10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2020

☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from _______ to _______

Commission File No. 000-53554

DAIS CORPORATION

(Exact name of Registrant as specified in its charter)

New York	14-1760865
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

11552 Prosperous Drive, Odessa, Florida	33556
(Address of principal executive offices)	(Zip Code)

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

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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
N/A	N/A	N/A

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

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

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

Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	☒	Smaller reporting company	☒
Emerging Growth Company	o

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

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

There were 278,128 shares of the Registrant's $0.01 par value common stock outstanding as of November 23, 2020.

DAIS CORPORATION

TABLE OF CONTENTS

		Page No.
PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements	3
	Condensed Balance Sheets as of September 30, 2020 (unaudited) and December 31, 2019	3
	Condensed Statements of Operations for the three and nine months ended September 30, 2020 and 2019 (unaudited)	4
	Condensed Statement of Stockholders’ Deficit for the three and nine months ended September 30, 2020 and 2019 (unaudited)	5
	Condensed Statements of Cash Flows for the nine months ended September 30, 2020 and 2019 (unaudited)	6
	Notes to Condensed Financial Statements (unaudited)	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	25
Item 4.	Controls and Procedures	25
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	26
Item 1A.	Risk Factors	26
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	26
Item 3.	Defaults Upon Senior Securities	26
Item 4.	Mine Safety Disclosures	26
Item 5.	Other Information	26
Item 6.	Exhibits	27
SIGNATURES		28

2

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

DAIS CORPORATION

CONDENSED BALANCE SHEETS

	September 30, 2020			December 31, 2019
	(Unaudited)
ASSETS
CURRENT ASSETS:
Cash	$	22,899		$	4,083
Accounts receivable, net		-			12,883
Other receivables		12,125			34,144
Inventory		80,143			91,281
Prepaid expenses		45,100			32,362
Total Current Assets		160,267			174,753
Property and equipment, net		10,765			30,957
OTHER ASSETS:
Deposits		4,780			4,780
Patents, net		151,659			146,135
Total Other Assets		156,439			150,915
TOTAL ASSETS	$	327,471		$	356,625
LIABILITIES AND STOCKHOLDERS’ DEFICIT
CURRENT LIABILITIES:
Accounts payable, including related party payables of $286,034 and $280,247 at September 30, 2020 and December 31, 2019, respectively	$	988,838		$	952,415
Accrued expenses, other, including interest due to related party of $617,663 and $444,476 at September 30, 2020 and December 31, 2019, respectively		1,374,531			1,034,745
Accrued compensation and related benefits		2,092,282			2,019,777
Customer deposits		50,590			91,742
Notes payable to related parties		1,957,600			1,822,600
Current portion of deferred revenue		361,156			398,656
Derivative liabilities		2,341,501			2,349,471
Convertible notes payable, net of unamortized debt discount and deferred debt issuance costs		1,453,960			1,346,213
Total Current Liabilities		10,620,458			10,015,619
Notes payable – due after one year		294,750			-
Note payable - related party – due after one year		10,000			10,000
Total Liabilities		10,925,208			10,025,619
STOCKHOLDERS’ DEFICIT
Preferred stock, undesignated; $0.01 par value; 7,990,000 shares authorized; no shares issued and outstanding		-			-
Preferred stock, Series A; $0.01 par value; 2,000,000 shares authorized; no shares issued and outstanding		-			-
Preferred stock, Series B; $0.01 par value; 10,000 shares authorized; 10 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively		-			-
Common stock; $0.01 par value; 1,100,000,000 shares authorized; 278,757 shares issued and 278,128 shares outstanding at September 30, 2020 and December 31, 2019, respectively		2,788			2,788
Capital in excess of par value		45,976,660			45,976,660
Accumulated deficit		(55,115,073	)		(54,186,330	)
		(9,135,625	)		(8,206,882	)
Treasury stock at cost, 629 shares at September 30, 2020 and December 31, 2019, respectively		(1,462,112	)		(1,462,112	)
Total Stockholders’ Deficit		(10,597,737	)		(9,668,994	)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT	$	327,471		$	356,625

See accompanying Notes to Unaudited Condensed Financial Statements

3

DAIS CORPORATION

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

	For the Three Months Ended						For the Nine Months Ended
	September 30,						September 30,
	2020			2019			2020			2019
REVENUE
Sales	$	360,764		$	239,609		$	828,796		$	809,707
Royalty and license fees		12,500			37,500			37,500			62,500
		373,264			277,109			866,296			872,207
COST OF GOODS SOLD		213,485			186,954			481,704			545,761
GROSS MARGIN		159,779			90,155			384,592			326,446
OPERATING EXPENSES
Research and development, net of government grant proceeds of $34,716, $22,443, $92,050 and $55,850, respectively		10,573			42,608			84,799			158,443
Selling, general and administrative		276,318			279,895			793,062			1,025,043
TOTAL OPERATING EXPENSES		286,891			322,503			877,861			1,183,486
LOSS FROM OPERATIONS		(127,112	)		(232,348	)		(493,269	)		(857,040	)
OTHER INCOME (EXPENSE)
Interest expense		(223,266	)		(427,961	)		(811,756	)		(1,529,409	)
Change in fair value of derivative liabilities		(208,916	)		(495,587	)		376,282			(293,094	)
Gain on extinguishment of debt		-			2,156			-			55,705
TOTAL OTHER INCOME (EXPENSE), NET		(432,182	)		(921,392	)		(435,474	)		(1,766,798	)
NET LOSS	$	(559,294	)	$	(1,153,740	)	$	(928,743	)	$	(2,623,838	)
NET LOSS PER COMMON SHARE, BASIC AND DILUTED	$	(2.01	)	$	(6.12	)	$	(3.34	)	$	(21.82	)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING, BASIC AND DILUTED		278,128			188,541			278,128			120,240

See accompanying Notes to Unaudited Condensed Financial Statements

4

DAIS CORPORATION

CONDENSED STATEMENT OF STOCKHOLDERS’ DEFICIT

(Unaudited)

	Preferred Stock				Common Stock				Capital in Excess of Par			Accumulated			Treasury			Total Stockholders’
	Shares		Amount		Shares		Amount		Value			Deficit			Stock			Deficit
Balance at December 31, 2019		10	$	-		278,757	$	2,788	$	45,976,660		$	(54,186,330	)	$	(1,462,112	)	$	(9,668,994	)
Net loss for the three months ended March 31, 2020		-		-		-		-		-			(1,830,965	)		-			(1,830,965	)
Balance at March 31, 2020		10		-		278,757		2,788		45,976,660			(56,017,295	)		(1,462,112	)		(11,499,959	)
Net income for the three months ended June 30, 2020		-		-		-		-		-			1,461,516			-			1,461,516
Balance at June 30, 2020		10		-		278,757		2,788		45,976,660			(54,555,779	)		(1,462,112	)		(10,038,443	)
Net loss for the three months ended September 30, 2020		-		-		-		-		-			(559,294	)		-			(559,294	)
Balance at September 30, 2020		10	$	-		278,757	$	2,788	$	45,976,660		$	(55,115,073	)		(1,462,112	)	$	(10,597,737	)
Balance at December 31, 2018		10	$	-		74,910	$	749	$	44,797,156		$	(50,137,190	)	$	(1,462,112	)	$	(6,801,397	)
Shares issued upon conversion of debt		-		-		4,427		44		88,490			-			-			88,534
Adjustment for fractions		-		-		277		3		(3	)		-			-			-
Warrants issued for finance cost		-		-		-		-		25,320			-			-			25,320
Net loss for the three months ended March 31, 2019		-		-		-		-		-			(718,162	)		-			(718,162	)
Balance at March 31, 2019		10		-		79,614		796		44,910,963			(50,855,352	)		(1,462,112	)		(7,405,705	)
Shares issued upon conversion of debt		-		-		46,436		465		379,144			-			-			379,609
Shares issued for finance cost		-		-		550		5		9,995			-			-			10,000
Warrants issued for finance cost		-		-		-		-		141,844			-			-			141,844
Net loss for the three months ended June 30, 2019		-		-		-		-		-			(751,937	)		-			(751,937	)
Balance at June 30, 2019		10	$	-		126,600	$	1,266	$	45,441,946		$	(51,607,289	)	$	(1,462,112	)	$	(7,626,189	)
Shares issued upon conversion of debt		-		-		139,325		1,393		474,844			-			-			476,237
Warrants issued for finance cost		-		-		-		-		17,734			-			-			17,734
Net loss for the three months ended September 30, 2019		-		-		-		-		-			(1,153,739	)		-			(1,153,739	)
Balance at September 30, 2019		10	$	-		265,925	$	2,659	$	45,934,524		$	(52,761,028	)	$	(1,462,112	)	$	(8,285,957	)

See accompanying Notes to Unaudited Condensed Financial Statements

5

DAIS CORPORATION

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

	For the Nine Months Ended September 30,
	2020			2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(928,743	)	$	(2,623,838	)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of deferred debt issue costs		5,848			40,323
Depreciation and amortization		33,301			32,009
Change in fair value of derivative liability		(376,282	)		293,094
Non-cash interest expenses		368,312			681,530
Amortization of debt discount		101,899			537,835
Gain on extinguishment of debt		-			(55,705	)
Legal fees paid through proceeds of notes payable		-			150,000
(Increase) decrease in:
Accounts receivable		12,883			19,904
Inventory		11,138			(41,310	)
Other receivables		22,019			(35,216	)
Prepaid expenses/Other assets		(12,738	)		(6,826	)
Increase (decrease) in:
Accounts payable		36,423			283,221
Accrued expenses		412,291			344,781
Customer deposits		(41,152	)		(56,926	)
Deferred revenue		(37,500	)		(37,500	)
Net cash used in operating activities		(392,301	)		(474,624	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in patent costs		(18,633	)		(5,222	)
Net cash used in investing activities		(18,633	)		(5,222	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable - related parties		135,000			260,500
Proceeds from notes payable		348,750			237,500
Repayment of note		(54,000	)		(33,680	)
Net cash provided by financing activities		429,750			464,320
Net increase (decrease) in cash		18,816			(15,526	)
Cash, beginning of period		4,083			29,300
Cash, end of period	$	22,899		$	13,774
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest	$	1,537		$	9,111
NON-CASH FINANCING AND FINANCING ACTIVITIES
Issuance of common stock upon conversion of notes and accrued interest	$	-		$	944,380
Notes and accrued interest converted to common stock	$	-		$	324,930
Debt costs deducted from proceeds of note	$	-		$	20,000
Issuance of shares for finance cost	$	-		$	10,000
Issuance of warrants for debt modification	$	-		$	184,898
Initial derivative liability at issuance of notes	$	-		$	848,863
Initial debt discount at issuance of notes	$	-		$	381,494

See accompanying Notes to Unaudited Condensed Financial Statements

6

Dais Corporation

Notes to Condensed Financial Statements

September 30, 2020 and 2019

(Unaudited)

Note 1. Background Information

Dais Corporation (“Dais”, “us,” “we,”, the “Company”), a New York corporation, is a nano-structured polymer technology materials company having developed and now commercializing products using its family of nanomaterial called Aqualyte. The first commercial product is called ConsERV, a fixed plate energy recovery ventilator which we believe is useful in meeting building indoor fresh air requirements while saving energy and lowering emissions for most forms of heating, ventilation and air conditioning (HVAC) equipment. The second commercial product is NanoClear, a water clean-up process useful in the creation of potable water from most forms of contaminated water including industrial process wastewater (petrochemical, steel, etc.) sea, brackish, or wastewater. We continue to develop other nano-structured polymer technology applications in HVAC/Refrigeration, energy, food services and wastewater treatment industries. The Company was incorporated in April 1993 and its corporate headquarters is in Odessa, Florida.

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

Basis of Presentation

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

The unaudited financial statements and notes are presented as permitted by Form 10-Q. Accordingly, certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted although the Company generally believes that the disclosures are adequate to ensure that the information presented is not misleading. The accompanying financial statements and notes should be read in conjunction with the audited financial statements and notes of the Company for the fiscal year ended December 31, 2019 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on June 2, 2020. The results of operations for the three and nine month periods ended September 30, 2020 are not necessarily indicative of the results that may be expected for any future quarters or for the entire year ending December 31, 2020.

7

Note 2. Going Concern and Management’s Plans

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. For the nine months ended September 30, 2020, the Company generated a net loss of $928,743 and has incurred significant losses since inception. As of September 30, 2020, the Company has an accumulated deficit of $55,115,073, total stockholders’ deficit of $10,597,737, negative working capital of $10,460,191 and cash of $22,899. The Company used $392,301 and $474,624 of cash in operations during the nine months ended September 30, 2020 and 2019, respectively, which was funded primarily by proceeds from loans from related parties and equity financings. There is no assurance that any such financing will be available in the future. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The Company is currently pursuing the following sources of short and long-term working capital:

1.	The Company 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;
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.

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.

Note 3. Significant Accounting Policies

The significant accounting policies followed are:

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

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

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 $91,531 for future warranty expenses at September 30, 2020 and December 31, 2019, which is included in accrued expenses, other.

Royalty revenue is recognized as earned. The Company recognized royalty revenue of $0 and $25,000 for the three months ended September 30, 2020 and 2019, respectively, and $0 and $25,000 for the nine months ended September 30, 2020 and 2019, respectively. Revenue derived from the sale of licenses is deferred and recognized as license fee revenue on a straight-line basis over the life of the license, or until the license arrangement is terminated. The Company recognized license fee revenue of $12,500 and $12,500 for the three months ended September 30, 2020 and 2019, respectively and $37,500 and $37,500 for the nine months ended September 30, 2020 and 2019, respectively.

8

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

In December 2017, the Company and Zhejiang MENRED Environmental Tech Co, Ltd., Zhejiang Province, China (“Menred”), entered into a License and Supply Agreement (the “Agreement”), effective December 21, 2017. Pursuant to the Agreement, the Company licensed certain intellectual property and improvements to Menred, for use in the manufacture and sale of energy recovery ventilators (“ERV”) and certain other HVAC systems for installation in commercial, residential or industrial buildings in China. Menred also agreed to purchase its requirements of certain products from the Company for Menred’s use, pursuant to the terms and conditions of the Agreement. Menred will also pay royalties, as defined, to the Company on a quarterly basis, based on price and production volume as provided by Menred. No royalties are due within the first year of the Agreement. Also pursuant to the Agreement, the Company is required to purchase 50,000 square meters of Product from Menred for delivery as an annual minimum with a 10,000 square meter minimum order quantity per delivery. The Agreement has a ten-year term with mutually agreed upon five-year extensions.

