DAIS CORPORATION The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. Although the Company generated income of
1. The Company is actively working with selected targeted parties who are
interested in licensing, purchasing the rights to, or establishing a joint
venture to commercialize applications of the Company's technology;
2. The Company continues to seek capital from certain strategic and/or
government grant opportunities and related sources. These sources may,
pursuant to any agreements that may be developed in conjunction with such
funding, assist in the product definition and design, roll-out and channel
penetration of products; and
3. The Company is actively working with newer investors, private equity
companies, purchase order financing parties, and its existing debt holders
to restructure its existing debt and obtain short and long-term working
and growth capital.
Any failure by the Company to timely procure additional financing or investment adequate to fund the ongoing operations, including planned product development initiatives and commercialization efforts, will have material adverse consequences on the Company's financial condition, results of operations and cash flows as could any unfavorable terms. There are no assurances the Company will be able to obtain the financing and planned product development commercialization. Accordingly, the Company 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 the Company be unable to continue as a going concern.
The Company has experienced and increase in inquiries relating to its' ConsERV product and has responded to bid requests generated through our network of sales representatives. Converting these bids into sales will increase cash-flow relating to operations, reducing the amount of anticipated short-term financing.
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
Significant estimates underlying the Company's reported financial position and results of operations include the allowance for doubtful accounts, fair value of derivative liabilities, valuation allowance on deferred taxes and the warranty reserve.
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Revenue recognition - The Company recognizes revenue in accordance with Financial Accounting Standards Boards (FASB) Accounting Standards Codification (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
Royalty revenue is recognized as earned. The Company recognized royalty revenue
of
The Company accounts for revenue arrangements with multiple elements under the provisions of 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 certain criteria being 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.
Shipping and handling fees billed to customers are included in revenue. Shipping and handling fees associated with freight are generally included in cost of revenue.
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 on
Concentrations - At
Fair Value of Financial Instruments - The Company's financial instruments,
including cash, accounts receivable, accounts payable, accrued expenses,
deferred revenue, customer deposits and notes payable are carried at historical
cost. At
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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
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
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
Research and development expenses and funding proceeds - Expenditures for
research and development are expensed as incurred. The Company incurred research
and development costs of
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:
· Level 1 - Unadjusted quoted prices in active markets that are accessible at
the measurement date for identical, unrestricted assets or liabilities.
· Level 2 - Inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly or indirectly,
including quoted prices for similar assets or liabilities in active
markets; quoted prices for identical or similar assets or liabilities in
markets that are not active; inputs other than quoted prices that are
observable for the asset or liability (e.g. interest rates); and inputs
that are derived principally from or corroborated by observable market data
by correlation or other means.· Level 3 - Inputs that are both significant to the fair value measurement
and unobservable.
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A financial asset or liability's classification within the hierarchy is
determined based on the lowest level input that is significant to the fair value
measurement. The Company has recorded a derivative liability for its convertible
notes which contain variable conversion prices. The table below summarizes the
fair values of our financial liabilities as of
Fair
Value at
September 30, Fair Value Measurement Using
2021 Level 1 Level 2 Level 3
Derivative liability $ - $ - $ - $ -
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, September 30,
2021 2020
Balance, beginning of period $ 3,845,662 $ 2,349,471
Additions 124,290 368,312
Extinguished derivative liability (1,728,274 ) -
Change in fair value of derivative liabilities (2,241,678 ) (376,282 ) Balance, end of period
$ - $ 2,341,501 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 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. In periods in which a net loss has been
incurred, all potentially dilutive common shares are considered anti-dilutive
and are excluded from the calculation. Common share equivalents of 7,193,399 and
14,624,579 were excluded from the computation of diluted earnings per share for
the three and nine ended
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Reconciliation of diluted loss per share for the nine-month period ended
Nine Months
Ended
September 30,
2021
Net income attributable to common shareholders
(2,241,678 )
Gain on extinguishment of debt (1,148,554 )
Expense attributable to note derivatives
Interest expense 216,378
Diluted loss attributable to common shareholders
Basic shares outstanding 4,494,649 Derivative notes and interest shares 3,866,301 Diluted shares outstanding 8,360,950 Diluted loss per share $ (0.19 )
Recent Accounting Pronouncements - There are new accounting pronouncements
issued by the
In
Other recent accounting pronouncements issued by the FASB and the
Note 4. Accrued Expenses, Other
Accrued expenses, other consists of the following:
September 30, December 31,
2021 2020
Accrued expenses, other $ 189,278 $ 185,656
Accrued common stock to be issued for financing
cost 120,990 -
Accrued interest 898,067 1,238,553
Accrued warranty costs 91,531 91,531
$ 1,299,866 $ 1,515,740
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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. Rent expense for this building is
On
The Company has accrued compensation due to the Chief Executive Officer as of
On
Note 6. Equity Transactions
Preferred Stock
As of
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
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
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 the 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
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Common Stock
As of
During the three months ended
During the three months ended
There were no common stock transactions in 2020.
