4) expected term of five years.

In August 2023, the Company granted to nine employees an aggregate of 4,000,000 options to purchase common stock. The options have a $0.03 exercise price and a term of five years. The options vest one third ninety thirty days after grant, one third one hundred and eighty days after grant, and one third one year after grant, subject to continued service by the employees of the Company in their respective capacities as of each applicable vesting date. The awards have been valued at $99,999 using the Black Sholes model and compensation expense will be recorded over the vesting periods. We have recorded compensation expense of $19,444 related to the options during the three and nine months ended September 30, 2023. The assumptions used in the Black Scholes model are as follows: (1) dividend yield of 0%; (2) expected volatility of 391%, (3) risk-free interest rate of 4.44%, (4) expected term of five years.

2022 Transactions

In connection with a note issued in September 2022, the Company 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.

Note 7. Convertible Notes Payable

2023 Convertible Notes

In April of 2023, the Company entered a convertible promissory note in the amount of $55,556. The note matures on March 30, 2024, and bears interest at 12% per year. The note has an original issue discount of $5,556 and debt costs of $3,500 were deducted from the proceeds. Also, $2,550 was paid directly by the lender to a vendor of the Company. The Company received proceeds of $43,950. The note is convertible into shares of common stock at a fixed conversion price of $0.05 per share. In connection with the note, the Company issued a warrant to purchase 555,556 shares of common stock, described in Note 6. The relative fair value of the warrant, $29,100 has been recorded as debt discount. The Company has also recorded a discount of $20,900 related to the beneficial conversion feature of the note. Total discount and costs of $59,056 will be amortized over the life of the note. During the three and nine months ended September 30, 2023, the Company amortized $14,764 and $29,528, respectively, of discount and costs to interest expense.

In April of 2023, the Company entered a convertible promissory note in the amount of $25,000. The note matures on April 27, 2024, and bears interest at 8% per year. The note is convertible into shares of common stock at a fixed conversion price of $0.05 per share. In connection with the note, the Company issued a warrant to purchase 500,000 shares of common stock, described in Note 6. The relative fair value of the warrant, $16,935 has been recorded as debt discount. The Company has also recorded a discount of $8,065 related to the beneficial conversion feature of the note. Total discount of $25,000 will be amortized over the life of the note. During the three and nine months ended September 30, 2023, the Company amortized $6,250 and $10,417, respectively, of discount and costs to interest expense.

In April of 2023, the Company entered a convertible promissory note in the amount of $100,000. The note matures on April 28, 2024, and bears interest at 8% per year. The note is convertible into shares of common stock at a fixed conversion price of $0.05 per share. In connection with the note, the Company issued a warrant to purchase 2,000,000 shares of common stock, described in Note 6. The relative fair value of the warrant, $67,741 has been recorded as debt discount. The Company has also recorded a discount of $32,259 related to the beneficial conversion feature of the note. Total discount of $100,000 will be amortized over the life of the note. During the three and nine months ended September 30, 2023, the Company amortized $25,000 and $41,668, respectively, of discount and costs to interest expense.

In August of 2023, the Company entered a convertible promissory note in the amount of $50,000. The note matures on August 2, 2024, and bears interest at 8% per year. The note is convertible into shares of common stock at a fixed conversion price of $0.05 per share. In connection with the note, the Company issued a warrant to purchase 500,000 shares of common stock, described in Note 6. The relative fair value of the warrant, $12,722 has been recorded as debt discount. The discount will be amortized over the life of the note. During the three and nine months ended September 30, 2023, the Company amortized $2,120 of discount to interest expense.

In September of 2023, the Company issued a convertible note with a face amount of $65,000. The note and related accrued interest are convertible, at the option of the holder, into shares of the Company’s common stock at a conversion price of 61% of the lowest trading price for 10 days prior to conversion. The note bears interest at 12% per year and matures on September 8, 2024. The Company has recorded discount of $60,000 related to the derivative value of the conversion feature of the note (see note 9) and also incurred costs of $5,000 which were deducted from the note proceeds. Total discount on costs of $65,000 will be amortized to interest expense over the life of the note. During the three and nine months ended September 30, 2023, the Company amortized $4,063 of discount and costs to interest expense.

