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Item 7. Management’s Discussion and Analysis

2026-03-25 compared with 2025-03-26 · 375 added, 170 removed, 12 unchanged (98% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of financial condition and results of operations should be read in conjunction with the financial statements and the notes to those statements appearing in this Annual Report.

Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks, assumptions and uncertainties.

Important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis include, but not limited to those set forth in “Item 1A.

Risk Factors” in this Annual Report.

All forward-looking statements included in this Annual Report are based on information available to us as of the time we file this Annual Report and, except as required by law, we undertake no obligation to update publicly or revise any forward-looking statements.

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.

Critical Accounting Estimates

The preparation of these consolidated financial statements in accordance with U.S.

generally accepted accounting principles (“GAAP”) requires management to make estimates 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.

Management’s Discussion and Analysis of Financial

Condition and Results of Operations

following discussion and analysis of financial condition and results of operations should be read in conjunction with the financial

statements and the notes to those statements appearing in this Annual Report.

Some of the information contained in this discussion

and analysis or set forth elsewhere in this Annual Report, including information with respect to our plans and strategy for our

business, includes forward-looking statements that involve risks, assumptions and uncertainties.

Important factors that could cause

actual results to differ materially from the results described in or implied by the forward-looking statements contained in the

following discussion and analysis include but are not limited to those set forth in “Item 1A.

Risk Factors” in this

Annual Report.

All forward-looking statements included in this Annual Report are based on information available to us as of the time

we file this Annual Report and, except as required by law, we undertake no obligation to update publicly or revise any

forward-looking statements.

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.

Nasdaq Deficiency Notices and Remediation

common stock is currently listed on the Nasdaq Capital Market, which has minimum requirements that a company must meet in order to

remain listed.

These requirements include maintaining a minimum Market Value of Listed Securities (“MVLS”) of $35

million, which MVLS cannot fall below $35 million for a period of more than 30 consecutive trading days (the “MVLS

Requirement”), and a minimum bid price of at least $1 per share, which cannot fall below $1 for a period more than 30

consecutive trading days (the “Minimum Bid Price Requirement”).

In early 2025, we were notified that we did not

comply with either of the MVLS Requirement or the Minimum Bid Price Requirement and could become subject to delisting if we did not

cure these deficiencies during specified cure periods.

In October 2025, we were notified by Nasdaq that we have since cured these

deficiencies within the applicable cure periods and have regained compliance with the applicable continued listing

requirements.

On December 19, 2025, the Company

was notified that we did not comply the Minimum Bid Price Requirement and could become subject to delisting if we did not cure these deficiencies

during specified cure period.

See “Item 1A.

Risk Factors—Risks Related to Our Common Stock— If we

fail to comply with listing standards of the Nasdaq Stock Market LLC (‘Nasdaq’), our common stock may be delisted, adversely

affecting the liquidity and market price of our common stock, as well as our ability to obtain sufficient additional capital to fund our

operations and to continue to operate as a going concern.”

Accounting Estimates

preparation of these consolidated financial statements in accordance with U.S.

generally accepted accounting principles (“GAAP”)

requires management to make estimates that affect the reported amount of assets and liabilities and related disclosure of contingent

assets and liabilities at the date of our consolidated financial statements and the reported amounts of revenues and expenses during

the applicable period.

Actual results may differ from these estimates under different assumptions or conditions.

Such differences could be material to the consolidated financial statements.

We define critical accounting estimates as those that are reflective of significant judgments and uncertainties and which may potentially result in materially different results under different assumptions and conditions.

In applying these critical accounting estimates, our management uses its judgment to determine the appropriate assumptions to be used in making certain estimates.

These estimates are subject to an inherent degree of uncertainty.

Such differences could

be material to the consolidated financial statements.

define critical accounting estimates as those that are reflective of significant judgments and uncertainties and which may potentially

result in materially different results under different assumptions and conditions.

In applying these critical accounting estimates, our

management uses its judgment to determine the appropriate assumptions to be used in making certain estimates.

These estimates are subject

to an inherent degree of uncertainty.

Our critical accounting estimates include the following:

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).

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”):

Company has no products approved for sale.

All our revenue to date has been research revenue from third-party collaborations and 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).

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;

1 unchanged sentence

(iii) determine the transaction price;

(iv) allocate the transaction price to the performance obligations in the contract;

(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.