Options and Warrants
In
The 2,826,733 warrants issued in 2021 in connection with the settlement of debt
have an exercise price of
During the three months ended
In
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Note 7. Notes Payable
Paycheck Protection Program Loans
On
On
Small Business Administration Loan
On
JMS Investments
Between April of 2021 and
GEX Management, Inc.
On
On
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A total of
The sums advanced by
Note 8. Convertible Notes Payable and Exchange Program
Debt to Equity Exchange Program
In the period from
The Company's convertible promissory notes atSeptember 30, 2021 andDecember 31, 2020 are as follows: September 30, December 31, 2021 2020 Convertible notes payable, bearing interest at 8-10% $ -$ 1,453,960 Current portion $ -$ 1,453,960
The company entered into various convertible notes during 2019 and 2018,
aggregating
During the nine months ended
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Note 9. Derivative Liabilities
The Company has identified certain embedded derivatives related to its convertible notes. Since the notes are convertible into a variable number of shares or have a price reset feature, the conversion features of those notes are recorded as derivative liabilities. 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 has recorded additions to the derivative conversion liabilities
related to the conversion feature attributable to interest accrued during the
period. These additions totaled
During the three and nine months ended
During the three and nine months ended
During the second quarter of 2021 the Company issued 7,036,668 shares of common
stock, valued at
Note 10. 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.
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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
On
On
The Company will vigorously defend itself against this Order, as well as move on all possible avenues open to it 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.
Accounts Payable
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 time" payment plan. To date the Company has one agreement in place with SoftinWay.
Company Sum Owned Payment Plan Legal Action Old Dominion Freight Line$ 13,576.95 No Yes Power Plant Services$ 85,199.11 No Yes SoftinWay$ 15,350.00 Yes Yes The O-Ring Store$ 10,334.00 No Yes Total$ 124,459.06 Note 11. Subsequent Events 1. The Company has accrued compensation due to the Chief Executive Officer ("Employee") beginning in 2004, of$2,053,878 and$1,983,639 atSeptember 30, 2021 andDecember 31, 2020 , respectively, included in accrued compensation and related benefits in the accompanying balance sheets. A Five-year cashless warrant for 5,134,690 shares with a strike price of$.08 will be issued to Employee to reduce the Company's indebtedness by 75% leaving a balance of$536,000 . 2. In November of 2021, the Company received additional advances from or throughJMS Investments, LLC . Each advance is in the form of a demand note having an interest rate of 8.5%. The total investment betweenApril 2021 andNovember 2021 is$536,000 . TheNovember 2021 additional sums are: Date Sum Received
November 2, 2021$ 30,000 November 3, 2021$ 100,000 November 4, 2021$ 30,000
No other material events have occurred after
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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
Unless otherwise indicated or the context requires otherwise, the words "we",
"us", "our", the "Company" or "our Company" refer to
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 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.
