What changed in this filing

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Item 1. Financial Statements

2024-08-13 compared with 2024-05-14 · 207 added, 168 removed, 624 unchanged (38% of the section changed)

3 unchanged sentences

CONSOLIDATED BALANCE SHEETS

March 31, 2024

June 30, 2024

December 31, 2023

45 unchanged sentences

Authorized shares - 100,000,000 ;

issued shares - 41,440,316 and 41,064,563 , outstanding shares - 29,186,814 and 28,811,061 as of March 31, 2024, and December 31, 2023, respectively

issued shares - 41,731,141 and 41,064,563 , outstanding shares - 29,477,639 and 28,811,061 as of June 30, 2024, and December 31, 2023, respectively

41,732 41,065

13 unchanged sentences

CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Research and development revenue

20 unchanged sentences

CONSOLIDATED STATEMENTS OF STOCKHOLDERS ’ EQUITY

Three Months Ended March 31, 2024

Six Months Ended June 30, 2024

Treasury Stock

4 unchanged sentences

March 31, 2024

Three Months Ended March 31, 2023

Stock-based compensation expense

Issuance of common stock upon vesting of restricted stock units

Issuance of common stock upon exercise of stock options

Issuance of common stock upon settlement of convertible debt

June 30, 2024

Six Months Ended June 30, 2023

Treasury Stock

4 unchanged sentences

March 31, 2023

Stock-based compensation expense

June 30, 2023

The accompanying notes are an integral part of these unaudited consolidated financial statements.

2 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows from operating activities

27 unchanged sentences

Effect of exchange rate changes on cash

Net increase in cash and cash equivalents

Net (decrease) increase in cash and cash equivalents

Cash and cash equivalents at beginning of period

2 unchanged sentences

Vesting of restricted stock units

Conversion of convertible notes

Cash paid for interest

The accompanying notes are an integral part of these unaudited consolidated financial statements.

9 unchanged sentences

DD) (the “DuPont Transaction”) on December 31, 2015, the Company has been focused on building the C1 -cell protein production platform 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 fromC1 -cells are protein antigens, ferritin nanoparticles, virus-like particles ("VLPs”), monoclonal antibodies ("mAbs”), Bi/Tri-specific antibodies, Fab antibody fragments, Fcfusion proteins, as well as other therapeutic enzymes and proteins.

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, Fcfusion 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.

11 unchanged sentences

The conversion price is $ 1.79 per share of the Common Stock, which is equal to 125 % of the trailing 30 -day VWAP of the Common Stock ending on the trading day immediately preceding the date of the securities purchase agreement.

As of June 30, 2024, $ 400,000 of the Convertible Notes were converted into 223.463 sh ares of Common Stock.

For more information regarding the Convertible Notes, including the covenants related thereto see Note 4 to the Consolidated Financial Statements.

27 unchanged sentences

The Company currently deals with four reputable financial institutions and has not experienced any losses in those accounts.

For the three months ended March 31, 2024 and 2023 , the Company’s revenue was generated from ten and seven customers, respectively.

For the three months ended June 30, 2024 and 2023 , the Company’s revenue was generated from ten and eight customers, respectively.

For the six months ended June 30, 2024 and 2023 , the Company’s revenue was generated from thirteen and eight custo mers, respectively.

Significant customers are those that account for greater than 10% of the Company’s revenues.

For the three months ended March 31, 2024 and 2023 , four and three significant customers accounted for $ 225,000 or 67.2 % and $ 626,000 or 67.0 % of research and development revenue, respectively.

As of March 31, 2024 and December 31, 2023 , accounts receivable was from ten and thirteen customers, of which, six and two customers accounted for $ 208,000 or 84.6 % and $ 1,150,000 or 45.2 % of total accounts receivable, respectively.

For the three months ended June 30, 2024 and 2023 , four and three significant customers accoun ted for $ 285,000 or 73.7 % and $ 525,000 or 66.2 % of research and development revenue, respectively.

For the six months ended June 30, 2024 and 2023 , five and three significant customers accoun ted for 506,000 or 70.3 % and $ 1,152,000 or 66.7 % of research and development revenue, respectively.

As of June 30, 2024 and December 31, 2023 , accounts receivable wa s from six and thirteen customers, of which, three and two customers accounted for $ 191,000 or 76.3 % and $ 1,150,000 or 45.2 % of total accounts receivable, 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 three months ended March 31, 2024 and 2023 , the Company had eight and one customer(s) outside of the United States (i.e., European customers) that accounted for $ 274,000 or 81.8 % and $ 154,000 or 16.5 % of research and development revenue, respectively.

As of March 31, 2024 and December 31, 2023 , the Company had seven an d six cus tomers outside of the United States (i.e., European customers) that accounted for $ 175,000 or 71.0 % and $ 213,000 or 45.6 % of accou nts receivable, respectively.

For the three months ended June 30, 2024 and 2023 , the Company had four and two cust omers outside of the United States (i.e., European customers) that accounted for $ 106,000 or 27.5 % and $ 98,000 or 12.4 % of research and development revenue, respectively.

For the six months ended June 30, 2024 and 2023 , the Company had seven and two customers outside of the United States (i.e., European customers) that accounted for $ 304,000 or 42.2 % and $ 187,000 or 10.8 % of research and development revenue, respectively.

As of June 30, 2024 and December 31, 2023 , the Company had three an d six cus tomers outside of the United States (i.e., European customers) that accounted for $ 108,000 or 43.3 % and $ 213,000 or 45.6 % of accou nts receivable, respectively.

The Company uses several contract research organizations (“CROs”) to conduct its research projects.

For the three months ended March 31, 2024 and 2023 , three CROs accounted for $ 359,000 or 81.4 % and $ 1,076,000 or 95.0 % of total research services we purchased, respectively.

As of March 31, 2024 and December 31, 2023 , three CROs accounted for $ 109,000 or 16.5 % and $ 620,000 or 94.4 % of accounts payable, respectively.

For the three months ended June 30, 2024 and 2023 , two and three CROs accounted for $ 598,000 or 96.5 % and $ 1,586,000 or 99.4 % of total research services we purchased, respectively.

For the six months ended June 30, 2024 and 2023 , two and three CROs accounted for $ 957,000 or 90.2 % and $ 2,662,000 or 97.6 % of total research services we purchased, respectively.

As of June 30, 2024 and December 31, 2023 , two and three CROs accounted for $ 195,000 or 35.9 % and $ 620,000 or 94.4 % of accounts payable, respectively.

The loss of one CRO or a combination of the Company’s CROs could adversely affect its operations.

16 unchanged sentences

The Company classifies its investments in money market funds as available-for-sale securities and presented as cash equivalents on the consolidated balance sheets.

As of March 31, 2024 and December 31, 2023, all of our money market funds were invested in U.S.

As of June 30, 2024 and December 31, 2023, all of our money market funds were invested in U.S.

Government money market funds, for which the risk of loss is minimal.