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.

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.

cost-based input method of revenue recognition requires management to make estimates of costs to complete the Company’s performance

In making such estimates, significant judgment is required to evaluate assumptions related to cost estimates.

The cumulative effect of revisions to estimated costs to complete the Company’s performance obligations will be recorded in the period in which changes are identified and amounts can be reasonably estimated.

A significant change in these assumptions and estimates could have a material impact on the timing and amount of revenue recognized in future periods.

Revenue related to grants:

The Company may receive grants from governments, agencies, and other private and not-for-profit organizations.

These grants are intended to be used to fund the Company’s research collaborations partially or fully, including opportunities and projects that the Company is pursuing with certain collaborators.

However, most, if not all, of such potential grant revenues, if received, is expected to be earmarked for third parties to advance the research required, including preclinical and clinical trials for vaccines and/or antibodies candidates.

Revenue related to sublicensing agreements:

If the sublicense to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenue allocated to the license when technology is transferred to the customer and the customer 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.

With respect to licenses deemed to be the predominant item to which the sales-based royalties relate, including milestone payments based on the level of sales, the Company recognizes revenue at the later of (i) when the related sales occur or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).

To date, the Company has not recognized any royalty revenue resulting from any of its sublicensing arrangements.

We invoice customers based on our contractual arrangements with each customer, which may not be consistent with the period that revenues are recognized.

When there is a timing difference between when we invoice customers and when revenues are recognized, we record either a contract asset (unbilled accounts receivable) or a contract liability (deferred research and development obligations), as appropriate.

If upfront fees or considerations related to sublicensing agreement are received prior to the technology transfer, the Company will record the amount received as deferred revenue from licensing agreement.

We are not required to disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed.

The Company adopted a practical expedient to expense sales commissions when incurred because the amortization period would be one year or less.

Accrued Research and Development Expenses

In order to properly record services that have been rendered but not yet billed to the Company, we review open contracts and purchase orders, communicate with our personnel and we estimate the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of the actual cost.

The majority of our service providers invoice us monthly or quarterly in arrears for services performed or when contractual milestones are met.

We make estimates of our accrued expenses as of each balance sheet date in our consolidated financial statements based on facts and circumstances known to us at that time.

We periodically confirm the accuracy of our estimates with the service providers and adjust if necessary.

Examples of accrued research and development expenses include amounts ow ed to contract research organizations, to service providers in connection with research and development activities.

Stock-Based Compensation

We have granted stock options to employees, directors and consultants.

The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model.

The Black-Scholes model considers volatility in the price of our stock, the risk-free interest rate, the estimated life of the option, the closing market price of our stock and the exercise price.

For purposes of the calculation, we assumed that no dividends would be paid during the life of the options.

We also used the weighted-average vesting period and contractual term of the option as the best estimate of the expected life of a new option.

The expected stock price volatility was calculated based on the Company’s own volatility since the DuPont Transaction.

The Company reviews its volatility assumption on an annual basis and has used the Company’s historical volatilities since 2016, as the DuPont Transaction resulted in significant changes in the Company’s business and capital structure.

The estimates utilized in the Black-Scholes calculation involve inherent uncertainties and the application of management judgment.

These estimates are neither predictive nor indicative of the future performance of our stock.

As a result, if other assumptions had been used, our recorded share-based compensation expense could have been materially different from that reported.

In addition, because some of the performance-based options issued to employees, consultants and other third-parties vest upon the achievement of certain milestones, the total ultimate expense of share-based compensation is uncertain.

Accounting for Income Taxes

The Company accounts for income taxes under the asset and liability method in accordance with ASC Topic 740, “Income Taxes”.

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.

related to grants:

The Company receives grants from governments, agencies, and other private and not-for-profit organizations.

grants are intended to be used to partially or fully fund the Company’s research collaborations.

However, most, if not all, of

such grant revenues, is expected to be earmarked for third parties to advance the research required, including preclinical and clinical

Revenue related to grants is presented on a gross basis on the Consolidated Statements of Operations.

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.

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.

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

If the milestone payment is in exchange for a sublicense and is based on the sublicensee’s subsequent sale of the product,

the Company recognizes milestone payment by applying the accounting guidance for royalties.