Management is keenly aware of the effects the pandemic is having on economies, and everyday life, across the globe. Governments, industry experts, and private business are working to create solutions to defeat the current pandemic and protect us from future infections. The Company is uniquely positioned as its' current products are designed to provide a solution to these issues especially in increased ventilation. The awareness of the benefits of increased ventilation in homes and workplaces is a major factor in the solution to battle the current, and future, pandemics. The ConsERV products are specifically designed to increase new, fresh, ventilated, air in our homes and workplaces. Management is developing and executing on plans to increase product awareness through existing and prospective sales channels.
Climate Change and
Countries and corporations around the world are adopting aggressive plans to
achieve newly established
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Rising Share Price
Beginning in mid-October of 2021 the Company's share price on the OTCM has risen
from a low of
Overview
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.
Corporate History
We were incorporated as a
In
In November of 2018 the board of directors unanimously voted to change the name
of the Company from
Having identified the Energy Recovery Ventilator ("ERV") application as being able to uniquely benefit from the management or the features/options proven to be achieved by using the Company's nanotechnology. The market, as near as management can tell, for ventilation equipment is changing.
The changes are believed linked to the 3rd party engineering agency (ASHRAE) and
others stating pathogens can and do travel via HVAC systems and duct work
as reported by the
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Our Technology
AqualyteTM
We use proprietary nanotechnology to reformulate thermoplastic materials called polymers, creating a material which water and a select group of similar substances can permeate through 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 AqualyteTM and we have been granted a series of patents relating to its manufacture and use.
AqualyteTM 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.
In July of 2017, Dais first entered a multi-year, exclusive license agreement
with the
ConsERVTM
Sales channels for our ConsERV product continues to expand. This is our HVAC
energy conservation product which should save an average of 30% on HVAC
ventilation air operating costs while providing increased amounts of ventilated
air. The economic savings typically allow the remainder of the system to be
smaller and less expensive, reducing
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 removes some of the heat and humidity from the incoming air and transfers it to the exhaust air stream, thereby saving energy under many conditions. For winter heating, the core typically recovers a portion of the heat and humidity in the exhaust air and transfers it into the incoming air to reduce heating requirements.
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When compared to similar competitive products, we believe, based on test results
conducted by the Air-conditioning, Heating and
Product Summary
Dais's advanced material has many demonstrated uses in the described products. Management is positioning a majority of the Company's resources behind the two most mature products in two major revenue generating paths: (1) ConsERV cores and systems, and (2) the sale 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. Management projects this narrower focus will increase revenues allowing profitability to occur faster. 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.
Sales activities for advanced materials are continuing with select, successful
companies located in the
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
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.
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Results of Operations
Three Months Ended
The following table sets forth, for the periods indicated, certain data derived from our Statements of Operations:
For the Three Months Ended
September 30,
2021 2020
REVENUE
Sales $ 116,864 $ 360,764
Royalty and license fees 12,500 12,500
129,364 373,264
COST OF GOODS SOLD 90,749 213,485
GROSS MARGIN 38,615 159,779
OPERATING EXPENSES
Research and development, net of government grant
proceeds of $28,651 and $34,716 , respectively 29,814 10,573
Selling, general and administrative 305,833 276,318
TOTAL OPERATING EXPENSES 335,647 286,891
LOSS FROM OPERATIONS (297,032 ) (127,112 )
OTHER INCOME (EXPENSE)
Interest expense (110,938 ) (223,266 )
Forgiveness of debt income 146,685 -
Change in fair value of derivative liabilities - (208,916
Gain on extinguishment of debt - -
TOTAL OTHER INCOME (EXPENSE), NET 38,459 (432,182 )
NET INCOME (LOSS) $ (261,285 ) $ (559,294 )
NET INCOME (LOSS) PER COMMON SHARE, BASIC $ (0.03 ) $ (2.01 )
NET LOSS PER COMMON SHARE, DILUTED $ (0.03 ) $ (2.01 )
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING, BASIC 9,414,796 278,128
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING, DILUTED 9,414,796 278,128
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Revenue
We generate our revenues primarily from the sale of our ConsERV cores and
systems and Aqualyte membrane. Product sales were
Revenues from royalty and license fees were
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 nanomaterial. Cost of goods sold were
We are dependent on third parties to manufacture the key components needed for our nano-structured based materials and some portion of the value-added products made with these materials. Accordingly, a supplier's failure to supply components in a timely manner, or to supply components that meet our 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 our products and/or increase the unit costs of production. Certain of the components or the processes of our suppliers are proprietary. If we were ever required to replace any of our suppliers, we should be able to obtain comparable components from alternative suppliers at comparable costs, but this would create a delay in production.
