DAIS ANALYTIC CORP (Form: S-1, Received: 08/11/2008 16:22:47)

As filed with the Securities and Exchange Commission on August 11, 2008

Registration No. 333-__________

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form S-1

REGISTRATION STATEMENT UNDER

THE SECURITIES ACT OF 1933

DAIS ANALYTIC CORPORATION

(Exact Name of Registrant as Specified in Its Charter)i

New York	3999	14-1760865
(State or other jurisdiction of	(Primary Standard Industrial	(I.R.S. Employer
incorporation or organization)	Classification Code Number)	Identification Number)

	State of New York – Secretary of State, Department of State
11552 Prosperous Drive	One Commerce Plaza
Odessa, FL 33556	99 Washington Avenue, 6 th Floor, Albany, New York 12231
Telephone: (727) 375-8484 Facsimile: (727) 375-8485	Telephone: (518) 473-2492Facsimile: (518) 474-1418
(Address, Including Zip Code, and Telephone Number,	(Name, Address, Including Zip Code and Telephone Number,
Including Area Code, of Principal Executive Offices)	Including Area Code, of Agent for Service)

As Soon as Practicable After the Effective Date of this Registration Statement.

(Approximate Date of Commencement of Proposed Sale to the Public)

Copies of communications to:

Addison K. Adams, Esq.

Richardson & Patel LLP

10900 Wilshire Boulevard, Suite 500

Los Angeles, California 90024

Telephone: (310) 208-1182 Facsimile (310) 208-1154

APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: AS SOON AS PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.

If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. R

If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. £

If this form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. £

If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. £

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a small reporting company. See definitions of “large accelerated filer,” “accelerated filed” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o	Accelerated filer o
Non-accelerated filer o (Do not check if a smaller reporting company)	Smaller reporting company R

CALCULATION OF REGISTRATION FEE

Title of Each Class of Securities to be Registered	Amount to be Registered	Proposed Maximum Offering Price Per Unit	Proposed Maximum Aggregate Offering Price	Amount of Registration Fee
Common stock, par value $0.01 per share	869,606	$0.33 (1)	$286,969	$11.28
Common stock, par value $0.01 per share underlying secured convertible notes	14,750,000	$0.33 (2)	$4,867,500	$191.29
Common stock, par value $0.01 per share underlying warrants	17,133,484	$0.33 (2)	$5,654,050	$222.20


Total	32,753,090		$10,808,519	$425

Pursuant to Rule 416 under the Securities Act, the shares being registered hereunder include such indeterminate number of shares of common stock as may be issuable with respect to the shares being registered hereunder as a result of stock splits, stock dividends or similar transactions affecting the shares to be offered by the Selling Shareholders.

(1) Estimated solely for the purpose of calculating the registration fee under Rule 457(c) promulgated under the Securities Act of 1933, as amended, based upon the average of the bid and ask prices of the Registrant’s common stock on August 5, 2008 as quoted on the Pink Sheets.

(2) Calculated pursuant to Rule 457(c) under the Securities Act, for the purpose of calculating the registration fee pursuant to Rule 457(g) under the Securities Act.

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.

SUBJECT TO COMPLETION, DATED AUGUST 11, 2008

PRELIMINARY PROSPECTUS

32,753,090 Shares of Common Stock

DAIS ANALYTIC CORPORATION

This prospectus covers the resale of up to 32,753,090 shares of common stock, $0.01 par value, (the “Common Stock”) of Dais Analytic Corporation, a New York Corporation (the “Company”, “Dais Analytic”, “we”, “us”, “our” shall refer to Dais Analytic Corporation) by the selling shareholders (the “Selling Shareholders”) identified in this prospectus under the section titled “Selling Shareholders.” Of the 32,753,090 shares of common stock being registered, 869,606 shares are currently outstanding, 14,750,000 are issuable upon the conversion by Selling Shareholders of certain secured convertible notes and 17,133,484 shares are issuable upon exercise by Selling Shareholders of certain warrants.

We will pay all expenses, except for the brokerage expenses, fees, discounts and commissions, which will all be paid by the Selling Shareholders, incurred in connection with the offering described in this prospectus. Our common stock is more fully described in the section of this prospectus entitled “Description of Securities.”

We will not receive any proceeds from the sale of the shares of common stock. We will not receive any proceeds upon conversion of the notes. Of the warrants, warrants representing 16,542,308 shares contain both cash and cashless exercise provisions. If all of the warrants are exercised for cash (and assuming there are no adjustments to the purchase price prior to exercise) we will receive approximately $4,462,647 in gross proceeds. Cash proceeds we receive from the exercise of the warrants will be used for general corporate purposes, including working capital. We have agreed to bear all expenses of registration of the common stock offered hereby. As a result of this offering and upon effectiveness of the registration of the common stock we will be an issuer filing periodic reports under Section 13 of the Securities Exchange Act of 1934.

Our common stock is quoted on Pink OTC Markets Inc.’s Pink Sheets under the symbol “DYLT.PK.” The last reported sales price of the common stock as reported on the Pink Sheets on August 5, 2008, was $0.31 per share.

The prices at which the Selling Shareholders may sell the shares of common stock that are part of this offering will be determined by the prevailing market price for the shares at the time the shares are sold, a price related to the prevailing market price, at negotiated prices or prices determined, from time to time, by the Selling Shareholders. See “Plan of Distribution.” Several of the Selling Shareholders are broker-dealers or affiliates of broker-dealers. The Selling Shareholders may be deemed “underwriters” within the meaning of the Securities Act of 1933, as amended, in connection with the sale of their common stock under this prospectus.

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Our executive offices are located at 11552 Prosperous Drive, Odessa Florida. Our telephone number is (727) 375-8484 and our facsimile number is (727) 375-8485. Our home page on the Internet may be found at www.daisanalytic.com. Information found on our website is not part of this prospectus.

An investment in the shares of our common stock being offered by this prospectus involves a high degree of risk. You should read the “Risk Factors” section beginning on page 9 before you decide to purchase any shares of our common stock.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

The date of this prospectus is August 11, 2008

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TABLE OF CONTENTS

	Page No.
Prospectus Summary	4
Risk Factors	9
Cautionary Statement Regarding Forward-Looking Statements	23
Use of Proceeds	24
Description of Business	24
Properties	30
Legal Proceedings	30
Directors, Executive Officers, Promoters and Control Persons	31
Executive Compensation; Corporate Governance	34
Security Ownership of Management and Certain Beneficial Owners	37
Certain Relationships and Related Transactions	41
Management's Discussion and Analysis of Financial Condition and Results of Operation	41
Market Price and Dividends on the Common Stock and Related Shareholder Matters	47
Description of Securities Being Registered	49
Selling Shareholders	50
Plan of Distribution	57
Interests of Named Experts and Counsel	58
Indemnification, Limitation on Liability and Disclosure of Commission Position on Indemnification for Securities Act	59
Where You Can Find Further Information	59
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	59
Index to Financial Statements	F-1

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PROSPECTUS SUMMARY

The following summary highlights selected information contained in this prospectus. This summary does not contain all the information you should consider before investing in the securities. Before making an investment decision, you should read the entire prospectus carefully, including the section entitled “Risk Factors” beginning on page 9 and the financial statements and notes to the financial statements beginning on page F-1.

Our Business

We were incorporated as New York corporation on April 8, 1993 as “Dais Corporation.” We changed our name to Dais Analytic Corporation on December 13, 1999.

We are a nanotechnology 1 materials company and have developed, patented, and are beginning to commercialize a series of nano-technology material based products. These materials can be adapted into a number of products that fill various needs in diverse market segments focused generally on energy and water uses. We believe that the use of our nano-structured products will generate an even greater number of products addressing wiser use of energy, creating potable water, personal safety, and protecting the environment. We have targeted four potential market opportunities for these products: Energy/Heating, Ventilation and Air Conditioning (“HVAC”), which is our ConsERV™ Energy Recovery Ventilator product, Water Desalination, Homeland Security, and Immersion Coatings.

ConsERV ™

ConsERV™ is an HVAC energy conservation product which, according to various tests, saves, in many instances, an average of up to 30% on HVAC operating costs, allows HVAC equipment to be up to 30% smaller, reducing peak energy usage by up to 20% and can simultaneously improve Indoor Air Quality (“IAQ”). The estimated technical market size for this type of HVAC product has been estimated by third parties 2 to exceed $1 billion in North America and over $3 billion internationally.

Most building codes mandate that commercial structures provide certain levels of fresh air ventilation determined by use and occupancy. Energy Recovery Ventilators (“ERV”), such as our ConsERV™ product, pre-condition the incoming ventilation air using energy removed from stale exhaust air. ConsERV™ has a core component made using our materials, and may be described as a high-performance ERV. It is used in conjunction with a building’s HVAC equipment.

ERVs are systems used by HVAC manufacturers to increase energy efficiencies in HVAC units by transferring heat and humidity between air flows. They do this by capturing a portion of the energy already used to heat or cool air that is being released to the outside and using it to condition the incoming air stream. In an air conditioning application, the heat and humidity that are part of the incoming air stream are transferred to the cool, dry exhaust air, thereby “pre-conditioning” the incoming air before it reaches the building’s air conditioning system. By preconditioning the incoming air, ERVs should increase the operating efficiency of the HVAC unit, thereby lowering the overall costs associated with heating and cooling buildings and potentially reducing the size and initial capital cost of the overall HVAC unit required.

1 Nanotechnology refers to a field of applied science and technology whose theme is the control of matter on the atomic and molecular scale, generally 100 nanometers or smaller, and the fabrication of devices or materials that lie within that size range.

2 Frost and Sullivan, June 2007, North American Energy Recovery Market Study.

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Based on third party test data 3 , we believe we have demonstrated that our ConsERV™ product, with its nano-structured materials, offers better total performance than other ERV products of which we are aware, with no moving parts and little or no cross-air stream contamination. Our ConsERV™ core product has received UL 900 recognition and Air-Conditioning, Heating, and Refrigeration Institute (“AHRI”) Standard 1060 certification. Our ConsERV™ product is compatible with most commercial HVAC units and requires only a small amount of additional HVAC technical expertise to install. We believe the purchase and installation costs of our ConsERV™ product is comparable to the cost of competing energy recovery products, and that our ConsERV™ product is more efficient in transferring moisture with lower life cycle maintenance costs.

Studies have shown that recent increases in the levels and overall volatility of energy prices in the United States (averaging in excess of 11% during 2007 4 ) have prompted renewed interest by corporate and political leaders, as well as the public at large, in energy conservation initiatives.

Achieving sales revenue growth from our ConsERV™ product is predicated on the success in five key areas:

· Achieving continued technological improvements in key materials to lower our ‘per unit’ cost structure.

· Completing outsourced manufacturing and assembly relationships which lower our ‘per unit’ cost structure.

· Securing HVAC equipment as well as ERV OEMs (or Licensees) with presence in existing and evolving sales channels to become our customers or partners to sell worldwide in-country/region.

· Recruiting the necessary people and infrastructure to support the sales growth of ConsERV – and the other products as they are introduced into their respective sales channels.

· Obtaining capital – in a timely manner – for the necessary steps outlined above to continue without interruption.

Our Other Nano-Structured Products

We plan to devote time to other uses of our nano-structured products in ways which are not disruptive to the key ConsERV™ effort. These product applications and activities include:

· Water Desalination: It is our belief that this application functions effectively to remove quantities of salt and other impurities from water to produce potable water using a design we believe uses less energy, is less expensive and is environmentally friendly. According to American Water Works, $30 billion will be spent on water desalination materials worldwide between now and 2015;

· Performance Fabrics: It is our expectation that such fabrics will passively manage the body’s heat and perspiration for comfort while simultaneously protecting the wearer from many chemical and biological hazards. According to studies, in 2006, the market for these types of products exceeded $3.6 billion annually worldwide and $1 billion in the U.S. with growth coming from first responders and military uses;

· Immersion Coatings: Based on our testing, we believe this application will inhibit mollusk, shellfish, and barnacles (“hard”) growth and accumulated algae and fronds (“soft”) growth on water-immersed devices. In 2005, we believe the market size for immersion coatings was $8 billion worldwide and in excess of $1 billion annually in the U.S.; and

3 Air-Conditioning, Heating, and Refrigeration Institute (“AHRI”) – May 2008 test results

4 “Rising demand for oil provokes new energy crisis,” New York Times, Nov. 9, 2007

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· Ultra-capacitor : Based on initial tests, we believe that using a combination of our nano-materials, a device may be able to be constructed which stores energy – similar to a battery – yet with projected increases in energy density and lifetimes. Key application is in transportation.

In addition, we have seven issued, patents, three pending U.S. patents (all owned by us) and two pending PCT applications that we co–own that relate to or are applications of our nano-structured polymer materials, a family of ionomeric nano-structured polymers that perform several functions, such as ion exchange and modification of surface properties. The polymers are selectively permeable to polar materials, such as water, in molecular form. We believe that selective permeability allows these materials to function as a nano-filter in various transfer applications. These materials are made from base polymer resins available from a number of commercial firms worldwide and possess unique and controllable properties, such as:

· Selectivity : It is our belief, that when the polymer is made there are small channels created that are 5 - 30 nanometers in diameter. There are two types of these channels; hydrophilic (water permeable), and hydrophobic (water impermeable). The channels can be chemically tuned to be highly selective for the ions or molecules they transfer. The high selectivity of the polymer can be adjusted to efficiently transfer water molecules from one face to the other using these channels.

· High transfer rate : We believe, based on in-house testing protocols and related results, the channels created when casting the materials into a nano-structured membrane have a transfer rate of water (“flux”) greater than 90% of an equivalent area of an open tube. Further, we believe that this feature is fundamental to the material’s ability to transfer moisture at the molecular level while substantially allowing or disallowing the transfer of other substances at a molecular level.

· Unique surface characteristic: The materials offer a surface characteristic that we believe inhibits the growth of bacteria, fungus and algae and prevents adhesives from attaching.

We believe the molecular selectivity, high transfer rate, and surface coating properties, coupled with our ability to produce the nano-structured materials at what we believe is an affordable price given their performance, distinguishes our technology and value-added products. By incorporating our nano-structured materials into existing products, we strive to address current real-world market needs by offering what we believe to be higher efficiencies and potentially improved price performance. For example, there are other energy recovery mechanisms available for HVAC that use coated paper or desiccant technology instead of our highly efficient nano-structured polymer materials.

We intend to finance our research and development, commercialization and distribution efforts and our working capital needs primarily through cash flow generated from operations and through funding from other sources, including debt financing and equity financing. While there can be no assurance that such sources will provide adequate funding for our operations, management believes such sources may be available to us.

The Offering

We are registering 32,753,090 shares of common stock for sale by Selling Shareholders. Of the 32,753,090 shares of common stock being registered, 869,606 shares are currently outstanding, 14,750,000 are issuable upon the conversion by Selling Shareholders of certain secured convertible notes and 17,133,484 shares are issuable upon exercise by Selling Shareholders of certain warrants. All shares of common stock being registered including shares underlying convertible notes and warrants, were issued to the Selling Shareholders in private transactions. Specifically, the various transactions underlying the shares of common stock being registered herein were as follows:

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29,500,000 shares of common stock comprised of 14,750,000 shares of common stock issuable upon the conversion of 9% secured convertible notes and 14,750,000 shares of common stock issuable upon exercise of certain outstanding warrants issued in connection with our December 2007 to January 2008 offering of 9% secured convertible notes and warrants (the “Financing”). The warrants issued in the Financing have a five-year term, cashless exercise provisions and anti-dilution protection. The anti-dilution protection includes standard protection for stock dividends or splits, reclassification or capital reorganization as well as protection with regards to additional issuances of common stock or common stock equivalents. The exercise price is $0.25 per share of common stock. Pursuant to the terms of the Financing we granted investors security interest in a significant portion of our assets.

1,400,000 shares of common stock issuable upon the exercise of warrants issued to the placement agent, Legend Merchant Group, Inc. (“Legend”), their sub-placement agent, and their affiliates and employees in connection with the Financing. Legend received a cash commission equal to 8% of the gross proceeds raised by Legend in the aggregate of $224,000, $34,000 of which was paid to Aegis Capital Corp., a sub placement agent. Legend also received warrants to purchase the number of shares of common stock equal to 10% of the number of warrant shares issued to the convertible note holders, for an aggregate of 1,400,000. Legend transferred some of its holdings under the warrant to its affiliates, employees and sub-placement agent, who further transferred some of its holdings to its employees. Warrants issued to Legend and its sub-placement agent are substantially the same as the cashless warrants issued in the Financing with the exception that the amount that may be exercised is tied to the percentage converted bears to the total of all notes issued.

784,616 shares of common stock comprised of 392,308 shares of common stock and 392,308 shares of common stock issuable upon exercise of certain outstanding warrants to Richardson & Patel LLP, our legal counsel, in connection with performance of legal services. Warrants issued to Richardson & Patel LLP are identical to the cashless warrants issued to placement agents in the Financing.

466,682 shares of common stock comprised of 38,005 shares of common stock issued and 428,677 shares of common stock issuable upon exercise of certain outstanding warrants in connection with our October 2005 to February 2007 offering of secured convertible promissory notes (the “Additional Financing”). The warrants issued in the Additional Financing have a five-year term and anti-dilution protection for stock dividends or splits, mergers, consolidation, reclassification, capital reorganization or a sale of substantially all of the Company’s assets. The exercise price is $0.55 per share of common stock and they do not provide for cashless exercise.

489,293 shares of common stock comprised of 439,293 shares of common stock and 50,000 shares of common stock issuable upon exercise of certain outstanding warrants to the Robb Charitable Trust in connection with a promissory note dated May 22, 2007 (the “Robb Trust Note”). Warrants issued to the Robb Charitable Trust are identical to warrants issued in the Additional Financing.

112,499 shares of common stock issuable upon exercise of certain outstanding warrants in connection with our December 2006 to March 2007 offering of common stock and warrants to various trust and family members of the Daily family (the “Daily Financing”). Warrants issued in the Daily Financing are identical to warrants issued in the Additional Financing with the exception that said warrants may be exercised immediately without limitation and have no provision for Company to compel exercise based on Company’s stock price.

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Securities offered	32,753,090 shares of common stock for sale by Selling Shareholders. Of the 32,753,090 shares of common stock being registered, 869,606 shares are currently outstanding, 14,750,000 are issuable upon the conversion by Selling Shareholders of certain secured convertible notes and 17,133,484 shares are issuable upon exercise by Selling Shareholders of certain warrants.

Common stock outstanding before the offering	11,877,184 shares, which do not include common shares underlying unexercised warrants, notes, options or other convertible securities.

Common stock to be outstanding after the offering	44,377,966 shares, including 32,753,090 shares being registered hereunder (including shares of common stock underlying convertible notes and warrants and assuming conversion of notes and exercise of warrants)

Intended use of the net proceeds of this offering	Of the warrants, warrants representing 16,542,308 shares contain both cash and cashless exercise provisions and have an exercise price of $0.25. The remaining warrants representing 591,177 shares of common stock are exercisable for $0.55 per share. If all of the warrants representing 17,133,484 shares are exercised for cash (and assuming there are no adjustments to the purchase price prior to exercise) we will receive approximately $4,462,647 in gross proceeds. We will not receive the proceeds of the common stock sold by the Selling Shareholders. We will receive no proceeds from the conversion of secured convertible notes. The proceeds received from the exercise of warrants will be used for working capital and general corporate purposes.

Risk factors	The offering involves a high degree of risk; see “Risk Factors” beginning on page 9 of this prospectus for a discussion of the risks and uncertainties in connection with investing in this offering.

Pink Sheets Trading Symbol	DLYT:PK

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RISK FACTORS

You should carefully consider the risks described below before making an investment decision. The risks described below are not the only ones facing the Company. Additional risks not presently known to us or that we currently deem immaterial may also impair our business operations. Our business, financial condition, results of operations or cash flows could be materially adversely affected by any of these risks. The valuation for the Company could also decline due to any of these risks, and you may lose all or part of your investment. This document also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of several factors, including the risks faced by us described below and elsewhere in this prospectus.

Risks Related to Our Business

We have a history of losses since our inception, we expect to sustain future losses and we may never achieve or sustain profitability.

We have incurred substantial losses since we were founded in 1993 and we anticipate we will continue to incur substantial losses in the future. As of December 31, 2007, we had an accumulated deficit of approximately $22.8 million. We have not achieved profitability in any year since inception and we expect to continue to incur net losses and negative free cash flow until we can produce sufficient revenues to cover our costs, which is not expected for several years. Furthermore, even if we achieve our projection of selling a greater number of ConsERV units in 2008, we anticipate that we will continue to incur losses until we can cost-effectively produce and sell our products to a wider market. Even if we do achieve profitability, we may be unable to sustain or increase our profitability in the future.

If we fail to raise additional capital, we will be unable to continue our business.

Our development efforts to date have consumed and will continue to require substantial amounts of capital in connection with our nano-technology materials based products technologies (including but not limited to ConsERV, water desalination, immersion coatings, and performance fabrics). Our channel penetration and product development programs require substantial capital outlays in order to reach full product commercialization. As we enter into more advanced product development we will need significant funding to complete product development and to pursue product commercialization.

Additionally, our auditors have expressed substantial doubt about our ability to continue as a going concern. Our ability to continue our business and our research, development and testing activities and commercialize our products in development is highly dependent on our ability to obtain additional sources of financing, including entering into and maintaining collaborative arrangements with third parties who have the resources to fund such activities. Any future financing, may result in substantial dilution to existing shareholders, and future debt financing, if available, may include restrictive covenants or may require us to grant a lender a security interest in any of our assets not already subject to an existing security interest. To the extent that we attempt to raise additional funds through third party collaborations and/or licensing arrangements, we may be required to relinquish some rights to our technologies or products currently in various stages of development, or grant licenses or other rights on terms that are not favorable to us. Any failure by us to timely procure additional financing or investment adequate to fund our ongoing operations, including planned product development initiatives, clinical studies and commercialization efforts, will have material adverse consequences on our business operations and as a result, on our consolidated financial condition, results of operations and cash flows.

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We have a history of operating losses, and we expect our operating losses to continue for the foreseeable future and we may not continue as a going concern.

We have generated limited revenue and have had operating losses since our inception. Please see the most recent three years summarized in the table below:

	2005	2006	2007
Product Revenue	$469,374	$828,991	$786,016
Licensing Revenue	$180,571	$84,143	$84,144
Gross Revenue	$650,908	$913,334	$870,160
Expenses & CGS	$1,697,029	$2,852,500	$3,104,145
Net Loss	$(1,046,121)	$(1,939,166)	$(2,233,985)

Our accumulated deficit was $22,797,323 as of December 31, 2007. The reports from Pender Newkirk & Company, L.L.C., our independent registered public accounting firm, relating to our December 31, 2007 financial statements contains Pender’s opinion that our recurring losses from operations, significant accumulated deficit and our failure to raise sufficient capital to fund our operations raise substantial doubt about our ability to continue as a going concern. There has been no change in the Company’s position relative to the foregoing statements. It is possible that we will never generate sufficient revenue to achieve and sustain profitability. Even if we achieve profitability, we may not be able to sustain or increase profitability. We expect our operating losses to continue for the foreseeable future as we continue to expend substantial resources to expand the ConsERV business while working to bring other, newer products to the market including research and development, design and testing, obtaining third party validations, identifying and securing collaborative partnerships, and executing to enter into strategic relationships.

The Company has financed its operations since inception primarily through private sales of its common and preferred stock, the issuance of convertible promissory notes, cash it received in connection with exercise of warrants, license agreements and the sale of certain fuel cell assets in 2002. As of December 31, 2007, the Company had $1,695,288 of current assets.

Even if the Company is successful in raising additional equity capital to fund its operations, the Company will still be required to raise an additional substantial amount of capital in the future to fund its development initiatives and to achieve profitability. The Company’s ability to fund its future operating requirements will depend on many factors, including the following:

•

its ability to obtain funding from third parties;

•

its progress on research and development programs;

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The time and costs required to gain third party approvals;

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The costs of manufacturing, marketing and distributing its products;

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the costs of filing, prosecuting and enforcing patents, patent applications, patent claims and trademarks;

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The status of competing products; and

•

The market acceptance and third-party reimbursement of its products, if successfully developed.

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Our future indebtedness could adversely affect our financial health.

We may incur a significant amount of indebtedness to finance our operations and growth. Any such indebtedness could result in negative consequences to us, including:

· increasing our vulnerability to general adverse economic and industry conditions;

· requiring that a portion of our cash flow from operations be used for the payment of interest on our debt, thereby reducing our ability to use our cash flow to fund working capital, capital expenditures and general corporate requirements;

· limiting our ability to obtain additional financing to fund future working capital, capital expenditures and general corporate requirements;

· limiting our flexibility in planning for, or reacting to, changes in our business;

· placing us at a competitive disadvantage to competitors who have less indebtedness; and

· as the majority of our assets are pledged to current debt holders the failure to meet the terms and conditions of the debt instruments, or a failure to timely rearrange the current terms and conditions of the notes, if so required, will result in the Company having no access to certain portions of its own technology.

If we fail to successfully address the challenges, risks and uncertainties associated with operating as a public company, our business, results of operations and financial condition would be materially harmed.

We will incur significant increased costs as a result of operating as a public company, and our management will be required to devote substantial time to new compliance initiatives. We have never operated as a public company. Once we begin reporting as a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. In addition, the Sarbanes-Oxley Act of 2002, as well as new rules subsequently implemented by the Securities and Exchange Commission (the “Commission”) and various stock exchanges, has imposed many new requirements on public companies, including requiring changes in corporate governance practices. Our management and other personnel will need to devote a substantial amount of time to these new compliance procedures.

We will incur significant increased costs as a result of operation as a public company, and our management will be required to devote substantial time to new compliance initiatives.

As a public company, we will be subject to the reporting requirements of the Securities and Exchange Act, the Sarbanes-Oxley Act and the rules promulgated by the Securities and Exchange Commission and the NASDAQ Global Market in response to the Sarbanes-Oxley Act. The requirements of these rules and regulations will significantly increase our legal and financial compliance costs, make some activities more difficult, time-consuming or costly and may strain our systems and resources. The Securities and Exchange Act requires, among other things, that we file annual, quarterly and current reports with respect to our business and financial condition. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal controls for financial reporting. In particular, commencing in 2009, we must perform system and process evaluation and testing of our internal controls over financial reporting to allow management and our independent registered public accounting firm to report on the effectiveness of our internal controls over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act. Our testing, or the subsequent testing by our independent registered public accounting firm, may reveal deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses. We expect to incur significant expense and devote substantial management effort toward ensuring compliance with Section 404. As a result, management’s attention may be diverted from other business concerns, which could have a material adverse effect on our business, financial condition and results of operations.

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Furthermore, we currently do not have an internal audit function, and we will need to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge. If we are not able to comply with the requirements of Section 404 in a timely manner, or if we or our independent registered public accounting firm identifies deficiencies in our internal controls that are deemed to be material weaknesses, the market price of our stock could decline and we could be subject to sanctions or investigations by NASDAQ, the SEC or other regulatory authorities, which would entail expenditure of additional financial and management resources.

These rules and regulations could also make it more difficult for us to attract and retain qualified independent members of our Board of Directors. Additionally, we expect these rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance. We may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. NASDAQ rules also require that a majority of our Board of Directors and all of the members of certain committees of the Board of Directors consist of independent directors. We cannot assure you that we will be able to expand our Board of Directors to include a majority of independent directors in a timely fashion to comply with the requirements of these rules.

Our ConsERV product is in small volume production and we may not be able to achieve cost effective large volume production.

Our ConsERV product continues to be built in small volumes. Our ability to achieve commercial production of that product is subject to significant uncertainties, including: completion of necessary product automation, developing experience in manufacturing and assembly on a large commercial scale; assuring the availability of raw materials and our key component parts from third party suppliers; and developing effective means of marketing and selling our product. Accordingly, it is too early to know whether we will be able to manufacture and sell our ConsERV product on a large scale in a profitable manner.

We may not be able to meet our product development and commercialization milestones.

We have established internal product and commercialization milestones and dates for achieving development goals related to technology and design improvements of our products. To achieve these milestones we must complete substantial additional research, development and testing of our products and our technologies. Product development and testing are subject to unanticipated and significant delays, expenses and technical or other problems. We cannot guarantee that we will successfully achieve our milestones. Our business strategy depends on acceptance by key market participants and end-users of our products.

Our plans and our ability to achieve profitability depend on acceptance by key market participants, such as vendors and marketing partners, and potential end-users of our products. We continue to educate designers and manufacturers of HVAC equipment with respect to our ConsERV product. More generally, the commercialization of our products may also be adversely affected by many factors that are out of our control, including:

· the willingness of market participants to try a new product, and the perceptions of these market participants of the safety, reliability and functionality of our products;

· the emergence of newer, possibly more effective technologies;

· the future cost and availability of the raw materials and components needed to manufacture and use our products;

· the cost competitiveness of our products; and

· the adoption of new regulatory or industry standards which may adversely affect the use or cost of our products.

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Accordingly, we cannot predict with any certainty that there will be acceptance of our products on a scale sufficient to support development of mass markets for those products.

We are dependent on third party suppliers and vendors for the supply of key components for our products.

We are dependent on third parties to manufacture the key components needed for our nano-structured based materials and 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 our technical specifications, or the inability to obtain alternative sources of these components on a timely basis or on terms acceptable to us, would create delays in production of our products or increase our unit costs of production. Also, to the extent that components are proprietary products of our suppliers, or the processes used by our suppliers to manufacture these components are proprietary, we may be unable to obtain comparable components from alternative suppliers.

We have no long term experience manufacturing our products on a commercial basis.

We are in the process of assembling our ConsERV product at our facility in Odessa, Florida. Initial production costs of this product line are high with no or a lower than desired profit margin. As a result, we believe we will need to reduce unit production costs – including that of the nano-structured materials themselves made for us to our specifications by third parties - over time in order to offer our products on a profitable basis on a commercial scale. Our ability to achieve cost reductions in all areas of nano-structured materials and value added products depends on entering into suitable manufacturing relationships with component suppliers, as well as increasing sales volumes so that we can achieve economies of scale. A failure by us to achieve a lower cost structure through economies of scale and improvements in engineering and manufacturing in a timely manner would have a material adverse effect on our business and financial results. There can be no assurance that we will obtain higher production levels or that the anticipated sales prices of our products will ever allow an adequate profit margin.

Our applications require extensive commercial testing and will take long periods of time to commercialize.

Our nano-structured materials and associated applications need to undergo extensive testing before becoming commercial products. Consequently, the commercialization of our products could be delayed significantly or rendered impractical. Moreover, much of the commercial process testing will be dependent on the efforts of others. Any failure in a manufacturing step or an assembly process may render a given application or possibly our nano-structured material(s) unsuitable or impractical for commercialization. Testing and required development of needed manufacturing process will take time and effort.

We have not devoted any significant resources towards the marketing and sale of our products, we expect to face intense competition in the markets in which we do business, and we expect to rely, to a significant extent, on the marketing and sales efforts of third parties that we do not control.

To date, we have primarily focused on the sale of the ConsERV and, since we have only sold limited quantities of our products we have limited experience in the marketing and sale of products on a commercial basis. We expect that the marketing and sale of our products will be conducted by a combination of independent manufactures representatives, third-party strategic partners, distributors, or Original Equipment Manufacturers (“OEMs”). Consequently, the commercial success of our products will be dependent largely on the efforts of others. We intend to enter into additional strategic marketing and distribution agreements or other collaborative relationships to market and sell our nano-structured materials and value added product. However, we may not be able to identify or establish appropriate relationships in the future. Even if we enter into these types of relationships, we cannot assure you that the distributors or OEMs with which we form relationships will focus adequate resources on selling our products or will be successful in selling them. In addition, our chosen third party distributors or OEMs may require us to provide volume price discounts and other allowances, customize our products or provide other concessions which could reduce the potential profitability of these relationships. To the extent any strategic relationships that we establish are exclusive, we may not be able to enter into other arrangements at a time when the distributor with which we form a relationship is not successful in selling our products or has reduced its commitment to marketing our products. Failure to develop sufficient distribution and marketing relationships in our target markets will adversely affect our commercialization schedule and, to the extent we enter into these relationships, the failure of our distributors and other third parties in assisting us with the marketing and distribution of our products may adversely affect our financial condition and results of operations.

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We will face intense competition in the markets for our nano-structured materials and valued added products made from these materials. We will compete directly with currently available products, some of which may be less expensive. The companies that make these other products may have established sales relationships and more name-brand recognition in their market than we do. In addition, some of those companies may have significantly greater financial, marketing, manufacturing and other resources.

Our future results could be harmed by economic, political, regulatory and other risks associated with international sales and operations.

We intend to market, distribute and service our products on an international basis and we expect to derive a significant portion of our revenue in coming years from international sales. If we fail to successfully sell our products internationally, our ability to increase our future revenue and grow our business would be impaired. We have limited experience developing, and no experience manufacturing, our products to comply with the commercial, regulatory and legal requirements of international markets. Our success in those markets will depend on our ability to secure relationships with foreign resellers and our ability to manufacture products that meet foreign regulatory and commercial requirements. In addition, our planned international operations could be harmed by a variety of factors, including but not limited to:

· difficulties in collecting international accounts receivable;

· increased costs associated with maintaining international marketing efforts;

· compliance with potential United States Department of Commerce export controls;

· increases in duty rates or other adverse changes in the tax laws;

· trade protection measures and import or export licensing requirements;

· fluctuations in currency exchange rates;

· political and economic instability; and

· difficulties in securing and enforcing intellectual property rights – foreign (where filed and obtained) or domestic.

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We depend on our intellectual property and our failure to protect it could enable competitors to market products with similar features that may reduce demand for our products.

We currently have seven United States patents, three patent applications and 2 PCT applications, the latter being co-owned, some of which apply to the composition and structure of a family of ion conducting polymers and membranes. These patents and patent applications often make reference to applications for and in some instance are application patents relating to materials we are developing. Patent applications relating to the subject matter of several of these patents are pending or may be entered as patent applications in foreign countries. These patent applications may or may not mature into issued patents.

Our success depends, to a significant extent, on the technology that is incorporated in our product. Although some of the inventions for which we have obtained or applied for patent protection are no longer suitable for use with our planned products, we believe that some of the other inventions covered by the patents and patent applications are important to the success of our products. If we are unable to protect our intellectual property, our competitors could use our intellectual property to market products similar to our products, which could reduce demand for our products. We may be unable to prevent unauthorized parties from attempting to copy or otherwise obtain and use our products or technology. Policing unauthorized use of our technology is difficult, and we may not be able to prevent misappropriation of our technology, particularly in foreign countries where the laws may not protect our intellectual property as fully as those in the United States. Others may circumvent the trade secrets, trademarks and copyrights that we own or may own. Any such infringements, or any alleged infringements, could have a material adverse effect on our business, results of operations, and financial condition.

Any of the United States patents or foreign patents owned by us or subsequently issued to us may be invalidated, circumvented, challenged or rendered unenforceable. We may not be issued any patents as a result of our pending and future patent applications and any patents we are issued may not have the breadth of claim coverage sought by us or necessary to prevent others from introducing similar products. Any litigation surrounding our patent rights could force us to divert significant financial and other important resources away from our business operations.

Currently there is a Patent Interference filed by Carrier Corporation in May 2006 against a Dais Analytic Corporation Patent granted in 2002 (US Patent No. 6,413,298 - Water-and ion-conducting membranes and uses thereof). Total loss of this Patent Interference matter may potentially alter our ability to compete in the United States energy recovery ventilator marketplace. We have followed, what we believe to be the prescribed administration actions for such Patent Interference actions as outlined, and conducted by the United States Patent and Trade Office . To date no ruling on this matter has been made and communicated by the United States Patent and Trade Office.

Some of our intellectual property is not covered by any patent or patent application. We seek to protect this proprietary intellectual property, which includes intellectual property that may not be patented or patentable, in part by confidentiality agreements with our distributors and employees. These agreements afford only limited protection and may not provide us with adequate remedies for any breach or prevent other persons or institutions from asserting rights to intellectual property arising out of these relationships. In addition, we cannot assure you that these agreements will not be breached, that we will have adequate remedies for any such breach or that the parties to such agreements will not assert rights to intellectual property arising out of these relationships.

The members of our scientific advisory board are employed by entities other than us, some of which may compete with us. While we intend to enter into non-competition agreements with our scientific advisors if any of them were to consult with or become employed by any of our competitors, our business could be negatively affected.

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We have entered into agreements with various third parties that may affect our intellectual property rights.

We have entered into agreements with various third parties in connection with the development of various applications for our technology. Those agreements generally provide for the third party to own any resulting intellectual property rights and often provide for the grant of a license to us relating to those rights. We cannot assure you that the terms of those licenses will not limit our ability to apply such rights to specific applications in competition with the relevant third party and which may adversely affect our business.

Our products employ technology that may unknowingly infringe on the proprietary rights of others, and, as a result, we could become liable for significant damages and suffer other harm.

We cannot assure you that our technologies and products do not or will not infringe on the proprietary rights of third parties or that third parties will not assert infringement claims against us in the future. We are aware of some of the patents in the nano-materials field held by potential competitors and other third parties. We cannot assure you that a third party will not claim infringement by us with respect to these patents or other patents or proprietary rights, or that we would prevail in any such proceeding. Any such infringement claim, whether meritorious or not, could:

· be time-consuming;

· result in costly litigation or arbitration and the diversion of technical and management personnel, as well as the diversion of financial resources from business operations;

· require us to develop non-infringing technology or seek to enter into royalty or licensing agreements; or

· require us to cease use of any infringing technology.

We might not be successful in developing non-infringing technologies. Royalty or licensing agreements, if required, may not be available on terms acceptable to us, or at all, and could significantly harm our business and operating results. A successful claim of infringement arising from the existence of a ‘submarine patent’ or another existing patent against us or our failure or inability to license the infringed or similar technology could require us to pay substantial damages and could harm our business. In addition, to the extent we agree to indemnify customers or other third parties against infringement of the intellectual property rights of others, a claim of infringement could disrupt or terminate their ability to use, market or sell our products.

Currently there is a Patent Interference filed by Carrier Corporation in May 2006 against a Dais Analytic Corporation Patent granted in 2002 (US Patent No. 6,413,298 - Water-and ion-conducting membranes and uses thereof). Total loss of this Patent Interference matter may potentially alter our ability to compete in the United States energy recovery ventilator marketplace. We have followed what we believe to be the prescribed administration actions for such Patent Interference actions as outlined, and conducted by the United States Patent and Trade Office. To date no ruling on this matter has been made and communicated by the United States Patent and Trade Office.

We may not be able to control our warranty exposure, which could increase our expenses.

We currently offer and expect to continue to offer a warranty with respect to our Conserve product and we expect to offer a warranty with each of our future products. If the cost of warranty claims exceed any reserves we establish for such claims, our results of operations and financial condition could be adversely affected.

We may be exposed to lawsuits and other claims if our products malfunction, which could increase our expenses, harm our reputation and prevent us from growing our business.

Any liability for damages resulting from malfunctions of our products could be substantial and could increase our expenses and prevent us from growing or continuing our business. Potential customers will rely on our products for critical needs, such as backup power. A malfunction of our products could result in tort, warranty claims or other product liability. In addition, a well-publicized actual or perceived problem could adversely affect the market's perception of our products. This could result in a decline in demand for our products, which would reduce our revenue and harm our business.

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Our key employees are critical to our success. The loss of any key employees could impair our ability to execute our strategy and grow our business.

Our future success depends, to a significant extent, on the continued service of our executive officers and other key technical, sales and senior management personnel and their ability to execute our growth strategy all of whom has non-compete agreements with the Company which may not withstand court review if litigation were to occur. The loss of the services of any of our senior level management, or our other key employees, could harm our business. Our future performance will depend, in part, on our ability to recruit and retain additional experienced management personnel and for our executive officers to work together effectively. Our executive officers may not be successful in carrying out their duties or running our Company. Any dissent among executive officers could impair our ability to make strategic decisions.

If we fail to attract, retain and motivate qualified employees, we may be unable to execute our business strategy.

Our future success will depend in part on our ability to attract and retain highly qualified individuals, including researchers, engineers, sales and marketing personnel and management. Competition for these individuals is intense, and it is becoming increasingly more difficult to attract, assimilate and retain these highly qualified persons. Competitors and others may attempt to recruit our employees.

Our failure to manage our growth could harm our business.

We expect that we will continue to grow in the number of our employees, the size of our physical facilities and the scope of our operations. In addition, we intend to begin to focus greater resource on ConsERV margins, sales/marketing activities and channel expansion, and marketplace education. Rapid expansion would likely place a significant strain on our senior management team and other internal and external resources. Furthermore, we may be required to hire additional senior management personnel. Our ability to manage growth will depend in part on our ability to continue to enhance our operating, financial and management information systems. Our personnel, systems and controls may be unable to support our growth and as a result, our financial results will suffer.

Any acquisitions we make could disrupt our business and harm our financial condition.

As part of our growth strategy we may review opportunities to acquire other businesses or technologies that would complement our products, expand the breadth of our target markets or enhance our technical capabilities. Acquisitions entail a number of risks that could materially and adversely affect our business and operating results, including but not limited to:

· problems integrating the acquired operations, technologies or products with our existing businesses and products;

· constraints arising from increased expenses and working capital requirements;

· constraints on our ability to incur debt;

· dilution of our stock if we issue additional securities;

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· disruption of our ongoing business, diversion of capital and distraction of our management;

· difficulties in retaining business relationships with suppliers and customers of acquired companies;

· difficulties in coordinating and integrating overall business strategies, sales and marketing and research and development efforts;

· potential liabilities in businesses and facilities acquired;

· difficulties in maintaining corporate cultures, controls, procedures and policies;

· difficulties evaluating risks associated with entering markets in which we lack prior experience; and

· potential loss of key employees.

Our revenue and operating results may fluctuate significantly as a result of factors outside of our control, which could cause the value of our Company to decline.

Unless and until we establish a predictable sales record for our products, we expect our revenue and operating results to vary significantly from quarter to quarter. As a result, quarterly comparisons of our financial results are not necessarily meaningful and you should not rely on them as an indication, in any manner, of our future performance. In addition, due to our stage of development, we cannot predict our future revenue or results of operations accurately. As a consequence, our operating results may fall below the expectations of investors, which could cause the valuation of our company to decline.

We expect to make significant investments in all areas of our business, particularly in research and product development and in expanding in-house or outsourced manufacturing capability. Because the investments associated with these activities are relatively fixed in the short-term, we may be unable to adjust our spending quickly enough to offset any unexpected shortfall in our revenue growth. In addition, because we in the early years of commercializing the ConsERV application and are still developing our other products for commercial sale, we expect our order flow to be uneven from period to period.

Risks Related to Our Industry

If our products fail to meet certain technical standards, we could be subject to claims, fines or other penalties and we may be curtailed from conducting our business operations.

Our nano-structured membrane products are designed for use with specific applications with specific technical objectives and standards. If these membranes, or the hardware device(s) used to make the membranes work, fail to meet those technical objectives and/or standards we could be liable for potential personal injury or loss of life and damages to, destruction of property (including consequential damages). Depending on the nature of the claim, our current insurance policies may not adequately reimburse us for costs incurred by reason of said claims, including, but not limited to, environmental damage claims, and in certain instances, we may not be reimbursed at all. Our business is subject to numerous federal, state and local laws, regulations and policies that govern environmental protection. These laws and regulations have changed frequently in the past and may continue to do so in the future. Our operations may not comply with such changes and we may be required to make significant unanticipated capital and operating expenditures to comply with such changes. If we fail to comply with such applicable environmental laws and regulations, governmental authorities may seek to impose fines or other penalties on us or to revoke or deny the issuance or renewal of certain permits issued to us. Accordingly, we might be subject to damage claims or penalties, and we may be curtailed from conducting our business operations.

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We could be liable for environmental damages resulting from our research, development and manufacturing operations.

Our business exposes us to the risk of harmful substances escaping into the environment, resulting in potential personal injury or loss of life, damage to or destruction of property, and natural resource damage. Depending on the nature of the claim, our current insurance policies may not adequately reimburse us for costs incurred in settling environmental damage claims, and in certain instances, we may not be reimbursed at all. Our business is subject to numerous federal, state and local laws, regulations and policies that govern environmental protection. These laws and regulations have changed frequently in the past and may continue to do so in the future. Our operations may not comply with such changes and we may be required to make significant unanticipated capital and operating expenditures to comply with such changes. If we fail to comply with applicable environmental laws and regulations, governmental authorities may seek to impose fines or other penalties on us or to revoke or deny the issuance or renewal of certain permits issued to us. Accordingly, we might be subject to damage claims or penalties, and we may be curtailed from conducting our business operations.

Future government regulation may impair our ability to market and sell our products.

Our current and planned products are potentially subject to federal, state, local and foreign laws and regulations governing, among other things, emissions to air as well as laws relating to occupational health and safety. As these products are introduced commercially, it is possible that governmental authorities will adopt new regulations that will limit or curtail our ability to market and sell such products. We may also incur substantial costs or liabilities in complying with such new governmental regulations. Our potential customers and distributors, some of which operate in highly regulated industries, may also be required to comply with new laws and regulations applicable to products such as ours, which could adversely affect their interest in our products.

Traditional product producing firms could place barriers on our entry into the market.

Firms selling products that compete against us with our nano-structured materials may have sufficient presence with regulators to potentially impose added fees on our new nano-structured products as a way of slowing or preventing our growth into their old-line businesses. The imposition of such fees could increase the cost of using our systems, could make our systems less desirable, and, accordingly, could harm or curtail our revenue and profitability.

Alternatives to our technology could render our systems obsolete prior to commercialization.

Our nano-structured materials and their identified uses are one of a number of products being developed today as potential answers to perceived market needs. Improvements are also being made to the existing products. Technological advances in all fields, improvements in key targeted application areas with existing or different new technology may render our nano-structured material approach obsolete before or during commercialization.

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Risks Related to Investment in Our Securities

Future issuances or the conversion or exercise, as applicable, of our outstanding convertible securities and warrants could result in substantial dilution to the interests of our shareholders and downward pressure on the price of our common stock.

The issuance of any shares of our common stock, either pursuant to the conversion or exercise of our outstanding convertible securities and warrants, or at any time in the future, may result in substantial dilution to the interests of holders of our common stock. The sale of our shares of common stock in the market could cause the market price of our common stock to decline as a result of the increased supply of shares, which could in turn cause you to lose a portion of your investment. Such a depression in the value of our common stock could also reduce or eliminate amounts that would otherwise have been available to pay dividends on our common stock (which is unlikely in any event) or to make distributions upon our liquidation.

Furthermore, shares owned by our Selling Shareholders, which are registered in a registration statement, or which otherwise may be transferred without registration pursuant to applicable exemptions under the Securities Act of 1933, as amended (the “Act”) may be sold. Because of the perception by the investing public that a sale by such insiders may be reflective of their own lack of confidence in our prospects, the market price of our common stock could decline as a result of a sell-off following sales of substantial amounts of common stock by our officers, directors and 5% or more beneficial owners into the public market, or the mere perception that these sales could occur.

Our stock price is likely to be volatile.

Our common stock has been quoted on the Pink OTC Markets, Inc.’s Pink Sheets since November 15,2005. The market price of our common stock has been and will likely continue to be subject to fluctuations. In addition, the stock market in general and the market for technology companies in particular, have from time to time experienced significant price and volume fluctuations that have been often unrelated or disproportionate to the operating performance of such companies. These broad market and industry factors may cause our common stock to materially decline, regardless of our operating performance. In the past, following periods of volatility in the stock market and the market price of a particular company’s securities, securities class action litigation has often been instituted against that company. Litigation of this type could result in substantial legal fees and other costs, potential liabilities and a diversion of management’s attention and resources.

We have not and do not intend to pay dividends on our common stock.

The payment of dividends upon our capital stock is solely within the discretion of our board of directors and dependant upon our financial condition, results of operations, capital requirements, restrictions contained in our future financing instruments and any other factors our board of directors may deem relevant. We have never declared or paid a dividend on our common stock and, because we have very limited resources, we do not anticipate declaring or paying any dividends on our common stock in the foreseeable future. Rather, we intend to retain any future earnings for the continued operation and expansion of our business. It is unlikely, therefore, that the holders of our common stock will have an opportunity to profit from anything other than potential appreciation in the value of our common shares held by them. If you require dividend income, you should not rely on an investment in our common stock.

Our executive officers, directors and major shareholders have significant shareholdings, which may lead to conflicts with other shareholders over corporate governance matters.

Our current directors, officers and more than 5% shareholders, as a group, beneficially own approximately 68% of our outstanding common stock. Acting together, these shareholders would be able to significantly influence all matters that our shareholders vote upon, including the election of directors and mergers or other business combinations.

As a company quoted on the Pink OTC Markets, Inc.’s Pink Sheets we are not subject to any minimum listing criteria or other eligibility requirements.

Companies that are listed on a national securities exchange, such as the NASDAQ Stock Market, American Stock Exchange or New York Stock Exchange, must meet certain qualitative and quantitative listing criteria, for example, they must meet requirements with respect to operating results, net asset thresholds, corporate governance, trading price and minimums for their public float. Companies that are quoted on the OTC Bulletin Board, while not subject to listing requirements per se, must be registered with the Commission under Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, and must remain current in their reporting requirements in order to remain eligible for quotation.

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In contrast, companies quoted on the Pink Sheets do not have to meet minimum listing criteria nor do they have to be registered with the Commission under the Exchange Act or current in any reporting requirements. As we are quoted on the Pink Sheets, and not subject to any minimum listing criteria or other eligibility requirements, there may be limited or no information available regarding us, our financial condition, business or operations, and you may find it more difficult to obtain accurate quotations as to the price of our securities or dispose of securities which you own.

Our securities are characterized as “ microcap stock ”, and as such are subject to a number of unique risks.

The term “microcap stock” applies to companies with low or “micro” capitalizations, meaning the total value of the company’s stock. Our securities are characterized as “microcap stock”, and as such are subject to a number of unique risks. Microcap stocks are subject to a number of unique risks. Many microcap companies tend to be new and have no proven track record. Some of these companies have limited or no assets or operations. Others have products and services that are still in development or have yet to be tested in the market. Another risk that pertains to microcap stocks involves the low volumes of trades. Because microcap stocks trade in low volumes, any size of trade can have a large percentage impact on the price of the stock. While all investments involve risk, microcap stocks can be among the most risky.

Unless an active trading market develops for our securities, shareholders may have difficulty or be unable to sell their shares of common stock.

Our common stock is quoted on the Pink OTC Markets, Inc.’s Pink Sheets under they symbol “DYLT.PK.”; however, there is not currently an active trading market for our common stock, meaning that the number of persons interested in purchasing shares of our common stock at or near ask prices at any given time may be relatively small or non-existent, and there can be no assurance that an active trading market may ever develop or, if developed, that it will be maintained. There are a number of factors that contribute to this situation, including, without limitation, the fact that we are a small development-stage company that is relatively unknown to stock analysts, stock brokers, institutional investors and others in the investment community that generate or influence sales volume, and that even if we came to the attention of such persons, they tend to be risk-averse and would be reluctant to follow an unproven, development-stage company such as ours or purchase or recommend the purchase of shares of our common stock until such time as we became more seasoned and viable.

As a consequence, the Pink Sheets is characterized by a lack of liquidity, sporadic trading, larger spreads between bid and ask quotations, and other conditions that may affect shareholders’ ability to re-sell our securities. Moreover, there may be periods of several days or more when trading activity in our shares is minimal or non-existent, as compared to a seasoned issuer which has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share price. Unless an active trading market for our common stock is developed and maintained, shareholders may be unable to sell their common stock and any attempted sale of such shares may have the effect of lowering the market price of our common stock and a shareholder’s investment could be a partial or complete loss.

Since our common stock is thinly traded it is more susceptible to extreme rises or declines in price, and shareholders may not be able to sell their shares at or above the price paid.

Since our common stock is thinly traded its trading price is likely to be highly volatile and could be subject to extreme fluctuations in response to various factors, many of which are beyond our control, including:

· the trading volume of our shares;

· the number of securities analysts, market-makers and brokers following our common stock;

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· new products or services introduced or announced by us or our competitors;

· actual or anticipated variations in quarterly operating results;

· conditions or trends in our business industries;

· announcements by us of significant contracts, acquisitions, strategic partnerships, joint ventures or capital commitments;

· additions or departures of key personnel;

· sales of our common stock;

· general stock market price and volume fluctuations of publicly-quoted, and particularly microcap, companies; and

· material legal action.

Shareholders, upon exercise or conversion of our outstanding convertible securities and warrants, may have difficulty reselling shares of our common stock, either at or above the price paid, or even at fair market value. The stock markets often experience significant price and volume changes that are not related to the operating performance of individual companies, and because our common stock is thinly traded it is particularly susceptible to such changes. These broad market changes may cause the market price of our common stock to decline regardless of how well we perform as a company. In addition, and as noted below, our shares are currently traded on the Pink Sheets and, further, are subject to the penny stock regulations. Price fluctuations in such shares are particularly volatile and subject to manipulation by market-makers, short-sellers and option traders.

Our common stock is subject to the “penny stock” regulations, which are likely to make it more difficult to sell.

Our common stock is considered a “penny stock,” which generally is a stock trading under $5.00 and not registered on a national securities exchange. The Commission has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. These rules generally have the result of reducing trading in such stocks, restricting the pool of potential investors for such stocks, and making it more difficult for investors to sell their shares once acquired. Prior to a transaction in a penny stock, a broker-dealer is required to:

· deliver to a prospective investor a standardized risk disclosure document that provides information about penny stocks and the nature and level of risks in the penny stock market;

· provide the prospective investor with current bid and ask quotations for the penny stock;

· explain to the prospective investor the compensation of the broker-dealer and its salesperson in the transaction;

· provide investors monthly account statements showing the market value of each penny stock held in their account; and

· make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction.

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These requirements may have the effect of reducing the level of trading activity in the secondary market for a stock that is subject to the penny stock rules. Since our common stock is subject to the penny stock rules, investors in our common stock may find it more difficult to sell their shares.

The trading price of our common stock if moved to a different exchange may entail additional regulatory requirements, which may negatively affect such trading price.

We anticipate moving the listing to the OTC Bulletin Board where the trading price of our common stock will continue to be below $5.00 per share. As a result of this exchange relocation, trading in our common stock would be subject to the requirements of certain rules promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act“). These rules require additional disclosure by broker-dealers in connection with any trades generally involving any non-NASDAQ equity security that has a market price of less than $5.00 per share, subject to certain exceptions. Such rules require the delivery, before any penny stock transaction, of a disclosure schedule explaining the penny stock market and the risks associated therewith, and impose various sales practice requirements on broker-dealers who sell penny stocks to persons other than established customers and accredited investors (generally institutions). For these types of transactions, the broker-dealer must determine the suitability of the penny stock for the purchaser and receive the purchaser’s written consent to the transaction before sale. The additional burdens imposed upon broker-dealers by such requirements may discourage broker-dealers from effecting transactions in our common stock. As a consequence, the market liquidity of our common stock could be severely affected or limited by these regulatory requirements.

CAUTIONARY STATEMENT REGARDING

FORWARD-LOOKING STATEMENTS

This prospectus, including the sections titled “Summary” and “Risk Factors” and other sections, contains certain statements that constitute “forward-looking statements”. These forward-looking statements include certain statements regarding intent, belief or current expectations about matters (including statements as to “beliefs,” “expectations,” “anticipations,” “Intentions” or similar words). Forward-looking statements are also statements that are not statements of historical fact. Because these statements are based on factors that involve risks and uncertainties, actual results may differ materially from those expressed or implied by the forward-looking statements. These factors include, among others:

•	our ability to achieve and maintain profitability;

•	the price volatility of the Common Stock;

•	the historically low trading volume of the Common Stock;

•	our ability to manage and fund our growth;

•	the short period of time we have employed certain of our executive officers;

•	our ability to attract and retain qualified personnel;

•	litigation;

•	our ability to compete with current and future competitors;

•	our short operating history;

•	our ability to obtain additional financing;

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•	general economic and business conditions;

•	other risks and uncertainties included in the section of this document titled “Risk Factors”; and

•	other factors discussed in our other filings made with the Commission.

The subsequent forward-looking statements relating to the matters described in this document and attributable to us or to persons acting on our behalf are expressly qualified in their entirety by such factors. We have no obligation to publicly update or revise these forward-looking statements to reflect new information, future events, or otherwise, except as required by applicable Federal securities laws, and we caution you not to place undue reliance on these forward looking statements.

USE OF PROCEEDS

This prospectus relates to the sale of 32,753,090 shares of common stock that may be offered from time to time by Selling Shareholders. Of the 32,753,090 shares, 869,606 shares are currently outstanding, 14,750,000 are issuable upon the conversion by Selling Shareholders of certain secured convertible notes and 17,133,484 shares are issuable upon exercise by Selling Shareholders of certain warrants. We will receive no proceeds from the sale of shares of common stock in this offering. We will receive no proceeds from the conversion of secured convertible notes. Of the warrants, warrants representing 16,542,308 shares contain both cash and cashless exercise provisions and have an exercise price of $0.25. The remaining warrants representing 591,177 shares of common stock are exercisable for $0.55 per share. If all of the warrants representing 17,133,484 shares are exercised for cash (and assuming there are no adjustments to the purchase price prior to exercise) we will receive approximately $4,462,647 in gross proceeds. The proceeds received from the exercise of warrants will be used for working capital and general corporate purposes. None of the Selling Shareholders are obligated to exercise any warrants.

DESCRIPTION OF BUSINESS

Dais Analytic Corporation is a nano-technology materials company which has developed, patented, and is beginning to commercialize a series of nano-technology material based products. We believe these materials can be adapted into a number of products that fill various needs in diverse market segments focused generally on energy and water uses. We believe that the use of our nano-structured products will generate an even greater number of products addressing wiser use of energy, creating water, personal safety, and protecting the environment. We have targeted four potential market opportunities for these products: Energy/Heating, Ventilation and Air Conditioning (“HVAC”), which is our ConsERV™ Energy Recovery Ventilator product, Water Desalination, Performance Fabrics, and Immersion Coatings.

History

We were incorporated as New York corporation on April 8, 1993 as “Dais Corporation”. We changed our name to Dais Analytic Corporation on December 13, 1999.

Dais Corporation was formed to develop new, cost-effective polymer materials for various applications, including providing a lower cost membrane material for Polymer Electrolyte Membrane (“PEM”) fuel cells. We believe our research on materials science has yielded technological advances in the field of selective ion transport polymer materials.

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In 1999, we purchased the assets of Analytic Power Corporation, which was founded in 1984 to provide fuel cell and fuel processor design and consulting services, systems integration and analysis services to develop integrated fuel cell power systems, and the Company was re-named Dais Analytic Corporation. Analytic Power Corporation had been identified by others as a technically sophisticated firm in the fuel cell industry and had developed a portfolio of fuel cell and related fuel cell component technologies, including fuel cell stack designs, a high performance membrane catalyzation process, and natural gas, propane, diesel and ammonia fuel processors for integrated fuel cell systems.

In 2000, we acquired all of the outstanding capital stock of American Fuel Cell Corporation (“AFCC”). The founders of Analytic Power Corporation founded the AFCC structure to develop a residential power system. Prior to the acquisition, AFCC had contracted to develop and manufacture power systems for the Electric Power Research Institute and Hamburg Gas Consult, GmbH, and we assisted AFCC in the performance of the contracts since the time of the acquisition.

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

Mission

We are committed to continue innovating applications for our nano-structured materials with a focus on products meeting the needs of the marketplace, largely in energy and water applications. These materials, innovated from our patented base of polymers and proprietary manufacturing processes, are expected to increase shareholder value by creating new or better products filling diverse market needs.

Products

We earn revenues from selling, licensing and making value-added products from our nano-structured materials with the first recurring source, and the current focus of our business, being our ConsERV™ product. Our ConsERV™ product is the primary focus of our resources and commercialization efforts and the revenues we generate by ConsERV™ are continuously growing. Our main focus is to continue to grow the revenues we generate from the sale of ConsERV™ while continuing product development on our other products based on the functionality found in our nano-technology materials platform. Of the products we reviewed, it is our belief that ConsERV™ is twice as effective as other products of its kind in a field that is growing due to increased regulation and the quest for energy efficient (or “LEED”) products. In 2007, the majority of our commercial focus and revenues came from our ConsERV™ product and we expect this to continue to be the case until early 2009.

ConsERV ™

ConsERV™ is an HVAC energy conservation product which, according to various tests, saves, in many instances, an average of up to 30% on HVAC operating costs, allows HVAC equipment to be up to 30% smaller, reducing peak energy usage by up to 20% and can simultaneously improve Indoor Air Quality (“IAQ”). The estimated technical market size for this type of HVAC product has been estimated by third parties 5 to exceed $1 billion in North America and over $3 billion internationally.

Most building codes mandate that commercial structures provide certain levels of fresh air ventilation determined by use and occupancy. Energy Recovery Ventilators (“ERV”), such as our ConsERV™ product, pre-condition the incoming ventilation air using energy removed from stale exhaust air. ConsERV™ has a core component made using our and may be described as a high-performance ERV. It is used in conjunction with a building’s HVAC equipment.

5 Frost and Sullivan, June 2007, North American Energy Recovery Market Study

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Given third party test data 6 , we believe we have demonstrated that our ConsERV™ product, with its nano-structured materials, offers better total performance than other ERV products of which we are aware, with no moving parts and little or no cross-air stream contamination. Our ConsERV™ core product has received UL 900 recognition and Air-Conditioning, Heating and Refrigeration Institute (“AHRI”) Standard 1060 certification. Our ConsERV™ product is compatible with most commercial HVAC units and requires only a small amount of additional HVAC technical expertise to install. We believe the purchase and installation costs of our ConsERV™ product are comparable to the cost of competing energy recovery product and that our ConsERV™ product is more efficient in transferring moisture with lower life cycle maintenance costs.

Studies have shown that recent increases in the levels and overall volatility of energy prices in the United States (averaging in excess of 11% during 2007 7 ) have prompted renewed interest by corporate and political leaders, as well as the public at large, in energy conservation initiatives.

Achieving sales revenue growth from our ConsERV™ product is predicated on the success in five key areas:

· Achieving continued technological improvements in key materials to lower our ‘per unit’ cost structure.

· Completing outsourced manufacturing and assembly relationships which lower our ‘per unit’ cost structure.

· Securing HVAC equipment as well as ERV OEMs (or Licensees) with presence in existing and evolving sales channels to become our customers or partners to sell worldwide in-country/region.

· Recruiting the necessary people and infrastructure to support the sales growth of ConsERV – and the other products as they are introduced into their respective sales channels.

· Obtaining capital – in a timely manner – for the necessary steps outlined above to continue without interruption.

Our Other Nano-Structured Products

We plan to devote time to other uses of our nano-structured products in ways which are not disruptive to the key ConsERV™ effort. These product applications and activities include:

6 Air-Conditioning, Heating and Refrigeration Institute (“AHRI”) – May 2008 test results

7 “Rising demand for oil provokes new energy crisis,” New York Times, Nov. 9, 2007

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According to studies, in 2006, the market for these types of products exceeded $3.6 billion annually worldwide and $1 billion in the U.S. with growth coming from first responders and military uses;

In addition, we have seven issued, patents, three pending U.S. patents (all owned by us) and two pending PCT applications that we co–own and that relate to or are applications of our nano-structured polymer materials, a family of ionomeric nano-structured polymers that perform several functions, such as ion exchange and modification of surface properties. The polymers are selectively permeable to polar materials, such as water, in molecular form. We believe that selective permeability allows these materials to function as a nano-filter in various transfer applications. These materials are made from base polymer resins available from a number of commercial firms worldwide and possess unique and controllable properties, such as:

· Selectivity: It is our belief, that when the polymer is made there are small channels created that are 5 - 30 nanometers in diameter. There are two types of these channels; hydrophilic (water permeable), and hydrophobic (water impermeable). The channels can be chemically tuned to be highly selective for the ions or molecules they transfer. The high selectivity of the polymer can be adjusted to efficiently transfer water molecules from one face to the other using these channels.

· Unique surface characteristic: The materials offer a surface characteristic that we believe inhibits the growth of bacteria, fungus and algae and prevents adhesives from attaching.

We believe the molecular selectivity, high transfer rate, and surface coating properties, coupled with our ability to produce the nano-structured materials at what we believe is an affordable price given its performance, distinguishes our technology and value-added products. By incorporating our nano-structured materials into existing products, we strive to address current real-world market needs by offering what we believe to be higher efficiencies, and potentially improved price performance. For example, there are other energy recovery mechanisms available for HVAC that use coated paper or desiccant technology instead of our highly efficient nano-structured polymer materials.

Key Relationships

We have what we believe to be strategic relationships with leaders in the energy industry who have entered into sales, marketing, distribution and product development arrangements with us and, in some cases, hold equity in us. They include:

· Electric Power Research Institute (“EPRI”) . We have an on-going relationship with a number of utilities through EPRI. The EPRI participants include Public Service Company of New Mexico, Kansas City Power & Light, Reliant Energy Incorporated, Alliant Energy Company, Omaha Public Power District, Wisconsin Public Service Corporation, Southern California Gas Company, EDF Electricite de France, Consolidated Edison of New York, Tokyo Gas Co., Ltd., CINERGY Corporation, Northern States Power Company, American Electric Power Company, Inc., Sierra Pacific Power Company, Public Service Electric & Gas Company (“PSE&G”), and Tennessee Valley Authority. The EPRI users group has been helpful in creating opportunities for us to define specifications and applications for our nano-structured materials that address existing energy related challenges while possibly opening new sources of revenue for some of the world’s largest utility companies.

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· Comfort Systems USA . In June 2006 we entered into a non-exclusive national sales arrangement with Comfort Systems, a national HVAC and mechanical systems installation and service company principally oriented to the mid-market commercial industrial and institutional sectors. Pursuant to this arrangement, Comfort Systems and its forty-six branches agreed to sell our ConsERV™ product into new or retro-fit HVAC building applications. Our marketing team works with the key Comfort Systems designers on new and retro-fit HVAC system applications.

ConsERV - Sales and Marketing Strategies

We market our ConsERV™ product principally through alliances with local independent manufacturer representatives. We currently have seventeen (17) independent commercial sales representatives in various locations throughout North America selling the ConseERV product. We project to bring the number of commerical independent sales representatives to approximately forty (40) to properly cover the North American commercial sales territory. We are also working to secure ongoing relationships with leading industry HVAC manufacturers and other ERV manufacturers. Also targeted to be sales channels for the ConsERV product include energy service companies, and HVAC product distributorships. We continue to leverage our relationship with EPRI and a group of 16 utility companies (consisting of EPRI members and some of our minority shareholders) into expected sources of future product sales through the introduction of demand reduction incentives.

Future Products – Sales and Marketing Strategies

The sales and marketing strategy we plan to execute for other products – as they complete ‘proof of concept’, or beta testing, or complete product development-finds us seeking to create alliances with firm(s) having strong, existing channel presence in the target industries. We believe working with industry leaders at the development level allows us to better address the market’s needs and possibly accelerate the ‘time to market’ cycle.

Competition and Barriers to Entry

We believe the efficacy of our value-added products made from these materials have the ability to decrease sales of competing products, thus taking business away from more established firms using older technology. We believe that our ConsERV™ product’s value-added nature may become a functional component of newer, more efficient Original Equipment Manufacturer (“OEM”) products. Our key challenge is to educate channel decision makers of the benefits of products made using our materials and processes to overcome the strength of the current product sales.

There are a number of companies located in the United States, Canada, Europe and Asia that have been developing and selling technologies and products in the energy recovery (or ERV) industry (i.e. Semco, Greenheck, Venmar, Bry-Air, Renewaire, AirXchange,).

Future product competitors include but are not limited to Dow, DuPont, Lakeland Industries, 3M, RPM, & GE. These companies possess greater financial and personnel resources than we do and represent significant competition.

We believe that the combination of (i) our nano-material platform’s characteristics (high selectivity, high flux rate, manufacturability, et al.), (ii) our growing patent position, and (iii) our possible ‘first to market’ position, may be competitive advantages, which may allow us time to execute on our business plan. Competitors may experience barriers to entry in these markets primarily related to the lack of similary performing proprietary materials and processes.

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Intellectual Property

We rely on patent, trade secret, trademark and copyright law to protect our intellectual property. As stated above, we have seven granted U.S. patents, some covering the composition and structure of a family of ion conducting polymers and membranes and others covering some applications of the polymer. We believe some of these patents make reference to applications for and in some cases are application patents relating to the materials we are developing. Please see the “Risk Factors” Section of this prospectus. A list of our existing patents follows:

1. Patent No. 6,841,601- Cross-linked polymer electrolyte membranes for heat and moisture exchange devices.

2. Patent No. 6,413,298 - Water-and ion-conducting membranes and uses thereof

3. Patent No. 6,383,391 - Water-and ion-conducting membranes and uses thereof

4. Patent No. 6,110,616 - Ion-conducting membrane for fuel cell

5. Patent No. 5,679,482 - Fuel-Cell incorporating novel ion-conducting membrane

6. Patent No. 5,468,574 - Fuel-Cell incorporating novel ion-conducting membrane

7. Patent No. 7,179,860 - Cross Linked Polymer electrolyte Membranes for Heat, Ion and Moisture Exchange Devices

We have provisional and patent applications in the following areas: Advanced Polymer Synthesis Processes, Reversible Liquid to Air Enthalpy Core Applications and Construction, and Desalination.

A partial list of the patent applications within the United States Patent Database is below. The list covers only those applications that are publicly visible.

1. No. 20050215728 - Cross-linked polymer electrolyte membranes for heat, ion, and moisture exchange devices

2. No. 20030118887 - Cross-linked polymer electrolyte membranes for heat and moisture exchange devices

3. No. 20030106680 - Heat and Moisture exchange device

Patents may or may not be granted on these applications. We also seek to protect our proprietary intellectual property, including intellectual property that may not be patented or patentable, in part by confidentiality agreements with our current and prospective strategic partners and employees.

Currently there is a Patent Interference filed by Carrier Corporation in May 2006 against a Dais Analytic Corporation Patent granted in 2002 (US Patent No. 6,413,298 - Water-and ion-conducting membranes and uses thereof). Total loss of this Patent Interference matter may potentially alter our ability to compete in the United States energy recovery ventilator marketplace. We believe we have followed the prescribed administration actions for such Patent Interference actions as outlined, and conducted by the United States Patent and Trade Office. To date no ruling on this matter has been made and communicated by the United States Patent and Trade Office.

Government Regulation

We do not believe the sale, installation or use of our nano-structured products will be subject to any government regulation, other than perhaps adherence to building codes, military specifications, and water safety regulations governing products used in HVAC, military clothing, immersion coatings, and water desalination. We do not believe that the cost of complying with such codes and regulations, to the extent applicable to our products, will be material.

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We do not know the extent to which any existing or new regulations may affect our ability to distribute, install and service any of our products. Once our products reach the commercialization stage and we begin distributing them to our early target markets, federal, state or local governmental entities or competitors may seek to impose regulations.

We are also subject to various international, federal, state and local laws and regulations relating to, among other things, land use, safe working conditions, handling and disposal of hazardous and potentially hazardous substances and emissions of pollutants into the atmosphere. Our business exposes us to the risk of harmful substances escaping into the environment, resulting in potential personal injury or loss of life, damage to or destruction of property, and natural resource damage. Depending on the nature of the claim, our current insurance policies may not adequately reimburse us for costs incurred in settling environmental damage claims, and in some instances, we may not be reimbursed at all. To date, we are not aware of any claims or liabilities under these existing laws and regulations that would materially affect our results of operations or financial condition.

Employees

As of July 2008, we employ 17 full time employees and one part time employee in our Odessa, Florida facility. None of the employees is subject to a collective bargaining agreement. We consider our relations with our employees to be good.

Principal Offices

Our principal office is located at 11552 Prosperous Drive, Odessa, FL 33556.