As of March 31, 2024 , and December 31, 2023 , the Company did not have any investment securities classified as trading.

As of June 30, 2024 , and December 31, 2023 , the Company did not have any investment securities classified as trading.

Accounts Receivable

7 unchanged sentences

Substantially all of our accounts receivable were current and include unbilled amounts that will be billed and collected over the next twelve ( 12 ) months.

Management determined that no allowance for credit losses was required as of March 31, 2024 , and December 31, 2023 .

Management determined that no allowance for credit losses was required as of June 30, 2024 , and December 31, 2023 .

Accounts receivable consist of the following:

March 31, 2024

June 30, 2024

December 31, 2023

6 unchanged sentences

Accounts payable consist of the following:

March 31, 2024

June 30, 2024

December 31, 2023

7 unchanged sentences

Accrued expenses consist of the following:

March 31, 2024

June 30, 2024

December 31, 2023

6 unchanged sentences

$ 870,597 $ 1,057,164

$ 987,973 $ 1,057,164

Deferred Financing Costs

7 unchanged sentences

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, including related party, for the three months ended March 31, 2024 and 2023 were as follows:

Three Months Ended March 31,

Research and development costs, including related party, for the three and six months ended June 30, 2024 and 2023 were as follows:

Three Months Ended June 30,

Six Months Ended June 30,

Outside contracted services

20 unchanged sentences

See Note 4 for additional information related to the Convertible Notes.

For the three months ended March 31, 2024 , there was no provision for income taxes or unrecognized tax benefits recorded.

As of March 31, 2024 and December 31, 2023 , deferred tax assets wer e $ 17.7 million and $ 16.4 million, res pectively.

Due to the Company’s history of operating losses and the uncertainty regarding our ability to generate taxable income in the future, the Company has established a 100 % valuation allowance against deferred tax assets as of March 31, 2024 and December 31, 2023 .

For the six months ended June 30, 2024 , there was no provision for income taxes or unrecognized tax benefits recorded.

As of June 30, 2024 and December 31, 2023 , deferred tax assets were $ 17.8 million and $ 16.4 million, res pectively.

Stock-Based Compensation

6 unchanged sentences

Diluted net loss per share adjusts the weighted average number of common stock shares outstanding for the potential dilution that could occur if common stock equivalents, such as stock options were exercised and converted into common stock, calculated by applying the treasury stock method.

For the three months ended March 31, 2024 , a total of 6,100,857 shares of potentially dilutive securities, including 191,510 shares of unvested restrict stock units and options to purchase 5,909,347 shares of common stock, were excluded from the computation of diluted net loss per share as their effect would have been anti-dilutive.

For the three months ended March 31, 2023, a total of 5,581,991shares of potentially dilutive securities, including 163,044 shares of unvested restrict stock units and options to purchase 5,418,947 shares of common stock, were excluded from the computation of diluted net loss per share as their effect would have been anti-dilutive.

Recent Accounting Pronouncements Not Adopted as of March 31, 2024

For the three and six months ended June 30, 2024 , a total of 5,948,147 shares of potentially dilutive securities, including 117,925 shares of unvested restrict stock units and options to purchase 5,830,222 shares of common stock, were excluded from the computation of diluted net loss per share as their effect would have been anti-dilutive.

For the three and six months ended June 30, 2023, a total of 5,619,491 shares of potentially dilutive securities, including 163,044 shares of unvested restrict stock units and options to purchase 5,456,447 shares of common stock, were excluded fro m the computation of diluted net loss per share as their effect would have been anti-dilutive

Recent Accounting Pronouncements Not Adopted as of June 30, 2024

In December 2023, the FASB issued Accounting Standards Update 2023 - 09 – Income Taxes (Topic ASC 740 ) Income Taxes.

1 unchanged sentence

It also includes certain other amendments to improve the effectiveness of income tax disclosures.

The amendments in ASU 2023 - 09 will become effective beginning with our 2025 fiscal year.

The amendments in ASU 2023 - 09 will become effective for annual periods beginning January 1, 2025.

Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance.

3 unchanged sentences

The enhancements under this update require disclosure of significant segment expenses that are regularly provided to the Chief Operating Decision Maker (“CODM”) and included within each reported measure of segment profit or loss, require disclosure of other segment items by reportable segment and a description of the composition of other segment items , require annual disclosures under ASC 280 to be provided in interim periods, clarify use of more than one measure of segment profit or loss by the CODM, require that the title of the CODM be disclosed with an explanation of how the CODM uses the reported measures of segment profit or loss to make decisions, and require that entities with a single reportable segment provide all disclosures required by this update and required under ASC 280.

ASU 2023 - 07 is effective for public business entities for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

We continue to evaluate these changes and do not expect that this guidance will have a material impact on our financial position, results of operations, or financial statement disclosures.

ASU 2023 - 07 is effective for public business entities for fiscal years beginning January 1, 2024, and interim periods beginning January 1, 2025, with early adoption permitted.

We do not expect that this guidance will have a material impact on our financial position and results of operations.

Cash, Cash Equivalents, and Investments

The Company’s investments in debt securities are classified as held-to-maturity and are recorded at amortized cost, net of allowance for credit losses, and its investments in money market funds are classified as available-for-sale securities and presented as cash equivalents on the consolidated balance sheets.

The following table shows the Company’s cash, available-for-sale securities, and investment securities by major security type as of March 31, 2024 , and December 31, 2023 :

March 31, 2024 (Unaudited)

The following table shows the Company’s cash, available-for-sale securities, and investment securities by major security type as of June 30, 2024 , and December 31, 2023 :

June 30, 2024 (Unaudited)

Credit Losses

33 unchanged sentences

( 3 ) Short-term investment securities will mature within 12 months or less, from the applicable reporting date.

( 4 ) For the three months ended March 31, 2024 and 2023 , the Company received discounts of $ 1,547 and $ 15,233 to purchase held-to-maturity investment securities, respectively.

( 4 ) For the three months ended June 30, 2024 and 2023 , the Company received discounts of $ 31,357 and $ 17,601 to purchase held-to-maturity investment securities, respectively.

For the six months ended June 30, 2024 and 2023, the Company received discounts of $ 61,472 and $ 32,834 to purchase held-to-maturity investment securities, respectively.

For the year ended December 31, 2023 , the Company received discounts of $ 39,012 to purchase held-to-maturity investment securities.

( 5 ) The Company considers the declines in market value of its investment portfolio to be temporary in nature.

As of March 31, 2024 and December 31, 2023, the Company did not consider any of its investments to be other-than-temporarily impaired and no allowance for credit losses was recorded.

As of June 30, 2024 and December 31, 2023, the Company did not consider any of its investments to be other-than-temporarily impaired and no allowance for credit losses was recorded.

Research and Collaboration Agreements, Sublicense Agreements, and Investments in Privately Held Companies

On June 27, 2024, the Company entered into a License and Development Agreement (the “Proliant Agreement”) with Proliant Biologicals, LLC d/b/a Proliant Health and Biologicals (“Proliant”), pursuant to which Proliant will license Dyadic’s proprietary fungal microbial expression and production platforms and microbial strains for the production of recombinant serum albumin.