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 at September 30, 2020 and December 31, 2019. The Company has never experienced any losses related to these balances. The company does not have any cash equivalents.

Concentrations – At December 31, 2019, one customer accounted for 77% of accounts receivable. For the nine months ended September 30, 2020, three customers accounted for 71% of total revenue. For the nine months ended September 30, 2019, six customers accounted for 80% of total revenue.

Fair Value of Financial Instruments - The Company’s financial instruments, including cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, deferred revenue, customer deposits and notes payable are carried at historical cost. At September 30, 2020 and December 31, 2019 the carrying amounts of these instruments approximated their fair values because of the short-term nature of these instruments.

Inventory - Inventory consists of raw materials, work-in-process and finished goods and is stated at the lower of cost, determined by first-in, first-out method, or market. Market is determined based on the net realizable value, with appropriate consideration given to obsolescence, excessive levels, deterioration, and other factors. At September 30, 2020 and December 31, 2019, the Company had $53,227 and $85,456 of raw materials, $5,385 and $4,101 of in-process inventory and $21,531 and $1,724 of finished goods inventory, respectively. A reserve is recorded for any inventory deemed excessive or obsolete. No reserve is recorded at September 30, 2020 and December 31, 2019, respectively.

Property and equipment - Property and equipment is recorded at cost. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets ranging from 3 to 7 years. Leasehold improvements are amortized over the shorter of their estimated useful lives of 5 years or the related lease term. Depreciation expense was $6,493 and $7,126 for the three months ended September 30, 2020 and 2019, respectively, and $20,191 and $19,847 for the nine months ended September 30, 2020 and 2019, respectively. Gains and losses upon disposition are reflected in the Statement of Operations in the period of disposition. Maintenance and repair expenditures are charged to expense as incurred. There were no dispositions of property and equipment in 2020 or 2019.

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 $4,459 and $(148) for the three months ended September 30, 2020 and 2019, respectively and $13,110 and $12,162 for the nine months ended September 30, 2020 and 2019, respectively. Based on current capitalized costs, total patent amortization expense is estimated to be approximately $17,000 per year for the next five years and thereafter.

Research and development expenses and funding proceeds - Expenditures for research and development are expensed as incurred. The Company incurred research and development costs of $45,289 and $65,051 for the three months ended September 30, 2020 and 2019, respectively and $176,849 and $214,293 for the nine months ended September 30, 2020 and 2019, respectively. The Company accounts for proceeds received from government funding for research as a reduction in research and development costs. The Company recorded proceeds against research and development expenses on the Statements of Operations of $34,716 and $22,443 for the three months ended September 30, 2020 and 2019, respectively and $92,050 and $55,850 for the nine months ended September 30, 2020 and 2019, respectively.

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.

9

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.

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 September 30, 2020:

	Fair Value at September 30,		Fair Value Measurement Using
	2020		Level 1		Level 2		Level 3
Derivative liability	$	2,341,501	$	-	$	-	$	2,341,501

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, 2020 and 2019:

	September 30,			September 30,
	2020			2019
Balance, beginning of period	$	2,349,471		$	1,280,188
Additions		368,312			848,863
Extinguished derivative liability		-			(746,529	)
Change in fair value of derivative liabilities		(376,282	)		293,094
Balance, end of period	$	2,341,501		$	1,675,616

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 14,624,579 and 1,635,431 were excluded from the computation of diluted earnings per share for and the three and nine months ended September 30, 2020 and 2019, respectively, because their effect is anti-dilutive.

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Recent Accounting Pronouncements - There are new accounting pronouncements issued by the Financial Accounting Standards Board (“FASB”) which are not yet effective as follows:

In December 2019, the FASB issued ASU 2019-12, “Simplifying the Accounting for Income Taxes.” This guidance, among other provisions, eliminates certain exceptions to existing guidance related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. This guidance also requires an entity to reflect the effect of an enacted change in tax laws or rates in its effective income tax rate in the first interim period that includes the enactment date of the new legislation, aligning the timing of recognition of the effects from enacted tax law changes on the effective income tax rate with the effects on deferred income tax assets and liabilities. Under existing guidance, an entity recognizes the effects of the enacted tax law change on the effective income tax rate in the period that includes the effective date of the tax law. ASU 2019-12 is effective for interim and annual periods beginning after December 15, 2020, with early adoption permitted. We are currently evaluating the impact of this guidance.

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

Note 4. Accrued Expenses, Other

Accrued expenses, other consists of the following:

	September 30,		December 31,
	2020		2019
Accrued expenses, other	$	171,782	$	166,158
Accrued interest		1,111,218		777,056
Accrued warranty costs		91,531		91,531
	$	1,374,531	$	1,034,745

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 $4,066 per month, including sales tax. The Company recognized rent expense related to this lease of $12,198 and $12,198 for the three months ended September 30, 2020 and 2019, respectively and $36,594 and $36,594 for the nine months ended September 30, 2020 and 2019, respectively The lease term will terminate upon 30 days’ written notice from landlord or 90 days written termination from us.

The Company has accrued compensation due to the Chief Executive Officer as of September 30, 2020 and December 31, 2019 of $1,954,970 and $1,882,464, respectively, included in accrued compensation and related benefits in the accompanying balance sheets.

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

During 2016 to the period ended September 30, 2020, the Holder extended the Note pursuant to various amendments. Pursuant to the amendments, the principal amount due was increased to $1,957,600 with an extended maturity date of August 20, 2020. As of the date of filing, the maturity date has been extended to November 5, 2020 and is being renegotiated with the Senior Secured Note Holder. The Senior Secured Note Holder has not placed the note into default pending the outcome of the renegotiation process.

The Company is using the proceeds of the Note and related amendments for working capital purposes. Interest expense on the Note was $59,211 and $46,424 for the three month periods ended September 30, 2020 and 2019, respectively and $172,737 and $130,780 for the nine month periods ended September 30, 2020 and 2019, respectively. Accrued interest on the Note was $617,063 and $444,326 at September 30, 2020 and December 31, 2019, respectively.

During May 2019 Dais Holdings Corp. (Dais Holdings”) was formed in Vancouver, B.C. and is wholly owned by our Chief Executive Officer. Dais Holdings’ purpose is to facilitate debt financing in Europe. The intent is for Dais Holdings to enter into the debt transactions. It will then immediately loan any proceeds received to the Company on the same or similar terms as the European debt. To date, Dais Holdings has not entered into any transactions and Dais Corporation has not received any funding from Dais Holdings. The Company has paid the professional and other fees for setting up the Dais Holdings structure, aggregating $150,000. Ultimately, Dais Corporation will benefit from the Dais Holdings capital raise activities, and therefore has borne the cost. The costs have been expensed as incurred.

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On October 12, 2019, the Company entered a promissory note with an entity controlled by our Chief Executive Officer in the amount of $10,000. The note bears interest at 10% per year and matures on October 12, 2021. Interest expense was $150 and $450 for the three and nine months ended September 30, 2020, respectively. Accrued interest at September 30, 2020 and December 31, 2019 was $600 and $150, respectively.

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

Note 6. Equity Transactions

Preferred Stock

At September 30, 2020 and December 31, 2019, the Company’s Board of Directors has authorized 10,000,000 shares of preferred stock with a par value of $0.01 to be issued in series with terms and conditions to be determined by the Board of Directors.

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

10,000 of the shares of preferred stock has been designated as Class B Preferred Stock. The Class B Stock includes the right to vote in an amount equal to 51% of the votes to approve certain corporate actions, including, without limitation, changing the name of the Company and increasing the number of authorized shares.

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

The Holder (as defined in the Class A Preferred Stock certificate of designations) of the Class A Preferred Stock may convert all or part of the outstanding and unpaid Stated Amount (as defined in the Class A Preferred Stock certificate of designations) into fully paid and non-assessable shares of the Company’s common stock at the Conversion Price (as defined in the Class A Preferred Stock certificate of designations). The number of shares receivable upon conversion equals the Stated Amount divided by the Conversion Price. The Conversion Price shall be equal to 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 $0.01 per share on the date that Timothy N. Tangredi ceases, for any reason, to serve as an officer, director, or consultant of the Company.

Common Stock

At September 30, 2020 and December 31, 2019, the Company’s Board of Directors has authorized 1,100,000,000 shares of common stock with a par value of $0.01 to be issued in series with terms and conditions to be determined by the Board of Directors.

2019 Transactions:

During the nine months ended September 30, 2019, the Company issued 190,188 shares of common stock upon the conversion of $284,240 principal amount of notes and related accrued interest and costs of $40,690.

During the nine months ended September 30, 2019, the Company issued 550 shares of common stock, valued at $10,000, as a finance cost.

Note 7. Notes Payable

Paycheck Protection Program Loan

On April 29, 2020, the Company received $144,750 in a loan borrowed from a bank pursuant to the Paycheck Protection Program under the CARES Act guaranteed by the Small Business Administration (“SBA”), which we expect to be forgiven in part or in full, subject to our compliance with the conditions of the Paycheck Protection Program. If not forgiven, the terms on the note provide for interest at 1% per year and the note mature in 24 months, with 18 monthly payments of $8,146 beginning after the initial 6 month deferral period for payments.

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Small Business Administration Loan

On June 12, 2020, the Company received $150,000 in a loan borrowed from the SBA. Installment payments, including principal and interest, of $731 monthly, will begin 12 months from the date of the note. The balance of principal and interest will mature 30 years from the date of the note. Interest will accrue at the rate of 3.75% per year.

Secured Promissory Note

On April 3, 2020, the Company received $54,000 pursuant to a secured promissory note. The note bears interest at 10% per year and matured on June 25, 2020. The note provides for a minimum payment of $7,500 for fees and expenses incurred by the lender. The note is secured by the Company’s receivables, inventory and interest in a certain purchase order issued to the Company by a customer.

The note was repaid on August 3, 2020.

Note 8. Convertible Notes Payable

The Company’s convertible promissory notes at September 30, 2020 and December 31, 2019 are as follows:

	September 30, 2020		December 31, 2019
Convertible notes payable, bearing interest at 8-10%	$	1,453,960	$	1,453,960
Unamortized debt discount		-		(101,899	)
Unamortized deferred debt issuance cost		-		(5,848	)
Total		1,453,960		1,346,213
Current portion	$	1,453,960	$	1,346,213

The Company entered various convertible notes during 2019, aggregating $412,500 at September 30, 2020. The notes all mature during 2020.

The Company entered various convertible notes during 2018, aggregating $1,041,460 at September 30, 2020. The notes all matured during 2019. Three notes that came due during the period were extended to August 15, 2019. Pursuant to the terms of the extensions, we have agreed to issue five hundred shares of common stock for each month that the notes are outstanding, commencing in April 2019. The shares have not been issued at September 30, 2020. We have accrued $687 and $8,100 as interest expense during the three months ended September 30, 2020 and 2019, respectively, for the shares due for the extensions. We have accrued $2,601 and $31,300 as interest expense during the nine months ended September 30, 2020 and 2019 for the shares due for the extensions. All notes are currently being renegotiated. Accrued interest related to the shares is $36,924 for an aggregate of 26,500 shares.

During the nine months ended September 30, 2020, the Company amortized $101,899 of debt discount and $5,848 of debt issue costs to interest expense.

During the three months ended September 30, 2019, the Company amortized $188,473 of debt discount and $12,477 of debt issue costs to interest expense. During the nine months ended September 30, 2019, the Company amortized $537,835 of debt discount and $40,323 of debt issue costs to interest expense. 

Debt conversions

During the nine months ended September 30, 2019, the Company issued 190,188 shares of common stock with a value of $944,380 upon the conversion of $284,240 principal amount of notes and related accrued interest and costs of $40,690. Unamortized debt discount and debt costs of $68,079 and $3,295, respectively, were charged against gain on extinguishment of debt at the time of redemption. In addition, $746,529 of derivative liability was extinguished. The company recorded gain on extinguishment of debt of $55,705.

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.

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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 $106,366 and $26,625 for the three months ended September 30, 2020 and 2019, respectively, and $368,312 and $76,351 for the nine months ended September 30, 2020 and 2019, respectively and were charged to interest expense.

During the three and nine months ended September 30, 2020, the Company recorded expense of $208,916 and income of $376,282, respectively, related to the change in the fair value of the derivatives. The fair value of the embedded derivatives was $2,341,501 at September 30, 2020, determined using the Black Scholes Model with the following assumptions: (1) risk free interest rate of 0.11%; (2) dividend yield of 0%; (3) volatility factor of the expected market price of the Company’s common stock of 621%; and (4) an expected life of 6 months.

During the three and nine months ended September 30, 2019, the Company recorded expense of $495,587 and $293,094 related to the change in the fair value of the derivative.

During the nine months ended September 30, 2019, the Company issued 190,188 shares of common stock with a value of $944,380 upon the conversion of $284,240 principal amount of notes and related accrued interest and costs of $40,690. As a result of the conversions, $746,529 of derivative liability was extinguished. The company recorded gain on extinguishment of debt of $55,705.

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 the third quarter of 2015, the Company commenced an action for the cancellation of the 37,500,000 shares issued to Soex (the “Shares”) in connection with a Securities Purchase Agreement, dated January 21, 2014 (“Soex SPA”), and 3,750,000 shares issued to Zan Investment Advisory Limited (“Zan”), which is affiliated with Soex through Aifan Liu, who was appointed as a Company board observer by SOEX and her husband, Xinghong Hua. Sharon Han, General Manager and Chairwoman of Soex, served on our board pursuant to the provisions of the Soex SPA. Ms. Han resigned from the Board of Directors effective February 1, 2016.

On April 24, 2014, we entered into a Distribution Agreement (the “Distribution Agreement”), with Soex to distribute certain of the Company’s products in China. As reported in the Company’s Form 10-K for the year ended December 31, 2014 and filed with the Securities and Exchange Commission on April 1, 2015, the Company was entitled to receive, pursuant to the Distribution Agreement, royalties and a $500,000 payment, of which $50,000 has been received, that was due on or before October 24, 2014. Further, the Company reported it had not received any royalties from Soex. Soex is in breach of the Distribution Agreement.