Gross margin
Gross margin from the sales of products was
Research and development costs
Expenditures for research and development are expensed as incurred. We incurred
research and development costs of
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Selling, general and administrative expenses
Our selling, general and administrative expenses consist primarily of payroll
and related benefits, 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
Our selling, general and administrative expenses may fluctuate due to a variety of factors, including, but not limited to:
• Additional infrastructure needed to support the expanded commercialization
of our ConsERV and Aqualyte products and/or new product applications of
our polymer technology for, among other things, administrative personnel,
physical space, marketing and channel support and information technology;
• The issuance and recognition of expenses related to fair value of new
share-based awards, which is based on various assumptions including, among
other things, the volatility of our stock price; and
• Additional expenses because of being an SEC reporting company, including,
but not limited to, director and officer insurance, director fees, SEC
compliance expenses, transfer agent fees, additional staffing,
professional fees, and similar expenses.
We continue to focus on decreasing selling, general and administrative expenses for all our product efforts.
Other Income (Expense)
Other income for the three months ended
Net Income (Loss)
Net loss was
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Nine Months Ended
The following table sets forth, for the periods indicated, certain data derived from our Statements of Operations:
For the Nine Months Ended
September 30,
2021 2020
REVENUE
Sales $ 288,854 $ 828,796
Royalty and license fees 37,500 37,500
326,354 866,296
COST OF GOODS SOLD 173,639 481,704
GROSS MARGIN 152,715 384,592
OPERATING EXPENSES
Research and development, net of government grant
proceeds of $89,617 and $92,050 , respectively 69,660 84,799
Selling, general and administrative 1,590,907 793,062
TOTAL OPERATING EXPENSES 1,660,567 877,861
LOSS FROM OPERATIONS (1,507,852 ) (493,269 )
OTHER INCOME (EXPENSE)
Interest expense (471,746 ) (811,756 )
Forgiveness of debt income 146,685 -
Change in fair value of derivative liabilities 2,241,678 376,282
Gain on extinguishment of debt 1,148,554 -
TOTAL OTHER INCOME (EXPENSE), NET 3,067,883 (435,474 )
NET INCOME (LOSS) $ 1,557,319 $ (928,743 )
NET INCOME (LOSS) PER COMMON SHARE, BASIC $ 0.35 $ (3.34 )
NET LOSS PER COMMON SHARE, DILUTED $ (0.19 ) $ (3.34 ) WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING, BASIC
4,494,649 278,128
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING,
DILUTED 8,360,950 278,128
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Revenue
We generate our revenues primarily from the sale of our ConsERV cores and
systems and Aqualyte membrane. Product sales were
Revenues from royalty and license fees were
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 nanomaterial. Cost of goods sold were
We are dependent on third parties to manufacture the key components needed for our nano-structured based materials and some portion of the value-added products made with these materials. Accordingly, a supplier's failure to supply components in a timely manner, or to supply components that meet our 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 our products and/or increase the unit costs of production. Certain of the components or the processes of our suppliers are proprietary. If we were ever required to replace any of our suppliers, we should be able to obtain comparable components from alternative suppliers at comparable costs, but this would create a delay in production.
Gross margin
Gross margin from the sales of products was
Research and development costs
Expenditures for research and development are expensed as incurred. We incurred
research and development costs of
Selling, general and administrative expenses
Our selling, general and administrative expenses consist primarily of payroll
and related benefits, 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
Our selling, general and administrative expenses may fluctuate due to a variety of factors, including, but not limited to:
• Additional infrastructure needed to support the expanded commercialization
of our ConsERV and Aqualyte products and/or new product applications of
our polymer technology for, among other things, administrative personnel,
physical space, marketing and channel support and information technology;
• The issuance and recognition of expenses related to fair value of new
share-based awards, which is based on various assumptions including, among
other things, the volatility of our stock price; and
• Additional expenses because of being an SEC reporting company, including,
but not limited to, director and officer insurance, director fees, SEC
compliance expenses, transfer agent fees, additional staffing,
professional fees and similar expenses.
