DYADIC INTERNATIONAL INC 10-K

Item 9A. Controls and procedures   Evaluation of Disclosure Controls and Procedures   Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2022. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms. Based on the evaluation of our disclosure controls and procedures as of December 31, 2022, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective.   Management’s Report on Internal Control Over Financial Reporting   Our management is responsible for establishing and maintaining adequate “internal control over financial reporting,” as defined in Rule 13a-15(f) under the Exchange Act. Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2022 based on the criteria set forth in the Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on the assessment, our management has concluded that our internal control over financial reporting was effective as of December 31, 2022. This Report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our independent registered public accounting firm pursuant to the rules of the SEC that permit us to provide only management’s report in this Report because we are a “smaller reporting company.”   Changes in Internal Controls Over Financial Reporting   There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d- 15(d) of the Exchange Act that occurred during the year ended December 31, 2022 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We have not experienced any material impact to our internal controls over financial reporting despite the fact that most of our employees are working remotely due to the COVID-19 pandemic. We are continually monitoring and assessing the COVID-19 situation on our internal controls to minimize the impact on their design and operating effectiveness.   Inherent Limitation on Effectiveness of Controls   A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.       Item 9B. Other Information   None.       Item 9C.   Disclosure regarding foreign jurisdictions that prevent inspections   Not applicable   33       PART III     Item 10. Directors, Executive Officers and Corporate Governance   The information required by this item is incorporated by reference to the Company’s definitive proxy statement relating to the 2023 annual meeting of shareholders. The definitive proxy statement will be filed with the Securities and Exchange Commission within 120 days after the end of the 2022 fiscal year.   Item 11. Executive Compensation   The information required by this item is incorporated by reference to the Company’s definitive proxy statement relating to the 2023 annual meeting of shareholders. The definitive proxy statement will be filed with the Securities and Exchange Commission within 120 days after the end of the 2022 fiscal year.     Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters   The information required by this item is incorporated by reference to the Company’s definitive proxy statement relating to the 2023 annual meeting of shareholders. The definitive proxy statement will be filed with the Securities and Exchange Commission within 120 days after the end of the 2022 fiscal year.     Item 13. Certain Relationships and Related Transactions, and Director Independence   The information required by this item is incorporated by reference to the Company’s definitive proxy statement relating to the 2023 annual meeting of shareholders. The definitive proxy statement will be filed with the Securities and Exchange Commission within 120 days after the end of the 2022 fiscal year.     Item 14. Principal Accounting Fees and Services   The information required by this item is incorporated by reference to the Company’s definitive proxy statement relating to the 2023 annual meeting of shareholders. The definitive proxy statement will be filed with the Securities and Exchange Commission within 120 days after the end of the 2022 fiscal year.   34         PART IV     Item 15. Financial Statement and Exhibits   (a)     Financial Statement   Our financial statements and related notes thereto are listed and included in this Annual Report on Form 10-K beginning on page F-1.   (b)     Exhibits           Incorporated by Reference Exhibit No.   Description of Exhibit   Form   Original No.   Date Filed   Filed Herewith 2.1*#   Investment Shareholders Agreement with respect to Biotechnology Developments for Industry, S.L, and VLP The Vaccines Company, S.L.U. dated June 30, 2017   10-12G   2.1   January 14, 2019     2.2#   S ale and Purchase of Shares Agreement of Biotechnology Developments for Industry, S.L. dated July 26, 2021   8-K   10.1   July 27, 2021     2.3#   Sale and Purchase of Shares Agreement of VLP The Vaccine Company, S.L.U. dated July 26, 2021   8-K   10.2   July 27, 2021     2.4#   Amendment No. 1 dated July 26, 2021 to the Service Framework Agreement   dated June 30, 2017   8-K   10.3   July 27, 2021     3.1#   Restated Certificate of Incorporation dated November 1, 2004   10-12G   3.1   January 14, 2019     3.2#   Third Amended and Restated Bylaws dated March 28, 2023   8-K   3.1   March 29, 2023     4.1#   Specimen Stock Certificate Evidencing Shares of Common Stock   10-12G   4.1   January 14, 2019     4.2#   Description of Securities   S-3       August 13, 2020     10.1**#   Dyadic International, Inc. 2011 Equity Incentive Plan   10-12G   10.2   January 14, 2019     10.2**#   Dyadic International, Inc. 2021 Equity Incentive Plan   S-8   4.3   August 12, 2021     10.3**#   POST-EFFECTIVE AMENDMENT NO. 1 TO FORM S-8 for Dyadic International, Inc. 2006 Stock Option Plan, Dyadic International, Inc. 2011 Equity Incentive Plan, and Dyadic International, Inc. 2021 Equity Incentive Plan   S-8 POS       August 12, 2021     10.4**#   Form of Restricted Stock Unit Agreement Pursuant to the Dyadic International, Inc. 2011 Equity Incentive Plan   10-12G   10.3   January 14, 2019     10.5**#   Form of Stock Option Agreement Pursuant to the Dyadic International, Inc. 2011 Equity Incentive Plan   10-12G   10.4   January 14, 2019     10.6**#   Employment Agreement, dated June 16, 2016, and First Amendment dated January 23, 2017, by and between Dyadic International, Inc. and Mark A. Emalfarb   10-12G   10.5   January 14, 2019     10.6.1**#   Second Amendment to Employment Agreement between Dyadic International, Inc. and Mark A. Emalfarb, dated as of November 12, 2019   8-K   10.1   November 13, 2019     10.7**#   Consulting Agreement, dated January 1, 2016, by and between Dyadic Netherlands B.V. and Sky Blue Biotech kft on behalf of Ronen Tchelet   10-12G   10.7   January 14, 2019     10.8**#   Compensation Letter, dated March 26, 2018, by and between Dyadic International, Inc. and Ping W. Rawson   10-12G   10.9   January 14, 2019     10.9**#   Employment Agreement between Dyadic International Inc. and Joseph Hazelton dated November 9, 2021   8-K   10.1   November 9, 2021     10.10#   Form of Director and Officer Indemnification Agreement   10-12G   10.10   January 14, 2019     10.11#   Intracoastal Pointe Office Building Lease Agreement by and between Dyadic International, Inc. and Quentin Partners Co. dated December 30, 2010 and Renewal of Lease dated June 8, 2018   10-K   10.11   March 30, 2020     10.11.1   Intracoastal Pointe Office Building Lease Agreement by and between Dyadic International, Inc. and Quentin Partners Co. dated December 30, 2010 and Renewal of Lease dated August 29, 2022               X 10.12†#   Pharma License Agreement with Danisco US, Inc. dated December 31, 2015   10-12G   10.12   January 14, 2019     10.13†#   Commission Contract with VTT Technical Research Centre of Finland Ltd dated September 2, 2016   10-12G   10.13   January 14, 2019     10.13.1†#   Commission Contract with VTT Technical Research Centre of Finland Ltd dated June 28, 2019   8-K   10.1   July 5, 2019     10.14†#   Research Services Agreement with Biotechnology Developments for Industry in Pharmaceuticals, S.L.U. dated June 30, 2017   10-12G   10.14   January 14, 2019     10.15†#   Service Framework Agreement with Biotechnology Developments for Industry in Pharmaceuticals, S.L.U. dated June 30, 2017   10-12G   10.15   January 14, 2019     10.16†#   Feasibility Study Agreement with Sanofi-Aventis Deutschland GmbH dated September 7, 2018   10-12G   10.16   January 14, 2019     10.17†#   License Agreement with VTT Technical Research Centre of Finland Ltd dated July 17, 2017   10-12G   10.17   January 14, 2019     10.18†#   Joint Development Agreement   8-K   10.1   May 11, 2022       35     10.19†#   Research and Commercialization Collaboration Agreement with Serum Institute of India Pvt. Ltd., dated May 7, 2019   8-K   10.1   May 8, 2019     10.20†#   Non-Exclusive Sublicense Agreement among Dyadic International, Inc., Alphazyme, LLC, dated May 5, 2019   8-K   10.1   May 8, 2019     10.20.1†#   Amended and Restated Non-Exclusive Sublicense Agreement among Dyadic International, Inc., Alphazyme, LLC, dated June 24, 2020   8-K   10.1   June 29, 2020     10.21†#   Sub-License Agreement among Dyadic International (USA), Inc., Luina Bio Pty Ltd. and Novovet Pty Ltd, dated April 26, 2019   8-K   10.1   May 2, 2019     10.21.1†#   Shareholders Agreement among Dyadic International (USA), Inc., JCL Biologics Pty Ltd and Novovet Pty Ltd, dated April 26, 2019   8-K   10.2   May 2, 2019     10.22#   Open Market Sale Agreement by and between the Company and Jefferies LLC, dated August 13, 2020   S-3   1.2   August 13, 2020     10.23#   Master Services Agreement and Work Order, between Dyadic International (USA), Inc. and CR2O B.V., Dated May 28, 2021   8-K   10.1   June 3, 2021     10.24†#   Research, License, and Collaboration Agreement with Janssen dated December 16, 2021   8-K   10.1   December 16, 2021     10.25†#   Alphazyme Sale Agreement dated January 18, 2023   8-K   10.1   January 23, 2023     14   Code of Ethics (1)               (1) 21.1#   Subsidiaries of the Registrant   10-12G   21.1   January 14, 2019     23.1   Consent of Independent Registered Public Accounting Firm               x 31.1   Certification of Chief Executive Officer of Dyadic Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002               x 31.2   Certification of Chief Financial Officer of Dyadic Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002               x 32.1   Certification of Chief Executive Officer of Dyadic Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002               x 32.2   Certification of Chief Financial Officer of Dyadic Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002               x     Exhibit No.   Description 101.INS   Inline XBRL Instance Document 101.SCH   Inline XBRL Taxonomy Extension Schema Document 101.CAL   Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF   Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB   Inline XBRL Taxonomy Extension Labels Linkbase Document 101.PRE   Inline XBRL Taxonomy Extension Presentation Linkbase Document 104   Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)   Notes: *    This filing excludes schedules and similar attachments pursuant to Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule will be furnished supplementary to the SEC upon request; provided, however, that the parties may request confidential treatment pursuant to Rule 24b-2 of the Exchange Act for any document so furnished. **   Identifies each management contract or compensatory plan or arrangement. †     Portions of the exhibits have been omitted pursuant to a request for confidential treatment. #     Previously filed with the SEC. (1)    The Company elect to satisfy Regulation S-K §229.406(c) by posting its Code of Ethics on its website at www.dyadic.com.   Item 16. Form 10-K Summary   Not applicable.   36     SIGNATURES   Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.     DYADIC INTERNATIONAL, INC.       March 29, 2023 By: /s/ Mark A. Emalfarb     Mark A. Emalfarb     President and Chief Executive Officer     (Principal Executive Officer)       March 29, 2023 By: /s/ Ping W. Rawson     Ping W. Rawson     Chief Financial Officer     (Principal Financial Officer and Principal Accounting Officer)   Pursuant to the requirements of Securities Exchange Act of 1934, as amended, this Annual Report has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated.   Signature Title Date       /s/ Mark A. Emalfarb Chief Executive Officer, Director March 29, 2023 Mark A. Emalfarb (Principal Executive Officer)         /s/ Ping W. Rawson Chief Financial Officer March 29, 2023 Ping W. Rawson (Principal Financial Officer and Principal Accounting Officer)         /s/ Michael P. Tarnok Chairman, Director March 29, 2023 Michael P. Tarnok           /s/ Jack L. Kaye Director March 29, 2023 Jack L. Kaye           /s/ Seth J. Herbst Director March 29, 2023 Seth J. Herbst, MD           /s/Arindam Bose Director March 29, 2023 Arindam Bose, Ph.D.           /s/Barry C. Buckland Director March 29, 2023 Barry C. Buckland, Ph.D.           /s/ Patrick Lucy Director March 29, 2023 Patrick Lucy         37           Index to Consolidated Financial Statements     Page Financial Statements:   Report of Independent Registered Public Accounting Firm (PCAOB ID 199 ) F-2 Consolidated Balance Sheets as of December 31, 2022 and 2021 F-3 Consolidated Statements of Operations for the Years Ended December 31, 2022 and 2021 F-4 Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2022 and 2021 F-5 Consolidated Statements of Cash Flows for the Years Ended December 31, 2022 and 2021 F-6 Notes to Consolidated Financial Statements F-7   F-1           Report of Independent Registered Public Accounting Firm   To the Board of Directors and   Stockholders of Dyadic International, Inc.:   Opinion on the Financial Statements   We have audited the accompanying consolidated balance sheets of Dyadic International, Inc. and Subsidiaries (“Company”) as of December 31, 2022 and 2021, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2022, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.   Basis for Opinion   These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.   We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting 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.   Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.     Critical Audit Matters Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.     /s/ Mayer Hoffman McCann P.C. We have served as the Company’s auditor since 2008. St. Peterburg, Florida March 29, 2023     F-2       DYADIC INTERNATIONAL, INC. AND SUBSIDIARIES   CONSOLIDATED BALANCE SHEETS       December 31,       2022     2021   Assets                 Current assets:                 Cash and cash equivalents   $ 5,794,272     $ 15,748,480   Short-term investment securities     6,847,270       4,511,780   Interest receivable     58,285       94,375   Accounts receivable     330,001       277,831   Prepaid expenses and other current assets     392,236       375,830   Total current assets     13,422,064       21,008,296                     Non-current assets:                 Investment in Alphazyme     284,709       284,709   Other assets     6,045       6,117   Total assets   $ 13,712,818     $ 21,299,122                     Liabilities and stockholders’ equity                 Current liabilities:                 Accounts payable   $ 1,276,313     $ 1,547,953   Accrued expenses     955,081       709,560   Deferred research and development obligations     40,743       151,147   Deferred license revenue, current portion     176,471       147,059   Total current liabilities     2,448,608       2,555,719                     Deferred license revenue, net of current portion     176,471       352,941   Total liabilities     2,625,079       2,908,660                     Commitments and contingencies (Note 5)                                       Stockholders’ equity:                 Preferred stock, $ .0001 par value:                 Authorized shares - 5,000,000 ; none issued and outstanding     —       —   Common stock, $ .001 par value:                 Authorized shares - 100,000,000 ; issued shares - 40,816,602 and 40,482,659 , outstanding shares - 28,563,100 and 28,229,157 as of December 31, 2022 and 2021, respectively     40,817       40,483   Additional paid-in capital     103,458,697       101,026,496   Treasury stock, shares held at cost - 12,253,502     ( 18,929,915 )     ( 18,929,915 ) Accumulated deficit     ( 73,481,860 )     ( 63,746,602 ) Total stockholders’ equity     11,087,739       18,390,462   Total liabilities and stockholders’ equity   $ 13,712,818     $ 21,299,122     The accompanying notes are an integral part of these audited consolidated financial statements.   F-3       DYADIC INTERNATIONAL, INC. AND SUBSIDIARIES   CONSOLIDATED STATEMENTS OF OPERATIONS       Years Ended December 31,       2022     2021   Revenues:                 Research and development revenue   $ 2,683,244     $ 2,403,831   License revenue     247,059       —   Total revenue     2,930,303       2,403,831                     Costs and expenses:                 Costs of research and development revenue     2,123,193       1,944,438   Research and development     4,501,365       8,392,370   General and administrative     6,421,505       6,697,617   Foreign currency exchange loss     49,918       96,893   Total costs and expenses     13,095,981       17,131,318                     Loss from operations     ( 10,165,678 )     ( 14,727,487 )                   Other income:                 Interest income     180,420       51,704   Other income     250,000       1,605,532   Total other income     430,420       1,657,236                     Net loss   $ ( 9,735,258 )   $ ( 13,070,251 )                   Basic and diluted net loss per common share   $ ( 0.34 )   $ ( 0.47 )                   Basic and diluted weighted-average common shares outstanding     28,364,482       27,838,047     The accompanying notes are an integral part of these audited consolidated financial statements.   F-4       DYADIC INTERNATIONAL, INC. AND SUBSIDIARIES   CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY       Common Stock     Treasury Stock     Additional     Accumulated               Shares     Amount     Shares     Amount     paid-in capital     deficit     Total                                                             Balance at December 31, 2020     39,747,659     $ 39,748       ( 12,253,502 )   $ ( 18,929,915 )   $ 98,013,079     $ ( 50,676,351 )   $ 28,446,561                                                             Stock-based compensation expenses     —       —       —       —       1,784,102       —       1,784,102                                                             Issuance of common stock upon exercise of stock options     735,000       735       —       —       1,229,315       —       1,230,050                                                             Net loss     —       —       —       —       —       ( 13,070,251 )     ( 13,070,251 )                                                           Balance at December 31, 2021     40,482,659     $ 40,483       ( 12,253,502 )   $ ( 18,929,915 )   $ 101,026,496     $ ( 63,746,602 )   $ 18,390,462                                                             Stock-based compensation expenses     —       —       —       —       1,888,944       —       1,888,944                                                             Issuance of common stock upon exercise of stock options     333,943       334       —       —       543,257       —       543,591                                                             Net loss     —       —       —       —       —       ( 9,735,258 )     ( 9,735,258 )                                                           Balance at December 31, 2022     40,816,602     $ 40,817       ( 12,253,502 )   $ ( 18,929,915 )   $ 103,458,697     $ ( 73,481,860 )   $ 11,087,739     The accompanying notes are an integral part of these audited consolidated financial statements.   F-5       DYADIC INTERNATIONAL, INC. AND SUBSIDIARIES   CONSOLIDATED STATEMENTS OF CASH FLOWS       Years Ended December 31,       2022     2021   Cash flows from operating activities                 Net loss   $ ( 9,735,258 )   $ ( 13,070,251 ) Adjustments to reconcile net loss to net cash used in operating activities:                 Stock-based compensation expense     1,888,944       1,784,102   Amortization of held-to-maturity securities, net     33,790       329,612   Gain on investment in BDI     —       ( 1,605,532 ) Foreign currency exchange loss     49,918       96,893   Changes in operating assets and liabilities:                 Interest receivable     36,090       17,872   Accounts receivable     ( 83,265 )     ( 31,792 ) Prepaid expenses and other current assets     ( 13,925 )     ( 95,366 ) Accounts payable     ( 248,128 )     549,562   Accrued expenses     245,521       219,824   Deferred license revenue     ( 147,058 )     500,000   Deferred research and development obligations     ( 110,404 )     28,131   Net cash used in operating activities     ( 8,083,775 )     ( 11,276,945 )                   Cash flows from investing activities                 Purchases of held-to-maturity investment securities     ( 9,869,280 )     ( 11,283,940 ) Proceeds from maturities of investment securities     7,500,000       14,900,000   Proceeds from the sale of investment in BDI     —       1,605,532   Net cash (used in) provided by investing activities     ( 2,369,280 )     5,221,592                     Cash flows from financing activities                 Proceeds from exercise of options     543,591       1,230,050   Net cash provided by financing activities     543,591       1,230,050   Effect of exchange rate changes on cash     ( 44,744 )     ( 63,262 ) Net decrease in cash and cash equivalents     ( 9,954,208 )     ( 4,888,565 ) Cash and cash equivalents at beginning of period     15,748,480       20,637,045   Cash and cash equivalents at end of period   $ 5,794,272     $ 15,748,480     The accompanying notes are an integral part of these audited consolidated financial statements.   F-6     Notes to Consolidated Financial Statements     Note 1:      Organization and Summary of Significant Accounting Policies   Description of Business   Dyadic International, Inc. (“Dyadic”, “we”, “us”, “our”, or the “Company”) is a global biotechnology platform company based in Jupiter, Florida with operations in the United States and a satellite office in the Netherlands, and it utilizes several third -party consultants and research organizations to carry out the Company’s activities. Over the past two plus decades, the Company has developed a gene expression platform for producing commercial quantities of industrial enzymes and other proteins, and has previously licensed this technology to third parties, such as Abengoa Bioenergy, BASF, Codexis and others, for use in industrial (non-pharmaceutical) applications. This technology is based on the Thermothelomyces heterothallica (formerly known as Myceliophthora thermophila ) fungus, which the Company named C1.   On December 31, 2015, the Company sold its industrial technology business to Danisco USA (“Danisco”), the industrial biosciences business of DuPont (NYSE: DD) (the “DuPont Transaction”). As part of the DuPont Transaction, Dyadic retained co-exclusive rights to the C1 -cell protein production platform for use in all human and animal pharmaceutical applications, and currently the Company has the exclusive ability to enter into sub-license agreements (subject to the terms of the license and to certain exceptions) for use in all human and animal pharmaceutical applications. Danisco retained certain rights to utilize the C1 -cell protein production platform in pharmaceutical applications, including the development and production of pharmaceutical products, for which it will be required to make royalty payments to Dyadic upon commercialization. In certain circumstances, Dyadic may owe a royalty to either Danisco or certain licensors of Danisco, depending upon whether Dyadic elects to utilize certain patents either owned by Danisco or licensed in by Danisco.   After the DuPont Transaction, the Company has been focused on building innovative microbial platforms to address the growing demand for global protein bioproduction and unmet clinical needs for effective, affordable, and accessible biopharmaceutical products for human and animal health and for other biologic products for use in non-pharmaceutical applications.   