As first reported in the Company’s Form 10-Q for the quarter ended June 30, 2015, the Company began pursuing legal action against Soex for breach of the Soex SPA and Distribution Agreement. On July 8, 2015, the Company filed a lawsuit in state courts in Florida against Soex and Zan.

Pursuant to the Distribution Agreement, Soex is in material breach of the following:

(1)	Section 1(a) of the Distribution Agreement for Soex’s failure to make a $225,000 payment to the Company for the appointment of Soex as the exclusive distributor of the Products in the Field and Territory (the “Distribution Payment Default”) in accordance with the terms set forth in the Distribution Agreement. Such payment was due on October 20, 2014 (the “Payment Date”).
(2)	Section 8(b) of the Distribution Agreement for Soex’s failure to make a $225,000 payment to the Company for the grant of the license and right to manufacture, sell, lease and distribute Products (excluding manufacture of MTM), and to use the Intellectual Property in connection therewith (the “License Payment Default” and, together with the Distribution Payment Default, the “Payment Default”) in accordance with the terms set forth in the Distribution Agreement. Such payment was due on the Payment Date.
(3)	Section 15(b) of the Distribution Agreement for Soex’s failure to issue to the Company 25% of the equity (the “Equity Default”) of SOEX (Beijing) Environmental Protection Technology Company Limited (the “China Subsidiary”).

As a result of the above, we terminated the Soex Distribution Agreement. As provided in Section 14€ of the Soex Distribution Agreement, the Company has the right to enforce any obligation due to us by Soex. As a result, Soex still must (a) pay the remaining $450,000 due under the Distribution Agreement and the amount of Royalties due, plus interest at 1.5% per month (18% per year) with interest accruing from the date that payment was due and (b) issue to us 25% of the equity of SOEX (Beijing) Environmental Protection Technology Company Limited. As provided in Section 14(b), neither us nor Soex shall be liable for compensation, reimbursement or damages due to loss of profits on sales or anticipated sales or losses due to expenditures, investments or commitments made or in connection with the establishment, development or maintenance of the business.

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The Soex Litigation was moved to the U.S. District Court for the Middle District of Florida where Soex has instituted a counterclaim (Civil Docket Case #: 8:15-CV-02362-MSS-EAJ). On September 19, 2018, a pre-trial conference was held in Tampa finding a trial date set for October 22, 2018. The trial for the original case was held between October 22 and 24, 2018. The jury at the conclusion of the trial did not award monetary damages to either party for claims or counterclaims.

On October 24, 2018, the Company initiated a third lawsuit against an affiliate of Soex, Zhongshan Trans-Tech New Material Technology Co. Ltd. Zhongshan, China, (“Transtech”), and the Chairperson of the affiliate and Soex, based on new information learned by the Company. The Company will seek maximum relief and damages for this on-going and growing illegal misuse the Company’s Intellectual Property. The Company feels this third action will lead in a judgment in favor of the Company.

Note 11. Subsequent Events

No material events have occurred after September 30, 2020 that requires recognition or disclosure in the financial statements except as follows:

On October 8, 2020, the Company entered into a Consent and Waiver and Twenty Sixth Amendment to the Senior Secured Promissory Note and Loan and Security Agreement with a related party (described in Note 5). The Maturity Date of the Note was extended to the earlier of (i) the date upon which the Company secures funds, regardless of source, equal to or exceeding, in the aggregate, $1,957,600 or (ii) October 15, 2020. The Secured Party (related party) gives consent to the issuance of the October 2020 Note and October 2020 Security Agreement described below.

On October 8, 2020, the Company entered into a Loan and Security agreement (“October 2020 Security Agreement”) pursuant to which the Company issued a Promissory Note (“October 2020 Note”) for $18,500 for the purpose of purchase order funding. The note bears interest at 10% per annum compounded daily. The principal amount plus all interest is due on the earlier of (i) the date upon which the Company receives payment for the purchase order or (ii) December 20, 2020 (the “Maturity Date”)

On October 28, 2020, the Company entered into a Twenty Seventh Amendment of the Loan and Security Agreement with a related party (described in Note 5), whereby the Maturity Date of the Note was extended to the earlier of (i) the date upon which the Company secures funds, regardless of source, equal to or exceeding, in the aggregate, $2,025,600 or (ii) November 5, 2020 and the principal amount of the note was increased by $68,000.

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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 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 us and members of its management team as well as the assumptions on which such statements are based. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risk and uncertainties, and that actual results may differ materially from those contemplated by such forward-looking statements.

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

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

Overview

Dais Corporation (“Dais”, “us,” “we,”, the “Company”) is a nanomaterial technology company developing and commercializing products using the nanomaterial called Aqualyte. The first commercial product is the Aqualyte nanomaterial itself. It is useful in managing moisture and key gases in a variety of cross-industry products. The second commercial product is called ConsERV, a fixed plate energy recovery ventilator which is useful in meeting building indoor fresh air requirements while saving energy and lowering emissions for most forms of heating, ventilation and air conditioning (HVAC) equipment. The third commercial product is NanoClear, a water clean-up process useful in the creation of potable water from most forms of contaminated water including industrial process wastewater (petrochemical, steel, etc.) sea, brackish, or wastewater. We continue to develop other Aqualyte uses in cross-industry applications, HVAC/Refrigeration, energy, and wastewater treatment. 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 New York corporation on April 8, 1993 as Dais Corporation. The Company was formed to develop new, cost-effective polymer materials for various applications, including providing a lower cost membrane material for Polymer Electrolyte Membrane fuel cells. We believe our research on materials science has yielded technological advances in the field of selective ion transport polymer materials.

In December 1999, the Company purchased the assets of Analytic Power Corporation, a corporation founded in 1984 to provide design, analysis, and systems integration services in the field of fuel cells, fuel processors, and integrated fuel cell power systems. Subsequently, on December 13, 1999, the Company changed its name to Dais Analytic Corporation.

In March 2002, the Company sold substantially all of its fuel cell assets to Chevron, a large U.S. oil company for a combination of cash and the assumption by such company of certain of the Company’s obligations. Subsequently, the Company focused on expanding its nano-structured polymer platform, having already identified the Energy Recovery Ventilator (“ERV”) application as our first commercial product.

In November of 2018 the board of directors unanimously voted to change the name of the Company from Dais Analytic Corporation to Dais Corporation (the “Name Change”). The Name Change took effect with FINRA on February 27, 2019.

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

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Our Technology

We use proprietary nanotechnology to reformulate thermoplastic materials called polymers. Nanotechnology involves studying and working with matter on an ultra-small scale. Polymers are chemical, plastic-like compounds used in diverse products such as Dacron, Teflon, and polyurethane. A thermoplastic is a material that is plastic or deformable, melts to a liquid when heated and to a brittle, glassy state when cooled sufficiently. These reformulated polymers have properties that allow them to be used in unique ways. We transform polymers from a hard, water impermeable substance into a material which water and similar liquids can, under certain conditions, permeate at a molecular level as opposed to flowing in bulk as liquid water through a pore. Water and similar molecules permeate readily through the thermoplastic material while oxygen and most chemicals show severely limited permeability. It is believed this selectivity depends on the size and chemical characteristics of the molecules. We call this specialized material Aqualyte.

Aqualyte^TM

Aqualyte membrane is the foundation of the Dais product line. Commercially available polymer resins from any number of large chemical companies, industrial grade solvents, and industrial mixing and tape casting equipment are used to create the Company’s advanced nanomaterial called Aqualyte. The proprietary process changes the molecular properties of the starting polymer resin embedding a number of features including selectively allowing largely moisture molecules to transfer through the finished material in membrane form.

The Company invented and patented Aqualyte as a disruptive platform plastic material technology with carefully tailored properties for use in air, energy, and water applications. This modified block copolymer membrane with a nanoscale structure serves as the foundation of the Dais product line. It is a nonporous nanomaterial that selectively and efficiently transports moisture through a solid membrane and blocks passage of most gases and volatile compounds. The membrane is robust and durable, with no pores to clog, and not allowing fungal growth or most pathogens to grow or live on its surface. We began selling Aqualyte in 2018 to strategic customers and continue through 2020 and beyond. Development work on a variant of Aqualyte is being conducted targeting surface treatments to potentially create a protective layer designed to inactivate human coronaviruses. This is an on-going activity.

The Company continues to develop next generation versions of our Aqualyte material by adding new features and improving the manufacturability of the nanomaterial. These and other improvements allow Aqualyte to serve a wider variety of uses in the ConsERV and NanoClear target markets. Aqualyte is the underlying technology for our family of products, including ConsERV fixed-plate Energy Recovery Ventilators (ERVs), and NanoClear high-performance contaminated water cleaning devices. Aqualyte represents the basis for a broad class of materials with unique features precisely managed by engineered products. Features of the Aqualyte technology include the ability to create hermetic composite membranes possessing ion conduction, high moisture transfer and high molecular selectivity. Our engineering process manages these features to offer differentiated products like ConsERV and NanoClear that are targeting worldwide needs in the clean air, energy efficiency and clean water markets.

In July of 2017, Dais first entered into a multi-year, exclusive license agreement with the Haier Group to provide its Aqualyte nanomaterials for use in select refrigeration products. This first agreement continues to generate quarterly revenue for Dais. We project these revenues should increase as Haier continues its full rollout into 2021. Dais projects this agreement for targeted refrigeration products should ultimately generate over $5 million in annual revenues once world-wide rollout occurs. Haier’s use of Dais’s Aqualyte material follows a growing world-wide trend reported by Market Insight Reports (July 18, 2018) that states global adoption of mature nanotechnology materials continues to grow and is on track to reach $90.5 billion by 2021 from $39.2 billion in 2016 at a compound annual growth rate (CAGR) of 18.2%, from 2016 to 2021. Dais was listed as one of the companies by Market Insight Reports along with BASF, Bayer AG, Dow Chemical, and others.

In addition, during 2019 and 2020, Dais sold Aqualyte to multiple customers for use in ventilation and wastewater cleaning uses. These sales are expected to continue through 2020 and beyond.

ConsERV^TM

We continue widening sales channels for our ConsERV product, an HVAC energy conservation product which should save an average of 30% on HVAC ventilation air operating costs while providing increased amounts of ventilation air in conditioned spaces thought to yield health (COVID19, allergies and asthma ‘trigger’ contaminants) and productivity improvements (cognitive abilities). The economic savings typically allow the remainder of the system to be smaller and less expensive, reducing carbon dioxide (CO₂) emissions from electrical power generation. ConsERV generally attaches onto existing HVAC systems, useful in both commercial and residential structures, to provide improved ventilation air within the structure. 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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ConsERV sales were negatively impacted at the beginning of 2017 from the December 2016 termination of a failed licensing agreement with a North American company. In 2018, the Company began selling its ConsERV cores and systems across North America. The Company is continuing this effort to expand its North American sales channels to grow ConsERV sales with initiatives aimed at targeted professionals and companies specializing in the sale of HVAC components and systems. In addition, the company began selling nanomaterial to companies in the European Union and continues discussions with several companies to expand the market for Aqualyte sales. In 2019 the company began discussions with interested parties outside of China in Southeast Asia to specify or distribute ConsERV cores and systems. These efforts slowed considerably in 2020 due to the pandemic. As the pandemic comes under control it is our continued belief that efforts in these areas will see revenues grow throughout 2021, and beyond.

In December 2017, we signed a 7-year exclusive agreement with the Zhejiang MENRED Environmental Tech Co., Ltd, Zhejiang Province, China, to provide our Aqualyte moisture transfer nanomaterial in a new line of Menred energy recovery ventilators (ERV) to be sold in the growing Chinese HVAC market, and for possible export use by Dais to meet its growing needs. This arrangement has been slowed by China governmental issues (we believe these are now resolved), increased in-country competition which we believe is partially tied to the unlicensed use of Dais intellectual property by others, and the pandemic general 2020 slow-down in the market. As the market is recovering and Menred’s production is ready with the product being now being actively promoted we expect to yield increasing revenues during 2021.

When compared to similar competitive products, we believe, based on test results conducted by the Air-conditioning, Heating and Refrigeration Institute (AHRI), a leading industry association, ConsERV maintains an industry-leading position in the management of latent heat. The Company continues to make and sell ConsERV cores, and customer ERV systems. The Company began a limited introduction of an updated line of ConsERV products in January 2020 (marketed as the N Series: newer cores and packaged systems). The experiences of the limited N Series introduction are being incorporated into this newer packaged ERV product line projected to be fully certified and broadly introduced into the market no later than 2Q 2021. We believe based on its performance and price-point, and end-user feedback, the product will be well received in the market. Sales of existing cores and customer systems are expected to continue generating revenue during 2020 and beyond as we increase the number of sales channels for ConsERV. The newer N Series will begin contributing to increasing revenues in mid-2021 and beyond.

NanoClear^TM

We have commercially introduced the first NanoClear membrane evaporators for pilot testing, which remove quantities of metals, acids, salt and other impurities from various contaminated water sources, producing potable water using an environmentally friendly, low maintenance design that is competitive with industry leaders in terms of electrical consumption. The evolving NanoClear product line desalinates seawater and purifies contaminated water produced by manufacturing and utility processes. These sorts of applications are the Company’s primary focus for this product line. This includes higher salt concentrations and low pH waste streams.

Development efforts on a U.S. Army Corps of Engineers, $1,000,000, Phase II Small Business Innovation Research (SBIR) award continued throughout the first, second, and third quarter of 2020 to develop NanoClear water cleaning technology for military use. The NanoClear funding project titled "Non-Fouling Water Reuse Technologies" uses our patented Aqualyte membrane to produce potable water from grey-water sources. The potential product improvements from this award will widen NanoClear’s applications in separating clean water from contaminated waste streams. Work on this project continues.

PolyCool^TM

PolyCool is a product in development and is believed to offer strategic advantages over existing cooling tower systems. In effect, the process water is isolated in a largely closed system (similar to dry cooling technology) and initial testing shows it reduces the likelihood of dangerous germs and viruses such as Legionella becoming airborne. In-house testing has shown the ability to generate cooling effects comparable to today’s existing cooling towers while largely isolating the process water from the air stream.

