Dais (DLYT) 10-Q 16 May 16 2016 Q1 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2016	May. 13, 2016
Document And Entity Information
Entity Registrant Name	DAIS ANALYTIC CORP
Entity Central Index Key	1,125,699
Document Type	10-Q
Document Period End Date	Mar. 31, 2016
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Is Entity a Well-known Seasoned Issuer?	No
Is Entity a Voluntary Filer?	No
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		119,542,864
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2,016

Balance Sheets

Balance Sheets - USD ($)	Mar. 31, 2016	Dec. 31, 2015
Current assets:
Cash and cash equivalents	$ 382,055	$ 698,754
Accounts receivable, net	87,764	133,777
Other receivables	16,918	88,243
Inventory	106,461	94,911
Prepaid expenses	$ 35,861	49,727
Investment in China Operating Company		190,000
Total current assets	$ 629,059	1,255,412
Property and equipment, net	168,658	151,485
Other assets:
Deposits	4,780	4,280
Patents, net of accumulated amortization of $231,022 and $225,410 at March 31, 2016 and December 31, 2015, respectively	120,474	108,510
Total other assets	125,254	112,790
Total assets	922,971	1,519,687
Current liabilities:
Accounts payable, including related party payables of $10,677 and $8,212 at March 31, 2016 and December 31, 2015, respectively	304,876	295,734
Accrued expenses	109,766	140,118
Current portion of deferred revenue	119,678	119,678
Total current liabilities	534,320	555,530
Long-term liabilities:
Accrued compensation and related benefits	1,356,127	1,321,958
Deferred revenue, net of current portion	1,504,250	1,534,170
Total long-term liabilities	2,860,377	2,856,128
Total liabilities	$ 3,394,697	$ 3,411,658
Stockholders’ deficit:
Preferred stock; $0.01 par value; 10,000,000 shares authorized; no shares issued and outstanding
Common stock; $0.01 par value; 240,000,000 shares authorized; 120,800,077 shares issued and 119,542,864 and 120,542,864 shares outstanding at March 31, 2016 and December 31, 2015, respectively	$ 1,208,001	$ 1,208,001
Additional paid in capital	41,560,619	41,560,619
Accumulated deficit	(43,778,234)	(43,388,479)
Total	(1,009,614)	(619,859)
Treasury stock at cost, 1,257,213 and 257,213 shares at March 31, 2016 and December 31, 2015, respectively	(1,462,112)	(1,272,112)
Total stockholders' deficit	(2,471,726)	(1,891,971)
Total liabilities and stockholder's deficit	$ 922,971	$ 1,519,687

Balance Sheets (Parenthetical)

Balance Sheets (Parenthetical) - USD ($)	Mar. 31, 2016	Dec. 31, 2015
Other assets:
Patents, net of accumulated amortization	$ 231,022	$ 225,410
Current liabilities:
Accounts payable, including related party payables	$ 10,677	$ 8,212
Stockholders' deficit:
Preferred stock par value	$ 0.01	$ 0.01
Preferred stock shares authorized	10,000,000	10,000,000
Preferred stock shares issued	0	0
Preferred stock shares outstanding	0	0
Common stock par value	$ 0.01	$ 0.01
Common stock shares authorized	240,000,000	240,000,000
Common stock shares issued	120,800,077	120,800,077
Common stock shares outstanding	119,542,864	120,542,864
Treasury stock shares	1,257,213	257,213

Statements Of Operations (unaud

Statements Of Operations (unaudited) - USD ($)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Revenue
Sales	$ 161,645	$ 314,028
Royalty and license fees	51,419	30,753
Total revenue	213,064	344,781
Cost of goods sold	110,501	252,944
Gross margin	102,563	91,837
Operating expenses
Research and development, net	186,631	196,930
Selling, general and administrative expenses	337,885	323,238
Total operating expenses	524,516	520,168
Loss from operations	(421,953)	$ (428,331)
Other income (expense)
Other income	32,338
Interest income	(242)
Interest expense	102	$ 1
Total other income (expense)	32,198	1
Net loss	$ (389,755)	$ (428,330)
Net loss per common share, basic and diluted	$ 0	$ 0
Weighted average number of common shares outstanding, basic and diluted	120,279,128	113,366,247

Statement of Stockholders' Defi

Statement of Stockholders' Deficit (unaudited) - 3 months ended Mar. 31, 2016 - USD ($)	Common Stock	Additional Paid-In Capital	Accumulated Deficit	Treasury Stock	Total
Beginning Balance, Shares at Dec. 31, 2015	120,800,077
Beginning Balance, Amount at Dec. 31, 2015	$ 1,208,001	$ 41,560,619	$ (43,388,479)	$ (1,272,112)	$ (1,891,971)
Treasury stock from investment in China operating company				(190,000)	(190,000)
Net loss			(389,755)		(389,755)
Ending Balance, Shares at Mar. 31, 2016	120,800,077
Ending Balance, Amount at Mar. 31, 2016	$ 1,208,001	$ 41,560,619	$ (43,778,234)	$ (1,462,112)	$ (2,471,726)