The C1 -cell protein production platform is a robust and versatile thermophilic filamentous fungal expression system for the development and production of biologic products including enzymes and other proteins for human and animal health. Some examples of human and animal vaccines and drugs which have the potential to be produced from C1 -cells are protein antigens, ferritin nanoparticles, virus-like particles (“VLPs”), monoclonal antibodies (“mAbs”), Bi/Tri-specific antibodies, Fab antibody fragments, Fc-fusion proteins, as well as other therapeutic enzymes and proteins. The Company is involved in multiple funded research collaborations with animal and human pharmaceutical companies which are designed to leverage its C1 -cell protein production platform to develop innovative vaccines and drugs, biosimilars and/or biobetters.   The Company also developed the Dapibus™ thermophilic filamentous fungal based microbial protein production platform to enable the rapid development and large-scale manufacture of low-cost proteins, metabolites, and other biologic products for use in non-pharmaceutical applications, such as food, nutrition, and wellness.   Liquidity and Capital Resources   We rely on our existing cash and cash equivalents, investments in debt securities, and operating cash flows to provide the working capital needs for our operations. We believe that our existing cash position and investments in investment grade securities will be adequate to meet our operational, business, and other liquidity requirements for at least the next twelve ( 12 ) months. However, in the event our financing needs are not able to be met by our existing cash, cash equivalents and investments, we would seek to raise funds through public or private equity offerings, and/or other means to meet our financing requirements. The Company has self-funded the development and cGMP manufacturing costs of its proprietary COVID- 19 vaccine candidate, DYAI- 100, and in February 2023 completed the dosing of its related Phase 1 clinical trial to demonstrate the safety in humans of a protein produced from the C1 -cell protein production platform. We do not expect that significant amounts of additional capital will be needed to support the continued development, manufacturing and testing of DYAI- 100 in 2023 and beyond.    In January 2023, the Company received cash payment of approximately $ 1.27  million from the sale of its equity interest in Alphazyme, LLC.  See Note 8 Subsequent Events for details.   Summary of Significant Accounting Policies   Basis of Presentation   The accompanying audited consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. Dyadic consolidates entities in which we have a controlling financial interest. We consolidate subsidiaries in which we hold and/or control, directly or indirectly, more than 50% of the voting rights. All significant intra-entity transactions and balances have been eliminated in consolidation. These consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”).   The Company conducts business in one operating segment, which is identified by the Company based on how resources are allocated, and operating decisions are made. Management evaluates performance and allocates resources based on the Company as a whole.   F- 7     Use of Estimates   The preparation of these consolidated financial statements in accordance with GAAP requires management to make estimates and judgments that affect the reported amount of assets and liabilities and related disclosure of contingent assets and liabilities at the date of our consolidated financial statements and the reported amounts of revenues and expenses during the applicable period. Actual results may differ from these estimates under different assumptions or conditions. Such differences could be material to the consolidated financial statements.   Concentrations and Credit Risk   The Company’s financial instruments that are potentially subject to concentrations of credit risk consist primarily of cash and cash equivalents, investment securities, and accounts receivable. At times, the Company has cash, cash equivalents, and investment securities at financial institutions exceeding the Federal Depository Insurance Company (“FDIC”) and the Securities Investor Protection Corporation (“SIPC”) insured limit on domestic currency and the Netherlands FDIC counterpart for foreign currency. The Company only deals with reputable financial institutions and has not experienced any losses in such accounts.   For each of the years ended December 31, 2022 and 2021 , the Company’s revenue was generated from  fourteen  customers. As of  December 31, 2022 and 2021 , the Company’s accounts receivable was from  six and eight  customers, respectively. The loss of business from one or a combination of the Company’s customers could adversely affect its operations.   The Company conducts operations in the Netherlands through its foreign subsidiary and generates a portion of its revenues from customers that are located outside of the United States. For the years ended December 31, 2022 and 2021 , the Company had  six  and eight  customers outside of the United Sates (i.e. European and Asian customers) that accounted for approximately $ 586,000  or  21.8 % and $ 1,716,000  or  71.3 % of total revenue, respectively. As of  December 31, 2022 and 2021 , the Company had four  and four customers outside of the United Sates (i.e. European and Asian customers) that accounted for approximately $ 91,000  or  27.4 % and $ 157,000  or 56.4 % of accounts receivable, respectively.   The Company uses several contract research organizations (“CROs”) to conduct its research projects and manage its clinical trial. For the years ended December 31, 2022 and 2021 ,  three CROs accounted for approximately $ 5,575,000  or  97.9 % and $ 9,061,000  or  95.1 % of total research services we purchased, respectively. As of  December 31, 2022 , three  CROs accounted for approximately $ 1,018,000  or 79.7 % of accounts payable. As of  December 31, 2021 , two  CROs accounted for approximately $ 1,312,000  or 84.8 % of accounts payable. The loss of business from any CRO or a combination of the Company’s CROs could adversely affect its operations.   Cash and Cash Equivalents   We treat highly liquid investments with original maturities of three months or less when purchased as cash equivalents, including money market funds, which are unrestricted for withdrawal or use.   Investment Securities   The Company invests excess cash balances in short-term and long-term investment grade securities. Short-term investment securities mature within twelve ( 12 ) months or less, and long-term investment securities mature over twelve ( 12 ) months from the applicable reporting date. Management determines the appropriate classification of its investments at the time of purchase and reevaluates the classifications at each balance sheet date. The Company’s investments in debt securities have been classified and accounted for as held-to-maturity. Held-to-maturity securities are those securities that the Company has the ability and intent to hold until maturity. Held-to-maturity securities are recorded at amortized cost, adjusted for the amortization or accretion of premiums or discounts. Premiums and discounts are amortized over the life of the related held-to-maturity security. When a debt security is purchased at a premium, both the face value of the debt and premium amount are reflected as investing outflow. Other-than-temporary impairment charges, if incurred, will be included in other income (expense).   As of December 31, 2022 and 2021 , all of our money market funds were invested in U.S. Government money market funds. The Company did not have any investment securities classified as trading as of December 31, 2022 and 2021 .   Accounts Receivable   Accounts receivable consist of billed receivables currently due from customers and unbilled receivables. Unbilled receivables represent the excess of contract revenue (or amounts reimbursable under contracts) over billings to date. Such amounts become billable in accordance with the contract terms, which usually consider the passage of time, achievement of certain milestones or completion of the project.   Outstanding account balances are reviewed individually for collectability. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable. Substantially all our accounts receivable were current and include unbilled amounts that will be billed and collected over the next twelve ( 12 ) months. There was no allowance for doubtful accounts as of  December 31, 2022 and 2021 .   F- 8     Accounts receivable consist of the following:       December 31,       2022     2021   Billed receivable   $ 115,469     $ 101,175   Unbilled receivable     214,532       176,656       $ 330,001     $ 277,831     Prepaid Expenses and Other Current Assets   Prepaid expenses and other current assets consist of the following:       December 31,       2022     2021   Prepaid insurance   $ 265,429     $ 326,712   Prepaid expenses - various     124,273       45,839   Prepaid taxes     2,534       3,279       $ 392,236     $ 375,830     Accounts Payable   Accounts payable consist of the following:       December 31,       2022     2021   Research and development expenses   $ 1,067,958     $ 1,363,889   Legal expenses     56,514       27,675   Other     151,841       156,389       $ 1,276,313     $ 1,547,953     Accrued Expenses   Accrued expenses consist of the following:       December 31,       2022     2021   Employee wages and benefits   $ 580,264     $ 405,758   Research and development expenses     343,457       194,250   Other     31,360       109,552       $ 955,081     $ 709,560     Revenue Recognition   The Company has no pharmaceutical products approved for sale at this point. All of our revenue to date has been research revenue from third -party collaborations and government grants, as well as revenue from sublicensing agreements and collaborative arrangements, which may include upfront payments, options to obtain a license, payment for research and development services, milestone payments and royalties, in the form of cash or non-cash considerations (e.g., minority equity interest).   F- 9     Revenue related to research collaborations and agreements: The Company typically performs research and development services as specified in each respective agreement on a best efforts basis, and recognizes revenue from research funding under collaboration agreements in accordance with the 5 -step process outlined in ASC Topic 606 (“Topic 606” ): (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. We recognize revenue when we satisfy a performance obligation by transferring control of the service to a customer in an amount that reflects the consideration that we expect to receive. Depending on how the performance obligation under our license and collaboration agreements is satisfied, we elected to recognize the revenue either at a point in time or over time by using the input method under Topic 606 to measure the progress toward complete satisfaction of a performance obligation.    Under the input method, revenue will be recognized based on the entity’s efforts or inputs to the satisfaction of a performance obligation (e.g., resources consumed, labor hours expended, costs incurred, or time elapsed) relative to the total expected inputs to the satisfaction of that performance obligation. The Company believes that the cost-based input method is the best measure of progress to reflect how the Company transfers its performance obligation to a customer. In applying the cost-based input method of revenue recognition, the Company uses actual costs incurred relative to budgeted costs to fulfill the performance obligation. These costs consist primarily of full-time equivalent effort and third -party contract costs. Revenue will be recognized based on actual costs incurred as a percentage of total budgeted costs as the Company completes its performance obligations.    A cost-based input method of revenue recognition requires management to make estimates of costs to complete the Company’s performance obligations. In making such estimates, significant judgment is required to evaluate assumptions related to cost estimates. The cumulative effect of revisions to estimated costs to complete the Company’s performance obligations will be recorded in the period in which changes are identified and amounts can be reasonably estimated. A significant change in these assumptions and estimates could have a material impact on the timing and amount of revenue recognized in future periods.    Revenue related to grants: The Company may receive grants from governments, agencies, and other private and not -for-profit organizations. These grants are intended to be used to partially or fully fund the Company’s research collaborations, including opportunities arising in connection with COVID- 19 that the Company is pursuing with certain collaborators. However, most, if not all, of such potential grant revenues, if received, is expected to be earmarked for third parties to advance the research required, including preclinical and clinical trials for SARS-CoV- 2 vaccines and/or antibodies candidates.    Revenue related to sublicensing agreements: If the sublicense to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenue allocated to the license when technology is transferred to the customer and the customer is able to use and benefit from the license.   Customer options: If the sublicensing agreement includes customer options to purchase additional goods or services, the Company will evaluate if such options are considered material rights to be deemed as separate performance obligations at the inception of each arrangement.    Milestone payments: At the inception of each arrangement that includes development, commercialization, and regulatory milestone payments, the Company evaluates whether the achievement of the milestones is considered probable and estimates the amount to be included in the transaction price. If the milestone payment is in exchange for a sublicense and is based on the sublicensee’s subsequent sale of product, the Company recognizes milestone payment by applying the accounting guidance for royalties. To date, the Company has not recognized any milestone payment revenue resulting from any of its sublicensing arrangements.    Royalties: With respect to licenses deemed to be the predominant item to which the sales-based royalties relate, including milestone payments based on the level of sales, the Company recognizes revenue at the later of (i) when the related sales occur or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). To date, the Company has not recognized any royalty revenue resulting from any of its sublicensing arrangements.    We invoice customers based on our contractual arrangements with each customer, which may not be consistent with the period that revenues are recognized. When there is a timing difference between when we invoice customers and when revenues are recognized, we record either a contract asset (unbilled accounts receivable) or a contract liability (deferred research and development obligations), as appropriate. If upfront fees or considerations related to sublicensing agreement are received prior to the technology transfer, the Company will record the amount received as deferred revenue from licensing agreement.    We are not required to disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed.    The Company adopted a practical expedient to expense sales commissions when incurred because the amortization period would be one year or less.   F- 10     Research and Development Costs   Research and development (“R&D”) costs are expensed as incurred. R&D costs are related to the Company’s internally funded pharmaceutical programs and other governmental and commercial projects.   Research and development costs consist of personnel-related costs, facilities, research-related overhead, services from independent contract research organizations, and other external costs. Research and development costs, during the years ended December 31, 2022 and 2021 were as follows:       Years Ended December 31,       2022     2021   Outside contracted services   $ 3,707,269     $ 7,607,035   Personnel related costs     743,051       773,823   Facilities, overhead and other     51,045       11,512       $ 4,501,365     $ 8,392,370     Foreign Currency Transaction Gain or Loss   The Company and its foreign subsidiary use the U.S. dollar as its functional currency, and initially measure the foreign currency denominated assets and liabilities at the transaction date. Monetary assets and liabilities are then re-measured at exchange rates in effect at the end of each period, and property and non-monetary assets and liabilities are converted at historical rates.   Fair Value Measurements   The Company applies fair value accounting for certain financial instruments that are recognized or disclosed at fair value in the financial statements. The Company defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:     • Level 1 – Quoted prices in active markets for identical assets or liabilities.   • Level 2 – Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.   • Level 3 – Inputs that are generally unobservable and typically reflect management’s estimate of assumptions that market participants would use in pricing the asset or liability.   The Company’s financial instruments included cash and cash equivalents, investment in debt securities, accounts receivable, accounts payable and accrued expenses, accrued payroll and related liabilities, deferred research and development obligations and deposits. The carrying amount of these financial instruments, except for investment in debt securities, approximates fair value due to the short-term maturities of these instruments. The Company’s short-term and long-term investments in debt securities are recorded at amortized cost, and their estimated fair value amounts are provided by the third -party broker service for disclosure purposes.   Non-Marketable Investments   The Company also holds investments in non-marketable equity securities of privately-held companies, which usually do not have a readily determinable fair value. Our policy is to measure these investments at cost less impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer such observable price changes may include instances where the investee issues equity securities to new investors, thus creating a new indicator of fair value, as an example. On a quarterly basis, we perform a qualitative assessment considering impairment indicators to evaluate whether these investments are impaired and also monitor for any observable price changes. If indicators of impairment exist, we will prepare a quantitative assessment of the fair value of our equity investments, which may include using both the market and income approaches which require judgment and the use of estimates, including discount rates, investee revenues and costs, and available comparable market data of private and public companies, among others. Valuations of such privately-held companies are inherently complex and uncertain due to the lack of liquid market for the company’s securities. In addition, such investments are inherently risky in that such companies are typically at an early stage of development, may have no or limited revenues, may not be or may never become profitable, may not be able to secure additional funding or their technologies, services or products may not be successfully developed or introduced into the market.   On January 18, 2023, the Company entered into a Securities Purchase Agreement, under which the Company agreed to sell its equity interest in Alphazyme, LLC (the “Alphazyme Sale Agreement”). After taking into account the adjustments for the transaction and legal expenses, payments to the Company were approximately US$1.27 million in connection with the sale. See Note 8 Subsequent Events for details.   For the year ended December 31, 2021, the Company recorded a gain from the sale of its investment in BDI in other income in the amount of approximately $ 1.6  million, net of transaction and legal expenses.      F- 11     Income Taxes   The Company accounts for income taxes under the asset and liability method in accordance with ASC Topic 740, “Income Taxes”. Under this method, income tax expense /(benefit) is recognized for: (i) taxes payable or refundable for the current year and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of the available positive and negative evidence, it is more likely than not some portion or all the deferred tax assets will not be realized.   In determining taxable income for the Company’s consolidated financial statements, we are required to estimate income taxes in each of the jurisdictions in which we operate. This process requires the Company to make certain estimates of our actual current tax exposure and assessment of temporary differences between the tax and financial statement recognition of revenue and expense. In evaluating the Company’s ability to recover its deferred tax assets, the Company must consider all available positive and negative evidence including its past operating results, the existence of cumulative losses in the most recent years and its forecast of future taxable income. Significant management judgment is required in determining our provision for income taxes, deferred tax assets and liabilities and any valuation allowance recorded against our net deferred tax assets.   The Company is required to evaluate the provisions of ASC 740 related to the accounting for uncertainty in income taxes recognized in a company’s financial statements. ASC 740 prescribes a comprehensive model for how a company should recognize, present, and disclose uncertain positions that the company has taken or expects to take in its tax return. For those benefits to be recognized, a tax position must be more-likely-than- not to be sustained upon examination by taxing authorities. Differences between tax positions taken or expected to be taken in a tax return and the net benefit recognized and measured pursuant to the interpretation are referred to as “unrecognized benefits.” A liability should be recognized (or amount of net operating loss carry forward or amount of tax refundable is reduced) for unrecognized tax benefits, because it represents a company’s potential future obligation to the taxing authority for a tax position that was not recognized as a result of applying the provision of ASC 740.   Comprehensive Income (Loss)   Comprehensive income (loss) includes net income (loss) and other revenue, expenses, gains and losses that are recorded as an element of shareholders’ equity but are excluded from net income (loss) under U.S. GAAP. The Company does not have any significant transactions that are required to be reported in other comprehensive income (loss), and therefore, does not separately present a statement of comprehensive income (loss) in its consolidated financial statements.   Stock-Based Compensation   We recognize all share-based payments to employees, consultants, and our Board of Directors (the “Board”), as non-cash compensation expense, in research and development expenses or general and administrative expenses in the consolidated statement of operations based on the grant date fair values of such payments. Stock-based compensation expense recognized each period is based on the value of the portion of share-based payment awards that is ultimately expected to vest during the period. Forfeitures are recorded as they occur.   For performance-based awards, the Company recognizes related stock-based compensation expense based upon its determination of the potential likelihood of achievement of the specified performance conditions at each reporting date.   Net Loss Per Share   Basic net loss per share is computed by dividing net loss available to common shareholders by the weighted average number of common shares outstanding during the reporting period. Diluted net loss per share adjusts the weighted average number of common stock outstanding for the potential dilution that could occur if common stock equivalents, such as stock options, warrants, restricted stock, restricted stock units and convertible debt, were exercised and converted into common stock, calculated by applying the treasury stock method.   For the years ended December 31, 2022 and 2021 , the effect of the potential exercise of options to purchase  5,031,097  and 4,774,215  shares of common stock, respectively, were excluded from the computation of diluted net loss per share as their effect would have been anti-dilutive.   Recently Accounting Pronouncements   In  June 2016,  the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)  2016 - 13,   Financial Instruments - Credit Losses (Topic   326 ): Measurement of Credit Losses on Financial Instruments , which modifies the measurement of expected credit losses of certain financial instruments. ASU  2016 - 13  will be effective for the Company beginning in the  first  quarter of  2023.  