2022 Convertible Notes

On December 12, 2022, the Company entered a convertible promissory note in the amount of $40,000. The Note was amended in January of 2023. The note matures on January 5, 2024, and bears interest at 8% per year. The note is convertible into shares of common stock at a fixed conversion price of $0.05 per share. As consideration for the amendment, the Company issued a warrant to purchase 800,000 shares of common stock. The warrant has a term of five years and has a cash exercise price of $0.10 or a cashless exercise price of $0.20. The warrant had a value of $78,395, which has been charged to finance cost.

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. The note is convertible into shares of common stock at a fixed conversion price of $0.10 per share. The company has recorded a discount of $100,000. Amortization of discount was $18,630 and $68,219 for the three and nine months ended September 30, 2023.

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, which was fully amortized in 2022.

2021 Convertible Notes

On September 20, 2021, the Company entered a convertible promissory note with GS Capital Partners, LLC with a face value of $220,000. The note matured on September 20, 2022, and bears interest at 8% per year. The note is convertible into shares of common stock at a fixed conversion price of $0.10 per share. To date, the lender has not declared a default as both Parties continue to actively explore a mutually beneficial path forward. A compromise was not reached as of September 30, 2023; however, the Company remains committed to addressing this matter in full with its convertible note holders and looks forward to reaching an amicable agreement which is advantageous to both Parties during the 4Q of 2023. During the nine months ended September 30, 2023, an aggregate of 3,186,595 shares of common stock were issued upon the conversion of $68,250 of notes payable, $9,995 of related accrued interest, and $3,750 of fees. The value of the shares issued was $542,243, and the Company recorded a loss on conversion of $460,248.

During the fourth quarter of 2021, the Company entered twenty convertible promissory notes with various holders aggregating $1,412,000. The notes matured one year from issuance and bear interest at 8% per year. The notes are convertible into shares of common stock at a fixed conversion price of $0.10 per share. During the nine months ended September 30, 2023, an aggregate of 4,376,139 shares of common stock were issued upon the conversion of $145,752 of notes payable, $3,760 of related accrued interest, and $3,000 of fees. The value of the shares issued was $603,290, and the Company recorded a loss on conversion of $450,778.

The Company’s convertible promissory notes at September 30, 2023 and December 31, 2022 are as follows:

Note 8. Notes Payable

JMS Investments

Between April of 2021 and September 30, 2021, JMS Investments of Staten Island, NY, USA invested $376,000 in seven separate transactions. The sums are repayable in the form of one-year demand notes having an interest rate of 8.5%.

GEX Management, Inc.

On August 30, 2021, the Company entered a promissory note with GEX Management, Inc. The note matured on February 28, 2022, and was repaid in December 2021. In connection with this note, the Company has agreed to issue 1,000,000 shares of common stock to the lender. These shares have not been issued at September 30, 2023. The shares have been valued at $120,990, which has been included in accrued expenses at September 30, 2023, and December 31, 2022. 

Small Business Administration Loan

On June 12, 2020, the Company received $150,000 in a loan borrowed from the SBA. Installment payments, including principal and interest, of $731 monthly, will begin 12 months from the date of the note. The balance of principal and interest will mature 30 years from the date of the note. Interest will accrue at the rate of 3.75% per year. On March 16, 2021, the U.S. Small Business Administration announced that the deferment period for the repayment would be extended an additional 12 months. On March 15, 2022, the U.S. Small Business Administration announced that the deferment period for the repayment would be extended to 30 months from the date of the note.

2023 Note

On January 27, 2023, the Company received a short-term loan of $350,000. The loan was repaid in full on March 6, 2023. In connection with this loan, the Company agreed to issue 2,000,000 shares to the individual, valued at $196,000. As of September 30, 2023, 500,000 shares have been issued and the remaining 1,500,000 shares, valued at $147,000, are classified as Common Stock To Be Issued.

2023 Financing Agreement

In June 2023, the Company entered into a financing agreement with a face amount of $260,000. The agreement will be repaid with weekly payments of $3,753, over approximately 16 months. The agreement contained an original issue discount of $60,000 and $5,000 of fees were deducted from the proceeds. The Company received proceeds of $195,000. Additionally, the Company incurred debt costs of $22,655. Total discount and costs of $87,655 will be amortized over the life of the agreement. During the three and nine months ended September 30, 2023, the Company amortized $16,435 and $21,913, respectively, of discount and costs to interest expense. The Company has granted the lender a security interest in substantially all of its cash, accounts receivable, inventory and other assets. The Company has made payments aggregating $63,801 through September 30, 2023.

The Company’s notes at September 30, 2023 and December 31, 2022 are as follows:

Note 9. Derivative Liabilities

The Company has identified certain embedded derivatives related to one of its convertible notes. Since the note is convertible into a variable number of shares, the conversion features of the note is recorded as a derivative liability. The accounting treatment of derivative financial instruments requires that the Company record fair value of the derivatives as of the inception date and to adjust to fair value as of each subsequent balance sheet date.

The Company identified embedded derivatives related to the conversion features of the September 2023 note described in Note 7. The accounting treatment of derivative financial instruments requires that the Company record the fair value of the derivatives as of the inception date of the note and to adjust the fair value as of each subsequent balance sheet date. The Company calculated the fair value of the embedded derivative at the inception of the note as $128,951, using the Black Scholes Model based on the following assumptions: (1) risk free interest rate of 5.42%; (2) dividend yield of 0%; (3) volatility factor of the expected market price of the Company's common stock of 421%; and (4) an expected life of 1 year. The initial fair value of the embedded debt derivative was allocated $60,000 as debt discount, which will be amortized to interest expense over the original term of the note, with the balance of $68,951 charged to expense at issue date as non-cash interest expense. During the three and nine months ended September 30, 2023, the Company recorded income of $4,183 related to the change in the fair value of the derivative. The fair value of the embedded derivatives was $124,768 at September 30, 2023, determined using the Black Scholes Model with the following assumptions: (1) risk free interest rate of 5.462%; (2) dividend yield of 0%; (3) volatility factor of the expected market price of the Company’s common stock of 439%; and (4) an expected life of 11 months. 

Note 10. Deferred Revenue

In December 2017, the Company and Zhejiang MENRED Environmental Tech Co, Ltd., Zhejiang Province, China (“Menred”), entered into a royalty bearing License and Supply Agreement (the “License and Supply Agreement”), effective December 21, 2017. Pursuant to the License and Supply Agreement, the Company licensed certain intellectual property and improvements to Menred, for use in the manufacture and sale of certain product types sold by Menred mostly for installation in buildings in China. Menred also agreed to purchase its requirements of certain products from the Company for Menred’s use, pursuant to the terms and conditions of the License and Supply Agreement. Also pursuant to the License and Supply Agreement, each year the Parties have minimum sales commitments of each other’s products. The License and Supply Agreement has a ten-year term with mutually agreed upon five-year extensions. The parties began a renegotiation of the terms and conditions of this agreement in December of 2022.

The Company recognized license revenue of $12,500 for each of the three months ended September 30, 2023 and 2022, and $37,500 for each of the nine months ended September 30, 2023 and 2022. Deferred revenue for the agreement was $211,156 and $248,656 at September 30, 2023 and December 31, 2022, respectively. The Company recognized royalty revenue of $0 for the three and nine months ended September 30, 2023, and 2022.

Note 11. Commitments and Contingencies

Litigation

From time to time, claims are made against the Company in the ordinary course of its 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 the Company 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 the Company’s results of operations for that period or future periods. 

In 2015, the Company commenced an action for the cancellation of shares issued to Soex (the “Shares”) in connection with a breached Securities Purchase Agreement and Distribution Agreement entered 2014.

The Soex Litigation was tried in U.S. District Court for the Middle District of Florida in October of 2018. The jury at the conclusion of the 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. The Company will seek maximum relief and damages for this on-going and growing illegal misuse the Company’s Intellectual Property. The Company feels this third action will lead in a judgment in favor of the Company.

On October 8, 2021, the Company was notified of an unusual order by the Federal District Court judge who oversaw the initial 2018 proceedings. This activity was initiated at the request of Soex’s counsel. The Order awards the defendant (Soex) $300,568 in attorney’s fees and $82,096 in costs for a total award of $382,664 to be paid by Dais. The Order doesn’t specify the date by which the award needs to be paid. The sum is recorded in accrued liabilities.