Statements Of Cash Flows (unaud

Statements Of Cash Flows (unaudited) - USD ($)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015
Cash flows from operating activities:
Net loss	$ (389,755)	$ (428,330)
Adjustments to reconcile net loss to net cash and cash equivalents used by operating activities:
Depreciation and amortization	$ 22,011	16,358
Stock based compensation expense		3,186
(Increase) decrease in:
Accounts receivable	$ 46,013	11,924
Other receivables	71,325	(54,360)
Inventory	(11,550)	(1,752)
Prepaid expenses and other assets	13,366	(45,458)
Increase (decrease) in:
Accounts payable and accrued expenses	(21,210)	(412,638)
Accrued compensation and related benefits	34,169	8,639
Deferred revenue	(29,920)	(30,751)
Net cash used by operating activities	(265,551)	(933,182)
Cash flows from investing activities:
Patent expenditures	(17,576)	(9,461)
Purchases of property and equipment	(33,572)	(4,663)
Net cash used by investing activities	$ (51,148)	(14,124)
Cash flows from financing activities:
Issuance of common stock, net of offering costs		550,040
Net cash provided by financing activities		550,040
Net decrease in cash and cash equivalents	$ (316,699)	(397,266)
Cash and cash equivalents, beginning of period	698,754	2,343,523
Cash and cash equivalents, end of period	382,055	$ 1,946,257
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest	242
NON-CASH FINANCING ACTIVITIES
Treasury stock from investment in China operating company	$ (190,000)

Background Information

Background Information	3 Months Ended
	Mar. 31, 2016
Notes to Financial Statements
Note 1 - Background Information	Dais Analytic Corporation (the "Company"), a New York corporation, has developed and is commercializing applications using its nano-structure polymer technology. The first commercial product is an energy recovery ventilator ("ERV") (core and systems) for use in commercial Heating, Ventilating, and Air Conditioning (HVAC) applications. In addition to direct sales, the Company licenses its nano-structures polymer technology to strategic partners in the aforementioned application and is in various stages of development with regard to other applications employing its base technologies. The Company was incorporated in April 1993 and its corporate headquarters is located in Odessa, Florida. The Company is dependent on third parties to manufacture the key components needed for its nano-structured based 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. The Company's accompanying 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, 2015 included in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 30, 2016. The results of operations for the three month period ended March 31, 2016 are not necessarily indicative of the results that may be expected for any future quarters or for the entire year ending December 31, 2016.

Going Concern and Management's

Going Concern and Management's Plans	3 Months Ended
	Mar. 31, 2016
Notes to Financial Statements
Note 2 - Going Concern and Management’s Plans	The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. For the three months ended March 31, 2016, the Company generated a net loss of $389,755 and the Company has incurred significant losses since inception. As of March 31, 2016, the Company has an accumulated deficit of $43,778,234 and a stockholders' deficit of $2,471,726 but positive working capital of $94,739 and cash and cash equivalents of $382,055. The Company used $265,551 and $933,182 of cash from operations during the three months ended March 31, 2016 and 2015, respectively, which was funded primarily by proceeds from equity financings. There is no assurance that such financing will be available in the future. These factors raise substantial doubt about the Company's ability to continue as a going concern within one year after the date that the financial statements are issued. The Company is currently pursuing the following sources of short and long-term working capital: 1. The Company is holding preliminary discussions with parties who are interested in licensing, purchasing the rights to or establishing a joint venture to commercialize applications of the Company's technology. 2. The Company is seeking growth capital from certain 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. 3. The Company is holding discussions with investors and investment banks to obtain debt and/or equity financing. 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.