PolyCool systems are expected to use up to 32% less energy than a conventional cooling tower while reducing or eliminating the need for expensive chemical biocide application programs to prevent the of risk of spreading dangerous diseases. We believe these savings can reduce the operating expenses of a cooling tower by up 74% versus conventional technology. The demonstrated ability of Aqualyte to resist fouling and operate with dissolved solids levels up to 25% salinity allows PolyCool technology to operate with seawater, brine, or other forms of wastewater instead of consuming potable water as with conventional evaporative cooling technologies. This advantage expands the applicability of evaporative cooling into geographic regions that are suffering from water scarcity or stress. In addition, the dramatic reduction in maintenance and safety issues allows use of PolyCool in smaller installations with correspondingly smaller maintenance budgets and less risk tolerance, which conventionally use less efficient dry cooling instead of evaporative cooling.

In the quarter ending September 30, 2018, the Company announced that we entered into a second definitive two-part, license agreement with the Haier Group of Qingdao, China for an Aqualyte based new product component targeted at a specific, existing Haier HVAC cooling system. Prototype testing has been slowed by the pandemic effected business environment with the project completion date now pushed to 2Q 2021. Once complete and having satisfactory results, it is projected the integrated new product will then move into field testing prior to commercial release into Haier’s sales channels throughout Greater China. When commercial release occurs, this action may have a sizeable, recurring revenue impact to Dais projected to be as much as $73 million annually.

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Product Summary

Dais’s advanced material has many demonstrated uses in the described products. Management is placing the 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 being done with select, successful companies located in the European Union and South East Asia (including China) which take 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 for us, guided by Dais-qualified manufacturing practices to meet the growing demand for product in North America, in the European Union and South East Asia (including China). We project this expansion of the supply chain will result in lower costs and quicker order fulfillment, generating revenues faster.

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

Results of Operations

Three Months Ended September 30, 2020 Compared to September 30, 2019

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

	For the Three Months Ended
	September 30,
	2020			2019
REVENUE
Sales	$	360,764		$	239,609
Royalty and license fees		12,500			37,500
		373,264			277,109
COST OF GOODS SOLD		213,485			186,954
GROSS MARGIN		159,779			90,155
OPERATING EXPENSES
Research and development, net of government grant proceeds of $34,716 and $22,443, respectively		10,573			42,608
Selling, general and administrative		276,318			279,895
TOTAL OPERATING EXPENSES		286,891			322,503
LOSS FROM OPERATIONS		(127,112	)		(232,348	)
OTHER INCOME (EXPENSE)
Interest expense		(223,266	)		(427,961	)
Change in fair value of derivative liabilities		(208,916	)		(495,587	)
Gain on extinguishment of debt		-			2,156
TOTAL OTHER INCOME (EXPENSE), NET		(432,182	)		(921,392	)
NET LOSS	$	(559,294	)	$	(1,153,740	)
NET LOSS PER COMMON SHARE, BASIC AND DILUTED	$	(2.01	)	$	(6.12	)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING, BASIC AND DILUTED		278,128			188,541

19

Revenue

We generate our revenues primarily from the sale of our ConsERV cores and systems, Aqualyte membrane, and NanoClear evaporators. Product sales were $360,764 and $239,609 for the three months ended September 30, 2020 and 2019, respectively, an increase of $121,155 or 51%. The increase in product sales resulted primarily from an increase in Aqualyte sales. We are focusing on creating sustainable revenues with Aqualyte and ConsERV core and system sales with the expectation that this will allow for continued growth in 2020 and beyond.

Revenues from royalty and license fees were $12,500 and $37,500 for the three months ended September 30, 2020 and 2019, respectively, a decrease of $25,000 or 67%. The decrease is due to there being no royalties due pursuant to the Menred License and Supply Agreement in this period.

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, NanoClear evaporators, and Aqualyte nanomaterial. Cost of goods sold were $213,485 and $186,954 for the three months ended September 30, 2020 and 2019 respectively, an increase of $26,531 or 14%. This reflects our increased sales volume offset by our reduced manufacturing costs.

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 $159,779 and $90,155 representing 43% and 33% for the three months ended September 30, 2020 and 2019. The gross margin increase was due to focused efforts to reduce manufacturing costs and normal variances in manufacturing costs between our product lines.

Research and development costs

Expenditures for research and development are expensed as incurred. We incurred research and development costs of $45,289 and $65,051 for the three months ended September 30, 2020 and 2019, a decrease of $19,762 or 30%. We account for proceeds received from government funding for research and development as a reduction in research and development costs. We recorded proceeds against research and development expenses on the Statements of Operations of $34,716 and $22,443 for the three months ended September 30, 2020 and 2019, an increase of $12,273 or 55%. Variances in grant expenditures and reimbursements are due to an emphasis on completing an existing Small Business Innovation Research (SBIR) Phase II grant.

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 $276,318 and $279,895 for the three months ended September 30, 2020 and 2019, a decrease of $3,577 or 1%

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 as a result 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.

20

Other Income (Expense)

Other expenses were $432,182 and $921,392 for the three months ended September 30, 2020 and 2019, respectively, a decrease of $489,210 or 53%. The decrease in net other expenses is primarily due to the change in fair value of derivative liabilities (primarily as a result of changes in our stock price), and a decrease in debt discount and finance cost.    

Net Income (Loss)

Net loss for the three months ended September 30, 2020 was $559,294 compared to a net loss of $1,153,740 for the three months ended September 30, 2019. The decreased loss in the three months ended September 30, 2020 was primarily due to the decrease in net other loss and increase in gross margin.

Nine months ended September 30, 2020 Compared to September 30, 2019

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

	For the Nine Months Ended
	September 30,
	2020			2019
REVENUE
Sales	$	828,796		$	809,707
Royalty and license fees		37,500			62,500
		866,296			872,207
COST OF GOODS SOLD		481,704			545,761
GROSS MARGIN		384,592			326,446
OPERATING EXPENSES
Research and development, net of government grant proceeds of $92,050 and $55,850, respectively		84,799			158,443
Selling, general and administrative		793,062			1,025,043
TOTAL OPERATING EXPENSES		877,861			1,183,486
LOSS FROM OPERATIONS		(493,269	)		(857,040	)
OTHER INCOME (EXPENSE)
Interest expense		(811,756	)		(1,529,409	)
Change in fair value of derivative liabilities		376,282			(293,094	)
Gain on extinguishment of debt		-			55,705
TOTAL OTHER INCOME (EXPENSE), NET		(435,474	)		(1,766,798	)
NET LOSS	$	(928,743	)	$	(2,623,838	)
NET LOSS PER COMMON SHARE, BASIC AND DILUTED	$	(3.34	)	$	(21.82	)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING, BASIC AND DILUTED		278,128			120,240

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Revenue

We generate our revenues primarily from the sale of our ConsERV cores and systems, Aqualyte membrane, and NanoClear evaporators. Product sales were $828,796 and $809,707 for the nine months ended September 30, 2020 and 2019, respectively, an increase of $19,089 or 2%. The increase in product sales resulted primarily from an increase in Aqualyte sales offset by a decrease in ConsERV and NanoClear sales. We are focusing on creating sustainable revenues with Aqualyte and ConsERV core and system sales with the expectation that this will allow for continued growth in 2020 and beyond.

Revenues from royalty and license fees were $37,500 and $62,500 for the nine months ended September 30, 2020 and 2019, respectively, a decrease of $25,000 or 40%. The decrease is due to there being no royalties due pursuant to the Menred License and Supply Agreement in this period caused in part by now corrected issues with the Chinese government, increased competition in-country from unlicensed use of Dais technology, and the pandemic.

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, NanoClear evaporators, and Aqualyte nanomaterial. Cost of goods sold were $481,704 and $545,761 for the nine months ended September 30, 2020 and 2019 respectively, a decrease of $64,057 or 12%. This is due to focused efforts to reduce manufacturing costs.

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 $384,592 and $326,446 representing 44% and 37% for the nine months ended September 30, 2020 and 2019. The gross margin increase was due to focused efforts to reduce manufacturing costs and normal variances in manufacturing costs between our product lines.

Research and development costs

Expenditures for research and development are expensed as incurred. We incurred research and development costs of $176,849 and $214,293 for the nine months ended September 30, 2020 and 2019, a decrease of $37,444 or 17%. We account for proceeds received from government funding for research and development as a reduction in research and development costs. We recorded proceeds against research and development expenses on the Statements of Operations of $92,050 and $55,850 for the nine months ended September 30, 2020 and 2019, an increase of $36,200 or 65%. Variances in grant expenditures and reimbursements are due to an emphasis on completing an existing Small Business Innovation Research (SBIR) Phase II grant.

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 $793,062 and $1,025,043 for the nine months ended September 30, 2020 and 2019, a decrease of $231,981 or 23%.

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 as a result 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.

22

Other Expense

Other expenses were $435,474 and $1,766,798 for the nine months ended September 30, 2020 and 2019, respectively, a decrease of $1,331,324 or 75%. The decrease in net other expense is primarily due to the change in fair value of derivative liabilities (primarily as a result of changes in our stock price), and a decrease in debt discount and finance cost.    

Net Loss

Net loss for the nine months ended September 30, 2020 was $928,743 compared to a net loss of $2,623,838 for the nine months ended September 30, 2019. The decreased loss in the nine months ended September 30, 2020 was primarily due to the decrease in operating expenses and net other expense.

Liquidity and Capital Resources

The accompanying financial statements have been prepared assuming that we will continue as a going concern. For the nine months ended September 30, 2020, we generated a net loss of $928,743 and have incurred significant losses since inception. As of September 30, 2020, we had an accumulated deficit of $55,115,073, a stockholders’ deficit of $10,597,737 and cash and cash equivalents of $22,899. We used $392,301 and $474,624 of cash in operations during the nine months ended September 30, 2020 and 2019, respectively, which was funded primarily by proceeds from note payables. These factors raise substantial doubt about our ability to continue as a going concern within one year after the date that the financial statements are issued. We are currently pursuing the following sources of short and long-term working capital:

1.	The Company 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;
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.

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 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 unusually heavy pressures on management to monetize the entire technology base or 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 a 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 2020 is limited. New capital is critical to support the company’s operations needed to manufacture product to meet sales as well as create new sales of ConsERV and Aqualyte product. The Company is now more challenged than in the last reporting period. 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 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. This Senior Secured Note Holder is working closely with the Company’s management and Board exploring its options in this matter. The short-term debtholders, and key accounts payable companies are doing the same, i.e. continue working with the Company.

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, will have material adverse consequences on our financial condition, results of operations and cash flows as could any unfavorable terms. 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.

23

Statement of Cash Flows

Cash as of September 30, 2020 was $22,899 compared to $4,083 as of December 31, 2019. Cash is primarily used to fund our working capital requirements.

Net cash used in operating activities was $392,301 for the nine months ended September 30, 2020 compared to $474,624 for the same period in 2019. The decrease in net cash used was primarily due to a decrease in net loss (after adjusting for non-cash items), partially offset by a decrease in net working capital accounts. For the nine months ended September 30, 2020, net loss (after adjusting for non-cash items) was $795,665. Accounts receivable, inventory and other assets together decreased by $33,302. Accounts payable, accrued liabilities, customer deposits and deferred revenue increased in total by $370,062. For the nine months ended September 30, 2019, net loss (after adjusting for non-cash items) was $944,752. Accounts receivable, inventory and other assets together increased by $63,448. Accounts payable, accrued liabilities, customer deposits and deferred revenue increased in total by $533,576.

Net cash used in investing activities was $18,633 for the nine months ended September 30, 2020 compared to $5,222 for the same period in 2019, driven by an increase in patent costs.

Net cash provided by financing activities was $429,750 for the nine months ended September 30, 2020 compared to $464,320 for the same period in 2019. The decrease resulted from an increase in note repayments.

Financing and Capital Transactions

Paycheck Protection Program Loan

On April 29, 2020, the Company received $144,750 in a loan borrowed from a bank pursuant to the Paycheck Protection Program under the CARES Act guaranteed by the Small Business Administration (“SBA”), which we expect to be forgiven in part or in full, subject to our compliance with the conditions of the Paycheck Protection Program. If not forgiven, the terms on the note provide for interest at 1% per year and the note mature in 24 months, with 18 monthly payments of $8,146 beginning after the initial 6 month deferral period for payments.

Small Business Administration Loan

On June 12, 2020, the Company received $150,000 in a loan borrowed from the SBA. Installment payments, including principal and interest, of $731 monthly, will begin 12 months from the date of the note. The balance of principal and interest will mature 30 years from the date of the note. Interest will accrue at the rate of 3.75% per year.

Secured Promissory Note

On April 3, 2020, the Company received $54,000 pursuant to a secured promissory note. The note bears interest at 10% per year and matured on June 25, 2020. The note provides for a minimum payment of $7,500 for fees and expenses incurred by the lender. The note is secured by the Company’s receivables, inventory and interest in a certain purchase order issued to the Company by a customer. The principal amount, interest, and fees were subsequently repaid on August 3, 2020.

Related Party Note

On June 24, 2016, the Company entered into a Loan and Security Agreement (“Security Agreement”) with Patricia Tangredi (the “Holder”) pursuant to which the Company issued a Senior Secured Promissory Note for $150,000 (the “Note”). The interest rate is 12% per annum compounded daily with a minimum interest payment of $2,000. The Note grants the Holder a secured interest in the assets of the Company. Ms. Tangredi is the wife of Timothy N. Tangredi, the Company’s CEO and stockholder, and therefore is a related party of the Company.

During 2016 through the period ended September 30, 2020, the Holder extended the Note pursuant to various amendments. Pursuant to the amendments, the principal amount due was increased to $1,957,600 with an extended maturity date of August 20, 2020. The Company received $135,000 of additional proceeds during the nine months ended September 30, 2020. As of the date of filing, the maturity date has been extended to November 5, 2020 and is being renegotiated with the Senior Secured Note Holder. The Senior Secured Note Holder has not placed the note into default pending the outcome of the renegotiation process.

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.

24

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not required under Regulation S-K for “smaller reporting companies”.

ITEM 4. CONTROLS AND PROCEDURES

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our principal executive officer and outside legal and accounting resources of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the Exchange Act)). Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures are not effective in alerting them in a timely manner to material information required to be disclosed in our periodic reports filed with the SEC as a result of limited resources, and a lack of segregation of duties.

During our most recent quarter, there has not been any change in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

25

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, we may be engaged in various lawsuits and legal proceedings in the ordinary course of our business. We are currently not aware of any pending legal proceedings the ultimate outcome of which, in our judgment based on information currently available, would have a material adverse effect on our business, financial condition or results of operations. The information required by this Item is incorporated herein by reference to Notes to Financial Statements––Note 10. Litigation in Part I, Item 1, of this Quarterly Report on Form 10-Q.