Under the terms of the Proliant Agreement, Dyadic will receive an initial upfront payment of $ 500,000 , a second payment of $ 500,000 upon the completion of the transfer of a Production Strain (as defined in the Proliant Agreement.), and a final payment of $ 500,000 upon the meeting of a certain productivity threshold.

Dyadic also will receive a share of the profits received by Proliant from the sale of animal-free recombinant serum albumin products produced pursuant to the Proliant Agreement.

In July 2024, the Company has received the initial payment of $ 500,000 .

For the three and six months ended June 30, 2024, there was no revenue recognized related to the Proliant Agreement.

On September 18, 2023, Dyadic International (USA) Inc., a subsidiary of the Company, signed a Development and Exclusive License Agreement (the “Inzymes Agreement”) with Inzymes ApS (“Inzymes”), a Denmark corporation, to develop and commercialize certain non-animal dairy enzymes used in the production of food products using Dyadic’s proprietary Dapibus™ platform.

6 unchanged sentences

The payment consisted of funding for specified product research and development efforts and right of first refusal for certain product candidates.

For the three months ended March 31, 2024 , the Company recorded research and development revenues of $ 52,000 , in connection with the Inzymes Agreement.

For the three and six months ended June 30, 2024 , the Company recorded research and development revenues of $ 52,000 and $ 92,000 , respectively.

in connection with the Inzymes Agreement.

A Global Food Ingredient Company

1 unchanged sentence

Under the initial terms of the JDA, Dyadic was to develop its proprietary production cell lines for the manufacture of animal free ingredient product candidates.

The GFIC has completed its one -year funding commitment for the initial phase of research collaboration in an amount approximating $1.35 million, and, pursuant to the GFIC’s rights under the JDA, the Company and the GFIC are conferring to decide whether or not, and if it is possible, to move forward to the next phase of the project.

The Company is also considering other funding sources to continue the project.

For the three months ended March 31, 2024 and 2023, the Company recorded research and development revenues of $ 0 and $ 339,000 , respectively.

The GFIC has completed its one -year funding commitment for the initial phase of research collaboration in an amount approximating $1.35 million, and, pursuant to the GFIC’s rights under the JDA, the Company and the GFIC are in discussions related to the potential development of other animal free ingredient products.

The Company is also considering other funding sources to continue the original project.

For the three and six months ended June 30, 2024, there was no revenue recognized related to this JDA.

For the three and six months ended June 30, 2023, the Company recorded research and development revenues of approximately $ 226,000 and $ 565,000 , as well as Success Fees of approximately $ 65,500 in connection with the JDA, respectively.

On December 16, 2021, the Company entered 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”).

As of March 31, 2023, the upfront payment was recorded in deferred license revenue, current and non-current portion in the amount of $ 176,000 and $ 132,000 , respectively.

For the three months ended March 31, 2023, the Company recognized $ 44,000 of the upfront payment as license revenue and recorded research and development revenues of $ 189,000 in connection with the Janssen Agreement.

On October 2, 2023, Janssen provided written notice to Dyadic that it has decided to wind down the collaboration with an effective end date of December 31, 2023.

For the three and six months ended June 30, 2024, there was no revenue recognized related to the Janssen Agreement.

For th e three and six months ended June 30, 2023, the Company recognized approximately $ 44,000 and $ 88,000 of license revenue, respectively.

For the three and six months ended June 30, 2023, the Company recorded research and development revenues of approximately $ 191,000 and $ 380,000 , respectively, in connection with the Janssen Agreement.

In 2019 the Company entered into a sub-licensing agreement with Alphazyme, LLC (“Alphazyme”) that was subsequently amended (the “Amended Alphazyme LLC Agreement”).

9 unchanged sentences

For the year ended December 31, 2023, the Company received a total cash payment of $ 1.3 million from the sale of its equity interest in Alphazyme, LLC.

For the three months ended March 31, 2024 , the Company received a total cash payment of $ 61,000 from the earn-out related to the sale of its equity interest in Alphazyme, LLC, which was recorded as g ain on sale of Alphazyme in the consolidated statement of operations.

In the first quarter of 2024, the Company received an additional cash payment of $ 61,977 , which was recorded as g ain on sale of Alphazyme in the consolidated statement of operations.

Convertible Notes Payable

7 unchanged sentences

The Convertible Notes are convertible into shares of the Company’s common stock, in whole or in part, at the option of the Holders at any time, based on an initial conversion price of $ 1.79 per share of common stock.

For the three months ended June 30, 2024, $ 400,000 of the Convertible Notes were converted into 223,463 shares of the Company’s common stock.

The Convertible Notes are accounted for in accordance with ASC 470 - 20, Debt with Conversion and Other Options and ASC 815 - 15, Derivatives and Hedging .

4 unchanged sentences

The debt issuance costs are being amortized and recognized as additional interest expense over the expected life of the Convertible Notes using the effective interest method.

We determined the expected life of the debt is equal to the three -year term of the Convertible Notes.

As of March 31, 2024, no portion of the Convertible Notes were converted.

Accrued interest on the Convertible Notes to related parties and other third parties were $10,000 and $20,000, respectively, and was recognized as interest expenses in the consolidated statements of operations.

For the three months ended March 31, 2024, there were no payments of interest made and debt issuance costs of $4,000 were amortized and recorded in interest expenses on the consolidated statements of operations.

As of March 31, 2024, accumulated amortized debt issuance costs are $4,000.

As of March 31, 2024, convertible notes payable was consisted of the following:

We determined the expected life of the debt is eq ual to the three -year term of the Convertible Notes.

As of June 30, 2024 , accrued interest on the Convertible Notes to related parties and other third parties were $ 32,000 and $ 80,000 , respectively, and was recognized as interest expenses in the consolidated statements of operations.

For the three months ended June 30, 2024 , $ 34,844 of interest was paid and debt issuance costs of $ 23,591 were amortized and recorded in interest expense in the consolidated statements of operations.

For the six months ended June 30, 2024 , $ 34,844 of interest was paid and debt issuance costs of $ 26,716 were amortized and recorded in interest expense in the consolidated statements of operations.

As of June 30, 2024 , accumulated amortized debt issuance costs are $ 26,716 .

As of June 30, 2024 , convertible notes payable consisted of the following:

Issuance Date

2 unchanged sentences

Principal Repayments

Conversion to Common Stock

Principal Outstanding

8 unchanged sentences

Convertible Notes - Related Party

$ 2,000,000 $ — $ — 1,600,000

Unamortized Debt Issuance Costs - Related Party

1 unchanged sentence

Convertible Notes - Third Party

8 % $ 4,000,000 $ — $ — 4,000,000

Unamortized Debt Issuance Costs - Third Party

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Thomas Emalfarb may be deemed to have voting, dispositive and investment power with respect to the shares of common stock held by the Francisco Trust and disclaims any such beneficial ownership other than to the extent of any pecuniary interest he may have therein, directly or indirectly.

