Dyadic(DYAI) - 2025 Q2 - Quarterly Report

PART I FINANCIAL INFORMATION Item 1. Financial Statements Presents unaudited consolidated financial statements, including balance sheets, statements of operations, equity, and cash flows, with detailed notes Consolidated Balance Sheets Consolidated Balance Sheet Highlights (June 30, 2025 vs. December 31, 2024) | Metric | June 30, 2025 ($) | December 31, 2024 ($) | Change ($) | Change (%) | | :-------------------------------- | :-------------------------- | :-------------------------- | :--------- | :--------- | | Total current assets | $7,406,739 | $9,827,668 | $(2,420,929) | -24.6% | | Total assets | $8,138,046 | $9,930,275 | $(1,792,229) | -18.0% | | Total current liabilities | $3,661,552 | $2,448,017 | $1,213,535 | 49.6% | | Total liabilities | $8,667,747 | $7,459,985 | $1,207,762 | 16.2% | | Total stockholders' equity | $(529,701) | $2,470,290 | $(3,009,991) | -121.9% | Consolidated Statements of Operations Consolidated Statements of Operations Highlights (Three Months Ended June 30) | Metric (3 Months) | 2025 ($) | 2024 ($) | Change ($) | Change (%) | | :------------------ | :------- | :------- | :--------- | :--------- | | Total revenue | 966,630 | 385,896 | 580,734 | 150.5% | | Total costs & expenses | 2,695,698 | 2,428,487 | 267,211 | 11.0% | | Loss from operations | (1,729,068) | (2,042,591) | 313,523 | -15.3% | | Net loss | (1,793,774) | (2,045,223) | 251,449 | -12.3% | | Basic & diluted net loss per share | (0.06) | (0.07) | 0.01 | -14.3% | Consolidated Statements of Operations Highlights (Six Months Ended June 30) | Metric (6 Months) | 2025 ($) | 2024 ($) | Change ($) | Change (%) | | :------------------ | :------- | :------- | :--------- | :--------- | | Total revenue | 1,360,202 | 720,513 | 639,689 | 88.8% | | Total costs & expenses | 5,091,745 | 4,888,662 | 203,083 | 4.2% | | Loss from operations | (3,731,543) | (4,168,149) | 436,606 | -10.5% | | Net loss | (3,821,353) | (4,054,819) | 233,466 | -5.8% | | Basic & diluted net loss per share | (0.13) | (0.14) | 0.01 | -7.1% | Consolidated Statements of Stockholders' Equity - Total stockholders' equity decreased from $2,470,290 as of January 1, 2025, to $(529,701) as of June 30, 2025, primarily due to a net loss of $3,821,353, partially offset by stock-based compensation and common stock issuances[16] - Common stock shares outstanding increased from 29,835,799 as of December 31, 2024, to 30,135,798 as of June 30, 2025[13] Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows Highlights (Six Months Ended June 30) | Cash Flow Activity | 2025 ($) | 2024 ($) | Change ($) | Change (%) | | :----------------- | :------- | :------- | :--------- | :--------- | | Operating activities | (2,079,746) | (3,077,354) | 997,608 | -32.4% | | Investing activities | (479,516) | (3,127,551) | 2,648,035 | -84.7% | | Financing activities | 24,249 | 5,824,326 | (5,799,077) | -99.6% | | Net decrease in cash, cash equivalents, and restricted cash | (2,532,320) | (381,630) | (2,150,690) | 563.5% | | Cash, cash equivalents, and restricted cash at end of period | 3,974,430 | 6,133,398 | (2,158,968) | -35.2% | Notes to Consolidated Financial Statements - Dyadic International, Inc. is a global biotechnology platform company focused on developing and commercializing scalable, non-animal protein production platforms (Dapibus™ and C1) for life sciences, food and nutrition, and bio-industrial markets[19][20] - Effective August 1, 2025, the company rebranded to Dyadic Applied BioSolutions, signaling a strategic transition from a research-driven organization to a commercially focused enterprise, emphasizing applied biotechnology solutions and revenue-focused bioprocessing protein platforms[21][22] - The company expects to incur losses and negative net cash flows from operating activities as it continues to develop its platforms and products. Its success depends on technology development, regulatory approval, commercialization, sublicensing, and ability to raise capital[24] - As of June 30, 2025, the company's existing cash, cash equivalents, restricted cash, and short-term investment securities totaled approximately $6.9 million. With an additional $5.3 million from a public offering closed on August 1, 2025, the company expects to meet its liquidity requirements for at least the next 12 months[34] Note 1: Organization and Summary of Significant Accounting Policies Overview of Dyadic's business, strategic shift, financial health, and significant accounting policies Description of Business - Dyadic International, Inc. is