PROPERTIES

We currently lease a 7,200 square feet of combined office and production space located at 11552 Prosperous Drive, Odessa, FL 33556. We lease the site from Ethos Business Ventures, LLC., a Limited Liability Corporation in which our Chief Executive Officer, Timothy N. Tangredi, has a controlling financial interest.

The lease for our corporate headquarters began on March 18, 2005. The lease term will terminate upon 30 days’ written notice from either party. The current monthly rent is $3,800 per month. We shall also pay all taxes and utilities as well as most repairs relating to our office. Most of the Company functions are performed at this site including corporate, marketing, administration, on-going product and nano-structured polymer development, and product assembly and shipping. Key polymer synthesis and casting is out-sourced and not done at this facility.

We do not anticipate investing in real estate or interests in real estate, real estate mortgages, or securities of or interests in persons primarily engaged in real estate activities. We currently have no formal investment policy, and we do not intend to undertake investments in real estate as a part of our normal operations.

LEGAL PROCEEDINGS

In May of 2006, the United States Patent Office ("USPTO") informed the Company that an interference proceeding had been initiated between the Company's patent number US 6,413,298 and a pending patent application assigned to another corporation. In the course of the interference the USPTO has permitted the Company to file five motions. Each motion sets forth either the basis upon which the Company believes the other corporation's patent application is deficient for failing to meet minimum USPTO requirements for a valid patent application or the manner in which the Company believes the patents cited fail to meet the USPTO requirements for interference. The other corporation has been permitted to file a motion seeking benefit of a provisional patent application date and one requesting to add three additional claims to the application. Oppositions and replies have been filed by both parties. At this point, a possible financial outcome cannot be determined. However, the interference will not effect the validity of Company's other patents.

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The Company entered into a six month financial and strategic consulting agreement dated September 1, 2005 with Gray Capital Partners, Inc. a financial consulting company ("Consulting Company") by which the Consulting Company was to provide the Company with consulting services and assist it in the procurement of equity and debt financing for business expansion and development up to a maximum of $20,000,000. In exchange for these services, two of the shareholders of the Company assigned their Convertible Notes Receivable, valued at $627,723, to the Consulting Company. Per the terms of the Consulting Agreement and its related documents, one half of the first note became vested in the Consulting Company upon the execution of the Consulting Agreement which by the terms of the Agreement resulted in $156,930 of said first note being subject to conversion into the Company's common stock at the rate of one share per $.10 of note balance. In addition, the agreement states that an additional $156,931 would be potentially eligible for conversion upon the Company raising $1,000,000 in financing from any source during the term of the Consulting Agreement. Conversion rights were subject to pro-rata vesting based on the funding secured. For financial presentation purposes, the Company has accounted for this transaction as a capital contribution by the shareholders of $627,723 for the forgiveness of their notes and as consulting expense for equity given to the Consulting Company. During the year ended December 31, 2005, the Company received funding of $599,972 in the form of bridge loans. On December 23, 2005 the Company terminated the Consulting Agreement subject to the provisions thereof. The Company has no further obligations of any nature to the Consulting Company. The shareholder of one of the notes may contend, and has a possibility of being successful, in having the amendment and assignment declared void requiring his note be reinstated on the Company's books. The accounting entries made by the Company with regard to the first note are not to be construed as a waiver of any rights the Company may have in law or equity under the consulting agreement or any agreements related thereto, nor as an admission, of an nature, by the Company.

Subsequent to March 31, 2008, the Company has obtained a release of any liability to the Consulting Company and the corresponding liability was assigned to a third party. The vested value of the note that was assigned amounted to $244,000 which converts into the Company's common stock at a rate of one share per $0.10 of note balance which amounts to 2,440,000 shares. During 2005 and 2006, a total of approximately $244,000 was recorded as consulting expense. The note has been converted.

We know of no other material, existing or pending legal proceedings against us, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our Company.

From time to time, claims are made against us in the ordinary course of our 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 our results of operations for that period or future periods.

DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS

The following table sets forth the names and ages of all of our directors and executive officers as of the date of this prospectus. Also provided herein is a brief description of the business experience of each director, executive officer and significant employee during the past five years and an indication of directorships held by each director in other companies subject to the reporting requirements under the Federal securities laws. All of the directors will serve until the next annual meeting of shareholders and until their successors are elected and qualified, or until their earlier death, retirement, resignation or removal. There are no arrangements or understandings between any director or executive officer and any other person pursuant to which the director or executive officer was selected.

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Name	Age	Position
Timothy N. Tangredi	52	President, Chief Executive Officer and Chairman of the Board of Directors
Robert W. Brown	59	Vice President - Marketing
Scott G. Ehrenberg	53	Chief Technology Officer
William B. Newman	46	Executive Vice President
Robert W. Schwartz	63	Director
Raymond Kazyaka Sr.	78	Director

Directors and Executive Officers

The following are the Company’s directors and executive officers:

Timothy N. Tangredi has been our Chief Executive Officer since 1996. Mr. Tangredi joined the Company in 1996, and was appointed a member of our Board of Directors in 1997. In 1999 and 2000, respectively, Mr. Tangredi initiated and executed the strategic purchases of Analytic Power and American Fuel Cell Corporation. Earlier in his career, Mr. Tangredi worked for AT&T, as a member of the Leadership Continuity Program working in technical marketing, network operations, and project management. Mr. Tangredi earned his BS from Siena College and his MBA from Rensselaer Polytechnic Institute. He is a founder and a member of the Board of Directors of Aegis BioSciences, LLC (“Aegis”). Aegis, created in 1995, is a licensee of the Company’s nano-structured intellectual property and materials in the biomedical and healthcare fields. Mr. Tangredi spends approximately one to two days per month on Aegis business and is compensated by Aegis for his time and contribution(s).

Scott G. Ehrenberg, is a founder of Dais Analytic and has been our Chief Technology Officer since 1993. He has thirty years of experience developing new materials and applications. These applications range from laser cutting systems, optical inspection technology, and new organic electronic packages for IBM to new polymer electrolytes for electrochemical and mass transport devices for Dais. His background includes 12 years at IBM plus two previous successful startups in the fields of electronic packaging and ultrasonic devices: Tessera of San Jose CA and Sono-Tek of Milton NY. He has 14 issued patents with 6 more pending along with numerous technical papers and presentations.

Robert W. Brown has been Vice President of Marketing since March 2003. His background includes twenty eight years of experience in technical marketing and product management, technology commercialization, and many aspects of technology business start-up and growth. He has experience both onshore and internationally with utility and engineering organizations. From March 1994 to February 2003, as CEO of a subsidiary of Baymont Technologies Inc. Mr. Brown’s responsibilities included turn around management and financial restructuring.

William B. Newman was appointed Executive Vice President on April 15, 2008. From February 2006 to March 2008 he was the Executive Vice President of sales, marketing and product design for the Lehigh Group, a division of Jarden, JAH. Previously, from June 1999 to February 2006 he serves as Senior Vice President of sales, marketing and product design for Arrow Fastener, a division of Masco, MAS. Mr. Newman has an MBA in finance from Seton Hall University and a BA in Economics from Dickinson College.

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Non-Employee Directors

Raymond Kazyaka Sr. was appointed to our Board of Directors in 1995. Mr. Kazyaka is the former President and a co-founder of Wright Malta Corporation, which was founded in 1972. Wright Malta, liquidated in 2005, owned and operated the Malta Test Station, which had performed military product development for various governmental and commercial organizations. Mr. Kazyaka has also served as a consultant to the Canadian National Defense on facility noise abatement. Prior to founding Wright Malta, Mr. Kazyaka worked for General Electric as a rocket engine design engineer and a manager. Mr. Kazyaka holds several patents on rocket engine components and noise abatement systems, and is a senior member of the American Institute of Aeronautics and Astronautics. Mr. Kazyaka graduated from Union College with a degree in Mechanical Engineering.

Robert W. Schwartz was appointed to our board of directors in 2001 . Mr. Schwartz founded the Schwartz-Heslin Group (“SHG”) in 1985 and serves as one of its Managing Directors. Mr. Schwartz specializes in corporate planning, finance and development. Prior to starting SHG, he was a founder, President and Chief Executive Officer of a venture-funded high tech telecommunications company (Windsource, Inc.). In addition, he was the President and Chief Operating Officer of an American Stock Exchange listed company (Coradian Corporation). He was also the Chief Financial Officer of a major manufacturer of outdoor power equipment. His earlier experience was with KPMG as a management consultant and with IBM.

Involvement in Certain Legal Proceedings

None of our directors or executive officers has been, during the past five years:

(i) involved in any bankruptcy petition filed by or against such person or any business of which such person was a general partner or executive officer, either at the time of the bankruptcy or within two years prior to that time;

(ii) convicted of any criminal proceeding or subject to a pending criminal proceeding (excluding traffic violations and other minor offences);

(iii) subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoined, barred, suspended or otherwise limited from involvement in any type of business, securities, futures, commodities or banking activities; or

(iv) found by a court of competent jurisdiction (in a civil action), the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated

Director Independence

Our board of directors has determined that it currently has two members who qualify as “independent” as the term is used in Item 407 of Regulation S-K as promulgated by the Securities and Exchange Commission. The independent directors are Raymond Kazyaka Sr. and Robert W. Schwartz.

Board Meetings and Committees; Annual Meeting Attendance

Our board of directors has not adopted any committees to the board of directors. Our board of directors held ten formal meeting during the most recently completed fiscal year. Other proceedings of the board of directors were conducted by resolutions consented to in writing by all the directors and filed with the minutes of the proceedings of the directors. Such resolutions consented to in writing by the directors entitled to vote on that resolution at a meeting of the directors are, according to the corporate laws of the State of New York and our bylaws, as valid and effective as if they had been passed at a meeting of the directors duly called and held.

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At each annual meeting of shareholders, directors will be elected by the holders of common stock to succeed those directors whose terms are expiring. Directors will be elected annually and will serve until successors are elected and qualified or until a director’s earlier death, resignation or removal. Our bylaws provide that the authorized number of directors may be changed by action of the majority of the board of directors or by a vote of the shareholders of our Company. Vacancies in our board of directors may be filled by a majority vote of the board of directors with such newly appointed director to serve until the next annual meeting of shareholders, unless sooner removed or replaced. We currently do not have a policy regarding the attendance of board members at the annual meeting of shareholders.

A shareholder who wishes to communicate with our board of directors may do so by directing a written request addressed to our Chief Executive Officer at the address appearing on page 30 of this prospectus.

Code of Ethics

The Company has not adopted a code of ethics, but we plan to adopt a code of ethics shortly.

Compliance with Section 16(a) of the Exchange Act

Section 16(a) of the Securities Exchange Act of 1934 , as amended, requires our executive officers and directors, and persons who beneficially own more than 10% of a registered class of our equity securities to file with the Securities and Exchange Commission initial statements of beneficial ownership, reports of changes in ownership and annual reports concerning their ownership of our common shares and other equity securities, on Forms 3, 4 and 5 respectively. Once we have a class of equity securities registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended, we intend to file all such forms in a timely manner and if not, to disclose any untimely filings in accordance with Item 405 Regulation S-K.

DIRECTOR AND EXECUTIVE OFFICER COMPENSATION

The following executive compensation disclosure reflects all compensation awarded to, earned by or paid to the executive officers below for the fiscal years ended December 31, 2007 and 2006. The following table summarizes all compensation for fiscal years 2007 and 2006 received by our Chief Executive Officer, and most highly compensated executive officers in fiscal year 2007.

SUMMARY COMPENSATION TABLE

Summary Compensation Table
Name and principal position (a)	Year (b)	Salary ($) (c)	Bonus ($) (d)	Stock Awards ($) (e)	Option Awards ($) (f)	Non-Equity Incentive Plan ($) (g)	Non-qualified Deferred Compen- sation Earnings ($) (h)	All other compen-sation ($) (i)	Total ($) (j)

Timothy N. Tangredi Chief Executive Officer, President, Treasurer and Chairman of the Board of Directors (1)	2007 2006	65,833 64,850	- 87,500	- -	140,000 72,500	- -	- -	104,167 105,150	310,000 330,000
Robert W. Brown Secretary and Vice President of Marketing	2007 2006	83,451 80,766	- -	- -	10,500 39,875	- -	- -	- -	93,951 120,641
Scott G. Ehrenberg, Chief Technology Officer	2007 2006	60,000 60,000	- -	- -	116,000 22,000	- -	- -	- -	176,000 82,800

(1)

Mr. Tangredi receives a salary of $170,000 per year, and a bonus in an amount not to exceed 100% of his salary, which bonus shall be measured by meeting certain performance goals, which shall be set by our board of directors, and stock options as determined by our board of directors. Mr. Tangredi has accrued unpaid salary of $104,167 for 2007,$105, 145 for 2006 and $116,166 for 2005 and accrued bonus of $87,500 for year 2006.

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Employment Agreements

Officer Employment Agreement

Timothy N. Tangredi . We are party to an employment agreement with Mr. Tangredi, our President, Chief Executive Officer, Treasurer and director. The employment agreement, as amended and restated on July 29,2008, and sets forth Mr. Tangredi’s compensation level and eligibility for salary increases, bonuses, benefits, royalty sharing for newer applications, and option grants. Mr. Tangredi’s employment agreement provided for an initial term of three years with the term extending on the second anniversary thereof for an additional one year period and on each subsequent anniversary of the agreement for an additional year period. The contract sets forth Mr. Tangredi’s compensation level, conditions for certain option grants, benefits and the obligations of the Company in the event of termination. Mr. Tangredi’s base salary is $170,000 plus certain allowances as well as performance related payments, and option issuances.

William B. Newman We are party to an employment agreement with Mr. Newman, our Executive Vice President. The employment agreement was entered into on March 31, 2008, and sets forth Mr. Newman’s compensation level and eligibility for salary increases, bonuses, benefits, royalty sharing for newer applications, and option grants. Mr. Newman’s employment agreement provided for an initial term of one year with the term extending on the anniversary thereof for an additional one year period and on each subsequent anniversary of the agreement for an additional year period. The contract sets forth Mr. Newman’s compensation level, conditions for certain option grants, benefits and the obligations of the Company in the event of termination. Mr. Newman’s base salary is $150,000 plus certain allowances as well as performance related payments, and option issuances.

Significant Employee

Patricia K. Tangredi. We are a party to an employment agreement with Ms. Tangredi. The agreement, which was amended and restated on July 29, 2008, provides for her employment as the Company’s counsel for a three year term beginning on January 1, 2001 and ending December 31, 2005, with automatic extensions for subsequent one year terms, unless the Company or Ms. Tangredi provides the other party with written notice of intent not to renew. The employment agreement set forth Ms. Tangredi’s compensation level and eligibility for salary increases, options, royalty sharing for newer applications, benefits and the obligations of the Company in the event of termination. A portion of Patricia’s salary has been accrued and carried on the Company’s books since 2002.

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Outstanding Equity Awards

The following table sets forth certain information concerning unexercised stock options for each named executive officer. There were no stock awards outstanding as of the end of the fiscal year 2007.

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

OPTION AWARDS											STOCK AWARDS
Name	Number of securities underlying unexercised options (#) Exercisable			Number of securities underlying unexercised options (#) Unexercis-able		Equity Incentive Plan Awards: Number of Securities underlying unexercised unearned options (#)		Option exercise price ($)		Option expiration date	Number of shares or units of stock that have not vested (#)		Market value of shares or units of stock that have not vested ($)		Equity incentive plan awards: number of unearned shares, units or other rights that have not vested (#)		Equity incentive plan awards: Market or payout value of unearned shares, units or other rights that have not vested ($)
(a)	(b)			(c)		(d)		(e)		(f)	(g)		(h)		(i)		(j)
Timothy N. Tangredi (1)		825,000			0		0	$	.26	9/23/14		0		0		0		0
		150,000			0		0	$	.10	5/10/15
		120,000			0		0	$	.10	10/1/15
		40,000			0		0	$	.30	5/2/16
		110,000			0		0	$	.55	11/1/16
		140,000			0		0	$	.55	2/20/17
		300,000			0		0	$	.21	8/10/17
		350,000			0		0	$	.21	1/30/18
		3,000,000	*		0		0	$	.36	4/18/18
	*warrant
Robert W. Brown		106,416			0		0	$	.26	9/23/14		0		0		0		0
		120,000			0		0	$	.10	5/10/15
		80,000			40,000		40,000	$	.10	10/1/15
		24,167			48,333		48,333	$	.55	11/1/16
		0			50,000		50,000	$	.21	8/18/17
Scott G. Ehrenberg		140,000			0		0	$	.26	9/23/14
		110,000			0		0	$	.10	5/10/15
		53,333			26,667		26,667	$	.10	10/1/15
		13,333			26,667		26,667	$	.55	11/1/16
		80,000			40,000		40,000	$	.55	2/20/17
		0			50,000		50,000	$	.21	8/18/17

(1)

Mr. Tangredi receives a salary of $170,000 per year, and a bonus in an amount not to exceed 100% of his salary, which bonus shall be measured by meeting certain performance goals, which shall be set by our board of directors, and stock options as determined by our board of directors. Mr. Tangredi has accrued unpaid salary of $104,167 for 2007,$105, 150 for 2006 and $116,166 for 2005 and accrued bonus of $87,500 for year 2006.

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Director Compensation

The following table sets forth the compensation awarded to, earned by or paid to the directors during the fiscal year ended December 31, 2007.

DIRECTOR COMPENSATION
Name	Fees Earned or Paid in Cash ($)	Stock Awards ($)	Option Awards ($)	Non-Equity Incentive Plan Compen-sation ($)	Change in Pension Value and Non-qualified Deferred Compensation Earnings ($)	All Other Compen-sation ($)	Total ($)
(a)	(b)	(c)	(d)	(e)	(f)	(g)	(h)
Timothy N. Tangredi, Chairman	-	-	-	-		-	-
Raymond Kazyaka Sr., Director	-	-	12,600	-	-	-	12,600
Robert W. Schwartz, Director	-	-	12,600	-	-	-	12,600

We do not have a plan pursuant to which our directors are compensated and directors do not receive cash compensation for their services on the Board of Directors although they do receive stock options as determined by the full Board of Directors. Raymond Kazyaka Sr. and Robert W. Schwartz were each granted an option on August 18, 2007 to purchase 60,000 shares of common stock at an exercise price of $0.21 per share, vesting immediately upon issuance and exercisable for a period of ten years.

Our non-employee directors are currently compensated with the issuance of stock options, which generally become exercisable upon the date of grant, and which generally expire on the earlier of ten years from the date of grant or up to three years after the date that the optionee ceases to serve as a director. Non-employee directors are also reimbursed for out-of-pocket expenses associated with attending to the Company’s business.

SECURITY OWNERSHIP OF

CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information as of the date of this prospectus as to each person or group who is known to us to be the beneficial owner of more than 5% of our outstanding voting securities and as to the security and percentage ownership of each of our executive officers and directors and of all of our officers and directors as a group.

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Beneficial ownership is determined under the rules of the Securities and Exchange Commission and generally includes voting or investment power over securities. The number of shares shown as beneficially owned in the tables below are calculated pursuant to Rule 13d-3(d)(1) of the Securities Exchange Act of 1934. Under Rule 13d-3(d)(1), shares not outstanding that are subject to options, warrants, rights or conversion privileges exercisable within 60 days are deemed outstanding for the purpose of calculating the number and percentage owned by such person, but not deemed outstanding for the purpose of calculating the percentage owned by each other person listed. Except in cases where community property laws apply or as indicated in the footnotes to this table, we believe that each shareholder identified in the table possesses sole voting and investment power over all of the shares of common stock shown as beneficially owned by the shareholder.

The address for each of the persons named below is 11552 Prosperous Drive, Odessa, FL 33556, unless otherwise indicated.

Applicable percentage ownership in the following table is based on 11,877,184 shares of common stock outstanding as of August 7, 2008, plus, for each individual, any securities that individual has the right to acquire within 60 days of August 7, 2008.

	Common Stock Beneficially Owned
Name of Beneficial Owner	Number of Shares of Common Stock		Percentage of Class
Timothy N. Tangredi (Officer and Chairman) (1)		7,095,858		37.7%
Robert W. Brown (Officer) (2)		347,249		2.8%
Scott G. Ehrenberg (3)		652,799		5.2%
William B. Newman (Officer) (4)		566,667		4.6%
Raymond Kazyaka Sr. (Director ) (5)		404,600		3.3%
Robert W. Schwartz (Director) (6)		374,,600		3.1%
Executive officers and directors as a group (6 persons)		9,441,773		44.8%
Walt Robb (7) 300 Troy Road Schenectady, NY 12309		1,424,126		11.7%
Brian A. Kelly 181C Hague Blvd. Glenmont, N.Y. 12077		3,254,085		27.4%
Michael Gotomski (8) 1666 Valley View Dr. Winnona, MN 55987		1,056,544		8.4%
Andrew Mitchell (9) Furnival Chambers 32 Furnival Street London EC4A 1JQ UK		750,000		5.9%
Larry Hopfenspirger (10) 2025 Nocollet Ave. S. #203 Minneapolis, MN 55404		1,500,000		11.2%
Louis M. Jaffe (11) 1500 S. Ocean Blvd #5201 Boca Raton, FL 33432		1,273,334		9.9%

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Lawrence D. Isen (12) 4653 Carmel Mtn. Suite 308-402 San Diego, CA 92130	1,000,000	7.8%
Michael Frederick Stone (13) 18 Ozone Avenue Venice, CA 90291	2,000,000	14.4%
Michael J. McGrath (14) 1250 West Division Street Chicago, IL 60622	1,000,000	7.8%
Marisa Stadmauer (15) 26 Columbia Turnpike Florham Park, NJ 07932	1,500,000	11.2%
Andrew Vickery (16) 8 Airport Park Blvd. Latham, NY 12110	750,000	5.9%
Mark Nordlich (17) 152 West 575th St. 4th Floor New York, NY 10019	6,333,333	35.4%
Erick Richardson (18) 10900 Wilshire Blvd. Suite 500 Los Angeles, CA 90024	1,784,616	14.0%
Leonard Samuels (19) 1011 Centennial Road Penn Valley, PA 19072	7,250,000	37.9%
Leah Kaplan Samuels (20) 1011 Centennial Road Penn Valley, PA 19072	1,750,000	12.8%

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(1) Includes 5,110,000 shares of common issuable upon exercise of stock options and 1,965,858 shares beneficially owned by Mr. Tangredi’s wife, Patricia Tangredi. 1,838,058 of Ms. Tangredi’s shares are issuable upon the exercise of stock options.

(2) Includes 347,249 shares of common stock issuable upon exercise of stock options.

(3) Includes 569,999 shares of common stock issuable upon the exercise of stock options and 41,400 shares beneficially owned by Mr. Ehrenberg's wife, Linda Ehrenberg.

(4) Includes 66,667 shares of common stock issuable upon exercise of stock options. Also includes 250,000 shares of common stock issuable upon conversion of convertible notes and 250,000 shares of common stock issuable upon exercise of warrants issued in connection with the Financing.

(5) Includes 404,600 shares of common stock issuable upon exercise of stock options.

(6) Includes 374,600 shares of common stock issuable upon exercise of stock options.

(7) Includes 249,750 common shares issuable upon exercise of certain warrants issued in connection with the conversion of notes issued in the Additional Financing to CounterPoint Ventures LLC. The natural person with voting power and investment power on behalf of CounterPoint Ventures LLC is Walt Robb.

(8) Includes 18,750 common shares issuable upon exercise of certain warrant issued in connection with the conversion of notes issued in the Additional Financing. Also includes 375,000 shares of common stock issuable upon conversion of convertible notes and 375,000 shares of common stock issuable upon exercise of warrants issued in connection with the Financing.

(9) Includes 375,000 shares of common stock issuable upon conversion of convertible notes and 375,000 shares of common stock issuable upon exercise of warrants issued in connection with the Financing.

(10) Includes 750,000 shares of common stock issuable upon conversion of certain outstanding convertible notes and 750,000 shares of common stock issuable upon exercise of certain outstanding warrants issued in connection with the Financing.

(11) Includes 500,000 shares of common stock issuable upon conversion of convertible notes and 500,000 shares of common stock issuable upon exercise of certain outstanding warrants issued in connection with the Financing to Louis M. Jaffe 2004 Intangible Asset Mgmt. TR U/A DTD 5/24/04. Also includes 273,334 shares held by the trust. The natural person with voting power and investment power on behalf of Louis M. Jaffe 2004 Intangible Asset Mgmt. TR U/A DTD 5/24/04 is Louis M. Jaffe.

(12) Includes 500,000 shares of common stock issuable upon conversion of convertible notes and 500,000 shares of common stock issuable upon exercise of warrants issued in connection with the Financing in the name of Market Byte L.L.C. The natural person with voting power and investment power on behalf of Market Byte L.L.C. Defined Benefit & Trust is Lawrence D. Isen.

(13) Includes 1,000,000 shares of common stock issuable upon conversion of certain outstanding convertible notes and 1,000,000 shares of common stock issuable upon exercise of certain outstanding warrants issued in connection with the Financing.

(14) Includes 500,000 shares of common stock issuable upon conversion of convertible notes and 500,000 shares of common stock issuable upon exercise of warrants issued in connection with the Financing.

(15) Includes 750,000 shares of common stock issuable upon conversion of convertible notes and 750,000 shares of common stock issuable upon exercise of warrants issued in connection with the Financing in the name of MSSRPS, LLC. The natural person with voting power and investment power on behalf of MSSRPS, LLC is Marisa Stadmauer.

(16) Includes 375,000 shares of common stock issuable upon conversion of convertible notes and 375,000 shares of common stock issuable upon exercise of warrants issued in connection with the Financing to Next Generation Investment LLC. The natural person with voting power and investment power on behalf of Next Generation Investment LLC is Andrew Vickery.

(17) Includes 3,000,000 shares of common stock issuable upon conversion of convertible notes and 3,000,000 shares of common stock issuable upon exercise of warrants issued in connection with the Financing to Platinum Montaur Life Sciences LLC. The natural person with voting power and investment power on behalf of Platinum Montaur Life Sciences LLC is Mark Nordlich.

(18) Includes 500,000 shares of common stock issuable upon conversion of certain outstanding convertible notes and 500,000 shares of common stock issuable upon exercise of certain outstanding warrants issued in connection with the Financing in the name of RP Capital LLC. Erick Richardson and Nimish Patel of Richardson & Patel LLP own RP Capital LLC. Also includes 392,308 shares in the name of Richardson & Patel LLP and warrants to purchase an additional 392,308 shares. Mr. Richardson is a partner at Richardson & Patel LLP, our legal counsel. The natural person with voting and investment control over the shares held by these entities is Erick Richardson.

(19) Includes 875,000 shares of common stock issuable upon conversion of certain outstanding convertible notes and 875,000 shares of common stock issuable upon exercise of certain outstanding warrants issued in connection with the Financing held in the name of Leah Kaplan-Samuels and Leonard Samuels JTWTOS. The natural persons with voting power and investment power on behalf of Leah Kaplan-Samuels and Leonard Samuels JTWROS are Leah Kaplan-Samuels and Leonard Samuels. Also includes 5,500,000 shares of common stock underlying the convertible notes and warrants in the Financing issued to shareholder RBC Dain – Custodian for Leonard Samuels IRA and which are also registered under this prospectus.

(20) Includes 875,000 shares of common stock issuable upon conversion of certain outstanding convertible notes and 875,000 shares of common stock issuable upon exercise of warrants issued in connection with the Financing held in the name of Leah Kaplan-Samuels and Leonard Samuels JTWROS. The natural persons with voting power and investment power on behalf of Leah Kaplan-Samuels and Leonard Samuels JTWROS are Leah Kaplan-Samuels and Leonard Samuels.

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

During the year ended December 31, 2007, Timothy N. Tangredi, a shareholder and officer of the Company loaned the Company an aggregate of $156,500 pursuant to three loan agreements. One loan was unsecured, due on demand and did not accrue interest. The other two loans were unsecured, due in one and two months respectively, and accrued interest at 12 percent, increasing by 1 percent for every 30 days the principle balance is outstanding. Prior to year end, the Company repaid the loans.

The Company rents a building on a month to month basis from a related party which is wholly owned by two shareholders of the Company, one of which is Timothy N. Tangredi, our Chief Executive Officer. The base monthly rent expense is $3,800 per month. Company also pays the taxes, insurance and some repairs on the building. For the year three months ended March 31, 2008 and 2007, the Company has recorded $12,198 and $12,198, respectively, in rent expense to this related party.

The above amounts are not necessarily indicative of the amounts that would have been incurred had comparable transactions been entered into with independent parties. We believe that the foregoing transactions with were on terms no less favorable than could have been obtained from independent third parties. There are no material relationships between us and our directors or executive officers except as previously discussed herein.

Since the beginning of our last fiscal year, we are not a participant in any transaction, or proposed transaction, not disclosed herein in which any related person had or will have a direct or indirect material interest and in which the amount involved exceeds the lesser of $120,000 or one percent of our total assets at year end for the last two completed fiscal years.

MANAGEMENT'S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the notes thereto included elsewhere in this prospectus. This discussion includes forward-looking statements that are subject to risks, uncertainties and other factors described under the captions “Risk Factors” and “Forward Looking Statements.” These factors could cause our actual results in 2008 and beyond to differ materially from those expressed in, or implied by, those forward-looking statements.

OVERVIEW

We have developed and patented nano-structure polymer technology which is being commercialized in products based on the functionality of these materials. The applications of which has promise in a number of diverse market segments and applications.

Our growth product vehicle in the foreseeable future is the continued expansion of the commercialization of a multiple time, industry award winning Heating, Ventilation and Air Conditioning (“HVAC”) product we call “ConsERV". ConsERV 8 has been validated by third parties to reduce, in most cases, initial HVAC capital equipment costs, lower on-going operating costs, reduce peak energy usage, improve the environment by reducing the production of harmful CO 2 gases, and improve Indoor Air Quality (“IAQ”) to meet or exceed the current American Society of Heating, Refrigerating and Air-Conditioning Engineers ("ASHRAE") building guidelines outlined in their Standard 62.1 and 62.2.

8 The ConsERV product has received the “ 2006 Innovation Award ” presented byAHRI and ASHRAE. ConsERV was presented a first place award in July 2007 by ASHRAE for “ Nanotechnology in Public Building Application ” for the ConsERV installation at the Tampa, FL. Museum of Science and Industry.

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We currently generate revenues primarily through the sales of our ConsERV product, and licensing of our nano-structed polymer materials/processes.

Our main external focus is to continue to expand the sales channels for ConsERV while the main internal focus is to continue to improve ConsERV’s performance in its current application (HVAC air-side ventilation) while expanding its use into a complete heating/cooling system which is expected to use less energy than consumed in today’s commercial HVAC equipment.

Other projected uses include – but are not limited to - providing in sea water desalination, and allow for the storage of electrical energy in form factors with energy densities which are anticipated to exceed products currently available.

RESULTS OF OPERATIONS


	THREE MONTHS ENDED MARCH 31, 2008 COMPARED TO THREE MONTHS ENDED MARCH 31, 2007

REVENUES: Total revenues for the three months ended March 31, 2008 and 2007 were $224,267 and $184,208, respectively, an increase of $40,059, or 21.7%. The increase in revenues is primarily attributable to higher sales of our ConsERV products and interest income earned on proceeds from the private offering that closed in January 2008.

COST OF GOODS SOLD: Cost of goods sold increased $27,285 to $159,933 and represented 71.3% of revenues for the three months ended March 31, 2008 compared to $132,648 or 72.0% of revenues for the three months ended March 31, 2007. The decrease in percentage in 2008 is primarily the result of lower polymer costs.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES: Selling, general and administrative expenses of $1,405,749 for the three months ended March 31, 2008 increased $693,506 from $712,243 in the same period of 2007. This increase is primarily attributable to compensation expense associated with a warrant granted to an executive as discussed in Note 9 to the accompanying financial statements for the period ended March 31, 2008, partially offset by lower consulting fees.

INTEREST EXPENSE: Interest expense was $859,220 for the three months ended March 31, 2008, an increase of $828,301 compared to $30,919 for the same period of 2007. This increase is primarily the result of additional amortization of the beneficial conversion feature and discount on outstanding notes payable.

NET LOSS: Net loss for the three months ended March 31, 2008 increased by $1,509,033 to $2,200,635, from $691,602 for the three months ended March 31, 2007. The increase in net loss is primarily due to increases in compensation expense and interest expense.


	YEAR ENDED DECEMBER 31, 2007 COMPARED TO YEAR ENDED DECEMBER 31, 2006

REVENUES: Total revenues for the year ended December 31, 2007 and 2006 were $870,153 and $913,334, respectively, a decrease of $43,181, or 4.7%. The decrease in revenues is primarily attributable to a reduction in grant income associated with a one-time grant that we received in 2006 and lower sales of our ConsERV product, partially offset by the sale of a water desalination prototype.

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COST OF GOODS SOLD: Cost of goods sold decreased $11,035 to $637,032 and represented 73.2% of revenues for the year ended December 31, 2007 compared to $648,067 or 71.0% for the year ended December 31, 2006. The increase in the percentage in 2007 is primarily the result of incurring comparable direct payroll expenses in both periods with lower sales in 2007.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES: Selling, general and administrative expenses of $1,871,030 for the year ended December 31, 2007 decreased $213,513 from $2,084,543 for the year ended December 31, 2006. This decrease is primarily attributable to lower legal fees associated with the patent interference proceeding discussed in Note 11 to the accompanying financial statements for the period ending December 31, 2007.

INTEREST EXPENSE: Interest expense was $596,083 for the year ended December 31, 2007, an increase of $476,193 compared to $119,890 for the year ended December 31, 2006. This increase is primarily the result of additional amortization of the beneficial conversion feature and discount on outstanding notes payable.

NET LOSS: Net loss for the year ended December 31, 2007 increased by $294,826 to $2,233,992, from $1,939,166 for the year ended December 31, 2006 primarily due to lower revenues and an increase in interest expense, partially offset by a decrease in legal expenses.

LIQUIDITY AND CAPITAL RESOURCES

The Company has financed its operations since inception primarily through private sales of its common and preferred stock, the issuance of convertible promissory notes, license agreements, cash it received in connection with the exercise of warrants and the sale of certain fuel cell assets. The Company also received proceeds from various fuel cell contracts.

From 2000 through 2008, the Company has received funding of approximately $6,000,000 from private sales of its common and preferred stock to individuals and corporations, approximately $4,216,000 from the issuance of convertible notes and approximately $2,000,000 from licensing of its ConsERV product.

During 2005 and 2006, the Company received funding of approximately $1,265,600, from the issuance of 8% convertible promissory notes, secured by certain tangible assets. The Company settled these notes during 2007 by converting $840,547 of the notes and the related interest into 3,258,323 shares of common stock and repaying $425,000 of the notes in cash.

From November 2007 through January 2008, the Company consummated a private placement offering and received funding of $2,950,000 from the issuance of 9% convertible promissory notes, secured by patents, with maturity dates from December 2008 through January 2009. Warrants with a fair value of $1,566,563 to purchase common stock at an exercise price of $0.25 per share accompanied the promissory notes. These warrants vest immediately and expire December 2012 through January 2013. At maturity, the lender has the option of receiving payment of any principal and accrued interest due under the notes in either cash or common stock of the Company. If the lender opts for payment in the form of common stock, it will be issued at the rate of one share per $0.20 of outstanding principal and interest. The Company may, at any time prior to maturity, pay all interest and principal due under the note in cash. During the three months ended March 31, 2008, the Company issued common stock and warrants of $35,000 to pay for certain offering costs.

The Company has also issued stock options and warrants to certain employees and third party consultants for payment of services in lieu of cash. During the years ended December 31, 2007 and 2006, the Company issued options and warrants of $358,863 and $558,521, respectively, to employees and consultants in lieu of cash for services rendered. During the years ended December 31, 2007 and 2006, the Company issued common stock of $217,000 and $33,000, respectively, in lieu of cash for services received. Subsequent to March 31, 2008, the Company granted an executive a fully vested warrant to purchase 3,000,000 shares of the Company’s common stock at an exercise price of $.36 per share for services performed.