ITEM 1A. RISK FACTORS

Not required under Regulation S-K for “smaller reporting companies”.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

There were no unregistered sales of the Company’s equity securities during the quarter ended September 30, 2020 that were not previously reported in a Current Report on Form 8-K.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

Not applicable.

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ITEM 6. EXHIBITS

Exhibit		Incorporated by Reference			Filed or Furnished
Number	Exhibit Description	Form	Exhibit	Filing Date	Herewith
31.1	Certification by the Principal Executive Officer of Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a))				☒
31.2	Certification by the Principal Financial Officer of Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a))				☒
32.1	Certification by the Principal Executive Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*				☒
32.2	Certification by the Principal Financial Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*				☒
101.INS	XBRL Instance Document				☒
101.SCH	XBRL Taxonomy Extension Schema Document				☒
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document				☒
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document				☒
101.LAB	XBRL Taxonomy Extension Label Linkbase Document				☒
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document				☒

___________ 

* In accordance with SEC Release 33-8238, Exhibits 32.1 and 32.2 are being furnished and not filed.

27

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	DAIS CORPORATION
Date: November 23, 2020	By:	/s/ Timothy N. Tangredi
		Timothy N. Tangredi
		President and Chief Executive Officer
		(Principal Executive Officer)
		(Principal Financial and Accounting Officer)

28

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Timothy N. Tangredi, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Dais Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonable likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting.

Date: November 23, 2020	By:	/s/ Timothy N. Tangredi
		Timothy N. Tangredi
		Principal Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, Timothy N. Tangredi, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Dais Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonable likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting.

Date: November 23, 2020	By:	/s/ Timothy N. Tangredi
		Timothy N. Tangredi
		Principal Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATIONS OF CHIEF EXECUTIVE OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Timothy N. Tangredi, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Dais Corporation on Form 10-Q for the quarter ended September 30, 2020 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in this Quarterly Report on Form 10-Q fairly presents in all material respects the financial condition and results of operations of Dais Corporation.

Date: November 23, 2020	By:	/s/ Timothy N. Tangredi
		Timothy N. Tangredi
		Principal Executive Officer

EX-32.2

EXHIBIT 32.2

CERTIFICATIONS OF CHIEF FINANCIAL OFFICER

PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Timothy N. Tangredi, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Dais Corporation on Form 10-Q for the quarter ended September 30, 2020  fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in this Quarterly Report on Form 10-Q fairly presents in all material respects the financial condition and results of operations of Dais Corporation.

Date: November 23, 2020	By:	/s/ Timothy N. Tangredi
		Timothy N. Tangredi
		Principal Financial Officer

XML

Cover - shares	9 Months Ended
	Sep. 30, 2020	Nov. 23, 2020
Cover [Abstract]
Entity Registrant Name	DAIS Corp
Entity Central Index Key	0001125699
Document Type	10-Q
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Small Business	true
Entity Shell Company	false
Entity Emerging Growth Company	false
Entity Current Reporting Status	Yes
Document Period End Date	Sep. 30, 2020
Entity Filer Category	Non-accelerated Filer
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2020
Entity Common Stock Shares Outstanding		278,128
Document Quarterly Report	true
Document Transition Report	false
Entity Interactive Data Current	Yes

XML

CONDENSED BALANCE SHEETS - USD ($)	Sep. 30, 2020	Dec. 31, 2019
CURRENT ASSETS:
Cash	$ 22,899	$ 4,083
Accounts receivable, net	0	12,883
Other receivables	12,125	34,144
Inventory	80,143	91,281
Prepaid expenses	45,100	32,362
Total Current Assets	160,267	174,753
Property and equipment, net	10,765	30,957
OTHER ASSETS:
Deposits	4,780	4,780
Patents, net	151,659	146,135
Total Other Assets	156,439	150,915
TOTAL ASSETS	327,471	356,625
CURRENT LIABILITIES:
Accounts payable, including related party payables of $286,034 and $280,247 at September 30, 2020 and December 31, 2019, respectively	988,838	952,415
Accrued expenses, other, including interest due to related party of $617,663 and $444,476 at September 30, 2020 and December 31, 2019, respectively	1,374,531	1,034,745
Accrued compensation and related benefits	2,092,282	2,019,777
Customer deposits	50,590	91,742
Notes payable to related parties	1,957,600	1,822,600
Current portion of deferred revenue	361,156	398,656
Derivative liabilities	2,341,501	2,349,471
Convertible notes payable, net of unamortized debt discount and deferred debt issuance costs	1,453,960	1,346,213
Total Current Liabilities	10,620,458	10,015,619
Notes payable - due after one year	294,750	0
Note payable - related party - due after one year	10,000	10,000
Total Liabilities	10,925,208	10,025,619
STOCKHOLDERS' DEFICIT
Preferred stock value	0	0
Common stock; $0.01 par value; 1,100,000,000 shares authorized; 278,757 shares issued and 278,128 shares outstanding at September 30, 2020 and December 31, 2019, respectively	2,788	2,788
Capital in excess of par value	45,976,660	45,976,660
Accumulated deficit	(55,115,073)	(54,186,330)
Total stockholder dias corp.	(9,135,625)	(8,206,882)
Treasury stock at cost, 629 shares at September 30, 2020 and December 31, 2019, respectively	(1,462,112)	(1,462,112)
Total Stockholders' Deficit	(10,597,737)	(9,668,994)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	327,471	356,625
Preferred Stock Series A [Member]
STOCKHOLDERS' DEFICIT
Preferred stock value	0	0
Preferred Stock, Series B [Member]
STOCKHOLDERS' DEFICIT
Preferred stock value	$ 0	$ 0

XML

CONDENSED BALANCE SHEETS (Parenthetical) - USD ($)	Sep. 30, 2020	Dec. 31, 2019
Common stock, shares par value	$ 0.01	$ 0.01
Common stock, shares authorized	1,100,000,000	1,100,000,000
Common stock, shares issued	278,757	278,128
Common stock, shares outstanding	278,757	278,128
Related party payables included in accounts payable	$ 286,034	$ 280,247
Interest payable, related party included in accrued expenses	$ 617,663	$ 444,476
Preferred stock, shares issued	0	0
Preferred Stock Series A [Member]
Preferred stock, shares par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	2,000,000	2,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Preferred Stock, Series B [Member]
Preferred stock, shares par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	10,000	10,000
Preferred stock, shares issued	10	10
Preferred stock, shares outstanding	10	10
Preferred Stock Undesignated [Member]
Preferred stock, shares par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	7,990,000	7,990,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0

XML

CONDENSED STATEMENTS OF OPERATIONS (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
REVENUE
Sales	$ 360,764	$ 239,609	$ 828,796	$ 809,707
Royalty and license fees	12,500	37,500	37,500	62,500
Revenues	373,264	277,109	866,296	872,207
COST OF GOODS SOLD	213,485	186,954	481,704	545,761
GROSS MARGIN	159,779	90,155	384,592	326,446
OPERATING EXPENSES
Research and development, net of government grant proceeds of $34,716, $22,443, $92,050 and $55,850, respectively	10,573	42,608	84,799	158,443
Selling, general and administrative	276,318	279,895	793,062	1,025,043
TOTAL OPERATING EXPENSES	286,891	322,503	877,861	1,183,486
LOSS FROM OPERATIONS	(127,112)	(232,348)	(493,269)	(857,040)
OTHER INCOME (EXPENSE)
Interest expense	(223,266)	(427,961)	(811,756)	(1,529,409)
Change in fair value of derivative liabilities	(208,916)	(495,587)	376,282	(293,094)
Gain on extinguishment of debt	0	2,156	0	55,705
TOTAL OTHER INCOME (EXPENSE), NET	(432,182)	(921,392)	(435,474)	(1,766,798)
NET LOSS	$ (559,294)	$ (1,153,740)	$ (928,743)	$ (2,623,838)
NET LOSS PER COMMON SHARE, BASIC AND DILUTED	$ (2.01)	$ (6.12)	$ (3.34)	$ (21.82)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING, BASIC AND DILUTED	278,128	188,541	278,128	120,240

XML

CONDENSED STATEMENT OF STOCKHOLDERS DEFICIT (Unaudited) - USD ($)	Total	Preferred Stock	Common Stock	Capital in Excess of Par Value [Member]	Accumulated Deficit	Treasury Stock [Member]
Balance, shares at Dec. 31, 2018		10	74,910
Balance, amount at Dec. 31, 2018	$ (6,801,397)	$ 0	$ 749	$ 44,797,156	$ (50,137,190)	$ (1,462,112)
Shares issued upon conversion of debt, shares			4,427
Shares issued upon conversion of debt, amount	88,534	$ 0	$ 44	88,490	0	0
Adjustment for fractions, shares			277
Adjustment for fractions, amount	0	$ 0	$ 3	(3)	0	0
Warrants issued for finance cost	25,320	0	0	25,320	0	0
Net loss for the three months ended March 31, 2019	(718,162)	$ 0	$ 0	0	(718,162)	0
Balance, shares at Mar. 31, 2019		10	79,614
Balance, amount at Mar. 31, 2019	(7,405,705)	$ 0	$ 796	44,910,963	(50,855,352)	(1,462,112)
Balance, shares at Dec. 31, 2018		10	74,910
Balance, amount at Dec. 31, 2018	(6,801,397)	$ 0	$ 749	44,797,156	(50,137,190)	(1,462,112)
Net loss for the three months ended March 31, 2019	(2,623,838)
Balance, shares at Sep. 30, 2019		10	265,925
Balance, amount at Sep. 30, 2019	(8,285,957)	$ 0	$ 2,659	45,934,524	(52,761,028)	(1,462,112)
Balance, shares at Mar. 31, 2019		10	79,614
Balance, amount at Mar. 31, 2019	(7,405,705)	$ 0	$ 796	44,910,963	(50,855,352)	(1,462,112)
Shares issued upon conversion of debt, shares			46,436
Shares issued upon conversion of debt, amount	379,609	$ 0	$ 465	379,144	0	0
Warrants issued for finance cost	141,844	0	0	141,844	0	0
Net loss for the three months ended March 31, 2019	(751,937)	$ 0	$ 0	0	(751,937)	0
Shares issued for finance cost, shares			550
Shares issued for finance cost, amount	10,000	$ 0	$ 5	9,995	0	0
Balance, shares at Jun. 30, 2019		10	126,600
Balance, amount at Jun. 30, 2019	(7,626,189)	$ 0	$ 1,266	45,441,946	(51,607,289)	(1,462,112)
Shares issued upon conversion of debt, shares			139,325
Shares issued upon conversion of debt, amount	476,237	$ 0	$ 1,393	474,844	0	0
Warrants issued for finance cost	17,734	0	0	17,734	0	0
Net loss for the three months ended March 31, 2019	(1,153,740)	$ 0	$ 0	0	(1,153,739)	0
Balance, shares at Sep. 30, 2019		10	265,925
Balance, amount at Sep. 30, 2019	(8,285,957)	$ 0	$ 2,659	45,934,524	(52,761,028)	(1,462,112)
Balance, shares at Dec. 31, 2019		10	278,757
Balance, amount at Dec. 31, 2019	(9,668,994)	$ 0	$ 2,788	45,976,660	(54,186,330)	(1,462,112)
Net loss for the three months ended March 31, 2019	(1,830,965)	$ 0	$ 0	0	(1,830,965)	0
Balance, shares at Mar. 31, 2020		10	278,757
Balance, amount at Mar. 31, 2020	(11,499,959)	$ 0	$ 2,788	45,976,660	(56,017,295)	(1,462,112)
Balance, shares at Dec. 31, 2019		10	278,757
Balance, amount at Dec. 31, 2019	(9,668,994)	$ 0	$ 2,788	45,976,660	(54,186,330)	(1,462,112)
Net loss for the three months ended March 31, 2019	(928,743)
Balance, shares at Sep. 30, 2020		10	278,757
Balance, amount at Sep. 30, 2020	(10,597,737)	$ 0	$ 2,788	45,976,660	(55,115,073)	(1,462,112)
Balance, shares at Mar. 31, 2020		10	278,757
Balance, amount at Mar. 31, 2020	(11,499,959)	$ 0	$ 2,788	45,976,660	(56,017,295)	(1,462,112)
Net loss for the three months ended March 31, 2019	1,461,516	$ 0	$ 0	0	1,461,516	0
Balance, shares at Jun. 30, 2020		10	278,757
Balance, amount at Jun. 30, 2020	(10,038,443)	$ 0	$ 2,788	45,976,660	(54,555,779)	(1,462,112)
Net loss for the three months ended March 31, 2019	(559,294)	$ 0	$ 0	0	(559,294)	0
Balance, shares at Sep. 30, 2020		10	278,757
Balance, amount at Sep. 30, 2020	$ (10,597,737)	$ 0	$ 2,788	$ 45,976,660	$ (55,115,073)	$ (1,462,112)

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CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($)	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$ (928,743)	$ (2,623,838)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization of deferred debt issue costs	5,848	40,323
Depreciation and amortization	33,301	32,009
Change in fair value of derivative liability	(376,282)	293,094
Non-cash interest expenses	368,312	681,530
Amortization of debt discount	101,899	537,835
Gain on extinguishment of debt	0	(55,705)
Legal fees paid through proceeds of notes payable	0	150,000
(Increase) decrease in:
Accounts receivable	12,883	19,904
Inventory	11,138	(41,310)
Other receivables	22,019	(35,216)
Prepaid expenses/Other assets	(12,738)	(6,826)
Increase (decrease) in:
Accounts payable	36,423	283,221
Accrued expenses	412,291	344,781
Customer deposits	(41,152)	(56,926)
Deferred revenue	(37,500)	(37,500)
Net cash used in operating activities	(392,301)	(474,624)
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in patent costs	(18,633)	(5,222)
Net cash used in investing activities	(18,633)	(5,222)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable - related parties	135,000	260,500
Proceeds from notes payable	348,750	237,500
Repayment of note	(54,000)	(33,680)
Net cash provided by financing activities	429,750	464,320
Net increase (decrease) in cash	18,816	(15,526)
Cash, beginning of period	4,083	29,300
Cash, end of period	22,899	13,774
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest	1,537	9,111
NON-CASH FINANCING AND FINANCING ACTIVITIES
Issuance of common stock upon conversion of notes and accrued interest	0	944,380
Notes and accrued interest converted to common stock	0	324,930
Debt costs deducted from proceeds of note	0	20,000
Issuance of shares for finance cost	0	10,000
Issuance of warrants for debt modification	0	184,898
Initial derivative liability at issuance of notes	0	848,863
Initial debt discount at issuance of notes	$ 0	$ 381,494

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Background Information

9 Months Ended

Sep. 30, 2020

Background Information

Note 1. Background Information

Dais Corporation (“Dais”, “us,” “we,”, the “Company”), a New York corporation, is a nano-structured polymer technology materials company having developed and now commercializing products using its family of nanomaterial called Aqualyte. The first commercial product is called ConsERV, a fixed plate energy recovery ventilator which we believe is useful in meeting building indoor fresh air requirements while saving energy and lowering emissions for most forms of heating, ventilation and air conditioning (HVAC) equipment. The second commercial product is NanoClear, a water clean-up process useful in the creation of potable water from most forms of contaminated water including industrial process wastewater (petrochemical, steel, etc.) sea, brackish, or wastewater. We continue to develop other nano-structured polymer technology applications in HVAC/Refrigeration, energy, food services and wastewater treatment industries. The Company was incorporated in April 1993 and its corporate headquarters is in Odessa, Florida.