The amount of accrued interest as of March 31, 2024, is $5,000.

The amount of accrued interest as of June 30, 2024 , is $ 20,000 .

( 2 ) Mark A.

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Emalfarb, as sole beneficiary of the Irrevocable Trust, therefore, may be deemed to have voting, dispositive and investment power with respect to the shares of common stock held by the Irrevocable Trust and disclaims any such beneficial ownership other than to the extent of any pecuniary interest he may have therein, directly or indirectly.

The amount of accrued interest for Bradley Emalfarb as of March 31, 2024, is $2,000.

The amount of accrued interest for Bradley Scott Emalfarb Irrevocable Trust as of March 31, 2024, is $2,000.

For the three months ended June 30, 2024, $ 400,000 of the Convertible Notes held by Mr.

Emalfarb were converted into 223,463 shares of the Company’s common stock.

As of June 30, 2024, the amount of accrued interest for Bradley Emalfarb and Bradley Scott Emalfarb Irrevocable Trust was $2,000 and $ 8,200 , respectively.

( 3 ) Messrs.

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Emalfarb, our President and Chief Executive Officer, are co-trustees of the Descendant Trust and may therefore be deemed to have shared voting, dispositive and investment power over the shares of common stock held by the Descendant Trust.

The amount of accrued interest as of March 31, 2024, is $400.

The amount of accrued interest as of June 30, 2024 , is $ 1,800 .

Commitments and Contingencies

19 unchanged sentences

As of April 16, 2021, 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.

As of March 31, 2024 , the Company had 5,909,347 stock options outstanding and 191,510 unvested restricted stock units in addition to 1,979,087 shares of common stock available for grant under the 2021 Plan.

As of December 31, 2023 , there were 5,469,247 stock options outstanding in addition to 2,773,406 shares of common stock available for grant under the 2021 Plan.

As of June 30, 2024 , the Comp any had 5,830,222 stock options outstanding and 117,925 unvested restricted stock units in addition to 2,040,004 shares of common stock available for grant under the 2021 Plan.

As of December 31, 2023 , there were 5,469,247 stock options outstanding and 243,044 unvested restricted stock units in addition to 2,773,406 shares of co mmon stock available for grant under the 2021 Plan.

Stock Options

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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 three months ended March 31, 2024 are as follows:

The assumptions used in the Black-Scholes option pricing model for stock options granted for the six months ended June 30, 2024 are as follows:

Risk-Free interest rate

3 unchanged sentences

Expected life of options (in years)

The following table summarizes the stock option activities for the three months ended March 31, 2024 :

The following table summarizes the stock option activities for the six months ended June 30, 2024 :

Weighted-Average

Remaining Contractual

Aggregate Intrinsic

Exercise Price

2 unchanged sentences

( 30,000 ) 1.36

Outstanding at March 31, 2024

( 358,500 ) 2.10

Exercisable at March 31, 2024

( 63,125 ) 1.59

Outstanding at June 30, 2024

5,830,222 $ 2.96 5.83 $ 138,360

( 1 ) Options granted:

Exercisable at June 30, 2024

4,430,623 $ 3.20 4.89 $ 109,383

_________________

( 1 ) Represents the following options granted:

Annual share-based compensation awards on January 2, 2024 , with an exercise price of $ 1.59 , including:

(a) 387,500 stock options granted to executives and key personnel, vesting upon one year anniversary, or annually in equal installments over four years, (b) 352,500 stock options granted to members of the Board of Directors, vesting upon one year anniversary, (c) 17,600 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.

( 2 ) Options expired:

(a) 300,000 stock options with an exercise price of $ 1.87 per share granted to an executive, (b) 24,000 stock options with an exercise price of $ 1.76 per share granted to a member of the Board of Directors, and (c) 7,500 stock options with an exercise price of $ 5.56 per share granted to a consultant.

• One-time awards on April 11, 2024, with an exercise price of $ 1.84 , including 20,000 stock options granted to an executive, vesting annually in equal installments over four years, and 20,000 stock options granted to a member of the Board of Directors, vesting upon one year anniversary.

( 2 ) Repre sents the following options expired:

(a) 300,000 stock options with an exercise price of $ 1.87 per share granted to an executive, (b) 25,000 stock options with an exercise price of $ 1.76 per share granted to a member of the Board of Directors, (c) 7,500 stock options with an exercise price of $ 5.56 per share granted to a consultant, (d) 25,000 stock options with an exercise price of $ 4.14 per share granted to a consultant, and (e) 1,000 stock options with an exercise price of $ 1.55 per share granted to an employee.

( 3 ) Represents the following options canceled:

(a) 50,000 stock options granted to a former Board of Directors, (b) 13,125 stock options granted to the Company's former Chairman of the Board of Directors.

Restricted Stock Units

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The fair market value of RSUs is generally determined based on the closing market price of the stock on the grant date.

The following table summarizes the restricted stock award activity for the three months ended March 31, 2024 :

The following table summarizes the restricted stock award activity for the six months ended June 30, 2024 :

Weighted-Average

2 unchanged sentences

( 437,546 ) 1.52

Outstanding at March 31, 2024

Unvested shares forfeited (3)

( 11,792 ) 1.59

Outstanding at June 30, 2024

117,925 $ 1.59

On March 13, 2024, the Company gr anted 212,709 RSUs with immediate vesting, to executives and key personnel in lieu of cash bonuses earned for the year ended 2023.

On January 2, 2024, the Company granted 141,510 RSUs, vesting upon one year anniversary of the grant, to the Board of Directors The fair value of the common stock is the Company's closing stock price on the grant date as reported on the Nasdaq Stock Exchange.

Including 212,709 RSUs granted to executives and key personnel and 163,044 RSUs granted to the Board of Directors.

_________________

On March 13, 2024, the Company granted 212,709 RSUs with immediate vesting, to executives and key personnel in lieu of cash bonuses earned for the year ended 2023.

On January 2, 2024, the Company granted 141,510 RSUs, vesting upon one year anniversary of the grant, to the Board of Directors.

The fair value of the common stock is the Company's closing stock price on the grant date as reported on the Nasdaq Stock Exchange.

Represents 212,709 RSUs granted to executives and key personnel, 174,837 RSUs granted to the Board of Directors, and 50,000 RSUs granted to a contractor.

( 3 ) Represents the cancellation of RSUs granted to a former member of the Board of Directors.

Compensation Expenses

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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.

Forfeitures are recorded as they occu r.

For the three and six months ended June 30, 2024 , there were forfeitures of $ 20,000 and $ 40,000 , respectively.

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.

Total non-cash share-based compensation expense was allocated among the following expense categories:

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

General and administrative

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The following table summarizes the Company’s non-cash share-based compensation expense allocation between options and restricted stock units:

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Share based compensation expense - stock option

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Issuances of Common Stock

For the three months ended March 31, 2024 , there were 375,753 shares of the Company’s common stock issued resulting from the vesting of restricted stock units with a weighted average issue price of $ 1.50 per share.