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We have incurred net losses since inception and expect to incur substantial losses in the future. Our ability to continue as a going concern is highly dependent on our ability to obtain additional sources of financing sufficient to fund our working capital requirements, which primarily include payroll, product development and product commercialization-related costs. Any failure by us to timely procure additional financing adequate to fund our ongoing operations will have a materially adverse consequence on our business operations and our consolidated financial position, results of operations and cash flows.

As of and for the Three Months Ended March 31, 2008

Cash and cash equivalents and cash held in escrow at March 31, 2008 were $1,288,622 compared to $1,504,232 at December 31, 2007. Cash is primarily used to fund our working capital requirements and net operating losses. At December 31, 2007, cash held in escrow represented $1,000,000 of proceeds from the private offering, which was released from escrow when the transaction closed in January 2008.

During the three months ended March 31, 2008, we received net proceeds of $466,000 after expenses of $34,000 in connection with the fourth and final closing of our private offering.

As of March 31, 2008, we had a working capital deficit of $871,415compared to a working capital deficit of $334,449 as of December 31, 2007. The decrease in working capital was primarily due an increase in current debt, partially offset by timing differences in customer collections and vendor payments.

We used $581,610 of cash to fund our operating activities in the three months ended March 31, 2008 compared to $221,674 of cash used to fund our operating activities in three months ended March 31, 2007. The increase in cash used to fund our operating activities was primarily due to timing differences in customer collections and vendor payments.

During the three months ended March 31, 2008, financing activities provided $1,366,000 of cash primarily due to net proceeds received from our private placement offering of $1,466,000s, partially offset by payments on our outstanding notes payable.

As of and for the Fiscal Year Ended December 31, 2007

Cash and cash equivalents and cash held in escrow as of December 31, 2007 were $1,504,232 compared to $204,799 as of December 31, 2006. Cash is primarily used to fund our working capital requirements and net operating losses. At December 31, 2007, cash held in escrow represented $1,000,000 of proceeds from the private placement offering, which was released from escrow when the transaction closed in January 2008.

In December 2007, we consummated a private offering and received funds of $2,260,000 net of expenses of $190,000 from the issuance of convertible promissory notes. As of December 31, 2007, proceeds of $1,000,000 from the private offering were held in escrow until the final closing of the transaction which occurred in January 2008.

As of December 31, 2007, we had a working capital deficit of $334,449 compared to a working capital deficit of $2,264,546 as of December 31, 2006. The increase in working capital was primarily due to an increase in cash from funds received in connection with our private offering, a decrease in net losses (exclusive of non-cash charges) and a conversion of outstanding notes payable which reduced our current debt, partially offset by timing differences in customer collections and vendor payments.

We used $915,682 of cash to fund our operating activities in the year ended December 31, 2007 compared to $753,727 of cash used to fund our operating activities in the year ended December 31, 2006. The increase in cash used to fund our operating activities was primarily due to timing differences in customer collections and vendor payments, partially offset by a decrease in net losses (exclusive of non-cash charges).

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During the year ended December 31, 2007, financing activities provided $1,224,325 of cash primarily due to net proceeds received from our private placement offering of $1,260,000 and the issuance of 150,909 shares of common stock, partially offset by payments on our outstanding notes payable.

INFLATION

Our management believes that inflation has not had a material effect on our results of operations.

OFF-BALANCE SHEET ARRANGEMENTS

We do not have any off balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, revenues, results of operations, liquidity or capital expenditures.

CONTRACTUAL OBLIGATIONS

As of March 31, 2008, we have contractual obligations of $3,064,670 as indicated below:


			Less than 1
Contractual Obligations	Total		Year		1-3 Years		3-5 Years

Long-term debt	$	2,950,000	$	-	$	2,950,000	$	-
Purchase Obligations		114,670		114,670		-		-
Total	$	3,064,670	$	114,670	$	2,950,000	$	-

CRITICAL ACCOUNTING POLICIES

The preparation of the accompanying financial statements and related disclosures in conformity with U.S. GAAP requires us to make judgments, assumptions and estimates that affect the amounts reported in the accompanying financial statements and the accompanying notes. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. When making these estimates and assumptions, we consider our historical experience, our knowledge of economic and market factors and various other factors that we believe to be reasonable under the circumstances. Actual results could differ from these estimates. The following critical accounting policies are significantly affected by judgments, assumptions and estimates used in the preparation of the financial statements:

Revenue

Revenues from product sales are recorded when the products are shipped to the customer, net of allowances for warranties and returns, which are immaterial based on our historical experience.

Revenues from license sales are deferred and recognized over the life of the agreements on a straight-line basis.

Impairment of Long-Lived Assets

We review our long-lived assets, such as property and equipment and patents, for impairment in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS 144) whenever events or changes in circumstances indicate that the carrying value may not be recoverable. We compare the carrying value of long-lived assets to the expected undiscounted cash flows that the assets will generate over their remaining useful lives. In calculating the estimated undiscounted cash flows, we make assumptions that are subject to a high degree of judgment.

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Stock-Based Compensation

On January 1, 2006, we adopted SFAS No. 123(R), which requires the measurement and recognition of compensation expense for all share-based payment awards based on estimated fair values. Pre-tax stock-based compensation expense recognized under SFAS No. 123(R) was $575,863 and $591,521 for the years ended December 31, 2007 and 2006, respectively.

We currently use the Black-Scholes option pricing model to determine the fair value of stock options and warrants. The Black-Scholes option-pricing model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable, characteristics not present in our stock options and warrants. The determination of the fair value of stock-based payment awards on the date of grant using an option-pricing model is affected by our stock price as well as assumptions regarding a number of complex and subjective variables. These variables include our expected stock price volatility over the term of the awards, actual and projected employee equity award exercise behaviors, risk-free interest rates, expected forfeiture rates and expected dividends.

We estimate the expected term of options and warrants granted based on the Company’s historical pattern of exercise behavior. We estimate the expected volatility based on comparison to a peer company’s historical activity. The dividend rate is based on the Company’s actual historical dividend experience and the risk free interest rate is based on the U.S. Treasury yield curve in effect for the expected term of the option on the grant date. We estimate forfeitures at the grant date based on historical experience. If factors change and we employ different assumptions for estimating stock-based compensation expense in future periods or if we decide to use a different valuation model, the future periods may differ significantly from what we have recorded in the current period and could materially affect our results of operations.

Taxes

The Company adopted FASB Interpretation 48 ("FIN 48"), Accounting for Uncertainty in Income Taxes, in January 2007. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements in accordance with SFAS 109 and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The adoption of FIN 48 did not have a material impact on the Company's financial position and results of operations.

RECENT ACCOUNTING PRONOUNCEMENTS

In February 2007, the FASB issued SFAS No. 159, " The Fair Value Option for Financial Assets and Financial Liabilities - including an amendment of FASB Statement No. 115 " . Under SFAS No. 159, a company may elect to measure eligible financial assets and financial liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings at each subsequent reporting date. The adoption of this statement on January 1, 2008, did not have a material effect on the Company’s consolidated financial statements as the Company did not elect the fair value option.

In December 2007, the FASB issued SFAS No. 141(R), "Business Combinations," a replacement of SFAS No. 141, "Business Combinations." The objective of this Statement is to improve the relevance, representational faithfulness and comparability of the information that a reporting entity provides in its financial reports about a business combination and its effects. This Statement establishes principles and requirements for how the acquirer recognizes and measures the identifiable assets acquired and liabilities assumed, measures the goodwill acquired or gain from a bargain purchase, and determines what information to disclose. The Company has not yet determined what impact the adoption of this requirement, which becomes effective January 1, 2009, will have on its consolidated financial statements with respect to future acquisitions.

In December 2007, the Financial Accounting Standards Board ("FASB") issued SFAS No. 160, "Non-controlling Interests in Consolidated Financial Statements – An amendment of ARB No. 51". SFAS 160 requires companies with non-controlling interests to disclose such interests clearly as a portion of equity but separate from the parent's equity. The non-controlling interest's portion of net income must also be separately presented in the statement of operations. SFAS 160 is effective for fiscal years beginning after December 15, 2008. The adoption of this statement is not expected to have a material effect on the Company's financial position or results of operations.

There are other pronouncements existing that are not discussed above but we do not believe such pronouncements will have a material effect on Company’s financial position or results of operation.

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MARKET FOR COMMON EQUITY

Our common stock has been traded on the Pink Sheets since November 15, 2005 under the trading symbol “DYLT.PK”. The following table sets forth the range of reported high and low bid prices of our common stock during the periods indicated. Such quotations reflect prices between dealers in securities and do not include any retail mark-up, mark-down or commission, and may not necessarily represent actual transactions. Trading in our common stock should not be deemed to constitute an “established trading market.”

	High		Low
For the year ending December 31, 2008:
First Quarter		.51		.15
Second Quarter		.51		.24

For the year ending December 31, 2007:
First Quarter		1.45		.20
Second Quarter		.60		.12
Third Quarter		.51		.21
Fourth Quarter		.88		.15

For the year ended December 31, 2006:
First Quarter		1.75		.95
Second Quarter		1.75		.10
Third Quarter		.70		.50
Fourth Quarter		.70		.50

The above prices represent inter-dealer prices, without retail mark-up, mark-down or commissions, and may not represent actual transactions.

Transfer Agent

Our transfer agent is Island Stock Transfer located at 100 Second Avenue South, Suite 104N St. Petersburg, Florida 33701, telephone (727) 289-0010.

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Holders

As of August 7, 2008 there were approximately 149 shareholders of record of our common stock.

Dividend Policy

We have not declared or paid any dividends and do not intend to pay any dividends in the foreseeable future to the holders of our common stock. We intend to retain future earnings, if any, for use in the operation and expansion of our business. Any future decision to pay dividends on common stock will be at the discretion of our board of directors and will depend on our financial condition, results of operations, capital requirements and other factors our board of directors may deem relevant.

Equity Compensation Plan Information

The following table sets forth information regarding equity compensation plans under which our securities are authorized for issuance as of December 31, 2007.

Plan Category	Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights	Weighted Average Exercise Price of Outstanding Options, Warrants and Rights	Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans
Equity compensation plans approved by security holders:	6,376,889	.244	1,056,993
Equity compensation plans not approved by security holders:	0	0	0

In June 2000, our Board of Directors adopted, and our shareholders approved, the 2000 Plan, which provides for the grant of stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units and bonus stock and other awards to eligible persons, as defined in said plan, including, but not limited to, officers, directors and employees of the Company. Certain awards under the 2000 Plan may be subject to performance conditions.

Number of Shares of Common Stock Available Under the 2000 Plan . As of December 31, 2007, the Company's Board of Directors approved and made available 6,093,882 shares of common stock to be issued pursuant to said plan. During the period ended March 31, 2008, the Company's Board of Directors approved and made available an additional 5,000,000 shares of Company's common stock for issuance under the 2000 Plan. The Plan permits grants of options of common shares authorized and approved by the Company’s Board of Directors and shareholders for issuance prior to enactment of the 2000 plan.

Exercise Price. The 2000 Plan requires the Committee to grant options with an exercise price per share not less than the fair market price of a share of Common Stock on the date of grant of the option.

Administration of the 2000 Plan . The 2000 Plan is administered by a committee of two or more directors designated by the Board to administer the Plan (the “Committee”) or, in the absence of such Committee, by the Board. Currently, the 2000 Plan is administered by our Board. The board has the authority to select the participants to whom awards under the 2000 Plan will be granted, grant awards, determine the type, number and other terms and conditions of, and all other matters relating to, awards granted under the 2000 Plan and to prescribe the rules and regulations for the administration of the 2000 Plan. No option or stock appreciation rights granted under the 2000 Plan shall be exercisable, however, more than ten years after the date of the grant.

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Transferability. Awards granted under the 2000 Plan are generally not transferable by the optionee otherwise than by will or the laws of descent and distribution and generally are exercisable during the lifetime of the optionee only by the optionee.

Change in Control. All awards granted under the 2000 Plan carrying a right to exercise that was not previously exercisable and vested shall become fully exercisable and vested upon a change of control of the Company, which includes the consummation of a merger or consolidation of the Company with or into any other entity, the sale of all or substantially all of our assets, the replacement of a majority of our Board of Directors, the acquisition by any person of securities representing 20% or more of the voting power of our then outstanding securities (other than securities issued by us) or any other event which the Board determines would materially alter our structure or ownership.

Options Granted to Non-Employee Directors. Non-employee directors of the Company are usually granted options each year, which generally become exercisable upon the date of grant, and which generally expire on the earlier of ten years from the date of grant or up to three years after the date that the optionee ceases to serve as a director.

Stand-Alone Grants

Our board of directors may grant common share purchase options or warrants to selected directors, officers, employees, consultants and advisors in payment of goods or services provided by such persons on a stand-alone basis outside of any of our 2000 Incentive Compensation Plan. The terms of these grants may be individually negotiated.

DESCRIPTION OF SECURITIES BEING REGISTERED

Authorized Capital

We are authorized to issue shares of stock to be designated respectively “common stock” and “preferred stock” and collectively referred to herein as “capital stock.” The total number of shares of capital stock which we have the authority to issue are 110,000,000, consisting of 100,000,000 shares of common stock, par value $0.01 per share, and 10,000,000 shares of preferred stock, par value $0.01 per share.

Securities Being Registered Hereunder

Common Stock

We have 11,877,184 shares of common stock issued and outstanding as of August 7, 2008. Each shareholder of our common stock is entitled to a pro rata share of cash distributions made to shareholders, including dividend payments. The holders of our common stock are entitled to one vote for each share of record on all matters to be voted on by shareholders. There is no cumulative voting with respect to the election of our directors or any other matter. The holders of our common stock are entitled to receive dividends when, as and if declared by our board of directors from funds legally available therefore. Cash dividends are at the sole discretion of our board of directors. In the event of our liquidation, dissolution or winding up, the holders of common stock are entitled to share ratably in all assets remaining available for distribution to them after payment of our liabilities and after provision has been made for each class of stock, if any, having any preference in relation to our common stock. Holders of shares of our common stock have no conversion, preemptive or other subscription rights, and there are no redemption provisions applicable to our common stock.

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9% Secured Convertible Note

Of the 32,753,090 shares of common stock being registered, 14,750,000 are issuable upon the conversion by Selling Shareholders of 9% secured convertible notes issued in the Financing transaction. The notes have a twelve month term and earn 9% interest during the term. Conversion of the note into common stock is at the holder’s option during the term. The conversion price is $0.20 per share of common stock.

Warrants

Of the 32,753,090 shares of common stock being registered, 17,133,484 shares are issuable upon exercise by Selling Shareholders of certain warrants.

Cashless Warrants

The warrants issued in the Financing have a five-year term, cashless exercise provisions and anti-dilution protection. The anti-dilution protection includes standard protection for stock dividends or splits, reclassification or capital reorganization as well as protection with regards to additional issuances of common stock or common stock equivalents. The exercise price is $0.25 per share of common stock. Warrants issued to Legend Merchant Group, Inc. and Richardson & Patel LLP are substantially similar to the cashless warrants issued in the Financing, with the exception that the amount that may be exercised is tied to the percentage converted bears to the total of all notes issued.

Cash Exercise Only Warrants

The warrants issued in the Additional Financing have a five-year term and anti-dilution protection for stock dividends or splits, mergers, consolidation, reclassification, capital reorganization or a sale of substantially all of the Company’s assets. The exercise price is $0.55 per share of common stock and they do not provide for cashless exercise. Warrants issued to the Robb Charitable Trust are identical to warrants issued in the Additional Financing. Warrants issued in the Daily Financing are substantially similar to those issued in the Additional Financing but permit immediate exercise and contain no provision permitting the Company to compel exercise based on Company’s stock price.

SELLING SHAREHOLDERS

The Selling Shareholders listed in the table below may use this prospectus for the resale of shares of common stock being registered hereunder, although no Selling Shareholder is obligated to sell any such shares. Of the 32,753,090 shares of common stock offered by this prospectus, 869,606 shares of common stock are outstanding as of the date hereof.

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The first column of the table below lists the name of each Selling Shareholder. The second column lists the number of common shares beneficially owned by each Selling Shareholder as of August 7, 2008. The third column lists the number of common shares that may be resold under this prospectus. The fourth and fifth columns list the number of common shares owned and the percentage of common shares owned after the resale of the common shares registered under this prospectus. Except as noted in the table below, none of the Selling Shareholders have had any material relationship with us within the past three years. The total number of common shares outstanding as of August 7, 2008 was 11,877,184.

Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission, and includes voting and investment power with respect to our common stock. Common stock subject to convertible debentures, warrants or options that are currently convertible or exercisable or convertible or exercisable within 60 days after August 7, 2008 are deemed to be beneficially owned by the person holding those securities for the purpose of computing the percentage ownership of that person but are not treated as outstanding for the purpose of computing the percentage ownership of any other shareholder.

The inclusion of any securities in the following table does not constitute an admission of beneficial ownership by the persons named below. Except as indicated in the footnotes to the table, no selling shareholder has had any material relationship with us or our predecessors or affiliates during the last three years. We may amend or supplement this prospectus from time to time to update the disclosure set forth herein. Of the Selling Shareholders, Legend Merchant Group Inc. and Aegis Capital Corp. are broker-dealers and may be deemed underwriters of the shares they are offering. Pali Performance, LLC, Jason Adelman, Robert J. Eide, Thomas Masterson, Steve Maurer, Meaghan Manning, Mathew Balk, Hilary Bergman, Daniel Schneiderman and Craig Pierson are affiliates of a broker dealer and (1) purchased the shares in the ordinary course of business and, (2) at the time of the purchase of the securities to be resold, the had no agreements or understandings, directly or indirectly, with any person to distribute the securities.

Selling Shareholder Table

Name	Number of Shares Beneficially Owned Before Offering		Number of Shares Being Offered		Number of Shares Beneficially Owned Offering (1)		Percentage Owned After Offering (2)
David Ehrenberg (3)		323,579		15,000		308,579		2.60%
Harris K. Weston (4)		149,511		9,100		140,411		1.18%
Howard Rubinstein (5)		41,753		2,500		39,253		*
Mark Smith (6)		145,823		8,750		137,073		1.15%
Randolph Blum (7)		446,743		28,743		418,000		3.52%
Sussman Sales Co, Inc. Profit Sharing Plan (8)		304,251		18,650		285,601		2.40%
Michael M. Gostomski (9)		1,056,544		768,750		287,794		2.42%
Alan & Janet Leisen (10)		53,073		2,500		50,573		*
Charles B. Buchanan Trustee U/A DTD 5.12.1999 (11)		335,227		62,500		272,727		2.30%
CounterPoint Ventures, L.L.C. (12)		1,424,126		249,750		1,174,376		10.89%
Vision Opportunity Master Fund (13)		38,005		38,005		0		*
Teresina De Caravahlo (14)		2,994		2,994		0		*
Peter Farrand (15)		201,353		9,440		191,913		1.62%
Robb Charitable Trust (16)		489,293		489,293		0		*
William B. Newman (17)		566,667		500,000		66,667		*
Andrew J. Maffey (18)		500,000		500,000		0		*
Andrew Mitchell (19)		750,000		750,000		0		*
Bruce S. Mora (20)		500,000		500,000		0		*
Craig Laughlin (21)		500,000		500,000		0		*
E. Todd Tracey (22)		500,000		500,000		0		*
Gemini Master Fund Ltd. (23)		500,000		500,000		0		*
Larry Hopfenspirger (24)		1,500,000		1,500,000		0		*
Lawrence T. Jaffe (25)		500,000		500,000		0		*
Louis M. Jaffe 2004 Intangible Asset Mgmt. TR U/A DTD 5/24/04 (26)		1,273,334		1,000,000		273,334		2.3%
Market Byte L.L.C. Defined Benefit & Trust (27)		1,000,000		1,000,000		0		*

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Michael Frederick Stone (28)	2,000,000	2,000,000	0	*
Michael J. McGrath (29)	1,000,000	1,000,000	0	*
MSSRPS, LLC (30)	1,500,000	1,500,000	0	*
Next Generation Investment LLC (31)	750,000	750,000	0	*
Platinum Montaur Life Sciences LLC (32)	6,333,333	6,000,000	333,333	2.81%
RBC Dain Custodian for Leonard Samuels IRA (33)	5,500,000	5,500,000	0	*
Robert Melnick (34)	639,333	500,000	139,333	1.17%
RP Capital LLC (35)	1,000,000	1,000,000	0	*
Sharon Youcha (36)	500,000	500,000	0	*
Sheldon T. Fleck (37)	500,000	500,00	0	*
Leah Kaplan-Samuels and Leonard Sameuls JTWROS (38)	1,750,000	1,750,000	0	*
Aegis Capital Corp. (39) **	25,000	25,000	0	*
Legend Merchant Group, Inc. (40) **	288,083	288,083	0	*
Robert Nathan (41) **	219,000	119,000	100,000	*
Craig Pierson (42) **	297,862	295,862	2,000	*
Daniel Schneiderman (43) **	25,000	25,000	0	*
Hillary Bergman (44) **	15,000	15,000	0	*
Mathew Balk (45) **	263,333	190,000	73,333	*
Matthew Waxelbaum (46) **	2,250	2,250	0	*
Meaghan Manning (47) **	17,943	17,943	0	*

Pali Performance LLC (48) **	15,000	15,000	0	*
Steve Maurer (49) **	30,000	30,000	0	*
Thomas Masterson (50) **	295,862	295,862	0	*
Robert Eide (51) **	25,500	25,500	0	*
Jason Adelman (52) **	55,000	55,000	0	*
Richardson & Patel LLP (53)	392,308	392,308	0	*
Arthur M. and Elva R. Daily Trust GST Trust Dtd 09/13/1982 FBO Carrie N. Daily, Sun Trust Bank, Trustee (54)	68,939	8,333	60,606	*
Arthur M. and Elva R. Daily Trust GST Trust Dtd 09/13/1982 FBO Travis D. Bjork, Sun Trust Bank, Trustee (55)	68,939	8,333	60,606	*
Arthur M. and Elva R. Daily Trust GST Trust Dtd 09/13/1982 FBO Troy S. Daily, Sun Trust Bank, Trustee (56)	68,939	8,333	60,606	*
Arthur M. Daily Family Trust Dated May 8, 1995, FBO Cleora Daily, Sun Trust Bank, Trustee (57)	103,409	12,500	90,909	*
Carrie Daily (58)	103,409	12,500	90,909	*
Cleora Daily (59)	103,409	12,500	90,909	*
James Daily (60)	206,818	25,000	181,818	1.53%
James T. Daily Revocable Trust Dated 10/1/1975 (61)	310,227	12,500	297,727	2.51%
Troy Daily (62)	297,727	12,500	285,227	2.40%

__________

*	Indicates less than one percent.

** Denotes broker-dealer or affiliate of a broker-dealer.

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(1) Assumes that all shares offered hereby will be resold by the selling security holders after this offering.

(2) Percentage based on 11,877,184 shares of common stock outstanding as of August 7, 2008.

(3) Includes 15,000 common shares issuable upon exercise of certain warrants issued in connection with the conversion of the notes issued in the Additional Financing.

(4) Includes 9,100 common shares issuable upon exercise of certain warrants issued in connection with the conversion of the notes issued in the Additional Financing.

(5) Includes 2,500 common shares issuable upon exercise of certain warrants issued in connection with the conversion of notes issued in the Additional Financing.

(6) Includes 8,750 common shares issuable upon exercise of certain warrants issued in connection with the conversion of notes issued in the Additional Financing. Mr. Smith is an independent sales representative for the ConsERV line.

(7) Includes 28,743 common shares issuable upon exercise of certain warrants issued in connection with the conversion of notes issued in the Additional Financing.

(8) Includes 18,650 common shares issuable upon exercise of certain warrants issued in connection with the conversion of notes issued in the Additional Financing. The natural person with voting power and investment power on behalf of Sussman Sales Co, Inc. Profit Sharing Plan is Mr. Joe Sussman.

(9) Includes 18,750 common shares issuable upon exercise of certain warrant issued in connection with the conversion of notes issued in the Additional Financing. Also includes 375,000 shares of common stock issuable upon conversion of convertible notes and 350,000 shares of common stock issuable upon exercise of warrants issued in connection with the Financing.

(10) Includes 2,500 common shares issuable upon exercise of certain warrants issued in connection with the conversion of notes issued in the Additional Financing.

(11) Includes 62,500 common shares issuable upon exercise of certain warrants issued in connection with the conversion of notes issued in the Additional Financing. The natural person with voting power and investment power on behalf of Charles B. Buchanan Trustee U/A DTD 5.12.1999 is Mr. Charles Buchanan.

(12) Includes 249,750 common shares issuable upon exercise of certain warrants issued in connection with the conversion of notes issued in the Additional Financing. The natural person with voting power and investment power on behalf of CounterPoint Ventures, LLC is Walt Robb.

(13) Includes 38,005 shares of common stock issued upon conversion of interest under notes issued in the Additional Financing into shares of common stock. Vision Opportunity Master Fund, initially elected not to convert its principal and interest into common stock and warrants and instead received cash. At the time of payment of the cash, the parties agreed to convert the interest only into 38,005 shares of common stock. The principal was paid out in cash and therefore no warrant was issued since issuance of warrant was tied to conversion of the principal into common stock.

(14) Includes 2,994 shares of common stock issued upon conversion of the interest under of notes issued in the Additional Financing into shares of common stock.

(15) Includes 9,440 shares of common stock issued upon conversion of the interest of notes issued in the Additional Financing into shares of common stock.

(16) Includes 50,000 shares of common stock issuable upon conversion of warrants issued in connection with Robb Charitable Trust Note. Also includes 439,292 shares of common stock issued in connection with an amendment to the Robb Charitable Trust Note dated January 20, 2008 pursuant to which one half of the principal and interest was payable in cash and one half of the principal and interest was payable in common stock. The natural person with voting power and investment power on behalf of Robb Charitable Trust is Lindsey Robb.

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(17) Includes 250,000 shares of common stock issuable upon conversion of convertible notes and 250,000 shares of common stock issuable upon exercise of warrants issued in connection with the Financing. Number of shares held after offering includes 66,667 option shares vested of June 30, 2008. A total of 800,000 option shares were granted on March 31, 2008. 66,667 option shares vests every three months for lesser of term of employment or 800,000 option shares. Mr. Newman has been the Executive Vice President of the Company since March 31, 2008.

(18) Includes 250,000 shares of common stock issuable upon conversion of convertible notes and 250,000 shares of common stock issuable upon exercise of warrants issued in connection with the Financing.

(19) Includes 375,000 shares of common stock issuable upon conversion of convertible notes and 375,000 shares of common stock issuable upon exercise of warrants issued in connection with the Financing.

(20) Includes 250,000 shares of common stock issuable upon conversion of certain outstanding convertible notes and 250,000 shares of common stock issuable upon exercise of certain outstanding warrants issued in connection with the Financing.

(21) Includes 250,000 shares of common stock issuable upon conversion of convertible notes and 250,000 shares of common stock issuable upon exercise of warrants issued in connection with the Financing.

(22) Includes 250,000 shares of common stock issuable upon conversion of certain outstanding convertible notes and 250,000 shares of common stock issuable upon exercise of certain outstanding warrants issued in connection with the Financing.

(23) Includes 250,000 shares of common stock issuable upon conversion of convertible notes and 250,000 shares of common stock issuable upon exercise of warrants issued in connection with the Financing. The natural person with voting power and investment power on behalf of Gemini Master Fund Ltd. is Steven Winters.

(24) Includes 750,000 shares of common stock issuable upon conversion of certain outstanding convertible notes and 750,000 shares of common stock issuable upon exercise of certain outstanding warrants issued in connection with the Financing.

(25) Includes 250,000 shares of common stock issuable upon conversion of certain outstanding convertible notes and 250,000 shares of common stock issuable upon exercise of certain outstanding warrants issued in connection with the Financing.

(26) Includes 500,000 shares of common stock issuable upon conversion of certain outstanding convertible notes and 500,000 shares of common stock issuable upon exercise of certain outstanding warrants issued in connection with the Financing. Number of shares held after offering includes 273,334 held by the trust. The natural person with voting power and investment power on behalf of Louis M. Jaffe 2004 Intangible Asset Mgmt. TR U/A DTD 5/24/04 is Louis M. Jaffe.

(27) Includes 500,000 shares of common stock issuable upon conversion of convertible notes and 500,000 shares of common stock issuable upon exercise of warrants issued in connection with the Financing. The natural person with voting power and investment power on behalf of Market Byte L.L.C. Defined Benefit & Trust is Lawrence D. Isen.

(28) Includes 1,000,000 shares of common stock issuable upon conversion of certain outstanding convertible notes and 1,000,000 shares of common stock issuable upon exercise of certain outstanding warrants issued in connection with the Financing.

(29) Includes 500,000 shares of common stock issuable upon conversion of convertible notes and 500,000 shares of common stock issuable upon exercise of warrants issued in connection with the Financing.

(30) Includes 750,000 shares of common stock issuable upon conversion of convertible notes and 750,000 shares of common stock issuable upon exercise of warrants issued in connection with the Financing. The natural person with voting power and investment power on behalf of MSSRPS, LLC is Marisa Stadmauer.

(31) Includes 375,000 shares of common stock issuable upon conversion of convertible notes and 375,000 shares of common stock issuable upon exercise of warrants issued in connection with the Financing. The natural person with voting power and investment power on behalf of Next Generation Investment LLC is Andrew Vickery.

(32) Includes 3,000,000 shares of common stock issuable upon conversion of convertible notes and 3,000,000 shares of common stock issuable upon exercise of warrants issued in connection with the Financing. The natural person with voting power and investment power on behalf of Platinum Montaur Life Sciences LLC is Mark Nordlich.

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(33) Includes 2,750,000 shares of common stock issuable upon conversion of convertible notes and 2,750,000 shares of common stock issuable upon exercise of warrants issued in connection with the Financing. The natural person with voting power and investment power on behalf of RBC Dain Custodian for Leonard Samuels IRA is Peter Hancuh. Leonard Samuels also beneficially owns 1,750,000 shares of common stock underlying convertible notes and warrants issued in the Financing held in the name of Leah Kaplan-Samuels and Leonard Samuels JTWROS and which are also registered under this prospectus.

(34) Includes 250,000 shares of common stock issuable upon conversion of convertible notes and 250,000 shares of common stock issuable upon exercise of warrants issued in connection with the Financing.

(35) Includes 500,000 shares of common stock issuable upon conversion of certain outstanding convertible notes and 500,000 shares of common stock issuable upon exercise of certain outstanding warrants issued in connection with the Financing. The natural person with voting and investment control over the shares is Erick Richardson. Erick Richardson and Nimish Patel of Richardson & Patel LLP own RP Capital LLC. Mr. Richardson is a partner at Richardson & Patel LLP, our legal counsel. (See footnote 53 below).

(36) Includes 250,000 shares of common stock issuable upon conversion of certain outstanding convertible notes and 250,000 shares of common stock issuable upon exercise of certain outstanding warrants issued in connection with the Financing.

(37) Includes 250,000 shares of common stock issuable upon conversion of certain outstanding convertible notes and 250,000 shares of common stock issuable upon exercise of certain outstanding warrants issued in connection with the Financing.

(38) Includes 875,000 shares of common stock issuable upon conversion of certain outstanding convertible notes and 875,000 shares of common stock issuable upon exercise of certain outstanding warrants issued in connection with the Financing. The natural persons with voting power and investment power on behalf of Leah Kaplan-Samuels and Leonard Samuels JTWROS are Leah Kaplan-Samuels and Leonard Samuels. Leonard Samuels also holds 5,500,000 shares of common stock underlying the convertible notes and warrants in the Financing issued to shareholder RBC Dain – Custodian for Leonard Samuels IRA and which are also registered under this prospectus.

(39) Includes 25,000 shares of common stock issuable upon exercise of warrants issued in connection with the Dec 07-Jan 08 Financing. The natural person with voting power and investment power on behalf of Aegis Capital Corp. is Mr. Robert Eide. The warrant was issued pursuant to a transfer from the warrant issued to Legend Merchant Group, Inc. for 1,400,000 under the terms of the placement agent agreement. Rober Eide holds a warrants for the 25,000 shares of common stock issued to him in connection with the Financing. Aegis Capital Corp. is a broker-dealer.

(40) Includes 288,083 shares of common stock issuable upon exercise of warrants issued in connection with the Financing. The natural person with voting power and investment power on behalf of Legend Merchant Group, Inc. is Thomas J. Gallagher. The warrant was issued pursuant to the placement agent agreement. Legend Merchant Group, Inc. is a broker-dealer.

(41) Includes 119,000 shares of common stock issuable upon exercise of warrants issued in connection with the Financing. The warrants were issued pursuant to a transfer from the warrants issued to Legend Merchant for 1,400,000 under the terms of the placement agent agreement. Robert Nathan is an affiliate of a broker-dealer.

(42) Includes 295,862 shares of common stock issuable upon exercise of warrants issued in connection with the Financing. The warrants were issued pursuant to a transfer from the warrants issued to Legend Merchant Group, Inc. for 1,400,000 under the terms of the placement agent agreement. Craig Pierson is an affiliate of a broker-dealer.

(43) Includes 25,000 shares of common stock issuable upon exercise of warrants issued in connection with the Financing. The warrants were issued pursuant to a transfer from the warrants issued to Legend Merchant Group, Inc. for 1,400,000 under the terms of the placement agent agreement. Daniel Schneiderman is an affiliate of a broker-dealer.

(44) Includes 15,000 shares of common stock issuable upon exercise of warrants issued in connection with the Financing. The warrants were issued pursuant to a transfer from the warrants issued to Legend Merchant Group, Inc. for 1,400,000 under the terms of the placement agent agreement. Hillary Bergman is an affiliate of a broker-dealer.

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(45) Includes 190,000 shares of common stock issuable upon exercise of warrants issued in connection with the Financing. The warrants were issued pursuant to a transfer from the warrants issued to Legend Merchant Group, Inc. for 1,400,000 under the terms of the placement agent agreement. Mathew Balk is an affiliate of a broker-dealer.

(46) Includes 2,250 shares of common stock issuable upon exercise of warrants issued in connection with the Financing. The warrants were issued pursuant to a transfer from the warrants issued to Legend Merchant Group, Inc. for 1,400,000 under the terms of the placement agent agreement. Matthew Waxelbaum is an affiliate of a broker-dealer.

(47) Includes 17,943 shares of common stock issuable upon exercise of warrants issued in connection with the Financing. The warrants were issued pursuant to a transfer from the warrants issued to Legend Merchant Group, Inc. for 1,400,000 under the terms of the placement agent agreement. Meaghan Manning is an affiliate of a broker-dealer.

(48) Includes 15,000 shares of common stock issuable upon exercise of warrants issued in connection with the Financing. The warrants were issued pursuant to a transfer from the warrants issued to Legend Merchant Group, Inc. for 1,400,000 under the terms of the placement agent agreement. The natural person with voting power and investment power on behalf of Legend Merchant Group, Inc. is Thomas J. Gallagher. Legend Merchant Group, Inc. is a broker-dealer.

(49) Includes 30,000 shares of common stock issuable upon exercise of warrants issued in connection with the Financing. The warrants were issued pursuant to a transfer from the warrants issued to Legend Merchant Group, Inc. for 1,400,000 under the terms of the placement agent agreement. Steve Maurer is an affiliate of a broker-dealer.

(50) Includes 295,862 shares of common stock issuable upon exercise of warrants issued in connection with the Financing. The warrants were issued pursuant to a transfer from the warrants issued to Legend Merchant Group, Inc. for 1,400,000 under the terms of the placement agent agreement. Thomas Masterson is an affiliate of a broker-dealer.

(51) Includes 25,000 shares of common stock issuable upon exercise of warrants issued in connection with the Financing. The warrants were issued pursuant to a transfer from the warrants issued to Legend Merchant Group, Inc. for 1,400,000 under the terms of the placement agent agreement. Robert Eide is an affiliate of a broker-dealer. Robert Eide is also the natural person with voting power and investment power on behalf of Aegis Capital Corp. which was also issued warrant pursuant to a transfer from the warrant issued to Legend Merchant for 1,400,000 under the terms of the placement agent agreement.

(52) Includes 55,000 shares of common stock issuable upon exercise of s warrants issued in connection with the Financing. The warrants were issued pursuant to a transfer from the warrants issued to Legend Merchant Group, Inc. for 1,400,000 under the terms of the placement agent agreement. Jason Adelman is an affiliate of a broker-dealer.