With respect to licenses deemed to be the predominant item to which the sales-based royalties relate, including milestone

payments based on the level of sales, the Company recognizes revenue at the later of (i) when the related sales occur or (ii) when the

performance obligation to which some or all of the royalty has been satisfied (or partially satisfied).

To date, the Company has not recognized

any royalty revenue resulting from any of its sublicensing arrangements.

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 a sublicensing agreement are received prior to the technology transfer, the Company will

record the amount received as deferred revenue from the licensing agreement.

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.

Company adopted a practical expedient to expense sales commissions when incurred because the amortization period would be one year or

Research and Development Expenses

order to properly record services that have been rendered but not yet billed to the Company, we review open contracts and purchase orders,

communicate with our personnel and we estimate the level of service performed and the associated cost incurred for the service when we

have not yet been invoiced or otherwise notified of the actual cost.

The majority of our service providers invoice us monthly or quarterly

in arrears for services performed or when contractual milestones are met.

We make estimates of our accrued expenses as of each balance

sheet date in our consolidated financial statements based on facts and circumstances known to us at that time.

We periodically confirm

the accuracy of our estimates with the service providers and adjust if necessary.

Examples of accrued research and development expenses

include amounts ow ed to contract research organizations, to service providers in connection with

research and development activities.

have granted stock options to employees, directors and consultants.

The fair value of each option award is estimated on the date of grant

using the Black-Scholes option-pricing model.

The Black-Scholes model considers volatility in the price of our stock, the risk-free interest

rate, the estimated life of the option, the closing market price of our stock and the exercise price.

For purposes of the calculation,

we assumed that no dividends would be paid during the life of the options.

We also used the weighted-average vesting period and contractual

term of the option as the best estimate of the expected life of a new option.

The expected stock price volatility was calculated based

on the Company’s own volatility since the DuPont Transaction.

The Company reviews its volatility assumption on an annual basis

and has used the Company’s historical volatilities since 2016, as the DuPont Transaction resulted in significant changes in the

Company’s business and capital structure.

estimates utilized in the Black-Scholes calculation involve inherent uncertainties and the application of management judgment.

estimates are neither predictive nor indicative of the future performance of our stock.

As a result, if other assumptions had been used,

our recorded share-based compensation expense could have been materially different from that reported.

In addition, because some of the

performance-based options issued to employees, consultants and other third-parties vest upon the achievement of certain milestones, the

total ultimate expense of share-based compensation is uncertain.

for Income Taxes

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 because of applying the provision of ASC 740.

The Company classifies accrued interest and penalties related to its tax positions as a component of income tax expense.

The Company currently is not subject to U.S.

(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.

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.

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.

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 because of applying the provision of ASC 740.

Company classifies accrued interest and penalties related to its tax positions as a component of income tax expense.

The Company currently

is not subject to U.S.

federal, state and local tax examinations by tax authorities for the years before 2022.

See Note 8 to the Consolidated Financial Statements.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Recent Accounting Pronouncements

See Note 1 to the Consolidated Financial Statements for information about recent accounting pronouncements .

Results of Operations

Year Ended December 31, 2024 Compared to the Year Ended December 31, 2023

Revenue and Cost of Revenue

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

See Note 8 to the Consolidated

Financial Statements.

Sheet Arrangements

do not have any off-balance sheet arrangements.

Accounting Pronouncements

Note 1 to the Consolidated Financial Statements for information about recent accounting pronouncements .

of Operations

Ended December 31, 2025 Compared to the Year Ended December 31, 2024

and Cost of Revenue

following table summarizes the Company’s revenue and cost of research and development revenue for the years ended December 31,

2025 and 2024:

Year ended December 31,

Research and development revenue

License revenue

Cost of research and development revenue

For the years ended December 31, 2024 and 2023, the Company’s revenue was generated from 19 and 16 collaborations, respectively.

The decrease in research and development revenue and cost of research and development revenue was due to higher individual contract amounts on certain research funding and related work performed during 2023.

The license revenue for the year ended December 31, 2024 was in connection with the Inzymes and Proliant license agreements, and for the year ended December 31, 2023 was in connection with the Janssen license agreement.

Research and Development Expenses

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

Research and development expenses for the year ended December 31, 2024 decreased to $2,044,000 compared to $3,297,000 for the year ended December 31, 2023.