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

Basis of Presentation

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

The unaudited financial statements and notes are presented as permitted by Form 10-Q. Accordingly, certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted although the Company generally believes that the disclosures are adequate to ensure that the information presented is not misleading. The accompanying financial statements and notes should be read in conjunction with the audited financial statements and notes of the Company for the fiscal year ended December 31, 2019 included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on June 2, 2020. The results of operations for the three and nine month periods ended September 30, 2020 are not necessarily indicative of the results that may be expected for any future quarters or for the entire year ending December 31, 2020.

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Going Concern and Managements Plans

9 Months Ended

Sep. 30, 2020

Going Concern and Managements Plans

Note 2. Going Concern and Management's Plans

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. For the nine months ended September 30, 2020, the Company generated a net loss of $928,743 and has incurred significant losses since inception. As of September 30, 2020, the Company has an accumulated deficit of $55,115,073, total stockholders’ deficit of $10,597,737, negative working capital of $10,460,191 and cash of $22,899. The Company used $392,301 and $474,624 of cash in operations during the nine months ended September 30, 2020 and 2019, respectively, which was funded primarily by proceeds from loans from related parties and equity financings. There is no assurance that any such financing will be available in the future. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The Company is currently pursuing the following sources of short and long-term working capital:

1.	The Company 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;
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.

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.

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Significant Accounting Policies

9 Months Ended

Sep. 30, 2020

Significant Accounting Policies

Note 3. Significant Accounting Policies

The significant accounting policies followed are:

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

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

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 $91,531 for future warranty expenses at September 30, 2020 and December 31, 2019, which is included in accrued expenses, other.

Royalty revenue is recognized as earned. The Company recognized royalty revenue of $0 and $25,000 for the three months ended September 30, 2020 and 2019, respectively, and $0 and $25,000 for the nine months ended September 30, 2020 and 2019, respectively. Revenue derived from the sale of licenses is deferred and recognized as license fee revenue on a straight-line basis over the life of the license, or until the license arrangement is terminated. The Company recognized license fee revenue of $12,500 and $12,500 for the three months ended September 30, 2020 and 2019, respectively and $37,500 and $37,500 for the nine months ended September 30, 2020 and 2019, respectively.

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

In December 2017, the Company and Zhejiang MENRED Environmental Tech Co, Ltd., Zhejiang Province, China (“Menred”), entered into a License and Supply Agreement (the “Agreement”), effective December 21, 2017. Pursuant to the Agreement, the Company licensed certain intellectual property and improvements to Menred, for use in the manufacture and sale of energy recovery ventilators (“ERV”) and certain other HVAC systems for installation in commercial, residential or industrial buildings in China. Menred also agreed to purchase its requirements of certain products from the Company for Menred’s use, pursuant to the terms and conditions of the Agreement. Menred will also pay royalties, as defined, to the Company on a quarterly basis, based on price and production volume as provided by Menred. No royalties are due within the first year of the Agreement. Also pursuant to the Agreement, the Company is required to purchase 50,000 square meters of Product from Menred for delivery as an annual minimum with a 10,000 square meter minimum order quantity per delivery. The Agreement has a ten-year term with mutually agreed upon five-year extensions.

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 at September 30, 2020 and December 31, 2019. The Company has never experienced any losses related to these balances. The company does not have any cash equivalents.

Concentrations – At December 31, 2019, one customer accounted for 77% of accounts receivable. For the nine months ended September 30, 2020, three customers accounted for 71% of total revenue. For the nine months ended September 30, 2019, six customers accounted for 80% of total revenue.

Fair Value of Financial Instruments - The Company’s financial instruments, including cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, deferred revenue, customer deposits and notes payable are carried at historical cost. At September 30, 2020 and December 31, 2019 the carrying amounts of these instruments approximated their fair values because of the short-term nature of these instruments.

Inventory - Inventory consists of raw materials, work-in-process and finished goods and is stated at the lower of cost, determined by first-in, first-out method, or market. Market is determined based on the net realizable value, with appropriate consideration given to obsolescence, excessive levels, deterioration, and other factors. At September 30, 2020 and December 31, 2019, the Company had $53,227 and $85,456 of raw materials, $5,385 and $4,101 of in-process inventory and $21,531 and $1,724 of finished goods inventory, respectively. A reserve is recorded for any inventory deemed excessive or obsolete. No reserve is recorded at September 30, 2020 and December 31, 2019, respectively.

Property and equipment - Property and equipment is recorded at cost. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets ranging from 3 to 7 years. Leasehold improvements are amortized over the shorter of their estimated useful lives of 5 years or the related lease term. Depreciation expense was $6,493 and $7,126 for the three months ended September 30, 2020 and 2019, respectively, and $20,191 and $19,847 for the nine months ended September 30, 2020 and 2019, respectively. Gains and losses upon disposition are reflected in the Statement of Operations in the period of disposition. Maintenance and repair expenditures are charged to expense as incurred. There were no dispositions of property and equipment in 2020 or 2019.

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 $4,459 and $(148) for the three months ended September 30, 2020 and 2019, respectively and $13,110 and $12,162 for the nine months ended September 30, 2020 and 2019, respectively. Based on current capitalized costs, total patent amortization expense is estimated to be approximately $17,000 per year for the next five years and thereafter.

Research and development expenses and funding proceeds - Expenditures for research and development are expensed as incurred. The Company incurred research and development costs of $45,289 and $65,051 for the three months ended September 30, 2020 and 2019, respectively and $176,849 and $214,293 for the nine months ended September 30, 2020 and 2019, respectively. The Company accounts for proceeds received from government funding for research as a reduction in research and development costs. The Company recorded proceeds against research and development expenses on the Statements of Operations of $34,716 and $22,443 for the three months ended September 30, 2020 and 2019, respectively and $92,050 and $55,850 for the nine months ended September 30, 2020 and 2019, respectively.

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.

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 September 30, 2020:

	Fair Value at September 30,		Fair Value Measurement Using
	2020		Level 1		Level 2		Level 3
Derivative liability	$	2,341,501	$	-	$	-	$	2,341,501

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, 2020 and 2019:

	September 30,			September 30,
	2020			2019
Balance, beginning of period	$	2,349,471		$	1,280,188
Additions		368,312			848,863
Extinguished derivative liability		-			(746,529	)
Change in fair value of derivative liabilities		(376,282	)		293,094
Balance, end of period	$	2,341,501		$	1,675,616

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 14,624,579 and 1,635,431 were excluded from the computation of diluted earnings per share for and the three and nine months ended September 30, 2020 and 2019, respectively, because their effect is anti-dilutive.

Recent Accounting Pronouncements - There are new accounting pronouncements issued by the Financial Accounting Standards Board (“FASB”) which are not yet effective as follows:

In December 2019, the FASB issued ASU 2019-12, “Simplifying the Accounting for Income Taxes.” This guidance, among other provisions, eliminates certain exceptions to existing guidance related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. This guidance also requires an entity to reflect the effect of an enacted change in tax laws or rates in its effective income tax rate in the first interim period that includes the enactment date of the new legislation, aligning the timing of recognition of the effects from enacted tax law changes on the effective income tax rate with the effects on deferred income tax assets and liabilities. Under existing guidance, an entity recognizes the effects of the enacted tax law change on the effective income tax rate in the period that includes the effective date of the tax law. ASU 2019-12 is effective for interim and annual periods beginning after December 15, 2020, with early adoption permitted. We are currently evaluating the impact of this guidance.

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

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Accrued Expenses Other

9 Months Ended

Sep. 30, 2020

Accrued Expenses Other

Note 4. Accrued Expenses, Other

Accrued expenses, other consists of the following:

	September 30,		December 31,
	2020		2019
Accrued expenses, other	$	171,782	$	166,158
Accrued interest		1,111,218		777,056
Accrued warranty costs		91,531		91,531
	$	1,374,531	$	1,034,745

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Related Party Transactions

9 Months Ended

Sep. 30, 2020

Related Party Transactions

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 $4,066 per month, including sales tax. The Company recognized rent expense related to this lease of $12,198 and $12,198 for the three months ended September 30, 2020 and 2019, respectively and $36,594 and $36,594 for the nine months ended September 30, 2020 and 2019, respectively The lease term will terminate upon 30 days’ written notice from landlord or 90 days written termination from us.

The Company has accrued compensation due to the Chief Executive Officer as of September 30, 2020 and December 31, 2019 of $1,954,970 and $1,882,464, respectively, included in accrued compensation and related benefits in the accompanying balance sheets.

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

During 2016 to the period ended September 30, 2020, the Holder extended the Note pursuant to various amendments. Pursuant to the amendments, the principal amount due was increased to $1,957,600 with an extended maturity date of August 20, 2020. As of the date of filing, the maturity date has been extended to November 5, 2020 and is being renegotiated with the Senior Secured Note Holder. The Senior Secured Note Holder has not placed the note into default pending the outcome of the renegotiation process.

The Company is using the proceeds of the Note and related amendments for working capital purposes. Interest expense on the Note was $59,211 and $46,424 for the three month periods ended September 30, 2020 and 2019, respectively and $172,737 and $130,780 for the nine month periods ended September 30, 2020 and 2019, respectively. Accrued interest on the Note was $617,063 and $444,326 at September 30, 2020 and December 31, 2019, respectively.

During May 2019 Dais Holdings Corp. (Dais Holdings”) was formed in Vancouver, B.C. and is wholly owned by our Chief Executive Officer. Dais Holdings’ purpose is to facilitate debt financing in Europe. The intent is for Dais Holdings to enter into the debt transactions. It will then immediately loan any proceeds received to the Company on the same or similar terms as the European debt. To date, Dais Holdings has not entered into any transactions and Dais Corporation has not received any funding from Dais Holdings. The Company has paid the professional and other fees for setting up the Dais Holdings structure, aggregating $150,000. Ultimately, Dais Corporation will benefit from the Dais Holdings capital raise activities, and therefore has borne the cost. The costs have been expensed as incurred.

On October 12, 2019, the Company entered a promissory note with an entity controlled by our Chief Executive Officer in the amount of $10,000. The note bears interest at 10% per year and matures on October 12, 2021. Interest expense was $150 and $450 for the three and nine months ended September 30, 2020, respectively. Accrued interest at September 30, 2020 and December 31, 2019 was $600 and $150, respectively.

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.

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Equity Transactions

9 Months Ended

Sep. 30, 2020

Equity Transactions

Note 6. Equity Transactions

Preferred Stock

At September 30, 2020 and December 31, 2019, the Company’s Board of Directors has authorized 10,000,000 shares of preferred stock with a par value of $0.01 to be issued in series with terms and conditions to be determined by the Board of Directors.

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

10,000 of the shares of preferred stock has been designated as Class B Preferred Stock. The Class B Stock includes the right to vote in an amount equal to 51% of the votes to approve certain corporate actions, including, without limitation, changing the name of the Company and increasing the number of authorized shares.

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

The Holder (as defined in the Class A Preferred Stock certificate of designations) of the Class A Preferred Stock may convert all or part of the outstanding and unpaid Stated Amount (as defined in the Class A Preferred Stock certificate of designations) into fully paid and non-assessable shares of the Company’s common stock at the Conversion Price (as defined in the Class A Preferred Stock certificate of designations). The number of shares receivable upon conversion equals the Stated Amount divided by the Conversion Price. The Conversion Price shall be equal to 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 $0.01 per share on the date that Timothy N. Tangredi ceases, for any reason, to serve as an officer, director, or consultant of the Company.

Common Stock

At September 30, 2020 and December 31, 2019, the Company’s Board of Directors has authorized 1,100,000,000 shares of common stock with a par value of $0.01 to be issued in series with terms and conditions to be determined by the Board of Directors.

2019 Transactions:

During the nine months ended September 30, 2019, the Company issued 190,188 shares of common stock upon the conversion of $284,240 principal amount of notes and related accrued interest and costs of $40,690.

During the nine months ended September 30, 2019, the Company issued 550 shares of common stock, valued at $10,000, as a finance cost.

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Notes Payable

9 Months Ended

Sep. 30, 2020

Notes Payable

Note 7. Notes Payable

Paycheck Protection Program Loan

On April 29, 2020, the Company received $144,750 in a loan borrowed from a bank pursuant to the Paycheck Protection Program under the CARES Act guaranteed by the Small Business Administration (“SBA”), which we expect to be forgiven in part or in full, subject to our compliance with the conditions of the Paycheck Protection Program. If not forgiven, the terms on the note provide for interest at 1% per year and the note mature in 24 months, with 18 monthly payments of $8,146 beginning after the initial 6 month deferral period for payments.

Small Business Administration Loan

On June 12, 2020, the Company received $150,000 in a loan borrowed from the SBA. Installment payments, including principal and interest, of $731 monthly, will begin 12 months from the date of the note. The balance of principal and interest will mature 30 years from the date of the note. Interest will accrue at the rate of 3.75% per year.

Secured Promissory Note

On April 3, 2020, the Company received $54,000 pursuant to a secured promissory note. The note bears interest at 10% per year and matured on June 25, 2020. The note provides for a minimum payment of $7,500 for fees and expenses incurred by the lender. The note is secured by the Company’s receivables, inventory and interest in a certain purchase order issued to the Company by a customer.

The note was repaid on August 3, 2020.

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Convertible Notes Payable

9 Months Ended

Sep. 30, 2020

Notes Payable

Note 8. Convertible Notes Payable

The Company’s convertible promissory notes at September 30, 2020 and December 31, 2019 are as follows:

	September 30, 2020		December 31, 2019
Convertible notes payable, bearing interest at 8-10%	$	1,453,960	$	1,453,960
Unamortized debt discount		-		(101,899	)
Unamortized deferred debt issuance cost		-		(5,848	)
Total		1,453,960		1,346,213
Current portion	$	1,453,960	$	1,346,213

The Company entered various convertible notes during 2019, aggregating $412,500 at September 30, 2020. The notes all mature during 2020.

The Company entered various convertible notes during 2018, aggregating $1,041,460 at September 30, 2020. The notes all matured during 2019. Three notes that came due during the period were extended to August 15, 2019. Pursuant to the terms of the extensions, we have agreed to issue five hundred shares of common stock for each month that the notes are outstanding, commencing in April 2019. The shares have not been issued at September 30, 2020. We have accrued $687 and $8,100 as interest expense during the three months ended September 30, 2020 and 2019, respectively, for the shares due for the extensions. We have accrued $2,601 and $31,300 as interest expense during the nine months ended September 30, 2020 and 2019 for the shares due for the extensions. All notes are currently being renegotiated. Accrued interest related to the shares is $36,924 for an aggregate of 26,500 shares.

During the nine months ended September 30, 2020, the Company amortized $101,899 of debt discount and $5,848 of debt issue costs to interest expense.

During the three months ended September 30, 2019, the Company amortized $188,473 of debt discount and $12,477 of debt issue costs to interest expense. During the nine months ended September 30, 2019, the Company amortized $537,835 of debt discount and $40,323 of debt issue costs to interest expense. 

Debt conversions

During the nine months ended September 30, 2019, the Company issued 190,188 shares of common stock with a value of $944,380 upon the conversion of $284,240 principal amount of notes and related accrued interest and costs of $40,690. Unamortized debt discount and debt costs of $68,079 and $3,295, respectively, were charged against gain on extinguishment of debt at the time of redemption. In addition, $746,529 of derivative liability was extinguished. The company recorded gain on extinguishment of debt of $55,705.

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Derivative Liabilities

9 Months Ended

Sep. 30, 2020

Derivative Liabilities

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 $106,366 and $26,625 for the three months ended September 30, 2020 and 2019, respectively, and $368,312 and $76,351 for the nine months ended September 30, 2020 and 2019, respectively and were charged to interest expense.

During the three and nine months ended September 30, 2020, the Company recorded expense of $208,916 and income of $376,282, respectively, related to the change in the fair value of the derivatives. The fair value of the embedded derivatives was $2,341,501 at September 30, 2020, determined using the Black Scholes Model with the following assumptions: (1) risk free interest rate of 0.11%; (2) dividend yield of 0%; (3) volatility factor of the expected market price of the Company’s common stock of 621%; and (4) an expected life of 6 months.

During the three and nine months ended September 30, 2019, the Company recorded expense of $495,587 and $293,094 related to the change in the fair value of the derivative.

During the nine months ended September 30, 2019, the Company issued 190,188 shares of common stock with a value of $944,380 upon the conversion of $284,240 principal amount of notes and related accrued interest and costs of $40,690. As a result of the conversions, $746,529 of derivative liability was extinguished. The company recorded gain on extinguishment of debt of $55,705.

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2020

Significant Accounting Policies

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 the third quarter of 2015, the Company commenced an action for the cancellation of the 37,500,000 shares issued to Soex (the “Shares”) in connection with a Securities Purchase Agreement, dated January 21, 2014 (“Soex SPA”), and 3,750,000 shares issued to Zan Investment Advisory Limited (“Zan”), which is affiliated with Soex through Aifan Liu, who was appointed as a Company board observer by SOEX and her husband, Xinghong Hua. Sharon Han, General Manager and Chairwoman of Soex, served on our board pursuant to the provisions of the Soex SPA. Ms. Han resigned from the Board of Directors effective February 1, 2016.

On April 24, 2014, we entered into a Distribution Agreement (the “Distribution Agreement”), with Soex to distribute certain of the Company’s products in China. As reported in the Company’s Form 10-K for the year ended December 31, 2014 and filed with the Securities and Exchange Commission on April 1, 2015, the Company was entitled to receive, pursuant to the Distribution Agreement, royalties and a $500,000 payment, of which $50,000 has been received, that was due on or before October 24, 2014. Further, the Company reported it had not received any royalties from Soex. Soex is in breach of the Distribution Agreement.

As first reported in the Company’s Form 10-Q for the quarter ended June 30, 2015, the Company began pursuing legal action against Soex for breach of the Soex SPA and Distribution Agreement. On July 8, 2015, the Company filed a lawsuit in state courts in Florida against Soex and Zan.

Pursuant to the Distribution Agreement, Soex is in material breach of the following:

(1)	Section 1(a) of the Distribution Agreement for Soex’s failure to make a $225,000 payment to the Company for the appointment of Soex as the exclusive distributor of the Products in the Field and Territory (the “Distribution Payment Default”) in accordance with the terms set forth in the Distribution Agreement. Such payment was due on October 20, 2014 (the “Payment Date”).
(2)	Section 8(b) of the Distribution Agreement for Soex’s failure to make a $225,000 payment to the Company for the grant of the license and right to manufacture, sell, lease and distribute Products (excluding manufacture of MTM), and to use the Intellectual Property in connection therewith (the “License Payment Default” and, together with the Distribution Payment Default, the “Payment Default”) in accordance with the terms set forth in the Distribution Agreement. Such payment was due on the Payment Date.
(3)	Section 15(b) of the Distribution Agreement for Soex’s failure to issue to the Company 25% of the equity (the “Equity Default”) of SOEX (Beijing) Environmental Protection Technology Company Limited (the “China Subsidiary”).

As a result of the above, we terminated the Soex Distribution Agreement. As provided in Section 14€ of the Soex Distribution Agreement, the Company has the right to enforce any obligation due to us by Soex. As a result, Soex still must (a) pay the remaining $450,000 due under the Distribution Agreement and the amount of Royalties due, plus interest at 1.5% per month (18% per year) with interest accruing from the date that payment was due and (b) issue to us 25% of the equity of SOEX (Beijing) Environmental Protection Technology Company Limited. As provided in Section 14(b), neither us nor Soex shall be liable for compensation, reimbursement or damages due to loss of profits on sales or anticipated sales or losses due to expenditures, investments or commitments made or in connection with the establishment, development or maintenance of the business.

The Soex Litigation was moved to the U.S. District Court for the Middle District of Florida where Soex has instituted a counterclaim (Civil Docket Case #: 8:15-CV-02362-MSS-EAJ). On September 19, 2018, a pre-trial conference was held in Tampa finding a trial date set for October 22, 2018. The trial for the original case was held between October 22 and 24, 2018. The jury at the conclusion of the trial did not award monetary damages to either party for claims or counterclaims.

On October 24, 2018, the Company initiated a third lawsuit against an affiliate of Soex, Zhongshan Trans-Tech New Material Technology Co. Ltd. Zhongshan, China, (“Transtech”), and the Chairperson of the affiliate and Soex, based on new information learned by the Company. The Company will seek maximum relief and damages for this on-going and growing illegal misuse the Company’s Intellectual Property. The Company feels this third action will lead in a judgment in favor of the Company.

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Subsequent Event

9 Months Ended

Sep. 30, 2020

Subsequent Event

Note 11. Subsequent Events

No material events have occurred after September 30, 2020 that requires recognition or disclosure in the financial statements except as follows:

On October 8, 2020, the Company entered into a Consent and Waiver and Twenty Sixth Amendment to the Senior Secured Promissory Note and Loan and Security Agreement with a related party (described in Note 5). The Maturity Date of the Note was extended to the earlier of (i) the date upon which the Company secures funds, regardless of source, equal to or exceeding, in the aggregate, $1,957,600 or (ii) October 15, 2020. The Secured Party (related party) gives consent to the issuance of the October 2020 Note and October 2020 Security Agreement described below.

On October 8, 2020, the Company entered into a Loan and Security agreement (“October 2020 Security Agreement”) pursuant to which the Company issued a Promissory Note (“October 2020 Note”) for $18,500 for the purpose of purchase order funding. The note bears interest at 10% per annum compounded daily. The principal amount plus all interest is due on the earlier of (i) the date upon which the Company receives payment for the purchase order or (ii) December 20, 2020 (the “Maturity Date”)

On October 28, 2020, the Company entered into a Twenty Seventh Amendment of the Loan and Security Agreement with a related party (described in Note 5), whereby the Maturity Date of the Note was extended to the earlier of (i) the date upon which the Company secures funds, regardless of source, equal to or exceeding, in the aggregate, $2,025,600 or (ii) November 5, 2020 and the principal amount of the note was increased by $68,000.

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Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2020

Significant Accounting Policies

Use of estimates

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

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

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 $91,531 for future warranty expenses at September 30, 2020 and December 31, 2019, which is included in accrued expenses, other.

Royalty revenue is recognized as earned. The Company recognized royalty revenue of $0 and $25,000 for the three months ended September 30, 20, 2020 and 2019, respectively, and $0 and $25,000 for the nine months ended September 30, 2020 and 2019, respectively. Revenue derived from the sale of licenses is deferred and recognized as license fee revenue on a straight-line basis over the life of the license, or until the license arrangement is terminated. The Company recognized license fee revenue of $12,500 and $12,500 for the three months ended September 30, 2020 and 2019, respectively and $37,500 and $37,500 for the nine months ended September 30, 2020 and 2019, respectively.

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

In December 2017, the Company and Zhejiang MENRED Environmental Tech Co, Ltd., Zhejiang Province, China (“Menred”), entered into a License and Supply Agreement (the “Agreement”), effective December 21, 2017. Pursuant to the Agreement, the Company licensed certain intellectual property and improvements to Menred, for use in the manufacture and sale of energy recovery ventilators (“ERV”) and certain other HVAC systems for installation in commercial, residential or industrial buildings in China. Menred also agreed to purchase its requirements of certain products from the Company for Menred’s use, pursuant to the terms and conditions of the Agreement. Menred will also pay royalties, as defined, to the Company on a quarterly basis, based on price and production volume as provided by Menred. No royalties are due within the first year of the Agreement. Also pursuant to the Agreement, the Company is required to purchase 50,000 square meters of Product from Menred for delivery as an annual minimum with a 10,000 square meter minimum order quantity per delivery. The Agreement has a ten-year term with mutually agreed upon five-year extensions.

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 at September 30, 2020 and December 31, 2019. The Company has never experienced any losses related to these balances. The company does not have any cash equivalents.

Concentrations

At December 31, 2019, one customer accounted for 77% of accounts receivable. For the nine months ended September 30, 2020, three customers accounted for 71% of total revenue. For the nine months ended September 30, 2019, six customers accounted for 80% of total revenue.

Fair Value of Financial Instruments

The Company’s financial instruments, including cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, deferred revenue, customer deposits and notes payable are carried at historical cost. At September 30, 2020 and December 31, 2019 the carrying amounts of these instruments approximated their fair values because of the short-term nature of these instruments.

Inventory

Inventory consists of raw materials, work-in-process and finished goods and is stated at the lower of cost, determined by first-in, first-out method, or market. Market is determined based on the net realizable value, with appropriate consideration given to obsolescence, excessive levels, deterioration, and other factors. At September 30, 2020 and December 31, 2019, the Company had $53,227 and $85,456 of raw materials, $5,385 and $4,101 of in-process inventory and $21,531 and $1,724 of finished goods inventory, respectively. A reserve is recorded for any inventory deemed excessive or obsolete. No reserve is recorded at September 30, 2020 and December 31, 2019, respectively.

Property and equipment

Property and equipment is recorded at cost. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets ranging from 3 to 7 years. Leasehold improvements are amortized over the shorter of their estimated useful lives of 5 years or the related lease term. Depreciation expense was $6,493 and $7,126 for the three months ended September 30, 2020 and 2019, respectively, and $20,191 and $19,847 for the nine months ended September 30, 2020 and 2019, respectively. Gains and losses upon disposition are reflected in the Statement of Operations in the period of disposition. Maintenance and repair expenditures are charged to expense as incurred. There were no dispositions of property and equipment in 2020 or 2019.

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 $4,459 and $(148) for the three months ended September 30, 2020 and 2019, respectively and $13,110 and $12,162 for the nine months ended September 30, 2020 and 2019, respectively. Based on current capitalized costs, total patent amortization expense is estimated to be approximately $17,000 per year for the next five years and thereafter.

Research and development expenses and funding proceeds

Expenditures for research and development are expensed as incurred. The Company incurred research and development costs of $45,289 and $65,051 for the three months ended September 30, 2020 and 2019, respectively and $176,849 and $214,293 for the nine months ended September 30, 2020 and 2019, respectively. The Company accounts for proceeds received from government funding for research as a reduction in research and development costs. The Company recorded proceeds against research and development expenses on the Statements of Operations of $34,716 and $22,443 for the three months ended September 30, 2020 and 2019, respectively and $92,050 and $55,850 for the nine months ended September 30, 2020 and 2019, respectively.

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.

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 September 30, 2020:

	Fair Value at September 30,		Fair Value Measurement Using
	2020		Level 1		Level 2		Level 3
Derivative liability	$	2,341,501	$	-	$	-	$	2,341,501

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, 2020 and 2019:

	September 30,			September 30,
	2020			2019
Balance, beginning of period	$	2,349,471		$	1,280,188
Additions		368,312			848,863
Extinguished derivative liability		-			(746,529	)
Change in fair value of derivative liabilities		(376,282	)		293,094
Balance, end of period	$	2,341,501		$	1,675,616

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 14,624,579 and 1,635,431 were excluded from the computation of diluted earnings per share for and the three and nine months ended September 30, 2020 and 2019, respectively, because their effect is anti-dilutive.

Recent Accounting Pronouncements

There are new accounting pronouncements issued by the Financial Accounting Standards Board (“FASB”) which are not yet effective as follows:

In December 2019, the FASB issued ASU 2019-12, “Simplifying the Accounting for Income Taxes.” This guidance, among other provisions, eliminates certain exceptions to existing guidance related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. This guidance also requires an entity to reflect the effect of an enacted change in tax laws or rates in its effective income tax rate in the first interim period that includes the enactment date of the new legislation, aligning the timing of recognition of the effects from enacted tax law changes on the effective income tax rate with the effects on deferred income tax assets and liabilities. Under existing guidance, an entity recognizes the effects of the enacted tax law change on the effective income tax rate in the period that includes the effective date of the tax law. ASU 2019-12 is effective for interim and annual periods beginning after December 15, 2020, with early adoption permitted. We are currently evaluating the impact of this guidance.

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

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Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2020

Significant Accounting Policies

Schedule of fair value of derivative liability

	Fair Value at September 30,		Fair Value Measurement Using
	2020		Level 1		Level 2		Level 3
Derivative liability	$	2,341,501	$	-	$	-	$	2,341,501

Schedule of reconciliation of the derivative liability

	September 30,			September 30,
	2020			2019
Balance, beginning of period	$	2,349,471		$	1,280,188
Additions		368,312			848,863
Extinguished derivative liability		-			(746,529	)
Change in fair value of derivative liabilities		(376,282	)		293,094
Balance, end of period	$	2,341,501		$	1,675,616

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Accrued Expenses Other (Tables)

9 Months Ended

Sep. 30, 2020

Accrued Expenses Other (Tables)

Schedule of accrued expenses, other

	September 30,		December 31,
	2020		2019
Accrued expenses, other	$	171,782	$	166,158
Accrued interest		1,111,218		777,056
Accrued warranty costs		91,531		91,531
	$	1,374,531	$	1,034,745

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Convertible Notes Payable (Tables)

9 Months Ended

Sep. 30, 2020

Convertible Notes Payable (Tables)

Schedule of convertible notes payable

	September 30, 2020		December 31, 2019
Convertible notes payable, bearing interest at 8-10%	$	1,453,960	$	1,453,960
Unamortized debt discount		-		(101,899	)
Unamortized deferred debt issuance cost		-		(5,848	)
Total		1,453,960		1,346,213
Current portion	$	1,453,960	$	1,346,213

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Going Concern and Management's Plans (Details Narrative) - USD ($)	3 Months Ended						9 Months Ended
	Sep. 30, 2020	Jun. 30, 2020	Mar. 31, 2020	Sep. 30, 2019	Jun. 30, 2019	Mar. 31, 2019	Sep. 30, 2020	Sep. 30, 2019	Dec. 31, 2019	Dec. 31, 2018
Equity Transactions
Net loss	$ (559,294)	$ 1,461,516	$ (1,830,965)	$ (1,153,740)	$ (751,937)	$ (718,162)	$ (928,743)	$ (2,623,838)
Accumulated deficit	(55,115,073)						(55,115,073)		$ (54,186,330)
Total stockholders' deficit	(10,597,737)	$ (10,038,443)	$ (11,499,959)	(8,285,957)	$ (7,626,189)	$ (7,405,705)	(10,597,737)	(8,285,957)	(9,668,994)	$ (6,801,397)
Working capital deficit	(10,460,191)						(10,460,191)
Net cash used in operating activities							(392,301)	(474,624)
Cash and cash equivalents	$ 22,899			$ 13,774			$ 22,899	$ 13,774	$ 4,083	$ 29,300

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Significant Accounting Policies (Details) - USD ($)	Sep. 30, 2020	Dec. 31, 2019	Sep. 30, 2019	Dec. 31, 2018
Derivative Liability	$ 2,341,501	$ 2,349,471	$ 1,675,616	$ 1,280,188
Level 1 [Member]
Derivative Liability	0
Level 2 [Member]
Derivative Liability	0
Level 3 [Member]
Derivative Liability	$ 2,341,501

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Significant Accounting Policies (Details 1) - USD ($)	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Significant Accounting Policies
Balance, beginning of period	$ 2,349,471	$ 1,280,188
Additions	368,312	848,863
Extinguished derivative liability	0	(746,529)
Change in fair value of derivative liabilities	(376,282)	293,094
Balance, end of period	$ 2,341,501	$ 1,675,616

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Significant Accounting Policies (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019	Dec. 31, 2019
Accrued warranty costs	$ 91,531		$ 91,531		$ 91,531
Patent amortization expense	$ 4,459	$ 148	$ 13,110	$ 12,162
Common share excluded from diluted earnings per share	14,624,579	14,624,579	1,635,431	1,635,431
Inventory raw materials	$ 53,227		$ 53,227		85,456
Inventory in process	5,385		5,385		4,101
Inventory finished goods	21,531		21,531		$ 1,724
Depreciation expense	6,493	$ 7,126	20,191	$ 19,847
Future amortization expense, 2020	17,000		17,000
Future amortization expense, 2021	17,000		17,000
Future amortization expense, 2022	17,000		17,000
Future amortization expense, 2023	17,000		17,000
Future amortization expense, 2024	17,000		17,000
Future amortization expense, thereafter	17,000		17,000
Proceeds for research and development expenses	34,716	22,443	92,050	55,850
Research and development expenses	45,289	65,051	176,849	214,293
Royalty revenues	0	25,000	0	25,000
License fees revenue	$ 12,500	$ 12,500	$ 37,500	$ 37,500
Estimated useful lives of patents			17 years
Leasehold Improvements [Member]
Property plant and equipment, estimated useful lives			The shorter of their estimated useful lives of 5 years or the related lease term.
Minimum [Member]
Property and equipment estimated useful life			3 years
Maximum [Member]
Property and equipment estimated useful life			7 years
Zhejiang MENRED Environmental Tech Co, Ltd [Member] | License and Supply Agreement [Member]
Agreement, description			The Company is required to purchase 50,000 square meters of Product from Menred for delivery as an annual minimum with a 10,000 square meter minimum order quantity per delivery. The Agreement has a ten-year term with mutually agreed upon five-year extensions.
Account receivables [Member]
Concentration of risk, percentage					77.00%
Number of customers					1
Revenue [Member]
Concentration of risk, percentage			71.00%	80.00%
Number of customers			3	6

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Accrued Expenses Other (Details) - USD ($)	Sep. 30, 2020	Dec. 31, 2019
Accrued Expenses Other
Accrued expenses, other	$ 171,782	$ 166,158
Accrued interest	1,111,218	777,056
Accrued warranty costs	91,531	91,531
Accrued Expenses, other	$ 1,374,531	$ 1,034,745

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Related Party Transactions (Details Narrative) - USD ($)		1 Months Ended		3 Months Ended		9 Months Ended
	Oct. 12, 2019	May 31, 2019	Jun. 24, 2016	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019	Dec. 31, 2019
Rent expense				$ 12,198	$ 12,198	$ 36,594	$ 36,594
Lease term description				The lease term will terminate upon 30 days’ written notice from landlord or 90 days written termination from us.
Building [Member]
Monthly rent expense						4,066
Loan And Security Agreement [Member] | Patricia Tangredi [Member]
Debt instrument maturity date			Oct. 31, 2016
Senior secured Promissory Note			$ 150,000
Senior secured debt, minimum interest payment			2,000
Principal loan amount			$ 150,000	$ 1,957,600		1,957,600
Interest expense				59,211	46,424	172,737	130,780
Accrued interest				617,063		617,063		$ 444,326
Description for the terms of repayment of senior debt			The Company is to pay the Holder the principal amount of $150,000 plus all interest due thereon in accordance with terms and conditions of the Security Agreement on the earlier of: (i) the date upon which the Company secures funds, regardless of source, equal to or exceeding, in the aggregate, $1,000,000 or (ii) October 31, 2016 (the “Maturity Date”).
Dais Holdings structure [Member]
Professional and other fees		$ 150,000
Chief Executive Officer [Member]
Debt instrument maturity date	Oct. 12, 2021
Interest expense				150	$ 150	450	$ 450
Accrued interest				600		600		150
Interest bearing per year	10.00%
Accrued compensation				$ 1,954,970		$ 1,954,970		$ 1,882,464
Promissory note	$ 10,000

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Equity Transactions (Details Narrative)	9 Months Ended
	Sep. 30, 2020 integer $ / shares shares	Sep. 30, 2019 USD ($) shares	Dec. 31, 2019 $ / shares shares
Common stock par value | $ / shares	$ 0.01		$ 0.01
Common stock shares authorized	1,100,000,000		1,100,000,000
Preferred stock, shares issued	0		0
Common stock shares issued upon conversion of debt, shares		190,188
Debt instrument converte amount, principal | $		$ 284,240
Debt instrument converte amount, accrued interest | $		$ 40,690
Common stock shares issued for finance cost		550
Common stock value issued for finance cost | $		$ 10,000
Preferred Stock, Series B [Member]
Preferred stock, shares issued	10		10
Preferred stock shares authorized	10,000		10,000
Voting right description	Equal to 51% of the votes to approve certain corporate actions,
Preferred stock shares authorized	10,000
Preferred Stock, Series A [Member]
Conversion price description	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.
Preferred stock shares authorized	2,000,000
Preferred stock, number of votes | integer	150
Equity Transactions [Member]
Preferred stock shares authorized	10,000,000		10,000,000
Preferred stock, par value | $ / shares	$ 0.01		$ 0.01

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Notes Payable (Details Narrative) - USD ($)	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Promissory Note	$ 348,750	$ 237,500
April 3, 2020 [Member] | Senior Secured Promissory Note [Member]
Extended maturity date description	The note provides for a minimum payment of $7,500 for fees and expenses incurred by the lender.
Maturity date	Jun. 25, 2020
Interest rate	10.00%
Promissory Note	$ 54,000
June 12, 2020 [Member] | Economic Injury Disaster Loan [Member]
Interest rate	3.75%
Loan agreement amount	$ 150,000
Debt instrument, payment terms	Installment payments, including principal and interest, of $731 monthly, will begin 12 months from the date of the note. The balance of principal and interest will mature 30 years from the date of the note.
April 29, 2020 [Member] | Paycheck Protection Program [Member]
Interest rate	1.00%
Loan agreement amount	$ 144,750
Debt description	If not forgiven, the terms on the note provide for interest at 1% per year and the note mature in 24 months, with 18 monthly payments of $8,146 beginning after the initial 6 month deferral period for payments.

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Convertible Notes Payable (Details) - USD ($)	Sep. 30, 2020	Dec. 31, 2019
Convertible Notes Payable (Tables)
Convertible notes payable, bearing interest at 8%-10%	$ 1,453,960	$ 1,453,960
Unamortized debt discount	0	(101,899)
Unamortized deferred debt issuance cost	0	(5,848)
Total	1,453,960	1,346,213
Current portion	$ 1,453,960	$ 1,346,213

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Convertible Notes Payable (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Convertible notes payable	$ 412,500		$ 412,500
Amortization of debt issue costs		$ 12,477	5,848	$ 40,323
Amortization of debt discount		188,473	101,899	537,835
Extinguished derivative liability			0	(746,529)
Accrued interest expenses			412,291	344,781
Debt Conversions [Member]
Amortization of debt issue costs				3,295
Common stock issuable, value				944,380
Accured interest		40,690		40,690
Conversion amount				284,240
Extinguished derivative liability				746,529
Unamortized debt discount				68,079
Gain on extinguishment of debt				$ 55,705
Common stock issuable, shares				190,188
2018 Notes [Member]
Convertible notes payable	$ 1,041,460		$ 1,041,460
Common stock issuable, shares each month			500
Shares due for the extensions	4,500		4,500
Accrued interest related shares			26,500
Accured interest and costs			$ 36,924
Accrued interest expenses	$ 687	$ 8,100	$ 2,601	$ 31,300

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Derivative Liabilities (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Sep. 30, 2020	Sep. 30, 2019
Risk free interest rate			0.11%
Volatility rate			621.00%
Dividend yield			0.00%
Expected life			6 months
Debt conversion converted instrument, shares issued				190,188
Debt conversion converted instrument, values issued				$ 284,240
Extinguished derivative liability			$ 0	(746,529)
Debt instrument converte amount, accrued interest				40,690
Gain on extinguishment of debt	$ 0	$ 2,156	0	$ 55,705
Derivative Liabilities [Member]
Change in fair value of derivative recorded income/expense	208,916		376,282
Fair value of embedded derivative	2,341,501		2,341,501
Debt conversion converted instrument, shares issued				190,188
Debt conversion converted instrument, values issued				$ 944,380
Extinguished derivative liability				746,529
Debt conversion converted amount, principal				284,240
Debt instrument converte amount, accrued interest				40,690
Gain on change in fair value of derivative liability		495,587		293,094
Interest expense	$ 106,366	$ 26,625	$ 368,312	76,351
Gain on extinguishment of debt				$ 55,705

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Commitments and Contingencies (Details Narrative) - USD ($)		1 Months Ended
	Jul. 08, 2015	Apr. 24, 2014	Sep. 30, 2017	Sep. 30, 2015
Soex [Member]
Royalty payments payable		$ 500,000
Royalty received		$ 50,000
Payment due date	Oct. 20, 2014
Failure to make payment for appointing as distributor	$ 225,000
Failure to make payment for grant of license	$ 225,000
Percentage of equity default	25.00%
Securities Purchase Agreement [Member] | Soex [Member]
Cancellation of share issued				37,500,000
Securities Purchase Agreement [Member] | Zan [Member]
Cancellation of share issued				3,750,000
Employment Agreement [Member] | Soex [Member]
Percentage of equity default			25.00%
Remaining balance to pay			$ 450,000
Interest rate per month			1.50%
Interest rate per year			18.00%

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Subsequent Event (Details Narrative) - Subsequent Event [Member] - Loan and Security Agreement [Member] - USD ($)		1 Months Ended
	Oct. 08, 2020	Oct. 28, 2020
Promissory note issued	$ 18,500
Interest rate	10.00%
Maturity date	Dec. 20, 2020
Extended maturity date description	The Maturity Date of the Note was extended to the earlier of (i) the date upon which the Company secures funds, regardless of source, equal to or exceeding, in the aggregate, $1,957,600 or (ii) October 15, 2020. The Secured Party (related party) gives consent to the issuance of the October 2020 Note and October 2020 Security Agreement described below.	Maturity Date of the Note was extended to the earlier of (i) the date upon which the Company secures funds, regardless of source, equal to or exceeding, in the aggregate, $2,025,600 or (ii) November 5, 2020 and the principal amount of the note was increased by $68,000.