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Item 1. Financial Statements

2024-11-12 compared with 2024-08-13 · 174 added, 161 removed, 670 unchanged (33% of the section changed)

3 unchanged sentences

CONSOLIDATED BALANCE SHEETS

June 30, 2024

September 30, 2024

December 31, 2023

45 unchanged sentences

Authorized shares - 100,000,000 ;

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

issued shares - 41,842,873 and 41,064,563 , outstanding shares - 29,589,371 and 28,811,061 as of September 30, 2024, and December 31, 2023, respectively

41,843 41,065

13 unchanged sentences

CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Research and development revenue

20 unchanged sentences

CONSOLIDATED STATEMENTS OF STOCKHOLDERS ’ EQUITY

Six Months Ended June 30, 2024

Nine Months Ended September 30, 2024

Treasury Stock

9 unchanged sentences

June 30, 2024

Six Months Ended June 30, 2023

Stock-based compensation expense

Issuance of common stock upon settlement of convertible debt

September 30, 2024

Nine Months Ended September 30, 2023

Treasury Stock

6 unchanged sentences

June 30, 2023

Stock-based compensation expense

September 30, 2023

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

2 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended June 30,

Nine Months Ended September 30,

Cash flows from operating activities

4 unchanged sentences

Gain from the sale of investment in Alphazyme

Foreign currency exchange loss (gain), net

Foreign currency exchange loss, net

Changes in operating assets and liabilities:

27 unchanged sentences

Cash paid for interest

Right-of-use asset obtained in exchange for lease obligations

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

13 unchanged sentences

Liquidity and Capital Resources

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 Company expects to incur losses and have negative net cash flows from operating activities as it continues developing its microbial protein production 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.

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 “Securities Act”).

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, (collectively, the “Purchasers”).

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

The purchasers of the Convertible Notes included 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, (collectively, the “Purchasers”).

The net proceeds from the sale of the Convertible Notes, after deducting offering expenses, were $ 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.

2 unchanged sentences

The Convertible Notes can be converted into shares of Dyadic’s Class A common stock (the “Common Stock”), at the option of the holders of the Convertible Notes (the “Noteholders”) at any time prior to the Maturity Date.

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.

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

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.

On October 4, 2024, the Company entered into an amendment (the “Amendment”) to the Convertible Notes.

Pursuant to the Amendment, (i) the conversion price upon which the Convertible Notes will be convertible into shares of the Company’s common stock is $ 1.40 per share of common stock, and (ii) the Redemption Date (as defined in the Amendment) will fall on any of the 26, 29 and 32 -month anniversaries of the original issue date of the Convertible Notes.

As of September 30, 2024 , $ 600,000 of the Convertible Notes were converted in to 335,195 shares of Common Stock.

F or more information regarding the Convertible Notes, including the covenants related thereto, 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 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.

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

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.

For the three months ended September 30, 2024 and 2023 , the Company’s revenue was generated from t en and seven customers, respectively.

For the nine months ended September 30, 2024 and 2023 , the Company’s revenue was generated from sixteen and thirteen customers, respectively.

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

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.

For the three months ended September 30, 2024 and 2023 , two and four significant customers accounted for $ 1,358,000 or 69.4 % and $ 297,000 or 74.8 % % of revenue, respectively.

For the nine months ended September 30, 2024 and 2023 , two significant customers accounted for $ 1,450,000 or 54.1 % and $ 1,137,000 or 51.4 % of revenue, respectively.

As of September 30, 2024 and December 31, 2023 , accounts receivable was from nine and thirteen customers, of which, four customers accounted for $ 262,000 or 74.1 % and $ 336,000 or 72.0 % 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 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.

For the three months ended September 30, 2024 and 2023 , the Company had four and three customers outside of the United States (i.e., European customers) that accounted for $ 550,000 or 28.1 % and $ 127,000 or 32.0 % of revenue, respectively.

For the nine months ended September 30, 2024 and 2023 , the Company had eight and four customers outside of the United States (i.e., European customers) that accounted for $ 854,000 or 31.9 % and $ 314,000 or 14.2 % of revenue, respectively.

As of September 30, 2024 and December 31, 2023 , the Company had five and six cus tomers outside of the United States (i.e., European customers) that accounted for $ 167,000 or 47.2 % 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 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.

For the three months ended September 30, 2024 and 2023 , two and three CROs accounted for $ 690,000 or 94.6 % and $ 977,000 or 93.4 % of total research services we purchased, respectively.

For the nine months ended September 30, 2024 and 2023 , two and three CROs accounted for $ 1,647,000 or 92.0 % and $ 3,639,000 or 96.4 % of total research services we purchased, respectively.

As of September 30, 2024 and December 31, 2023 , two and three CROs accounted for $ 341,000 or 60.8 % 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 June 30, 2024 and December 31, 2023, all of our money market funds were invested in U.S.

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

As of September 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 June 30, 2024 , and December 31, 2023 .

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

Accounts receivable consist of the following:

June 30, 2024

September 30, 2024

December 31, 2023

6 unchanged sentences

Accounts payable consist of the following:

June 30, 2024

September 30, 2024

December 31, 2023

7 unchanged sentences

Accrued expenses consist of the following:

June 30, 2024

September 30, 2024

December 31, 2023

6 unchanged sentences

11,360 11,360

$ 839,420 $ 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 and six months ended June 30, 2024 and 2023 were as follows:

Three Months Ended June 30,

Six Months Ended June 30,

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

Three Months Ended September 30,

Nine Months Ended September 30,

Outside contracted services

20 unchanged sentences

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

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.

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 June 30, 2024 and December 31, 2023 .

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

As of September 30, 2024 and December 31, 2023 , deferred tax assets were $ 17.7 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 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

For the three and nine months ended September 30, 2024 , a total of 5,962,960 shares of potentially dilutive securities, including 117,925 shares of unvested restrict stock units and options to purchase 5,845,035 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 nine months ended September 30, 2023 , a total of 5,658,811 shares of potentially dilutive securities, including 163,044 shares of unvested restrict stock units and options to purchase 5,495,767 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 September 30, 2024

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

11 unchanged sentences

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 June 30, 2024 , and December 31, 2023 :

June 30, 2024 (Unaudited)

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

September 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 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.

( 4 ) For the three months ended September 30, 2024 and 2023 , the Company received discounts of $ 9,023 and $ 1,148 to purchase held-to-maturity investment securities, respectively.

For the nine months ended September 30, 2024 and 2023, the Company received discounts of $ 70,495 a nd $ 33,982 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 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.

As of September 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.

Under the terms of the Proliant Agreement, Dyadic has received 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 will receive a final payment of $ 500,000 upon the meeting of a certain productivity threshold.

Upon commencing commercial sales of animal-free recombinant serum albumin products produced pursuant to the Proliant Agreement, the Company will receive royalties based on a certain percentage of the gross margin received by Proliant, as defined in the Proliant Agreement.

For the three and nine months ended September 30, 2024 , the Company recognized $ 1.0 million in license revenue related to the Proliant Agreement, as the performance obligation to deliver the production strains has been completed.

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.

Under the terms of the Inzymes Agreement, a research collaboration to develop a basket of dairy enzymes will be fully funded by Inzymes with an upfront payment of

$ 0.6 million and an additional payment payable upon the

first commercial sale of product.

On October 11, 2024, the Inzymes Agreement was amended (“the Amended Inzymes Agreement”).

Under the terms of the Amended Inzymes Agreement, a research collaboration to develop a basket of dairy enzymes will be fully funded by Inzymes with an upfront payment of

$ 0.6 million.

Dyadic will also be eligible to receive success fees upon the achievement of certain target yields, milestone payments upon

2 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 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.

For the three and nine months ended September 30, 2024 , the Company recorded research and development revenues of $ 0 and $ 25,000 , respectively.

For the three months ended September 30, 2024, the Company recognized $ 425,000 license revenue from success fees upon the achievement of target yield for one product.

The Company will continue evaluating the achievement of success fees related to target yields and product commercialization of each product when they are considered probable and estimable under the Inzymes Agreement.

A Global Food Ingredient Company

3 unchanged sentences

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.

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

For the three and nine months ended September 30, 2023 , the Company recorded research and development revenues of approximately $ 0 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”).

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.

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

For the three and nine months ended September 30, 2023 , the Company recognized approximately $ 44,000 and $ 132,000 of license revenue, respectively.

For the three and nine months ended September 30, 2023 , the Company recorded research and development revenues of approximat ely $ 127,000 and $ 507,000 , r espectively, 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”).

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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.

Under the Amended Alphazyme Sub-License Agreement, Dyadic is entitled to potentia l milestone and royalty payments upon the commercialization of Alphazyme products using Dyadic’s proprietary C1 -cell protein production platform.

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.

6 unchanged sentences

The Convertible Notes are secured by a first priority lien on substantially all assets of the Company and Dyadic International (USA), Inc.

The Holders may require the Company to redeem all or any part of the Convertible Notes on a redemption date falling on any of the 18, 21, 24, 27, 30, and 33 -month anniversaries of the original issue date of the Convertible Notes (any such date, a "Redemption Date”) upon not less than 60 calendar days written notice prior to the applicable Redemption Date.

Pursuant to an amendment entered into by the Company on October 4, 2024, the Holders may require the Company to redeem all or any part of the Convertible Notes on a redemption date falling on any of the 26, 29, and 32 -month anniversaries of the original issue date of the Convertible Notes (any such date, a “Redemption Date”) upon not less than 60 calendar days written notice prior to the applicable Redemption Date.

The Company may also elect to redeem all or any part of the Convertible Notes on a Redemption Date upon not less than 60 calendar days written notice prior to the applicable Redemption Date.

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 convertible into shares of the Company’s common stock, in whole or in part, at the option o f the Holders at any time, based on a conversion price of $ 1.40 per share of 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 .

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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:

For the three months ended September 30, 2024 , $ 114,933 of interest was paid and debt issuance costs of $ 17,244 were amortized and recorded in interest expense in the consolidated statements of operations.

For the nine months ended September 30, 2024 , $ 149,778 of interest was paid and debt issuance costs of $43,961 were amortized and recorded in interest expense in the consolidated statements of operations.

As of September 30, 2024 , accrued interest on the Convertible Notes to related parties and other third parties were $ 28,000 and $ 80,000 , respectively.

As of September 30, 2024 , accumulated amortized debt issuance costs are $ 26,394 .

For the nine months ended September 30, 2024 , $ 600,000 of the Convertible Notes were converted into 335,195 shares of the Company’s common stock.

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

Issuance Date

24 unchanged sentences

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 June 30, 2024 , is $ 20,000 .

The amount of accrued interest as of September 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.

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

For the nine months ended September 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.

For the nine months ended September 30, 2024 , $ 200,000 of the Convertible Notes held by Bradley Scott Emalfarb Irrevocable Trust were converted into 111,732 shares of the Company’s common stock.

As of September 30, 2024 , the amount of accrued interest for Bradley Emalfarb and Bradley Scott Emalfarb Irrevocable Trust was $ 2,000 and $4,200, 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 June 30, 2024 , is $ 1,800 .

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

Commitments and Contingencies

10 unchanged sentences

The original contract was entered on June 28, 2019, and subsequently amended by the First Amendment on June 21, 2022, and the Second Amendment on September 9, 2022.

Under the terms of the Third Amendment, the contract duration was extended to January 31, 2025, and Dyadic will pay VTT a total of EUR €186,000 to continue developing Dyadic’s C1 -cell protein production platform for therape utic protein production, including our C1 host system.

Under the terms of the Third Amendment, the contract duration was extended to January 31, 2025, and Dyadic will pay VTT a total of EUR €186,000 to continue developing Dyadic’s C1 -cell protein production platform for therapeutic protein production, including our C1 host system.

Dyadic has the right to terminate the contract with 90 days’ notice.

As of September 30, 2024 , t he Company paid EUR €93,000, and the remaining amount of the contract of EUR €93,000 will be paid during the first quarter of 2025.

Share-Based Compensation

5 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 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 September 30, 2024 , the Comp any had 5,845,035 stock options outstanding and 117,925 unvested restricted stock units in addition to 2,025,191 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.

2 unchanged sentences

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 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 two or five 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.

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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., 2 or 5 years).

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:

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

Risk-Free interest rate

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Expected stock price volatility

63.02 - 63.64 %

Expected life of options (in years)

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

The following table summarizes the stock option activities for the nine months ended September 30, 2024 :

Weighted-Average

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( 73,312 ) 1.73

Outstanding at June 30, 2024

Outstanding at September 30, 2024

5,845,035 $ 2.96 5.57 $ 3,500

Exercisable at June 30, 2024

Exercisable at September 30, 2024

4,458,123 $ 3.19 4.63 $ 3,500

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• 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.

• A one -time award on September 23, 2024, of 25,000 stock options granted to a consultant with an exercise price of $ 1.79 , vesting in three months.

( 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.

( 3 ) Represen ts the following options canceled:

(a) 50,000 s tock options granted to a former member of the Board of Directors, (b) 13,125 stock options granted to the Company's former Chairman of the Board of Directors, and (c) 10,187 stock options granted to the Company's former employee.

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 six months ended June 30, 2024 :

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

Weighted-Average

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( 11,792 ) 1.59

Outstanding at June 30, 2024

Outstanding at September 30, 2024

117,925 $ 1.59

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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 the three and nine months ended September 30, 2024 , there were forfeitures of $ 9,000 and $ 50,000 , 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 June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 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 June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

Share based compensation expense - stock option

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Issuances of Common Stock

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.

For the nine months ended September 30, 2024 , there were 778,310 shares of the Company’s common stock issued with a weighted average issue price of $ 1.63 per share, including 335,195 shares from the conversion of the Convertible Notes, 437,546 shares from the vesting of restricted stock units, and 5,569 shares from the exercise of stock options.

For the nine months ended September 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

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.

As of September 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 August 13, 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 November 12, 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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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 has received an initial payment of $500,000 in July 2024 and received a second payment of $500,000 for completing the transfer of a Production Strain according to the terms of the agreement in September 2024, and we expect to 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.

A portion of the final 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.

The Company has completed its development of the DNASE-1 enzyme, and a Certificate of Analysis has been issued for the product, sampling efforts have begun.

The Company is currently in dialog with manufacturing organizations to produce a research grade DNASE-1 product with anticipation of taking pre-orders by the first quarter of 2025.

The Company has initiated a project to produce research grade DNA/RNA Polymerases, DNA Ligase, and RNase Inhibitor products;

stable cell lines have been developed with optimization and analysis ongoing.

These enzymes are essential tools in molecular biology with unique functions in DNA and RNA manipulation.

The Company has made progress in the production of recombinant transferrin for use in cell culture media for the alternative protein industry and a Certificate of Analysis has been issued for the product; product sampling occurred in the third quarter, earlier than originally estimated.

Current application testing for recombinant bovine transferrin is ongoing for use in cell culture media for the cultured meat industry, with results expected in the fourth quarter.

The Company has made progress with its research grade recombinant bovine alpha-lactalbumin;

a Certificate of Analysis has been issued for the product;

sampling is expected to begin in the late fourth quarter.

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 achieving a milestone payment and is in the process of delivering the strain for verification by its partner.

During the third quarter, the Company has received its first milestone of $425,000 for achieving the target yield level from the development and license agreement entered into in 2023 to commercialize certain non-animal dairy enzymes used in the production of food products using the Dapibus™ protein production platform.

This is in addition to the upfront payment of $0.6 million received in October 2023.

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.

Additionally, the Company provided samples to four alternative protein companies.

The Company is sampling recombinant lactoferrin to several interested parties.

Bio Industrial Products

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.

Development of five enzymes is ongoing with potential for use in multiple industries, such as nutrition, biogas, biofuels and biorefining.

Sampling has been initiated 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.

The Company further expanded its collaboration with Phibro/Abic targeting a number of additional vaccines for use in developing livestock animal diseases.

The Co mpany’s C1-produced H5 A/2.3.3.4.b A/Astrakhan ferritin nanoparticle antigen is being evaluated in poultry and cattle trials by multiple partners, underscoring the platform’s scalability for animal health application s.

In collaboration with ViroVax, LLC, the Company co-developed a C1-produced ferritin nanoparticle Mpox antigen that can be manufactured rapidly, cost-effectively, and at flexible scales.

Preclinical studies for Mpox vaccine candidate developed in collaboration with ViroVax LLC are scheduled to begin in Q4 2024.

The Company is advancing its human health collaborations with partnerships with two top ten pharmaceutical companies and a leading biotech, having successfully expressed an antibody targeting digestive health and antigens for HIV, HPV, RSV, and other respiratory viruses.

Third party collaborator(s) reported data demonstrating all three infectious disease mAbs expressed from C1-cells showed virtual identical neutralizing and binding activity to traditionally produced CHO mAbs.

The Company submitted multiple applications for grant funding from leading Non-Governmental Organization in collaboration with Fondazione Biotecnopolo di Siena and other partners for a variety of vaccine antigens.

C1- produced H5 Clade 2.3.3.4.b A/Astrakhan recombinant ferritin nanoparticle sample provided to a prospective partner for development of potential H5 avian influenza ‘Bird Flu’ diagnostic kit.

Critical Accounting Estimates

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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.

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 the royalty has been allocated has been satisfied (or partially satisfied).

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Results of Operations

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

Three and Nine Months Ended September 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 and six months ended June 30, 2024 and 2023:

Three Months Ended June 30,

Six Months Ended June 30,

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

Three Months Ended September 30,

Nine Months Ended September 30,

Research and development revenue

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Cost of research and development revenue

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.

For the three months ended September 30, 2024 , the increase in research and development revenue and cost of research and development revenue was due to the increasing numbers of collaborations conducted in 2024.

The Company’s revenue was generated from eleven collaborations compared to seven collaborations for the same period a year ago.

For the nine months ended September 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 nine months ended September 30, 2024 , the Company’s revenue was generated from nineteen collaborations compared to twenty collaborations for the same period a year ago.

The license revenue for the three and nine months ended September 30, 2024, was related to t he licensing fee from the Proliant agreement of $1.0 million, and a success fee payment from the Inzyme agreement of $425,000.

The license revenue for the three and nine months ended September 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 June 30, 2024 , decreased to $ 516,000 compared to $ 918,000 for the same period a year ago.

Research and development expenses for the three months ended September 30, 2024 , decreased to $ 460,000 compared to $ 716,000 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.

Research and development expenses for the nine months ended September 30, 2024 , decreased to $ 1,499,000 compared to $2,444,000 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.

General and Administrative Expenses

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.

General and administrative expenses for the three months ended September 30, 2024 , increased by 1.2% to $ 1,298,000 compared to $ 1,282,000 for the same period a year ago.

The increase reflected increases in business development and investor relations expenses of $52,000, and other increases of $24,000, offset by decreases in management incentives of $38,000, and accounting and legal expenses of $22,000.

General and administrative expenses for the nine months ended September 30, 2024 , increased by 12.7% to $ 4,694,000 compared to $ 4,165,000 for the same period a year ago.

The increase reflected increases in business development and investor relations expenses of $241,000, share-based compensation expenses of $90,000, accounting expenses of $82,000, legal expenses of $63,000, and other increases of $92,000, offset by decrease in insurance expenses of $39,000.

Loss from Operations

Loss from operations for the three months ended

June 30, 2024

September 30, 2024

, decreased to $

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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.

The decrease in loss from operations was largely due to the licensing revenue of $1.0 million from Proliant and success fees of $425,000 from Inzyme.

Loss from operations for the

six months ended June 30, 2024

nine months ended September 30, 2024

, decreased to $

1 unchanged sentence

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.

The decrease in loss from operations was largely due to the licensing revenue of $1.0 million from Proliant and success fees of $425,000 from Inzyme.

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.

For the three months ended September 30, 2024 , total other income (expenses), net, was an expense of $ 1,000 compared to an income of $ 106,000 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.

For the nine months ended September 30, 2024 , total other income (expenses), net, was $ 112,000 compared to $ 1,337,000 for the same period a year ago.

The decrease in other income was largely due to the gain on sale of the Company’s equity interest in Alphazyme, LLC of $1,018,000 in 2023, and interest expenses of $302,000 related to the Convertible Notes in 2024.

Net loss for the three months ended September 30, 2024 , was $ 203,000 compared to $ 1,614,000 for the same period a year ago.

The decrease in net loss was largely due to the licensing revenue of $1.0 million from Proliant and success fees of $425,000 from Inzyme recognized in the third quarter 2024, in addition to increase in research and development revenue of $180,000, partially offset by interest expense, net of interest income of $107,000.

Net loss for the nine months ended September 30, 2024 , was $ 4,258,000 compared to $ 4,724,000 for the same period a year ago.

The decrease in loss from operations was largely due to the licensing revenue of $1.0 million from Proliant and success fees of $425,000 from Inzyme recognized in the third quarter of 2024, offset by the gain on sale of the Company’s equity interest in Alphazyme LLC of $1,018,000 in 2023 and decrease in research and development expenses of $946,000, partially offset by increases in general and administrative expenses of $529,000 and interest expenses of $302,000.

Liquidity and Capital Resources

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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 “Securities Act”).

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

The net proceeds from the sale of the Convertible Notes, after deducting offering expenses, were $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.

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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.

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.

On October 4, 2024, the Company entered into an amendment (the “Amendment”) to the Convertible Notes.

Pursuant to the Amendment, (i) the conversion price upon which the Convertible Notes will be convertible into shares of the Company’s common stock is $1.40 per share of common stock, and (ii) the Redemption Date (as defined in the Amendment) will fall on any of the 26, 29 and 32-month anniversaries of the original issue date of the Convertible Notes.

As of September 30, 2024, $600,000 of the Convertible Notes were converted in to 335,195 shares of Common Stock.

F or more information regarding the Convertible Notes, including the covenants related thereto 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.

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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 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.

As of September 30, 2024 , cash and cash equivalents were $5.9 million compared to $6.5 million as of December 31, 2023 .

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

Net cash used in operating activities for the nine months ended September 30, 2024 was $ 3.3 million, which was principally attributable to a net loss of $ 4.3 million , partially offset by changes in operating assets and liabilities of $ 0.2 million and share-based compensation expenses of $ 0.9 million.

Net cash used in operating activities for the nine months ended September 30, 2023, of approximately $5.8 million was principally attributable to a net loss of approximately $4.7 million, gain from the sale of investment in Alphazyme, LLC of approximately $1.0 million, and changes in operating assets and liabilities of approximately $1.0 million, partially offset by share-based compensation expenses of approximately $0.9 million.

Net cash used in investing activities for the nine months ended September 30, 2024 was $ 3.1 millio n, compared to a net cash provided by investing activities of $7.4 million for the nine months ended September 30, 2023.

The decrease in net cash used in investing activities was attributable to additional purchases of investment securities of $3.7 million, decreases in proceeds received from maturities of investment securities of $5.6 million, and proceeds from the sale of investment in Alphazyme of $1.3 million.

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

For the nine months ended September 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