The Company does  not  expect ASU  2016 - 13  to have a material impact on our consolidated financial positions, results of operations, and cash flows.   Other pronouncements issued by the FASB or other authoritative accounting standards group with future effective dates are either not applicable or not significant to our consolidated financial statements.   F- 12       Note 2:      Cash, Cash Equivalent, and Investments   The Company’s investments in debt securities are classified as held-to-maturity and are recorded at amortized cost, and its investments in money market funds are classified as cash equivalents. The following table shows the Company’s cash, available-for-sale securities, and investment securities by major security type as of December 31, 2022 and 2021 :       December 31, 2022                       Gross     Gross               Level             Unrealized     Unrealized                 (1)     Fair Value     Holding Gains     Holding Losses     Adjusted Cost   Cash and Cash Equivalents                                         Cash           $ 26,782     $ —     $ —     $ 26,782   Money Market Funds     1       5,767,490       —       —       5,767,490   Subtotal             5,794,272       —       —       5,794,272   Short-Term Investment Securities (2)                                         Corporate Bonds (3)     2       6,800,062       —       ( 47,208 )     6,847,270   Total           $ 12,594,334     $ —     $ ( 47,208 )   $ 12,641,542         December 31, 2021                     Gross     Gross               Level             Unrealized     Unrealized               (1)     Fair Value     Holding Gains     Holding Losses     Adjusted Cost   Cash and Cash Equivalents                                       Cash         $ 1,377,094     $ —     $ —     $ 1,377,094   Money Market Funds   1       14,371,386       —       —       14,371,386   Subtotal           15,748,480       —       —       15,748,480   Short-Term Investment Securities (2)                                       Corporate Bonds (3)   2       4,509,285       —       ( 2,495 )     4,511,780   Total         $ 20,257,765     $ —     $ ( 2,495 )   $ 20,260,260     Notes: ( 1 ) Definition of the three -level fair value hierarchy:   • Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities   • Level 2 - Other inputs that are directly or indirectly observable in the markets   • Level 3 - Inputs that are generally unobservable ( 2 ) Short-term investment securities will mature within 12 months or less, from the applicable reporting date. ( 3 ) For the years ended December 31, 2022 and 2021 , the Company received discounts of $ 6,280  and paid premiums of $ 283,940 to purchase held-to-maturity investment securities,  respectively.   The Company considers declines in market value of its investment portfolio to be temporary in nature. The Company’s investment policy requires investment securities to be investment grade and held to maturity with the primary objective to maintain a high degree of liquidity while maximizing yield. When evaluating an investment for other-than-temporary impairment, the Company reviews factors such as the length of time and extent to which fair value has been below its cost basis, the financial condition of the issuer and any changes thereto, changes in market interest rates, and whether it is more likely than not the Company will be required to sell the investment before recovery of the investment’s cost basis. As of December 31, 2022 , the Company does not consider any of its investments to be other-than-temporarily impaired.   F- 13       Note 3:      Research and Collaboration Agreements, Sublicense Agreements, and Investments in Privately-Held Companies   A Global Food Ingredient   Company   On May 10, 2022, the Company entered into a Joint Development Agreement (the “JDA”) with a Global Food Ingredient Company (“GFIC”) to develop and manufacture several animal free ingredient products using the Company’s biotechnologies.   Under the terms of the JDA, Dyadic is to develop its proprietary production cell lines for the manufacture of animal free ingredient product candidates. The research collaboration will be fully funded by the GFIC in an amount approximating $ 4.1 million over two years. Dyadic will receive certain defined “Success Fees” (the “Success Fees”), upon researching certain productivity and activity levels and milestones at different stages of the collaboration. Dyadic will also receive a “Commercialization Fee” (the “Commercialization Fee”) of low eight figures upon commercialization, and a royalty payment of low single digits based on commercial sales.    The JDA can be terminated in its entirety along with any sublicense granted, with or without cause by either party, within 90  business days after receipt of written termination notice.    Accounting Treatment     The Company considered the guidance in ASC  808,  Collaborative Arrangements (ASC  808 ) and determined the JDA is  not  applicable to such guidance. The Company concluded that GFIC represented a customer and applied relevant guidance from ASC  606,  Revenue from Contracts with Customers (ASC  606 ) to evaluate the appropriate accounting for the JDA.    The Company identified the following promises under the JDA: ( 1 ) to provide agreed-upon research and development services with GFIC’s proteins; ( 2 ) to nominate a project manager and two additional steering committee members to meet at least quarterly to review the project’s status; ( 3 ) to grant a R&D license in consideration of GFIC’s payment of Service Fees and its other project obligations; and ( 4 ) to grant a commercial license in consideration of and subject to GFIC’s payment of the commercialization fee and royalties.    The Company concluded that, while participation on the joint steering committee was capable of being distinct from other promises, such participation is considered to be part of the research and development services and does not constitute the transfer of a good or service within the context of the JDA. Additionally, the Company concluded that the promise to grant a commercial license is a contingent promise based upon the success of the research project which is outside the control of both the Company and the GFIC, and therefore, it should be accounted for in the same way as a customer option. The Company further concluded that the contingent promise to grant a commercial license is not considered a material right and does not give rise to a separate performance obligation.    Based on management’s assessment, the Company concluded the agreed-upon research and development services and the R&D license under the R&D plan should be combined and accounted for as one single performance obligation in consideration of the service fees. Accordingly, the Company recorded the service fees as research and development revenue using the cost-based input method in accordance with the Company’s policy (Note  1 ).    Under the JDA, the Company is also eligible to receive Success Fees upon certain milestones, a Commercialization Fee upon commercialization, and future sales-based royalty payments. The Success Fees are considered constrained variable considerations and excluded from the transaction price at inception. The Company will re-evaluate the Success Fees and estimate the transaction price in each reporting period and as uncertain events are resolved or other changes in circumstances occur. The Company will  not  recognize revenue related to the Commercialization Fee and sales-based royalty until the associated event occurs.   For the year ended December 31, 2022 , the Company recorded research and development revenues of approximately $ 790,000  in connection with the JDA.   F- 14     Phibro/Abic   On February 10, 2022, the Company entered into an exclusive sub-license agreement with Abic Biological Laboratories Ltd. (“Abic”), an affiliate of Phibro Animal Health Corporation (“Phibro”) to provide services for a targeted disease (the “Phibro/Abic Agreement”). The Phibro/Abic Agreement was an addendum to the initially non-exclusive sub-license agreement the Company signed with Phibro on July 1, 2020. According to the Phibro/Abic Agreement, the Company received an exclusivity payment in April 2022. In July 2022, the Company expanded the license agreement to include an additional research project to develop another animal vaccine for livestock.    Phibro/Abic may terminate the Phibro/Abic Agreement in its entirety, or any sublicense granted, in each case with or without cause at any time upon 90 days’ prior written notice to Dyadic.    Accounting Treatment   The Company considered the guidance in ASC 808, Collaborative Arrangements (ASC 808 ) and determined the Phibro Agreement is not applicable to such guidance. The Company concluded that Phibro/Abic represented a customer and applied relevant guidance from ASC 606, Revenue from Contracts with Customers (ASC  606 ) to evaluate the appropriate accounting for the Phibro/Abic Agreement.    The Company identified the following obligations under the Phibro/Abic Agreement: ( 1 ) an exclusive right to utilize the C1 -cell protein production platform for certain disease; ( 2 ) our obligation to provide agreed-upon research and development services; ( 3 ) research report to be provided to Phibro/Abic based on the requirements of the agreement.   Based on management’s assessment, the Company concluded two performance obligations should be accounted for separately: ( 1 ) the agreed-upon research and development services, and ( 2 ) the right to exclusively access and use C1 -cell protein production platform for certain disease.   Accordingly, the Company records the R&D services as research and development revenue using the cost-based input method in accordance with the Company’s policy (Note 1 ).    Under the Phibro/Abic Agreement, the Company has received an exclusivity payment in April 2022 and is elgible to receive certain milestone payment upon regulatory approval, and future sales-based royalty payments. The milestone payment is considered constrained variable consideration and excluded from the transaction price at inception. The Company will re-evaluate the transaction price in each reporting period and as uncertain events are resolved or other changes in circumstances occur. The Company will not recognize revenue related to sales-based royalty until the associated event occurs.     Janssen   On December 16, 2021, the Company entered into a Research, License, and Collaboration Agreement (the “Janssen Agreement”) for the manufacture of therapeutic protein candidates using its C1 -cell protein production platform with Janssen Biotech, Inc., one of the Janssen Pharmaceutical Companies of Johnson & Johnson (“Janssen”). Pursuant to the terms of the Janssen Agreement: (i) Janssen will pay Dyadic an upfront payment of $ 500,000 for a non-exclusive license to utilize the C1 -cell protein production platform to develop C1 production cell lines for the manufacturing of Janssen’s therapeutic protein candidates against several biologic targets, (ii) Janssen will provide R&D funding up to €1.6 million to develop and assess C1 production cell lines for its product candidates, (iii) Janssen will have an option to pay a mid- seven figure payment for an exclusive license from Dyadic to use the C1 -cell protein production platform for the manufacturing of therapeutic proteins directed to one specific target, and upon exercise, Janssen would have the right to add additional non-exclusive targets to the collaboration and Dyadic would complete the technology transfer of the C1 -cell protein production platform, fully enabling Janssen to internally develop C1 cell lines against licensed targets, and upon successful completion of the technology transfer, Dyadic is eligible to receive a milestone payment in the low seven figures, (iv) for each product candidate, Dyadic could receive development and regulatory milestones in the mid- seven figures, and (v) Dyadic could receive aggregate commercial milestone payments in the low nine figures per product, subject to a limit on the number of such products, with the amount depending on the cumulative amount of active pharmaceutical ingredient produced by Janssen for each product manufactured with Dyadic’s C1 -cell protein production platform.   Janssen may terminate the Janssen Agreement in its entirety, or on a country-by-country or other jurisdiction-by-other jurisdiction basis, for any or no reason, upon 90 days’ prior written notice to Dyadic.   F- 15     Accounting Treatment   The Company applied ASC 808, Collaborative Arrangements (ASC 808 ) and determined the Janssen Agreement is not applicable to such guidance. The Company concluded that Janssen represented a customer and applied relevant guidance from ASC 606, Revenue from Contracts with Customers (ASC  606 ) to evaluate the appropriate accounting for the Janssen Agreement.    The Company identified the following promises under the Janssen Agreement: ( 1 ) A right to access the C1 -cell protein production platform; ( 2 ) our obligation to provide agreed upon research and development services under the R&D Funding; ( 3 ) participation in the joint steering committee; ( 4 ) the reservation of targets; ( 5 ) the grant of option to obtain a research license of intellectual property and know-how rights of its C1 -cell protein production platform to produce target proteins; ( 6 ) our obligation to complete tech transfer activities upon the exercise of a research license; and ( 7 ) the options to obtain a commercial license and an exclusive license on specific targets.   The Company concluded that the research and development services under the R&D Funding represents a separate unit of account, because it is a prerequisite to the license agreement and a third -party contract research organization will be used to conduct the research. The Company also concluded that, while participation on the joint steering committee was capable of being distinct, participation is part of the research and development services and does not constitute the transfer of a good or service to Janssen within the context of the contract.   Other promises including the reservation of targets and tech transfer are not capable of being distinct from the licenses within the context of the contract and should therefore not be treated as a separate performance obligation. Additionally, at contract inception, the Company evaluated Janssen’s options for a research license, commercial license and to exercise exclusive rights on certain targets in order to determine whether these options to purchase additional license rights at their standalone selling prices provide a material right (i.e., an optional good or service offered for free or at a discount) to the customer. The Company concluded that these options in the Janssen Agreement are not material rights and do not give rise to a separate performance obligation. Instead, these options are deemed as marketing offers, and additional option fee payments are recognized or being recognized as revenue when Janssen exercises the option. The exercise of an option that does not represent a material right is treated as a separate contract for accounting purposes.   Based on management’s assessment, the Company concluded two performance obligations should be accounted for separately: ( 1 ) the agreed-upon research and development services, and ( 2 ) the right to access C1 -cell protein production platform under the research plan. Accordingly, the Company will record the €1.6 million of R&D Funding as research and development revenue using the cost-based input method in accordance with the Company’s policy (See Note 1 ).   As noted above, the Company received a non-refundable upfront payment of $ 0.5  million to reserve the initial protein targets until Janssen decides to exercise an option to license in the future, which represents a right to access the C1 -cell protein production platform prior to using it. The Company will recognize the upfront payment of $ 0.5 million over the target reservation period, during which Janssen can obtain a research and/or commercial license and/or an exclusive license on specific targets, or recognize in full when the contract is terminated.    The Company also excluded option exercise fees and future milestone payments that the Company was eligible to receive under the Janssen Agreement, from the initial transaction price. The Company will not recognize revenue related to option exercise payments and future milestone payments until the associated event occurs, or relevant thresholds are met. The Company will re-evaluate the transaction price in each reporting period and as uncertain events are resolved or other changes in circumstances occur.   As of  December 31, 2022 ,   the deferred license revenue, current and non-current portion were approximately $ 176,000  and $ 176,000 , respectively. For the years ended December 31, 2022  and 2021, the Company recorded research and development revenues of $ 539,000 and $0, respectively, in connection with the Janssen Agreement. As of  December 31, 2022 and 2021 , approximately $ 121,000  and $ 0 of accounts receivable were related to the Janssen Agreement, respectively.      IDBiologics, Inc.    On July 8, 2020, the Company entered into a Common Stock Purchase Agreement (the “IDBiologics Agreement”) with IDBiologics, Inc (“IDBiologics”). IDBiologics is a private biotechnology company focused on the development of human monoclonal antibodies for the treatment and prevention of serious infectious diseases. The Company was founded in 2017 and seeded by Vanderbilt University Medical Center in response to the repeated threats of epidemics around the world including Ebola in West Africa and Zika in the Americas. IDBiologics is developing a portfolio of monoclonal antibodies against SARS-CoV- 2, influenza and Zika viruses.   Pursuant to the term of the IDBiologics Agreement, on July 8, 2021,  Dyadic received 129,661 shares of IDBiologics’ common stock, which represent 0.37 % of IDBiologics’ outstanding equity, in exchange of a feasibility study performed by Dyadic. Dyadic provided services including the use of Dyadic’s C1 -cell technology to express a SARS-CoV- 2 monoclonal antibody which IDBiologics licensed from the Vanderbilt Vaccine Center. The Company determined not to record the basis for its equity interest in IDBiologics because the fair value amount of the service provided is considered immaterial.   The Company evaluated the nature of its equity interest in IDBiologics and determined that IDBiologics is a VIE due to the capital structure of the entity. However, the Company is not the primary beneficiary of IDBiologics as Dyadic does not have the power to control or direct the activities of IDBiologics that most significantly impact the VIE. As a result, the Company does not consolidate its investment in IDBiologics.    On April 25, 2021, the Company entered into a project agreement (the “Project Agreement”) to provide additional research services to IDBiologics.   For the years ended December 31, 2022 and 2021 , the Company recorded research and development revenues of approximatel y $ 109,000 and $ 194,000 , respectively, in connection with IDBiologics. As of  December 31, 2022 and 2021 , $ 0 and approximately $ 27,000 of unbilled accounts receivable were related to IDBiologics, respectively.    F- 16     Alphazyme   On May 5, 2019, the Company entered into a sub-license agreement (the “Alphazyme Sub-License Agreement”) with Alphazyme, LLC (“Alphazyme”). Under the terms of the Alphazyme Sub-License Agreement, the Company has granted to Alphazyme, subject to the terms of the license agreement entered into between the Company and Danisco US, Inc. on December 31, 2015, a sub-license to certain patent rights and know-how related to Dyadic’s proprie tary C1 -cell protein production platform for the purpose of commercializing certain pharmaceutical products that are used as reagents to catalyze a chemical reaction to detect, measure, or be used as a process intermediate to produce a nucleic acid as a therapeutic or diagnostic agent.   On June 24, 2020, the Company entered into an Amended and Restated Non-Exclusive Sub-License A greement (the “Amended Sub-License Agreement”) with Alphazyme to amend and restate the Alphazyme Sub-License Agreement. Pursuant to the Amended Sub-License Agreement and in consideration of Dyadic’s transfer of its C1 -cell protein production platform, Alphazyme issued  2.50 % of the Class A shares of Alphazyme to Dyadic, and Dyadic became a party to the Alphazyme Limited Liability Company Agreement pursuant to which the Company will agree to certain customary rights, covenants and obligations. In addition, and subject to achieving certain milestones, Alphazyme is obligated to pay a potential milestone payment and royalties on net sales, if any, which incorporate Dyadic’s proprietary C1 -cell protein production platform.    On December 1, 2020, an Amended and Restated Limited Liability Company Agreement with Alphazyme (the “Amended Alphazyme LLC Agreement”) was entered into. Under the Amended Alphazyme LLC Agreement, Alphazyme obtained additional capital contribution and Dyadic’s ownership was diluted to 1.99 %.   The Company evaluated the nature of its equity interest investment in Alphazyme and determined that Alphazyme is a VIE due to the capital structure of the entity. However, the Company is not the primary beneficiary of Alphazyme as Dyadic does not have the power to control or direct the activities of Alphazyme that most significantly impact the VIE. As a result, the Company does not consolidate its investment in Alphazyme. The Company reports its investment in Alphazyme under the cost method of accounting, given that it does not have the ability to exercise significant influence or control over Alphazyme.    For the year ended December 31, 2020,  the Company recorded a gain of $ 284,709 from  its investment in Alphazyme resulting from a third -party capital contribution obtained by Alphazyme. As of December 31, 2021, the Company does not consider its investment in Alphazyme to be impaired, as there was no event or transaction that would change the value of this investment.    On January 18, 2023, the Company entered into a Securities Purchase Agreement, under which the Company agreed to sell its equity interest in Alphazyme, LLC (the “Alphazyme Sale Agreement”). Net proceeds to the Company were approximately $ 1.27 million in connection with the sale. The Company also has the potential to receive additional payments based on the future sales of Alphazyme’s existing products, pursuant to the Alphazyme Sale Agreement.   The Amended Sublicense Agreement between Dyadic and Alphazyme, which was previously entered on June 24, 2020, remains in effect. Under the Amended Alphazyme Sub-License Agreement, Dyadic is entitled to potential milestone and royalty payments upon the commercialization of Alphazyme products using Dyadic’s proprietary C1 -cell protein production platform.   BDI    On June 30, 2017, the Company entered into a strategic Research Services Agreement (the “RSA”) with Biotechnology Developments for Industry in Pharmaceuticals, S.L.U. (“BDI Pharma”), and with VLP The Vaccines Company, S.L.U. (“VLPbio”), both of which are subsidiaries of Biotechnology Developments for Industry, S.L., a Spanish biotechnology company (“BDI Holdings” and together with BDI Pharma and VLPbio, “BDI”).   The Company paid EUR €1.0  million (the “RSA Initial Payment”) in cash to engage BDI to develop designated C1 based product candidates and further improve the C1 manufacturing process, in consideration of which Dyadic also received a 16.1 % equity interest in BDI Holdings and a 3.3 % equity interest in VLPbio. Under the RSA, BDI is obligated to spend a minimum amount of EUR €936,000 over two years for the research and development project.    The Company concluded that BDI is not a Variable Interest Entity (“VIE”), because BDI has sufficient equity to finance its activities without additional subordinated financial support and its at-risk equity holders have the characteristics of a controlling financial interest. Additionally, Dyadic is not the primary beneficiary of BDI as Dyadic does not have the power to control or direct the activities of BDI or its operations. As a result, the Company does not consolidate its investments in BDI, and the financial results of BDI are not included in the Company’s consolidated financial results.    The Company performed a valuation analysis of the components of the transaction and concluded that the fair value of BDI equity interest was considered immaterial, the RSA Initial Payment of approximately USD $ 1.1 million (EUR €1.0 million) was accounted for as a prepaid research and development collaboration payment on our consolidated balance sheet, and the collaboration payment under the RSA paid by Dyadic were expensed as the related research services were performed by BDI.   On July 26, 2021, the Company entered (i) a Sale and Purchase of Shares Agreement under which the Company agreed to sell its 16.1 % equity interest in BDI Holdings, and (ii) a Sale and Purchase of Shares Agreement under which the Company agreed to sell its 3.3 % equity interest in VLPBio (together the “BDI Sale”). In connection with the closing of the BDI Sale, the Company received approximately $ 1.6  m illion, net of transaction and legal expenses in August 2021. The gain generated from the BDI Sale was recorded in other income.   In connection with the BDI Sale, the Company also entered into an amendment to the Service Framework Agreement (the “Amended SFA”) with BDI Pharma. Under the Amended SFA, the Company maintains the right to engage in research and development projects at BDI Pharma until June 30, 2025, with the non-compete term extending to June 30, 2030, without any other material terms and conditions changed.   For the years ended December 31, 2022 and 2021, there was no research and development revenue or research and development expenses associated with the Amended SFA.   Novovet and Luina Bio    On April 26, 2019, the Company entered into a sub-license agreement (the “Luina Bio Sub-License Agreement”) with Luina Bio Pty Ltd. (“Luina Bio”) and Novovet Pty Ltd (“Novovet”). Under the terms of the Luina Bio Sub-License Agreement, the Company granted to Novovet, subject to the terms of the license agreement entered into between the Company and Danisco US, Inc. on December 31, 2015, a worldwide sub-license to certain patent rights and know-how related to Dyadic’s proprietary C1 -cell protein production platform for the exclusive and sole purpose of commercializing certain targeted antigen and biological products for the prevention and treatment of various ailments for companion animals.   F- 17     In consideration of the license granted pursuant to the Luina Bio Sub-License Agreement, Dyadic received a 20 % equity interest in Novovet (“Novovet Up-Front Consideration”) in accordance with the terms of Novovet’s Shareholder Agreement (“Shareholders Agreement”) and will receive a percentage of royalties on future net sales and non-sales revenue, if any, which incorporates Dyadic’s proprietary C1 -cell protein production platform.   The Company evaluated the nature of its equity interest investment in Novovet and determined that Novovet is a VIE, because Novovet does not have sufficient equity to finance its activities without additional financial support from third party investors or lenders. However, the Company is not the primary beneficiary of Novovet as Dyadic does not have the power to control or direct the activities of Novovet that most significantly impact the VIE. As a result, the Company will not consolidate its investment in Novovet, but account for under the equity method investment, given that it has the ability to exercise significant influence, but not control, over Novovet.   To date Novovet has not raised the capital required to move this opportunity forward, and therefore, the Company has not transferred its C1 -cell protein production platform to Novovet. Therefore, the Novovet Up-Front Consideration received under the Luina Bio Sub-License Agreement, in the form of a 20 % equity interest in Novovet, does not yet meet the revenue recognition criteria under ASC 606.   On February 15, 2022, the Company sent a letter to Luina Bio Pty Ltd and Novovet Pty Ltd, indicating its intention to terminate the Luina Bio Sub-License Agreement.    On  June 29, 2022,  the Company sent a letter to Luina Bio Pty Ltd and Novovet Pty Ltd, to transfer our shares of Novovet Pty Ltd back to Novovet pursuant to the Shareholders Agreement.     Note 4:      Income Taxes   For the year ended December 31, 2022 , there was  no provision for income taxes or unrecognized tax benefits recorded.   The significant components of gain (loss) before income taxes are as follows:       Years Ended December 31,       2022     2021   U.S. operations   $ ( 9,828,427 )   $ ( 13,115,869 ) Foreign operations     93,169       45,618   Total loss before provision for income taxes   $ ( 9,735,258 )   $ ( 13,070,251 )   The Company has no current or deferred income tax for the years ended December 31, 2022 and 2021 .   The income tax provision differs from the expense amount that would result from applying the federal statutory rates to income before income taxes due to permanent differences, state income taxes and a change in the deferred tax valuation allowance.   The reconciliation between the statutory tax rate and the Company’s actual effective tax rate is as follows:       Years Ended December 31,       2022     2021   Tax at U.S. statutory rate     ( 21.00 )%     ( 21.00 )% State taxes, net of federal benefit     ( 4.35 )     ( 4.52 ) Non-deductible items     —       ( 0.84 ) Change in valuation allowance     24.77       28.09   True-up adjustment     0.34       0.06   Foreign operations     0.24       0.09   Change in tax rate     —       ( 1.88 ) Other     —       —   Effective income tax rate     — %     — %   F- 18     The significant components of the Company’s net deferred income tax assets are as follows:       December 31,       2022     2021   Stock option expense   $ 1,341,900     $ 947,400   NOL carryforward     11,524,900       10,509,900   Research and development credits     1,623,100       1,656,500   Section 174 - R&D expenses     1,046,400       —   Unrealized gain from investment in Alphazyme     —       ( 72,100 ) Other     ( 78,200 )     ( 6,100 ) Deferred tax asset, net of deferred tax liabilities     15,458,100       13,035,600   Valuation allowance     ( 15,458,100 )     ( 13,035,600 ) Net deferred tax asset   $ —     $ —     Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. In assessing the realizability of deferred tax assets, Management evaluates whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based on Management’s evaluation, the net deferred tax asset, was offset by a full valuation allowance as of December 31, 2022  and 2021.     The Company had net operating loss (“NOL”) carryforwards available as of December 31, 2022, and 2021, in the amount of approximately $ 44.0 million and $ 39.9 million, respectively. Approximately $ 41.1 million of the net operating loss carryforwards will be carried forward indefinitely and will be available to offset 80 % of taxable income. The remaining amount of the net operating loss carryforwards will expire at varying dates through 2037.   The Tax Cuts and Jobs Act eliminated the current year deduction election for research and experimental expenditures. Instead, a taxpayer must charge such expenditures to a capital account and is allowed to amortize such expenditures ratably over a five -year period (or fifteen -year period for expenditures attributable to foreign research), beginning with the midpoint of the tax year in which such expenditures are paid or incurred.     Note 5:      Commitments and Contingencies   Leases   Jupiter, Florida Headquarters   The Company’s corporate headquarters are located in Jupiter, Florida. The Company occupies approximately 2,000 square feet with a monthly rental rate and common area maintenance charges of approximately $ 4,500 . The lease will expire on September 1, 2023. The Company will reconsider the square footage of the leased space to align with the staffing requirements of the future operations of the Company.    The Netherlands Office   The Company maintains a small satellite office in Wageningen, The Netherlands. The Company occupies a flexible office space for an annual rental rate of approximately $ 4,000 . The lease expires on January 31, 2024, and thereafter, the Company will reconsider the leased space to a lign with the future operations of the Company.   VTT Research Contract Extension   On September 12, 2022, the Company extended its research contract (“Amendment”) through December 2023 with VTT Technical Research Centre of Finland Ltd. (“VTT”). Under the terms of this Amendment, Dyadic will pay VTT a total of approximately EUR €1.1 million over  fifteen months to continue developing Dyadic’s C1 -cell protein production platform for therapeutic protein production, including C1 host system improvement, glycoengineering, and management of third -party target protein projects. Dyadic retains the right to terminate the Contract with 90 days’ notice.   Purchase Obligations   The following table provides a schedule of commitments related to agreements to purchase certain services in the ordinary course of business, as of December 31, 2022 :   2023   $ 2,912,761   2024     164,794   2025     40,951   Total   $ 3,118,506     The purchase obligations in the table above are primarily related to our contracts with the Company’s contract research organizations to provide certain research services. The contracts set forth the Company’s minimum purchase requirements that are subject to adjustments based on certain performance conditions. All contracts expire in or prior to 2024.   F- 19     Legal Proceedings   We are not currently involved in any litigation that we believe could have a materially adverse effect in our financial condition or results of operations. From time to time, the Company is subject to legal proceedings, asserted claims and investigations in the ordinary course of business, including commercial claims, employment and other matters, which management considers immaterial, individually and in the aggregate. The Company makes a provision for a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. The requirement for these provisions is reviewed at least quarterly and adjusted to reflect the impact of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular case. Litigation is inherently unpredictable and costly. Protracted litigation and/or an unfavorable resolution of one or more of proceedings, claims or investigations against the Company could have a material adverse effect on the Company’s consolidated financial position, cash flows or results of operations.       Note 6:      Share-Based Compensation   Description of Equity Plans   The 2021 Equity Incentive Award Plan (the “2021 Plan”) was adopted by the Company's Board of Directors on April 9, 2021, and approved by the Company’s Annual Meeting of Shareholders (the “Annual Meeting”) on June 11, 2021. The 2021 Plan serves as a successor to the Company’s 2011 Equity Incentive Plan (the “2011 Plan”). Since the effective date of the 2021 Plan, all equity awards were made from the 2021 Plan, and no additional awards will be granted under the 2011 Plan. The 2021 Plan is reserved for issuance of a variety of share-based compensation awards, including stock options, restricted stock awards, restricted stock unit awards, performance award, dividend equivalents award, deferred stock awards, stock payment awards and stock appreciation rights. The 2021 Plan increased the number of shares available for grant by  3,000,000  in addition to the number of shares remaining available for the grant of new awards under the 2011  Plan as of April 16, 2021.   As of December 31, 2022 , the Company had 5,031,097  stock options outstanding and an additio nal  3,672,561 share s of common stock available for grant under the 2021 Plan. As of December 31, 2021 , there were 4,774,215  stock options outstanding and an additional 4,263,386  shares of common stock available for grant under the 2021 Plan.   Stock Options   Options are granted to purchase common stock at prices that are equal to the fair value of the common stock on the date the option is granted. Vesting is determined by the Board of Directors at the time of grant. The term of any stock option awards under the Company’s 2011 Plan and 2021 Plan is ten years, except for certain options granted to the contractors which are either one or three years.   