(53) Includes 392,308 shares of common stock and 392,308 shares of common stock issuable upon exercise of warrants issued in connection with performance of legal services. The natural person with voting power and investment power on behalf of Richardson & Patel LLP is Erick Richardson. Erick Richardson and Nimish Patel of Richardson & Patel LLP own RP Capital LLC. (See footnote 35 above).

(54) Includes 8,333 shares of common stock issuable upon exercise of warrants issued in connection with the Daily Financing. The natural person with voting power and investment power on behalf of Arthur M. and Elva R. Daily Trust GST Trust Dtd 09/13/1982 FBO Carrie N. Daily, Sun Trust Bank, Trustee is Anne Hoofnaglel.

(55) Includes 8,333 shares of common stock issuable upon exercise of warrants issued in connection with the Dec 06-Mar 07 Daily Offering. The natural person with voting power and investment power on behalf of Arthur M. and Elva R. Daily Trust GST Trust Dtd 09/13/1982 FBO Travis D. Bjork, Sun Trust Bank, Trustee is Anne Hoofnaglel.

(56) Includes 8,333 shares of common stock issuable upon exercise of warrants issued in connection with the Daily Financing. The natural person with voting power and investment power on behalf of Arthur M. and Elva R. Daily Trust GST Trust Dtd 09/13/1982 FBO Troy S. Daily, Sun Trust Bank, Trustee is Anne Hoofnaglel.

(57) Includes 8,333 shares of common stock issuable upon exercise of warrants issued in connection with the Daily Financing. The natural person with voting power and investment power on behalf of Arthur M. Daily Family Trust Dated May 8, 1995, FBO Cleora Daily, Sun Trust Bank, Trustee is Anne Hoofnaglel.

-56-

(58) Includes 12,500 shares of common stock issuable upon exercise of warrants issued in connection with the Daily Financing.

(59) Includes 12,500 shares of common stock issuable upon exercise of warrants issued in connection with the Daily Financing.

(60) Includes 25,000 shares of common stock issuable upon exercise of warrants issued in connection with the Daily Financing.

(61) Includes 12,500 shares of common stock issuable upon exercise of warrants issued in connection with the Daily Financing.

(62) Includes 12,500 shares of common stock issuable upon exercise of warrants issued in connection with the Daily Financing.

PLAN OF DISTRIBUTION

We are registering shares of our common stock for resale by the Selling Shareholders identified in the section above entitled “Selling Shareholders.” We will receive none of the proceeds from the sale of these shares by the Selling Shareholders. The common stock may be sold from time to time to purchasers:

	·	through the Pink Sheets at prevailing market prices; or
	·	through underwriters, broker-dealers or agents who may receive compensation in the form of discounts, concessions or commissions from the Selling Shareholders or the purchasers of the common stock.

The Selling Shareholders may use any one or more of the following methods when selling shares:

	·	ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;
	·	a block trade in which the broker-dealer so engaged will attempt to sell such shares as agent, but may position and resell a portion of the block as principal to facilitate the transaction;
	·	purchases by a broker-dealer as principal and resale by such broker-dealer for its own account pursuant to this prospectus;
	·	an exchange distribution in accordance with the rules of the applicable exchange;
	·	privately negotiated transactions;
	·	settlement of short sales;
	·	broker-dealers may agree with the selling shareholders to sell a specified number of such shares at a stipulated price per share;
	·	a combination of any such methods of sale;
	·	through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise; or
	·	any other method permitted pursuant to applicable law.

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Neither the Selling Shareholders nor the Company can presently estimate the amount of compensation in the form of discounts, concessions or commissions that underwriters, broker-dealers or agents may receive from the Selling Shareholders or the purchasers of the common stock. We know of no existing arrangements between the Selling Shareholders, broker-dealers, underwriters or agents relating to the sale or distribution of the shares.

The Selling Shareholders may also enter into hedging transactions and persons with whom they effect such transactions, including broker-dealers, may engage in short sales of our common shares. Our Selling Shareholders may also engage in short sales and short sales against the box, and in options, swaps, derivatives and other transactions in our securities, and may sell and deliver the shares covered by this prospectus in connection with such transactions or in settlement of securities loans. These transactions may be entered into with broker-dealers or other financial institutions that may resell those shares pursuant to this prospectus (as supplemented or amended to reflect such transaction).

The Selling Shareholders and any broker-dealers or agents that are involved in selling the shares may be deemed to be “underwriters” within the meaning of section 2(11) of the Securities Act in connection with the sales and distributions contemplated under this prospectus and may have civil liability under Sections 11 and 12 of the Securities Act for any omissions or misstatements in this prospectus and the registration statement of which it is a part. Additionally, any profits which our Selling Shareholders may receive might be deemed to be underwriting compensation under the Securities Act. Because the Selling Shareholders may deemed to be underwriters under Section 2(11) of the Securities Act, the Selling Shareholders will be subject to the prospectus delivery requirements of the Securities Act. Any profits realized by the Selling Shareholders and the compensation of any broker-dealer may be deemed to be underwriting discounts and commissions.

The resale shares will be sold only through registered or licensed broker-dealers if required under applicable state securities laws. In addition, in certain states, the resale shares may not be sold unless they have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and is complied with.

We will bear all expenses relating to the sale of our common shares under this prospectus, except that the Selling Shareholders will pay any applicable underwriting commissions and expenses, brokerage fees and transfer taxes, as well as the fees and disbursements of counsel to and experts for the Selling Shareholders.

Any common shares offered under this prospectus that qualify for sale pursuant to Rule 144 of the Securities Act may also be sold under Rule 144 rather than pursuant to this prospectus.

Under applicable rules and regulations under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), any person engaged in the distribution of the resale shares may not simultaneously engage in market making activities with respect to our common stock for a period of two business days prior to the commencement of the distribution. In addition, the Selling Shareholders will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, including Regulation M, which may limit the timing of purchases and sales of shares of our common stock by the Selling Shareholders or any other person. We will make copies of this prospectus available to the Selling Shareholders and have informed them of the need to deliver a copy of this prospectus to each purchaser at or prior to the time of the sale.

INTERESTS OF NAMED EXPERTS AND COUNSEL

The financial statements of Dais Analytic included in this prospectus have been audited by Pender Newkirk & Company LLP, Certified Public Accountants (“Pender”), to the extent and for the periods set forth in their report appearing elsewhere herein and are included in reliance upon such report given upon the authority of that firm as experts in auditing and accounting. The validity of the issuance of the common shares to be sold by the Selling Shareholders under this prospectus will be passed upon for our Company by Richardson & Patel, LLP (“R&P”). Neither Pender nor R&P have been employed by us on a contingent basis with respect to the sale or registration under this prospectus of the securities to be sold by the Selling Shareholders. Pender does not own a substantial interest in us. R&P and its partners beneficially own 1,784,616shares of our common stock, all of which are being registered hereunder.

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INDEMNIFICATION, LIMITATION OF LIABILITY, AND

DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION

FOR SECURITIES ACT LIABILITIES

As permitted under the Business Corporation Law of the State of New York, our Certificate of Incorporation provides that all our directors shall be entitled to be indemnified for any breach of duty, provided that no indemnification maybe made to or on behalf of any director if a judgment or other final adjudication adverse to the director establishes that his acts were committed in bad faith or were the result of active and deliberate dishonesty and were material to the cause of action so adjudicated, or that he personally gained in fact a financial profit or other advantage to which he was not legally entitled.

Our Certificate of Incorporation further provides for indemnification of any person for actions as a director, officer, employee or agent of the Company to the fullest extent permitted by law with regards to fines, judgments fees and amounts paid in a settlement in an action or proceeding if the person acted in good faith and in a manner the person reasonably believed in or not opposed to the best interests of the Company and, with respect to any criminal action or proceeding, had no reasonable cause to believe the person’s conduct was unlawful.

Our Certificate of Incorporation, as amended, provides that our directors are not to be liable for any breach of their directors’ duties, except for acts or omissions involving bad faith, intentional misconduct, knowing violation of the law or personal financial gain or advantage. Our Certificate of Incorporation also provides a right of indemnification in specified circumstances to our directors, officers, employees or agents to the fullest extent permitted by law. These provisions cannot be amended without the affirmative vote of the holders of at least a majority in interest of the outstanding shares entitled to vote.

Under the Company’s Director and Officer Insurance Policy, the Company’s directors and officers are provided liability coverage of $3 million (subject to retention) while the Company itself is covered for securities claims only. The policy has a one year term with annual renewal possible. The policy can be terminated by the insured if there is a merger or acquisition which includes a change in ownership of 50% of the voting shares. At such time, the insurer may elect to cancel the policy and the total premium would be due. The Company may elect to then obtain “run off” insurance at a cost of 150% of the initial policy premium. The policy is a claim made policy. It only covers those claims made during the policy term. If an act giving rise to a claim occurs during the term, but the claim is not made until after the policy terminates, there is no coverage.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted for our directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by us for expenses incurred or paid by a director, officer or controlling person in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether our indemnification is against public policy as expressed in the Securities Act and we will be governed by the final adjudication of the issue by the court.

WHERE YOU CAN FIND FURTHER INFORMATION

We filed with the Securities and Exchange Commission (the “Commission”) a Registration Statement on Form S-1 under the Securities Act with respect to the common stock being offered in this offering. Although this prospectus, which forms a part of the Registration Statement, contains all of the material information set forth in the Registration Statement, parts of the Registration Statement are omitted in accordance with the rules and regulations of the Commission.

The omitted information may be inspected and copied, at prescribed rates, at the public reference facilities maintained by the Commission at Judiciary Plaza, 100 F Street, NE., Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330. The Commission maintains an Internet site at http://www.sec.gov that contains reports, proxy and information statements and other information regarding issuers that file electronically with the Commission. For further information with respect to our company and the securities being offered in this offering, reference is hereby made to the Registration Statement, including the exhibits thereto and the financial statements, notes, and schedules filed as a part thereof.

The Registration Statement, including all exhibits and schedules and amendments, has been filed with the Commission through the Electronic Data Gathering, Analysis and Retrieval (EDGAR) system. We do not currently file periodic reports with the Commission; however, following the effective date of the Registration Statement relating to this prospectus, we intend to become a reporting company and will be required to file annual, quarterly and current reports, and other information with the Commission. Copies of all of our filings with the Commission may be viewed on the Commission's internet web site at http://www.sec.gov. We also maintain a website at http://www.daisanalytic.com. We may include our public filings on our website, and will include such information to the extent required by applicable law and the rules and regulations of any exchange on which our shares are listed.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

There were no changes in or disagreements with our accountants on accounting and financial disclosure during the last two fiscal years or the interim period from January 1, 2008 through the date of this prospectus.

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INDEX TO FINANCIAL STATEMENTS

INTERIM FINANCIAL INFORMATION

Balance Sheet as of March 31, 2008	F-3
Statements of Operations for the three months ended March 31, 2008 and 2007	F-4
Statements of Cash Flows for the three months ended March 31, 2008 and 2007	F-5
Condensed Notes to Financial Statements	F-7

ANNUAL FINANCIAL INFORMATION

Report of Independent Registered Public Accounting Firm	F-19
Balance Sheet as of December 31, 2007 and 2006	F-20
Statements of Operations for the years ended December 31, 2007 and 2006	F-22
Statement of Stockholders’ Equity for the years ended December 31, 2007 and 2006	F-23
Statement of Cash Flows for the years ended December 31, 2007 and 2006	F-24
Notes to Financial Statements	F-26

Financial Statements

Dais Analytic Corporation

As of March 31, 2008 and for the

Three Months Ended March 31, 2008 and 2007

(unaudited)

Dais Analytic Corporation

Balance Sheet

March 31, 2008

(unaudited)

Assets
Current assets:
Cash and cash equivalent	$	1,288,622
Accounts receivable		125,197
Inventory		118,223
Loan costs, net of accumulated amortization		79,566
Prepaid expenses and other current assets		10,370
Total current assets		1,621,978

Property and equipment, net of accumulated depreciation of $299,967		15,399

Other assets:
Deposits		2,280
Patents, net of accumulated amortization of $89,442		49,480
Total other assets		51,760

	$	1,689,137

Liabilities and Stockholders’ Deficit
Current liabilities:
Accounts payable, including related party payables of $95,016	$	321,946
Accrued compensation and related benefits, related party		1,103,639
Current portion of deferred revenue		84,145
Current portion of notes payable, net of unamortized discount of
$2,175,158, included related party payable of $624		775,466
Accrued expenses, other		208,197
Total current liabilities		2,493,393

Long-term liabilities:
Accrued compensation, related party		836,518
Deferred revenue, net of current portion		356,877
Total long-term liabilities		1,193,395

Stockholders’ deficit:
Series A preferred stock; $.01 par value; 10,000,000 shares authorized;
0 shares issued and outstanding
Common stock; $.01 par value; 100,000,000 shares authorized; 9,316,961
shares issued; and 9,079,748 shares outstanding		93,170
Capital in excess of par value		24,259,483
Deferred non cash offering costs		(86,234	)
Accumulated deficit		(24,997,958	)
		(731,539	)
Treasury stock at cost, 237,213 shares		(1,266,112	)
Total stockholders’ deficit		(1,997,651	)

	$	1,689,137

The accompanying notes are an integral part of the financial statements.

F-3

Dais Analytic Corporation

Statements of Operations

	Three Months Ended March 31,
Revenue:	2008			2007
	(unaudited)			(unaudited)
Sales	$	192,474		$	163,171
License fees		21,037			21,037
Interest income		10,756

Total revenues		224,267			184,208

Expenses:

Cost of goods sold		159,933			132,648
Selling, general and administrative		1,405,749			712,243
Interest expense		859,220			30,919

Total expenses		2,424,902			875,810


Loss before provision for income taxes		(2,200,635	)		(691,602	)

Provision for income taxes

Net loss	$	(2,200,635	)	$	(691,602	)

Net loss per common share, basic and fully diluted	$	(0.24	)	$	(0.25	)

Weighted average number of common shares outstanding		9,174,764			2,714,565

The accompanying notes are an integral part of the financial statements.

F-4

Dais Analytic Corporation

Statements of Changes in Stockholders’ Deficit

For the Three Months Ended March 31, 2008

							Capital in						Deferred
	Preferred Stock		Common Stock				Excess of			Accumulated			Offering			Treasury			Stockholders’
	Shares	Amount	Shares		Amount		Par Value			Deficit			Costs			Stock			Deficit
Balance, December 31, 2007				8,742,797	$	87,428	$	23,389,320		$	(22,797,323	)	$	(55,000	)	$	(1,266,112	)	$	(641,687	)

Issuance of common stock for conversion of notes payable and related accrued interest (unaudited)				434,164		4,342		104,198												108,540
Value of beneficial conversion feature for the conversion of notes payable and related accrued interest and for issuance of convertible debt (unaudited)								266,814												266,814
Offering costs (unaudited)								(17,340	)											(17,340	)
Issuance of warrants with convertible debt (unaudited)								298,005												298,005
Issuance of options (unaudited)								184,886												184,886
Issuance of common stock and warrants for offering costs (unaudited)				140,000		1,400		33,600						(35,000	)
Amortization of deferred offering costs														3,766						3,766
Net loss for three months ended March 31, 2008 (unaudited)											(2,200,635	)								(2,200,635	)
Balance, March 31, 2008 (unaudited)				9,316,961	$	93,170	$	24,259,483		$	(24,997,958	)	$	(86,234	)	$	(1,266,112	)	$	(1,997,651	)

The accompanying notes are an integral part of the financial statements.

F-5

Dais Analytic Corporation

Statements of Cash Flows

	Three Months Ended March 31,
	2008			2007
	(unaudited)			(unaudited)
Operating activities
Net loss	$	(2,200,635	)	$	(691,602	)
Adjustments to reconcile net loss to net cash used
by operating activities:
Depreciation and amortization		3,517			3,358
Amortization of deferred loan costs		23,854			15,694
Amortization of discount on convertible notes		374,506
Amortization of the beneficial conversion feature on convertible notes		329,467			79,030

Issuance of common stock for services and amortization
of common stock issued for services		3,766			217,000
Issuance of common stock warrants for conversion of notes payable		43,111

Issuance of common stock options to employees and consultants		184,886			23,003
Value of beneficial conversion feature for conversion of notes
payable and related accrued interest		21,708
(Increase) decrease in:
Accounts receivable		(118,447	)		86,436
Inventory		(44,594	)		(24,999	)
Prepaid expenses and other current assets		13,547			(1,783	)
Increase (decrease) in:
Accounts payable and accrued expenses		(39,903	)		60,726
Accrued compensation and related benefits		844,644			32,500
Deferred revenue		(21,037	)		(21,037	)
Net cash used by operating activities		(581,610	)		(221,674	)

Investing activities
Purchase of property and equipment					(798	)
Net cash used by investing activities					(798	)

Financing activities
Proceeds from issuance of notes payable		500,000			150,000
Proceeds received from escrow		1,000,000
Payments on notes payable		(100,000	)
Payments for loan costs		(34,000	)
Issuance of common stock for cash					51,000
Net cash provided by financing activities		1,366,000			201,000

Net increase (decrease) in cash and cash equivalent		784,390			(21,472	)

Cash and cash equivalent, beginning of period		504,232			204,799

Cash and cash equivalent, end of period	$	1,288,622		$	183,327

Supplemental disclosures of cash flow information and noncash
investing and financing activities:
Cash paid during the year for interest	$	15,028		$	29,762

During the three months ended March 31, 2008, the Company issued 434,164 shares of common stock in conversion of $100,000 of notes payable and $8,540 of accrued interest.

During the three months ended March 31, 2008 the Company issued 140,000 shares of common stock for future services valued at $35,000.

During the three months ended March 31, 2008, the Company issued convertible notes payable with beneficial conversion features of $245,106 and a discount equivalent to the relative fair value of the accompanying warrants of $254,894.

The accompanying notes are an integral part of the financial statements.

F-6

Dais Analytic Corporation

Notes to Financial Statements

Three Months Ended March 31, 2008 and 2007

(unaudited)

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”) (cores and systems) for use in commercial Heating, Ventilating, and Air Conditioning (HVAC) applications. In addition to direct sales, the Company licenses its nano-structured 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 of 1993 with its corporate headquarters located in Odessa, Florida.

2. Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. For the three month’s ended March 31, 2008, the Company has a net loss of $2,200,635 and an accumulated deficit of $24,997,958 has negative working capital of $871,415 and a stockholder’s deficit of $1,997,651 at March 31, 2008. In view of these matters, there is substantial doubt that the Company will continue as a going concern. The recoverability of recorded property and equipment, intangible assets, and other asset amounts shown in the accompanying financial statements is dependent upon the Company’s ability to continue as a going concern and to achieve a level of profitability. The Company intends on financing its future activities and its working capital needs largely from the sale of public equity securities with some additional funding from other traditional financing sources, including term notes and proceeds from sub-licensing agreements until such time that funds provided by operations are sufficient to fund working capital requirements. However, there can be no assurance that the Company will be successful in its efforts. 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.

3. Significant Accounting Policies

In the opinion of management, all adjustments consisting only of normal recurring adjustments necessary for a fair statement of (a) the results of operations for the three month periods ended March 31, 2008 and 2007, (b) the financial position at March 31, 2008, and (c) cash flows for the three month periods ended March 31, 2008 and 2007, have been made.

F-7

Dais Analytic Corporation

Notes to Financial Statements

Three Months Ended March 31, 2008 and 2007

(unaudited)

3. Significant Accounting Policies (continued)

The unaudited financial statements and notes are presented as permitted by Form 10-Q. Accordingly, certain information and note disclosures normally included in the financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted. 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, 2007. The results of operations for the three month periods ended March 31, 2008 and 2007 are not necessarily indicative of those to be expected for the entire year.

The significant accounting policies followed are:

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.

Direct loan costs of $103,420 incurred with the issuance of notes payable are deferred and amortized to interest expense over the life of the related notes payable, $15,694 per month for 12 months. For the three months ended March 31, 2008 and 2007, the Company incurred amortization expense of $23,854 and 15,694, respectively.

Inventory consists of raw materials 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.

Revenue derived from the sale of licenses is deferred and recognized as revenue on a straight-line basis over the life of the license, or until the license arrangement is terminated. The Company recognized $21,037 of deferred revenue associated with license agreements for each of the three months ended March 31, 2008 and 2007.

F-8

Dais Analytic Corporation

Notes to Financial Statements

Three Months Ended March 31, 2008 and 2007

(unaudited)

3. Significant Accounting Policies (continued)

required to provide services in exchange for the award, known as the requisite service period (usually the vesting period). The Company adopted SFAS 123R effective beginning January 1, 2006 using the Modified Prospective Application Method. Under this method, SFAS 123R applies to new awards and to awards modified, repurchased or cancelled after the effective date. Prior to the adoption of SFAS 123(R) the Company accounted for stock option grants using the intrinsic value method prescribed in APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and accordingly, recognized no compensation expense for stock option grants.

The value of each grant under SFAS 123(R) is estimated at the grant date using the Black-Scholes option model with the following assumptions for options granted during the three months ended March 31, 2008 and 2007:

	Three Months Ended March 31, 2008	Three Months Ended March 31, 2007
Dividend rate	0	0
Risk free interest rate	2.64% – 3.45%	4.50% - 4.69%
Term	5 – 10 years	5 – 10 years
Volatility	80% – 114%	71% – 82%

The basis for the above assumptions are as follows: the dividend rate is based upon the Company’s history of dividends; the risk-free interest rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant; the expected term was calculated based on the Company’s historical pattern of options granted that are expected to be outstanding; and expected volatility was calculated by review of a peer company’s historical activity.

SFAS No. 123R requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Based on historical experience of forfeitures, the Company estimated future unvested option forfeitures at zero percent for the period ended March 31, 2008 and 2007 and incorporated this rate in the estimated fair value of employee option grants during 2008 and 2007.

As of March 31, 2008, there was $542,998 of unrecognized stock-based compensation expense related to nonvested stock options. This expense will be recognized over a weighted average period of three years.

F-9

Dais Analytic Corporation

Notes to Financial Statements

Three Months Ended March 31, 2008 and 2007

(unaudited)

3. Significant Accounting Policies (continued)

The following table represents our nonvested stock option activity for the period ended March 31, 2008:

				Weighted Average
	Number of			Grant Date
	Options			Fair Value

Nonvested options - December 31, 2007		1,036,198

Granted		5,973,500		$	0.22
Vested		(5,099,273	)
Forfeited		-

Nonvested options - March 31, 2008		1,910,425

The aggregate intrinsic value of options outstanding and exercisable at March 31, 2008, based on the Company’s closing stock price of $0.31 as of the last business day of the period ended March 31, 2008, which would have been received by the optionees had all options been exercised on that date was $1,709,989 and $1,540,811, respectively. Intrinsic value is the amount by which the fair value of the underlying stock exceeds the exercise price of the options.

Basic and diluted earnings per share are computed based on the weighted average number of common stock outstanding during the period. Common stock equivalents, which amounted to 5,692,086 and 3,433,230 at March 31, 2008 and 2007, respectively, are not considered in the calculation of the diluted earnings per share for the period presented as their effect would be anti-dilutive due to losses incurred.

F-10

Dais Analytic Corporation

Notes to Financial Statements

Three Months Ended March 31, 2008 and 2007

(unaudited)

3. Significant Accounting Policies (continued)

in a parent’s controlling ownership interest. SFAS No. 160 is effective for fiscal years beginning after December 15, 2008, with early adoption prohibited. Management is currently evaluating the effect, if any the adoption will have on the Company’s financial position and results of operations.

Other recent accounting pronouncements issued by the FASB (including its EITF), the AICPA, and the SEC did not or are not believed by management to have a material impact on the Company’s present or future financial statements.

4. Notes Payable

Notes payable consist of the following at March 31, 2008:

Convertible notes payable; interest at 9%; with notes maturing 12 months from date of issue beginning December 2008, secured by certain patents held by the Company net of unamortized discount and beneficial conversion feature	$	774,842
Note payable to a related party; non-interest bearing; due on demand; unsecured		624
		775,466
Less amounts currently due		775,466
	$	0

Convertible notes payable

During the three months ended March 31, 2008, the Company issued convertible promissory notes and warrants to purchase common stock to individuals in exchange for proceeds totaling $500,000. At March 31, 2008, the Company had $2,950,000 convertible promissory notes outstanding. The convertible promissory notes contained an embedded conversion feature. As such, in accordance with EITF Issue No. 98-5, “Accounting for Securities with Beneficial Conversion Feature or Contingently Adjustable Conversion Ratio,” and EITF Issue No. 00-27, “Application of Issue No. 98-5 to Certain Convertible Instruments,” the difference between the conversion price and the Company’s estimated fair market value of its stock price on the commitment date of the notes was calculated to be $245,106 for notes issued during 2008 and

F-11

Dais Analytic Corporation

Notes to Financial Statements

Three Months Ended March 31, 2008 and 2007

(unaudited)

4. Notes Payable (continued)

$1,18,331 for notes issued for the year ended December 31, 2007. The Company is amortizing the beneficial conversion feature over the life of the convertible debt of one year and therefore recognized interest expense resulting from the amortization of the beneficial conversion feature for all of the outstanding notes of $329,467 for the three months ended March 31, 2008.

The notes bear interest at nine percent per annum and mature beginning in December 2008 through January 2009. At maturity, lender has the option of receiving payment of any principal and accrued interest due under the note in either cash or common stock of the Company. If lender opts for payment in the form of common stock the stock will be issued at the rate of one share per $0.20 of principal and interest. Company may, at any time prior to maturity, pay all interest and principal due under the note in cash. Accrued interest on the notes totaled $69,510 at March 31, 2008.

The warrants to purchase common stock which accompanied the convertible promissory notes are, subject to certain limitations, exercisable at $0.25 per share, vest immediately, and expire in December 2012. Pursuant to APB No. 14, the Company valued the warrants issued in 2008 and 2007 at their relative fair value of $254,894 and $1,311,669, respectively. To recognize the relative fair value of the warrants, the Company discounted the notes and increased additional paid in capital in the financial statements. The discount is amortized over the term of the notes and resulted in a $374,506 charge to interest expense for the three months ended March 31, 2008.

The following table presents the allocation of proceeds from the financing:

Principal balance of convertible notes	$	2,950,000
Relative fair value of the warrants		(1,566,563	)
Beneficial conversion feature		(1,383,437	)
Amortization of the discount		415,327
Amortization of the beneficial conversion feature		359,515
Carrying value at March 31, 2008	$	774,842

F-12

Dais Analytic Corporation

Notes to Financial Statements

Three Months Ended March 31, 2008 and 2007

(unaudited)

5. Related Party Transactions

The Company rents a building on a month to month basis from a related party which is wholly owned by two stockholders of the Company, one of which is the Chief Executive Officer. The monthly rent expense is $3,800 per month. For the year three months ended March 31, 2008 and 2007, the Company has recorded $12,198 and $12,198, respectively, in rent expense to this related party.

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

6. Authorized Shares

During the period ended March 31, 2008, the Company’s board of directors approved a proposal to amend the Articles of Incorporation to increase the number of authorized shares of common stock from 50,000,000 to 100,000,000 shares.

7. Stock Options and Warrants

At March 31, 2008, the Company has a stock option plan (the “2000 Plan”) that provides for the granting of options to qualified employees of the Company, independent contractors, consultants, directors and other individuals. As of December 31, 2007, the Company’s Board of Directors approved and made available 6,093,882 shares of common stock to be issued pursuant to said plan. During the period ended March 31, 2008, the Company’s Board of Directors approved and made available an additional 5,000,000 shares of Company’s common stock for issuance under the 2000 Plan. The 2000 Plan permits grants of options of common shares authorized and approved by the Company’s Board of Directors for issuance prior to enactment of the 2000 Plan.

F-13

Dais Analytic Corporation

Notes to Financial Statements

Three Months Ended March 31, 2008 and 2007

(unaudited)

7. Stock Options and Warrants (continued)

The following summarizes the information relating to outstanding stock options and warrants and the activity during 2008 and 2007:

	Number of Shares			Per Share Option/Warrant Price		Weighted Average Exercise Price

Shares under option/warrant at January 1, 2007		6,026,029		$	0.05-$5.50	$	0.62
Exercised		(60,000	)	$	0.05	$	0.05
Terminated		(1,064,585	)	$	0.05-$5.50	$	2.25
Granted		14,167,637		$	0.21-$0.55	$	0.26
Shares under option/warrant at December 31, 2007		19,069,081		$	0.05-$5.50	$	0.26
Terminated		(20,333	)	$	0.10	$	0.10
Exercised
Granted		5,973,500	*	$	0.21-$0.55	$	0.25
Shares under option/warrant at March 31, 2008		25,022,248		$	0.05-$5.50	$	0.26
Options/warrants exercisable at March 31, 2008		22,819,123		$	0.05-$5.50	$	0.27

*This amount does not include warrants granted subsequent to March 31, 2008 for services provided during the period ended March 31, 2008.

The weighted average fair value at the date of grant of the options was $0.22 for the three months ended March 31, 2008. The weighted average fair value at the date of grant of the options was $0.39 for the three months ended March 31, 2007.

F-14

Dais Analytic Corporation

Notes to Financial Statements

Three Months Ended March 31, 2008 and 2007

(unaudited)

7. Stock Options and Warrants (continued)

The warrants and options expire at various dates ranging April 2008 to March 2018. A further summary of information related to stock options and warrants outstanding and exercisable at March 31, 2008 is as follows:

Range of Exercise Price Per Share	Shares Under Option/Warrant	Weighted Average Exercise Price Per Share	Weighted Average Remaining Contractual Life in Years
Outstanding:
$0.05-0.75	24,993,291	$0.26	4.84
$2.50-5.50	28,957	$3.94	2.24
$0.05-5.50	25,022,248	$0.26	4.84

Exercisable:
$0.05-0.75	22,790,166	$0.26	4.42
$2.50-5.50	28,957	$3.94	2.24
$0.05-5.50	22,819,123	$0.26	5.55

8. Commitments and Contingencies

The Company has employment agreements with some of its key employees and executives. These agreements provide for minimum levels of compensation during current and future years. In addition, these agreements call for grants of stock options and for payments upon termination of the agreements.

In May of 2006, the United States Patent Office (“USPTO”) informed the Company that an interference proceeding had been initiated between the Company’s patent number US 6,413,298 and a pending patent application assigned to another corporation.

In the course of the interference the USPTO has permitted the Company to file five motions. Each motion sets forth either the basis upon which the Company believes the other corporation’s patent application is deficient for failing to meet minimum USPTO requirements for a valid patent application or the manner in which the Company believes the patents cited fail to meet the USPTO requirements for interference. The other corporation has been permitted to file a motion seeking benefit of a provisional patent application date and one requesting to add three additional claims to the application. Oppositions and replies have been filed by both parties.

F-15

Dais Analytic Corporation

Notes to Financial Statements

Three Months Ended March 31, 2008 and 2007

(unaudited)

8. Commitments and Contingencies (continued)

At this point, a possible financial outcome cannot be determined. However, the interference will not effect the validity of Company’s other patents.

The Company entered into a six month financial and strategic consulting agreement dated September 1, 2005 with a financial consulting company. (“Consulting Company”) by which the Consulting Company was to provide the Company with consulting services and assist it in the procurement of equity and debt financing for business expansion and development up to a maximum of $20,000,000. In exchange for these services, two of the shareholders of the Company assigned their Convertible Notes Receivable, valued at $627,723, to the Consulting Company. Per the terms of the Consulting Agreement and its related documents, one half of the first note became vested in the Consulting Company upon the execution of the Consulting Agreement which by the terms of the Agreement resulted in $156,930 of said first note being subject to conversion into the Company’s common stock at the rate of one share per $.10 of note balance. In addition, the agreement states that an additional $156,931 would be potentially eligible for conversion upon the Company raising $1,000,000 in financing from any source during the term of the Consulting Agreement. Conversion rights were subject to pro-rata vesting based on the funding secured. For financial presentation purposes, the Company has accounted for this transaction as a capital contribution by the stockholders of $627,723 for the forgiveness of their notes and as consulting expense for equity given to the Consulting Company. During the year ended December 31, 2005, the Company received funding of $599,972 in the form of bridge loans. On December 23, 2005 the Company terminated the Consulting Agreement subject to the provisions thereof. The Company has no further obligations of any nature to the Consulting Company. The shareholder of one of the notes may contend, and has a possibility of being successful, in having the amendment and assignment declared void requiring his note be reinstated on the Company’s books. The accounting entries made by the Company with regard to the first note are not to be construed as a waiver of any rights the Company may have in law or equity under the consulting agreement or any agreements related thereto, nor as an admission, of an nature, by the Company.

Subsequent to March 31, 2008, the Company was obtained a release of any liability to the Consulting Company and the corresponding liability was assigned to a third party. The vested value of the note that was assigned amounted to $244,000 which converts into the Company’s common stock at a rate of one share per $0.10 of note balance which amounts to 2,440,000 shares. During 2005 and 2006, a total of approximately $244,000 was recorded as consulting expense.

F-16

Dais Analytic Corporation

Notes to Financial Statements

Three Months Ended March 31, 2008 and 2007

(unaudited)

9. Subsequent Events

Subsequent to March 31, 2008, the Company granted an executive a fully vested warrant to purchase 3,000,000 shares of the Company’s common stock at an exercise price of $0.36 per share for services personally performed with a five year expiration date. During the period ended March 31, 2008, the Company recorded $836,518 in compensation expense and accrued compensation in connection with these warrants.

F-17

Financial Statements

Dais Analytic Corporation

Years Ended December 31, 2007 and 2006

Report of Independent Registered Public Accounting Firm

F-18

Report of Independent Registered Public Accounting Firm

Board of Directors

Dais-Analytic Corporation

Odessa, Florida

We have audited the accompanying balance sheets of Dais-Analytic Corporation as of December 31, 2007 and 2006 and the related statements of operations, changes in stockholders' deficit, and cash flows for the years then ended. These financial statements are the responsibility of the management of Dais-Analytic Corporation. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required at this time, to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Dais-Analytic Corporation as of December 31, 2007 and 2006 and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2, the Company incurred a net loss of $2,233,992 during the year ended December 31, 2007, has an accumulated deficit of $22,797,323, has negative working capital of $334,449, and a stockholder’s deficit of $641,687 at December 31, 2007. These factors, among others, raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Pender Newkirk & Company LLP

Certified Public Accountants

Tampa, Florida

March 14, 2008

F-19

Dais Analytic Corporation

Balance Sheets

	December 31,
	2007		2006
Assets
Current assets:
Cash	$	504,232	$	204,799
Cash held in escrow		1,000,000
Accounts receivable		6,750		111,472
Other receivables		12,178
Inventory		73,629		62,678
Loan costs, net of accumulated amortization		86,760		23,540
Prepaid expenses and other current assets		11,739		3,747



Total current assets		1,695,288		406,236

Property and equipment, net of accumulated depreciation of $298,765 and $295,231 at December 31, 2007 and 2006, respectively		16,600		10,924

Other assets:
Deposits		2,280		2,280
Patents, net of accumulated amortization of $87,127 and $77,866 at December 31, 2007 and 2006, respectively		51,796		61,057
Total other assets		54,076		63,337







	$	1,765,964	$	480,497

The accompanying notes are an integral part of the financial statements.