We continue to focus on decreasing selling, general and administrative expenses for all our product efforts.
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Other Income (Expense)
Other income for the nine months ended
Net Income (Loss)
Net income for the nine months ended
Liquidity and Capital Resources
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. Although the Company generated income of
1. The Company is actively working with selected targeted parties who are
interested in licensing, purchasing the rights to, or establishing a joint
venture to commercialize applications of the Company's technology;
2. The Company continues to seek capital from certain strategic and/or
government grant opportunities and related sources. These sources may,
pursuant to any agreements that may be developed in conjunction with such
funding, assist in the product definition and design, roll-out and channel
penetration of products; and
3. The Company is actively working with newer investors (like JMS
Investments), private equity companies, purchase order financing parties,
has increased its value and potential to attract new investors in the eyes
of the Management team when the Company completed the exchange program of
'debt to equity' in the 2nd quarter of 2021 clearing out all convertible
debt in exchange for equity at a fixed price at the end of the second
quarter of 2021.
Management believes:
1. In the face of current pandemic related events the market(s) demand for
its product(s) remains sluggish in places where the pandemic continues to
rise.
2. The Management and Board feel the Company's ability to raise new funds is
continuing to improve with (a.) the financial clarity earned with the debt
to equity program completing in the 2nd Quarter of 2021, (b.) the effects
of the bridge funding provided by JMS Investments and others allowing the
Company to once again be fully reporting, and (c.) the shift seemingly
occurring worldwide creating a pull for the Company's products showing a
proven linkage to lowering drivers for Climate Change. This said, make no
mistake, it remains a challenging time to raise growth capital and become
profitable. ..
3. We believe our current cash position and our projected ability to obtain
additional sources of growth capital, and to generate sustainable cash
flow from operations and investments for the balance of 2021 is improving
yet remains challenged.
We have, and seemingly continue to, be successful in attracting new
capital critical to support the Company's operations and efforts needed to
profitably manufacture and sell ConsERV and Aqualyte.
Lacking the occurrence of a major geopolitical event, a recurrence of the
worldwide pandemic, or something of equal magnitude which would affect
business worldwide Management and Board are guardedly optimist, despite
these times of uncharted causes/effects with companies, markets, sales
channel challenges, and people, the Company will continue to be successful
in securing needed funds to fund business continuation or secure growth
capital funding.
4. The Company entered into a Loan and Security Agreement in June 2016
pursuant to which the Company issued a Senior Secured Promissory Note that
grants the Holder a secured interest in all the assets of the Company. The
Company's plan is to make incremental monthly payments against this Note
while working with all Parties involved to resolve the matter in a larger,
faster manner in the coming year.
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Any failure by us to timely procure additional financing or investment adequate to fund the ongoing operations, including planned product development initiatives and commercialization efforts, or experience a major supply chain disruption will have material adverse consequences on our financial condition, results of operations and cash flows as could any unfavorable terms. While we believe the Company's prospects have improved for funding, there are no assurances we will be able to obtain the financing and planned product development commercialization, and the sales channel challenges continue to mount. The Company may fail to reach an accord with the Senior Secured Note Holder who has deep rights with the assets of the Company pledged as security for repayment of the Note. 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.
Statement of Cash Flows
Cash as of
Net cash used in operating activities was
Net cash used in investing activities was
Net cash provided by financing activities was
Financing and Capital Transactions
Paycheck Protection Program Loan
On
On
Small Business Administration Loan
On
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Related Party Note
On
JMS Investments
Between April of 2021 and
GEX Management, Inc.
On
On
A total of
The sums advanced by
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Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, sales or expenses, results of operations, liquidity or capital expenditures, or capital resources that are material to an investment in our securities.
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