a global biotechnology platform company based in Jupiter, Florida, with operations in the U.S. and the Netherlands, focused on developing and commercializing scalable, non-animal protein production platforms[19] - The company's proprietary Dapibus™ and C1 platforms are designed for rapid, cost-effective, and flexible production of high-value proteins for life sciences, food and nutrition, and bio-industrial markets, with a primary focus on non-therapeutic applications[20] DBA Name Change Update - Effective August 1, 2025, the company will operate as Dyadic Applied BioSolutions, reflecting a strategic shift towards a commercially focused enterprise delivering applied biotechnology solutions through its C1 and Dapibus™ platforms[21] - This rebranding emphasizes commercializing high-value, non-therapeutic proteins in life sciences, food, nutrition, and industrial bioprocessing, aiming for faster time to revenue and broader market reach by avoiding the regulatory complexities of therapeutic biologics[22] Liquidity and Capital Resources - The Company expects to incur losses and negative net cash flows from operating activities as it develops its C1 and Dapibus platforms and expands R&D[24] - On March 8, 2024, the Company issued $6.0 million in 8.0% Senior Secured Convertible Promissory Notes, with net proceeds of $5,824,326, for working capital and general corporate purposes[25] - On July 30, 2025, the Company entered into an underwriting agreement for the sale of 6,052,000 shares of common stock at $0.95 per share, generating approximately $5.3 million in net proceeds, which closed on August 1, 2025[33] - The Company expects its existing cash, cash equivalents, restricted cash, and short-term investment securities (approx. $6.9 million as of June 30, 2025), combined with the $5.3 million from the recent offering, to be sufficient for at least the next 12 months[34] Summary of Significant Accounting Policies - The unaudited condensed consolidated financial statements are prepared in accordance with U.S. GAAP and SEC rules for interim financial reporting, with all significant intra-entity transactions eliminated[35] Segment Information - The Company operates as a single operating segment, focused on developing and commercializing recombinant protein products using its C1 and Dapibus™ microbial platforms[37] Use of Estimates - The preparation of financial statements requires management to make estimates and judgments, including those related to revenue recognition, accrued expenses, stock-based compensation, and income taxes, which are based on historical experience and market assumptions[38] Concentrations and Credit Risk - For the three months ended June 30, 2025, three significant customers accounted for 58.4% of revenue, and for the six months, four significant customers accounted for 80.9% of revenue, indicating high customer concentration[40] - As of June 30, 2025, four customers accounted for 92.0% of total accounts receivable, and two CROs accounted for 86.5% of accounts payable, highlighting significant concentration risks[41][44] Cash and Cash Equivalents - Highly liquid investments with original maturities of three months or less are treated as cash equivalents, including money market funds[45] Investment Securities - The Company classifies debt securities as held-to-maturity, recorded at amortized cost, and money market funds as available-for-sale securities, presented as cash equivalents[47][50] Restricted Cash and Cash Equivalents - Restricted cash and cash equivalents are funds subject to restrictions under agreements, such as with the Gates Foundation, and are limited to specified uses[52] Accounts Receivable Accounts Receivable Breakdown | Type | June 30, 2025 ($) | December 31, 2024 ($) | | :---------------- | :---------------- | :-------------------- | | Billed receivable | 455,152 | 173,993 | | Unbilled receivable | 260,165 | 63,034 | | Total | 715,317 | 237,027 | - Accounts receivable increased significantly from $237,027 at December 31, 2024, to $715,317 at June 30, 2025, with unbilled receivables showing a notable increase[55] Accounts Payable Accounts Payable Breakdown | Type | June 30, 2025 ($) | December 31, 2024 ($) | | :------------------------ | :---------------- | :-------------------- | | Research and development expenses | 654,571 | 340,698 | | Legal expenses | — | 68,420 | | Other | 84,223 | 73,202 | | Total | 738,794 | 482,320 | - Accounts payable increased from $482,320 at December 31, 2024, to $738,794 at June 30, 2025, primarily driven by a rise in research and development expenses[56] Accrued Expenses Accrued Expenses Breakdown | Type | June 30, 2025 ($) | December 31, 2024 ($) | | :------------------------ | :---------------- | :-------------------- | | Employee wages and benefits | 349,187 | 496,906 | | Research and development expenses | 452,970 | 437,196 | | Legal expenses | 110,833 | 25,000 | | Other | 16,860 | 11,360 | | Total | 929,850 | 970,462 | - Accrued expenses slightly decreased from $970,462 at December 31, 2024, to $929,850 at June 30, 2025, with a notable increase in legal expenses offset by a decrease in employee wages and benefits[57] Deferred Financing Costs - Deferred financing costs related to debt issuance are amortized over the term of the instrument using the effective interest method and presented as an offset against the related debt[58] Revenue Recognition - All revenue is from research collaborations, grants, and sublicensing agreements, recognized over time using the cost-based input method[59][60] - Revenue from research collaborations is recognized over time using the cost-based input method, based on actual costs incurred relative to budgeted costs[62] - Grant revenue is presented on a gross basis and is primarily earmarked for third parties to advance research, including preclinical and clinical trials[64] Research and Development Costs - R&D costs are expensed as incurred and include personnel, facilities, overhead, and services from independent contract research organizations[70] Research and Development Costs (Three and Six Months Ended June 30) | R&D Cost Category | 3 Months 2025 ($) | 3 Months 2024 ($) | 6 Months 2025 ($) | 6 Months 2024 ($) | | :------------------ | :---------------- | :---------------- | :---------------- | :---------------- | | Outside contracted services | 486,585 | 395,188 | 842,841 | 783,434 | | Personnel related costs | 124,669 | 106,889 | 246,385 | 213,216 | | Facilities, overhead and other | 18,125 | 13,552 | 35,132 | 41,702 | | Total | 629,379 | 515,629 | 1,124,358 | 1,038,352 | Foreign Currency Transaction Gain or Loss - The Company uses the U.S. dollar as its functional currency, re-measuring foreign currency denominated monetary assets and liabilities at period-end exchange rates[72] Fair Value Measurements - Fair value is defined as the price received from selling an asset or paid to transfer a liability in an orderly transaction, categorized into a three-level hierarchy based on input observability[73][80] Income Taxes - No provision for income taxes or unrecognized tax benefits was recorded for the six months ended June 30, 2025. A 100% valuation allowance is maintained against deferred tax assets due to a history of operating losses[74] Stock-Based Compensation - Share-based payments to employees, consultants, and the Board of Directors are recognized as non-cash compensation expense based on grant date fair values and expected vesting[75] Net Loss Per Share - Basic net loss per share is calculated by dividing net loss by the weighted average common shares outstanding. Diluted net loss per share adjusts for potential dilution from common stock equivalents, which were anti-dilutive for the periods presented[77][78] New Accounting Pronouncements as of June 30, 2025 - ASU 2023-09 (Income Taxes) will be effective for annual disclosures for fiscal year ending December 31, 2025, and is not expected to materially impact financial position or results[81] - ASU 2024-03 (Expense Disaggregation Disclosures) is effective for fiscal years beginning after December 15, 2026, and interim periods beginning after December 15, 2027; the Company is evaluating its impact[82] - The U.S. government enacted the One Big Beautiful Bill Act (OBBBA) of 2025 on July 4, 2025, with certain provisions effective January 19, 2025, including changes to corporate income tax and immediate expensing of R&D; the Company is evaluating its impact[83] Note 2: Cash, Cash Equivalents, and Investments Details the Company's cash, cash equivalents, and investment securities by type and fair value hierarchy Cash, Available-for-Sale Securities, and Investment Securities (June 30, 2025) | Asset Type | Level | Fair Value ($) | Adjusted Cost ($) | | :-------------------------------- | :---- | :------------- | :---------------- | | Cash deposit | 1 | 1,878,460 | 1,878,460 | | Money market funds | 1 | 2,095,970 | 2,095,970 | | Short-term investment in corporate bonds | 2 | 2,841,103 | 2,842,419 | | Long-term investment in corporate bonds | 2 | 410,323 | 409,670 | | Total financial assets | | 6,815,533 | 7,226,519 | Cash, Available-for-Sale Securities, and Investment Securities (December 31, 2024) | Asset Type | Level | Fair Value ($) | Adjusted Cost ($) | | :-------------------------------- | :---- | :------------- | :---------------- | | Cash deposit | 1 | 926,287 | 926,287 | | Money market funds | 1 | 5,580,463 | 5,580,463 | | Short-term investment in corporate bonds | 2 | 2,756,428 | 2,756,577 | | Total financial assets | | 9,263,178 | 9,263,327 | - The Company's total financial assets decreased from $9,263,178 (fair value) at December 31, 2024, to $6,815,533 at June 30, 2025, primarily due to a reduction in money market funds[86] Note 3: Research and Collaboration Agreements, Sublicense Agreements, and Investments in Privately Held Companies Details key research, collaboration, and sublicense agreements, including grants and investment status Gates Foundation Grant - In November 2024, Dyadic was awarded a $3,092,136 grant from the Gates Foundation for C1-platform cell line development of monoclonal antibodies targeting RSV and malaria[88] - As of June 30, 2025, the Company received approximately $2.3 million of the grant, with the remaining $0.7 million expected in 2026[89] - For the three and six months ended June 30, 2025, the Company recognized grant revenue of $361,759 and $538,107, respectively, and incurred corresponding costs of grant revenue[92] - As of June 30, 2025, restricted cash and cash equivalents (current and noncurrent) totaled $1,833,531, and deferred research and development obligations related to the grant were $1,833,531[93] Coalition for Epidemic Preparedness Innovations (CEPI) Grant - On March 20, 2025, Dyadic received a funding award from CEPI, a $4.5 million grant through FBS, to advance its C1 platform for recombinant protein vaccine development, with Dyadic as a subcontractor receiving up to $2.4 million[94] - For the three and six months ended June 30, 2025, the Company recognized grant revenue of $141,422 and $175,545, respectively, in connection with the CEPI Grant[95] Proliant - On June 27, 2024, Dyadic entered a License and Development Agreement with Proliant Biologicals, LLC for the production of recombinant serum albumin using Dyadic's platforms[97] - Dyadic received an initial upfront payment of $500,000 and a second payment of $500,000 in 2024, with a final $500,000 payment expected in Q3 2025 upon meeting a productivity threshold[97] - The Company will receive royalties based on a percentage of gross margin from commercial sales of animal-free recombinant serum albumin products[97] Inzymes ApS - In September 2023, Dyadic signed a Development and Exclusive License Agreement with Inzymes ApS to develop and commercialize non-animal dairy enzymes using the Dapibus™ platform, receiving a $0.6 million upfront payment[98] - The agreement was amended in October 2024 to adjust the scope of R&D services, success fees, milestone payments, and royalties[99] - For the three and six months ended June 30, 2025, the Company recognized $250,000 in milestone revenue upon achieving a commercially viable target yield related to the Inzymes Agreement[101] Alphazyme - In 2023, Dyadic sold its equity interest in Alphazyme, LLC, receiving $1.3 million in cash payments in 2024, including a $60,977 gain on sale in Q1 2024[104][106] - The sublicense agreement with Alphazyme remains in effect, entitling Dyadic to potential milestone and royalty payments upon commercialization of Alphazyme products using the C1-cell platform[105] Note 4: Convertible Notes Details the Company's 8.0% Senior Secured Convertible Promissory Notes, including issuance, terms, and conversion - On March 8, 2024, the Company issued $6.0 million in 8.0% Senior Secured Convertible Promissory Notes due March 8, 2027, with $2.0 million sold to related parties[107] - The notes are senior, secured obligations with 8% annual interest payable quarterly in cash, and are convertible into common stock at the holders' option[108][26] - Amendments on October 4, 2024, and May 1, 2025, adjusted the conversion price to $1.40 per share and the Redemption Date to December 1, 2026, respectively[113][114] - During 2024, $910,000 of the Convertible Notes were converted into 556,623 shares of common stock[118] Convertible Notes Outstanding as of June 30, 2025 | Holder Type | Principal Outstanding ($) | Unamortized Debt Issuance Costs ($) | Net Carrying Amount ($) | | :-------------------------- | :------------------------ | :---------------------------------- | :---------------------- | | Related Party | 1,090,000 | (19,029) | 1,070,971 | | Third Party | 4,000,000 | (69,830) | 3,930,170 | | Total | 5,090,000 | (88,859) | 5,001,141 | Note 5: Commitments and Contingencies Addresses legal proceedings and contractual commitments, including a research contract, with no material adverse litigation expected - The Company is not currently involved in any litigation expected to have a materially adverse effect on its financial condition or results of operations[120] - On July 1, 2025, the Company extended its contract with VTT Technical Research Centre of Finland Ltd. to September 30, 2025, for developing its C1 fungal expression system, with a payment of approximately EUR104,000[121] Note 6: Share-Based Compensation Outlines equity incentive plans, detailing activity and valuation assumptions for stock options and restricted stock units Description of Equity Plans - The 2021 Equity Incentive Award Plan, adopted in April 2021, is the successor to the 2011 Plan and provides for various share-based compensation awards[122] - As of June 30, 2025, the Company had 5,999,597 stock options outstanding, 64,656 unvested restricted stock units, and 1,571,382 shares available for grant under the 2021 Plan[123] Stock Options - Stock options are granted at fair value on the grant date, with vesting determined by the Board of Directors and a typical term of ten years[124] - The grant-date fair value is estimated using the Black-Scholes option pricing model, with assumptions including a risk-free interest rate of 4.1%-4.4%, zero expected dividend yield, and 65.1-65.4% expected stock price volatility for the six months ended June 30, 2025[125][126][127][128] Stock Option Activity (Six Months Ended June 30, 2025) | Activity | Shares | Weighted Average Exercise Price ($) | | :------------------------ | :------- | :-------------------------------- | | Outstanding at Dec 31, 2024 | 5,788,597 | 2.97 | | Granted | 698,500 | 1.71 | | Exercised | (55,000) | 1.17 | | Canceled | (432,500) | 3.13 | | Outstanding at Jun 30, 2025 | 5,999,597 | 2.83 | | Exercisable at Jun 30, 2025 | 4,768,372 | 3.09 | Restricted Stock Units - Restricted stock units (RSUs) are granted with vesting conditions determined by the Board of Directors, and their fair market value is based on the closing market price on the grant date[130] Restricted Stock Unit Activity (Six Months Ended June 30, 2025) | Activity | Shares | Weighted-Average Grant Date Fair Value ($) | | :------------------------ | :------- | :----------------------------------------- | | Outstanding at Dec 31, 2024 | 117,925 | 1.59 | | Granted | 230,023 | 1.74 | | Vested | (272,516) | 1.67 | | Forfeited | (10,776) | 1.74 | | Outstanding at Jun 30, 2025 | 64,656 | 1.74 | Compensation Expenses - Total non-cash share-based compensation expense for the six months ended June 30, 2025, was $565,492, a decrease from $604,081 in the prior year[136] Share-Based Compensation Expense Allocation (Six Months Ended June 30) | Expense Category | 2025 ($) | 2024 ($) | Change ($) | Change (%) | | :----------------- | :------- | :------- | :--------- | :--------- | | General and administrative | 531,317 | 579,406 | (48,089) | -8.3% | | Research and development | 34,175 | 24,675 | 9,500 | 38.5% | | Total | 565,492 | 604,081 | (38,589) | -6.4% | Share-Based Compensation Expense by Type (Six Months Ended June 30) | Compensation Type | 2025 ($) | 2024 ($) | Change ($) | Change (%) | | :------------------ | :------- | :------- | :--------- | :--------- | | Stock option | 482,155 | 433,807 | 48,348 | 11.1% | | Restricted stock units | 83,337 | 170,274 | (86,937) | -51.1% | | Total | 565,492 | 604,081 | (38,589) | -6.4% | Note 7: Shareholders' Equity Details changes in shareholders' equity, including common stock issuance from RSU vesting, stock option exercises, and treasury stock Issuances of Common Stock - For the six months ended June 30, 2025, 272,516 shares were issued from RSU vesting (weighted average issue price $1.68) and 55,000 shares from stock option exercises[137] - For the six months ended June 30, 2024, 666,578 shares were issued (weighted average issue price $1.61), including conversions of Convertible Notes, RSU vesting, and stock option exercises[137] Treasury Stock - As of June 30, 2025, the Company held 12,253,502 shares of common stock in treasury at a cost of $18.9 million[138] Note 8: Segment Confirms the Company operates as a single segment, focusing on developing and commercializing synthetic protein products using microbial platforms - The Company operates as one reportable and operating segment, focused on developing and