The Company will continue to vigorously defend itself against this Order, as well as move on all possible avenues available in order to stop, what Management believes is an on-going misuse of the Company’s core Intellectual Property. The Company believes - based on the content of the Order and other admissions and actions on the part of others - it has a chance to prevail in an appeal to the benefit of the Company and its shareholders. The Company has engaged in regular conversation with its counsel regarding this matter.

Accounts Payable

The firms below have pursued legal action against the Company in an effort 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, but anticipates additional agreements with the other firms in the future:

Footnotes for Accounts Payable Table

Note 12. Subsequent Events

No material events have occurred after September 30, 2023, that requires recognition or disclosure in the financial statements except as follows:

Between October 1, 2023, and the date of filing, the Company has repaid $22,518 of the June 2023 financing agreement discussed under Note 8. Notes Payable.

On October 12, 2023, the Company issued 1,044,200 shares of common stock to an individual as commission for an order received from a customer.

On October 16, the Company issued 1,110,000 shares of common stock for conversions of notes payable.

On November 1, 2023, the Company entered into a finance agreement in which it received funds in the amount of $55,000. There are weekly payments due on this agreement. As of the date of filing, the Company has repaid $2,962.

No other material events have occurred after September 30, 2023, requiring recognition or disclosure in the financials.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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.

The Company is dependent on third parties to manufacture the key components needed for its nanostructured materials and some parts 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

During the COVID Pandemic awareness of the benefits of increased ventilation in homes and the workplace has emerged as a primary focus on the prevention of exposure to bacteria and viruses. The Company is uniquely positioned as its current products are designed to provide a solution to these issues, especially with increased ventilation. Health experts continue to cite increased ventilation as a major factor to battle future outbreaks. The ConsERV products are specifically designed to increase new, fresh, ventilated, air in our homes and workplaces. Management is developing and executing plans to increase product awareness through existing and prospective sales channels.

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 of 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.

Supply Chain Management

Economies around the World are experiencing inflationary pressures which are impacting prices and availability of materials throughout the supply chain. Management is taking a more aggressive strategy to identify a diverse portfolio of suppliers to increase options for materials and parts. The supply and availability of certain components remain sporadic and limited across the supply chain.

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 and is effective in the destruction of pathogens that meet the material, (As verified by 3^rd part analysis). 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.

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.

Corporate History

We were incorporated as a New York corporation on April 8, 1993, as 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, a corporation founded in 1984 to provide design, analysis, and systems integration services in the field of fuel cells, fuel processors, and integrated fuel cell power systems. Subsequently, on December 13, 1999, the Company changed its name to Dais Analytic Corporation. In the ensuing years the Company has purchased and/or sold assets for cash and/or assumption of certain company’s obligations seeking a path to solid, continuing growth, or monetize non-performing Company assets.

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.

Our Technology

Aqualyte^TM

We use proprietary chemistry to reformulate thermoplastic materials called polymers, creating a nanotechnology material through which water and a select group of similar substances can permeate at a molecular level as opposed to flowing in bulk as liquid water through a pore. At the same time, the permeability of oxygen, nitrogen, and most other substances is severely limited, making the material extremely selective. We call this specialized material Aqualyte^TM and we have been granted a series of patents relating to its manufacture and use.

Aqualyte^TM is the foundation of the Dais product line, using the unique material’s properties to enable differentiated air, energy, and water products. Products generally are highly efficient, have fewer or no moving parts, and notably are kinder and gentler to our planet Earth. The nanomaterial-based products market is growing worldwide as more eyes are on the accelerating push for highly efficient products like those Dais features.

ConsERV^TM

Sales channels for our ConsERV product continue to expand. This energy conservation product typically saves an average of 30% on HVAC operating costs while providing increased amounts of ventilation air. The economic savings typically allow the remainder of the system to be smaller (less expensive) and/or achieve the same results from a reduced run time, reducing carbon dioxide (CO₂) emissions from electrical power generation. ConsERV generally attaches onto existing HVAC systems and is useful in both commercial and residential structures to provide improved ventilation air within the structure. In turn, this yields health benefits (reduced COVID-19 exposure, fewer allergy and asthma ‘trigger’ contaminants) and productivity improvements (improvement in cognitive abilities).