The grant-date fair value of each option grant is estimated using the Black-Scholes option pricing model and amortized on a straight-line basis over the requisite service period, which is generally the vesting period, for each separately vesting portion of the award as if the award was, in substance, multiple awards. Use of a valuation model requires management to make certain assumptions with respect to selected model inputs, including the following:   Risk-free interest rate . The risk-free interest rate is based on U.S. Treasury rates with securities approximating the expected lives of options at the date of grant.   Expected dividend yield . The expected dividend yield is zero, as the Company has never paid dividends to common shareholders and does not currently anticipate paying any in the foreseeable future.   Expected stock price volatility. The expected stock price volatility was calculated based on the Company’s own volatility. The Company reviews its volatility assumption on an annual basis and has used the Company’s historical volatilities.    Expected life of option. The expected life of option was based on the contractual term of the option and expected employee exercise and post-vesting employment termination behavior. The Company uses the weighted average vesting period and contractual term of the option as the best estimate of the expected life of a new option, except for the options granted to the CEO (i.e., 5 or 10 years) and certain contractors (i.e., 1  or 3 years).   The assumptions used in the Black-Scholes option pricing model for stock options granted for the years ended  December 31, 2022 and 2021  are as follows:       Years Ended December 31,       2022     2021   Risk-free interest rate     1.40 % - 3.24 %       0.05 % - 1.24 %   Expected dividend yield     —%       —%   Expected stock price volatility     61.30 % - 61.58 %       54.52 % - 60.80 %   Expected life of options (in years)     5.5 - 6.25       0.5 - 6.25     F- 20     The following table summarizes the combined stock option activity under the Company’s Equity Compensation Plans:                       Weighted-                               Average                       Weighted-     Remaining     Aggregate               Average     Contractual     Intrinsic       Shares     Exercise Price     Term (Years)     Value   Outstanding at December 31, 2020     4,638,390     $ 2.44       5.64     $ 13,701,610   Granted     870,825       5.11                   Exercised     ( 735,000 )     1.67                   Expired     —       —                   Canceled     —       —                   Outstanding at December 31, 2021     4,774,215     $ 3.04       6.14.     $ 8,413,444   Granted (1)     865,825       4.43                   Exercised (2)     ( 333,943 )     1.63                   Expired (3)     ( 200,000 )     5.47                   Canceled (4)     ( 75,000 )     4.81                   Outstanding at December 31, 2022     5,031,097     $ 3.25       5.75     $ 13,000                                     Exercisable at December 31, 2022     3,655,280     $ 2.80       4.75     $ 13,000     Notes: ( 1 ) Represents the following stock options granted:   • Annual share-based compensation awards on January 3,  2022, including: (a) 325,000 stock options with an exercise price of $ 4.81 per share granted to executives and key personnel, upon one year anniversary, or vesting annually in equal installments over four years, (b) 75,000 performance-based stock option to a key personnel with an exercise price of  $4.81 per share, vesting upon the achievement of specified performance conditions, (c) 277,500 stock options with an exercise price of $4.81 per share granted to members of the Board of Directors, vesting upon one year anniversary, (d) 23,325 stock options with an exercise price of $ 4.81  per share granted to employees, vesting annually in equal installments over four years and (e) 15,000 stock options with an exercise price of $ 4.81  per share granted to a consultant, vesting upon one year anniversary.   • One-time award on June 10, 2022, 150,000 stock options with an exercise price of $ 2.60 per share granted to the Board of Directors, vesting in one year from the grant date as a result of a reduction in director cash compensation. ( 2 ) Represents the following stock options exercised:   • 150,000 stock options exercised at $ 1.87 , 40,000 stock options exercised at $ 1.63 , 8,943  stock options exercised at $ 1.57 , and 50,000 stock options exercised at $ 1.44 , 50,000  stock options exercised at $ 1.39 , and 35,000 stock options exercised at $ 1.21 . ( 3 ) Represents the following stock options expired: 30,000 stock options with exercise price of $ 6.87 , 90,000 stock options with exercise price of $ 5.27 , 80,000 stock option with exercise price of $ 5.16 . ( 4 ) Represents the cancellation of performance-based stock options granted to the Company’s former Managing Director of Business Development and Licensing, who separated from the Company on April 22, 2022.   The weighted average grant-date fair market value of stock options granted for the years ended December 31, 2022 and 2021 was $ 2.49 and $ 2.49 , respectively, bas ed on the Black-Scholes option pricing model. The intrinsic value of options exercised for the years ended December 31, 2022 and 2021 was $ 365,000  and $ 1,730,000 , respectively.   As of December 31, 2022 and 2021 , total unrecognized compensation cost related to non-vested stock options granted under the Company’s equity compensation plans was $ 919,000  and $ 857,000 , respectively, which is expected to be recognized over a weighted average period of 2.76  years and 3.07  years, respectively. The Company will adjust unrecognized compensation cost for actual forfeitures as they occur.   Compensation Expenses   We recognize all share-based payments to employees, consultants, and our Board, as non-cash compensation expense, in research and development expenses or general and administrative expenses in the consolidated statement of operations, and these charges had no impact on the Company’s reported cash flows. Stock-based compensation expense is calculated on the grant date fair values of such awards, and recognized each period based on the value of the portion of share-based payment awards that is ultimately expected to vest during the period. Forfeitures are recorded as they occur.   F- 21     For performance-based awards, the Company recognizes related stock-based compensation expenses based upon its determination of the potential likelihood of achievement of the specified performance conditions at each reporting date. There was no performance-based award recognized during the years ended  December 31, 2022 and 2021 .   Total non-cash stock option compensation expense was allocated among the following expense categories:       Years Ended December 31,       2022     2021   General and administrative   $ 1,661,025     $ 1,571,328   Research and development     227,919       212,774   Total   $ 1,888,944     $ 1,784,102       Note 7:      Shareholders’ Equity   Issuances of Common Stock   For the years ended December 31, 2022 and 2021  there were 333,943  and 735,000  shares of the Company's common stock issued, as a result of the exercise of stock options, with a weighted average issue price per share of $ 1.63  and $ 1.67 , respectively.   Treasury Stock   As of December 31, 2022 , and 2021 , there were 12,253,502  shares of common stock held in treasury, at a cost of approximately $ 18.9 million, representing the purchase price on the date the shares were surrendered to the Company.   Open Market Sale Agreement℠   On August 13, 2020, we entered into an Open Market Sale Agreement℠ with Jefferies LLC (“Jefferies”), with respect to an at the market offering program under which we may offer and sell, from time to time at our sole discretion, shares of our common stock, par value $ 0.001  per share, having an aggregate offering price of up to $ 50.0  million through Jefferies as our sales agent or principal.   We have not and are not obligated to sell any shares under the sale agreement. Subject to the terms and conditions of the sale agreement, Jefferies will use commercially reasonable efforts, consistent with its normal trading and sales practices and applicable laws and regulations, to sell shares of our common stock from time to time based upon our instructions, including any price, time or size limits or other customary parameters or conditions we specify, subject to certain limitations. Under the sale agreement, Jefferies may sell shares of our common stock by any method permitted by law deemed to be an “at the market offering” as defined in Rule 415 (a)( 4 ) under the Securities Act of 1933, as amended.   We will pay Jefferies a commission equal to  3.0 % of the gross proceeds from each sale of shares of our common stock sold through Jefferies under the sale agreement and will provide Jefferies with customary indemnification and contribution rights. In addition, we agreed to reimburse certain legal expenses and fees by Jefferies in connection with the offering up to a maximum of $ 50,000 , in addition to certain ongoing disbursements of Jefferies’ counsel, if required. The sale agreement will terminate upon the sale of all $ 50.0  million of shares under the sale agreement, unless earlier terminated by either party as permitted therein.   The issuance and sale, if any, of shares of our common stock by us under the sale agreement will be made pursuant to a registration statement on Form S- 3 filed with the SEC on August 13, 2020 and declared effective by the SEC on August 25, 2020 and the accompanying Prospectus, as supplemented by a Prospectus Supplement. As of the date of this filing, there have been no sales made under the Open Market Sale Agreement℠, and we have no immediate plans to sell any securities under this program to fund our near-term business plan.   F- 22       Note 8:      Subsequent Events   For purpose of disclosure in the consolidated financial statements, the Company has evaluated subsequent events through March 29, 2023 , the date the consolidated financial statements were available to be issued. Except as discussed below, management is not aware of any material events that have occurred subsequent to the balance sheet date that would require adjustment to, or disclosure in the accompanying financial statements.   Stock Option Grant   On January 3, 2023, the Company granted an annual stock option award with an exercise price of $ 1.38 , including: (a) 406,250 stock options granted to executives and key personnel, vesting upon one year anniversary, or annually in equal installments over four years, (b) 262,500 stock options granted to members of the Board of Directors, vesting upon one year anniversary, (c) 24,100  stock options granted to employees, vesting annually in equal installments over four years, and (d) 15,000 stock options granted to a consultant, vesting upon one year anniversary.    On January 3, 2023, the Company granted 247,961 restricted stock units (“RSUs”) vested in full, to executives and key personnel in lieu of cash bonus earned for the year ended 2022. The Company also granted 163,044 RSUs, vesting upon  one year anniversary, to the Board of Directors as a result of reduction in director cash compensation of 2023.  The grant of these RSUs has been approved by the Compensation Committee of the Board of Directors in November 2022.   Sale of Equity Interest in Alphazyme    On January 18, 2023, the Company entered into a Securities Purchase Agreement, under which the Company agreed to sell its equity interest in Alphazyme, LLC. After taking into account the adjustments for the transaction and legal expenses, payments to the Company were approximately $ 1.27 million in connection with the sale. The Company also has the potential to receive additional payments based on the future sales of Alphazyme’s existing products, pursuant to the Alphazyme Sale Agreement.   The Amended and Restated Non-Exclusive Sublicense Agreement between Dyadic and Alphazyme, which was previously entered on June 24, 2020, remains in effect, under which, Dyadic is entitled to potential milestone and royalty payments upon the commercialization of Alphazyme products using Dyadic’s proprietary C1 -cell protein production platform.           F-23