Significant Accounting Policies

Significant Accounting Policies	3 Months Ended
	Mar. 31, 2016
Notes to Financial Statements
Note 3 - Significant Accounting Policies	In the opinion of management, all adjustments necessary for a fair statement of (a) the results of operations for the three month periods ended March 31, 2016 and 2015, (b) the financial position at March 31, 2016 and December 31, 2015, and (c) the cash flows for the three month periods ended March 31, 2016 and 2015, have been made. The significant accounting policies followed are: Use of estimates Cash and cash equivalents Accounts receivable Other receivables Inventory Property and equipment Intangible assets Long-lived assets Government Funding Research and development expenses and funding proceeds Stock issuance costs Common stock Revenue recognition In certain instances, the Company's ConsERV system product may carry a limited warranty of up to two years for all parts contained therein with the exception of 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 March 31, 2016 and December 31, 2015, which is included in accrued expenses on the balance sheet. Royalty revenue is recognized as earned. The Company recognized royalty revenue of $21,500 and $0 for the three months ended March 31, 2016 and 2015, 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 $29,919 and $30,753 for the three months ended March 31, 2016 and 2015, respectively. The Company accounts for revenue arrangements with multiple elements under the provisions of the Financial Accounting Standards Boards (FASB) Accounting Standards Codification (ASC) Topic 605-25, "Revenue Recognition-Multiple-Element Arrangements." 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. Financial instruments Fair value Measurement and Disclosures" · Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. · Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g. interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means. · Level 3 - Inputs that are both significant to the fair value measurement and unobservable. The Company does have any financial instruments carried at fair value. The respective carrying values of certain on-balance sheet financial instruments approximated their fair values due to the short-term nature of these instruments. These financial instruments include cash and cash equivalents, accounts receivable, other receivables, accounts payable, accrued compensation and accrued expenses. Income taxes The Company identifies and evaluates uncertain tax positions, if any, and recognizes the impact of uncertain tax positions for which there is a less than more-likely-than-not probability of the position being upheld when reviewed by the relevant taxing authority. Such positions are deemed to be unrecognized tax benefits and a corresponding liability is established on the balance sheet. The Company has not recognized a liability for uncertain tax positions. If there were unrecognized tax benefit, the Company would recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. The Company's 2012, 2013 and 2014 tax years remain open and subject to examination by the Internal Revenue Service. Derivative Financial Instruments "Derivative and Hedging" Freestanding warrants issued by the Company in connection with the issuance or sale of debt and equity instruments are considered to be derivative instruments and are evaluated and accounted for in accordance with the provisions of ASC 815. Pursuant to ASC 815, an evaluation of specifically identified conditions is made to determine whether fair value of warrants issued is required to be classified as equity or as a derivative liability. Earnings (loss) per share Recent Accounting Pronouncements In February 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases. The new standard establishes right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company is currently evaluating the impact of the pending adoption of the new standard on its financial statements. In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (ASU 2014-09), which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgement and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP. The standard is effective for annual periods beginning after December 15, 2017, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). In July 2015, the FASB voted to defer the effective date of ASU 2014-09 for all entities by one year. The Company is currently evaluating the impact of the adoption of ASU 2014-09 on its financial statements and has not yet determined the method by which it will adopt the standard in 2018. Reclassifications

Accrued Expenses

Accrued Expenses	3 Months Ended
	Mar. 31, 2016
Notes to Financial Statements
Note 4 - Accrued Expenses	Accrued expenses consists of the following: March 31, 2016 December 31, 2015 Accrued expenses, other $ 18,235 $ 48,587 Accrued warranty costs 91,531 91,531 $ 109,766 $ 140,118

