DAIS CORPORATION The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. The Company has incurred significant losses
since inception, incurred a loss of
1. The Company guided by its Financial Advisor is actively working with
targeted third parties who have or are interested in licensing, purchasing
the rights to, or establishing a joint venture to commercialize
applications of the Company's technology; and,
2. The Company continues to seek capital from key strategic and/or government
(grant) 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.
3.
Management believes:
1. In the face of world-wide supply chain, financial market gyrations,
geopolitical events, and continuing pandemic related issues the market(s)
demand for its product(s) is entering a more sluggish period but not due
to interest the company's products.
2. The effect on the company's ability to raise new funds or on its current
and projected cash position resulting from slower growth in sales and
revenues due to a regional or world-wide economic downturn is placing
heavy pressures on management to widen the approaches to targeted places
to seek growth resources. Management with Board approval is seeking to
monetize one use (license, outright sale, etc.) of a particular asset.
Monetizing the entire technology would be done to extract the maximum
value of the technology for the benefit of the company's stakeholder at a
higher short-term cost. Whereas monetizing a technology segment would be
pursued to raise sufficient cash to continue in smaller, more concentrated
manner.
3. We believe our current cash position and our projected ability to obtain
additional sources of cash flow from operations and investments for the
balance of 2022 supporting the company's operations needed to manufacture
and create sales of ConsERV and Aqualyte product is more challenged as it
relates to the public markets. However, with investors (PE groups, Family
funds, individuals, etc.) savvy in the areas the Company is working are
increasing resource commitments in such opportunities. There is no
assurance, in these times of uncharted cause/effect with companies,
markets, and people, that management or the Board will be successful in
securing needed funds to fund business continuation or secure growth
capital funding.
4. The Senior Secured Note Holder has advised Management it is exploring its
options in this matter.
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We believe the Company's prospects to secure growth funding are good. The
company has shown solid progress over the last three quarters, removed a serious
impediment to growth by completing a 'debt to equity' program because where the
convertible noteholders debt positions were converted into equity (common stock
and warrants), introduced a popular new line of our ConsERV equipment having
improved performance and pricing to a growing independent sales channel
through-out
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
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
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 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
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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 uninsured balances of approximately
Concentrations - At
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
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, up until
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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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,
2021
Balance, beginning of period $ 3,845,662
Additions 124,290
Extinguished derivative liability (1,728,274 )
Change in fair value of derivative liabilities (2,241,678 ) Balance, end of period
$ -
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 29,996,165
and 7,193,399 were excluded from the computation of diluted earnings per share
for the three months ended
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 )
The Company had no derivative liabilities so measured for the three and nine
months ended
Recent Accounting Pronouncements - 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,
2022 2021
Accrued expenses, other $ 664,845 $ 656,810
Accrued interest 2,784,225 2,197,577
Accrued warranty costs 91,531 91,531
$ 3,540,601 $ 2,945,918 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
The Company has accrued compensation due to the Chief Executive Officer as of
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On
(i) The date upon which the Company secures funds, regardless of source, equal
to or exceeding, in the aggregate,
of the date of filing, has expired.
(ii) The Holder has not declared the Note in Default as the Parties have reached
terms to address several issues including the extension of the Maturity
Date (the "Maturity Date"). A binding agreement is being prepared for the
parties to execute by the end of the fourth quarter of 2022.
(iii) The Company has recorded interest expense of
three-month periods ended
and 2021, respectively.
(iv) The Company made a payment of fees and accrued interest totaling $154,398
during the nine months ended September 30, 2022 . Accrued interest was
$2,609,491 and $2,152,373 on September 30, 2022 , and December 31, 2021 On
On
On
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,
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
2,000,000 of the shares of preferred stock had 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 had been designated as Class B Preferred
Stock. The Class
During January and
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
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To implement the authorization of the four New Series of Preferred Stock, the
Certificate of Amendment was submitted to the
Common Stock
As of
2022 Common Stock Transactions
During
During
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 are to be reissued in the future.
In connection with a note issued in
2021 Common Stock Transactions
During the nine months ended
During the nine months ended
Note 7. Convertible Notes Payable and Exchange Program
Debt to Equity Exchange Program
In the period from
2022 Convertible Notes
On
On
On
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2021 Convertible Notes
On
During the fourth quarter of 2021, the Company entered twenty convertible
promissory notes with various holders aggregating
During
During
The Company's convertible promissory notes atSeptember 30, 2022 andDecember 31, 2021 are as follows: September 30, December 31, 2022 2021 Convertible notes payable, bearing interest at 8-10%$ 2,036,850 $ 1,453,960 Unamortized debt discount (385,108 ) (1,428,726 ) Unamortized deferred debt issuance cost (817 ) (9,112 ) Total 1,650,925 194,162 Current portion$ 1,650,925 $ 194,162 Note 8. Notes Payable
Paycheck Protection Program Loans
On
Note 9. Derivative Liabilities
The Company had identified certain embedded derivatives related to its convertible notes. Since the notes were convertible into a variable number of shares or have a price reset feature, the conversion features of those notes were 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
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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.
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 overtime" payment plan. To date the Company has an 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$ 3,850.00 Yes Yes The O-Ring Store$ 10,334.00 No Yes Total$ 113,960.06
Note 11. Subsequent Events
1. On October 5, 2022 , the sums of $30,000 and $62,800 (total $92,800 )
borrowed from the PKT Strategic Technologies, LLC , on July 28, 2022 ,
Senior Note Holder under the same terms and conditions as the existing
sums of money which have been loaned to the Company since June 16, 2016 ,
was repaid. Interest on this sum for this period remains to be repaid.
This interest payment is an item covered by the pending updated Senior
Secured Note Holder agreement referred to Related Party , Note 3.
2. On October 24, 2022 , the Company received $48,000 pursuant to the terms
and conditions of the Senior Secured Promissory Noteholder held by PKT
Strategic Assets, LLC . The note is secured by all the company's assets
including but not limited to the Company's cash, receivables, inventory,
WIP, patents, etc.
3. On October 31, 2022 , the Company received $72,000 (another additive amount
to the initial loan made since June 2016 ) pursuant to the terms and
conditions of the Senior Secured Promissory Noteholder held by PKT
Strategic Assets, LLC . The note is secured by all the company's assets
including but not limited to the Company's cash, receivables, inventory,
WIP, patents, etc.
4. On November 4, 2022 , the Company borrowed $25,000 from JEB Partners, L.P. ,
a Delaware limited partnership. Interest on the one-year note is 10% and
JEB Partners will receive a warrant for 100,000 common shares, five-year
term, strike price of $.15 , and a price per of $.10 per share if Company
defaults on repayment. Full document being prepared for signing by the
parties prior to December 15, 2022 .
5. On August 31, 2022 , the Company received $270,000 (another additive amount
to the initial loan made June 2016 ) pursuant to the terms and conditions
of the Senior Secured Promissory Noteholder held by PKT Strategic Assets,
LLC . The note is secured by all the company's assets including but not
limited to the Company's cash, receivables, inventory, WIP, patents, etc.
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
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.
Effects from the pandemic are still impacting economies, and routine life, across the globe. Certain key economies are still being negatively impacted by shutdowns. The Company is uniquely positioned as its current products are designed to provide a solution to these issues especially with increased ventilation. The awareness of the benefits of increased ventilation in homes and workplaces are being cited as a major factor by health experts and customers as a solution to battle future outbreaks and other 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
Economies around the World are experiencing inflationary pressures which is 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.
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
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In
In November of 2018 the board of directors unanimously voted to change the name
of the Company from
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.
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ConsERVTM
Sales channels for our ConsERV product continue to expand. This energy
conservation product which should save 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 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 preconditions the incoming air by removing some of the heat and humidity and transfers 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
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
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 4th 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.
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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
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
The following table sets forth, for the periods indicated, certain data derived from our Statements of Operations:
For the Three Months Ended
September 30,
2022 2021
REVENUE
Sales $ 492,394 $ 116,864
Royalty and license fees 12,500 12,500
504,894 129,364
COST OF GOODS SOLD 381,214 90,749
GROSS MARGIN 123,680 38,615
OPERATING EXPENSES
Research and development, net of government grant
proceeds of $0 and $28,651 , respectively 85,887 29,814
Selling, general and administrative 430,455 305,833
TOTAL OPERATING EXPENSES 516,342 335,647
LOSS FROM OPERATIONS (392,662 ) (297,032 )
OTHER INCOME (EXPENSE)
Interest expense (800,072 ) (110,938 )
Forgiveness of debt income 124,126 146,685
Change in fair value of derivative liabilities - -
Gain on extinguishment of debt - -
TOTAL OTHER INCOME (EXPENSE), NET (675,946 ) 38,459
NET INCOME (LOSS) $ (1,068,608 ) $ (261,285 )
NET INCOME (LOSS) PER COMMON SHARE, BASIC $ (0.10 ) $ 0.03
NET LOSS PER COMMON SHARE, DILUTED $ (0.10 ) $ (0.03 )
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING, BASIC 11,170,719 9,414,796
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING, DILUTED 11,170,719 9,414,796
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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
We believe there are largely three reasons driving this change. The first is the
cost of components and related shipping as well as supply-chain related
challenges forcing a change type of pricing of the component and associated
engineering costs. Some of these changes have costs not recoverable from the
custom. Our way of addresses these two issues are found (1) in newer IT system
allowing closing tracking of all production costs actively monitoring increases
production cost, (2.) we have raised the prices for our ConsERV product line
while continuing to work within our supply chain to reduce these costs, and to
attract and maintain a high-quality team the company's direct labor costs have
risen by approximately 25% since
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 expense for the three months ended
Net Income (Loss)
Net loss was
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,
2022 2021
REVENUE
Sales $ 653,288 $ 288,854
Royalty and license fees 37,500 37,500
690,788 326,354
COST OF GOODS SOLD 610,859 173,639
GROSS MARGIN 79,929 152,715
OPERATING EXPENSES
Research and development, net of government grant
proceeds of $0 and $89,617 , respectively 212,508 69,660
Selling, general and administrative 1,259,080 1,590,907
TOTAL OPERATING EXPENSES 1,471,588 1,660,567
LOSS FROM OPERATIONS (1,391,659 ) (1,507,852 )
OTHER INCOME (EXPENSE)
Interest expense (2,103,604 ) (471,746 )
Forgiveness of debt income 124,126 146,685
Change in fair value of derivative liabilities - 2,241,678
Gain on extinguishment of debt - 1,148,554
TOTAL OTHER INCOME (EXPENSE), NET (1,979,478 ) 3,067,883
NET INCOME (LOSS) $ (3,371,137 ) $ 1,557,319
NET INCOME (LOSS) PER COMMON SHARE, BASIC $ (0.33 ) $ 0.35
NET LOSS PER COMMON SHARE, DILUTED $ (0.33 ) $ (0.19 ) WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING, BASIC
10,107,546 4,494,649
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING,
DILUTED 10,107,546 8,360,950
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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
We believe there are largely three reasons driving this change. The first is the
cost of components and related shipping as well as supply-chain related
challenges forcing a change type of pricing of the component and associated
engineering costs. Some of these changes have costs not recoverable from the
custom. Our way of addresses these two issues are found (1) in newer IT system
allowing closing tracking of all production costs actively monitoring increases
production cost, (2.) we have raised the prices for our ConsERV product line
while continuing to work within our supply chain to reduce these costs, and to
attract and maintain a high-quality team the company's direct labor costs have
risen by approximately 25% since
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 expense for the nine months ended
Net Income (Loss)
Net loss for the nine months ending
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Liquidity and Capital Resources
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. The Company has incurred significant losses
since inception, incurred a loss 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 increased its value and potential to attract new investors
when it 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. This has helped
the Company attract growth capital it could not prior to this 'debt to
equity' exchange.
Management and the Board believe:
1. In the face of current world events (financial market see-sawing, war,
China slow-down, supply chain challenges, etc.) our products remain in
demand.
2. We believe the Company's prospects to secure growth funding remained
challenged by world events having varying degrees of effect on the
Company's going forward ability to raise reasonably priced growth capital
in the amount(s) required. Assisting the company is the internal and
external progress over the last three quarters. The solution of the
convertible debt matter, introduced a popular new line of our ConsERV
equipment, growing independent sales channel, believe will be signing
updated agreement 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), and for creating
the basis of a long term business relationship with a well-known,
multi-national corporation interested in using the Company's products for
its own and third-party use.
3. We believe our current cash position, and our projected ability to attract
additional growth capital including revenue generation (cash flow) from
operations, is adequate through the end of the fourth quarter 2022. At
which time the combination of our progress in the market, greater and
stronger market validation of our industry changing benefits, and
cautiously optimistic optimism that the recent downturn of the public
markets worldwide will have turned, finding additional growth capital will
be in place.
4. The supply chain impact of recent world events is affecting the Company's
ability to produce product for its customers. Inability to timely acquire
specified components may find the Company needing to redesign and
recertify its products, or to stop production until the supply chain
matter is resolved. In either event this will cause loss of sales revenue,
potentially key Dais team members, and customers. The Company has
successfully implemented several workarounds including sourcing 'similar
but when installed equal' components with new vendors to supply needed
components. Additionally, the Company is collaborating with its highest
profile suppliers to accelerate improved paths to minimize the impact of
this situation.
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
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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
Related Party Note
On
(i) The date upon which the Company secures funds, regardless of source, equal
to or exceeding, in the aggregate,
of the date of filing, has expired.
(ii) The Holder has not declared the Note in Default as the Parties have reached
terms to address several issues including the extension of the Maturity
Date (the "Maturity Date"). A binding agreement is being prepared for the
parties to execute by the end of the fourth quarter of 2022.
(iii) The Company has recorded interest expense of
three-month periods ended
and 2021, respectively.
(iv) The Company made a payment of fees and accrued interest totaling $154,398
during the nine months ended September 30, 2022 . Accrued interest was
$2,609,491 and $2,152,373 on September 30, 2022 , and December 31, 2021
JMS Investments
Between April of 2021 and
On
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2022 Convertible Notes
On
On
On
2021 Convertible Notes
On
During the fourth quarter of 2021, the Company entered twenty convertible
promissory notes with various holders aggregating
During
During
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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