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
The Company has selected targeted parties that it is actively working with who are interested in licensing, purchasing the rights to, or establishing a joint venture to commercialize applications of the Company's technology;
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
The Company is actively working with newer investors, private equity companies, purchase order financing parties, and seemingly 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.
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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. 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.
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).
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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. The reconciliation of the derivative liability measured at fair value on a recurring basis using unobservable inputs (Level 3) is as follows for the three months endedMarch 31, 2021 :March 31, 2021 Balance, beginning of period$ 3,845,662 Additions 75,133
Change in fair value of derivative liabilities (2,181,367 ) Balance, end of period
$ 1,739,428
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 32,526,731
and 250,834 were excluded from the computation of diluted earnings per share for
the three months ended
Diluted loss per share for the three months endedMarch 31, 2021 is computed as follows: Three Months EndedMarch 31, 2021
Net income attributable to common shareholders $ 1,743,060 Income attributable to note derivatives Change in fair value of derivatives
(2,181,367 ) Expense attributable to note derivatives Interest expense 127,622 Diluted loss attributable to common shareholders $ (310,685 ) Basic shares outstanding 278,128 Derivative notes and interest shares 15,114,788 Diluted shares outstanding 15,392,916 Diluted loss per share $ (0.02 )
The Company had no derivative liabilities so measured for the three months ended
Recent Accounting Pronouncements - Recent accounting pronouncements issued by
the FASB and the
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Note 4. Accrued Expenses, Other
Accrued expenses, other consists of the following:
March 31, December 31, 2022 2021 Accrued expenses, other$ 655,118 $ 656,810 Accrued interest 2,233,693 2,197,577 Accrued warranty costs 91,531 91,531$ 2,980,342 $ 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
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,
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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
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
To implement the authorization of the four New Series of Preferred Stock, the
Certificate of Amendment was submitted to the
A copy of the Certificate of Amendment to the Certificate of Incorporation, which included the respective Certificates of Designation for the Series C Convertible Preferred Stock, Series D Convertible Preferred Stock, Series E Convertible Preferred Stock and Series F Convertible Preferred Stock, is attached as Exhibit 3.11 to this Annual Report on Form 10-K.
Reference is made to the complete disclosure contained in Exhibit 3.11 of this Annual Report for the preferences, rights, limitations qualifications and restrictions, including conversion rights, of each of the above-referenced New Series of Preferred Stock.
Common Stock
As of
There were no common stock transactions for the three months ended
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Note 7. Convertible Notes Payable and Exchange Program
Debt to Equity Exchange Program
In the period from
2021 Convertible Notes
On
During the fourth quarter of 2021, the Company entered twenty convertible
promissory notes with various holders aggregating
A total of
The Company's convertible promissory notes atMarch 31, 2022 andDecember 31, 2021 are as follows:March 31 ,December 31, 2022 2021
Convertible notes payable, bearing interest at 8- 10%
(1,026,315 ) (1,428,726 ) Unamortized deferred debt issuance cost (6,400 ) (9,112 ) Total 599,285 194,162 Current portion$ 599,285 $ 194,162
Note 8. 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.
13 Table of Contents
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 months ended
Note 9. 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 over time" 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$ 7,850.00 Yes Yes The O-Ring Store$ 10,334.00 No Yes Total$ 116,960.06
Note 10. Subsequent Events
1. OnApril 29, 2022 , the Company received a loan of$100,000 from the Company's Chief Executive Officer. This was repaid in full onMay 17, 2022 . 2. OnMay 4, 2022 , the Company received$50,000 fromCarriage House Capital , Inc. as a short-term loan (less than six months) with 10% interest being paid when note sum repaid. 3. OnMay 6, 2022 the Company received$35,000 fromCarriage House Capital as a short term loan (less than six months) with 10% interest being paid when the note sum repaid. 4. OnMay 17, 2022 the Company received$30,000 fromDraper, Inc. , as a short term loan (less than six months) with 10% interest being paid when the note sum repaid.
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.
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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
Volatile 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
16 Table of Contents
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.
17 Table of Contents 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.
When compared to similar competitive products, we believe, based on test results
conducted by the Air-conditioning, Heating and
Having identified the Energy Recovery Ventilator ("ERV") application as being able to benefit from ConsERV's 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. Management feels the market for energy recovery ventilation is changing to be broader and better understood.
This change is believed linked to the industry specification setting body
(ASHRAE) and the
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" - new cores and packaged systems). The experiences of the Company's past ERV products modified by market needs are incorporated into this newer packaged ERV product line. 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, the product will continue to be well received in the market. Sales of existing cores and customer systems are expected to continue generating revenue during 2022 and beyond as we increase the number of sales channels for ConsERV. The newer N Series will begin contributing to increasing revenues in the second quarter of 2022 and beyond.
18 Table of Contents Product Summary
Dais's advanced material has many demonstrated uses in the described products. Management is positioning most 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.
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 March 31, 2022 2021 REVENUE Sales$ 43,195 $ 62,809 Royalty and license fees 12,500 12,500 55,695 75,309 COST OF GOODS SOLD 52,440 37,860 GROSS MARGIN 3,255 37,449 OPERATING EXPENSES Research and development, net of government grant proceeds of$0 and$31,080 for the three months ended March 31, 2022 and 2021, respectively 64,873 13,517 Selling, general and administrative 425,276 261,387 TOTAL OPERATING EXPENSES 490,149 274,904 LOSS FROM OPERATIONS (486,894 ) (237,455 ) OTHER INCOME (EXPENSE) Interest expense (595,636 ) (200,852 ) Change in fair value of derivative - 2,181,367 TOTAL OTHER INCOME (EXPENSE), NET (595,636 ) 1,980,515 NET INCOME (LOSS)$ (1,082,530 ) $ 1,743,060 NET LOSS PER COMMON SHARE, BASIC$ (0.12 ) $ 6.27 NET LOSS PER COMMON SHARE, DILUTED (0.12 ) (0.02 ) WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING, BASIC 9,414,796 278,128 WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING, DILUTED 9,414,796 15,392,916 19 Table of Contents 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
20 Table of Contents
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 anSEC 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 for the three months ending
21 Table of Contents
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. The Company's ability to raise new funds while improved by the solution of the Company's previous convertible note matter and the uptick in new orders for product, remains challenged. World events find varying degrees of effect on the Company's going forward ability to raise reasonably priced growth capital in the amount(s) required. This is a challenging time to raise growth capital and become profitable. 3. We believe our current cash position, our projected ability to obtain additional sources of growth capital, and to generate sustainable cash flow from operations and investments is sufficient through the end of the second quarter of 2022 by which time we have confidence additional growth capital will be in place. 4. The Company entered into a Loan and Security Agreement inJune 2016 pursuant to which the Company issued a Senior Secured Promissory Note that granting the Holder a secured interest in all the assets of the Company. All Parties are working to resolve open issues in the second quarter of 2022. 5. 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 is working a number of paths to minimize the impact of this situation. 22 Table of Contents
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
23 Table of Contents
Small Business Administration Loan
On
Related Party Note
On
JMS Investments
Between April of 2021 and
On
2021 Convertible Notes
On
During the fourth quarter of 2021, the Company entered twenty convertible
promissory notes with various holders aggregating
A total of
The sums advanced by
24 Table of Contents
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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