ConsERV separates incoming fresh ventilation air from outgoing exhaust air with our Aqualyte nanotechnology polymer in an enthalpy heat exchanger referred to as a “core”. While Aqualyte physically isolates the air streams so they don’t mix, heat and moisture are freely exchanged through the material. For summer air conditioning, the core preconditions the incoming air by removing some of the heat and humidity and transferring it to the exhaust air stream, saving energy. For winter heating, the core recovers a portion of the heat and humidity in the exhaust air and transfers it to the incoming air to reduce heating requirements.

When compared to similar competitive products, and based on test results 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 market for energy recovery ventilation equipment is changing as the technology is better understood. Management believes this change is linked to the industry’s specification-setting body (ASHRAE) and the US Centers for Disease Control stating that pathogens can and do travel via HVAC systems and duct work as reported by the White House Science Advisory Panel, the US EPA, NIH/Harvard, Trane Corporation, and more. This potential change in the market for ERVs coupled with the seemingly proven value proposition Dais’s ConsERV product provides optimism to the Management team and the Board of Directors for the future of the ConsERV product.

The Company began engineering for an updated line of ConsERV products in the year 2020 (known as the “N Series”) with new cores and packaged systems that incorporate the Company’s experience with the ERV market. The line was certified by the needed outside agencies and initial market introduction began in the 4^th quarter of 2021. We have seen positive market reception to date, and believe based on the N Series performance, price-point, and end-user feedback that the product will continue to be well received in the market. Sales of existing cores and customer systems are expected to continue generating revenue as we increase the number of sales channels for ConsERV. The newer N Series has begun contributing to increasing revenues in the second quarter of 2022 and beyond. Engineering efforts continue to optimize the N Series design for both manufacturing and customer usage.

The Company has increased its product offerings by selling and delivering custom-engineered systems in addition to the N Series. These products are constructed from an aluminum frame-and-panel system that allows ready modification and configuration to match customer requirements, making them well-suited to large projects with a relatively customized HVAC plant. These designs are evolutions of the D, J, and Z Series systems the Company sold prior to 2013, allowing them to be introduced to the market relatively quickly.

DisruptorCC^TM

The Company is prepared to begin ‘soft-selling’ a new HVAC product (based around the Aqualyte membrane) as another member of the company’s HVAC group called NanoAir™. This moisture management system increases or decreases the humidity of the process air as commanded to enable precise control of conditions without requiring traditional systems such as steam boilers. The initial sale of this product has been purchased and shipped to a large multinational company in the HVAC industry using it on one of their own facilities to maintain a narrow humidity range needed for precise manufacturing operations. The large multinational company in the HVAC industry has an open purchase order to buy over twenty DisruptorCC units. The Disruptor™ extends the company’s HVAC product offerings. The DisruptorCC expands the Dais product line into new within the HVAC market.

Product Summary

Dais’s advanced material has many demonstrated uses. Management is positioning most of the Company’s resources behind ConsERV, and is working to grow revenues of Aqualyte™ nanomaterials and engineering support in areas where Aqualyte has shown proven results and Dais has partners well-placed to bring products to market. This strategy leverages the Company’s experience and depth in marketing, building, and selling ConsERV cores and systems and in manufacturing and selling high performance Aqualyte nanomaterial.

Increased sales activities for advanced materials are focused on targeted companies within key industries worldwide, taking full advantage of Dais’s past and continuing market penetration efforts. The uses include energy recovery ventilation and other known HVAC and select cross-industry uses.

To help us support our capabilities to deliver ConsERV cores and systems, and Aqualyte advanced nanomaterials, we have qualified manufacturing companies to join our supply chain to produce materials and components. Guided by Dais-qualified manufacturing practices these efforts target the growing demand for product in North America, European Union, and Southeast Asia (including China). We project this expansion of the supply chain will result in lower costs and quicker order fulfillment, generating revenues faster.

Orders are already being generated from these agreements, and we expect them to increase as we expand and add new strategic partnerships along the way. The new orders include sales of Aqualyte nanomaterials, components for energy recovery ventilation, and other known HVAC and select cross industry products.

Results of Operations

Three Months Ended September 30, 2023 Compared to September 30, 2022

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