commercializing synthetic protein products using its C1 and Dapibus microbial platforms[139] Segment Revenue and Expenses (Three and Six Months Ended June 30) | Metric | 3 Months 2025 ($) | 3 Months 2024 ($) | 6 Months 2025 ($) | 6 Months 2024 ($) | | :-------------------------- | :---------------- | :---------------- | :---------------- | :---------------- | | Total revenues | 966,630 | 385,896 | 1,360,202 | 720,513 | | Total cost of revenues | 613,591 | 301,956 | 911,249 | 445,911 | | Research and development expenses | 612,238 | 513,398 | 1,090,183 | 1,043,677 | | General and administrative expenses | 1,436,630 | 1,607,756 | 3,032,968 | 3,396,350 | | Net loss | 1,793,774 | 2,045,223 | 3,821,353 | 4,055,069 | Note 9: Subsequent Event Discloses a significant subsequent event: a public offering of common stock after the balance sheet date - On July 30, 2025, the Company entered into an Underwriting Agreement, which closed on August 1, 2025, for net proceeds of $5.3 million[144] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the Company's financial condition, operational results, business overview, platform capabilities, strategic focus, and critical accounting estimates Overview Describes Dyadic's core business as a biotechnology platform, highlighting Dapibus™ and C1 platforms for scalable protein production - Dyadic International, Inc. is a global biotechnology platform company focused on developing and commercializing scalable, non-animal protein production platforms (Dapibus™ and C1) for life sciences, food and nutrition, and bio-industrial markets[146][147] - The Dapibus™ platform is designed for rapid, cost-effective production of high-value, non-animal proteins and enzymes for non-pharmaceutical markets, with commercialization of multiple products expected to begin in 2025[149][150][151] - The C1 platform is a patented, thermophilic fungal expression system engineered for cost-effective, large-scale protein production for both biopharmaceutical and non-pharmaceutical applications, retaining co-exclusive rights for human and animal pharmaceutical use[153][154] - Key developments include a dairy enzyme program with expected commercial launch in late 2025, improved recombinant bovine alpha-lactalbumin, and ongoing development of recombinant human alpha-lactalbumin, lactoferrin, and casein proteins for food and nutrition[155] - In life sciences, Dyadic is advancing recombinant serum albumin (with Proliant, anticipating a $500,000 milestone in Q3 2025), transferrin, and fibroblast growth factor (FGF) for cell culture media and diagnostics[159] - Fully funded global health collaborations include grants from the Gates Foundation (for RSV and malaria mAbs) and CEPI (up to $2.4 million for recombinant vaccine development), validating the C1 platform's biopharmaceutical potential[164][166] Other Recent Developments Highlights recent corporate developments, including rebranding and Nasdaq deficiency notices for MVLS and minimum bid price - Effective August 1, 2025, the Company rebranded to Dyadic Applied BioSolutions, signifying a strategic shift towards a commercially focused enterprise[174] - The Company received Nasdaq deficiency notices on June 23, 2025, for not maintaining a minimum Market Value of Listed Securities (MVLS) of $35 million, and on July 17, 2025, for not maintaining a minimum bid price of $1.00 per share[175] - The Company has 180 calendar days (until December 20, 2025, for MVLS and January 13, 2026, for bid price) to regain compliance with Nasdaq listing requirements[175] Critical Accounting Estimates Outlines critical accounting estimates requiring significant management judgment that can materially impact financial results - Critical accounting estimates involve significant judgments and uncertainties, potentially leading to materially different results under varying assumptions[177] Revenue Recognition - All revenue is from research collaborations, grants, and sublicensing agreements, recognized over time using the cost-based input method[178] - Revenue from research collaborations is recognized over time using the cost-based input method, requiring management to estimate costs to complete performance obligations[180][182] - Grant revenue is presented on a gross basis and is primarily earmarked for third parties to advance research[183] Accrued Research and Development Expenses - Accrued R&D expenses are estimated based on open contracts, purchase orders, and communication for services rendered[190] Stock-Based Compensation - Fair value of stock option awards is estimated using the Black-Scholes model, involving uncertainties and management judgment[191][193] Accounting for Income Taxes - Income taxes are accounted for under the asset and liability method, requiring judgment for tax exposure and deferred tax assets/liabilities[194][195] - A 100% valuation allowance is provided against deferred tax assets due to the Company's history of operating losses and uncertainty regarding future taxable income[195] Off-Balance Sheet Arrangements - The Company does not have any off-balance sheet arrangements[198] Recent Accounting Pronouncements - Information about recent accounting pronouncements is provided in Note 1 to the Consolidated Financial Statements[199] Results of Operations Analyzes the Company's financial performance for the three and six months ended June 30, 2025, detailing changes in revenue, costs, and net loss Revenue and Cost of Revenue Revenue and Cost of Revenue (Three Months Ended June 30) | Metric | 2025 ($) | 2024 ($) | Change ($) | Change (%) | | :-------------------------------- | :------- | :------- | :--------- | :--------- | | Research and development revenue | 213,449 | 385,896 | (172,447) | -44.7% | | Grant revenue | 503,181 | — | 503,181 | N/A | | License and milestone revenue | 250,000 | — | 250,000 | N/A | | Total revenue | 966,630 | 385,896 | 580,734 | 150.5% | | Costs of research and development revenue | 148,457 | 301,956 | (153,499) | -50.8% | | Cost of grant revenue | 465,134 | — | 465,134 | N/A | Revenue and Cost of Revenue (Six Months Ended June 30) | Metric | 2025 ($) | 2024 ($) | Change ($) | Change (%) | | :-------------------------------- | :------- | :------- | :--------- | :--------- | | Research and development revenue | 396,549 | 720,513 | (323,964) | -45.0% | | Grant revenue | 713,653 | — | 713,653 | N/A | | License and milestone revenue | 250,000 | — | 250,000 | N/A | | Total revenue | 1,360,202 | 720,513 | 639,689 | 88.8% | | Costs of research and development revenue | 274,937 | 445,911 | (170,974) | -38.3% | | Cost of grant revenue | 636,312 | — | 636,312 | N/A | - Total revenue increased significantly for both the three-month (150.5%) and six-month (88.8%) periods ended June 30, 2025, primarily due to new grant revenue (Gates Foundation and CEPI) and license/milestone revenue (Inzymes Agreement), offsetting a reduction in traditional R&D revenue[200][202] Research and Development Expenses - R&D expenses increased by $113,000 (21.9%) to $629,000 for the three months ended June 30, 2025, and by $86,000 (8.3%) to $1,124,000 for the six months, driven by a rise in active internal research initiatives[203][204] General and Administrative Expenses - G&A expenses decreased by 10.6% to $1,437,000 for the three months ended June 30, 2025, and by 10.7% to $3,033,000 for the six months, primarily due to reductions in business development, investor relations, accounting, legal, and management incentives[206][207] Loss from Operations - Loss from operations decreased by $314,000 (15.3%) to $1,729,000 for the three months ended June 30, 2025, and by $436,000 (10.5%) to $3,732,000 for the six months, mainly due to increased total revenue and reduced G&A expenses, partially offset by higher cost of revenue and R&D expenses[208][209] Other Income (Expenses), Net - For the three months ended June 30, 2025, other income (expenses), net, was an expense of $65,000, a decrease from an income of $3,000 in the prior year, primarily due to reduced interest income[210] - For the six months ended June 30, 2025, other income (expenses), net, was an expense of $90,000, a decrease from an income of $113,000 in the prior year, mainly due to a $61,000 gain on sale of Alphazyme in 2024, reduced interest income, and increased interest expenses[211] Net Loss - Net loss decreased by $251,000 (12.3%) to $1,794,000 for the three months ended June 30, 2025, and by $233,000 (5.8%) to $3,821,000 for the six months, reflecting improvements in operating loss partially offset by changes in other income/expenses[212][213] Liquidity and Capital Resources Discusses the Company's ability to meet financial obligations, highlighting reliance on capital raising to fund R&D and commercialization - The Company anticipates continued losses and negative operating cash flows, requiring capital to fund technology development, regulatory approval, commercialization, and sublicensing efforts[214] - In March 2024, the Company issued $6.0 million in 8.0% Senior Secured Convertible Promissory Notes, generating $5,824,000 in net proceeds for working capital and general corporate purposes[215] - A public offering closed on August 1, 2025, generated approximately $5.3 million in net proceeds, intended for working capital, product development, sales, and marketing[220][221] - As of June 30, 2025, cash, cash equivalents, and restricted cash were $4.0 million (down from $6.5 million at Dec 31, 2024). Including the $5.3 million from the August 2025 offering, the Company expects sufficient liquidity for the next 12 months[222][221] - Net cash used in operating activities decreased to $2.1 million for the six months ended June 30, 2025, from $3.1 million in the prior year, primarily due to a lower net loss and changes in operating assets/liabilities[222][223] - Net cash provided by financing activities was $24,000 for the six months ended June 30, 2025, a significant decrease from $5.8 million in the prior year, which included proceeds from convertible notes[225] Item 3. Quantitative and Qualitative Disclosures about Market Risk As a smaller reporting company, Dyadic International, Inc. is not required to provide quantitative and qualitative disclosures about market risk - The Company is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk[226] Item 4. Controls and Procedures Details the evaluation of the Company's disclosure controls and procedures, confirming effectiveness and noting no material changes Evaluation of Disclosure Controls and Procedures - Management evaluated and concluded the disclosure controls and procedures were effective as of June 30, 2025[228] Changes in Internal Controls Over Financial Reporting - No material changes in internal control over financial reporting occurred during the three months ended June 30, 2025[229] Inherent Limitation on Effectiveness of Controls - Control systems provide only reasonable assurance due to inherent limitations like faulty judgments, errors, circumvention, and management override[230] PART II OTHER INFORMATION Item 1. Legal Proceedings The Company is not currently involved in any litigation expected to have a materially adverse effect on its financial condition or results of operations - The Company is not currently involved in any litigation that is believed to have a materially adverse effect on its financial condition or results of operations[233] Item 1A. Risk Factors Updates risk factors, focusing on Nasdaq deficiency notices for MVLS and minimum bid price, and potential delisting consequences - The Company received Nasdaq deficiency notices for not maintaining a minimum Market Value of Listed Securities (MVLS) of $35 million and a minimum bid price of $1.00 per share[236] - Failure to regain compliance by the respective deadlines (December 20, 2025, for MVLS and January 13, 2026, for bid price) could lead to delisting from Nasdaq[236][237] - Delisting could adversely affect the liquidity and market price of the common stock, impair the ability to raise capital, and negatively impact business operations and employee morale[239] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds States there were no unregistered sales of equity securities or use of proceeds to report for the period - There were no unregistered sales of equity securities and use of proceeds to report[241] Item 3. Defaults Upon Senior Securities Indicates there are no defaults upon senior securities to report - Not applicable; there are no defaults upon senior securities[242] Item 4. Mine Safety Disclosures States that mine safety disclosures are not applicable to the Company - Not applicable; mine safety disclosures are not relevant to the Company's operations[243] Item 5. Other Information Confirms no other material information to disclose, specifically no Rule 10b5-1 trading arrangements by directors or officers - No directors or officers adopted or terminated a "Rule 10b5-1 trading arrangement" or a "non-Rule 10b5-1 trading arrangement" for the quarter ended June 30, 2025[244] Item 6. Exhibits Lists all exhibits filed as part of the report, including corporate governance documents, convertible note amendments, and certifications - The report includes various exhibits such as the Restated Certificate of Incorporation, Amended and Restated Bylaws, Second Amendment to Form of Senior Secured Convertible Promissory Note, and certifications from the Principal Executive and Financial Officers[246] Signatures Contains the required signatures of the Company's CEO and CFO, certifying the report's submission - The report is signed by Mark A. Emalfarb, Chief Executive Officer, and Ping W. Rawson, Chief Financial Officer, on August 13, 2025[250]