Related Party Transactions

Related Party Transactions	3 Months Ended
	Mar. 31, 2016
Notes to Financial Statements
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 in each of the three months ended March 31, 2016 and 2015. The Company has accrued compensation due to the Chief Executive Officer as of March 31, 2016 and December 31, 2015 of $1,356,127 and $1,321,958, respectively, included in accrued compensation and related benefits in the balance sheet. On February 27, 2015, the Company and Timothy N. Tangredi, the Company's Chief Executive Officer, entered into an amendment to Mr. Tangredi's Amended and Restated Employment Agreement. Currently, the Company has non-interest bearing accrued compensation due to the Chief Executive Officer for deferred salaries earned and unpaid as described above. The amendment provides that, if at any time during a calendar year, the unpaid compensation is greater than $500,000, Mr. Tangredi must convert $100,000 of unpaid compensation into the Company's common stock during such calendar year. The conversion rate shall be equal to 75% of the average closing price for the Company's common stock for the 30 trading days prior to the date of conversion. The Company shall also pay Mr. Tangredi a cash payment equal to 20% of the compensation income incurred as a result of the conversion. Further, at any time any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934) becomes the "beneficial owner" (as defined in Rules 13(d)-3 and 13(d)-5 under such Act) of greater than 40% of the then-outstanding voting power of the voting equity interests or a person or group initiate a tender offer for the Company's common stock, Mr. Tangredi may convert unpaid compensation to Class A Convertible Preferred Stock of the Company at $1.50 per share. The Board of Directors waived the requirement to convert $100,000 of unpaid compensation into common stock during 2015. On April 24, 2014, the Company entered into a Distribution Agreement (the "Distribution Agreement") with SoEX (Hong Kong) Industry & Investment Co., Ltd., a Hong Kong corporation ("Soex"). The Distribution Agreement was a covenant included in a Securities Purchase Agreement, dated January 21, 2014, between the Company and Soex, pursuant to which Soex purchased 37,500,000 shares of the Company's common stock, equal to approximately 31% of the Company's issued and outstanding shares of common stock as of March 31, 2016. Pursuant to the Distribution Agreement, in exchange for $500,000 to be paid by October 20, 2014, royalty payments and a commitment from Soex to purchase nano-material membrane and other products from the Company, Soex obtained the right to distribute and market the Company's products for incorporation in energy recovery ventilators sold and installed in commercial, industrial and residential buildings, transportation facilities and vehicles (the "Field") in mainland China, Hong Kong, Macao and Taiwan (the "Territory"). Further, Soex received an exclusive license in the Territory to use the Company's intellectual property in the manufacture and sale of its products in the Field and Territory and to purchase its requirements of nano-material membrane only from the Company, subject to terms and conditions of the Distribution Agreement. During 2014, $50,000 of the $500,000 license fee was received. Pursuant to the Distribution Agreement, Soex was required to pay the Company $500,000, issue the Company 25% of the equity of a newly-created company, Soex (Beijing) Environmental Protection Technology Company Limited and pay the Company royalties. Soex only paid the Company $50,000 of the required $500,000, did not issue the required equity and did not pay any required royalties. Effective June 12, 2015, the Company's Board of Directors ratified the termination of the Distribution Agreement, dated April 24, 2014, with Soex as a result of a breach of the Distribution Agreement by Soex. There are no early termination penalties for the termination of the Distribution Agreement. The deferred revenue for this Distribution Agreement was recognized as income upon the termination of the agreement in June 2015. The Company recognized license fee revenue of $0 and $833 for this Agreement during the three months ended March 31, 2016 and 2015, respectively. The Company is pursuing legal action against Soex for breach of the Distribution Agreement as well as the Securities Purchase Agreement entered into in January 2014 (See Note 9 Litigation). In December 2015, the Company reported that it entered into a Share Exchange Agreement (the "Exchange Agreement"), dated as of December 24, 2015 but effective as of December 1, 2015, with Open Systems Control, a California corporation (the "Shareholder"), and Synpower Corporation Ltd., a Hong Kong corporation ("Synpower") through the issuance of 1,000,000 shares of common stock at $.19 per share which was recorded as Investment in China Operating Company on the balance sheet at December 31, 2015. Pursuant to the Exchange Agreement, the Company purchased from the Shareholder all of the equity ownership in Synpower. At the time of the Exchange Agreement, Synpower was the owner of 62% of Jixiun-Cast Ltd., an engineering company organized in the People's Republic of China ("Cast"). The Company's plan was to use Cast for its manufacturing and distribution operations in China. On March 7, 2016, the Company and Synpower rescinded the Exchange Agreement, as of December 1, 2015, as a result of the discovery of an undisclosed event, not discoverable in the due diligence, related to Cast's ability to function in China as an operating entity for the Company. As a result of the event, the Shareholder breached the representations, warranties and covenants made by the Shareholder in the Exchange Agreement. As a result of rescission, which was agreed to by the Shareholder, the transaction was unwound as of December 1, 2015, the Company will return the equity interest in Synpower to an entity identified by the Shareholder, and the shares issued to the Shareholder were returned to the Company and will be cancelled pending final notification of cancellation from the Shareholder. As a result of the rescission and return of shares, the Company reduced the Investment in China Operating Company and recorded Treasury Stock of $190,000 during the three months ended March 31, 2016. The financial statements of Synpower and its subsidiary, Cast, were not consolidated with the Company's financial statements for the period from December 1, 2015 through March 7, 2016 because the Company never had control of Synpower or Cast. 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.