For the three months ended March 31, 2023 , there were 247,961 shares of the Company’s common stock issued resulting from the exercise of stock options with a weighted average issue price of $ 1.38 per share.

For the six months ended June 30, 2024 , there were 666,578 shares of the Company’s common stock issued with a weighted average issue price of $ 1.61 per share, including 223,463 shares from the conversion of the Convertible Notes, 61,793 shares from the vesting of restricted stock units, and 5,569 shares from the exercise of stock options.

For the six months ended June 30, 2023 , there were 247,961shares of the Company’s common stock issued resulting from the vesting of restricted stock units with a weighted average issue price of $ 1.38 per share.

Treasury Stock

For the three months ended March 31, 2024 , there were 12,253,502 shares of common stock held in treasury, at a cost of $ 18.9 million, representing the purchase price on the date the shares were surrendered to the Company.

As of June 30, 2024, there were 12,253,502 shares of common stock held in treasury, at a cost of $ 18.9 million, representing the purchase price on the date the shares were surrendered to the Company.

Subsequent Events

For purpose of disclosure in the con solidated financial statements, the Company has evaluated subsequent events through May 14, 2024 , the date the consolidated financial statements were available to be issued.

For purpose of disclosure in the con solidated financial statements, the Company has evaluated subsequent events through August 13, 2024 , the date the consolidated financial statements were available to be issued.

Except for items mentioned in the notes, management is not aware of any material events that have occurred after the balance sheet date that would require adjustment to, or disclosure in the accompanying financial statements.

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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.

After December 31, 2029, Danisco will have certain rights to sublicense C1 technology to third parties for which the Company will be entitled to receive royalties on such pharmaceutical products for a certain period of time.

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.

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Recent Developments

Corporate Events

On March 8, 2024, the Company issued an aggregate principal amount of $6.0 million of its 8.0% Senior Secured Convertible Promissory Notes due March 8, 2027 (the “Convertible Notes”) in a private placement in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended.

The purchasers of the Convertible Notes include immediate family members and family trusts related to Mark Emalfarb, our President and Chief Executive Officer and a member of our Board of Directors, including The Francisco Trust, an existing holder of more than 5% of the Company’s outstanding common stock.

On March 28, 2024, the Company announced changes in the leadership roles of the Board and senior management team by appointing Mr.

Patrick Lucy to Chairman of Board of Directors and promoting Mr.

Joe Hazelton to Chief Operating Officer.

Human Health Sector

DYAI-100 Phase 1 Clinical Trial

DYAI-100, a C1-SARS-CoV-2 recombinant protein RBD vaccine candidate, is the first C1-expressed protein tested in humans.

The Phase 1 randomized, double-blind, placebo-controlled trial was designed as a first-in-human trial to assess the clinical safety and antibody response of DYAI-100, produced using the C1 platform and administered as a booster vaccine at two single dose levels in healthy volunteers.

Following regulatory clearance from the South African Health Products Regulatory Authority (SAHPRA), the trial was initiated in 1Q 2023, with the last patient visit occurring in 3Q 2023.

On November 29, 2023, the Company announced the top-line safety results, indicating that the study has met its primary endpoint that both the low and high dose levels of the vaccine are safe and well tolerated among participants.

Additionally, the vaccine has been shown to induce immune responses at both dose levels, suggesting its potential efficacy in generating protective immunity against the target virus.

The study has been finalized, and the final Clinical Study Report has been issued, demonstrating that the DYAI-100 vaccine met its primary endpoint of safety and reactogenicity.

In April 2024, Dyadic and its development partner ViroVax reported pre-clinical animal testing on a ferritin nanoparticle H5N1 bird flu recombinant protein human vaccine candidate that demonstrated a strong immune response in rabbits.

The potential vaccine combines Dyadic’s C1 single step ferritin nanoparticle H5N1 antigen production with a novel adjuvant from ViroVax.

Additional animal studies are being carried out that preliminarily show that this H5N1 bird flu vaccine has the potential to be used in humans.

Successfully expressed H1N1 influenza antigen in the fully funded research collaboration with the Vaccine and Immunotherapy Center (“VIC”) at Massachusetts General Hospital to express vaccine antigens for influenza A and other infectious diseases, as part of a US $5.88 million award from the Department of Defense (“DoD”).

On March 25, 2024, the Company entered a funded research collaboration with a top ten pharmaceutical company to develop a vaccine antigen and a monoclonal antibody produced from the C1 technology.

In March 2024, a manuscript of preclinical studies on C1-produced monoclonal antibody in non-human primates and hamsters was published in the prestigious peer-reviewed journal Nature Communications.

A non-human primate challenge study completed dosing of a C1-produced COVID-19 monoclonal antibody (mAb) that had previously demonstrated broad neutralization and protection against Omicron (BA.1 and BA.2) and the other earlier variants of concern in hamsters.

Preliminary results obtained from the challenge study with the SARS-CoV-2 Delta virus on non-human primates demonstrated potential high protection.

This was the first time a C1-produced monoclonal antibody was used in a non-human primate study validating the safety and efficacy of a C1 produced antibody for infectious diseases.

On February 28, 2024, the Company’s Dutch subsidiary, Dyadic Nederland BV, entered into a strategic partnership agreement and collaboration with Rabian BV (“Rabian”), a Dutch innovative SME founded by experienced entrepreneurs and vaccine scientists.

Awarded by Eurostars for the AVATAR project, a part of the European Partnership on Innovative SMEs (small and medium-sized enterprises), and co-funded by the European Union through Horizon Europe.

Rabian will use the total funding of approximately Є1.7 million leveraging its expertise in virology to develop a rabies vaccine using Dyadic’s C1 protein production platform to tackle the challenges posed by rabies, particularly in lower- and middle-income countries.

Dyadic is expected to receive an equity stake in Rabian, fully funded research and development costs, and specified product milestones and royalties upon commercialization.

On February 21, 2024, the Company announced it has advanced its collaboration with the IIBR and its commercial arm Life Science Research Israel (LSRI), to target emerging disease solutions.

This partnership aims to leverage Dyadic’s expertise in microbial platforms for flexible scale protein bioproduction and the IIBR’s antibodies and antigens discovery capabilities to develop and manufacture innovative solutions for addressing emerging diseases and potential bio-threats.

Through this collaboration, both parties are working towards the development of effective treatments and vaccines to combat global health challenges with the intention of future commercialization (to date, the framework is non-binding and subject to the execution of a binding agreement to be negotiated by the parties) through collaborative out-licensing initiatives.

On February 13, 2024, the Company announced a strategic partnership with Cygnus Technologies®, part of Maravai LifeSciences® (Nasdaq:

MRVI), who have developed the C1 Host Cell Protein ELISA Kit for the quality release of products produced using Dyadic’s protein expression platforms.