The decrease was due to the completion of activities related to the Company’s Phase 1 clinical trial of DYAI-100 COVID-19 vaccine candidate.

General and Administrative Expenses

General and administrative expenses for the year ended December 31, 2024 increase d to $6,135,000 compared to $5,817,000 for the year ended December 31, 2023 .

The increase reflected increases in business development and investor relations expenses of $294,000, share-based compensation expenses of $109,000, professional service expenses of $82,000, and other increases of $84,000, partially offset by decreases in management incentive expenses of $124,000, legal expenses of $65,000 and insurance expenses of $64,000.

Foreign Currency Exchange

Foreign currency exchange loss for the year ended December 31, 2024 was $23,000 compared to $38,000 for the year ended December 31, 2023.

The decrease reflected the currency fluctuation of the Euro in comparison to the U.S.

Loss from Operations

Loss from operations for the year ended December 31, 2024, decreased to $5,901,000 compared to $8,230,000 f or the year ended December 31, 2023.

The decrease in loss from operations was largely due to an increase in licensing revenue of $1,000,000 from Proliant and $890,000 from Inzymes, including success fees in 2024 and the above-discussed decrease in research and development expenses associated with the completion of activities related to the Company’s Phase 1 clinical trial of DYAI-100 COVID-19 vaccine candidate.

Other Income, Net

For the year ended December 31, 2024, the total other income, net, of $92,000 compared to $1,434,000 for the year ended December 31, 2023.

The decrease was largely due to an increase in interest expenses of $428,000 related to the Convertible Notes in 2024 and a gain on the sale of the Company’s equity interest in Alphazyme, LLC of $1,018,000 in 2023.

The Company had 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 NOL carryforwards will be carried forward indefinitely and will be available to offset 80% of taxable income.

Grant revenue

License and milestone revenue

Costs of research and development revenue

Cost of grant revenue

decrease in research and development revenue and cost of research and development revenue was primarily attributable to a decline in

the number of active collaborations to 14, compared to 19 in the prior year.

revenue and cost of grant revenue for the year ended December 31, 2025 were attributable to the Gates Foundation and CEPI grants.

grant revenue was recognized for the year ended December 31, 2024.

license and milestone revenue recognized during the year ended December 31, 2025 was derived from the Inzymes and B RIG BIO license agreements,

compared to the Inzymes and Proliant license agreements for the year ended December 31, 2024.

and Development Expenses

and development costs are expensed as incurred and primarily include salary and benefits of research personnel, third-party contract

research organization services and supply costs.

and development expenses for the year ended December 31, 2025 increased to $2,155,000 compared to $2,044,000 for the year ended December

The increase was driven by a higher number of active internal research initiatives undertaken to expedite product development.

and Administrative Expenses

and administrative expenses for the year ended December 31, 2025 decrease d to $5,762,000 from $6,135,000

for the year ended December 31, 2024 .

The decrease reflected reductions in management incentive

expenses of $225,000, share-based compensation expenses of $166,000, and insurance expenses of $51,000, partially offset by increases

in professional service expenses of $51,000 and other expenses of $18,000.

Currency Exchange

currency exchange losses for the year ended December 31, 2025 were $47,000, compared to $23,000 for the year ended December 31, 2024.

The increase was primarily due to fluctuations in the Euro relative to the U.S.

from Operations

from operations for the year ended December 31, 2025 increased to $7,193,000, compared to $5,901,000

f or the year ended December 31, 2024.

The increase in loss from operations was primarily driven by a decrease in licensing and

milestone revenue of $265,000 for 2025, compared to $1,890,000 in 2024, partially offset by a decrease in general and administrative expenses.

the year ended December 31, 2025, total other expenses, net, were $172,000, compared to other income, net, of $92,000 for the year ended

December 31, 2024.

The decrease in other income was primarily due to an increase in interest expense related to the Convertible Notes,

which totaled $456,000 in 2025 compared to $428,000 for the partial year in 2024, and the absence of a $63,000 gain on the sale of the

Company’s equity interest in Alphazyme, LLC recognized in 2024.

The decrease was also partially attributable to a reduction in

interest income.

Company had federal and state net operating loss (“NOL”) carryforwards available as of December 31, 2025 and 2024 ,

in the amount of approximately $53,011,000 and $49,903,000, respectively.