Equity Transactions

Equity Transactions	3 Months Ended
	Mar. 31, 2016
Notes to Financial Statements
Note 6 - Equity Transactions	Preferred Stock On March 5, 2015, the Company amended its Certificate of Incorporation to increase the number of authorized shares to 250,000,000, consisting of 240,000,000 shares of common stock and 10,000,000 shares of preferred stock, and to cancel the designated but unissued Series A-D Preferred Stock and create a new series of preferred stock designated as the "Class A Preferred Stock". There are no shares of Class A Preferred Stock currently issued by the Company. Any holder of Class A Preferred Stock shall entitle the holder thereof to 150 votes on all matters submitted to a vote of the stockholders of the Company. The Class A Preferred Stock is convertible into common stock at a conversion price equal to 75% of the average closing price of the Company's common stock for the 30 trading days prior to the holder's election to convert. Options In June 2000, November 2009 and February 2015, the Company's Board of Directors adopted, and the shareholders approved, the 2000 Plan, 2009 Plan and 2015 Plan, respectively (together the "Plans"). The Plans provide for the granting of options to qualified employees of the Company, independent contractors, consultants, directors and other individuals. The Company's Board of Directors approved and made available 11,093,886, 15,000,000 and 10,000,000 shares of common stock to be issued pursuant to the 2000 Plan, 2009 Plan and 2015 Plan, respectively. The Plans permit grants of options to purchase common shares authorized and approved by the Company's Board of Directors. The following table summarizes the information relating to outstanding stock option activity during 2016: Common Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term (in years) Aggregate Intrinsic Value Outstanding at December 31, 2015 19,215,058 $ 0.28 4.89 $ 9,000 Granted - - - - Forfeited/expired (1,270,000 ) $ 0.29 - - Exercised - - - - Outstanding at March 31, 2016 17,945,058 $ 0.28 4.97 $ 23,000 Exercisable at March 31, 2016 17,945,058 $ 0.28 4.97 $ 23,000 Stock compensation expense was $0 and $3,186 for the three months ended March 31, 2016 and 2015, respectively. No shares were granted or vested during the three months ended March 31, 2016 and 2015. As of March 31, 2016, there was no unrecognized employee stock-based compensation expense related to non-vested stock options. Warrants At March 31, 2016, the Company had outstanding warrants to purchase the Company's common stock which were issued in connection with stock purchases. Information relating to these warrants is summarized as follows: Remaining Number Outstanding Weighted Average Remaining Life (in years) Weighted Average Exercise Price Stock Purchases 6,547,858 1.52 $ 0.36

Deferred Revenue

Deferred Revenue	3 Months Ended
	Mar. 31, 2016
Notes to Financial Statements
Note 7 - Deferred Revenue	On October 30, 2012, the Company and MG Energy LLC, a Delaware limited liability company ("MG Energy"), entered into a License and Supply Agreement (the "Agreement"), effective October 26, 2012. Pursuant to the Agreement, the Company licensed certain intellectual property and improvements to MG Energy, 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 North America and South America in exchange for the cancellation of $2,034,521 of debt due to MG Energy. MG Energy also agreed to purchase its requirements of certain ConsERV products from the Company for MG Energy's use, pursuant to the terms and conditions of the Agreement. MG Energy will also pay royalties, as defined, to the Company on the net sales of each product or system sold. The term of the Agreement will expire upon the last to expire of the underlying patent rights for the licensed technology. The Company has identified all off the deliverables under the Agreement and has determined the significant deliverables to be the license for the intellectual property and the supply services. In determining the units of accounting, the Company evaluated whether the license has stand-alone value to MG Energy based upon consideration of the relevant facts and circumstances of the Agreement. The Company determined that the license does not have stand-alone value to the licensee and, therefore, should be combined with the supply agreement as one unit of accounting. The initial payment for the license agreement was treated as an advance payment and is being recognized over the performance period of the supply agreement. The Company recognized license revenue of $29,919 in each of the three months ended March 31, 2016 and 2015. Deferred revenue for this agreement was $1,623,928 and $1,653,848 at March 31, 2016 and December 31, 2015, respectively. Royalties are recognized as revenue when earned. The Company recognized royalty revenue of $21,500 and $0 for the three months ended March 31, 2016 and 2015, respectively. MG Energy entered into a sublicense with Multistack, LLC. For the three months ended March 31, 2016 and 2015, Multistack LLC and Dais (Beijing) New Energy Technology Co., Ltd. accounted for approximately 78% and 20% and 90% and 1% of the Company's sales revenue, respectively. At March 31, 2016 and December 31, 2015, amounts due from Multistack were approximately 85% and 61%, of total accounts receivable, respectively. On April 24, 2014, the Company entered into a Distribution Agreement with SoEX (Hong Kong) Industry & Investment Co., Ltd., as discussed in Note 5 Related Party Transactions. The deferred revenue for this Distribution Agreement was $49,167 as of December 31, 2014. The remaining amount of deferred revenue was recognized as income upon the termination of the Distribution Agreement in June 2015. The Company recognized license fee revenue of $0 and $834 for this Agreement during the three months ended March 31, 2016 and 2015, respectively.

Securities Purchase Agreement

Securities Purchase Agreement	3 Months Ended
	Mar. 31, 2016
Notes to Financial Statements
Note 8 - Securities Purchase Agreement	On December 15, 2014, the Company entered into a Securities Purchase Agreement (the "SPA") with two investors, Hong Kong SAGE Technology Investment Co., Limited and Hong Kong JHSE Technology Investment Co., Limited, both with principal offices in Hong Kong (the "Purchasers"). Pursuant to the SPA, the Company sold 18,000,000 shares of the Company's common stock, $0.01 par value per share for $2,750,000, at approximately $0.153 per share pursuant to Regulation S. The investors were issued 18,000,000 shares after the Company received all funds in the first quarter of 2015. The SPA also provided for the issuance of 20,333,334 shares of the Company's common stock to the Purchasers for 51% of the equity of an existing company in China (the "Operating Company") upon the completion of the following conditions: (1) the Purchasers shall have capitalized the Operating Company with $3,000,000 of registered capital or a valuation of assets at or above $3,000,000; (2) the Purchasers shall have completed the legal registration of shares of the Operating Company owned by the parties with the Company owning 51% of the Operating Company and the Purchasers jointly, and/or by and through their respective third party designees, owning a total of 49% of the Operating Company; and (3) the Operating Company, the Purchasers and the Company shall have executed an HVAC Services Agreement with $60,000,000 of revenues in greater China over a three year period with such HVAC Services Agreement having standard terms and conditions acceptable to the Company and the Purchasers. On December 7, 2015, the Company amended the SPA to reduce the number of shares to be issued to the Purchasers. Pursuant to terms of the Amendment, the Purchasers will receive 10,000,000 shares of the Company's common stock over three years as they introduce orders for $60,000,000 to a subsidiary located in China, created or acquired by the Company. The Company will own greater than 51% of such subsidiary. The parties are currently negotiating sales contracts.

Litigation

Litigation	3 Months Ended
	Mar. 31, 2016
Notes to Financial Statements
Note 9 - 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 us 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 the Company's 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, the Company entered into a Distribution Agreement (the "Distribution Agreement"), with Soex to distribute certain of the Company's products in China as discussed in Note 5. 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 has not received any royalties from Soex. Soex is in breach of the Distribution Agreement. As 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 Securities Purchase Agreement 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 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, the Company terminated the Distribution Agreement. As provided in Section 14(e) of the Distribution Agreement, the Company has the right to enforce any obligation due to it by the 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 the Company 25% of the equity of SOEX (Beijing) Environmental Protection Technology Company Limited. As provided in Section 14(b), neither the Company 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. Further, in consideration of the issuance of the Shares to Soex and the equity to Zan under the Soex SPA was the covenant that Soex would enter into a Distribution Agreement and establish a subsidiary in China and issue shares to the Company in the China Subsidiary. With Soex's Equity Default, Soex breached the Soex SPA and the Company is seeking return of the Shares from Soex in the lawsuit filed in July 2015. The litigation has been 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). While the Company believes it has a strong case against Soex as a result of its breaches of the agreements, the Company cannot make any predictions about the success of its action against Soex or whether or not Soex will have the assets to satisfy any judgment.