The C1 Host Cell Protein ELISA Kit is now available for purchase on Cygnus Technologies.

On February 6, 2024, the Company announced it signed a fully funded evaluation agreement including a commercial option with an undisclosed leading global biopharmaceutical company to design and produce recombinant proteins using Dyadic’s C1 microbial protein production platform.

Animal Health Sector

On March 15, 2024, the Company expanded its collaboration with Phibro Animal Health/Abic Biological Laboratories Ltd to develop vaccines and treatments for companion and livestock animal diseases.

C1 produced adjuvanted recombinant ferritin nanoparticle H5N1 “Bird Flu” human vaccine candidate demonstrated a strong immune response in animal studies for potential use in poultry, cattle and other animals.

The H5N1 C1 produced bird flu ferritin nanoparticle vaccine elicits high neutralizing antibodies against all three virus isolates (including Texas) of the H5 virus in livestock.

Alternative Proteins Sector

Dyadic is advancing a pipeline of differentiated product candidates that leverage its microbial protein production platforms, including Dapibus™ which have demonstrated the ability and efficiency to enable the rapid development and large-scale manufacture of proteins at low cost in a wide range of non-pharmaceutical applications and commercial use.

Cell Culture Media Products

In March 2024, the Company executed a term sheet with a large global albumin manufacturer and distributor to develop and license Dyadic’s recombinant serum albumin.

The Company’s animal-free recombinant serum albumin projects were initiated in late 2022 using Dyadic pharmaceutical cell lines for use in potential therapeutic, product development, research, and/or diagnostic human and animal pharmaceutical applications.

The Company has completed the initial analysis of its recombinant albumin products and has Certificates of Analysis for recombinant human and bovine albumin that demonstrate comparability to reference standards used in the testing.

In March 2024, the Company entered into a co-promotion agreement with Biftek Co.

for the promotion of growth media supplement for cell culture.

The Company is undergoing a project to produce recombinant transferrin for use in cell culture media for the alternative protein industry.

The Company is currently sampling recombinant bovine albumin for application testing as growth media for the cultured meat industry.

Non-animal Dairy Products

Alternative Proteins

Non-Food Applications

On June 28, 2024, the Company announced that it entered into a development and commercialization partnership with Proliant Health and Biologicals (“PHB”), a leading supplier of purified proteins for the diagnostic, nutrition and cell culture markets.

According to the terms of the agreement, Dyadic received an initial payment of $500,000 in July 2024.

Dyadic will receive a second payment of $500,000 upon the completion of the transfer of a Production Strain (as defined in the agreement), and will receive a final payment of $500,000 upon the meeting of a certain productivity threshold.

Dyadic will also receive a share of profits received by PHB from the sale of animal-free recombinant albumin products produced using Dyadic’s filamentous fungal microbial platforms.

A portion of the upfront milestone payment will be allocated to the technology transfer and commercialization effort.

The initial focus of the partnership will be the commercialization of recombinant human serum albumin products, with the anticipated launch of the first product in the first half of 2025.

The Company has completed its development of the DNASE-1, and a Certificate of Analysis has been issued for the product, which is expected to begin sampling in the third quarter.

The Company’s project to produce recombinant transferrin for use in cell culture media for the alternative protein industry has achieved high titers with additional optimization and analysis ongoing; product samples are expected to be available in the fourth quarter.

The Company’s recombinant bovine albumin was shown in third party application testing to be comparable to animal derived bovine albumin for use as a component of cell culture media to grow animal muscle cells for the cultured meat industry; further development and analyses are ongoing.

Food Applications

As previously announced, in September 2023, the Company entered into a development and exclusive license agreement to commercialize certain non- animal dairy enzymes used in the production of food products using Dapibus™ and received an upfront payment of $0.6 million in October 2023.

The Company believes it has achieved the specified target yield level required for a milestone payment upon verification by its partner, and the development of a second enzyme is progressing as planned.

The Company has developed a highly productive strain and is actively sampling recombinant alpha-lactalbumin, a whey protein, and is currently negotiating several development and commercialization agreements.

The Company is undergoing a beta-lactoglobulin animal-free recombinant whey protein project, expected to begin sampling in the late third quarter.

The Company is undergoing a recombinant lactoferrin project, expected to begin sampling the product in the late second or early third quarter.

The Company believes it has achieved the specified target yield level required for achieving a milestone payment and is in the process of delivering the strain for verification by its partner.

The development of a second enzyme is progressing.

The Company has developed a highly productive strain and is actively sampling recombinant alpha-lactalbumin, a whey protein, and has entered into a joint development agreement with a Top 10 global dairy company for the development of food grade alpha-lactalbumin.

Additionally, the Company has ongoing discussions with plans to provide samples to three additional alternative protein companies.

The Company is sampling recombinant lactoferrin for several interested parties.

Bio Industrial Products

The Company has developed three enzymes, with plans for two additional enzymes, that have the potential for use in multiple industries, such as dairy, nutrition, biogas, biofuels and biorefining.

Several initial targets are under evaluation with interested parties.

Dyadic has developed three enzymes, with plans for two additional enzymes, that have the potential for use in multiple industries, such as dairy, nutrition, biogas, biofuels and biorefining.

Several initial enzymes are under evaluation with interested parties.

Animal Health

The Company continued its ongoing development and collaboration with Phibro Animal Health/Abic Biological Laboratories Ltd to develop vaccines and treatments for livestock animal diseases.

The Company has provided samples of the C1 produced H5 A/Astrakhan 2.3.4.4b recombinant ferritin nanoparticle antigen to multiple parties for evaluation and potential use in poultry and cattle vaccines.

Initial studies indicate that the adjuvanted C1 produced H5 A/2.3.3.4.b A/Astrakhan ferritin nanoparticle antigen has the potential for use as an animal vaccine candidate against the current avian influenza ‘Bird Flu’ viruses in poultry and cattle.

Animal studies conducted by ViroVax has demonstrated that the C1 produced H5 A/Astrakhan 2.3.4.4b ferritin nanoparticle vaccine elicits high neutralizing antibodies against the three circulating viruses:

(a) H5/Influenza A/Astrakhan/3212/2020, (b) H5/Influenza A /Texas/37/2024, and (c) H5/Influenza A/Dairy Cattle/Texas/24-008749-003/2024.

In April 2024, Dyadic and its development partner ViroVax reported pre-clinical animal testing on an adjuvanted H5 Clade 2.3.3.4.b A/Astrakhan avian influenza ferritin nanoparticle ‘Bird Flu’ human vaccine candidate that demonstrated a strong immune response in rabbits.

The potential vaccine combines Dyadic’s C1 single step ferritin nanoparticle antigen production with a novel antigen and adjuvant from ViroVax.

In the second quarter, the Company presented an overview of a H5N1 ‘Bird Flu’ recombinant protein human vaccine candidate to BARDA Tech Watch, NIH, and to the White House Office of Pandemic Preparedness and Response Policy.

The Company successfully delivered a C1 produced H1N1 influenza antigen in a fully funded research collaboration with the Vaccine and Immunotherapy Center at Massachusetts General Hospital.

The program is focused on expressing vaccine antigens for influenza A and other infectious diseases, as part of a US $5.88 million award granted to Massachusetts General Hospital from the Department of Defense.

In third party funded programs, the C1 Platform has:

successfully expressed multiple infectious disease antigens including HPV, HIV, and multiple RSV antigens;

delivered three mAbs for evaluation as neutralizing antibodies for infectious diseases; and

two additional mAbs in development, including a top ten pharmaceutical company.

Critical Accounting Estimates

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Results of Operations

Three Months Ended March 31, 2024 Compared to the Same Period in 2023

Three and Six Months Ended June 30, 2024 Compared to the Same Periods in 2023

Revenue and Cost of Research and Development Revenue

The following table summarizes the Company’s revenue and cost of research and development revenue for the three months ended March 31, 2024 and 2023:

Three Months Ended March 31,

The following table summarizes the Company’s revenue and cost of research and development revenue for the three and six months ended June 30, 2024 and 2023:

Three Months Ended June 30,

Six Months Ended June 30,

Research and development revenue

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Cost of research and development revenue

For the three months ended March 31, 2024 , the decrease in research and development revenue and cost of research and development revenue was due to the winding down of several large research collaborations conducted in 2023.

For the three months ended March 31, 2024, the Company’s revenue was generated from ten collaborations compared to seven collaborations in the same period a year ago.

The license revenue for the three months ended March 31, 2023, was related to the Janssen license agreements.

For the three and six months ended June 30, 2024 , the decrease in research and development revenue and cost of research and development revenue was due to the winding down of several large research collaborations conducted in 2023.

For the three months ended June 30, 2024 , the Company’s revenue was generated from ten collaborations compared to eight collaborations for the same period a year ago.

For the six months ended June 30, 2024 , the decrease in research and development revenue and cost of research and development revenue was due to the winding down of several large research collaborations conducted in 2023.

For the six months ended June 30, 2024 , the Company’s revenue was generated from thirteen collaborations compared to eight collaborations for the same period a year ago.

The license revenue for the three and six months ended June 30, 2023, was related to the Janssen license agreement, which was completed in December 2023.

Research and Development Expenses

Research and development costs are expensed as incurred and include salary and benefits of research personnel, third-party contract research organization services and supply costs.

Research and development expenses for the three months ended March 31, 2024 , decreased to $ 523,000 compared to $ 811,000 for the same period a year ago.

Research and development expenses for the three months ended June 30, 2024 , decreased to $ 516,000 compared to $ 918,000 for the same period a year ago.

The decrease reflected the winding down of activities related to the Company’s Phase 1 clinical trial of DYAI-100 COVID-19 vaccine candidate as patient dosing was completed in February 2023 and a decrease in the amount of ongoing internal research projects.

Research and development expenses for the six months ended June 30, 2024 , decreased to $ 1,038,000 compared to $1,728,000 for the same period a year ago.

General and Administrative Expenses

General and administrative expenses for the three months ended March 31, 2024 , increased by 20.9% to $ 1,789,000 compared to $ 1,480,000 for the same period a year ago.

The increase reflected increases in business development and investor relations expenses of $138,000, audit fees of $99,000, management incentives of $59,000, and other increases of $59,000, offset by decreases in insurance expenses of $29,000 and legal expenses of $17,000.

Other Income (Expenses), Net

For the three months ended March 31, 2024 , other income (expenses), net, was $116,000 compared to $1,094,000 for the same period a year ago.

Other income in 2024 was derived from interest income from investment securities and the earn-out from the sale of the Company’s equity interest in Alphazyme, LLC., and interest expenses were related to the Convertible Notes.

Other income in 2023 was derived from interest income from investment securities and sale of the Company’s equity interest in Alphazyme, LLC for $989,000.

General and administrative expenses for the three months ended June 30, 2024 , increased by 14.6% to $ 1,608,000 compared to $ 1,403,000 for the same period a year ago.

The increase reflected increases in share-based compensation expenses of $84,000, legal expenses of $81,000, business development and investor relations expenses of $60,000, and other increases of $22,000, offset by decreases in management incentives of $36,000, and insurance expenses of $6,000.

General and administrative expenses for the six months ended June 30, 2024 , increased by 17.8% to $3,396,000 compared to $2,883,000 for the same period a year ago.

The increase reflected increases in business development and investor relations expenses of $296,000, share-based compensation expenses of $87,000, legal expenses of $64,000, management incentives of $19,000, and other increases of $82,000, offset by decrease in insurance expenses of $35,000.

Loss from Operations

Loss from operations for the three months ended March 31, 2024, slightly increased to $2,126,000, compared to $2,050,000 for the same period a year ago.

Net loss for the three months ended March 31, 2024, was $2,010,000 compared to $956,000 for the same period a year ago.

The increase in net loss was derived from the sale of the Company’s equity interest in Alphazyme LLC for $989,000 in 2023.

Loss from operations for the three months ended

June 30, 2024

, decreased to $ 2,043,000

, compared to $

for the same period a year ago.

The decrease in loss from operations was due to a decrease in research and development expenses of $402,000, partially offset by an increase in general and administrative expenses of $205,000.

Loss from operations for the

six months ended June 30, 2024

, decreased to $

, compared to $

for the same period a year ago.

The decrease in loss from operations was due to a decrease in research and development expenses of $690,000, partially offset by an increase in general and administrative expenses of $514,000.

Other Income (Expenses), Net

For the three months ended June 30, 2024 , total other income (expenses), net, was an expense of $ 3,000 compared to an income of $ 137,000 for the same period a year ago.

The decrease in other income was due to interest expenses related to the Convertible Notes in 2024.

For the six months ended June 30, 2024 , total other income (expenses), net, was $ 113,000 compared to $ 1,232,000 for the same period a year ago.

The decrease in other income was due to the gain on sale of the Company’s equity interest in Alphazyme, LLC of $1,018,000 in 2023, and interest expenses related to the Convertible Notes in 2024.

Net loss for the three months ended June 30, 2024 , was $ 2,045,000 compared to $ 2,153,000 for the same period a year ago.

The decrease in net loss was due to a decrease in research and development expenses of $402,000, partially offset by increases in general and administrative expenses of $205,000 and interest expenses of $141,000 in 2024.

Net loss for the six months ended June 30, 2024, was $ 4,055,000 compared to $ 3,109,000 for the same period a year ago.

The decrease in net loss was due to a decrease in the gain on sale of the Company’s equity interest in Alphazyme LLC of $957,000 and research and development expenses of $690,000, partially offset by increases in general and administrative expenses of $514,000 and interest expenses of $174,000.

Liquidity and Capital Resources

Our primary source of cash to date has been the cash received from the DuPont Transaction in 2015, interest income received from investment grade securities, revenues from our research collaboration agreements and license agreements, the issuance of Senior Secured Convertible Promissory Note, and funds from the exercise of employee stock options.

The Company expects to incur losses and have negative net cash flows from operating activities as it continues developing its microbial platforms and related products, and as it expands its pipelines and engages in further research and development activities for internal products as well as for its third-party collaborators and licensees.

The success of the Company depends on its ability to develop its technologies and products to the point of regulatory approval and subsequent revenue generation or through the sublicensing of the Company’s technologies and products, and its ability to raise capital to finance these developmental efforts.

The net proceeds from the sale of the Convertible Notes, after deducting offering expenses, are $5,824,000.

The net proceeds from the sale of the Convertible Notes, after deducting offering expenses, is $5,824,000.

The Company intends to use the net proceeds from the offering of the Convertible Notes for working capital and general corporate purposes.

This private placement funding is expected to support our near-term revenue growth and accelerate our strategic objective of commercialization opportunities for pharmaceutical and non-pharmaceutical applications.

The Convertible Notes are senior, secured obligations of Dyadic and its affiliates, and interest is payable quarterly in cash on the principal amount equal to 8% per annum.

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The conversion price is $1.79 per share of the Common Stock, which is equal to 125% of the trailing 30-day VWAP of the Common Stock ending on the trading day immediately preceding the date of the securities purchase agreement.

For more information regarding the Convertible Notes, including the covenants related thereto see Note 8 to the Consolidated Financial Statements.

This private placement funding strengthened our financial position, and it will support our near-term revenue growth and accelerate our strategic objective of commercialization opportunities for pharmaceutical and non-pharmaceutical applications.

Our ability to achieve profitability depends on many factors, including our scientific results and our ability to continue to obtain funded research and development collaborations from industry and government programs, as well as sub-license agreements.

We may continue to incur substantial operating losses even if we begin to generate revenues from research and development and licensing.

Our primary future cash needs are expected to be for general operating activities, including our business development and research expenses, as well as legal and administrative costs as an SEC reporting and NASDAQ listed company.

Our future cash requirements will depend on many factors, including those factors discussed under Item 1A.

Risk Factors of Annual Report.

As of March 31, 2024, we had an accumulated deficit of $82.3 million.

W e expect to incur losses and have negative net cash flows from operating activities as we continue developing our microbial platforms and related products, and as we expand our pipeline and engage in further research and development activities for internal products as well as for our third-party collaborators and licensees.

The success of the Company depends on its ability to develop its technologies and products to the point of regulatory approval and subsequent revenue generation or through sublicensing of the Company’s technologies and products, and its ability to raise capital to finance these developmental efforts.

We expect our existing cash and cash equivalents and cash raised from the Convertible Notes, investments in debt securities, and operating cash flows will be sufficient to meet our operational, business, and other liquidity requirements for at least the next twelve (12) months from the date of issuance of the financial statements contained in this Quarterly Report.

However, we have based this estimate on assumptions that may prove to be wrong, and our operating plan may change because of many factors currently unknown.

As of June 30, 2024, $400,000 of the Convertible Notes were converted into 223.463 shares of Common Stock.

For more information regarding the Convertible Notes, see Note 4 to the Consolidated Financial Statements.

The Company expects its existing cash and cash equivalents and cash raised from the Convertible Notes, investments in debt securities, and operating cash flows from its existing and future license agreement(s) will be sufficient to meet its operational, business, and other liquidity requirements for at least the next twelve (12) months from the date of issuance of the financial statements contained in this Quarterly Report.

However, the Company has based this estimate on assumptions that may prove to be wrong, and its operating plan may change as a result of many factors currently unknown to it.

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 additional capital through strategic financial opportunities that could include, but are not limited to, future public or private equity offerings, collaboration agreements, and/or other means.

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There is no guarantee that any of these strategic or financing opportunities will be executed or realized on favorable terms, if at all, and some could be dilutive to existing shareholders.

As of March 31, 2024 , cash and cash equivalents were $10.6 million compared to $6.5 million as of December 31, 2023 .

The carrying value of investment grade securities, including accrued interest as of March 31, 2024 , was $1.5 million compared to $0.8 million as of December 31, 2023 .

Net cash used in operating activities for the three months ended March 31, 2024 was $ 1.1 million, which was principally attributable to a net loss of $2.0 million, partially offset by changes in operating assets and liabilities of $0.7 million and share-based compensation expenses of $ 0.3 million.

Net cash used in operating activities for the three months ended March 31, 2023 was $2.2 million, which was principally attributable to a net loss of $1.0 million, gain from the sale of investment in Alphazyme, LLC of $1.0 million, and changes in operating assets and liabilities of $0.6 million, partially offset by share-based compensation expenses of $0.3 million.

Net cash used in investing activities for the three months ended March 31, 2024 was $ 0.7 million, which was attributable to purchases of investment securities of $1.6 million, offset by proceeds from maturities of investment securities of $0.9 million and the earn-out from the sale of equity interest in Alphazyme, LLC of $61,000.

Net cash provided by investing activities for the three months ended March 31, 2023 was$2.8 million, which was related to proceeds from maturities of investment securities of $2.2 million, proceeds from the sale of equity interest in Alphazyme, LLC of $1.3 million, offset by purchases of investment securities of $0.7 million.

Net cash provided by financing activities for the three months ended March 31, 2024 was $5.8 million, which was related to net proceeds from issuance of convertible notes.

For the three months ended March 31, 2023 , there were no cash flows from financing activities.

As of June 30, 2024 , cash and cash equivalents were $6.1 million compared to $6.5 million as of December 31, 2023 .

The carrying value of investment grade securities, including accrued interest as of June 30, 2024 , was $4.0 million compared to $0.8 million as of December 31, 2023 .

Net cash used in operating activities for the six months ended June 30, 2024 was $ 3.1 million, which was principally attributable to a net loss of $ 4.0 million , partially offset by changes in operating assets and liabilities of $ 0.4 million and share-based compensation expenses of $ 0.6 million.

Net cash used in operating activities for the six months ended June 30, 2023, was $3.8 million, which was principally attributable to a net loss of $3.1 million, gain from the sale of investment in Alphazyme, LLC of approximately $1.0 million, and changes in operating assets and liabilities of $0.4 million, partially offset by share-based compensation expenses of approximately $0.7 million.

Net cash used in investing activities for the six months ended June 30, 2024 was $ 3.1 millio n, compared to a net cash provided by investing activities of $3.8 for the six months ended June 30, 2023.

The increase in net cash used in investing activities was attributable to additional purchases of investment securities of $2.7 million, decreases in proceeds received from maturities of investment securities of $3.1 million, and proceeds from the sale of investment in Alphazyme of $1.3 million.

Net cash provided by financing activities for the six months ended June 30, 2024 was $ 5.8 million , which was related to net proceeds from issuance of convertible notes.

For the six months ended June 30, 2023 , there were no cash flows from financing activities.

Quantitative and Qualitative Disclosures about Market Risk

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements