DYADIC INTERNATIONAL INC 10-K

Item 9A. Controls and Procedures Evaluation of Disclosure Controls and Procedures Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2024. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) , means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms. Based on the evaluation of our disclosure controls and procedures as of December 31, 2024, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective. Management’s Report on Internal Control Over Financial Reporting Our management is responsible for establishing and maintaining adequate “internal control over financial reporting,” as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2024 based on the criteria set forth in the Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on the assessment, our management has concluded that our internal control over financial reporting was effective as of December 31, 2024. This Annual Report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our independent registered public accounting firm pursuant to the rules of the SEC that permit us to provide only management’s report in this Annual Report because we are a “smaller reporting company” and “non-accelerated filer.” Changes in Internal Controls Over Financial Reporting There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rules 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the year ended December 31, 2024 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Inherent Limitation on Effectiveness of Controls A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or because the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. Item 9B. Other Information Insider Trading Arrangements During the quarter ended December 31, 2024, none of our directors or officers (as defined in Rule 16a - 1 (f) under the Exchange Act) adopted or terminated a “Rule 10b5 - 1 trading arrangement” or a “non-Rule 10b5 - 1 trading arrangement” (each as defined in Item 408 (a) and (c), respectively, of Regulation S-K). 44 Item 9C. Disclosure Regarding Foreign Jurisdictions That Prevent Inspections Not applicable. PART III Item 10. Directors, Executive Officers and Corporate Governance The information required by this item is incorporated by reference to the Company’s definitive proxy statement relating to the 2025 annual meeting of shareholders. The definitive proxy statement will be filed with the Securities and Exchange Commission within 120 days after the end of the 2024 fiscal year. Item 11. Executive Compensation The information required by this item is incorporated by reference to the Company’s definitive proxy statement relating to the 2025 annual meeting of shareholders. The definitive proxy statement will be filed with the Securities and Exchange Commission within 120 days after the end of the 2024 fiscal year. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The information required by this item is incorporated by reference to the Company’s definitive proxy statement relating to the 2025 annual meeting of shareholders. The definitive proxy statement will be filed with the Securities and Exchange Commission within 120 days after the end of the 2024 fiscal year. Item 13. Certain Relationships and Related Transactions, and Director Independence The information required by this item is incorporated by reference to the Company’s definitive proxy statement relating to the 2025 annual meeting of shareholders. The definitive proxy statement will be filed with the Securities and Exchange Commission within 120 days after the end of the 2024 fiscal year. Item 14. Principal Accounting Fees and Services The information required by this item is incorporated by reference to the Company’s definitive proxy statement relating to the 2025 annual meeting of shareholders. The definitive proxy statement will be filed with the Securities and Exchange Commission within 120 days after the end of the 2024 fiscal year. 45 PART IV Item 15. Financial Statement and Exhibits (a) Financial Statement Our financial statements and related notes thereto are listed and included in this Annual Report on Form 10-K beginning on page F-1. (b) Exhibits Incorporated by Reference Exhibit No. Description of Exhibit Form Original No. Date Filed Filed Herewith 3.1# Restated Certificate of Incorporation dated November 1, 2004 10-12G 3.1 January 14, 2019 3.2# Third Amended and Restated Bylaws dated March 28, 2023 8-K 3.1 March 29, 2023 4.1# Specimen Stock Certificate Evidencing Shares of Common Stock 10-12G 4.1 January 14, 2019 4.2# Description of Registered Securities 10-K 4.2 March 30, 2020 4.3# Senior Secured Convertible Promissory Note due March 8, 2027, dated March 8, 2024 8-K 4.1 March 11, 2024 4.3.1# Amendment, dated as of October 4, 2024, to Form of Senior Secured Convertible Promissory Note due March 8, 2027 8-K 4.1 October 8, 2024 10.1**# Dyadic International, Inc. 2011 Equity Incentive Plan 10-12G 10.2 January 14, 2019 10.2**# Dyadic International, Inc. 2021 Equity Incentive Plan S-8 4.3 August 12, 2021 10.2.1**# Form of Stock Option Agreement Pursuant to the Dyadic International, Inc. 2021 Equity Incentive Plan 10-K 10.2.1 March 28, 2024 10.2.2**# Form of Restricted Stock Unit Agreement Pursuant to the Dyadic International, Inc. 2021 Equity Incentive Plan 10-K 10.2.2 March 28, 2024 10.3**# Form of Restricted Stock Unit Agreement Pursuant to the Dyadic International, Inc. 2011 Equity Incentive Plan 10-12G 10.3 January 14, 2019 10.4**# Form of Stock Option Agreement Pursuant to the Dyadic International, Inc. 2011 Equity Incentive Plan 10-12G 10.4 January 14, 2019 10.5**# Employment Agreement, dated June 16, 2016, and First Amendment dated January 23, 2017, by and between Dyadic International, Inc. and Mark A. Emalfarb 10-12G 10.5 January 14, 2019 10.5.1**# Second Amendment to Employment Agreement between Dyadic International, Inc. and Mark A. Emalfarb, dated as of November 12, 2019 8-K 10.1 November 13, 2019 10.6**# Consulting Agreement, dated January 1, 2016, by and between Dyadic Netherlands B.V. and Sky Blue Biotech kft on behalf of Ronen Tchelet 10-12G 10.7 January 14, 2019 10.7**# Employment Agreement dated November 8, 2024, between Dyadic International, Inc. and Ping Rawson 8-K 10.1 November 2024 10.8**# Employment Agreement between Dyadic International Inc. and Joseph Hazelton dated November 9, 2021 8-K 10.1 November 9, 2021 10.9**# Form of Director and Officer Indemnification Agreement 10-12G 10.10 January 14, 2019 46 10.10# Lease Agreement with Jupiter Harbour Office, LLC dated August 19, 2023 10-Q 10.1 November 8, 2023 10.11†# Pharma License Agreement with Danisco US, Inc. dated December 31, 2015 10-12G 10.12 January 14, 2019 10.12†# Commission Contract with VTT Technical Research Centre of Finland Ltd dated September 2, 2016 10-12G 10.13 January 14, 2019 10.12.1†# Commission Contract with VTT Technical Research Centre of Finland Ltd dated June 28, 2019 8-K 10.1 July 5, 2019 10.13†# Service Framework Agreement with Biotechnology Developments for Industry in Pharmaceuticals, S.L.U. dated June 30, 2017 10-Q 10.2 November 8, 2023 10.13.1†# Amendment No. 1 dated July 26, 2021, to the Service Framework Agreement dated June 30, 2017 8-K 10.3 July 27, 2021 10.14†# License Agreement with VTT Technical Research Centre of Finland Ltd dated July 17, 2017 10-12G 10.17 January 14, 2019 10.15†# Joint Development Agreement with Leprino Foods Company, dated May 12, 2022 8-K 10.1 May 11, 2022 10.16†# Non-Exclusive Sublicense Agreement among Dyadic International, Inc., Alphazyme, LLC, dated May 5, 2019 8-K 10.1 May 8, 2019 10.17†# Amended and Restated Non-Exclusive Sublicense Agreement among Dyadic International, Inc., Alphazyme, LLC, dated June 24, 2020 8-K 10.1 June 29, 2020 10.18†# Alphazyme Sale Agreement dated January 18, 2023 8-K 10.1 January 23, 2023 10.19†# RUBIC License Agreement dated April 6, 2023 8-K 10.1 April 6, 2023 10.20†# Inzyme Development and Exclusive License Agreement, effective September 18, 2023 8-K 10.1 September 19, 2023 10.21# Securities Purchase Agreement Relating to the Senior Secured Convertible Promissory Note dated March 8, 2024 8-K 10.1 March 11, 2024 10.22# Registration Rights Agreement Relating to the Senior Secured Convertible Promissory Note dated March 8, 2024 8-K 10.2 March 11, 2024 10.23# Security Agreement Relating to the Senior Secured Convertible Promissory Note dated March 8, 2024 8-K 10.3 March 11, 2024 10.24# Subsidiary Guarantee Relating to the Senior Secured Convertible Promissory Note dated March 8, 2024 8-K 10.4 March 11, 2024 10.25 License and Development Agreement between Dyadic International (USA), Inc. and Proliant Biologicals, LLC d/b/a Proliant Health and Biologicals, dated June 27, 2024 8-K 10.1 July 2, 2024 10.28†# Grant Agreement between Dyadic International, Inc. and the Bill & Melinda Gates Foundation, dated as of November 16, 2024 8-K 10.1 November 26, 2024 47 19.1 Insider Trading Policy x 21.1 Subsidiaries of the Registrant x 23.1 Consent of Independent Registered Public Accounting Firm - Crowe LLP x 24.1 Power of Attorney (included on signature page) 31.1 Certification of Chief Executive Officer of Dyadic International, Inc, Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 x 31.2 Certification of Chief Financial Officer of Dyadic International, Inc. Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 x 32.1^ Certification of Chief Executive Officer of Dyadic International, Inc. Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 32.2^ Certification of Chief Financial Officer of Dyadic International, Inc. Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 97# Policy Related to Recovery of Erroneously Awarded Compensation 10-K 97 March 28, 2024 101.INS Inline XBRL Instance Document x 101.SCH Inline XBRL Taxonomy Extension Schema Document x 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document x 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document x 101.LAB Inline XBRL Taxonomy Extension Labels Linkbase Document x 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document x 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) Legend: ** Identifies a management contract or compensatory plan or arrangement. † Certain provisions of this exhibit have been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K. # Previously filed with the SEC. ^ Furnished herewith. Item 16. Form 10-K Summary Not applicable. 48 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. DYADIC INTERNATIONAL, INC. March 26, 2025 By: /s/ Mark A. Emalfarb Mark A. Emalfarb President and Chief Executive Officer (Principal Executive Officer) March 26, 2025 By: /s/ Ping W. Rawson Ping W. Rawson Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Mark A. Emalfarb and Ping W. Rawson, jointly and severally, his or her attorneys-in-fact, each with the power of substitution, for him or her in any and all capacities, to sign any amendments to this Annual Report on Form 10-K, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof. Pursuant to the requirements of Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ Mark A. Emalfarb Chief Executive Officer, Director March 26, 2025 Mark A. Emalfarb (Principal Executive Officer) /s/ Ping W. Rawson Chief Financial Officer March 26, 2025 Ping W. Rawson (Principal Financial Officer and Principal Accounting Officer) /s/ Patrick Lucy Chairman, Director March 26, 2025 Patrick Lucy /s/ Jack L. Kaye Director March 26, 2025 Jack L. Kaye /s/ Seth J. Herbst Director March 26, 2025 Seth J. Herbst, MD /s/Arindam Bose Director March 26, 2025 Arindam Bose, Ph.D. /s/ Michael P. Tarnok Director March 26, 2025 Michael P. Tarnok 49 Index to Consolidated Financial Statements Page Financial Statements: Report of Independent Registered Public Accounting Firm (PCAOB ID 173 ) F-2 Consolidated Balance Sheets as of December 31, 2024 and 2023 F-3 Consolidated Statements of Operations for the Years Ended December 31, 2024 and 2023 F-4 Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2024 and 2023 F-5 Consolidated Statements of Cash Flows for the Years Ended December 31, 2024 and 2023 F-6 Notes to Consolidated Financial Statements F-7 F-1 Report of Independent Registered Public Accounting Firm Shareholders and the Board of Directors of Dyadic International, Inc. Jupiter, Florida Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Dyadic International, Inc. (the "Company") as of December 31, 2024 and 2023, the related consolidated statements of operations, stockholders’ equity, and cash flows for the years ended December 31, 2024 and 2023, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for the years ended December 31, 2024 and 2023, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters /s/ Crowe LLP We have served as the Company's auditor since 2023. Livingston, New Jersey March 26, 2025 F-2 DYADIC INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31, 2024 2023 Assets Current assets: Cash and cash equivalents $ 6,506,750 $ 6,515,028 Short-term investment securities 2,756,577 748,290 Interest receivable 24,248 10,083 Accounts receivable 237,027 466,159 Prepaid expenses and other current assets 303,066 327,775 Total current assets 9,827,668 8,067,335 Non-current assets: Operating lease right-of-use asset, net 92,211 141,439 Other assets 10,396 10,462 Total assets $ 9,930,275 $ 8,219,236 Liabilities and stockholders’ equity Current liabilities: Accounts payable $ 482,320 $ 656,445 Accrued expenses 970,462 1,057,164 Deferred research and development obligations 833,813 490,113 Operating lease liability, current portion 54,249 48,059 Accrued interest 80,000 — Accrued interest- related party 27,173 — Total current liabilities 2,448,017 2,251,781 Non-current liabilities: Convertible notes, net of issuance costs 3,911,471 — Convertible notes, net of issuance costs - related party 1,065,876 — Operating lease liability, net of current portion 34,621 88,870 Total liabilities 7,459,985 2,340,651 Commitments and contingencies (Note 4) Stockholders’ equity: Preferred stock, $ .0001 par value: Authorized shares - 5,000,000 ; none issued and outstanding — — Common stock, $ .001 par value: Authorized shares - 100,000,000 ; issued shares - 42,089,301 and 41,064,563 , outstanding shares - 29,835,799 and 28,811,061 as of December 31, 2024 and 2023, respectively 42,090 41,065 Additional paid-in capital 107,444,595 105,044,756 Treasury stock, shares held at cost - 12,253,502 ( 18,929,915 ) ( 18,929,915 ) Accumulated deficit ( 86,086,480 ) ( 80,277,321 ) Total stockholders’ equity 2,470,290 5,878,585 Total liabilities and stockholders’ equity $ 9,930,275 $ 8,219,236 The accompanying notes are an integral part of these audited consolidated financial statements. F-3 DYADIC INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS Years Ended December 31, 2024 2023 Revenues: Research and development revenue $ 1,605,220 $ 2,545,865 License revenue 1,890,169 352,941 Total revenue 3,495,389 2,898,806 Costs and expenses: Costs of research and development revenue 1,194,624 1,975,849 Research and development 2,044,253 3,297,266 General and administrative 6,134,773 5,817,013 Foreign currency exchange loss 22,561 38,417 Total costs and expenses 9,396,211 11,128,545 Loss from operations ( 5,900,822 ) ( 8,229,739 ) Other income (expense): Interest income 456,992 416,686 Gain on sale of Alphazyme 62,642 1,017,592 Interest expense ( 288,142 ) — Interest expense - related party ( 139,829 ) — Total other income (expense), net 91,663 1,434,278 Net loss $ ( 5,809,159 ) $ ( 6,795,461 ) Basic and diluted net loss per common share $ ( 0.20 ) $ ( 0.24 ) Basic and diluted weighted-average common shares outstanding 29,318,123 28,798,833 The accompanying notes are an integral part of these audited consolidated financial statements. F-4 DYADIC INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY Common Stock Treasury Stock Additional Accumulated Shares Amount Shares Amount paid-in capital deficit Total Balance at December 31, 2022 40,816,602 $ 40,817 ( 12,253,502 ) $ ( 18,929,915 ) $ 103,458,697 $ ( 73,481,860 ) $ 11,087,739 Stock-based compensation expenses — — — — 1,244,121 — 1,244,121 Issuance of common stock upon vesting of restricted stock units 247,961 248 — — 341,938 — 342,186 Net loss — — — — — ( 6,795,461 ) ( 6,795,461 ) Balance at December 31, 2023 41,064,563 $ 41,065 ( 12,253,502 ) $ ( 18,929,915 ) $ 105,044,756 $ ( 80,277,321 ) $ 5,878,585 Stock-based compensation expenses — — — — 1,126,279 — 1,126,279 Issuance of common stock upon vesting of restricted stock units 437,546 437 — — 339,897 — 340,334 Issuance of common stock upon exercise of stock options 30,569 31 — — 24,220 — 24,251 Issuance of common stock upon settlement of convertible debt 556,623 557 — — 909,443 — 910,000 Net loss — — — — — ( 5,809,159 ) ( 5,809,159 ) Balance at December 31, 2024 42,089,301 $ 42,090 ( 12,253,502 ) $ ( 18,929,915 ) $ 107,444,595 $ ( 86,086,480 ) $ 2,470,290 The accompanying notes are an integral part of these audited consolidated financial statements. F-5 DYADIC INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended December 31, 2024 2023 Cash flows from operating activities Net loss $ ( 5,809,159 ) $ ( 6,795,461 ) Adjustments to reconcile net loss to net cash used in operating activities: Stock-based compensation expense 1,126,279 1,244,121 Amortization of held-to-maturity securities, net ( 71,057 ) ( 53,032 ) Amortization of debt issuance costs 63,021 — Gain on investment in Alphazyme ( 60,977 ) ( 1,017,592 ) Foreign currency exchange loss 22,561 38,418 Changes in operating assets and liabilities: Interest receivable ( 14,165 ) 48,202 Accounts receivable 219,425 ( 141,332 ) Prepaid expenses and other current assets 24,742 64,902 Operating lease assets and liabilities, net 1,169 ( 4,510 ) Accounts payable ( 180,182 ) ( 651,168 ) Accrued expenses 252,664 444,269 Accrued interest 80,000 — Accrued interest - related party 27,173 — Deferred license revenue — ( 352,942 ) Deferred research and development obligations 343,700 449,370 Net cash used in operating activities ( 3,974,806 ) ( 6,726,755 ) Cash flows from investing activities Purchases of held-to-maturity investment securities ( 7,343,230 ) ( 2,995,988 ) Proceeds from maturities of investment securities 5,406,000 9,148,000 Proceeds from the sale of investment in Alphazyme 60,977 1,297,884 Net cash (used in) provided by investing activities ( 1,876,253 ) 7,449,896 Cash flows from financing activities Proceeds from issuance of convertible notes, net of issuance costs 3,882,884 — Proceeds from issuance of convertible notes, net of issuance costs - related party 1,941,442 — Proceeds from exercise of options 24,251 — Net cash provided by financing activities 5,848,577 — Effect of exchange rate changes on cash ( 5,796 ) ( 2,385 ) Net (decrease) increase in cash and cash equivalents ( 8,278 ) 720,756 Cash and cash equivalents at beginning of period 6,515,028 5,794,272 Cash and cash equivalents at end of period $ 6,506,750 $ 6,515,028 Supplemental cash flow information Vesting of restricted stock units $ 340,334 $ 342,186 Conversion of convertible notes $ 910,000 — Cash paid for interest $ 257,778 — Right-of-use asset obtained in exchange for lease obligations — $ 156,983 The accompanying notes are an integral part of these audited consolidated financial statements. F-6 Notes to Consolidated Financial Statements Note 1: Organization and Summary of Significant Accounting Policies Description of Business Dyadic International, Inc. (“Dyadic”, “we”, “us”, “our”, or the “Company”) is a global biotechnology platform company based in Jupiter, Florida with operations in the United States and a satellite office in the Netherlands, and it utilizes several third -party consultants and contract research organizations to carry out the Company’s activities. Over the past two plus decades, the Company developed a gene expression platform for producing commercial quantities of industrial enzymes and other proteins, and previously licensed this technology to third parties, such as Abengoa Bioenergy SA, BASF SE, Codexis, Inc. and others, for use in industrial (non-pharmaceutical) applications. This technology is based on the Thermothelomyces heterothallica (formerly known as Myceliophthora thermophila ) fungus, which the Company named C1. For the past nine years since the Company sold its industrial technology business to Danisco USA (“Danisco”), the industrial biosciences business of DuPont (NYSE: DD) (the “DuPont Transaction”), the Company has been focused on building innovative microbial protein production platforms to address the growing demand for global protein bioproduction and unmet clinical needs for effective, affordable, and accessible biopharmaceutical products for human and animal health and for other biologic products for use in non-pharmaceutical applications. As part of the DuPont Transaction, Dyadic retained co-exclusive rights to its proprietary and patented C1 protein production platform (the “C1 platform”) for use in all human and animal pharmaceutical applications, and currently, the Company has the exclusive ability to enter into sub-license agreements (subject to the terms of the license and to certain exceptions) for use in all human and animal pharmaceutical applications. Danisco retained certain rights to utilize the C1 platform in pharmaceutical applications, including the development and production of pharmaceutical products, for which it will be required to make royalty payments to Dyadic upon commercialization. In certain circumstances, Dyadic may owe a royalty to either Danisco or certain licensors of Danisco, depending upon whether Dyadic elects to utilize certain patents either owned by Danisco or in licensed by Danisco. After the DuPont Transaction, the Company has directed its efforts toward advancing the C1 platform to address the increasing global demand for the development and manufacturing of prophylactic and therapeutic biopharmaceuticals for human and animal health. The Company’s biopharmaceutical development efforts have been centered on enhancing the capability of the C1 platform to produce stable, properly folded, and functional proteins for pharmaceutical applications, including vaccines and monoclonal antibodies. In addition to improving the quality and productivity of the C1 platform, the Company has sought to validate its platform for human use through a series of fully funded biopharmaceutical projects, extensive animal studies utilizing C1 -produced proteins, and in 2024, the successful completion of a Phase 1 first -in-human study for a vaccine antigen produced using C1, which demonstrated its safety for human applications. Recognizing the longer development timelines, clinical testing, and regulatory requirements associated with human and animal pharmaceutical products, the Company has refined its core business strategy to expand into recombinant (non-animal derived) alternative proteins for non-pharmaceutical applications in research, nutrition, and industrial markets. To address these opportunities, the Company has developed and launched the Dapibus™ Protein Production Platform (“Dapibus™”), which supports various applications within the alternative proteins field, namely in Life Sciences, Food & Nutrition, and Bioindustrial applications. Given the reduced developmental costs, shorter timelines, and fewer regulatory requirements associated with alternative proteins, Dapibus™ has enabled the Company to generate near-term recurring revenue while continuing to build long-term value through C1 for pharmaceutical applications. The Company anticipates achieving commercialization of certain alternative protein products in 2025 through a combination of existing collaborations and internal manufacturing efforts. Liquidity, Capital Resources, and Going Concern In accordance with FASB Accounting Standards Codification (“ASC”) 205 - 40, Presentation of Financial Statements – Going Concern (“Topic 205 - 40” ), management is required to evaluate whether there are conditions and events, considered in the aggregate that raise substantial doubt about the Company’s ability to continue as a going concern for at least 12 months from the issuance date of the Company’s condensed interim financial statements. This evaluation does not take into consideration the potential mitigating effect of management’s plans that have not been fully implemented or are not within control of the Company as of the date the financial statements are issued. When substantial doubt exists under this methodology, management evaluates whether the mitigating effect of its plans sufficiently alleviates substantial doubt about the Company’s ability to continue as a going concern. The mitigating effect of management’s plans, however, is only considered if both ( 1 ) it is probable that the plans will be effectively implemented within one year after the date that the financial statements are issued, and ( 2 ) it is probable that the plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued. F- 7 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. 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, we re $ 5,824,326 . The Company intends to use the net proceeds from the offering of the Convertible Notes for working capital and general corporate purposes. 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. The Convertible Notes will mature on March 8, 2027 ( the “Maturity Date”), unless earlier converted, repurchased, or redeemed in accordance with the terms of the Convertible Notes. 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. 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 changed from $ 1.79 to $ 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, which are May 8, 2026, August 8, 2026 and November 8, 2026. The Convertible Notes contain customary covenants, and the Securities Purchase Agreement relating to the Convertible Notes also contains certain affirmative and negative covenants (including, without limitation, restrictions on our ability to incur indebtedness, permit liens, make dividends or certain debt payments or consummate certain affiliate transactions). The Company was in compliance with its covenants with respect to the Convertible Notes as of December 31, 2024. As of December 31, 2024, $ 910,000 of the Convertible Notes have been converted into 556,623 shares of Common Stock. For more information regarding the Convertible Notes, including the covenants related thereto , see Note 5 to the Co nsolidated Financial Statements. In addition, on November 16, 2024, Dyadic entered into an agreement with the Bill & Melinda Gates Foundation (the “Gates Foundation”) relating to a grant in the amount of $ 3,092,136 awarded from the Gates Foundation for the cell line development of monoclonal antibodies targeting respiratory syncytial virus and malaria utilizing the Company’s C1 platform to provide globally accessible treatment options for underserved populations (the “Gates Foundation Grant”). As of December 31, 2024, the Company had $ 6,506,750 cash and $ 2,780,825 short-term investment securities (including accrued interest) on its balance sheet, totaling $ 9,287,575 . The Company expects its existing cash and cash equivalents, and cash raised from the Convertible Notes, or other debt instruments, and or other means, the Gates Foundation Grant, 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 Annual 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, convertible notes and other debt instruments, and/or other means. Any amounts raised may be used for the further development and commercialization of product candidates, and for other working capital purposes. 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. F- 8 Basis of Presentation The accompanying audited consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. Dyadic consolidates entities in which we have a controlling financial interest. We consolidate our subsidiaries in which we hold and/or control, directly or indirectly, more than 50% of the voting rights. All significant intra-entity transactions and balances have been eliminated in consolidation. These consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”). Segment Information Operating segments are defined as components of an entity about which separate discrete information is available for evaluation by the chief operating decision maker, or CODM, in deciding how to allocate resources and in assessing performance. The CODM is the Company's senior management team that includes the Chief Executive Officer, Chief Operating Officer, and Chief Financial Officer. The Company views its operations as and manages its business in one operating segment, which is the business of developing and commercializing synthetic protein products using the Company’s proprietary microbial platforms, including C1 and Dapibus™. Segment information is further described in Note 9 to the consolidated financial statements included in this Annual Report on Form 10 -K. Use of Estimates The preparation of these consolidated financial statements in accordance with GAAP requires management to make estimates and judgments that affect the reported amount of assets and liabilities and related disclosure of contingent assets and liabilities at the date of our consolidated financial statements and the reported amounts of revenues and expenses during the applicable period. Estimates inherent in the preparation of these consolidated financial statements include, but are not limited to, estimates related to revenue recognition, accrued expenses, stock-based compensation expense, and income taxes. The Company bases its estimates on historical experience and other market specific or other relevant assumptions it believes to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates as there are changes in circumstances, facts and experience. Actual results may differ from these estimates under different assumptions or conditions. Such differences could be material to the consolidated financial statements. Concentrations and Credit Risk The Company’s financial instruments that are potentially subject to concentrations of credit risk consist primarily of cash and cash equivalents, investment securities, and accounts receivable. At times, the Company has cash, cash equivalents, and investment securities at financial institutions exceeding the Federal Depository Insurance Company (“FDIC”) and the Securities Investor Protection Corporation (“SIPC”) insured limit on domestic currency and the Netherlands FDIC counterpart for foreign currency. The Company only deals with reputable financial institutions and has not experienced any losses in such accounts. For the years ended December 31, 2024 and 2023 , the Company’s revenue was generated from 19 and 16 customers, respectively. As of December 31, 2024 and 2023 , the Company’s accounts receivable was from nine and thirteen customers, respectively. Significant customers are those that account for greater than 10% of the Company’s revenues. For the years ended December 31, 2024 and 2023 , two significant customers accounted for approximately $ 1,915,000 or 54.8 % and $ 1,503,000 or 51.9 % of revenue, respectively. The loss of business from one or a combination of the Company’s customers could adversely affect its operations. The Company conducts operations in the Netherlands through its foreign subsidiary and generates a portion of its revenues from customers that are located outside of the United States. For the years ended December 31, 2024 and 2023 , the Company had eleven and six customers outside of the United States (i.e., European and Asian customers) that accounted for approximately $ 1,526,000 or 43.7 % and $ 537,000 or 18.5 % of total revenue, respectively. As of December 31, 2024 and 2023 , the Company had four and six customers outside of the United States (i.e., European and Asian customers) that accounted for approximately $ 146,000 or 61.5 % and $ 213,000 or 45.6 % of accounts receivable, respectively. The Company uses CROs to conduct its research projects and manage its clinical trial. For the years ended December 31, 2024 and 2023 , two and three CROs accounted for approximately $ 2,389,000 or 93.0 % and $ 4,644,000 or 96.0 % of total research serv ices we purchased, respectively. As of December 31, 2024 , two CROs accounted for approximately $ 284,000 or 58.9 % of ac counts payable. As of December 31, 2023 , three CROs accounted for approximately $ 620,000 or 94.4 % of accounts payable. The loss of business from one of these CROs or a combination of them could adversely affect the Company's operations. F- 9 Cash and Cash Equivalents We treat highly liquid investments with original maturities of three months or less when purchased as cash equivalents, including money market funds, which are unrestricted for withdrawal or use. The Company has no restricted cash balances as of December 31, 2024 and 2023. Investment Securities The Company’s investment policy requires investment securities to be investment grade and held to maturity with the primary objective to maintain a high degree of liquidity while maximizing yield. The Company invests excess cash balances in short-term and long-term investment grade securities. Short-term investment securities mature within twelve ( 12 ) months or less, and long-term investment securities mature over twelve ( 12 ) months from the applicable reporting date. Management determines the appropriate classification of each investment at the time of purchase and reevaluates the classifications at each balance sheet date. The Company classifies its investments in debt securities as held-to-maturity. Held-to-maturity securities are those securities that the Company has the ability and intent to hold until maturity. Held-to-maturity securities are recorded at amortized cost, net of allowance for credit losses if applicable, and adjusted for the amortization or accretion of premiums or discounts. Premiums and discounts are amortized over the life of the related held-to-maturity security. When a debt security is purchased at a premium, both the face value of the debt and premium amount are reflected as investing outflow. When evaluating an investment for other-than-temporary impairment, the Company reviews factors such as the length of time and extent to which fair value has been below its cost basis, the financial condition of the issuer and any changes thereto, changes in market interest rates, and whether it is more likely than not the Company will be required to sell the investment before recovery of the investment’s cost basis. The Company measures expected credit losses on held to maturity debt securities on an individual security basis. The estimate of expected credit losses considers historical credit information from external sources. The impairment of the investment that is related to the credit loss, if any, is expensed in the period in which the event or change occurred. As of December 31, 2024 and 2023 , all of our money market funds were invested in U.S. Government money market funds. The Company did not have any investment securities classified as trading as of December 31, 2024 and 2023 . Accounts Receivable Accounts receivable consist of billed receivables currently due from customers and unbilled receivables. Unbilled receivables represent the excess of contract revenue (or amounts reimbursable under contracts) over billings to date. Such amounts become billable in accordance with the contract terms, which usually consider the passage of time, achievement of certain milestones or completion of the project. Accounts receivable are stated net of an allowance for credit losses, if deemed necessary based on the Company’s evaluation of collectability and potential credit losses. Management assesses the collectability of its accounts receivable using the specific identification of account balances and considers the credit quality and financial condition of its significant customers, historical information regarding credit losses and the Company’s evaluation of current and expected future economic conditions and changes in our customer collection trends. If necessary, an allowance for credit losses is recorded against accounts receivable such that the carrying value of accounts receivable reflects the net amount expected to be collected. Accounts receivable balances are written off against the allowance for credit losses when the potential for collectability is considered remote. 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 December 31, 2024 and 2023 . F- 10 Accounts receivable consist of the following: December 31, 2024 2023 Billed receivable $ 173,993 $ 410,617 Unbilled receivable $ 63,034 55,542 $ 237,027 $ 466,159 Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets consist of the following: December 31, 2024 2023 Prepaid insurance $ 182,270 $ 209,888 Prepaid expenses - various 117,560 117,887 Prepaid taxes 3,236 — $ 303,066 $ 327,775 Accounts Payable Accounts payable consist of the following: December 31, 2024 2023 Research and development expenses $ 340,698 $ 575,436 Legal expenses 68,420 1,957 Other 73,202 79,052 $ 482,320 $ 656,445 Accrued Expenses Accrued expenses consist of the following: December 31, 2024 2023 Employee wages and benefits $ 496,905 $ 561,720 Research and development expenses 437,196 274,080 Legal expenses 25,000 210,004 Other 11,360 11,360 $ 970,462 $ 1,057,164 Revenue Recognition The Company has no products approved for sale. All our revenue to date has been research revenue from third -party collaborations and government grants, as well as revenue from sublicensing agreements and collaborative arrangements, which may include upfront payments, options to obtain a license, payment for research and development services, milestone payments and royalties, in the form of cash or non-cash considerations (e.g., minority equity interest). F- 11 Revenue related to research collaborations and agreements: The Company typically performs research and development services as specified in each respective agreement on a best-efforts basis, and recognizes revenue from research funding under collaboration agreements in accordance with the 5 -step process outlined in ASC Topic 606 (“Topic 606” ): (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. We recognize revenue when we satisfy a performance obligation by transferring control of the service to a customer in an amount that reflects the consideration that we expect to receive. Depending on how the performance obligation under our license and collaboration agreements is satisfied, we recognize the revenue either at a point in time or over time by using the input method under Topic 606 to measure the progress toward complete satisfaction of a performance obligation. Under the input method, revenue will be recognized based on the entity’s efforts or inputs to the satisfaction of a performance obligation (e.g., resources consumed, labor hours expended, costs incurred, or time elapsed) relative to the total expected inputs to the satisfaction of that performance obligation. The Company believes that the cost-based input method is the best measure of progress to reflect how the Company transfers its performance obligation to a customer. In applying the cost-based input method of revenue recognition, the Company uses actual costs incurred relative to budgeted costs to fulfill the performance obligation. These costs consist primarily of full-time equivalent effort and third -party contract costs. Revenue will be recognized based on actual costs incurred as a percentage of total budgeted costs as the Company completes its performance obligations. A cost-based input method of revenue recognition requires management to make estimates of costs to complete the Company’s performance obligations. In making such estimates, significant judgment is required to evaluate assumptions related to cost estimates. The cumulative effect of revisions to estimated costs to complete the Company’s performance obligations will be recorded in the period in which changes are identified and amounts can be reasonably estimated. A significant change in these assumptions and estimates could have a material impact on the timing and amount of revenue recognized in future periods. Revenue related to grants: T he Company may receive grants from governments, agencies, and other private and not -for-profit organizations. These grants are intended to be used to partially or fully fund the Company’s research collaborations . However, most, if not all, of such potential grant revenues, when received, is expected to be earmarked for third parties to advance the research required, including preclinical and clinical trials. Revenue related to sublicensing agreements: If the sublicense to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenue allocated to the license when technology is transferred to the customer and the customer can use and benefit from the license. Customer options: If the sublicensing agreement includes customer options to purchase additional goods or services, the Company will evaluate if such options are considered material rights to be deemed as separate performance obligations at the inception of each arrangement. Milestone payments: At the inception of each arrangement that includes development, commercialization, and regulatory milestone payments, the Company evaluates whether the achievement of the milestones is considered probable and estimates the amount to be included in the transaction price. If the milestone payment is in exchange for a sublicense and is based on the sublicensee’s subsequent sale of product, the Company recognizes milestone payment by applying the accounting guidance for royalties. Royalties: With respect to licenses deemed to be the predominant item to which the sales-based royalties relate, including milestone payments based on the level of sales, the Company recognizes revenue at the later of (i) when the related sales occur or (ii) when the performance obligation to which some or all the royalty has been allocated has been satisfied (or partially satisfied). To date, the Company has not recognized any royalty revenue resulting from any of its sublicensing arrangements. We invoice customers based on our contractual arrangements with each customer, which may not be consistent with the period that revenues are recognized. When there is a timing difference between when we invoice customers and when revenues are recognized, we record either a contract asset (unbilled accounts receivable) or a contract liability (deferred research and development obligations), as appropriate. If upfront fees or considerations related to sublicensing agreement are received prior to the technology transfer, the Company will record the amount received as deferred revenue from licensing agreement. F- 12 We are not required to disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed. The Company adopted a practical expedient to expense sales commissions when incurred because the amortization period would be one year or less. Leases The Company determines if an arrangement is, or contains, a lease at contract inception and during modifications or renewal of existing leases. The Company does not recognize leases with terms of twelve months or less on the balance sheet. Options to extend or terminate a lease are not included in the Company’s initial lease term assessment, unless there is reasonable certainty that the Company will exercise any such option. Leases are classified as either finance leases or operating leases based on criteria in Accounting Standards Codification (“ASC”) 842. For operating leases, right-of-use assets and liabilities are recognized at lease commencement date based on the present value of lease payments over the lease term. In determining the net present value of lease payments, the Company uses an estimated rate of interest that they would have to pay to borrow equivalent funds on a collateralized basis at the lease commencement date. The operating lease right-of-use asset also includes any lease payments made and excludes any lease incentives. Lease expense is recognized on a straight-line basis over the expected lease term. The Company’s prior lease for its corporate headquarters located at 140 Intracoastal Pointe Dr. expired on August 31, 2023, and there was no right-of-use asset or lease liability recognized for this lease due to its short-term nature. In August 2023, the Company entered into a new lease ( “1044 N Lease”) for office space for its new corporate headquarters located at 1044 N US 1, Jupiter, Florida, commencing September 1, 2023 ( “Commencement Date”) and expiring on August 31, 2026. Rent is subject to three percent ( 3 %) annual increases, and the Company is responsible for certain common area maintenance charges and taxes throughout the life of the 1044 N Lease. The 1044 N Lease has an initial term of three ( 3 ) years, following the Commencement Date with an option to extend for two ( 2 ) successive one ( 1 ) year terms. The options were not included in the lease term used in determining the right-of-use asset or lease liability as the Company did not consider it reasonably certain they would exercise the options. For the years ended December 31, 2024 and 2023 , the Company’s total operating lease expense was $ 106,785 and $ 71,656 , respectively. As of December 31, 2024 , the Company’s total operating lease liabilities was $ 88,870 , which is presented net of imputed interest o f $ 6,669 , and the oper ating lease right-of-use asset was $ 92,211 . As of December 31, 2023, the Company’s total operating lease liabilities was $ 136,929 , which is presented net of imputed interest of $ 16,770 , and the operating lease right-of-use asset was $ 141,439 . As of December 31, 2024 , the weighted average remaining lease term was 1.7 years, and the weighted average discount rate was 8.8 %. Research and Development Costs Research and development (“R&D”) costs are expensed as incurred. R&D costs are related to the Company’s internally funded pharmaceutical programs and other governmental and commercial projects. Research and development costs consist of personnel-related costs, facilities, research-related overhead, services from independent contract research organizations, and other external costs. Research and development costs, during the years ended December 31, 2024 and 2023 were as follows: Years Ended December 31, 2024 2023 Outside contracted services $ 1,503,397 $ 2,677,941 Personnel related costs 473,444 553,741 Facilities, overhead and other 67,412 65,584 $ 2,044,253 $ 3,297,266 F- 13 Foreign Currency Transaction Gain or Loss The Company and its foreign subsidiary use the U.S. dollar as its functional currency, and initially measure the foreign currency denominated assets and liabilities at the transaction date. Monetary assets and liabilities are then re-measured at exchange rates in effect at the end of each period, and property and non-monetary assets and liabilities are converted at historical rates. Fair Value Measurements The Company applies fair value accounting for certain financial instruments that are recognized or disclosed at fair value in the financial statements. The Company defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement: • Level 1 – Quoted prices in active markets for identical assets or liabilities. • Level 2 – Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. • Level 3 – Inputs that are generally unobservable and typically reflect management’s estimate of assumptions that market participants would use in pricing the asset or liability. The Company’s financial instruments included cash and cash equivalents, investment in debt securities, accounts receivable, accounts payable and accrued expenses, accrued payroll and related liabilities, deferred research and development obligations and deposits. The carrying amount of these financial instruments, except for investment in debt securities, approximates fair value due to the short-term maturities of these instruments. The Company’s short-term and long-term investments in debt securities are recorded at amortized cost, and their estimated fair value amounts are provided by the third -party broker service for disclosure purposes. Income Taxes The Company accounts for income taxes under the asset and liability method in accordance with ASC Topic 740, “Income Taxes”. Under this method, income tax expense /(benefit) is recognized for: (i) taxes payable or refundable for the current year and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of the available positive and negative evidence, it is more likely than not some portion or all the deferred tax assets will not be realized. In determining taxable income for the Company’s consolidated financial statements, we are required to estimate income taxes in each of the jurisdictions in which we operate. This process requires the Company to make certain estimates of our actual current tax exposure and assessment of temporary differences between the tax and financial statement recognition of revenue and expense. In evaluating the Company’s ability to recover its deferred tax assets, the Company must consider all available positive and negative evidence including its past operating results, the existence of cumulative losses in the most recent years and its forecast of future taxable income. Significant management judgment is required in determining our provision for income taxes, deferred tax assets and liabilities and any valuation allowance recorded against our net deferred tax assets. The Company is required to evaluate the provisions of ASC 740 related to the accounting for uncertainty in income taxes recognized in a company’s financial statements. ASC 740 prescribes a comprehensive model for how a company should recognize, present, and disclose uncertain positions that the company has taken or expects to take in its tax return. For those benefits to be recognized, a tax position must be more-likely-than- not to be sustained upon examination by taxing authorities. Differences between tax positions taken or expected to be taken in a tax return and the net benefit recognized and measured pursuant to the interpretation are referred to as “unrecognized benefits.” A liability should be recognized (or amount of net operating loss carry forward or amount of tax refundable is reduced) for unrecognized tax benefits, because it represents a company’s potential future obligation to the taxing authority for a tax position that was not recognized as a result of applying the provision of ASC 740. F- 14 Comprehensive Income (Loss) Comprehensive income (loss) includes net income (loss) and other revenue, expenses, gains and losses that are recorded as an element of shareholders’ equity but are excluded from net income (loss) under U.S. GAAP. The Company does not have any significant transactions that are required to be reported in other comprehensive income (loss), and therefore, does not separately present a statement of comprehensive income (loss) in its consolidated financial statements. Stock-Based Compensation We recognize all share-based payments to employees, consultants, and our Board of Directors (the “Board”), as non-cash compensation expense, in research and development expenses or general and administrative expenses in the consolidated statement of operations based on the grant date fair values of such payments. Stock-based compensation expense recognized each period is based on the value of the portion of share-based payment awards that is ultimately expected to vest during the period. Forfeitures are recorded as they occur. For performance-based awards, the Company recognizes related stock-based compensation expense based upon its determination of the potential likelihood of achievement of the specified performance conditions at each reporting date. Net Loss Per Share Basic net loss per share is computed by dividing net loss available to common shareholders by the weighted average number of common shares outstanding during the reporting period. Diluted net loss per share adjusts the weighted average number of common stock outstanding for the potential dilution that could occur if common stock equivalents, such as stock options, warrants, restricted stock, restricted stock units and convertible debt, were exercised and converted into common stock, calculated by applying the treasury stock method. For the years ended December 31, 2024 and 2023 , the effect of the potential exercise of options to purchase 5,788,597 and 5,469,247 shares of common stock, respectively, were excluded from the computation of diluted net loss per share as their effect would have been anti-dilutive. New and Recently Adopted Accounting Pronouncements In November 2023, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (the “ASU”) 2023 - 07 – Segment Reporting (Topic ASC 280 ), or ASU 2023 - 07, Improvements to Reportable Segment Disclosures. The ASU improves reportable segment disclosure requirements, primarily through enhanced disclosure about significant segment expenses. 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. The Company adopted ASU 2023 - 07 and applied the guidance retrospectively to all periods presented in the consolidated financial statements. In December 2023, the FASB issued ASU 2023 - 09 – Income Taxes (Topic ASC 740 ) Income Taxes. The ASU improves the transparency of income tax disclosures by requiring ( 1 ) consistent categories and greater disaggregation of information in the rate reconciliation and ( 2 ) income taxes paid disaggregated by jurisdiction. 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. We do not expect that this guidance will have a material impact on our financial position and our results of operations. F- 15 Note 2: Cash, Cash Equivalent, and Investments The Company’s investments in debt securities are classified as held-to-maturity and are recorded at amortized cost, 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 December 31, 2024 and 2023 : December 31, 2024 Gross Gross Level Unrealized Unrealized (1) Fair Value Holding Gains Holding Losses Adjusted Cost Cash and Cash Equivalents Cash $ 926,287 $ — $ — $ 926,287 Money Market Funds 1 5,580,463 — — 5,580,463 Subtotal 6,506,750 — — 6,506,750 Short-Term Investment Securities (2) Corporate Bonds (3) 2 2,756,428 — ( 149 ) 2,756,577 Total $ 9,263,178 $ — $ ( 149 ) $ 9,263,327 December 31, 2023 Gross Gross Level Unrealized Unrealized (1) Fair Value Holding Gains Holding Losses Adjusted Cost Cash and Cash Equivalents Cash $ 25,775 $ — $ — $ 25,775 Money Market Funds 1 6,489,253 — — 6,489,253 Subtotal 6,515,028 — — 6,515,028 Short-Term Investment Securities (2) Corporate Bonds (3) 2 748,105 — ( 185 ) 748,290 Total $ 7,263,133 $ — $ ( 185 ) $ 7,263,318 Notes: ( 1 ) Definition of the three -level fair value hierarchy: • Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities • Level 2 - Other inputs that are directly or indirectly observable in the markets • Level 3 - Inputs that are generally unobservable ( 2 ) Short-term investment securities will mature within 12 months or less, from the applicable reporting date. ( 3 ) For the years ended December 31, 2024 and 2023 , the Company received discounts of $ 78,770 and $ 39,012 to purchase held-to-maturity investment securities, respectively. The Company considers declines in market value of its investment portfolio to be temporary in nature. The Company’s investment policy requires investment securities to be investment grade and held to maturity with the primary objective to maintain a high degree of liquidity while maximizing yield. When evaluating an investment for other-than-temporary impairment, the Company reviews factors such as the length of time and extent to which fair value has been below its cost basis, the financial condition of the issuer and any changes thereto, changes in market interest rates, and whether it is more likely than not the Company will be required to sell the investment before recovery of the investment’s cost basis. As of December 31, 2024 , the Company does not consider any of its investments to be other-than-temporarily impaired. F- 16 Note 3: Research and Collaboration Agreements, Sublicense Agreements, and Investments in Privately Held Companies Gates Foundation Grant In November 2024, Bill & Melinda Gates Foundation (the “Gates Foundation”) awarded the Company a grant in the amount of $ 3,092,136 for the cell line development of monoclonal antibodies targeting respiratory syncytial virus and malaria utilizing the Company’s C1 platform to provide globally accessible treatment options for underserved populations (the “Gates Foundation Grant”). In December 2024, the Company received approximately $ 0.8 million of the Gates Foundation Grant, and the remaining award will be received in 2025 and 2026 in the amount of approximately $ 1.5 million and $ 0.7 million, respectively. For the year ended December 31, 2024, the Company has not recognized any research and development revenue, in connection with the Gates Foundation Grant. Proliant 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, for an initial period of 10 years with an option to extend for an additional 3 years under certain circumstances. Under the terms of the Proliant Agreement, Dyadic has received an initial upfront payment of $ 500,000 , a second payment of $ 500,000 for completing 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 year ended December 31, 2024 , the Company recognized a total of $ 1.0 million in license revenue related to the Proliant Agreement, as the performance obligations for the first and second payments have been satisfied. Inzymes ApS 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. In October 2023, the Company received an upfront payment of $ 0.6 million in accordance with the terms of the Inzymes Agreement. On October 11, 2024, the Inzymes Agreement was amended (“the Amended Inzymes Agreement”) to change the scope of research and development services required under the agreement as well as adjust the success fees upon the achievement of certain target yields, milestone payments upon first commercial sale of each product and royalties. For the year ended December 31, 2024 , the Company has completed all product research and development services and satisfied all related performance obligations under the Amended Inzymes Agreement, and recognized $ 890,169 in license revenues, including success fees upon the achievement of target yield of one related product. For the year ended December 31, 2024, the Company also recognized research and development revenues of $ 25,000 related to the Amended Inzymes Agreement. The Company will continue evaluating the achievement of milestones related to target yields and product commercialization of each product when they are considered probable and estimable under the Inzymes Agreement. F- 17 A Global Food Ingredient Company On May 10, 2022, the Company entered into a Joint Development Agreement (the “JDA”) with a Global Food Ingredient Company (“GFIC”) to develop and manufacture several animal free ingredient products using the Company’s biotechnologies. Under the initial terms of the JDA, Dyadic was to develop its proprietary production cell lines for the manufacture of animal free ingredient product candid ates. As of December 31, 2023, th e GFIC has completed its one -year funding commitment for the initial phase of research collaboration in an amount approximatin g $1.35 million, and, pu rsuant 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 proj ect. The Company is also considering other funding sources to continue the project. For the years ended December 31, 2024 and 2023 , the Company recorded research and development revenues, including milestone payments, of $ 0 and approximately $ 631,000 , respectively, in c onnection with the JDA. Janssen 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 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 year ended December 31, 2024 , there were no revenues related to the Janssen Agreement. For the year ended December 31, 2023, the Company recognized approximately $ 353,000 in license revenue and approximately $ 520,000 in research and development revenues in connection with the Janssen Agreement. As of December 31, 2024 and 2023 , $ 0 an d approximately $ 145,000 of accounts receivable were related to Janssen, respectively. Alphazyme In 2019 the Company entered into a sub-licensing agreement with Alphazyme, LLC (“Alphazyme”) that was subsequently amended (the “Amended Alphazyme LLC Agreement”). Under the Amended Alphazyme LLC Agreement, Alphazyme obtained additional capital contribution and Dyadic’s ownership was diluted to 1.99 %. The Company evaluated the nature of its equity interest investment in Alphazyme and determined that Alphazyme is a VIE due to the capital structure of the entity. However, the Company is not the primary beneficiary of Alphazyme as Dyadic does not have the power to control or direct the activities of Alphazyme that most significantly impact the VIE. As a result, the Company does not consolidate its investment in Alphazyme. The Company reports its investment in Alphazyme under the cost method of accounting, given that it does not have the ability to exercise significant influence or control over Alphazyme. On January 18, 2023, the Company entered into a Securities Purchase Agreement, under which the Company agreed to sell its equity interest in Alphazyme, LLC (the “Alphazyme Sale Agreement”). The Company continues to have the potential to receive additional payments based on the future sales of Alphazyme’s existing products, pursuant to the Alphazyme Sale Agreement. F- 18 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 platform. For the year ended December 31, 2024, there were no revenues related to Alphazyme. For the year ended December 31, 2023, the Company recognized a total revenue of approximately $ 1.3 million from the sale of its equity interest in Alphazyme, LLC. Note 4: Commitments and Contingencies Leases Jupiter Florida Headquarters In August 2023, the Company entered into a new lease comprising approximately 1,719 square feet of office space located at 1044 N US 1, Jupiter, Florida, commencing September 1, 2023, and will expire on August 31, 2026. The Company occupies this space for an annual rental rate of approximately $ 59,000 , excluding common area maintenance expenses. The Netherlands Office The Company maintains a small satellite office in Wageningen, The Netherlands. The Company occupies a flexible office space for an annual rental rate of approximatel y $ 4,600 . The lease expires on January 31, 2026, and thereafter, the Company will reconsider the leased space to align with the future operations of the Company. As of December 31, 2024 , the future minimum annual lease payments under the operating leases are below. There are no future minimum annual lease payments after 2026. 2025 $ 59,901 2026 35,638 2027 — Total $ 95,539 Purchase Obligations Purchase obligations are primarily related to our contracts with the Company’s contract research organizations to provide certain research services. The contracts set forth the Company’s minimum purchase requirements that are subject to adjustments based on certain performance conditions. As of December 31, 2024 , the commitments related to agreements to purchase certain services in the ordinary course of business are below. All current contracts expire in or before 2026. 2025 $ 2,134,460 2026 1,429,044 2027 — Total $ 3,563,504 F- 19 Legal Proceedings From time to time, the Company is subject to legal proceedings, asserted claims and investigations in the ordinary course of business, including commercial claims, employment and other matters, which management considers immaterial, individually and in the aggregate. The Company is not currently involved in any litigation that it believes could have a materially adverse effect in our financial condition or results of operations. The Company makes a provision for a liability when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. The requirement for these provisions is reviewed at least quarterly and adjusted to reflect the impact of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular case. Litigation is inherently unpredictable and costly. Protracted litigation and/or an unfavorable resolution of one or more of proceedings, claims or investigations against the Company could have a material adverse effect on the Company’s consolidated financial position, cash flows or results of operations. Note 5: Convertible Notes On March 8, 2024, the Company issued senior secured convertible promissory notes (the “Convertible Notes”) with an aggregate principal amount of $ 6.0 million, of which, $2.0 million were sold to related parties, including immediate family members and family trusts related to Mark Emalfarb, our President and Chief Executive Officer and a member of our Board of Directors. The Convertible Notes are senior, secured obligations of the Company and its affiliates, and interest is payable quarterly in cash on the principal amount equal to 8 % per annum, and guaranteed by its subsidiary, Dyadic International (USA), Inc. under a subsidiary guarantee for the benefit of the holders of the Convertible Notes (each such holder, a “Holder”). The Convertible Notes mature on March 8, 2027, unless earlier converted or redeemed in accordance with the terms of the Convertible Notes. The Convertible Notes are secured by a first priority lien on substantially all assets of the Company and Dyadic International (USA), Inc. 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 . Under ASC 815, contracts that are both indexed to its own stock and classified in stockholders’ equity in its statement of financial position are not considered to be derivative instruments. Based on the Company’s analysis, it is determined that the Convertible Notes contain embedded features that are indexed to the Company’s own stock and are classified in stockholders’ equity in the Company’s statement of financial position, but do not meet the requirements for bifurcation and recognition as derivatives, and therefore, do not need to be accounted for separately. Accordingly, the proceeds received from the issuance of the Convertible Notes were recorded as a single liability in accordance with ASC 470 on the Company’s consolidated balance sheets. The Company incurred $ 175,674 of debt issuance costs associated with the Convertible Notes, which were recorded as a reduction of the Convertible Notes on the consolidated balance sheets. 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. On October 4, 2024, the Company entered into an amendment (the “Amendment”) to the Convertible Notes. Under 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 fal l on any of the 26, 29 and 32 -month anniversaries of the original issue date of the Convertible Notes which are May 8, 2026, August 8, 2026 and November 8, 2026. The Company assessed the Amendment for a debt extinguishment or modification in accordance with ASC 470 - 50. As both the change in the present value of future cash flows of the modified Convertible Notes to that of the original Convertible Notes (including callable features) and the change in fair value of the embedded conversion option to that of the carrying value of the Convertible Notes immediately before modification resulted in a less than 10% change, the Amendment was deemed not substantial and is regarded as a note modification. The Company did not incur any gain or loss relating to the modification and any incremental costs related to the Amendment were expensed. F- 20 For the year ended December 31, 2024 , $ 257,778 o f interest was paid and debt issuance costs o f $ 63,020 wer e amortized and recorded in interest expense in the consolidated statements of operations. As of December 31, 2024 , accrued interest on the Convertible Notes to related parties and other third parties was $ 27,173 and $ 80,000 , respe ctively. As of December 31, 2024 , accumulated amortized debt issuance costs were $ 36,376 . As of December 31, 2024, $ 910,000 of the Convertible Notes were converted into 556,623 shares o f the Company’s common stock. As of December 31, 2024 , convertible notes payable consisted of the following: Holder Issuance Date Due Date Interest Rate Convertible Note Principal Principal Repayments Conversion to Common Stock Principal Outstanding Francisco Trust dated 2/28/1996 (1) 03/08/24 03/08/27 8% $ 1,000,000 $ — $ — $ 1,000,000 Bradley Emalfarb (2) 03/08/24 03/08/27 8% 500,000 — ( 500,000 ) — Bradley Scott Emalfarb Irrevocable Trust (2) 03/08/24 03/08/27 8% 410,000 — ( 410,000 ) — Emalfarb Descendent Trust (3) 03/08/24 03/08/27 8% 90,000 — — 90,000 Convertible Notes - Related Party $ 2,000,000 $ — $ (910,000 ) 1,090,000 Unamortized Debt Issuance Costs - Related Party (24,124 ) Net Carrying Amount $ 1,065,876 Convertible Notes - Third Party 03/08/24 03/08/27 8% $ 4,000,000 $ — $ — 4,000,000 Unamortized Debt Issuance Costs - Third Party (88,529 ) Net Carrying Amount $ 3,911,471 Notes: ( 1 ) Mr. Thomas Emalfarb, nephew of Mr. Mark A. Emalfarb, our President and Chief Executive Officer, is the Trustee of the Francisco Trust. Mr. 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 December 31, 2024 , is $ 20,000 . ( 2 ) Mark A. Emalfarb, our President and Chief Executive Officer, is the Trustee of the Irrevocable Trust and the brother of Mr. Bradley S. Emalfarb, who is the sole beneficiary of the Irrevocable Trust. Mr. Bradley S. 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 year ended December 31, 2024 , $ 500,000 of the Convertible Notes held by Mr. Bradley S. Emalfarb were converted into 294,891 shares of the Company’s common stock. For the year ended December 31, 2024 , $ 410,000 of the Convertible Notes held by Bradley Scott Emalfarb Irrevocable Trust were converted into 261,732 shares of the Company’s common stock. As of December 31, 2024 , the amount of accrued interest for Bradley Emalfarb and Bradley Scott Emalfarb Irrevocable Trust was $ 1,733 and $ 3,640 , respectively. ( 3 ) Messrs. Thomas Emalfarb, Scott Emalfarb and Michael Emalfarb, nephews of Mr. Mark A. 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 December 31, 2024 , is $ 1,800 . The Convertible Notes contain customary covenants, and the Securities Purchase Agreement relating to the Convertible Notes also contains certain affirmative and negative covenants (including, without limitation, restri ctions on our ability to incur indebtedness, permit liens, make dividends or certain debt payments or consummate certain affiliate transactions). The Company was in compliance with its covenants with respect to the Convertible Notes as of December 31, 2024. F- 21 Note 6: Share-Based Compensation Description of Equity Plans The 2021 Equity Incentive Award Plan (the “2021 Plan”) was adopted by the Company's Board of Directors on April 9, 2021, and approved by the Company’s Annual Meeting of Shareholders (the “Annual Meeting”) on June 11, 2021. The 2021 Plan serves as a successor to the Company’s 2011 Equity Incentive Plan (the “2011 Plan”). Since the adoption of the 2021 Plan, all equity awards were made from the 2021 Plan and no additional awards will be granted under the 2011 Plan. The 2021 Plan provides for the issuance of a variety of share-based compensation awards, including stock options, restricted stock awards, restricted stock unit awards, performance awards, dividend equivalents awards, deferred stock awards, stock payment awards and stock appreciation rights. 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 Plan. As of December 31, 2024 , the Company had 5,788,597 stock options outstanding and an additio nal 2,056,629 share s of common stock available for grant under the 2021 Plan. As of December 31, 2023 , there were 5,469,247 stock options outstanding and an additional 3,672,561 shares of common stock available for grant under the 2021 Plan. Stock Options Options are granted to purchase common stock at prices that are equal to the fair value of the common stock on the date the option is granted. Vesting is determined by the Board of Directors at the time of grant. The term of any stock option awards under the Company’s 2011 Plan and 2021 Plan is ten years, except for certain options granted to the contractors which are between two to three years. The grant-date fair value of each option grant is estimated using the Black-Scholes option pricing model and amortized on a straight-line basis over the requisite service period, which is generally the vesting period, for each separately vesting portion of the award as if the award was, in substance, multiple awards. Use of a valuation model requires management to make certain assumptions with respect to selected model inputs, including the following: Risk-free interest rate . The risk-free interest rate is based on U.S. Treasury rates with securities approximating the expected lives of options at the date of grant. Expected dividend yield . The expected dividend yield is zero, as the Company has never paid dividends to common shareholders and does not currently anticipate paying any in the foreseeable future. Expected stock price volatility. The expected stock price volatility was calculated based on the Company’s own volatility. The Company reviews its volatility assumption on an annual basis and has used the Company’s historical volatilities. Expected life of option. The expected life of option was based on the contractual term of the option and expected employee exercise and post-vesting employment termination behavior. The Company uses the weighted average vesting period and contractual term of the option as the best estimate of the expected life of a new option . The assumptions used in the Black-Scholes option pricing model for stock options granted for the years ended December 31, 2024 and 2023 are as follows: Years Ended December 31, 2024 2023 Risk-free interest rate 3.56 % - 4.61 % 3.90% -5.12 % Expected dividend yield — % — % Expected stock price volatility 63.02 - 63.64 % 62.22% - 64.27 % Expected life of options (in years) 2.63 - 6.25 1.13 -6.25 F- 22 The following table summarizes the combined stock option activity under the Company’s Equity Compensation Plans: Weighted- Average Weighted- Remaining Aggregate Average Contractual Intrinsic Shares Exercise Price Term (Years) Value Outstanding at December 31, 2022 5,031,097 $ 3.25 5.75 $ 13,000 Granted 805,350 1.45 Exercised — — Expired ( 351,520 ) 1.71 Canceled ( 15,680 ) 3.50 Outstanding at December 31, 2023 5,469,247 $ 3.08 5.66 $ 322,738 Granted (1) 830,725 1.61 Exercised (2) ( 55,000 ) 1.18 Expired (3) ( 383,063 ) 2.16 Canceled (4) ( 73,312 ) 1.73 Outstanding at December 31, 2024 5,788,597 $ 2.97 5.34 $ 655,578 Exercisable at December 31, 2024 4,438,810 $ 3.19 4.44 $ 436,263 Notes: ( 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. • 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 13,125 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 ) Represents the following options exercised: (a) 25,000 stock options exercised at $ 0.97 , and (b) 30,000 stock options exercised at $ 1.36 . ( 3 ) Represents 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) 25,563 stock options with a weighted average exercise price of $ 2.93 per share granted to employees. ( 4 ) Represents the following options canceled: (a) 50,000 stock 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. The weighted average grant-date fair market value of stock options granted for the years ended December 31, 2024 and 2023 was $ 0.95 and $ 0.81 , respectively, based on the Black-Scholes option pricing model. The intrinsic value of options exercised for the years ended December 31, 2024 and 2023 was $ 33,300 and $ 0 , respectively. As of December 31, 2024 and 2023 , total unrecognized compensation cost related to non-vested stock options granted under the Company’s equity compensation plans was $ 319,978 and $ 559,121 , respectively, which is expected to be recognized over a weighted average period of 2.40 years and 2.68 years, respectively. The Company adjusts the unrecognized compensation cost for actual forfeitures as they occur. F- 23 Restricted Stock Units Restricted stock units (the “RSUs”) are granted subject to certain restrictions. Vesting conditions are determined at the discretion of the Board of Directors. 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 units activity during the year ended December 31, 2024 : Weighted-Average Grant Date Shares Fair Value Outstanding at December 31, 2023 213,044 1.43 Granted (1) 354,219 1.60 Vested (2) ( 437,546 ) 1.52 Unvested shares forfeited (3) ( 11,792 ) 1.59 Outstanding at December 31, 2024 117,925 $ 1.59 Notes: ( 1 ) On January 2, 2024, the Company granted 141,510 RSUs, vesting upon one year anniversary of the grant, to members of 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 of 2023. The fair value of the restricted stock unit is the Company’s closing stock price on the grant date as reported on the Nasdaq Stock Exchange. ( 2 ) Represents the vesting of 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 consultant. ( 3 ) Represents the cancellation of RSUs granted to a former member of the Board of Directors. Compensation Expenses We recognize all share-based payments to employees, consultants, and our Board, as non-cash compensation expenses, in research and development expenses or general and administrative expenses in the consolidated statement of operations, and these charges had no impact on the Company’s reported cash flows. Stock-based compensation expense is calculated on the grant date fair values of such awards, and recognized each period based on the value of the portion of share-based payment awards that is ultimately expected to vest during the period. Forfeitures are recorded as they occur. For performance-based awards, the Company recognizes related stock-based compensation expenses based upon its determination of the potential likelihood of achievement of the specified performance conditions at each reporting date. There was no performance-based award recognized during the years ended December 31, 2024 and 2023 . Total non-cash stock option compensation expense was allocated among the following expense categories: Years Ended December 31, 2024 2023 General and administrative $ 1,067,750 $ 1,201,027 Research and development 58,529 43,094 Total $ 1,126,279 $ 1,244,121 The following table summarizes the Company’s non-cash share-based compensation expense allocation between options and restricted stock units: Years Ended December 31, 2024 2023 Share-based compensation expenses- stock option $ 861,999 $ 1,004,054 Share-based compensation expenses- restricted stock units 264,280 240,067 Total $ 1,126,279 $ 1,244,121 F- 24 Note 7: Shareholders’ Equity Issuances of Common Stock For the year ended December 31, 2024 , there wer e 556,623 shares of the Company’s common stock issued resulting from the conversion of convertible notes with a weighted average issue price of $ 1.63 pe r share, 437,546 shares of the Company’s common stock issued resulting from the vesting of restricted stock units with a weighted average issue price of $ 1.52 pe r share, and 30,569 shares of the Company's common stock issued resulting from the exercise of stock options, with a weighted average issue price of $ 1.04 per share. For the year ended December 31, 2023, there were 247,961 shares 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 December 31, 2024 , and 2023 , there were 12,253,502 shares of common stock held in treasury, at a cost of approximately $ 18.9 million, representing the purchase price on the date the shares were surrendered to the Company. Note 8: Income Taxes For the year ended December 31, 2024 , there was no provision for income taxes or unrecognized tax benefits recorded. The significant components of gain (loss) before income taxes are as follows: Years Ended December 31, 2024 2023 U.S. operations $ ( 5,757,824 ) $ ( 6,766,409 ) Foreign operations ( 51,335 ) ( 29,052 ) Total loss before provision for income taxes $ ( 5,809,159 ) $ ( 6,795,461 ) The Company has no current or deferred income tax for the years ended December 31, 2024 and 2023 . The income tax provision differs from the expense amount that would result from applying the federal statutory rates to income before income taxes due to permanent differences, state income taxes and a change in the deferred tax valuation allowance. The reconciliation between the statutory tax rate and the Company’s actual effective tax rate is as follows: Years Ended December 31, 2024 2023 Tax at U.S. statutory rate ( 21.00 )% ( 21.00 )% State taxes, net of federal benefit ( 4.29 ) ( 4.19 ) Non-deductible items 0.26 0.76 Change in valuation allowance 20.59 14.54 True-up adjustment 4.44 10.00 Foreign operations — ( 0.11 ) Change in tax rate — — Other — — Effective income tax rate — % — % F- 25 The significant components of the Company’s net deferred income tax assets are as follows: December 31, 2024 2023 Section 174 - R&D expenses $ 2,123,800 $ 1,769,000 Stock option expense 1,584,700 1,419,300 NOL carryforward 12,655,300 11,620,700 General Business credits 1,278,400 1,503,600 Operating lease liability 22,500 34,700 Right-of-use asset ( 23,400 ) ( 35,800 ) Other 800 134,800 Deferred tax asset, net of deferred tax liabilities 17,642,100 16,446,300 Valuation allowance ( 17,642,100 ) ( 16,446,300 ) Net deferred tax asset $ — $ — Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. In assessing the realizability of deferred tax assets, Management evaluates whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based on Management’s evaluation, the net deferred tax asset, was offset by a full valuation allowance as of December 31, 2024 and 2023. The Company had federal and state net operating loss (“NOL”) carryforwards available as of December 31, 2024, and 2023, in the amount of approximately $ 49,903,000 and $ 45,850,000 , respectively. Approximately $ 46,965,000 of the federal net operating loss carryforwards will be carried forward indefinitely and will be available to offset 80 % of taxable income. The remaining amount of the net operating loss carryforwards will expire at varying dates through 2038. The Tax Cuts and Jobs Act eliminated the current year deduction election for research and experimental expenditures. Instead, a taxpayer must charge such expenditures to a capital account and is allowed to amortize such expenditures ratably over a five -year period (or fifteen -year period for expenditures attributable to foreign research), beginning with the midpoint of the tax year in which such expenditures are paid or incurred. Note 9: Segment The Company operates and manages its business as one reportable segment and one operating segment, which is the business of developing and commercializing synthetic protein products using the Company’s proprietary microbial platforms, including C1 and Dapibus™. The Company's chief operating decision maker, or CODM, is the Company's senior management team that includes the Chief Executive Officer, Chief Operating Officer and Chief Financial Officer. The CODM assesses performance for the segment and decides how to allocate resources based on consolidated net loss that is also reported on the consolidated statements of operations. The measure of segment assets is reported on the consolidated balance sheets as total consolidated assets. The Company operates in the U.S. and Europe. All material long-lived assets of the Company reside in the U.S. For geographic information about the Company’s product revenues, see Note 1, Concentration . Long-lived assets primarily consist of operating lease right-of-use assets. The CODM uses consolidated net loss to evaluate the Company's spend and monitor budget versus actual results. The monitoring of budgeted versus actual results is used in assessing performance of the segment and in establishing resource allocation across the organization. Factors used in determining the reportable segment include the nature of the Company's operating activities, the organizational and reporting structure and the type of information reviewed by the CODM to allocate resources and evaluate financial performance. The accounting policies of the segment are the same as those described in Note 1 of the notes to the consolidated financial statements included in this Annual Report on Form 10 -K. F- 26 The C ODM reviews cash, cash equivalents and investment securities as a measure of segment assets. As of December 31, 2024 and 2023, the Company’s cash, cash equivalents and investment securities were $ 9.3 million and $ 7.3 million, respectively. The following table presents information about segment revenue, significant segment expenses and segment operating loss for the years ended December 31, 2024 and 2023: Years Ended December 31, 2024 2023 Revenues $ 3,495,389 $ 2,898,806 Cost of revenues 1,194,624 1,975,849 Research and development expenses: Outside contracted services 1,503,397 2,677,941 Personnel related costs 414,916 510,647 Facilities, overhead, and other 67,411 65,584 General and administrative expenses: - Compensation and related expenses 2,308,566 2,200,914 Business consulting expenses 764,326 305,348 Legal and professional services 998,630 931,038 Other G&A expenses 995,501 1,244,121 Share-based compensation expenses 1,126,279 1,178,686 Foreign currency exchange loss 22,561 38,417 Other Income (expenses), net 91,663 1,434,278 Net loss $ ( 5,809,159 ) $ ( 6,795,461 ) Note 10: Subsequent Events For purpose of disclosure in the consolidated financial statements, the Company has evaluated subsequent events through March 26, 2025 , the date the consolidated financial statements were available to be issued. Except for items mentioned in the notes, and as discussed below, management is not aware of any material events that have occurred subsequent to the balance sheet date that would require adjustment to, or disclosure in the accompanying financial statements. On January 2, 2025, the Company granted an annual stock option award with an exercise price of $ 1.74 , including: (a) 356,500 stock options granted to executives and key personnel, vesting upon one year anniversary, or annually in equal installments over four years, (b) 277,500 stock options granted to members of the Board of Directors, vesting upon one year anniversary, (c) 19,500 stock options granted to employees, vesting annually in equal installments over four years, and (d) 20,000 stock options granted to a consultant, vesting upon one year anniversary. On January 2, 2025, the Company granted 96,984 restricted stock units, vesting upon one year anniversary, to the Board of Directors as a result of reduction in director cash compensation of 2025, and an aggregate of 133,039 restricted stock units, vested in full, to executives and key personnel in lieu of cash bonus earned for the year ended December 31, 2024. On March 20, 2025, the Company announced that it has received a funding award from CEPI to use C1 to accelerate the development of protein-based vaccines through the partnership with Fondazione Biotecnopolo di Siena (FBS), a non-profit foundation backed by the Italian government. F-27