Significant Accounting Polici16

Significant Accounting Policies (Policies)	3 Months Ended
	Mar. 31, 2016
Significant Accounting Policies 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.
Cash and cash equivalents	For the 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 has never experienced losses related to these balances.
Accounts receivable	Accounts receivable consist primarily of receivables from the sale of the Company's ERV products and royalties due under license and supply agreements. The Company regularly reviews accounts receivable for any bad debt based on an analysis of the Company's collection experience, customer credit worthiness and current economic trends. After all attempts to collect a receivable have failed, the receivable is written off against the allowance. Based on management's review of accounts receivable, an allowance for doubtful accounts of $3,261 has been recorded at March 31, 2016 and December 31, 2015.
Other receivables
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 March 31, 2016 and December 31, 2015, the Company had $2,937 and $2,560 of in-process inventory, respectively. A reserve is recorded for any inventory deemed excessive or obsolete. No reserve is considered necessary at March 31, 2016 and December 31, 2015.
Property and equipment
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 to 20 years. Patent amortization expense was $5,612 and $5,951 for the three months ended March 31, 2016 and 2015, respectively. Based on current capitalized costs, total patent amortization expense is estimated to be approximately $24,000 per year for the next five years.
Long-lived assets
Government funding	Government funding represents grants from the U.S. Department of Defense and U.S. Department of Energy and are recognized when there is reasonable assurance that the funding will be received and conditions associated with the funding are met. When fundings are received related to property and equipment, the Company reduces the basis of the assets on the balance sheet, resulting in lower depreciation expense over the life of the associated asset. Fundings received related to expenses are reflected as a reduction of the associated expense in the period in which the expense is incurred.
Research and development expenses and grant proceeds	Expenditures for research and development are expensed as incurred. The Company incurred research and development costs of $335,269 and $251,290 for the three months ended March 31, 2016 and 2015, respectively. The Company accounts for proceeds received from government fundings 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 $148,638 and $54,360 for the three months ended March 31, 2016 and 2015, respectively.
Stock issuance costs
Common stock	The Company records common stock issuances when all of the legal requirements for the issuance of such common stock have been satisfied.
Revenue recognition	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 two years for all parts contained therein with the exception of 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 March 31, 2016 and December 31, 2015, which is included in accrued expenses on the balance sheet. Royalty revenue is recognized as earned. The Company recognized royalty revenue of $21,500 and $0 for the three months ended March 31, 2016 and 2015, 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 $29,919 and $30,753 for the three months ended March 31, 2016 and 2015, respectively. The Company accounts for revenue arrangements with multiple elements under the provisions of the Financial Accounting Standards Boards (FASB) Accounting Standards Codification (ASC) Topic 605-25, "Revenue Recognition-Multiple-Element Arrangements." 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.
Financial instruments	The Company accounts for financial instruments in accordance with FASB Accounting Standards Codification (ASC) 820 " Fair value Measurement and Disclosures" · Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. · Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g. interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means. · Level 3 - Inputs that are both significant to the fair value measurement and unobservable. The Company does have any financial instruments carried at fair value. The respective carrying values of certain on-balance sheet financial instruments approximated their fair values due to the short-term nature of these instruments. These financial instruments include cash and cash equivalents, accounts receivable, other receivables, accounts payable, accrued compensation and accrued expenses.
Income taxes	The Company identifies and evaluates uncertain tax positions, if any, and recognizes the impact of uncertain tax positions for which there is a less than more-likely-than-not probability of the position being upheld when reviewed by the relevant taxing authority. Such positions are deemed to be unrecognized tax benefits and a corresponding liability is established on the balance sheet. The Company has not recognized a liability for uncertain tax positions. If there were unrecognized tax benefit, the Company would recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. The Company's 2012, 2013 and 2014 tax years remain open and subject to examination by the Internal Revenue Service.
Derivative financial instruments	The Company does not use derivative instruments to hedge exposure to cash flow, market or foreign currency risk. Terms of convertible promissory note instruments are reviewed to determine whether or not they contain embedded derivative instruments that are required under ASC 815 "Derivative and Hedging" Freestanding warrants issued by the Company in connection with the issuance or sale of debt and equity instruments are considered to be derivative instruments and are evaluated and accounted for in accordance with the provisions of ASC 815. Pursuant to ASC 815, an evaluation of specifically identified conditions is made to determine whether fair value of warrants issued is required to be classified as equity or as a derivative liability.
Earnings (loss) per share
Recent accounting pronouncements	T In February 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases. The new standard establishes right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company is currently evaluating the impact of the pending adoption of the new standard on its financial statements. In May 2014, the FASB issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (ASU 2014-09), which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgement and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP. The standard is effective for annual periods beginning after December 15, 2017, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). In July 2015, the FASB voted to defer the effective date of ASU 2014-09 for all entities by one year. The Company is currently evaluating the impact of the adoption of ASU 2014-09 on its financial statements and has not yet determined the method by which it will adopt the standard in 2018.
Reclassifications

Accrued Expenses (Tables)

Accrued Expenses (Tables)	3 Months Ended
	Mar. 31, 2016
Accrued Expenses Tables
Accrued expenses and other expenses	Accrued expenses consists of the following: March 31, 2016 December 31, 2015 Accrued expenses, other $ 18,235 $ 48,587 Accrued warranty costs 91,531 91,531 $ 109,766 $ 140,118

Stock Options and Warrants (Tab

Stock Options and Warrants (Tables)	3 Months Ended
	Mar. 31, 2016
Stock Options And Warrants Tables
Outstanding stock options activity	The following table summarizes the information relating to outstanding stock option activity during 2016: Common Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term (in years) Aggregate Intrinsic Value Outstanding at December 31, 2015 19,215,058 $ 0.28 4.89 $ 9,000 Granted - - - - Forfeited/expired (1,270,000 ) $ 0.29 - - Exercised - - - - Outstanding at March 31, 2016 17,945,058 $ 0.28 4.97 $ 23,000 Exercisable at March 31, 2016 17,945,058 $ 0.28 4.97 $ 23,000
Warrants	At March 31, 2016, the Company had outstanding warrants to purchase the Company's common stock which were issued in connection with stock purchases. Information relating to these warrants is summarized as follows: Remaining Number Outstanding Weighted Average Remaining Life (in years) Weighted Average Exercise Price Stock Purchases 6,547,858 1.52 $ 0.36

Going Concern and Management'19

Going Concern and Management's Plans (Details Narrative) - USD ($)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015
Going Concern And Managements Plans Details Narrative
Net loss	$ (389,755)	$ (428,330)
Accumulated deficit	(43,778,234)		$ (43,388,479)
Working capital	94,739
Stockholders' deficit	(2,471,726)		$ (1,891,971)
Net cash used by operating activities	(265,551)	(933,182)
Cash and cash equivalents, end of period	$ 382,055	$ 1,946,257

Significant Accounting Polici20

Significant Accounting Policies (Details Narrative) - USD ($)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015
Allowance for doubtful accounts	$ 3,261		$ 3,261
Inventory in process	2,937		$ 2,560
Depreciation expense	16,399	$ 10,407
Patent amortization expense	5,612	5,951
Research and development costs, incurred	335,269	251,290
Grant proceeds against research and development expenses	148,638	54,360
Warranty accrual expense	91,531	91,531
Revenue recognition from license agreements	29,919	30,753
Revenue recognition from royalties	$ 21,500	$ 0
Common share excluded from diluted earnings per share	24,492,916	35,836,512
Minimum [Member]
Patents estimated useful life	17 years
Property and equipment estimated useful life	3 years
Maximum [Member]
Patents estimated useful life	20 years
Property and equipment estimated useful life	7 years

Accrued Expenses, Other (Detail

Accrued Expenses, Other (Details) - USD ($)	Mar. 31, 2016	Dec. 31, 2015
Accrued Expenses Other Details
Accrued expenses, other	$ 18,235	$ 48,587
Accrued warranty costs	91,531	91,531
Accrued Expenses	$ 109,766	$ 140,118

Related Party Transactions (Det

Related Party Transactions (Details Narrative) - USD ($)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015
Rent expense recognized	$ 12,198	$ 12,198
Accrued compensation	1,356,127		$ 1,321,958
License fee revence	$ 0	$ 833
Investment in China Operating Company			$ 190,000
Issuance of common stock for Investment in China Operating Company, Shares			1,000,000
Issuance of common stock for Investment in China Operating Company, Per Share			$ 0.19
Soex [Member]
Purchased outstanding shares			37,500,000

Equity Transactions (Details)

Equity Transactions (Details)	3 Months Ended
	Mar. 31, 2016USD ($)$ / sharesshares
Information relating to outstanding stock options activity with employees
Outstanding, Beginning Balance | shares	19,215,058
Common shares granted | shares
Common shares expired/forfeited | shares	(1,270,000)
Common shares exercised | shares
Outstanding, Ending Balance | shares	17,945,058
Exercisable, Ending Balance | shares	17,945,058
Weighted average exercise price of shares outstanding, Beginning Balance | $ / shares	$ 0.28
Weighted average exercise price of shares Granted | $ / shares
Weighted average exercise price of shares exercised | $ / shares	$ 0.29
Weighted average exercise price of shares expired/forfeited | $ / shares
Weighted average exercise price of shares outstanding, Ending Balance | $ / shares	$ 0.28
Weighted average exercise price of shares exercisable, Ending Balance | $ / shares	$ 0.28
Weighted average remaining contractual term (in years) of shares outstanding, Begining Balance	4 years 10 months 21 days
Weighted average remaining contractual term (in years) of shares outstanding, Ending Balance	4 years 11 months 19 days
Weighted average remaining contractual term (in years) of shares exercisable, Ending Balance	4 years 11 months 19 days
Aggregate intrinsic value of shares outstanding, Beggining Balance | $	$ 9,000
Aggregate intrinsic value of shares outstanding, Ending Balance | $	23,000
Aggregate intrinsic value of shares exerciseable | $	$ 23,000

Equity Transactions (Details 1)

Equity Transactions (Details 1)	3 Months Ended
	Mar. 31, 2016USD ($)$ / shares
Remaining Number Outstanding	$ 14,546,858
Weighted Average Remaining Life	4 years 11 months 19 days
Warrants Stock Purchases [Member]
Remaining Number Outstanding	$ 6,547,858
Weighted Average Remaining Life	1 year 6 months 7 days
Weighted Average Exercise Price | $ / shares	$ 0.36

Equity Transactions (Details Na

Equity Transactions (Details Narrative) - USD ($)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015
Equity Transactions Details Narrative
Preferred stock par value	$ 0.01		$ 0.01
Preferred stock shares authorized	10,000,000		10,000,000
Stock based compensation expense		$ 3,186

Deferred Revenue (Details Narra

Deferred Revenue (Details Narrative) - USD ($)	3 Months Ended
	Mar. 31, 2016	Mar. 31, 2015	Dec. 31, 2015
License revenue	$ 29,919	$ 29,919
Deferred revenue	1,623,928		$ 1,653,848
Royalty revenue	$ 21,500	$ 0
Multistack, LLC [Member]
Percentage of revenue	78.00%	20.00%
Percentage of accounts receivable	85.00%	61.00%
Soex [Member]
License revenue	$ 0	$ 834
Dais (Beijing) New Energy Technology [Member]
Percentage of revenue	90.00%	1.00%