F-20

Dais Analytic Corporation

Balance Sheets

(continued)

	December 31,
	2007			2006

Liabilities and Stockholders’ Deficit
Current liabilities:
Accounts payable, including related party payables of $91,320 and $87,098 at December 31, 2007 and 2006, respectively	$	456,341		$	532,197
Accrued compensation and related benefits		6,041			416
Accrued compensation and related benefits, related party		1,089,472			925,629
Current portion of deferred revenue		84,145			84,145
Current portion of notes payable, net of unamortized discount of $2,379,131 at December 31, 2007, including related party of $624 and $13,675 at December 31, 2007 and 2006, respectively		271,493			1,068,647
Accrued expenses, other		122,245			59,748

Total current liabilities		2,029,737			2,670,782

Long-term liabilities:
Notes payable, net of current portion					60,574
Deferred revenue, net of current portion		377,914			462,057
Total long-term liabilities		377,914			522,631

Stockholders’ deficit:
Series A preferred stock; $.01 par value; 10,000,000 shares authorized; 0 and 305,097 shares issued and outstanding at December 31, 2007 and 2006, respectively					3,051
Common stock; $.01 par value; 50,000,000 and 20,000,000 shares authorized; 8,742,797 and 2,603,565 shares issued; and 8,505,584 and 2,366,352 shares outstanding at December 31, 2007 and 2006, respectively		87,428			26,036
Capital in excess of par value		23,389,320			19,142,447
Deferred non-cash offering costs		(55,000	)		(55,000	)
Accumulated deficit		(22,797,323	)		(20,563,338	)
		624,425			(1,446,804	)
Treasury stock at cost, 237,213 shares		(1,266,112	)		(1,266,112	)
Total stockholders’ deficit		(641,687	)		(2,712,916	)

	$	1,765,964		$	480,497

The accompanying notes are an integral part of the financial statements.

F-21

Dais Analytic Corporation

Statement of Operations

	Years Ended December 31,
	2007			2006
Revenue:
Sales	$	786,016		$	828,991
License fees		84,144			84,143
Interest income					200
		870,160			913,334
Expenses:
Cost of goods sold		637,032			648,067
Selling, general and administrative		1,871,030			2,084,543
Interest expense		596,083			119,890
		3,104,145			2,852,500

Loss before provision for income taxes		(2,233,985	)		(1,939,166	)

Provision for income taxes

Net loss	$	(2,233,985	)	$	(1,939,166	)

Net loss per common share, basic and fully diluted	$	(0.44	)	$	(1.07	)

Weighted average number of common shares outstanding		5,062,725			1,808,780

The accompanying notes are an integral part of the financial statements.

F-22

Dais Analytic Corporation

Statements of Changes in Stockholders’ Deficit

Years Ended December 31, 2007 and 2006

	Preferred Stock						Common Stock				Capital in Excess of Par Value			Accumulated Deficit				Deffered Non-Cash Offering Costs		Treasury Stock			Stockholders' Deficit
	Shares			Amount			Shares		Amount
Balance, December 31, 2005		305,097		$	3,051			1,716,292	$	17,163	$	18,104,801		$	(18,624,172	)				$	(1,266,112	)	$	(1,765,269	)

Issuance of common stock								727,273		7,273		392,725												399,998
Issuance of options												558,521												558,521
Issuance of common stock for services								60,000		600		32,400												33,000
Deferred offering costs								100,000		1,000		54,000					$	(55,000	)
Net loss															(1,939,166	)								(1,939,166	)

Balance, December 31, 2006		305,097			3,051			2,603,565		26,036		19,142,447			(20,563,338	)		(55,000	)		(1,266,112	)		(2,712,916	)

Issuance of common stock								90,9090		909		49,091												50,000
Issuance of common stock for exercise of options								60,000		600		2,400												3,000
Issuance of common stock for services								230,000		2,300		214,700												217,000
Issuance of common stock for conversion of notes payable and related accrued interest								3,220,318		32,203		849,328												881,531
Issuance of options and warrants												358,863												358,863
Value of beneficial conversion feature for the conversion of notes payable and related accrued interest												1,576,891												1,576,891
Issuance of common stock for conversion of preferred stock		(305,097	)		(3,051	)		2,500,000		25,000		(21,949	)
Issuance of warrants with convertible debt												1,311,669												1,311,669
Issuance of common stock for accrued interest								38,005		380		9,120												9,500
Offering costs												(103,240	)											(103,240	)
Net loss															(2,233,985	)		(55,000	)					(2,233,985	)

Balance, December 31, 2007		0		$	0			8,742797	$	87,428	$	23,389,320		$	(22,797,323	)	$	(55,000	)	$	(1,266,112	)	$	(641,687	)

The accompanying notes are an integral part of the financial statements.

F-23

Dais Analytic Corporation

Statements of Cash Flows

	Years Ended December 31,
	2007			2006
Operating activities
Net loss	$	(2,233,985	)	$	(1,939,166	)
Adjustments to reconcile net loss to net cash used by operating activities:
Depreciation and amortization		12,788			17,159
Amortization of deferred loan costs		23,540			62,776
Amortization of discount on convertible notes		40,821
Amortization of the beneficial conversion feature on convertible notes		30,048
Issuance of common stock for services		217,000			33,000
Issuance of common stock options to employees and consultants		358,863			558,521
Value of beneficial conversion feature for conversion of notes payable and related accrued interest		438,560
(Increase) decrease in:
Accounts receivable		104,722			(34,294	)
Inventory		(10,951	)		(3,820	)
Prepaid expenses and other current assets		(20,170	)		(1,984	)
Increase (decrease) in:
Accounts payable and accrued expenses		37,757			395,576
Accrued compensation and related benefits		169,468			242,649
Deferred revenue		(84,143	)		(84,144	)
Total adjustments		1,318,303			1,185,439
Net cash used by operating activities		(915,682	)		(753,727	)

Investing activities
Purchase of property and equipment		(9,210	)		(5,099	)
Financing activities
Proceeds from issuance of notes payable		1,800,000			515,575
Payments on notes payable		(425,000	)		(230	)
Payments for offering costs		(190,000	)
Proceeds from advance from related party		156,000
Repayment of advance from related party		(169,675	)
Issuance of common stock for cash		53,000			399,998
Net cash provided by financing activities		1,224,325			915,343

The accompanying notes are an integral part of the financial statements.

F-24

Dais Analytic Corporation

Statements of Cash Flows

	Years Ended December 31,
	2007		2006
Net increase in cash		299,433		156,517
Cash, beginning of period		204,799		48,282
Cash, end of period	$	504,232	$	204,799
Supplemental disclosures of cash flow information and noncash investing and financing activities:
Cash paid during the year for interest	$	38,479	$	15,144

During the year ended December 31, 2007, the Company issued 3,220,318 shares of common stock in conversion of $840,547 of notes payable and $40,984 of accrued interest.

During the year ended December 31, 2007, the Company issued 230,000 shares of common stock for services valued at $217,000.

During the year ended December 31, 2007, the Company issued 38,005 shares of common stock for $9,500 of accrued interest

During the year ended December 31, 2007, the Company issued $1,000,000 of convertible notes payable for which the proceeds are held in escrow at December 31, 2007.

During the year ended December 31, 2007, the Company issued convertible notes payable with a beneficial conversion feature of $1,138,331 and a discount equivalent to the relative fair value of the accompanying warrants of $1,311,669.

During the year ended December 31, 2007, the Company exchanged 305,097 preferred stock shares for 2,500,000 common stock shares.

During the year ended December 31, 2006, the Company issued 100,000 shares of common stock valued at $55,000 in exchange for offering costs.

The accompanying notes are an integral part of the financial statements.

F-25

Dais Analytic Corporation

Notes to Financial Statements

Years Ended December 31, 2007 and 2006

1. Background Information and Certain Concentrations

Some components of the Company’s ConServ product, such as the substrate used in concert with the Company’s nano-structured materials, are currently purchased from a single source or processed for the Company by a single entity. Although the number of manufacturers of comparable materials or processors of said materials may be somewhat limited, management believes that other suppliers/processors exist who can provide similar components/processing capabilities on comparable terms and is in the process of identifying said sources and qualifying them. A change in suppliers, however, could cause a delay in manufacturing and a possible loss of sales, which would affect operating results adversely.

For the years ended December 31, 2007 and 2006, three and two customers accounted for 65 and 53 percent of the Company’s total revenue, respectively. No other customer accounted for 10 percent or more of the Company’s total revenue.

2. Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. For the year ended December 31, 2007, the Company has a net loss of $2,233,985 and an accumulated deficit of $22,797,323 has negative working capital of $334,449 and a stockholder’s deficit of $641,687 at December 31, 2007. In view of these matters, substantial doubt is raised about the Company’s ability to continue as a going concern. The recoverability of recorded property and equipment, intangible assets, and other asset amounts shown in the accompanying financial statements is dependent upon the Company’s ability to continue as a going concern and to achieve a level of profitability. The Company intends on financing its future activities and its working capital needs largely from the sale of public equity securities with some additional funding from other traditional financing sources, including term notes and proceeds from sub-licensing agreements until such time that funds provided by operations are sufficient to fund working capital requirements. However, there can be no assurance that the Company will be successful in its efforts. 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.

F-26

Dais Analytic Corporation

Notes to Financial Statements

Years Ended December 31, 2007 and 2006

3. Significant Accounting Policies

The significant accounting policies followed are:

The Company’s financial instruments include cash, accounts receivable, accounts payable, accrued liabilities and notes payable. The carrying amounts of these financial instruments approximate their fair value, due to the short-term nature of these items and due to the use of market rates of interest.

All cash, other than held in escrow, is maintained with a major financial institution in the United States. Deposits with this bank may exceed the amount of insurance provided on such deposits. Generally, these deposits may be redeemed upon demand and, therefore, bear minimal risk.

Cash held in escrow consists of convertible note proceeds associated with the December 31, 2007 closings. Such funds were held in escrow pending the receipt of the signed secured convertible promissory notes. These funds were subsequently released from escrow on January 3, 2008.

Inventory consists of raw materials and is stated at the lower of cost, determined by the 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.

F-27

Dais Analytic Corporation

Notes to Financial Statements

Years Ended December 31, 2007 and 2006

3. Significant Accounting Policies (continued)

Trade accounts receivable consist primarily of receivables from the sale of ERV core and ERV units. The Company sells to its customers based on its standard credit policies and regularly reviews accounts receivable for any bad debts. The review for bad debts is based on an analysis of the Company’s collection experience, customer credit worthiness, and current economic trends. Based on management’s review of accounts receivable, no allowance for doubtful accounts is considered necessary at December 31, 2007 and 2006.

Property and equipment are recorded at cost. Depreciation is calculated using accelerated methods over the estimated useful lives of the assets ranging from 5 to 7 years. Maintenance and repairs are charged to operations when incurred. Betterments and renewals are capitalized. When property and equipment are sold or otherwise disposed of, the asset account and related accumulated depreciation account are relieved, and any gain or loss is included in operations. Depreciation expense amounted to approximately $3,500 and $7,900 for the years ended December 31, 2007 and 2006, respectively.

Patents are being amortized over their estimated useful or economic lives of 15 years. Amortization expense amounted to approximately $9,300 per year for each of the years ended December 31, 2007 and 2006, continuing until fully amortized in 2013.

Expenditures for research, development, and engineering of products are expensed as incurred. For the years ended December 31, 2007 and 2006, the Company did not incur any research and development costs.

Direct loan costs of $94,162 incurred with the issuance of notes payable are deferred and amortized to interest expense over the life of the related notes payable, $5,231 per month for 18 months. For the years ended December 31, 2007 and 2006, the Company incurred amortization expense of $23,540 and $62,776, respectively.

The Company records all common stock as issued at the time when all of the legal requirements for issuance of the common stock have been met.

The Company records amounts billed to customers for shipping and handling costs as sales revenue. Costs incurred by the Company for shipping and handling are included in cost of sales.

F-28

Dais Analytic Corporation

Notes to Financial Statements

Years Ended December 31, 2007 and 2006

3. Significant Accounting Policies (continued)

Sales are recorded when products are shipped to the customer. No products or parts are delivered with any contingencies except for defects.

Amounts collected on behalf of governmental authorities for sales taxes and other similar taxes are reported on a net basis.

Revenue derived from the sale of licenses is deferred and recognized as revenue on a straight-line basis over the life of the license, or until the license arrangement is terminated. The Company recognized approximately $84,100 of deferred revenue associated with license agreements for each of the years ended December 31, 2007 and 2006.

The Company follows SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No. 144 addresses the financial accounting and reporting for the impairment of long-lived assets, excluding goodwill and intangible assets, not subject to amortization, to be held and used or disposed of. In accordance with SFAS No. 144, the carrying values of long-lived assets are periodically reviewed by the Company and impairments would be recognized if the expected future operating non-discounted cash flows derived from an asset were less than its carrying value and if the carrying value is more than the fair value of the asset. At December 31, 2007, the Company did not have any asset that it considered impaired.

In December 2004, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 123 (Revised 2004), “Share-Based Payment” (SFAS 123R). SFAS 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized as compensation expense in the financial statements based on their fair values. That expense will be recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period). The Company adopted SFAS 123R effective beginning January 1, 2006 using the Modified Prospective Application Method. Under this method, SFAS 123R applies to new awards and to awards modified, repurchased or cancelled after the effective date. Prior to the adoption of SFAS 123(R), the Company accounted for stock option grants using the intrinsic value method prescribed in APB Opinion No. 25, “Accounting for Stock Issued to Employees,” and accordingly, recognized no compensation expense for stock option grants.

F-29

Dais Analytic Corporation

Notes to Financial Statements

Years Ended December 31, 2007 and 2006

3. Significant Accounting Policies (continued)

As a result of adopting SFAS 123(R), our earnings before income taxes and net earnings for the years ended December 31, 2007 and 2006 was $326,480 and $558,521, respectively, less than if we had continued to account for stock based compensation under APB Opinion No. 25 for our stock option grants. In addition, the effect of adopting SFAS 123(R) on the net loss per share for the years ended December 31, 2007 and 2006 was an increase in the loss of $0.07 and $0.31, respectively, per share.

The value of each option granted under SFAS 123(R), as well as warrants issued in connection with debt, is estimated at the grant date using the Black-Scholes option pricing model with the following assumptions:

	2007			2006
Dividend rates		0			0
Risk free interest rate		3.32% - 5.13	%		4.57% - 5.12	%
Term	5 - 10 years			2 - 10 years
Volatility		71% - 90	%		127	%

The basis for the above assumptions are as follows: the dividend rate is based upon the Company’s history of dividends; the risk-free interest rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant; the expected term was calculated based on the Company’s historical pattern of options granted and warrants issued that are expected to be outstanding; and expected volatility was calculated by review of a peer company’s historical activity.

As of December 31, 2007 and 2006, there was $271,875 and $260,705 of unrecognized stock-based compensation expense related to nonvested stock options, respectively. This expense will be recognized over a weighted average period of three years.

The aggregate intrinsic value of options outstanding and exercisable at December 31, 2007 and 2006, based on the Company’s closing stock price of $0.30 and $0.70 as of the last business day of the years ended December 31, 2007 and 2006, respectively, which would have been received by the optionees had all options been exercised on that date was $1,166,908 and $1,009,206 at December 31, 2007, respectively, and $2,368,294 and $1,844,422 at December 31, 2006, respectively. Intrinsic value is the amount by which the fair value of the underlying stock exceeds the exercise price of the options.

F-30

Dais Analytic Corporation

Notes to Financial Statements

Years Ended December 31, 2007 and 2006

3. Significant Accounting Policies (continued)

Taxes on income are provided in accordance with SFAS No. 109, “Accounting for Income Taxes.” Deferred income tax assets and liabilities arise from temporary differences associated with differences between the financial statements and tax basis of assets and liabilities, as measured by the enacted tax rates, which are expected to be in effect when these differences reverse. Deferred tax assets and liabilities are classified as current or non-current, depending upon the classification of the asset or liabilities to which they relate. Deferred tax assets and liabilities not related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse.

Basic and diluted earnings per share are computed based on the weighted average number of common stock outstanding during the period. Common stock equivalents, which amounted to 13,612,844 and 10,942,388 at December 31, 2007 and 2006, respectively, are not considered in the calculation of the diluted earnings per share for the period presented as their effect would be anti-dilutive due to losses incurred.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (SFAS No. 159). SFAS No. 159 permits entities to choose to measure, on an item-by-item basis, specified financial instruments and certain other items at fair value. Unrealized gains and losses on items for which the fair value has been elected are required to be reported in earnings at each reporting date. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007, the provisions of which are required to be applied prospectively. The Company expects to adopt SFAS No. 159 in the first quarter of fiscal 2008.

Effective January 1, 2007, the Company adopted FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – An Interpretation of FASB Statement No. 109.” The Company recognized no adjustment in the liability for unrecognized income tax benefits as a result of the adoption of FIN No. 48.

F-31

Dais Analytic Corporation

Notes to Financial Statements

Years Ended December 31, 2007 and 2006

3. Significant Accounting Policies (continued)

In December 2007, the FASB issued Statement No. 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51 (SFAS No. 160). The standard changes the accounting for noncontrolling (minority) interests in consolidated financial statements including the requirements to classify noncontrolling interests as a component of consolidated stockholders’ equity, and the elimination of “minority interest” accounting in results of operations with earnings attributable to noncontrolling interests reported as part of consolidated earnings. Additionally, SFAS No. 160 revises the accounting for both increases and decreases in a parent’s controlling ownership interest. SFAS No. 160 is effective for fiscal years beginning after December 15, 2008, with early adoption prohibited. Management is currently evaluating the effect, if any the adoption will have on the Company’s financial position and results of operations.

Certain amounts in the 2006 financial statements have been reclassified to conform to the 2007 presentation.

4. Property and Equipment

Property and equipment consists of the following:

	2007		2006
Furniture and fixtures	$	33,530	$	31,731
Computer equipment		105,114		95,903
Office and lab equipment		176,721		178,521
		315,365		306,155
Less accumulated depreciation and amortization		298,765		295,231
	$	16,600	$	10,924

F-32

Dais Analytic Corporation

Notes to Financial Statements

Years Ended December 31, 2007 and 2006

5. Notes Payable

Notes payable consist of the following:

	2007		2006
Convertible notes payable; interest at 9.0%; with notes maturing 12 months from date of issue beginning December 2008, collateralized by the Company’s patents and patent applications, net of unamortized discount and beneficial conversion feature of $2,379,131	$	70,869
Convertible notes payable; interest at 8.0%; with notes maturing 18 months from date of issue beginning April 2007 to February 2008; collateralized by accounts receivable and property and equipment			$	1,115,546
Note payable; interest at 12.0% for the first 60 days and increases by 1.0% for every 30 days outstanding thereafter up to 18.0% per annum; due January 20, 2008; unsecured		200,000
Note payable, related party; interest at 8.0%; due on demand; collateralized by the intellectual property		624		13,675
		271,493		1,129,221
Less amounts currently due		271,493		1,068,647
	$	0	$	60,574

Convertible Notes Payable – 2007

During the year ended December 31, 2007, the Company issued convertible promissory notes and warrants to purchase common stock to individuals in exchange for proceeds totaling $2,450,000. The notes bear interest at nine percent per annum and mature in December 2008. Principal and accrued interest are payable in any combination of cash and common stock of the Company at the option of the lender. Assuming that the lender allows the Company to repay principal and accrued interest in common stock, the number of shares of common stock issuable is determined by dividing the principal amount plus any accrued and unpaid interest by $0.20. Accrued interest on the notes totaled $6,152 at December 31, 2007.

F-33

Dais Analytic Corporation

Notes to Financial Statements

Years Ended December 31, 2007 and 2006

5. Notes Payable (continued)

The convertible promissory notes contained an embedded conversion feature. As such, in accordance with EITF Issue No. 98-5, “Accounting for Securities with Beneficial Conversion Feature or Contingently Adjustable Conversion Ratio,” and EITF Issue No. 00-27, “Application of Issue No. 98-5 to Certain Convertible Instruments,” the difference between the effective conversion price and the Company’s estimated fair market value of its stock price on the commitment date of the notes was calculated to be $1,138,331. The Company is amortizing the beneficial conversion feature over the life of the convertible debt of one year and therefore recognized interest expense resulting from the amortization of the beneficial conversion feature of $30,048 for the year ended December 31, 2007.

The warrants to purchase common stock which accompanied the convertible promissory notes are exercisable at $0.25 per share, vest immediately, and expire in December 2012. Pursuant to APB No. 14, the Company valued the warrants at their relative fair value of $1,311,669. To recognize the relative fair value of the warrants, the Company discounted the notes and increased additional paid in capital in the financial statements. The discount is amortized over the term of the notes.

Principal balance of convertible notes	$	2,450,000
Relative fair value of the warrants		(1,311,669	)
Beneficial conversion feature		(1,138,331	)
Amortization of the discount		40,821
Amortization of the beneficial conversion feature		30,048
Carrying value at December 31, 2007	$	70,869

As discussed in Note 3, $1,000,000 of these convertible notes payable were executed on December 31, 2007. Such funds were held in escrow pending the receipt of the signed secured convertible promissory notes. These funds were subsequently released from escrow on January 3, 2008.

The Company gave the convertible promissory note holders registration rights to the shares issued to them in connection with the convertible notes and warrants pursuant to a Registration Rights Agreement (the “Agreement”). Under the Agreement, there are certain damages that will be assessed if the Company does not file a Registration Statement that becomes effective on or prior to the date that is 30 days following the effectiveness date. The damages, as defined in the Agreement, is one and one-half percent (1.5%) of the amount of the convertible promissory note holders’ initial investment for each calendar month, or portion thereof thereafter from the effectiveness date until cured, up to 8 percent of the amount of the note holder’s initial investment. The effectiveness date is defined as the earlier of A) the 150th day following the Filing Date (the 45th day following the completion of the first conversion of the notes) or B) the date which is within five business days after the date on which the Commission informs the Company that they will not review the Registration Statement or that the Company may request the acceleration of the effectiveness of the Registration Statement, and the Company makes such request. The Company has recorded a liability in the amount of $73,500 at December 31, 2007 related to the Agreement.

F-34

Dais Analytic Corporation

Notes to Financial Statements

Years Ended December 31, 2007 and 2006

5. Notes Payable (continued)

Convertible Notes Payable – 2006

As of December 31, 2006, the Company had convertible notes payable of $1,115,546 and, together with accrued unpaid interest of 8 percent, was due 18 months from the date of issue beginning April 2007 to February 2008. Interest begins to accrue on the 180 th day after the date of the convertible note payable and is paid quarterly in cash. In the event the Company consummates a $2,000,000 to $3,000,000 equity financing, the principal amount plus the accrued unpaid interest would be automatically convertible into shares of equity at a rate of 50 percent of the price per share of the equity financing shares. If the shares sold in the equity financing are sold as units including warrants or other securities, the note holders are entitled to those same securities upon conversion. The Company recorded the interest under the effective interest method.

During the year ended December 31, 2007, the Company converted $840,547 of convertible notes payable, together with accrued interest of $50,484 into 3,258,323 shares of common stock at a conversion rate of approximately $0.275 per share. The debenture holders accepted these shares in full consideration for the outstanding convertible notes. The Company recognized additional interest expense of $438,560 as a beneficial conversion feature because of the induced conversion to the note holders pursuant to the accounting requirements of SFAS No. 84, “Induced Conversions of Convertible Debt.” An additional warrant may be issued to two of the foregoing note holders in the event Company secures an equity investment or issues convertible notes of $1 million or more and the underlying share price of said securities does not meet a set price.

F-35

Dais Analytic Corporation

Notes to Financial Statements

Years Ended December 31, 2007 and 2006

6. Related Party Transactions

During the year ended December 31, 2007, a stockholder and officer loaned the Company $156,000. One loan was unsecured, due on demand and did not accrue interest. The other two loans were unsecured, due in one and two months, respectively, and accrued interest at 12 percent, increasing by 1 percent for every 30 days the principle balance is outstanding. Prior to year-end, the Company repaid the loans.

The Company rents a building on a month to month basis from a related party which is wholly owned by two stockholders of the Company, one of which is the Chief Executive Officer. The minimum lease payments on the building are $3,800 per month. For the years ended December 31, 2007 and 2006, the Company recorded $48,792 in rent expense to this related party. At December 31, 2007 and 2006, $91,320 and $87,098, respectively, were included in accounts payable for amounts owed to these stockholders.

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

7. Authorized Shares

During the year ended December 31, 2007, the Company's board of directors approved a proposal to amend the Articles of Incorporation to increase the number of authorized shares of common stock from 20,000,000 shares to 50,000,000 shares.

8. Preferred Stock

The Company’s Board of Directors has authorized 10,000,000 million shares of preferred stock with a par value of $.01 to be issued in series with terms and conditions to be determined by the Board of Directors. The Company has designated 400,000 shares of Series A convertible preferred stock; 1,000,000 shares of Series B convertible preferred stock; 500,000 shares of Series C convertible preferred stock; and 1,100,000 shares of Series D convertible preferred stock. The Series A through D convertible preferred stock rank senior to the common stock as to dividends and liquidation. Each share of Series A through D convertible preferred stock is convertible into one share of common stock, except in specified circumstances as defined by the Company’s Certificate of Incorporation, and is automatically converted into common stock upon the occurrence of an initial public offering that meets certain criteria. During the year ended December 31, 2007, the preferred stock holders converted all of the outstanding preferred stock into 2,500,000 shares of common stock. No dividend or distribution may be paid on any shares of the Company’s common stock unless an equivalent dividend or distribution is paid on the Series A through D convertible preferred stock.

F-36

Dais Analytic Corporation

Notes to Financial Statements

Years Ended December 31, 2007 and 2006

9. Stock Options and Warrants

At December 31, 2007, the Company has a stock option plan (the “2000 Plan”) that provides for the granting of options to qualified employees of the Company, independent contractors, consultants, directors and other individuals. In June of 2000, the Company’s Board of Directors approved and made available 2,350,000 shares of common stock to be issued pursuant to said plan. In subsequent years, the Company’s Board of Directors approved and made available an additional 3,743,882 shares of Company’s common stock for issuance under the 2000 Plan. The 2000 Plan permits grants of options of common shares authorized and approved by the Company’s Board of Directors for issuance prior to enactment of the 2000 Plan.

The following summarizes the information relating to outstanding stock options and warrants and the activity during 2007 and 2006:

	Number of Shares			Per Share Option/Warrant Price		Weighted Average Exercise Price
Shares under option/warrant at January 1, 2006		5,495,262		$	0.05-$5.50	$	1.15
Terminated		(698,106	)	$	0.10-$5.00	$	4.59
Granted		1,228,873		$	0.30-$0.55	$	0.52
Shares under option/warrant at December 31, 2006		6,026,029		$	0.05-$5.50	$	0.55
Terminated		(1,064,585	)	$	0.05-$5.50	$	2.25
Exercised		(60,000	)	$	0.05	$	0.05
Granted		14,167,637		$	0.21-$055	$	0.26
Shares under option/warrant at December 31, 2007		19,069,081		$	0.05-$5.50	$	0.26
Options/warrants exercisable at December 31, 2007		17,677,304		$	0.05-$5.50	$	0.27

The weighted average fair value at the date of grant of the options was $.27 and $.55 for 2007 and 2006, respectively.

The intrinsic value of options exercised in 2007 was $20,000. No options were exercised in 2006.

F-37

Dais Analytic Corporation

Notes to Financial Statements

Years Ended December 31, 2007 and 2006

9. Stock Options and Warrants (continued)

The warrants and options expire at various dates ranging January 2007 to August 2017. A further summary of information related to stock options and warrants outstanding and exercisable at December 31, 2007 is as follows:

Range of Exercise Price Per Share		Shares Under Option/Warrant		Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Life in Years
Outstanding:
$	0.05-0.75		19,040,124	$	0.26		4.64
$	2.50-5.50		28,957	$	3.94		2.49
$	0.05-5.50		19,069,081	$	0.26		4.64

Exercisable:
$	0.05-0.75		17,648,347	$	0.26		4.34
$	2.50-5.50		28,957	$	3.94		2.49
$	0.05-5.50		17,677,304	$	0.27		5.55

10. Deferred Revenue

In exchange for a licensing agreement, the Company received an initial license fee of $770,000 during the year ended December 31, 2003. As of December 31, 2007 and 2006, the Company has recognized $343,653 and $266,654, respectively, in the statements of operations relative to this licensing agreement since the receipt of the initial fee. The licensing agreement also included future royalties of between 3% and 5% for each such licensed product sold within Japan. A minimum royalty fee of $100,000 was required in each of the first three years of the agreement. As of December 31, 2007 and 2006, the Company has received the minimum royalty fees of $300,000; however, to date no additional fees have been received.

The Company also had a licensing agreement with a biomedical entity, whereby the Company received an initial license fee of $50,000 during the year ended December 31, 2005. As of December 31, 2007 and 2006, the Company has recognized $14,288 and $7,144, respectively, of deferred revenue as licensing fees in the statement of operations in conjunction with this licensing agreement.

F-38

Dais Analytic Corporation

Notes to Financial Statements

Years Ended December 31, 2007 and 2006

11. Commitments and Contingencies

The Company is currently seeking to raise capital from the sale of equity or equity backed securities to accredited investors pursuant to a private sale. To assist it in this effort, Company has retained the services of investment advisors who shall be compensated for services rendered upon the successful closing of the raise. Said compensation, if any, shall be equal to a given percentage of the capital raised plus a five year warrant to purchase shares of Company’s $0.01 par value common stock. The warrant shares are set at a given percentage of the shares issued as a result of the raise.

At this point, a possible financial outcome cannot be determined. However, the interference will not effect the validity of Company’s other patents.

F-39

Dais Analytic Corporation

Notes to Financial Statements

Years Ended December 31, 2007 and 2006

11. Commitments and Contingencies (continued)

In 1995, having determined biomedical applications were outside of its expertise, the Company granted a license permitting the use of its polymer technologies to develop, use sell and lease biomedical devices, inventions and innovations to a biomedical entity (“Entity”). In June of 2004 Company and Entity entered into an amendment to the 1995 license agreement whereby Entity paid Company $150,000 as full and final payment of all sums due to Company under the agreement. In June of 2005 Company and Entity entered into a license agreement whereby the Company granted Entity the exclusive right, license and privilege, including the right to sub-license, to use and have used the Company’s know-how and patent rights to manufacture, use, sell, import, lease and distribute products in the health care field which contain or are derived from the Company’s proprietary or patented polymer. In exchange for the rights granted under said license Entity paid a one time fee of $50,000 and will, for the first ten years of the license or until fees paid pursuant to this agreement reach $1 million dollars, pay Company one and one half percent of the net sub-license price received by Entity as a result of Entity granting a third party a sub-license to sell surgical gowns, certain clothing for use in certain health care settings and personal hygiene products and will also pay one and one half percent of the net sales price it receives with relation to the aforementioned products when Entity sells said products on its own behalf. The Chief Executive Officer is also a member of Entity.

F-40

Dais Analytic Corporation

Notes to Financial Statements

Years Ended December 31, 2007 and 2006

12. Income Taxes

There is no current or deferred income tax expense or benefit to continuing operations for the years ended December 31, 2007 and 2006.

The provision for income taxes is different from that which would be obtained by applying the statutory federal income tax rate to income before income taxes. The items causing this difference are as follows:

	2007			2006
Tax benefit at U.S. statutory rate	$	(760,000	)	$	(659,300	)
State income tax benefit, net of federal benefit		(52,100	)		(50,100	)
Effect of non-deductible expenses		23,800			300
SFAS No. 123(R) expense		98,400			189,900
Non-deductible interest		149,100
Change in valuation allowance		540,800			519,200
	$	0		$	0

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are as follows:

	2007			2006
Deferred tax assets (liabilities), current:
Bonus payable (paid more than 75 days after year-end)	$	108,300		$	108,300
Accrued deferred compensation payable		303,900			240,100
Accrued contractual expense		5,000			5,000
Deferred license revenue		31,700			31,700
Valuation allowance		(448,900	)		(385,100	)
	$	0		$	0
Deferred tax assets (liabilities), noncurrent:
Deferred license revenue		$142,200			$142,200
Property and equipment		3,400			3,400
Net operating loss		6,171,000			5,662,400
Valuation allowance		(6,316,600	)		(5,839,600	)
	$	0		$	0

F-41

Dais Analytic Corporation

Notes to Financial Statements

Years Ended December 31, 2007 and 2006

12. Income Taxes (continued)

As of December 31, 2007 and 2006, the Company had federal and state net operating loss carry-forwards totaling approximately $16,400,000 and $15,000,000, respectively, which begin expiring in 2012. As it is more likely than not that the Company will not be able to utilize such assets, the Company has established a valuation allowance to fully reserve such assets at December 31, 2007 and 2006.

As of December 31, 2007, the Company has not performed an IRC Section 382 study to determine the amount, if any, of its net operating losses that may be limited as a result of the ownership change percentages during 2007. However, the Company will complete the study prior to the utilization of any of its recorded net operating losses.

13. Subsequent Events

In January 2008, the Company granted several employees a total of 900,000 options to purchase the Company’s common stock at an exercise price of $0.21 per share. The fair market value of these shares at the date of grant was approximately $169,000.

In January 2008, the Company issued an additional $500,000 of convertible debt with 2,500,000 detachable warrants, which completed the $2,950,000 private equity placement that began in December 2007. At this time, as discussed in Note 11, the placement agent was issued five-year term warrants for common shares equal in number to ten percent of the common shares underlying the warrants issued as a result of the placement.

In February 2008, the Company entered into an agreement with legal counsel to help the Company in its registration of its shares. As part of this agreement, the Company agreed to pay the $50,000 retainer by delivery of a certificate representing 200,000 shares of the Company’s common stock and a warrant to purchase 200,000 shares of the Company’s common stock.

F-42

You should rely only on the information contained in this document. We have not authorized anyone to provide you with information that is different. This document may only be used where it is legal to sell these securities. The information in this document may only be accurate on the date of this document.

Additional risks and uncertainties not presently known or that are currently deemed immaterial may also impair our business operations. The risks and uncertainties described in this document and other risks and uncertainties which we may face in the future will have a greater impact on those who purchase our common stock. These purchasers will purchase our common stock at the market price or at a privately negotiated price and will run the risk of losing their entire investment.

Until 90 days after the commencement of the offering, all dealers that buy, sell or trade shares, whether or not participating in this offering, may be required to deliver a prospectus. This requirement is in addition to the dealer’s obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

DAIS ANALYTIC CORPORATION

32,753,090 Shares of Common Stock

_______________

PROSPECTUS

________________

August 11, 2008

-60-

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution

The estimated expenses of the offering, all of which are to be borne by the Registrant, are as follows:

SEC Filing Fee#	$	425
Printing Expenses*	$	4,375
Accounting Fees and Expenses*	$	7,000
Legal Fees and Expenses*	$	125,000
Miscellaneous*	$	3,500
Total*	$	140,300

____________

# Paid with the initial filing of this Registration Statement.

Item 14. Indemnification Of Directors And Officers

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel that the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

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Item 15. Recent Sales of Unregistered Securities

During the past three years, we issued the following securities without registration under the Securities Act of 1933, as amended (the “Securities Act”) pursuant to exemption from registration under Section 4(2) and Regulation D of the Securities Act:

In January 2008 we closed on an aggregate of $2,950,000 in gross proceeds from the private sale to 21 accredited investors of 9% secured convertible notes and warrants to purchase 1,4750,000 shares of our common stock. Pursuant to the terms of this financing we granted the investors a security interest in certain of our assets. We entered into an agreement with placement agent, Legend Merchant Group, Inc. on October 5, 2007 pursuant to which, Legend Merchant Group, Inc. received a cash commission equal to 8% of the gross proceeds raised by Legend Merchant ( and its subagent), which totaled $2,800,000, plus a warrant equal to 10% of the number of shares of common stock underlying the warrants issued to convertible note holders, or 1,400,000.

In February 2008 we issued 140,000 shares of common stock and warrants to purchase an additional 140,000 shares to Richardson & Patel LLP, our legal counsel, in connection with performance of legal services. On August 7, 2008 we issued an additional 252,308 shares of common stock and warrants to purchase an additional 252,308 shares to Richardson & Patel LLP, our legal counsel, in connection with performance of legal services

From October 2005 to February 2007 we sold an aggregate of $1,265,547 of secured convertible promissory notes to 16 investors. Pursuant to a subsequent conversion agreement between the Company and the various note holders, the notes were converted into an aggregate of 38,005 shares of common stock and warrants to purchase 428,677 shares of common.

From December 2006 to March 2007 we sold 818,181 shares of common stock and warrants to purchase 112,499 shares of common stock to six trust and family members of the Daily family for aggregate gross proceeds of $450,000.

In December 2006 we issued a warrant to purchase 84,555 shares of common stock to Matrix, USA in connection with providing strategic financial advice to the Company.

In February 2007 we issued 180,000 shares of common stock to Consulting for Strategic Growth, Inc. for consulting services.

In February 2007 we issued 50,000 shares of common stock to Spartan Securities, St. Petersburg, FL in connection with Spartan’s senior management team providing strategic financial advice to the Company.

In February 2007, we issued 100,000 shares of common stock to Michael Williams. P.A, in connection with legal services.

In January 2008, we issued 439,293 shares of common stock and warrants to purchase 50,000 additional to the Robb Charitable Trust. The 439,293 shares of common stock were issued in connection with an amendment to a prior note pursuant to which one half of the principal and interest was payable in cash and one half of the principal and interest was payable in common stock. The aggregate value of principal and interest relating to the conversion was $109,823. The warrant was issued pursuant to the terms of the original note.

In June 2008 we agreed to issue and have since issued 100,000 shares of common stock to Gemini Strategies, L.L.C in connection with consulting services related to establishing an environmental based carbon credit program.

The proceeds from the transactions described above were used for general corporate purposes and working capital.

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Item 16. Exhibits.

No.	Exhibit
3.1	Certificate of Incorporation of The Dais Corporation filed April 8, 1993
3.2	Certificate of Amendment of the Certificate of Incorporation of The Dais Corporation filed February 21, 1997
3.3	Certificate of Amendment of the Certificate of Incorporation of The Dais Corporation filed June 25, 1998
3.4	Certificate of Amendment of the Certificate of Incorporation of Dais Analytic Corporation filed December 13, 1999
3.5	Certificate of Amendment of the Certificate of Incorporation of Dais Analytic Corporation filed September 26, 2000
3.6	Certificate of Amendment of the Certificate of Incorporation of Dais Analytic Corporation filed September 28, 2000
3.7	Certificate of Amendment of the Certificate of Incorporation of Dais Analytic Corporation filed August 28, 2007
3.8	Certificate of Amendment of the Certificate of Incorporation of Dais Analytic Corporation filed March 20, 2008
3.9	Bylaws of The Dais Corporation
4.1	Form of Non-Qualified Stock Option Agreement
4.2	Form of Non-Qualified Option Agreement
4.3	Form of Warrant (Daily Financing)
4.4	Form of Warrant (Financing)
4.5	Form of Warrant (Robb Trust Note and Additional Financing)
4.6	Form of Placement Agent Warrant (Financing)
4.7	Form of 9% Secured Convertible Note (Financing)
4.8	Form of Note (Robb Trust Note)
4.9	Form of Amendment to Note (Robb Trust Note)
5.1	Legal Opinion of Richardson & Patel, LLP +
10.1	2000 Equity Compensation Plan
10.2	Form of Employee Non-Disclosure and Non-Compete Agreement
10.3	Amended and Restated Employment Agreement between Dais Analytic Corporation and Timothy N. Tangredi dated July 29, 2008
10.4	Amended and Restated Employment Agreement between Dais Analytic Corporation and Patricia K. Tangredi dated July 29, 2008
10.5	Employment Agreement between Dais Analytic Corporation and William B. Newman dated March 31, 2008
10.6	Commercial Lease Agreement between Ethos Business Venture LLC and Dais Analytic Corporation dated March 18, 2005
10.7	First Amendment of Lease Agreement between Ethos Business Venture LLC and Dais Analytic Corporation dated November 15, 2005
10.8	Form of Subscription Agreement (Daily Financing)

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10.9	Form of Subscription Agreement (Financing)
10.10	Form of Registration Rights Agreement (Financing)
10.11	Form of Secured Patent Agreement (Financing)
10.12	Placement Agent Agreement between Dais Analytic Corporation and Legend Merchant Group, Inc., dated October 5, 2007
23.1	Consent of Pender Newkirk & Company LLP, Certified Public Accountants
23.2	Consent of Richardson & Patel, LLP (included in Exhibit 5.1)
24.1	Power of Attorney (included as part of the signature page to this registration statement)
	* Exhibits are filed herewith
	+ To be filed by amendment

Item 17. Undertakings.

The undersigned Company hereby undertakes:

(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement:

(a) To include any prospectus required by section 10(a)(3) of the Securities Act of 1933;

(b) To reflect in the prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective Registration Statement; and

(c) To include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement.

(2) To, for determining liability under the Securities Act of 1933, treat each post-effective amendment as a new registration statement of the securities offered, and the offering of the securities at that time to be the initial bona fide offering.

(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

(4) That, for the purpose of determining liability of the Registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities, the undersigned Registrant undertakes that in a primary offering of securities of the undersigned Registrant pursuant to this Registration Statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned Registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

(a) Any preliminary prospectus or prospectus of the undersigned Registrant relating to the offering required to be filed pursuant to Rule 424;

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(b) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned Registrant or used or referred to by the undersigned Registrant;

(c) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned Registrant or its securities provided by or on behalf of the undersigned Registrant; and

(d) Any other communication that is an offer in the offering made by the undersigned Registrant to the purchaser.

(5) To provide to the underwriter at the closing specified in the underwriting agreements certificates in such denominations and registered in such names as required by the underwriter to permit prompt delivery to each purchaser.

(6) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

(7) Each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing this Registration Statement on Form S-1 and has duly caused this Registration Statement on Form S-1 to be signed on its behalf by the undersigned thereunto duly authorized, in the City of Odessa, State of Florida on the 11th day of August 2008.

DAIS ANALYTIC CORPORATION,

a New York corporation

By: /s/ TIMOTHY N. TANGREDI

Timothy N. Tangredi, Chief Executive Officer, President & Chairman

POWER OF ATTORNEY

We, the undersigned directors and officers of Dais Analytic Corporation, do hereby constitute and appoint Timothy N. Tangredi as our true and lawful attorney and agent to do any and all such acts and things in our name and on our behalf in our capacities as directors and officers and to execute any and all instruments for us and in our names in the capacities indicated below, which said attorney and agent may deem necessary or advisable to enable said corporation to comply with the Securities Act and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this registration statement, including specifically, but without limitation, power and authority to sign for us or in any of our names and in the capacities indicated below any and all amendments (including post-effective amendments) to this registration statement, or any related registration statement under the Securities Act of 1933; and we do hereby ratify and confirm all that the said attorney and agent shall do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement on Form S-1 has been signed by the following persons in the capacities with Dais Analytic Corporation and on the dates indicated.

Dated: August 11, 2008	/s/ TIMOTHY N. TANGREDI
	Timothy N. Tangredi, Chief Executive Officer, President and Chairman

Dated: August 11, 2008	/s/SCOTT G. EHRENBERG
	Scott G. Ehrenberg – Chief Technology Officer

Dated: August 11, 2008	/s/ROBERT W. BROWN
	Robert W. Brown, Vice President - Marketing

Dated: August 11, 2008	/s/WILLIAM B. NEWMAN
	William B. Newman, Executive Vice President

Dated: August 11, 2008	/s/ ROBERT W. SCHWARTZ
	Robert W. Schwartz , Director

Dated: August 11, 2008	/s/ RAYMOND KAZYAKA SR.
	Raymond Kazyaka Sr., Director

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DAIS-ANALYTIC CORPORATION

2000 Incentive Compensation Plan

(Amended and Restated on April 6, 2001 and on February 5, 2003 to be effective as of June 2, 2000)

		TABLE OF CONTENTS


			Page
1	Purpose		3

2	Definitions		3

3	Administration		6
	(a)	Authority of the Committee	6
	(b)	Manner of Exercise of Committee Authority	6
	(c)	Limitation of Liability	6

4	Stock Subject to Plan		7
	(a)	Overall Number of Shares Available for Delivery	7
	(b)	Application of Limitation to Grants of Awards	7
	(c)	Availability of Shares Not Delivered under Awards	7

5	Eligibility; Per-Person Award Limitations		7

6	Specific Terms of Awards		8
	(a)	General	8
	(b)	Options	8
	(c)	Stock Appreciation Rights	9
	(d)	Restricted Stock	9
	(e)	RSUs	10
	(f)	Bonus Stock and Awards in Lieu of Obligations	11
	(g)	Dividend Equivalents	11
	(h)	Other Stock-Based Awards	11

7	Certain Provisions Applicable to Awards		12
	(a)	Stand-Alone, Additional, Tandem, and Substitute Awards	12
	(b)	Term of Awards	12
	(c)	Form and Timing of Payment under Awards; Deferrals	12
	(d)	Exemptions from Section 16(b) Liability	13

8	Performance Awards and Annual Incentive Awards		13
	(a)	Authorization	13
	(b)	Performance Awards Granted to Designated Covered Employees	13
	(c)	Annual Incentive Awards Granted to Designated Covered Employees	15
	(d)	Written Determinations	16
	(e)	Status of Section 8(b) and Section 8(c) Awards under Code Section 162(m)	16


9	Change in Control		16

	(a)	Effect of Change in Control	16
	(b)	Definition of Change in Control	17
	(c)	Definition of Change in Control Price	18

10	General Provisions		18
	(a)	Compliance with Legal and Other Requirements	18
	(b)	Limits on Transferability; Beneficiaries	19
	(c)	Adjustments	19
	(d)	Taxes	19
	(e)	Changes to the Plan and Awards	20
	(f)	Limitation on Rights Conferred under Plan	20
	(g)	Unfunded Status of Awards, Creation of Trusts	20
	(h)	Nonexclusivity of the Plan	21
	(i)	Payments in the Event of Forfeitures; Fractional Shares	21
	(j)	Governing Law	21
	(k)	Plan Effective Date and Shareholder Approval	21

DAIS-ANALYTIC CORPORATION

2000 Incentive Compensation Plan

1. Purpose . The purpose of this 2000 Incentive Compensation Plan (the "Plan") is to assist Dais-Analytic Corporation, a New York corporation (the "Corporation"), and its subsidiaries in attracting, retaining, and rewarding high-quality executives, employees, directors and other persons who provide services to the Corporation and/or its subsidiaries, enabling such persons to acquire or increase a proprietary interest in the Corporation to strengthen the mutuality of interests between such persons and the Corporation's shareholders, and providing such persons with annual and long-term performance incentives to expend their maximum efforts in the creation of shareholder value. The Plan is also intended to qualify certain compensation awarded under the Plan for tax deductibility under Code Section 162(m) (as hereafter defined) to the extent deemed appropriate by the Committee (or any successor committee) of the Board of Directors of the Corporation.

2. Definitions . For purposes of the Plan, the following terms shall be defined as set forth below, in addition to such terms defined in Section 1 hereof:

(a) "Annual Incentive Award" means a conditional right granted to a Participant under Section 8(c) hereof to receive a cash payment, Stock or other Award, unless otherwise determined by the Committee, after the end of a specified fiscal year.

(b) "Award" means any Option, SAR (including Limited SAR), Restricted Stock, RSU, Stock granted as a bonus or in lieu of another award, Dividend Equivalent, Other Stock-Based Award, Performance Award or Annual Incentive Award, together with any other right or interest granted to a Participant under the Plan.

(c) "Beneficiary" means the person, persons, trust or trusts which have been designated by a Participant in his or her most recent written beneficiary designation filed with the Committee to receive the benefits specified under the Plan upon such Participant's death or to which Awards or other rights are transferred if and to the extent permitted under Section 10 (b) hereof. If, upon a Participant's death, there is no designated Beneficiary or surviving designated Beneficiary, then the term Beneficiary means person, persons, trust or trusts entitled by will or the laws of descent and distribution to receive such benefits.

(d) "Beneficial Owner" shall have the meaning ascribed to such term in Rule 13d-3 under the Exchange Act and any successor to such Rule.

(e) "Board" means the Corporation's Board of Directors.

(f) "Change in Control" means Change in Control as defined with related terms in Section 9 of the Plan.

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(g) "Change In Control Price" means the amount calculated in accordance with Section 9(c) of the Plan.

(h) "Code" means the Internal Revenue Code of 1986, as amended from time to time, including regulations thereunder and successor provisions and regulations thereto.

(i) "Committee" means a committee of two or more directors designated by the Board to administer the Plan; provided, however, that, unless otherwise determined by the Board, the Committee shall consist solely of two or more directors, each of whom shall be (i) a "non employee director" within the meaning of Rule 16b-3 under the Exchange Act, unless administration of the Plan by "non-employee directors" is not then required in order for exemptions under Rule 16b-3 to apply to transactions under the Plan, and (ii) an "outside director" as defined under Code Section 162(m), unless administration of the Plan by "outside directors" is not then required to qualify for tax deductibility under Code Section 162(m).

(j) "Covered Employee" means an Eligible Person who is a Covered Employee as specified in Section 8(e) of the Plan.

(k) "Dividend Equivalent" means a right granted to a Participant under Section 6(g), to receive cash, Stock, other Awards or other property equal in value to dividends paid with respect to a specified number of shares of Stock, or other periodic payments.

(l) "Effective Date" means June 2, 2000.

(m) "Eligible Person" means each Executive Officer and other officers and employees of the Corporation or of any subsidiary, and other persons who provide services to the Corporation or any of its subsidiaries, including directors of the Corporation. An employee on leave of absence may be considered as still in the employ of the Corporation or a subsidiary for purposes of eligibility for participation in the Plan.

(n) "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time, including rules thereunder and successor provisions and rules thereto.

(o) "Executive Officer" means an executive officer of the Corporation as defined under the Exchange Act.

(p) "Fair Market Value" means the fair market value of Stock, Awards or other property as determined by the Committee or under procedures established by the Committee.

(q) "Incentive Stock Option" or "ISO" means any Option intended to be and designated as an incentive stock option within the meaning of Code Section 422 or any successor provision thereto.

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(r) "Limited SAR" means a right granted to a Participant under Section 6(c)(ii) hereof.

(s) "Option" means a right, granted to a Participant under Section 6(b) hereof, to purchase Stock or other Awards at a specified price during specified time periods.

(t) "Other Stock-Based Awards" means Awards granted to a Participant under Section 6(h) hereof.

(u) "Participant" means a person who has been granted an Award under the Plan which remains outstanding, including a person who is no longer an Eligible Person.

(v) "Performance Award" means a right, granted to a Participant under Section 8 hereof, to receive Awards based upon performance criteria specified by the Committee.

(w) "Person" shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof, and shall include a "group" as defined in Section 13(d) thereof.

(x) "Qualified Member" means a member of the Committee who is a "non-employee director" within the meaning of Rule 16b-3(b)(3) and an "outside director" within the meaning of Regulation 1.162-27 under Code Section 162(m).

(y) "Restricted Stock" means Stock granted to a Participant under Section 6(d) hereof, that is subject to certain restrictions and to a risk of forfeiture.

(z) "Restricted Stock Unit or "RSU" means a right, granted to a Participant under Section 6(e) hereof, to receive Stock, cash or a combination thereof at the end of a specified deferral period.

(aa) "Rule 16b-3” means Rule 16b-3, as from time to time in effect and applicable to the Plan and Participants, promulgated by the Securities and Exchange Commission under Section 16 of the Exchange Act.

(bb) "Stock" means the Corporation's Common Stock, $0.01 par value per share, and such other securities as may be substituted (or resubstituted) for Stock pursuant to Section 10(c) hereof.

(cc) "Stock Appreciation Rights" or "SAR" means a right granted to a Participant under Section 6(c)(i) hereof.

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3. Administration .

(a) Authority of the Committee. The Plan shall be administered by the Committee except to the extent the Board elects to administer the Plan, in which case references herein to the "Committee" shall be deemed to include references to the "Board". The Committee shall have full and final authority, in each case subject to and consistent with the provisions of the Plan, to select Eligible Persons to become Participants, grant Awards, determine the type, number and other terms and conditions of, and all other matters relating to, Awards, prescribe Award agreements (which need not be identical for each Participant) and rules and regulations for the administration of the Plan, construe and interpret the Plan and Award agreements and correct defects, supply omissions or reconcile inconsistencies therein, and to make all other decisions and determinations as the Committee may deem necessary or advisable for the administration of the Plan.

(b) Manner of Exercise of Committee Authority. At any time that a member of the Committee is not a Qualified Member, any action of the Committee relating to an Award granted or to be granted to a Participant who is then subject to Section 16 of the Exchange Act in respect of the Corporation, or relating to an Award intended by the Committee to qualify as "performance-based compensation" within the meaning of Code Section 162(m) and regulations thereunder, may be taken either (i) by a subcommittee, designated by the Committee, composed solely of two or more Qualified Members, or (ii) by the Committee but with each such member who is not a Qualified Member abstaining or recusing himself or herself from such action; provided, however, that, upon such abstention or recusal, the Committee remains composed solely of two or more Qualified Members. Such action, authorized by such a subcommittee or by the Committee upon the abstention or recusal of such non-Qualified Member(s), shall be the action of the Committee for purposes of the Plan. Any action of the Committee shall be final, conclusive and binding on all persons, including the Corporation, its subsidiaries, Participants, Beneficiaries, transferees under Section 10(b) hereof or other persons claiming rights from or through a Participant, and shareholders. The express grant of any specific power to the Committee, and the taking of any action by the Committee, shall not be construed as limiting any power or authority of the Committee. The Committee may delegate to officers or managers of the Corporation or any subsidiary, or committees thereof, the authority, subject to such terms as the Committee shall determine, to perform such functions, including administrative functions, as the Committee may determine, to the extent that such delegation will not result in the loss of an exemption under Rule 16b-3(d)(1) for Awards granted to Participants subject to Section 16 of the Exchange Act in respect of the Corporation and will not cause Awards intended to qualify as "performance-based compensation" under Code Section 162(m) to fail to so qualify. The Committee may appoint agents to assist it in administering the Plan. With respect to any Awards to any person who is a director of the Corporation, the Award must be approved by a majority of the disinterested members of the Committee.

(c) Limitation of Liability. The Committee and each member thereof shall be entitled to, in good faith, rely or act upon any report or other information furnished to him or her by any executive officer, other officer or employee of the Corporation or a subsidiary, the Corporation's independent auditors, consultants or any other agents assisting in the administration of the Plan. Members of the Committee and any officer or employee of the Corporation or a subsidiary acting at the direction or on behalf of the Committee shall not be personally liable for any action or determination taken or made in good faith with respect to the Plan, and shall, to the extent permitted by law, be fully indemnified and protected by the Corporation with respect to any such action or determination.

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4. Stock Subject to Plan .

(a) Overall Number of Shares Available for Delivery. Subject to adjustment as provided in Section 10(c) hereof, the total number of shares of Stock reserved and available for delivery in connection with Awards under the Plan shall be 2,350,000 plus any authorized shares not issued or subject to outstanding grants under any other plan of the Corporation as of the Effective Date and any shares issued under any such other plan that are forfeited or repurchased by the Corporation or that are issuable upon exercise of options granted pursuant to such other plans that expire or become unexercisable for any reason without having been exercised in full, which shares will no longer be available for grant and issuance under such other plans, but will be available for grant and issuance under this Plan. Any shares of Stock delivered under the Plan shall consist of authorized and unissued shares or treasury shares.

(b) Application of Limitation to Grants of Awards. No Award may be granted if the number of shares of Stock to be delivered in connection with such Award or, in the case of an Award relating to shares of Stock that may be settled only in cash (such as cash-only SARs), the number of shares to which such Award relates, exceeds the number of shares of Stock remaining available under the Plan minus the number of shares of Stock issuable in settlement of or relating to then outstanding Awards. The Committee may adopt reasonable counting procedures to ensure appropriate counting, avoid double counting (as, for example, in the case of tandem or substitute awards) and make adjustments if the number of shares of Stock actually delivered differs from the number of shares previously counted in connection with an Award.

(c) Availability of Shares Not Delivered under Awards. Shares of Stock subject to an Award under the Plan that are canceled, expired, forfeited, settled in cash or otherwise terminated without a delivery of shares to the Participant, including (i) the number of shares withheld in payment of any exercise or purchase price of an Award or taxes relating to Awards, and (ii) the number of shares surrendered in payment of any exercise or purchase price of an Award or taxes relating to any Award, will again be available for Awards under the Plan, except that if any such shares could not again be available for Awards to a particular Participant under any applicable law or regulation, such shares shall be available exclusively for Awards to Participants who are not subject to such limitation.

5. Eligibility; Per-Person Award Limitations . Awards may be granted under the Plan only to Eligible Persons. In each fiscal year during any part of which the Plan is in effect an Eligible Person may not be granted Awards under each of Sections 6(b), 6(c), 6(d), 6(e), 6(f), 6(g), 6(h), 8(b) and 8(c) relating to more than 1,000,000 shares of Stock (subject in each case to adjustment as provided in Section 10(c)). In addition, the maximum cash amount that may be earned under the Plan as a final Annual Incentive Award or other cash annual Award in respect of any fiscal year by any one Participant shall not exceed an amount recommended by the Compensation Committee, and the maximum cash amount that may be earned under the Plan as a final Performance Award or other cash Award in respect of a performance period other than an annual period by any one Participant on an annualized basis shall not exceed an amount recommended by the Compensation Committee.

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6. Specific Terms of Awards .

(a) General. Awards may be granted on the terms and conditions set forth in this Section 6. In addition, the Committee may impose on any Award or the exercise thereof, at the date of grant or thereafter (subject to Section 10(e)), such additional terms and conditions, not inconsistent with the provisions of the Plan, as the Committee shall determine, including terms requiring forfeiture of Awards in the event of termination of employment by the Participant and terms permitting a Participant to make elections relating to his or her Award. The Committee shall retain full power and discretion to accelerate, waive or modify, at any time, any term or condition of an Award that is not mandatory under the Plan; provided, however, that the Committee shall not have any discretion to accelerate, waive or modify any term or condition of an Award that is intended to qualify as "performance-based compensation" for purposes of Code Section 162(m) if such discretion would cause the Award not to so qualify. Except in cases in which the Committee is authorized to require other forms of consideration under the Plan, or to the extent other forms of consideration must by paid to satisfy the requirements of state law, no consideration other than services may be required for the grant (but not the exercise) of any Award.

(b) Options. The Committee is authorized to grant Options to Participants on the

following terms and conditions:

(i) Exercise Price. The exercise price per share of Stock purchasable under an Option shall be determined by the Committee, provided that the exercise price of an ISO shall be not less than the Fair Market Value of a share of Stock on the date of grant of such Option except as provided under Section 7(a) hereof.

(ii) T ime and Method of Exercise. The Committee shall determine the time or times at which or the circumstances under which an Option may be exercised in whole or in part (including based on achievement of performance goals and/or future service requirements), the methods by which such exercise price may be paid or deemed to be paid, the form of such payment, including, without limitation, cash, Stock, other Awards or awards granted under other plans of the Corporation or any subsidiary, or other property (including notes or other contractual obligations of Participants to make payment on a deferred basis), and the methods by or forms in which Stock will be delivered or deemed to be delivered to Participants. In no event may an Option remain exercisable more than ten years following the date of grant (or such shorter term as may be required in respect of an ISO under Code Section 422).

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(iii) ISOs. The terms of any ISO granted under the Plan shall comply in all respects with the provisions of Code Section 422. Anything in the Plan to the contrary notwithstanding, no term of the Plan relating to ISOs (including any SAR in tandem therewith) shall be interpreted, amended or altered, nor shall any discretion or authority granted under the Plan be exercised, so as to disqualify either the Plan or any ISO under Code Section 422, unless the Participant has first requested the change that will result in such disqualification.

(c) Stock Appreciation Rights. The Committee is authorized to grant SARs and Limited SARs to Participants on the following terms and conditions:

(i) SAR. A SAR shall confer on the Participant to whom it is granted a right to receive, upon exercise thereof, the excess of (A) the Fair Market Value of one share of Stock on the date of exercise over (B) the grant price of the SAR as determined by the Committee, provided that such grant price shall not be less than the Fair Market Value of a share of Stock on the date of grant of such SAR except as provided under Section 7(a) hereof.

(ii) Limited SAR. A Limited SAR shall confer on the Participant to whom it is granted a right to receive, upon exercise thereof, upon a Change in Control, as defined in Section 9(b) hereof, the excess of (A) the Fair Market Value of one share of Stock determined by reference to the Change in Control Price, as defined under Section 9(c) hereof, on the date of exercise over (B) the grant price of the SAR as determined by the Committee, provided that such grant price shall not be less than the Fair Market Value of a share of Stock on the date of grant of such Limited SAR except as provided under Section 7(a) hereof.

(iii) Other Terms. The Committee shall determine at the date of grant or thereafter, the time or times at which and the circumstances under which a SAR or Limited SAR may be exercised in whole or in part (including based on achievement of performance goals and/or future service requirements), the method of exercise, method of settlement, form of consideration payable in settlement, method by or forms in which Stock will be delivered or deemed to be delivered to Participants, whether or not a SAR or Limited SAR shall be in tandem or in combination with any other Award, and any other terms and conditions of any SAR or Limited SAR. SARs and Limited SARs may be either freestanding or in tandem with other Awards.

(d) Restricted Stock. The Committee is authorized to grant Restricted Stock to Participants on the following terms and conditions:

(i) Grant and Restrictions. Restricted Stock shall be subject to such restrictions on transferability, risk of forfeiture and other restrictions, if any, as the Committee may impose, which restrictions may lapse separately or in combination at such times, under such circumstances (including based on achievement of performance goals and/or future service requirements), in such installments or otherwise, as the Committee may determine at the date of grant or thereafter. Except to the extent restricted under the terms of the Plan and any Award agreement relating to the Restricted Stock, a Participant granted Restricted Stock shall have all of the rights of a shareholder, including the right to vote the Restricted Stock and the right to receive dividends thereon (subject to any mandatory reinvestment or other requirement imposed by the Committee). During the restricted period applicable to the Restricted Stock, subject to Section 10(b) below, the Restricted Stock may not be sold, transferred, pledged, hypothecated, margined or otherwise encumbered by the Participant.

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(ii) Forfeiture. Except as otherwise determined by the Committee, upon termination of employment during the applicable restriction period, Restricted Stock that is at that time subject to restrictions shall be forfeited and reacquired by the Corporation; provided that the Committee may provide, by rule or regulation or in any Award agreement, or may determine in any individual case, that restrictions or forfeiture conditions relating to Restricted Stock shall be waived in whole or in part in the event of terminations resulting from specified causes, and the Committee may in other cases waive in whole or in part the forfeiture of Restricted Stock.

(iii) Certificates for Stock. Restricted Stock granted under the Plan may be evidenced in such manner as the Committee shall determine. If certificates representing Restricted Stock are registered in the name of the Participant, the Committee may require that such certificates bear an appropriate legend referring to the terms, conditions and restrictions applicable to such Restricted Stock, that the Corporation retain physical possession of the certificates, and that the Participant deliver a stock power to the Corporation, endorsed in blank, relating to the Restricted Stock.

(iv) Dividends and Splits. As a condition to the grant of an Award of Restricted Stock, the Committee may require or permit a Participant to elect that any cash dividends paid on a share of Restricted Stock be automatically reinvested in additional shares of Restricted Stock or applied to the purchase of additional Awards under the Plan. Unless otherwise determined by the Committee, Stock distributed in connection with a Stock split or Stock dividend, and other property distributed as a dividend, in respect of any Restricted Stock shall be subject to restrictions and a risk of forfeiture to the same extent as the Restricted Stock with respect to which such Stock or other property has been distributed.

(e) RSUs. The Committee is authorized to grant RSUs to Participants, which are rights to receive Stock, cash, or a combination thereof at the end of a specified deferral period, subject to the following terms and conditions:

(i) Award and Restrictions. Satisfaction of an Award of RSUs shall occur upon expiration of the deferral period specified for such RSUs by the Committee (or, if permitted by the Committee, as elected by the Participant). In addition, RSUs shall be subject to such restrictions (which may include a risk of forfeiture) as the Committee may impose, if any, which restrictions may lapse at the expiration of the deferral period or at earlier specified times (including based on achievement of performance goals and/or future service requirements), separately or in combination, in installments or otherwise, as the Committee may determine. RSUs may be satisfied by delivery of Stock, cash equal to the Fair Market Value of the specified number of shares of Stock covered by the RSUs, or a combination thereof, as determined by the Committee at the date of grant or thereafter.

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(ii) Forfeiture. Except as otherwise determined by the Committee, upon termination of employment during the applicable deferral period or portion thereof to which forfeiture conditions apply (as provided in the Award agreement evidencing the RSUs), all RSUs that are at that time subject to deferral (other than a deferral at the election of the Participant) shall be forfeited; provided that the Committee may provide, by rule or regulation or in any Award agreement, or may determine in any individual case that restrictions or forfeiture conditions relating to RSUs shall be waived in whole or in part in the event of terminations resulting from specified causes, and the Committee may in other cases waive in whole or in part the forfeiture of RSUs.

(iii) Dividend Equivalents. Unless otherwise determined by the Committee at date of grant, Dividend Equivalents on the specified number of shares of Stock covered by an Award of RSUs shall be either (A) paid with respect to such RSUs at the dividend payment date in cash or in shares of unrestricted Stock having a Fair Market Value equal to the amount of such dividends, or (B) deferred with respect to such RSUs and the amount or value thereof automatically deemed reinvested in additional RSUs, other Awards or other investment vehicles, as the Committee shall determine or permit the Participant to elect.

(f) Bonus Stock and Awards in Lieu of Obligations. The Committee is authorized to grant Stock as a bonus, or to grant Stock or other Awards in lieu of obligations to pay cash or deliver other property under the Plan or under other plans or compensatory arrangements, provided that, in the case of Participants subject to Section 16 of the Exchange Act, the amount of such grants remains within the discretion of the Committee to the extent necessary to ensure that acquisitions of Stock or other Awards are exempt from liability under Section 16(b) of the Exchange Act. Stock or Awards granted hereunder shall be subject to such other terms as shall be determined by the Committee.

(g) Dividend Equivalents. The Committee is authorized to grant Dividend Equivalents to a Participant, entitling the Participant to receive cash, Stock, other Awards, or other property equal in value to dividends paid with respect to a specified number of shares of Stock, or other periodic payments. Dividend Equivalents may be awarded on a free-standing basis or in connection with another Award. The Committee may provide that Dividend Equivalents shall be paid or distributed when accrued or shall be deemed to have been reinvested in additional Stock, Awards, or other investment vehicles, and subject to such restrictions on transferability and risks of forfeiture, as the Committee may specify.

(h) Other Stock-Based Awards. The Committee is authorized, subject to limitations under applicable law, to grant to Participants such other Awards that may be denominated or payable in, valued in whole or in part by reference to, or otherwise based on, or related to, Stock, as deemed by the Committee to be consistent with the purposes of the Plan, including, without limitation, convertible or exchangeable debt securities, other rights convertible or exchangeable into Stock, purchase rights for Stock, Awards with value and payment contingent upon performance of the Corporation or any other factors designated by the Committee, and Awards valued by reference to the book value of Stock or the value of securities of or the performance of specified subsidiaries. The Committee shall determine the terms and conditions of such Awards. Stock delivered pursuant to an Award in the nature of a purchase right granted under this Section 6(h) shall be purchased for such consideration, paid for at such times, by such methods, and in such forms including, without limitation, cash, Stock, other Awards, or other property, as the Committee shall determine. Cash awards, as an element of or supplement to any other Award under the Plan, may also be granted pursuant to this Section 6(h).

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7. Certain Provisions Applicable to Awards .

(a) Stand-Alone, Additional, Tandem, and Substitute Awards. Awards granted under the Plan may, in the discretion of the Committee, be granted either alone or in addition to, in tandem with, or in substitution or exchange for, any other Award or any award granted under another plan of the Corporation, any subsidiary, or any business entity to be acquired by the Corporation or a subsidiary, or any other right of a Participant to receive payment from the Corporation or any subsidiary. Such additional, tandem, and substitute or exchange Awards may be granted at any time. If an Award is granted in substitution or exchange for another Award, the Committee shall require the surrender of such other Award in consideration for the grant of the new Award. In addition, Awards may be granted in lieu of cash compensation, including in lieu of cash amounts payable under other plans of the Corporation or any subsidiary, in which the value of Stock subject to the Award is equivalent in value to the cash compensation (for example, RSUs or Restricted Stock), or in which the exercise price, grant price or purchase price of an Award which is in the nature of a right that may be exercised is reduced by an amount equal to the value of the cash compensation surrendered (for example, Options may be granted with an exercise price "discounted" by the amount of the cash compensation surrendered).

(b) Term of Awards. The term of each Award shall be for such period as may be determined by the Committee; provided that in no event shall the term of any Option, SAR or Limited SAR exceed a period of ten years (or such shorter term as may be required in respect of an ISO under Code Section 422).

(c) Form and Timing of Payment under Awards; Deferrals. Subject to the terms of the Plan and any applicable Award agreement, payments to be made by the Corporation or a subsidiary upon the exercise of an Option or other Award or settlement of an Award may be made in such forms as the Committee shall determine, including, without limitation, cash, Stock, other Awards or other property, and may be made in a single payment or transfer, in installments, or on a deferred basis. The settlement of any Award may be accelerated, and cash paid in lieu of Stock in connection with such settlement, in the discretion of the Committee or upon occurrence of one or more specified events (in addition to a Change in Control, upon the occurrence of which settlement shall be accelerated in each case). Installment or deferred payments may be required by the Committee (subject to Section 10(e) of the Plan, including the consent provisions thereof in the case of any deferral of an outstanding Award not provided for in the original Award agreement) or permitted at the election of the Participant on terms and conditions established by the Committee. Payments may include, without limitation, provisions for the payment or crediting of reasonable interest on installment or deferred payments or the grant or crediting of Dividend Equivalents or other amounts in respect of installment or deferred payments denominated in Stock.

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(d) Exemptions from Section 16(b) Liability. It is the intent of the Corporation that the grant of any Awards to, or other transaction by, a Participant who is subject to Section 16 of the Exchange Act shall be exempt from Section 16 pursuant to an applicable exemption (except for transactions acknowledged in writing to be non-exempt by such Participant). Accordingly, if any provision of this Plan or any Award agreement does not comply with the requirements of Rule 16b-3 as then applicable to any such transaction, such provision shall be construed or deemed amended to the extent necessary to conform to the applicable requirements of Rule 16b-3 so that such Participant shall avoid liability under Section 16(b).

8. Performance Awards and Annual Incentive Awards .

(a) Authorization. The Committee is authorized to grant Performance Awards and Annual Incentive Awards payable in cash, Shares, or other Awards, on terms and conditions established by the Committee, subject to the terms of paragraphs (b) and (c) of this Section 8 in the event such Performance Awards or Annual Incentive Awards, as applicable, are intended to qualify as "performance-based compensation" for purposes of Code Section 162(m). The right of a Participant to receive, exercise or settle a Performance Award or Annual Incentive Award, and the timing thereof, shall be subject to the achievement of such performance conditions as the Committee may deem appropriate, and the Committee may exercise its discretion to reduce or increase the amounts payable under any Award subject to performance conditions, except as limited under Sections 8(b) and 8(c) hereof in the case of a Performance Award or Annual Incentive Award intended to qualify under Code Section 162(m).

(b) Performance Awards Granted to Designated Covered Employees. If the Committee determines that a Performance Award to be granted to an Eligible Person who is designated by the Committee as likely to be a Covered Employee should qualify as "performance-based compensation" for purposes of Code Section 162(m), the grant, exercise and/or settlement of such Performance Award shall be contingent upon achievement of preestablished performance goals and other terms set forth in this Section 8(b).

(i) Performance Goals Generally. The performance goals for such Performance Awards shall consist of one or more business criteria and a targeted level or levels of performance with respect to each of such criteria, as specified by the Committee consistent with this Section 8(b). Performance goals shall be objective and shall otherwise meet the requirements of Code Section 162(m) and regulations thereunder (including Regulation 1.162-27 and successor regulations thereto), including the requirement that the level or levels of performance targeted by the Committee result in the achievement of performance goals being "substantially uncertain". The Committee may determine that such Performance Awards shall be granted, exercised and/or settled upon achievement of any one performance goal or that two or more of the performance goals must be achieved as a condition to grant, exercise and/or settlement of such Performance Awards. Performance goals may differ for Performance Awards granted to any one Participant or to different Participants.

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(ii) Business Criteria. One or more of the following business criteria for the Corporation, on a consolidated basis and/or for specified subsidiaries or business or geographical units of the Corporation (except with respect to the total shareholder return and earnings per share criteria), shall be used by the Committee in establishing performance goals for such Performance Awards: (1) earnings per share, (2) increase in revenues: (3) increase in cash flow; (4) operating margin; (5) return on net assets, return on assets, return on investment, return on capital or return on equity; (6) economic value added; (7) direct contribution; (8) net income; pretax earnings: pretax earnings before interest; depreciation and amortization (EBITDA): pretax earnings after interest expense and income and before extraordinary or special items; operating income; pretax earnings before interest expense and income and extraordinary or special items and excluding budgeted and actual bonuses which might be paid under any ongoing bonus plans of the Corporation; (9) working capital; (10) management of fixed costs or variable costs, (10) identification or consummation of investment opportunities or completion of specified projects in accordance with corporate business plans, including strategic mergers, acquisitions or divestitures, (12) total shareholder return; (13) debt reduction: or (14) any of the above goals determined on an absolute or relative basis or as compared to the performance of a published or special index deemed applicable by the Committee including, but not limited to, the Standard & Poor's 500 Stock Index or a group of comparable companies. One or more of the foregoing business criteria shall also be exclusively used in establishing performance goals for Annual Incentive Awards granted to a Covered Employee under Section 8(c) hereof.

(iii) Performance Period; Timing for Establishing Performance Goals. Achievement of performance goals in respect of such Performance Awards shall be measured over a performance period of up to ten years, as specified by the Committee. Performance goals shall be established not later than 90 days after the beginning of any performance period applicable to such Performance Awards, or at such other date as may be required or permitted for "performance-based compensation" under Code Section 162(m).

(iv) Performance Award Pool. The Committee may establish a Performance Award pool, which shall be an unfunded pool, for purposes of measuring performance of the Corporation in connection with Performance Awards. The amount of such Performance Award pool shall be based upon the achievement of a performance goal or goals based on one or more of the business criteria set forth in Section 8(b)(ii) hereof during the given performance period, as specified by the Committee in accordance with Section 8(b)(iii) hereof. The Committee may specify the amount of the Performance Award pool as a percentage of any of such business criteria, a percentage thereof in excess of a threshold amount, or as another amount which need not bear a strictly mathematical relationship to such business criteria.

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(v) Settlement of Performance Awards; Other Terms. After the end of each performance period, the Committee shall determine the amount, if any, of the potential Performance Award payable to each Participant. Settlement of such Performance Awards shall be in cash, Stock, other Awards or other property, in the discretion of the Committee. The Committee may, in its discretion, reduce the amount of a settlement otherwise to be made in connection with such Performance Awards, but may not exercise discretion to increase any such amount payable to a Covered Employee in respect of a Performance Award subject to this Section 8(b). The Committee shall specify the circumstances in which such Performance Awards shall be paid or forfeited in the event of termination of employment by the Participant prior to the end of a performance period or settlement of Performance Awards.

(c) Annual Incentive Awards Granted to Designated Covered Employees. If the Committee determines that an Annual Incentive Award to be granted to an Eligible Person who is designated by the Committee as likely to be a Covered Employee should qualify as a performance-based compensation" for purposes of Code Section 162(m), the grant, exercise and/or settlement of such Annual Incentive Award shall be contingent upon achievement of preestablished performance goals and other terms set forth in this Section 8(c).

(i) Annual Incentive Award Pool. The Committee may establish an Annual Incentive Award pool, which shall be an unfunded pool, for purposes of measuring performance of the Corporation in connection with Annual Incentive Awards. The amount of such Annual Incentive Award pool shall be based upon the achievement of a performance goal or goals based on one or more of the business criteria set forth in Section 8(b)(ii) hereof during a particular 12 month period, as specified by the Committee. The Committee may specify the amount of the Annual Incentive Award pool as a percentage of any of such business criteria, a percentage thereof in excess of a threshold amount, or as another amount which need not bear a strictly mathematical relationship to such business criteria.

(ii) Potential Annual Incentive Awards. Not later than the end of the 90th day of the applicable 12 month period, or at such other date as may be required or permitted in the case of Awards intended to be "performance-based compensation" under Code Section 162(m), the Committee shall determine the Eligible Persons who will potentially receive Annual Incentive Awards, and the amounts potentially payable thereunder, for that 12 month period, either out of an Annual Incentive Award pool established by such date under Section 8(c)(i) hereof or as individual Annual Incentive Awards. In the case of individual Annual Incentive Awards intended to qualify under Code Section 162(m), the amount potentially payable shall be based upon the achievement of a performance goal or goals based on one or more of the business criteria set forth in Section 8(b)(ii) hereof in the given performance year, as specified by the Committee; in other cases, such amount shall be based on such criteria as shall be established by the Committee. In all cases, the maximum Annual Incentive Award of any Participant shall be subject to the limitation set forth in Section 5 hereof.

(iii) Payout of Annual Incentive Awards. After the end of the applicable 12 month period, the Committee shall determine the amount, if any, of the potential Annual Incentive Award payable to each Participant. The Committee may, in its discretion, determine that the amount payable to any Participant as a final Annual Incentive Award shall be increased or reduced from the amount of his or her potential Annual Incentive Award, including a determination to make no final Award whatsoever, but may not exercise discretion to increase any such amount in the case of an Annual Incentive Award intended to qualify under Code Section 162(m). The Committee shall specify the circumstances in which an Annual Incentive Award shall be paid or forfeited in the event of termination of employment by the Participant prior to the end of a fiscal year or settlement of such Annual Incentive Award.

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(d) Written Determinations. All determinations by the Committee as to the establishment of performance goals, the amount of any Performance Award pool or potential individual Performance Awards and as to the achievement of performance goals relating to Performance Awards under Section 8(b), and the amount of any Annual Incentive Award pool or potential individual Annual Incentive Awards and the amount of final Annual Incentive Awards under Section 8(c), shall be made in writing in the case of any Award intended to qualify under Code Section 162(m). The Committee may not delegate any responsibility relating to such Performance Awards or Annual Incentive Awards.

(e) Status of Section 8(b) and Section 8(c) Awards under Code Section 162(m). It is the intent of the Corporation that Performance Awards and Annual Incentive Awards granted to persons who are designated by the Committee as likely to be Covered Employees within the meaning of Code Section 162(m) and regulations thereunder (including Regulation 1.162-27 and successor regulations thereto) shall, if so designated by the Committee, constitute "performance-based compensation" within the meaning of Code Section 162(m) and regulations thereunder. Accordingly, the terms of Sections 8(b), (c), (d) and (e), including the definitions of Covered Employee and other terms used therein, shall be interpreted in a manner consistent with Code Section 162(m) and regulations thereunder. The foregoing notwithstanding, because the Committee cannot determine with certainty whether a given Participant will be a Covered Employee with respect to a fiscal year that has not yet been completed, the term Covered Employee as used herein shall mean only a person designated by the Committee, at the time of grant of Performance Awards or an Annual Incentive Award, as likely to be a Covered Employee with respect to that fiscal year. If any provision of the Plan as in effect on the date of adoption or any agreement relating to a Performance Award or Annual Incentive Award intended to comply with Code Section 162(m) does not comply or is inconsistent with the requirements of Code Section 162(m) or regulations thereunder, such provision shall be construed or deemed amended to the extent necessary to conform to such requirements.

9. Change in Control .

(a) Effect of Change In Control. In the event of a Change in Control of the Corporation, the following provisions shall apply unless otherwise provided in the Award agreement:

(i) Any Award carrying a right to exercise that was not previously exercisable and vested shall become fully exercisable and vested as of the time of the Change in Control and shall remain exercisable and vested for the balance of the stated term of such Award without regard to any termination of employment by the Participant, subject only to applicable restrictions set forth in Section 10 (a) hereof;

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(ii) Any optionee who holds an Option shall be entitled to elect, during the 60 day period immediately following a Change in Control, in lieu of acquiring the shares of Stock covered by such Option, to receive, and the Corporation shall be obligated to pay, in cash the excess of the Change in Control Price over the exercise price of such Option, multiplied by the number of shares of Stock covered by such Option;

(iii) The restrictions, deferral of settlement, and forfeiture conditions applicable to any other Award granted under the Plan shall lapse and such Awards shall be deemed fully vested as of the time of the Change in Control, except to the extent of any waiver by the Participant and subject to applicable restrictions set forth in Section 10(a) hereof; and

(iv) With respect to any outstanding Award subject to achievement of performance goals and conditions under the Plan, such performance goals and other conditions will be deemed to be met if and to the extent so provided in the Award agreement relating to such Award.

(b) Definition of Change in Control. Unless otherwise expressly provided by the Board on or prior to the occurrence of an event that would, but for such action of the Board, be deemed a Change in Control, a "Change in Control" shall be deemed to have occurred if:

(i) any Person (other than the Corporation, any trustee or other fiduciary holding securities under any employee benefit plan of the Corporation, or any company owned, directly or indirectly, by the stockholders of the Corporation in substantially the same proportions as their ownership of the Stock of the Corporation immediately prior to the occurrence with respect to which the determination of whether a Change in Control has occurred is being made) acquires securities of the Corporation and immediately thereafter is the Beneficial Owner (except that a Person shall be deemed to be the Beneficial Owner of all shares that any such Person has the right to acquire pursuant to any agreement or arrangement or upon exercise of conversion rights, warrants or options or otherwise, without regard to the sixty day period referred to in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Corporation representing 20% or more of the combined voting power of the Corporation's then outstanding securities (except that an acquisition of securities directly from the Corporation shall not be deemed an acquisition for purposes of this clause (i));

(ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board, and any new director (other than a director designated by a person who has entered into an agreement with the Corporation to effect a transaction described in clause (i), (iii), or (iv) of this paragraph (b)) whose election by the Board or nomination for election by the Corporation's stockholders was approved by a vote of at least two thirds of the directors then still in office who either were directors at the beginning of the two-year period or whose election or nomination for election was previously so approved but excluding for this purpose any such new director whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-10 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of an individual, corporation, partnership, group, associate or other entity or Person other than the Board, cease for any reason to constitute at least a majority of the Board;

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(iii) the consummation of a merger or consolidation of the Corporation with any other entity, other than (i) a merger or consolidation which would result in the voting securities of the Corporation outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving or resulting entity) more than 50% of the combined voting power of the surviving or resulting entity outstanding immediately after such merger or consolidation or (ii) a merger or consolidation in which no premium is intended to be paid to any shareholder participating in the merger or consolidation;

(iv) the stockholders of the Corporation approve a plan or agreement for the sale or disposition of all or substantially all of the consolidated assets of the Corporation (other than such a sale or disposition immediately after which such assets will be owned directly or indirectly by the stockholders of the Corporation, in substantially the same proportions as their ownership of the Stock of the Corporation immediately prior to such sale or disposition), in which case the Board shall determine the effective date of the Change in Control resulting therefrom; or

(v) any other event occurs which the Board determines, in its discretion, would materially alter the structure of the Corporation or its ownership.

(c) Definition of Change in Control Price. The "Change in Control Price" means an amount in cash equal to the higher of (i) the amount of cash and Fair Market Value of property that is the highest price per share paid (including extraordinary dividends) in any transaction triggering the Change in Control or any liquidation of shares following a sale of substantially all assets of the Corporation, or (ii) the highest Fair Market Value per share at any time during the 120 day period which commences 60 days prior to the effective date of the Change in Control and which ends 60 days following the effective date of the Change in Control.

10. General Provisions .

(a) Compliance with Legal and Other Requirements. The Corporation may, to the extent deemed necessary or advisable by the Committee, postpone the issuance or delivery of Stock or payment of other benefits under any Award until completion of such registration or qualification of such Stock or other required action under any federal or state law, rule or regulation, listing or other required action with respect to any stock exchange or automated quotation system upon which the Stock or other securities of the Corporation are listed or quoted, or compliance with any other obligation of the Corporation, as the Committee may consider appropriate, and may require any Participant to make such representations, furnish such information and comply with or be subject to such other conditions as it may consider appropriate in connection with the issuance or delivery of Stock or payment of other benefits in compliance with applicable laws, rules, and reasons, listing requirements, or other obligations.

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(b) Limits on Transferability; Beneficiaries. No Award or other right or interest granted under the Plan shall be pledged, hypothecated or otherwise encumbered or subject to any lien, obligation or liability of such Participant to any party (other than the Corporation or a subsidiary), or assigned or transferred by such Participant otherwise than by will or the laws of descent and distribution or to a Beneficiary upon the death of a Participant, and such Awards or rights that may be exercisable shall be exercised during the lifetime of the Participant only by the Participant or his or her guardian or legal representative, except that Awards and other rights (other than ISOs and SARs in tandem therewith) may be transferred to one or more Beneficiaries or other transferees during the lifetime of the Participant, and may be exercised by such transferees in accordance with the terms of such Award, but only if and to the extent such transfers are permitted by the Committee pursuant to the express terms of an Award agreement (subject to any terms and conditions which the Committee may impose thereon). A Beneficiary, transferee, or other person claiming any rights under the Plan from or through any Participant shall be subject to all terms and conditions of the Plan and any Award agreement applicable to such Participant, except as otherwise determined by the Committee, and to any additional terms and conditions deemed necessary or appropriate by the Committee.

(c) Adjustments . In the event that any dividend or other distribution (whether in the form of cash, Stock, or other property), recapitalization, forward or reverse split, reorganization, merger, consolidation, spin-off, combination, repurchase, share exchange, liquidation, dissolution or other similar transaction or event affects the Stock such that an adjustment is determined by the Committee to be appropriate under the Plan, then the Committee shall, in such manner as it may deem equitable, adjust any or all of (i) the number and kind of shares of Stock which may be delivered in connection with Awards granted thereafter, (ii) the number and kind of shares of Stock by which annual per-person Award limitations are measured under Section 5 hereof, (iii) the number and kind of shares of Stock subject to or deliverable in respect of outstanding Awards and (iv) the exercise price, grant price or purchase price relating to any Award (which adjustment may include making a provision for payment of cash or other property in respect of any outstanding Award). In addition, the Committee may, in its discretion, adjust any of (i) through (iv) above based on any other event effecting the Corporation, any subsidiary or business unit thereof, or in response to changes in applicable laws, regulations, accounting principles, tax rates and regulations or business conditions, and any other circumstances deemed relevant; provided, that no such adjustment shall be authorized or made if and to the extent that such authority or the making of such adjustment would cause Performance Awards or Annual Incentive Awards granted under Section 8 hereof to Participants designated by the Committee as Covered Employees and intended to qualify as "performance-based compensation" under Code Section 162(m) and regulations thereunder to otherwise fail to qualify as "performance-based compensation" under Code Section 162(m) and regulations thereunder.

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(d) Taxes. The Corporation and any subsidiary is authorized to withhold from any Award granted, any payment relating to an Award, including from a distribution of Stock or any payroll or other payment to a Participant, amounts of withholding and other taxes due or potentially payable in connection with any transaction involving an Award, and to take such other action as the Committee may deem advisable to enable the Corporation and Participants to satisfy obligations for the payment of withholding taxes and other tax obligations relating to any Award. This authority shall include authority to withhold or receive Stock or other property and to make cash payments in respect thereof in satisfaction of a Participant’s tax obligations, either on a mandatory or elective basis in the discretion of the Committee.

(e) Changes to the Plan and Awards. The Board may amend, alter, suspend, discontinue or terminate the Plan or the Committee's authority to grant Awards under the Plan without the consent of shareholders or Participants, except that any amendment or alteration to the Plan shall be subject to the approval of the Corporation's shareholders not later than the annual meeting next following such Board action if such shareholder approval is required by any federal or state law or regulation or the rules of any stock exchange or automated quotation system on which the Stock may then be listed or quoted, and the Board may otherwise, in its discretion, determine to submit other such changes to the Plan to shareholders for approval; provided that, without the consent of an affected Participant, no such Board action may materially and adversely affect the rights of such Participant under any previously granted and outstanding Award. The Committee may waive any conditions or rights under, or amend, alter, suspend, discontinue or terminate any Award theretofore granted and any Award agreement relating thereto, except as otherwise provided in the Plan; provided that, without the consent of an affected Participant, no such Committee action may materially and adversely affect the rights of such Participant under such Award. Notwithstanding anything in the Plan to the contrary, if any right under this Plan would cause a transaction to be ineligible for pooling of interest accounting that would, but for the right hereunder, be eligible for such accounting treatment, the Committee may modify or adjust the right so that pooling of interest accounting shall be available, including the substitution of Stock having a Fair Market Value equal to the cash otherwise payable hereunder for that right which caused the transaction to be ineligible for pooling of interest accounting. In addition, the Board shall also have the authority to modify the Plan, to the extent it deems necessary or desirable in its sole discretion, to minimize the taxes incurred by either the Corporation or any Participant relating to any Award.

(f) Limitation on Rights Conferred under Plan. Neither the Plan nor any action taken hereunder shall be construed as (i) giving any Eligible Person or Participant the right to continue as an Eligible Person or Participant or in the employ or service of the Corporation or a subsidiary, (ii) interfering in any way with the right of the Corporation or a subsidiary to terminate any Eligible Person's or Participant's employment or service at any time, (iii) giving an Eligible Person or Participant any claim to be granted any Award under the Plan or to be treated uniformly with other Participants and employees, or (iv) conferring on a Participant any of the rights of a shareholder of the Corporation unless and until the Participant is duly issued or transferred shares of Stock in accordance with the terms of an Award.

- 20 -

(g) Unfunded Status of Awards, Creation of Trusts. The Plan is intended to constitute an "unfunded" plan for certain incentive awards and deferred compensation. With respect to any payments not yet made to a Participant or obligation to deliver Stock pursuant to an Award, nothing contained in the Plan or any Award shall give any such Participant any rights that are greater than those of a general creditor of the Corporation.

(h) Nonexclusivity of the Plan. Neither the adoption of the Plan by the Board nor its submission to the shareholders of the Corporation for approval shall be construed as creating any limitations on the power of the Board or a committee thereof to adopt such other incentive arrangements as it may deem desirable including incentive arrangements and awards which do not qualify under Code Section 162(m).

(i) Payments in the Event of Forfeitures; Fractional Shares. Unless otherwise determined by the Committee, in the event of a forfeiture of an Award with respect to which a Participant paid cash or other consideration, the Participant shall be repaid the amount of such cash or other consideration. No fractional shares of Stock shall be issued or delivered pursuant to the Plan or any Award. The Committee shall determine whether cash, other Awards or other property shall be issued or paid in lieu of such fractional shares or whether such fractional shares or any rights thereto shall be forfeited or otherwise eliminated.

(j) Governing Law. The validity, construction and effect of the Plan, any rules and regulations under the Plan, and any Award agreement shall be determined in accordance with the laws of the State of New York, without giving effect to principles of conflicts of laws, and applicable federal law.

(k) Plan Effective Date and Shareholder Approval. This Plan has been adopted by the Board of Directors of Dais-Analytic on April 10, 2000, and was approved by the shareholders of the Corporation on June 2, 2000. Its effective date shall be deemed June 2, 2000.

- 21 -





	CERTIFICATE OF INCORPORATION
	OF
	THE DAIS CORPORATION








Filed by:
		Meiselman, Farber, Packman & Eberz, P.C.
		118 North Bedford Road
		P.O. Box 151
		Mount Kisco, New York 10549



	By:	/s/ GERALD WEINBERG
		GERALD WEINBERG
		90 State Street, Albany, New York

	CERTIFICATE OF AMENDMENT
	OF THE
	CERTIFICATE OF INCORPORATION
	OF
	THE DAIS CORPORATION


	Under Section 805 of the Business Corporation Law

1.	The name of the corporation is The DAIS Corporation.

2.	The certificate of incorporation for The DAIS Corporation was filed by the Department of State on April 8, 1993.

3.	The certificate of incorporation was amended, as authorized by Section 801 of the Business Corporation Law and the amendments were filed by the Department of State.

4.	The certificate of incorporation and all subsequent amendments to the certificate of incorporation are hereby amended, as authorized by Section 801 of the Business Corporation Law, to effect the following amendments:

	a. to change the name of the corporation from THE DAIS CORPORATION to DAIS ANALYTIC CORPORATION. Paragraph FIRST of the certificate of incorporation which refers to the corporate name, is amended to read as follows:

	"FIRST: The name of the corporation is DAIS ANALYTIC CORPORATION. ”

	b. to increase the number of shares from 15,000,000 with a par value of $.01, all of one class, to 20,000,000 with a par value of $.01, all of one class. Paragraph FOURTH of the certificate of incorporation, which refers to the authorized shares, is amended to read as follows:

	"FOURTH: The total number of shares that may be issued by the corporation is 20,000,000 shares, with a par value of $.01."

	c. At present the number of shares issued is 3,551,726. The 3,551,726 issued shares with a par value of $.01 will be changed into 710,345.20 shares at the rate of one share for every 5 shares currently issued with a par value of $.01; the 11,448,274 authorized but unissued shares will be changed into 19,289,654.8 shares at a rate of 1.68494001 shares with a par value of $.01.

	d. To change the post office address to which the Secretary of State shall mail a copy of any process against the corporation. Paragraph FIFTH of the certificate of incorporation is amended to read as follows:

	"FIFTH: The Secretary of State is designated as the agent of the corporation upon whom process against it may be served. The post office address to which the Secretary of State shall mail a copy of any process against the Corporation served on him is: 4326 Clairidge Way Palm Harbor, Florida 34685"

5.	The amendment to the certificate of incorporation was authorized by unanimous written consent of the board of directors, followed by a vote of the majority of all outstanding shares entitled to vote thereon at a duly convened meeting of shareholders at which a quorum was present.

	IN WITNESS WHEREOF, we have executed this certificate and affirm the truth of the statements therein set forth under penalty of perjury this 10th day of December 1999.

FIRST:		The name of the corporation is Dais Analytic Corporation (the "Company"), and the Company was formed under the name The Dais Corporation.

SECOND:		The Certificate of Incorporation of the Company was filed with the Department of State of the State of New York on April 8, 1993.

THIRD:		The Certificate of Incorporation of the Company, as previously amended, is hereby further amended as follows:

(1)	Article FOURTH is hereby amended to effect an increase in the authorized capital from 20,000,000 shares with a par value of $.01 per share, all of one class, to 30,000,000 shares, of which 20,000,000 shall be designated as Common Stock, par value $.01 per share, and 10,000,000 shall be designated as Preferred Stock, par value $.01 per share, and to grant the Board of Directors the authority to issue some or all of the shares of Preferred Stock with such right, designations and preferences as determined by the Board. There is no change in the number or par value of issued shares in connection therewith. Accordingly, Article FOURTH of the Certificate of Incorporation is hereby amended to read in its entirety as follows:

	“FOURTH. The total number of shares of stock which the Corporation shall have the authority to issue is 30,000,000 shares, of which 20,000,000 shares, par value $.01 per share, shall be designated as “Common Stock” and 10,000,000 shares, par value $.01 per share shall be designated as “Preferred Stock.”
	The Board of Directors is expressly authorized, subject to the limitations prescribed by law and the provisions of this Article, at any time, and from time to time, to provide for the issuance of shares of Preferred Stock in one or more classes or series, of any number of shares of Preferred Stock, and by filing a certificate of amendment pursuant to Section 805 of the New York Business Corporation Law to establish the number of shares to be included in each class or class or series of Preferred Stock and to fix the powers, designations, preferences, relative rights, qualifications and restrictions thereof. The authority of the Board of Directors with respect to each class or class or series of Preferred Stock shall include, but not be limited to, a determination of the following:

	(i)		The number of shares of Preferred Stock constituting that class or series and the distinctive designation of that class or series;

	(ii)		The dividend rate on the shares of Preferred Stock of that class or series, whether dividends shall be cumulative, and if so from which date or dates, and whether they shall be payable in preference to, or in such relation to, the dividends payable on any other class or classes or of any other class or series of the capital stock of the Corporation;

	(iii)		Whether that class or series shall have any voting rights in addition to those provided by law, and if so, the terms of such additional voting rights;

	(iv)		Whether that class or series shall have conversion or exchange privileges, and if so, the terms and conditions of such conversion or exchange, including provision for adjustment of the conversion or exchange rate in such events as the Board of Directors shall determine;

	(v)		Whether or not the shares of that class or series shall be redeemable, and if so, the terms and conditions of such redemption, including the manner of selecting shares for redemption if less than all of the shares are to be redeemed, the date or dates upon or after which they shall be redeemable and the type and amount of consideration payable per share in case of redemption, which amount may vary under different conditions and at different redemption dates;

	(vi)		Whether that class or series shall be entitled to the benefit of a sinking fund to be applied to the purchase or redemption of shares of that series, and if so, the terms and amount of such sinking fund;

	(vii)		The right of shares of that class or series to the benefit of conditions and restrictions upon the creation of indebtedness of the Corporation or any subsidiary, upon the issuance of any additional stock (including additional shares of such class or series or of any other series) and upon the payment of dividends or the making of other distributions on, and the purchase or redemption or other acquisition by the Corporation or any subsidiary of, any outstanding stock of the Corporation;

	(viii)		The rights of the shares of that class or series in the event of a voluntary or involuntary liquidation, dissolution or winding up of the corporation and whether such rights shall be in preference to, or it another relation to, the comparable rights or any other class or classes or class or series of capital stock; and

	(ix)		Any other relative, participating, optional or other special rights, qualifications, limitations, or restrictions of that series.”

(2)	Article SIXTH of the Certificate, concerning the personal liability of directors of the company for damages for breach of their duty as directors, is hereby amended in order to clarify the scope and application of such provision. Accordingly, Article SIXTH is hereby amended to read in its entirety as follows:

	“SIXTH. No director of the Corporation shall be liable to the Corporation or any of its shareholders for damages (as defined in the next sentence) for any breach of duty as a director, except for liability for acts or omissions if a judgment or other final adjudication adverse to the director establishes that his acts or omissions were in bad faith or involved intentional misconduct or a knowing violation of law or that he personally gained in fact a financial profit or other advantage to which he was not legally entitled or that his acts violated Section 719 of the Business Corporation Law of the State of New York. For purposes of the prior sentence, the term “damages” shall, to the extent permitted by law, include, without limitation, any judgment, fine, amount paid in settlement, penalty, punitive damages, exercise or other tax assessed with respect to an employee benefit plan, or expense of any nature (including, without limitation, counsel fees and disbursements). Each person who serves as a director of the Corporation while this Article SIXTH is in effect shall be deemed to be doing so in reliance on the provisions of this Article SIXTH, and neither the amendment or repeal of this Article SIXTH, nor the adoption of any provisions of this Certificate of incorporation inconsistent with this Article SIXTH, shall apply to or have any effect on the liability or alleged liability of any director or the Corporation for, arising out of, based upon, or in connection with any acts or omissions of such director occurring prior to such amendment, repeal, or adoption of an inconsistent provision. The provisions of this Article SIXTH are cumulative and shall be in addition to and independent of any and all other limitations on or eliminations of the liabilities of directors of the Corporation, as such, whether such limitations or eliminations arise under or are created by any law, rule, regulation, by-law, agreement, vote of shareholders or disinterested directors, or otherwise.”

(3)	A new Article EIGHTH providing for indemnification of directors, officers and employees of the Company, and certain other persons performing services on behalf of the Company, is hereby added to the Certificate, which Article shall read in its entirety as follows:

	"EIGHTH. Any person who was or is a party or is threatened to be made a party to any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative (other than an action by or in the right of the Corporation) by reason of the fact that the person is or was a director, officer, incorporator, employee, or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, incorporator, employee, partner, trustee, or agent of another corporation, partnership, joint venture, trust, or other enterprise (including an employee benefit plan), shall be entitled to be indemnified by the Corporation to the full extent then permitted by law against expenses (including reasonable counsel fees and disbursements), judgments, fines (including excise taxes assessed on a person with respect to an employee benefit plan), and amounts paid in settlement incurred by the person in connection with such action, suit, or proceeding if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe the person's conduct was unlawful. Such right of indemnification shall inure whether or not the claim asserted is based on matters which antedate the adoption of this Article EIGHTH. Such right of indemnification shall continue as to a person who has ceased to be a director, officer, incorporator, employee, partner, trustee, or agent and shall inure, to the benefit of the heirs and personal representatives of such a person. The indemnification provided by this Article EIGHTH shall not be deemed exclusive of any other rights which may be provided now or in the future under any provision currently in effect or hereafter adopted of the By-Laws, by any agreement, by vote of stockholders, by resolution of disinterested directors, by provision of law, or otherwise."

FOURTH. Each of the amendments to the certificate of incorporation set forth above was authorized by the unanimous written consent of the board of directors, followed by a vote of the majority of all of the outstanding shares entitled to vote thereon at a duly convened meeting of shareholders at which a quorum was present.

	IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to be signed this 25th day of September, 2000.

	DAIS ANALYTIC CORPORATION

	By:	/s/ Patricia K. Tangredi
		Patricia K. Tangredi
		Title: Secretary

	DAIS ANALYTIC CORPORATION

	By:	/s/ Patricia K. Tangredi
		Name: Patricia K. Tangredi
		Title: Secretary

	DAIS ANALYTIC CORPORATION

	By:	/s/ Robert W. Brown
		Name: Robert W. Brown
		Title: Secretary
		Address: 11552 Prosperous Drive

DAIS ANALYTIC CORPORATION		HOLDER

By:__________________________________		Printed Name: ________________

Name: _______________________________		Address _____________________

Title: ________________________________		_____________________________

		Telephone Number: _____________
		Facsimile Number: ______________


		DAIS ANALYTIC CORPORATION

		By:
		Name:
		Title:

		HOLDER

		Printed Name: ________________

		Address _______________________

		_____________________________

		Telephone Number: _____________
		Facsimile Number: ______________

DAIS ANALYTIC CORPORATION		HOLDER

By:

Name: Timothy N. Tangredi		By:
		Print Name:

Title: President and CEO		Title:

		Address:



		TIN#:

		Telephone Number:

		Facsimile Number:

$200,000.000	Dated: May 22, 2007
(Original Prinicipal Amount)	(" Issuance Date ")

(i)	Company fails to make payment of the full amount due under this Note within thirty (30) days of a demand following the Maturity Date; or
(ii)	A receiver, liquidator or trustee of Company is appointed by a court order; or
(iii)	Company is adjudicated bankrupt or insolvent; or
(iv)	Company files a petition in voluntary bankruptcy or requests reorganization under any provision of any bankruptcy or reorganization or consents to the filing of any petition against it under such law, or
(v)	Any petition against Company is filed under bankruptcy or receivership law and said petition is not vacated within 90 days; or
(vi)	Company makes a formal general assignment for the benefit of its creditors, or consents to the appointment of a receiver or liquidator of Company; or
(vii)	An attachment or execution is levied against the majority of Company’s assets that is not released within 90 days; or
(viii)	Company dissolves, liquidates or ceases business activity, or transfers its assets other than in the ordinary course of business; or
(ix)	Company breaches any material covenant or agreement on its part contained in this Note and such breach is not cured within 60 days of notice to Company.

	DAIS ANALYTIC CORPORATION

	By:
		Timothy N. Tangredi
		President/CEO
		Date: ___________, ______________

		Employee
		Date:____________________________

4.1	Termination of Employment . The following are the bases for termination of Executive's employment with Company:
	a. Death of Executive;

	b. Executive's Disability (as defined below) with sixty (60) days' prior written notice of termination;
	c. Expiration of the Term of this Agreement;

	d. Voluntary resignation of Executive without Good Reason (as defined below), with thirty (30) days prior written notice of termination;

	e. Termination by Executive for Good Reason, with thirty (30) days prior written notice;
	f. Termination by the Company for Cause (defined below);
	g. Termination by Executive within one year following a Change in Control of the Company (as defined below); and
	h. Any other termination by Company other than for Cause or Disability.

If to Company:	Dais-Analytic Corporation
	11552 Prosperous Drive
	Odessa, Florida 33556
	Attn: Board of Directors

If to Executive:	Mr. Timothy N. Tangredi
	10416 Pontofino Circle
	Trinity, FL 34655

	DAIS ANALYTIC CORPORATION

	By:	/s/ William Newman
		William Newman
		Title: Executive Vice President

	By:	/s/ Timothy N. Tangredi
		Timothy N. Tangredi
		Title: President

	DAIS ANALYTIC CORORATION

	By:	/s/ Robert Brown
		Robert Brown
		Vice- President

(i)	Upon the death of Employee,

(ii)	Upon Employee's Retirement (as defined below)

(iii)	Upon Employee's Permanent Disability (as defined below)

(iv)	At any time by Employer upon notice to Employee, or by Employee upon thirty (30) days notice to Employer, for any or no reason or

(v)	Upon expiration of the Term of this Agreement.

(i)	Death.

(ii)	Retirement. "Retirement" shall mean either (a) Employee's voluntary retirement from Employment pursuant to a bona fide retirement plan maintained by Employer at or after normal retirement age (either voluntarily or pursuant to any Employer policy) or


	(b) The voluntary termination of Employee's employment by Employee in accordance with Employer's early retirement policy or offer or for other than Good Reason (as defined below).

(iii)	Permanent Disability. "Permanent Disability" shall mean Employee's physical or mental illness, injury or condition that renders Employee incapable of performing his usual duties with such condition likely to remain continuous for a period of three months as determined, in its sole discretion, by the Board of Directors.


(iv)	Voluntary Termination. "Voluntary Termination" shall mean a termination of employment at the election of Employee for other than Good Reason. "Good Reason" shall mean a termination of employment by Employee because of a material breach by Employer of any material provision of this Agreement that which remains uncorrected for thirty (30) days following written notice of such breach by Employee to Employer provided such termination occurs within fifteen (15) days after the expiration of the notice period.

(v)	Termination of Employee's employment by Employer for Cause. "Cause" shall mean any of the following: (a) Employee's willful misconduct, dishonesty or reckless disregard of his responsibilities to Employer or in the performance of the duties and services required of Employee pursuant to this Agreement, and Employee has not cured such conduct within fifteen (15) days of written notice of his default, (b) the Employee is convicted or pleads nolo contendre or the equivalent to either a felony or misdemeanor involving moral turpitude, (c) a material violation of the Code of Business Conduct (if the Employer has in place such a plan), and Employee has not cured his default within fifteen (15) days of written notice of his default or (d) Employee's breach of any material provision of this Agreement which remains uncorrected for fifteen (15) days following notice of such breach to Employee by Employer, or (e) Employer’s failure to follow reasonable, lawful order or directions of the Chief Executive Officer or the Bo

	Determination as to whether or not Cause exists for termination of the Employee’s employment will be made by a majority vote of the Board of Directors.

(vi)	Expiration of Term.

	Upon the occurrence of any of the events described in (i) through (vi) of Section 3.2, Employee's employment shall terminate and the Employer shall have no further obligation to Employee hereunder except to pay to Employee (or his estate, as the case may be), upon the latter of ten (10) days following the date of termination or upon the date of Employer’s next scheduled payroll, any accrued but unpaid Base Salary, and earned commissions calculated to date of termination plus any of un-reimbursed expenses payable to Employee pursuant to the terms and conditions of this agreement. All future compensation to which Employee would otherwise have been entitled and all future benefits for which the Employee was eligible shall cease and terminate as of the date of termination.

	Any and all payments made To Employee ( or his estate, as the case may be)pursuant to this Section 3.2 shall be made after deduction of any non-reimbursable amounts paid by Employer on behalf of Employee and after all standard and customary withholding including but not limited to withholding for tax and social security purposes.

DAIS ANALYTIC CORPORATION			EMPLOYEE


/s/Timothy N. Tangredi			/s/William J. Newman
Timothy N. Tangredi			William J. Newman
Chief Executive Officer

LANDLORD			TENANT

Ethos Business Ventures			Dais Analytic Corporation

/s/ Brian A. Kelly			/s/ R.W. Brow

Printed			Printed
Name: Brian A. Kelly			Name: R.W. Brown
Title : Member			Title: V.P. Solutions

2.1	Term of Lease. The term of this Lease shall begin on the Commencement Date and end on Termination Date (“Initial Term”).

2.2	Commencement Date. The "Commencement Date" shall mean March 18, 2005.
2.3	Termination Date. The “Termination Date” shall mean the day immediately following thirty (30) days written notice from one Party to the other terminating the Lease Agreement or such earlier date upon which this Agreement terminates pursuant to any term or condition herein.”