Investors:

hi ~

we would like to know whats the latest and what are you and your firm doing to get dlyt in more shareholders hands?  the volume is pathetic!

seems as tho since tim got the 200mm contract, the stock spiked for 2 days and is now at a whopping 35cents!..........

we were under the assumtion that we have a REAL company here and that tims technology is truly “cutting edge”......i know things dont happen overnite.....but========= whats in the NEAR future and do they have earnings and the status of the BIG contract?  regards

SCP Editor:

Thank you for reaching out – currently there are less than 500 shareholders. Our rule of thumb is that it until we get to 4,000 or so shareholders the stock will not trade with any real liquidity, so our goal is to get there. Our plan consists of working with the company to:

• Create more steady news flow demonstrating that the company is making progress and setting reasonable expectations with the Street
• Getting out to more investor conferences and events – announcements on this front to come
• Staying consistent with road shows – plan to do at least 2-3 annually – just completed NYC, Boston and West Coast

To your point, this is a real company. I am extremely upbeat on the prospects of the business. My sense is the Street is discounting the announced contract to inner Mongolia by 100% and until we demonstrate (book) revenues from that contract in our financial statements that risk discount will persist. However, when we do start booking those revenues I think this will be a significant shift in terms of how the company is being valued.

Right now, the Street is looking at the stock based on ttm (trailing 12 month) performance which is about $1.5-$2M, so a $10.5M valuation may look even a little top-heavy (against peers in the alt energy and clean tech sector) on a P/S basis. But if that China contract ($48M) is real, which we believe it is, then think about this. If a business wanted to purchase Dais, and did its diligence to confirm the credibility of the contract, then a transaction would likely happen at about 2x-3x EBITDA of the business (acquirerors typically want payback in 2 years at the outset).

At 30% GM, the China contract represents about $10-$11M in EBTIDA, all things being equal. 2x-3x EBITDA would be $20M+ (double the current stock price) on the low end, and this is not taking into consideration the ConsERV business, which on a stand-alone business is about at cash flow break even and projected to grow by triple digits over the next couple years, and the Intellectual Property (patents) that the company owns.

In any case – this stock has tremendous upside. The analysis above is based on a single contract to a single water treatment facility. There are hundreds being built in China in the next several years. Water is a huge global issue. Dais has a better technology to support efforts in treating water and in desalination.  This is the story we are communicating. It will catch on, and investors that get in early will, in my opinion, be rewarded!

Please don’t hesitate to contact me if you have further questions, and I appreciate your candor in your questions.

Important Disclosure: This information is intended to assist investors.  The information does not constitute investment advice or an offer to invest or to provide management services and is subject to correction, completion and amendment without notice.  Any such offer, if made, will only be made by means of a confidential prospectus or offering memorandum or management agreement.  It is not our intention to state, indicate or imply in any manner that current or past results are indicative of future results or expectations.  As with all investments, there are associated risks and you could lose money investing.  Prior to making any investment, a prospective investor should consult with its own investment, accounting, legal and tax advisers to evaluate independently the risks, consequences and suitability of that investment.

SCPEditor is managing partner of Aspire Clean Tech Communications, a corporate communications and strategic advisory firm to alternative energy and clean tech businesses. Aspire is engaged by Dais Analytic Corporation to perform related services.

I know you from Yahoo message board. I’m interested in the investment in Dais. I’m glad to see some positive development for Dais in the recent weeks. I have one question about the deal in China. How much do you know about the status? Any further progress have they made? and how many potential customers have they contacted with? It’d be appreciated if any update about this.

Thanks,
Victor

Response:

Thank you Victor for reaching out, and your interest. Dais has begun shipping on this initial order to the water treatment facility in Inner Mongolia. We anticipate that the project ($48M purchase order) should be completed by the end of 2011 or the first half of 2012. Dais has been making strong inroads into the Chinese market, as evidenced by its being invited by U.S. Secretary Gary Locke to participate in a clean tech trade mission to China, and the company’s prior announcement of a distribution partnership with a Chinese firm which carries a 5-year term and a $200 million commitment for sales over this period. The $48M purchase order to the water treatment facility is part of this distribution agreement, so it appears to be tracking nicely.

As you probably know, the opportunity for Dais is vast, in China. China’s municipal water supply infrastructure is more than 120 years old, with the first water supply facility built in 1879. The total annual average water resource volume in China is about 2.8 trillion cubic meters, making China the fourth largest source for water in the world. But the water resource volume per capita is 2,200 cubic meters, putting it at an 88th ranking in the world – due to population. With forecasted population growth to 1.6 billion by the middle of the century, its per capital water resource is expected to be 1,760 cubic meters.

Making matters more challenging for China, is the fact that pollution in its watersheds is severe. According to a national surface water survey in 2002, 35.3% of the river sections surveyed could only fulfill the water requirements for Types IV and V water bodies (Type II is required for drinking water). According to a study of 24 primary lakes, only 6 are equal to or better than a Type III water body, 6 are partially deteriorated, and 12 are severely polluted. Of the total national groundwater resources, only 63% are usable as drinking water without treatment, 17% can be used for drinking water after appropriate treatment, 12% are unsuitable for drinking water but can be used for industrial and agricultural sources and 8% can be used as industrial water only after special treatment. (This data all comes from the U.S. Department of Commerce).

What makes Dais more compelling here, is that it is introducing membrane technology for treatment of water that acts on a parts-per-billion basis. The industry standard is parts-per-million. In fact, government officials in the province where Dais received that initial purchase order have made a recommendation to the national government that it adopt a parts-per-billion standard. This bodes well for further penetration for Dais into this market.

“What is your take on the outlook for renewable energy stocks with respect to whether Congress passes a national Renewable Energy Standard?”

Our take is that the states have been doing most of the heavy lifting to date, in terms of driving uptake of alt energy projects. At the national level, it does look like we are going to get some version of an RES but it is getting watered down each day. The opposition has effectively framed the debate pitting adoption of clean energy technologies on one side and jobs/economy concerns on the other.

After all, doesn’t renewable energy require perpetual subsidization given the fact that they are significantly more expensive than conventional sources of energy like coal, oil and nuclear? This point in itself is contentious given the fact that these industries continue to enjoy plenty of subsidies and breaks in their own rights.

Moreover, the math on conventional fuel and energy sources is a little fuzzy when it comes to true cost because it does not take into account the health and environmental costs of using them, and in many cases there are plenty of post-consumption costs that get passed through to consumers like decommissioning costs for nuclear.

In order to get a national RES, there is going to have to be sufficient votes on Capitol Hill, and in order to get sufficient votes on Capitol Hill, interests protecting conventional fuel and energy sources will be accommodated. So a national RES in itself is helpful in terms of ensuring that there will be a commitment on a national level to adopting cleaner energies, but we just don’t see this policy in itself doing much more work than what is in place today – at the state levels. DSIRE has a great website (http://www.dsireusa.org) which keeps up with the latest developments both at the state and federal level.

The RES is good for investors in alternative energy because it creates a framework and provides some level of certainty that there will be an ongoing commitment to clean technologies. It ensures a certain level of demand in the market place. But at the end of the day, alternative energy and clean technologies are going to have to compete on price on their own basis.

So the RES is a good thing and should be seen as a catalyst for alternative energy stocks. But it gets murky quickly from that point, in terms of where to invest. All alternative stocks are not created equally, and only the companies that are introducing and commercializing truly differentiated technologies that are capable of creating scale and driving costs per watt lower to the so-called level of grid parity are going to win in the long run.

For example, look at First Solar (Nasdaq:FSLR). In the solar space it quickly gained a leadership position by introducing a low-cost technology that could scale. While its modules are not as efficient as other crystalline modules, they are sufficiently lower priced to ensure strong demand. It has continued to add manufacturing capacity and improve manufacturing efficiencies driving costs of manufacturing per watt lower. Consequently, it has become the most profitable business in the solar market. It is the low cost producer of a leading edge technology.

That being said, over the past few quarters, First Solar’s module efficiency has flat-lined around 11%, while competitive crystalline technologies have gotten cheaper, and more efficient. Critics argue that First Solar is going to lose its competitive advantage on pricing and in the market as this gap closes. At some point it may. Advocates argue that First Solar has invested in R&D;and will be showing improvements in module efficiencies in the near term which will enable it to maintain its appeal in the market place.

This is an unfolding story, but gets to the heart of exactly how competitive the markets are and important shifts that can happen which can either keep a market leader in the lead, or cause them to lose share. In the background is the RES and other policies which will ensure that there is a consistent state (and potential federal) framework to support the industries. But it is still up to each company on a competitive basis to make the investment case.

Important Disclosure: This information is intended to assist investors.  The information does not constitute investment advice or an offer to invest or to provide management services and is subject to correction, completion and amendment without notice.  Any such offer, if made, will only be made by means of a confidential prospectus or offering memorandum or management agreement.  It is not our intention to state, indicate or imply in any manner that current or past results are indicative of future results or expectations.  As with all investments, there are associated risks and you could lose money investing.  Prior to making any investment, a prospective investor should consult with its own investment, accounting, legal and tax advisers to evaluate independently the risks, consequences and suitability of that investment.