Approximately $50,073,000

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 2037.

Net loss for the year ended December 31, 2024 was $ 5,809,000 compared to a net loss of $6,795,000 for the year ended December 31, 2023 .

The decrease in net loss of $986,000 was principally due to an increase in license revenue of $1,537,000 and a decrease in research and development expenses of $1,253,000, partially offset by an increase in general and administrative expenses of $318,000 and a decrease in other income of $1,343,000.

Liquidity and Capital Resources

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.

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, were $5,824,000.

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

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 $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 origi nal 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 were 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 Consolidated 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”).

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

At December 31, 2024 , cash and cash equivalents were $6,507,000 compared to $6,515,000 at December 31, 2023 .

The carrying value of investment grade securities, including accrued interest at December 31, 2024 was $2,781,000 compared to $758,000 at December 31, 2023 .

Net cash used in operating activities for the year ended December 31, 2024 of $3,975,000 resulted from a net loss of $5,809,000 adjusted for share-based compensation expenses of $1,126,000 , partially offset by changes in operating assets and liabilities of $755,000.

Net cash used in operating activities for the year ended D ecember 31, 2023 of $6,727,000 resulted from a net loss of $6,795,000 adjusted for share-based compensation expenses of $1,244,000, partially offset by sale of our investment in Alphazyme of $1,018,000, and changes in operating assets and liabilities of $143,000.

Net cash used in investing activities for the year ended December 31, 2024 was $1,876,000 compared to net cash provided by investing activities of $7,450,000 for the year ended December 31, 2023 .

Cash flows from investing activities in 2024 and 2023 were primarily related to proceeds from maturities, net of purchases of investment grade debt securities, and proceeds from the sale of investment in Alphazyme.

Net cash provided by financing activities for the year ended December 31, 2024 was $5,849,000, which was related to net proceeds from issuance of convertible notes, and proceed from exercise of options.

There were no cash flows from financing activities in 2023.

Quantitative and Qualitative Disclosures about Market Risk

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.

loss for the year ended December 31, 2025 was $ 7,364,000, compared to a net loss of $5,809,000

for the year ended December 31, 2024 .

The increase in net loss of $1,555,000 was primarily

attributable to a decrease in license and milestone revenue of $1,625,000 and an increase in research and development expenses of $110,000,

partially offset by a decrease in general and administrative expenses of $373,000.

and Capital Resources

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 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

Company expects to incur losses and have negative net cash flows from operating activities as it continues developing its Dapibus TM

and C1 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, commercialization, 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.

March 8, 2024, the Company issued an aggregate principal amount of $6.0 million of its 8.0% Senior Secured Convertible Promissory Notes

(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 Convertible Notes,

after deducting offering expenses, were $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.

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, as amended, will mature on December 31, 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

common stock, at the option of the holders of the Convertible Notes (the “Noteholders”) at any time prior to the Maturity

the year ended December 31, 2024, $910,000 of Convertible Notes were 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 Consolidated Financial Statements.

May 1, 2025, the Company amended the Convertible Notes to extend the Redemption Date (as defined in the Convertible Notes) to December 1, 2026.

September 15, 2025, the Company amended the security agreement to reflect updates to the Secured

Parties (as defined in the Security Agreement) thereunder, including the addition of a trust for the benefit of the Company’s

Chief Executive Officer, Mark Emalfarb, as a result of his purchase and assignment to him of one of the Notes from an existing note

holder in a principal amount of $1,000,000.

December 23, 2025, the Company entered into an additional amendment to the Convertible Notes, pursuant to which (i) the Maturity

Date (as defined in the Convertible Notes) was extended from March 8, 2027 to December 31, 2027, (ii) the conversion price at which

the Convertible Notes are convertible into shares of the Company’s common stock was set at $1.05 per share of common stock,

and (iii) except in the case of an Event of Default (as defined in the Convertible Notes), the holders no longer have the right

to elect to have the Company redeem all, or any part, of the principal amount then remaining under the Convertible Note.

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, 2025.

November 16, 2024, Dyadic entered into an agreement with the Gates Foundation relating to a grant in the amount of $3,092,000

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”).

Funds received in advance that have not been spent are recorded as restricted cash in the Company’s consolidated balance sheets.

March 20, 2025, the Company received a funding award (the “CEPI Grant”) from Coalition for Epidemic Preparedness (“CEPI”)

to advance Dyadic’s C1 platform through a $4.5 million grant through Fondazione Biotecnopolo di Siena (“FBS”) to accelerate

recombinant protein vaccine development and manufacturing.

The funding will support antigen design, cell line development, optimization,

characterization, and scale-up to cGMP manufacturing.

If successful, the next phase will focus on selecting a CEPI-priority pathogen

Dyadic, as a subcontractor, will receive up to $2.4 million of the total grant funding.

August 1, 2025, the Company completed an underwritten offering of 6,052,000 shares of the Company’s common stock (the

“Offering”) pursuant to an underwriting agreement, dated July 30, 2025, between the Company and Craig-Hallum Capital

Group LLC (“Craig-Hallum”).

The public offering price in the Offering was $0.95 per share of common stock.

The net proceeds to the Company from the

Offering were $4.9 million, after deducting legal expenses, underwriting discounts and commissions, and other offering expenses.

Company has been using the net proceeds of the Offering for working capital and general corporate purposes, such as product

development, sales and marketing.

March 6, 2026, the Company entered into an At-The-Market Issuance Sales Agreement (the “Sales Agreement”) with

Craig-Hallum as sales agent (the “Sales Agent”), pursuant to which the Company may offer and sell from time to time, at

its option, shares of the Company’s common stock having an aggregate offering price of up to $4,238,000 from time to time

through the Sales Agent, including block trades and sales made in ordinary brokers’ transactions directly on Nasdaq or any other trading

market for the Company’s common stock at market prices prevailing at the time of sale, at prices related to prevailing market prices

or at negotiated prices (the “At-The-Market Equity Offering Program”).

Subject to the terms and conditions of the Sales Agreement, the Sales Agent will use its commercially reasonable

efforts to sell the shares of the Company’s common stock from time to time, based upon the Company’s instructions (including

any price, time or size limits or other parameters or conditions the Company may impose), in exchange for a commission of up to 3.0% of

the aggregate gross sale proceeds.

The Company is not obligated to sell any shares of common stock under the Sales Agreement, and the

Company or the Sales Agent may at any time suspend or terminate offerings of shares under the At-The-Market Equity Offering Program upon

notice to the other party and subject to other conditions.

As of the date of this Annual Report, no shares have been sold under the

Sales Agreement.

Company expects its existing cash, cash equivalents, restricted cash and its investment securities, including accrued interest,

totaling approximately $8.6 million as of December 31, 2025, 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.

For more information on recent equity raises by the Company, see Notes 7 and 10.

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 or other debt instruments, and/or other means.

amount raised may be used for the further development and commercialization of product candidates, and for other working capital

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.

of December 31, 2025, cash, cash equivalents, and restricted cash were $5,853,000 compared to $6,507,000 as of December

The carrying value of investment grade securities, including accrued interest as of December 31, 2025, was $2,734,000 compared

to $2,781,000 as of December 31, 2024.

cash used in operating activities for the year ended December

31, 2025 of $5,702,000, resulting from a net loss of $7,365,000, adjusted for share-based compensation

expenses of $930,000, and partially offset by changes in operating assets and liabilities of $661,000.

cash used in operating activities for the year ended December 31, 2024 of $3,975,000, resulting

from a net loss of $5,809,000, adjusted for share-based compensation expenses of $1,126,000, and partially offset by changes in operating

assets and liabilities of $755,000.

cash provided by investing activities for the year ended December

31, 2025 was $82,000, compared to net cash used in investing activities of $1,876,000 for the year

ended December 31, 2024 .

Cash flows from investing activities in both years were primarily

related to proceeds from maturity, net of purchases of investment grade debt securities.

Additionally, the Company received proceeds

of $61,000 from the sale of investment in Alphazyme in 2024.

cash provided by financing activities for the year ended December 31, 2025 was $4,965,000,

primarily related to net proceeds from the issuance of convertible notes and proceeds from the exercise of stock options.

ended December 31, 2024, net cash provided by financing activities was $5,849,000, similarly related to net proceeds from the

issuance of convertible notes and proceeds from the exercise of stock options.

Quantitative and Qualitative Disclosures about Market

are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required

under this item.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis