UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2022
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to ______
Commission file number: 000-55264
DYADIC INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
45-0486747
(I.R.S. Employer Identification No.)
140 Intracoastal Pointe Drive, Suite 404
Jupiter, Florida 33477
(Address of principal executive offices) (Zip Code)
(561) 743-8333
(Registrant’s telephone number, including area code)
Title of each class
Common Stock, par value $0.001 per share
Securities registered pursuant to Section 12(b) of the Act:
Trading Symbol(s)
DYAI
Name of each exchange on which registered
The NASDAQ Stock Market LLC
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No X
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No X
Securities registered pursuant to Section 12(g) of the Act: None.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes X No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of
this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes X No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company.
See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐
Non-accelerated filer X
Accelerated filer ☐
Smaller reporting company X
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial
accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. Yes ☐ No X
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No X
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant (19,975,778 shares) computed by reference to the closing price of
$3.05 as reported on the NASDAQ Stock Market on June 30, 2022 (the last business day of the registrant’s most recently completed second fiscal quarter) was approximately $60.9
million. Shares of the registrant’s common stock held by executive officers, directors, and their affiliates have been excluded from this calculation. This determination of affiliate
status is not necessarily a conclusive determination for other purposes.
As of March 28, 2023, the registrant had 28,811,061 shares of common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The information required by Part III of this Report, to the extent not set forth herein, is incorporated in this Report by reference to the Registrant’s definitive proxy statement
relating to the 2023 annual meeting of shareholders. The definitive proxy statement will be filed with the Securities and Exchange Commission within 120 days after the end of the
2022 fiscal year.
TABLE OF CONTENTS
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Market for Registrant’s Common Equity, and Related Stockholder Matters and Issuer Purchases of Equity Securities
Selected Financial Data
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures about Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationship and Related Transactions, and Director Independence
Principal Accountant Fees and Services
Exhibits and Financial Statement Schedules
Form 10-K Summary
PART I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
PART II
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 9C.
PART III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
PART IV
Item 15.
Item 16.
SIGNATURES
INDEX TO FINANCIAL STATEMENTS
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F-1
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Information (other than historical facts) set forth in this Annual Report contains forward-looking statements within the meaning of the Federal securities laws, which
involve many risks and uncertainties that could cause our actual results to differ materially from those reflected in the forward-looking statements. Forward-looking statements
generally can be identified by use of the words “expect,” “should,” “intend,” “anticipate,” “will,” “project,” “may,” “might,” “potential,” or “continue” and other similar terms or
variations of them or similar terminology. Such forward-looking statements are included under Item 7 “Management’s Discussion and Analysis”. Dyadic International, Inc., and its
subsidiaries cautions readers that any forward-looking information is not a guarantee of future performance and that actual results could differ materially from those contained in
the forward-looking information. Such statements reflect the current views of our management with respect to our operations, results of operations and future financial
performance. Forward-looking statements involve many risks, uncertainties or other factors beyond Dyadic’s control. These factors include, but are not limited to, (1) general
economic, political and market conditions; (2) our ability to generate the required productivity, stability, purity, performance, cost, safety and other data necessary to carry out and
implement our biopharmaceutical research and business plans and strategic initiatives; (3) our ability to retain and attract employees, consultants, directors and advisors; (4) our
ability to implement and successfully carry out Dyadic’s and third parties’ research and development efforts; (5) our ability to obtain new license and research agreements; (6) our
ability to maintain our existing access to, and/or expand access to third party contract research organizations and other service providers in order to carry out our research projects
for ourselves and third parties; (7) competitive pressures and reliance on our key customers and collaborators; (8) our ability, and the ability of the contract research organizations
and other third-party service providers with whom we are currently working with, to advance product candidates into, and successfully complete, preclinical studies and clinical
trials; (9) the commercialization of our product candidates, if approved; (10) the pharmaceutical and biotech industry, governmental regulatory and other agencies’ willingness to
adopt, utilize and approve the use of our fungal based microbial protein production platforms and our other technologies; (11) the risk of theft, misappropriation or expiration of
owned or licensed proprietary and intellectual property, genetic and biological materials owned by us and/or Danisco US, Inc. and VTT Technical Research Centre of Finland Ltd,
and contract research organizations that we engage with; (12) the speculative nature and illiquidity of equity securities received as consideration from sub-licenses; (13) our
expectations concerning the impact of the novel coronavirus identified as “COVID-19” on our business and operating results; and (14) other factors discussed in Dyadic’s publicly
available filings, including information set forth under the caption “Risk Factors” in this Annual Report. We caution you that the foregoing list of important factors is not exclusive.
Any forward-looking statements are based on our beliefs, assumptions and expectations of future performance, considering the information currently available to us. These
statements are only predictions based upon our current expectations and projections about future events. There are important factors that could cause our actual results, level of
activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements.
Moreover, we operate in a highly regulated, competitive and rapidly changing environment. Our competitors have far greater resources, infrastructure and market presence than we
do which makes it difficult for us to enter certain markets, and/or to gain or maintain customers. New risks emerge from time to time and it is not possible for our management to
predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially
from those contained in any forward-looking statements we may make. Before investing in our common stock, investors should carefully read the information set forth under the
caption “Risk Factors” and elsewhere in this Annual Report which could have a material adverse effect on our business, results of operations and financial condition.
You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee that the future results, levels of activity, performance and events and circumstances reflected in the forward-looking statements
will be achieved or occur. Except as required by law, we undertake no obligation to publicly update any forward-looking statements for any reason after the date of this Annual
Report to conform these statements to actual results or to changes in our expectations.
We qualify all our forward-looking statements by these cautionary statements. In addition, with respect to all our forward-looking statements, we claim the protection of
the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.
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Item 1.
Business
Overview
PART I
Dyadic International, Inc. (“Dyadic”, “we”, “us”, “our”, or the “Company”) is a global biotechnology platform company based in Jupiter, Florida with operations in the
United States and a satellite office in the Netherlands, and it utilizes several third-party consultants and research organizations to carry out the Company’s activities. Over the past
two plus decades, the Company has developed a gene expression platform for producing commercial quantities of industrial enzymes and other proteins, and has previously
licensed this technology to third parties, such as Abengoa Bioenergy, BASF, Codexis and others, for use in industrial (non-pharmaceutical) applications. This technology is based
on the Thermothelomyces heterothallica (formerly known as Myceliophthora thermophila) fungus, which the Company named C1.
On December 31, 2015, the Company sold its industrial technology business to Danisco USA (“Danisco”), the industrial biosciences business of DuPont (NYSE: DD) (the
“DuPont Transaction”). As part of the DuPont Transaction, Dyadic retained co-exclusive rights to the C1-cell protein production platform for use in all human and animal
pharmaceutical applications, and currently the Company has the exclusive ability to enter into sub-license agreements (subject to the terms of the license and to certain exceptions)
for use in all human and animal pharmaceutical applications. Danisco retained certain rights to utilize the C1-cell protein production platform in pharmaceutical applications,
including the development and production of pharmaceutical products, for which it will be required to make royalty payments to Dyadic upon commercialization. In certain
circumstances, Dyadic may owe a royalty to either Danisco or certain licensors of Danisco, depending upon whether Dyadic elects to utilize certain patents either owned by
Danisco or licensed in by Danisco.
After the DuPont Transaction, the Company has been focused on building innovative microbial platforms to address the growing demand for global protein
bioproduction and unmet clinical needs for effective, affordable, and accessible biopharmaceutical products for human and animal health and for other biologic products for use in
non-pharmaceutical applications.
The C1-cell protein production platform is a robust and versatile thermophilic filamentous fungal expression system for the development and production of biologic
products including enzymes and other proteins for human and animal health. Some examples of human and animal vaccines and drugs which have the potential to be produced
from C1-cells are protein antigens, ferritin nanoparticles, virus-like particles (“VLPs”), monoclonal antibodies (“mAbs”), Bi/Tri-specific antibodies, Fab antibody fragments, Fc-
fusion proteins, as well as other therapeutic enzymes and proteins. The Company is involved in multiple funded research collaborations with animal and human pharmaceutical
companies which are designed to leverage its C1-cell protein production platform to develop innovative vaccines and drugs, biosimilars and/or biobetters.
The Company also developed the Dapibus™ thermophilic filamentous fungal based microbial protein production platform to enable the rapid development and large-scale
manufacture of low-cost proteins, metabolites, and other biologic products for use in non-pharmaceutical applications, such as food, nutrition, and wellness.
We rely on our existing cash and cash equivalents, investments in debt securities, and cash inflows from operating activities to provide the working capital needs for our
operations. We believe that our existing cash position, investments in investment grade securities, and additional cash received from the sale of certain equity and debt
investments will be adequate to meet our operational, business, and other liquidity requirements for at least the next twelve (12) months. However, in the event our financing needs
for the foreseeable future are not able to be met by our existing cash, cash equivalents and investments, we would seek to raise funds through public or private equity offerings,
and/or other means to meet our financing requirements. The Company has self-funded the development and cGMP manufacturing costs of its proprietary COVID-19 vaccine
candidate, DYAI-100, and in February 2023 completed the dosing of all patients related to the Phase 1 clinical trial to demonstrate the safety in humans of a protein produced from
our C1-cell protein production platform. The Company does not anticipate the need to spend significant additional capital to support the continued development, manufacturing
and testing of DYAI-100 in 2023 and beyond.
Our Technology
Our mission is to use our proprietary highly productive scalable microbial fungal protein production platforms to meet the growing demand for proteins worldwide for
human and animal health and to enable the rapid development and large-scale manufacture of low-cost proteins, metabolites, and other biologic products for use in non-
pharmaceutical applications, such as food, nutrition, and wellness.
We believe that our C1 cell line is unique compared to traditional filamentous fungal cells, and the C1-cell protein production platform has the potential to be used in the
discovery, development and manufacturing of biologic medicines and vaccines, given its anticipated competitive advantages compared to certain other legacy biopharmaceutical
expression systems, such as insect cells (i.e., baculovirus) and CHO (“Chinese Hamster Ovary”) cells.
We have also developed the Dapibus™ filamentous fungal based microbial protein production platform to enable the rapid development and large-scale manufacture of
low-cost proteins, metabolites, and other biologic products for use in non-pharmaceutical applications, such as food, nutrition, and wellness.
We believe that in comparison to other cell lines, our cell line has several significant potential operational advantages, which include but are not limited to:
Purity
High retention of target secreted protein through downstream processing
No requirement for viral (i.e., CHO and Baculovirus) or endotoxin (i.e., E. coli) removal
High Productivity
Robust & versatile growth conditions High yields of secreted protein
Low viscosity due to C1’s unique morphology
Robustness
Proven at both small and large scale, ranging from laboratory microtiter plates, shaker flasks, single use and/or stainless-steel microbial fermenters Stable and correctly
folded monoclonal antibodies (mAbs); having binding, neutralizing and certain other properties similar to CHO produced mAbs
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Speeds
Develop stable C1-cell lines for protein production in ~ 60 days
Production time savings of ~30 days over CHO-cell production (C1: 12-14 days vs. CHO 41-54 days) Manufacturing ~ 3-4 batches of C1 produced mAbs in the same
time it takes to make 1 batch using CHO-cells
Faster Product Release –No requirement for viral (i.e., CHO and Baculovirus) or endotoxin (i.e., E. coli) removal allowing for earlier product release
Costs
High yields and rapid manufacturing cycle times reduce costs and shrink manufacturing footprint
C1-cells can be grown using low-cost and readily available cGMP media; C1 media < 1/20 of the cost of CHO cell media
No requirement for viral or endotoxin removal, simplifies processing compared to CHO, Baculovirus & E. coli saving time and money
Competition
The biotechnology and biopharmaceutical industry is intensely competitive. There is continuous demand for innovation and speed, and as the vaccine and therapeutic
markets evolve, there is always the risk that a competitor may be able to develop other compounds or drugs that are able to achieve similar or better results for indications.
Potential competition includes major multinational pharmaceutical companies, established biotechnology companies, specialty pharmaceutical companies, universities, and other
research institutions. Many of these competitors have substantially greater financial, technical, and other resources, such as larger research and development staff and experienced
marketing and manufacturing organizations with established sales forces. Smaller or early-stage companies may also prove to be significant competitors, particularly through
collaborative arrangements with large, established companies.
Currently, we are not aware of other companies pursuing a business model similar to what we are developing under our microbial filamentous fungal based protein
production platform. However, our competitors using other protein production platforms who are significantly larger and better capitalized than us could undertake strategies
similar to what we are pursuing and even develop them at a much more rapid rate. These potential competitors include the same multinational pharmaceutical companies,
established biotechnology companies, specialty pharmaceutical companies, universities, governmental agencies, and other research institutions that are operating in the human
health and animal health fields. In that respect, smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with
large, established companies. Unlike human and animal health there are other companies who have and are developing filamentous fungal microorganisms for the development and
manufacture of low-cost proteins, metabolites, and other biologic products for use in non-pharmaceutical applications, such as food, nutrition, and wellness.
We believe that our microbial fungal based protein production platforms, including C1 and Dapibus™, have great potential to become an alternative to several legacy
production technologies currently used in the biopharmaceutical industry to produce vaccines, monoclonal antibodies, and other therapeutic proteins for both the human and
animal health markets. C1 has some inherent benefits and potential competitive advantages compared to CHO cells, E. coli, Pichia, and Insect Cells (i.e., Baculovirus) as discussed
below:
• Mammalian cells: Currently the preferred production host for most complex protein therapeutics due mainly to their ability to produce proteins with human- like
glycosylation. This market is dominated by CHO cells. Disadvantages include the longer duration required for cell line development, fermentation, and increased
costs associated with process media.
Bacterial: Bacteria such as E. coli are currently the easiest, cheapest, and quickest method for recombinant protein expression and are often used in laboratory
settings as well as commercial production of certain non-glycosylated proteins. However, they produce toxic and pyrogenic cell wall components that may make them
less suitable to produce biopharmaceuticals or food components. Moreover, insoluble expression, a frequent outcome in bacterial expression, is challenging with
regard to cost of goods due to the need for refolding and its direct impact on reduced overall yields.
•
• Yeast: In contrast to bacteria, yeast, such as Pichia pastoris, do not produce potentially toxic and pyrogenic cell wall components. Further, the genetic tools for yeast
development are advanced and enable continued engineering of new strains that may become more suitable than CHO cell lines. Disadvantages include the typically
lower protein titers than C1-cells and traditional yeast cells have a greater number of higher N and O glycosylation structures.
Insect cells: Insect cells (i.e., Baculovirus) offer protein expression with post translational modifications like mammalian cells, ease of scale-up, and simplified cell
growth readily adapted to high-density suspension culture for large-scale expression. Baculovirus expression systems are used for producing recombinant protein,
especially for vaccine antigens. Disadvantages include the comparably lower protein yields than C1 and the need for an added viral inactivation step.
•
We believe that our microbial protein production platforms have the potential to become leading protein production platforms for developing and manufacturing proteins
for use in biopharmaceuticals, food, nutrition, wellness and in drug formulation and research diagnostics due to their potential speed of development, high protein yields,
scalability, low-cost media, and hence lower production costs.
Our Industry and Potential Markets
Based on feedback from our collaborators and our ongoing discussions with leading pharmaceutical and biotech companies, contract manufacturing organizations
(CMOs), leading academic institutions, as well as U.S. and foreign governmental agencies, we continue to believe that the biopharmaceutical market is an attractive opportunity to
apply our C1-cell protein production platform. The Company continues to evaluate potential opportunities to expand the application of our C1-cell protein production platform, and
is currently focused on the following markets:
● Recombinant vaccines and drugs for animal and human health
● New innovative biotherapeutics
● Biosimilars / Biobetters non-Glycosylated/Glycosylated protein markets
● Drug formulation, research diagnostic and reagents
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● Alternative proteins for food, health and wellness
The use of biologic medicines, for applications such as infectious disease vaccines and therapeutics are growing significantly. However, biologic medicines are in many
cases limited and expensive for both patients and health care systems. The Company believes that lack of access and high cost is, in part, the result of the following bottlenecks in
the development and manufacture of biologic medicines:
● Extended stable cell line development timelines
● Insufficient titers and overall yields
● Expensive, often royalty stacked, production media in the case of CHO cell lines
● Long production time for stable CHO cell lines
● Previously underfunded development efforts for more efficient next-generation gene expression systems
The Company believes that the biopharmaceutical industry can benefit from an innovative protein production platform that is safe, efficient, reliable, and cost effective.
Such a platform would facilitate the rapid and high titer production of difficult to express proteins resulting in greater patient access and more affordable biopharmaceuticals. Our
C1-cell protein production platform has the potential to be an alternative to CHO, Baculovirus and other legacy expression systems to produce proteins for vaccines, therapeutics,
diagnostics, alternative foods, nutrition and wellness and other biological products.
Our Research Partners and Contract Research Organizations (CROs)
Currently, the Company is conducting its C1-cell protein production platform research and other internal and external third-party programs with several contract
organizations as follows:
(1) Research and Development Agreement with VTT Technical Research Centre of Finland, Ltd (“VTT”)
Since September 2016, the Company has been working with VTT Technical Research Centre of Finland, Ltd. (“VTT”), a third-party contract research organization, to
further modify and improve the Company’s C1-cell protein production platform to ensure a safe and efficient expression system for use in speeding up the development and
lowering the cost of manufacturing pharmaceutical products and processes. VTT is one of the leading research and technology organizations in Europe, and it has conducted
research and development on fungi and other microorganisms for more than three decades. VTT is continuing their development work to further develop our C1-cell protein
production platform.
On June 28, 2019, and November 9, 2021, the Company extended its research contract with VTT twice to continue developing Dyadic’s C1-cell protein production platform
for therapeutic protein production, including C1 host system improvement, glycoengineering, protease deletion, and management of third-party target protein projects.
On September 12, 2022, the Company further extended its research contract (the “Amendment”) through December 2023 with VTT. A significant portion of the research
and development activities at VTT are being funded by the Company’s third-party collaborators.
(2) Other CROs and cGMP Manufacturers
The Company works with several other research providers, cGMP manufacturers and contract research organizations from time to time, which are important to achieve the
Company’s scientific and business objectives. These arrangements are typically work for hire on an as need basis, however, certain of these programs, if negatively impacted due
to resource availability, disagreements, or for other reasons could lead to delays or inability to realize our research and commercial objectives. The Company, supplemented by
third party funding is also further developing its Dapibus™ protein production platform for use in non-pharmaceutical applications, such as food, nutrition, and wellness.
In March 2021, the Company engaged CR2O, a contract research organization, to manage and support further preclinical and clinical development of DYAI-100. CR2O
engaged Bio-Technology General (Israel) Ltd., (“BTG”), a cGMP subcontractor, to produce the DYAI-100 drug substance and perform certain other analytical tests required to
release the final drug product.
Our Research and Development (“R&D”) Programs
(1) Internal Research Programs
C1 Production Host Improvement Programs
The Company has research and development agreements with VTT, Eleszto Genetika (Budapest, Hungary), other CROs and service and technical providers to further
improve its C1-cell protein production platform to become an even more robust, versatile, and efficient therapeutic protein production platform. Ongoing projects include, among
others: (i) improving the C1 genetic tools, (ii) further reducing the background protease(s) levels by identifying and deleting certain protease genes and/or modifying C1
fermentation processes, (iii) developing high expression C1 cell lines by precision engineering, (iv) developing C1 cell lines to express several potential vaccine and drug
candidates and (v) modifying the glycosylation pathway of C1 cells in order for C1 to express certain mAbs and other proteins with mammalian like glycosylation structures and to
eliminate or modify certain unwanted glycan structures such as N and O-glycosylation.
We continue to generate a growing amount of data that demonstrates different C1-produced proteins are properly folded and are biologically active:
● Further development of DYAI-100 (SARS-CoV-2 RBD) vaccine candidate by preparing C1 cell lines that express and produce effective antigens against different
variants of the SARS-CoV-2 RBD in order to implement the FDA recommendation to produce annual multivalent vaccines against SARS-CoV-2 that are suitable for
the annual global threat.
● Developing additional antigens that were produced by C1 (e.g., SARS-CoV-2 Full Spike Protein, hemagglutinin (HA) and Neuraminidase (NA)) which were not only
produced at high levels, but they were also importantly shown to be safe, effective, and protective in several animal trials and in the case of influenza a challenge test
carried out by Oslo University demonstrated the potential of C1 produced antigens for seasonal and pandemic influenza.
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● Developing C1-cells to express complex proteins such as conjugating antigens to ferritin nanoparticles, scFv (MHCII) and trimerization domains to increase efficacy.
● Developing the C1-cell protein production platform for expressing mAbs at relatively high levels and high quality (e.g., data from more than one large pharma
collaborator demonstrated that the binding kinetics of mAbs produced from C1 are virtually indistinguishable from the binding kinetics of reference mAbs which were
produced in CHO cells).
● Success in glycoengineering C1 cells to express mAbs that have human like glycan structures.
● Expressed a number of third-party monoclonal antibodies (mAbs) which were assayed by multiple third parties who reported that the neutralizing and binding activity
assays demonstrated great similarity between C1-produced mAb and CHO-produced mAbs.
● Expressed a number of other types of therapeutic proteins, such as bi-specifics, tri-specifics and Fc-fusion proteins, at relative high yields compared to other
production hosts and high quality (e.g., expressed a third party bi-specific antibody which was assayed by the third party in an in vitro cellular activity assay which
indicated that dose response curves for the C1 expressed bi-specific antibody were very similar to the CHO expressed bi-specific antibody).
● Developed the C1-cell protein production platform to express human and bovine serum albumin and other recombinant proteins with therapeutic, drug formulation,
and research diagnostic applications.
Glycosylated Therapeutic Programs and Potential Nivolumab Commercialization Program
The Company’s longer-term objective, which will require substantially more time and capital is to apply the C1-cell protein production platform for the large therapeutic
glycoprotein market. We believe that the rapid advances being made in genomics and synthetic biology, make the C1 fungal cell line a promising candidate to further engineer
glycosylation pathways: (i) to produce therapeutic proteins having human like glycoforms structures such as G0, G2, G0F, and G2F; (ii) to reduce or eliminate O-glycosylation; and
(iii) to create potentially improved immunogenicity in the case of vaccines.
The initial steps to develop C1 strains that produce mAbs with mammalian-like glycosylation are progressing at VTT. Based on research results we have to date; the
Company believes that our C1-cell protein production platform has the potential to become a useful platform for the development and production of therapeutic glycoproteins with
human-like or potentially even superior glycan structures. We believe that, if successful, the glycoengineering of C1 cells may help to position the C1 protein production platform
to be an important production platform for developing and manufacturing glycosylated antibodies and other glycoproteins. These initial glycoengineered C1 cells have to date
shown reduced gene expression levels when compared to the non-glycoengineered C1 cells. Several approaches are now being applied to reach our main goal – to develop cell
line(s) that resemble the 3 main goals: (i) to produce therapeutic proteins having human-like glycoform structures, (ii) to produce therapeutic proteins at high level and (iii) to
produce stable therapeutic proteins.
We continue the development of Nivolumab (Opdivo®) as a potential biosimilar/biobetter immunotherapeutic biologic drug for human metastatic cancers, including
melanoma, lung, and other cancers. The aim of this program is to express Nivolumab (mAb) with a glycoprotein structure like Nivolumab produced in CHO cells. So far, C1
produced Nivolumab has been produced with similar glycosylated structures and the development of high producing C1 cell line that expresses a lower cost biosimilar/Biobetter
Nivolumab as part of its glycoengineering program for glycoprotein Immunoglobulin G (IgG) monoclonal antibodies is ongoing. This project has proved the concept that C1-cell
protein production platform can be applied to several very high value therapeutic or preventative monoclonal antibodies.
(2) Animal Health Programs
ZAPI Biologic Vaccines Program
We have completed our participation in the €20 million Zoonosis Anticipation Preparedness Initiative (“ZAPI”) program. ZAPI (www.zapi-imi.eu) is a five-year research
and development project funded as part of IMI EU program (Zoonoses Anticipation and Preparedness Initiative (ZAPI project; IMI Grant Agreement n°115760)), with the
assistance and partial financial support of IMI and the European Commission, and in-kind contributions from EFPIA partners. This project aims to develop a suitable platform for
the rapid development and production of vaccines and protocols to fast-track registration of product developed to combat pandemic Zoonotic diseases that have the potential to
affect human and animal populations. The Company’s C1 recombinant protein production platform has been selected by ZAPI as a production host of antigens for the SBV and
RVFV, and ZAPI has expanded its program with the Company and provided additional funding in 2019 and 2021, respectively. The SBV antigen from C1 was produced at
approximately 300 times greater yields than the SBV antigen from baculovirus and was more stable. Additionally, the C1 SBV antigen was shown to be safe and very effective (full
protection) in protecting cattle, sheep and mice from the SBV. Based on these results, additional fully funded animal trials are continuing in 2021 with C1 expressed antigens for
SBV and RVFV and to generate additional safety and efficacy data.
ZAPI brought together experts in human and animal health to create new platforms and technologies that will facilitate a fast, coordinated, and practical response to new
pandemic threats as soon as they emerge. The Company’s C1 recombinant protein production platform was selected by ZAPI as a production host of antigens for the
Schmallenberg virus (“SBV”) and Rift Valley Fever virus (“RVFV”). The C1 expressed SBV antigen was produced in less time and at approximately 300 times greater yield than the
SBV antigen expressed from insect (baculovirus) cells and was more stable. Additionally, the C1 SBV antigen was shown to be safe and effective to provide full protection to cattle,
sheep and mice. Based on these results, ZAPI provided the Company with additional funding in 2021 to produce both the SBV and RVFV antigens in order to perform expanded
animal trials with the C1 expressed antigens which is expected to generate additional safety and efficacy data. In the first quarter of 2021, ZAPI expanded its program with Dyadic
by providing additional funding to C1 research and development efforts as well as to conduct additional animal studies using the SBV and RVFV antigens produced from C1.
Phibro Sublicense Agreement
On February 8, 2022, the Company entered into an exclusive sublicense agreement with Abic Biological Laboratories Ltd. (“Abic”), an affiliate of Phibro Animal Health
Corporation (“Phibro”), based off an existing July 1, 2020, non-exclusive sublicense and development agreement (the “Phibro/Abic Agreement”), to provide services for a
targeted disease.
In July 2022, the Company expanded the Phibro/Abic Agreement to include an additional research project to develop an additional animal vaccine for livestock.
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Monoclonal Antibodies Collaboration
In 2022, the Company initiated a fully funded research and development collaboration with a top five animal health company to produce therapeutic monoclonal
antibodies for use in treating diseases in companion animals. The project is currently underway and on target to meet development milestones per the research agreement.
(3) Human Health Programs
COVID-19 DYAI-100 Vaccine Candidate
As a result of the positive results generated from the use of the Company’s C1-cell protein production platform in the ZAPI project, the Company expanded its in-house
and third-party vaccine-based antigen research and development efforts. The Company has invested more than $7.0 million in the development of its proprietary DYAI-100 COVID-
19 vaccine candidate to date. DYAI-100, also known as C1-SARS-CoV-2 RBD vaccine, is a novel receptor binding domain (RBD) recombinant protein booster vaccine candidate,
highly expressed in Dyadic's proprietary C1-cell protein production platform for the prevention of COVID-19. The C1-SARS-CoV-2 RBD vaccine drug product consists of the
SARS-CoV-2 RBD adjuvanted with Alhydrogel 85® 2%.
The DYAI-100 vaccine candidate has demonstrated excellent results in several pre-clinical animal studies. In particular, the Company relied on the preclinical animal
studies conducted by the Israel Institute for Biological Research (IIBR) who were using the SARS-CoV-2 RBD antigen from the Company’s RBD C1 strain. The Company also
relied on the toxicology study which concluded that the C1 SARS-CoV-2-RBD vaccine was not associated with major systemic adverse effects, and it is considered safe following
four repeated vaccination sessions by IM injections at an interval of one week to male and female NZW rabbits. We noted that germinal centers with increased lymphocytic
cellularity (i.e., follicular hyperplasia) seen in the regional lymph nodes were sustained throughout the recovery phase, in addition to the detection of SARS-CoV-2 specific IgG
antibodies in the sera of rabbits in the recovery phase, and it demonstrated a long-lasting immunogenic response against RBD.
On October 27, 2022, the Company announced that it has received regulatory approval of a Clinical Trial Application (CTA) from the South African Health Products
Regulatory Authority (SAHPRA) to initiate a Phase 1 clinical trial of the DYAI-100 COVID-19 RBD booster vaccine. The Company’s Phase 1 randomized, double blind, placebo-
controlled trial is designed as a first-in-human trial to assess the clinical safety and antibody response of DYAI-100, a C1-SARS-CoV-2 recombinant protein receptor binding
domain vaccine, produced using the C1-cell protein production platform, administered as a booster vaccine at two single dose levels (low dose and high dose cohorts) in healthy
volunteers. The trial included healthy patients ages 18-55 in a randomization scheme of 4:1 (active:placebo) with 15 subjects per cohort. Following the screening period there are 8
scheduled clinic visits with the first 6 visits occurring within the first 29 days and two follow-up visits on Days 90 and 180. Safety data will be collected throughout the trial and
immunogenicity assessments were scheduled on patient visits 1, 4, 5, 6 and the two follow up visits on Days 90 and 180.
Dosing of both low and high dose groups was completed in February 2023, with no serious adverse events (SAE’s) reported to date. A full study report is expected to be
available in the second half of 2023.
Other COVID-19 Vaccine Collaborations
The Company is evaluating a number of other approaches where its proprietary and patented C1-cell protein production platform can be used to help develop and
manufacture COVID-19 vaccines that have the potential to provide greater efficacy and protection from emerging SARS-CoV-2 variants, including multivalent and nanoparticle
vaccine designs.
● Rubic One Health, South Africa – This is a collaboration to develop end-to-end solutions for vaccine discovery, development, and manufacture for the African
market. Tech transfer of C1-cell protein production platform has been completed. Rubic has begun engineering and growing C1-cells to prepare for the development
of affordable vaccines and drugs for the African continent.
● Epygen, Indian – In 2020, the Company entered into a non-exclusive technology usage agreement with Epygen Biotech of India, who plans to conduct clinical trials in
India using one or more of the COVID-19 antigens that they are manufacturing using the Company’s C1 protein production platform. Epygen reported that it has
procured funding from the government of India, and they are progressing their vaccine development and production using antigens produced from the Company’s
C1-cell protein production platform across early-stage pre-clinical studies and to conduct Phase 1 and Phase 2 human clinical trials.
Janssen Agreement
During 2022, progress continues on the Research, License, and Collaboration Agreement (the “Janssen Agreement”) for the manufacture of therapeutic protein
candidates using its C1-cell protein production platform with Janssen Biotech, Inc., one of the Janssen Pharmaceutical Companies of Johnson & Johnson (“Janssen”), which was
entered into on December 16, 2022. Pursuant to the terms of the Janssen Agreement:
(i)
Janssen will pay Dyadic an upfront payment of $500,000 for a non-exclusive license to utilize the C1-cell protein production platform to develop C1 production cell lines for
the manufacturing of Janssen’s therapeutic protein candidates against several biologic targets,
(ii) Janssen will provide R&D funding up to €1.6 million to develop and assess C1 production cell lines for its product candidates,
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(iii) Janssen will have an option to pay a mid-seven figure payment for an exclusive license from Dyadic to use the C1-cell protein production platform for the manufacturing of
therapeutic proteins directed to one specific target, and upon exercise, Janssen would have the right to add additional non-exclusive targets to the collaboration and
Dyadic would complete the technology transfer of the C1-cell protein production platform, fully enabling Janssen to internally develop C1 cell lines against licensed
targets, and upon successful completion of the technology transfer, Dyadic is eligible to receive a milestone payment in the low seven figures,
(iv) for each product candidate, Dyadic could receive development and regulatory milestones in the mid-seven figures, and
(v) Dyadic could receive aggregate commercial milestone payments in the low nine figures per product, subject to a limit on the number of such products, with the amount
depending on the cumulative amount of active pharmaceutical ingredient produced by Janssen for each product manufactured with Dyadic’s C1-cell protein production
platform.
Janssen may terminate the Janssen Agreement in its entirety, or on a country-by-country or other jurisdiction-by-other jurisdiction basis, for any or no reason, upon 90
days’ prior written notice to Dyadic.
IDBiologics Agreement
On July 8, 2020, the Company entered into a Common Stock Purchase Agreement (the “IDBiologics Agreement”) with IDBiologics, Inc (“IDBiologics”). IDBiologics is a
private biotechnology company focused on the development of human monoclonal antibodies for the treatment and prevention of serious infectious diseases. The Company was
founded in 2017 and seeded by Vanderbilt University Medical Center in response to the repeated threats of epidemics around the world, including Ebola in West Africa and Zika in
the Americas. IDBiologics is developing a portfolio of monoclonal antibodies against SARS-CoV-2, influenza and Zika viruses.
Pursuant to the term of the IDBiologics Agreement, on July 8, 2021, Dyadic received 129,661 shares of IDBiologics’ common stock, which represent 0.37% of IDBiologics’
outstanding equity, upon the completion of a feasibility study performed by Dyadic. Dyadic provided services including the use of Dyadic’s C1-cell protein production platform to
express a SARS-CoV-2 monoclonal antibody which IDBiologics licensed from the Vanderbilt Vaccine Center.
On April 25, 2021, the Company entered into a project agreement to provide additional research services to IDBiologics.
Alphazyme Sub-License Agreement
On May 5, 2019, the Company entered into a sub-license agreement (the “Alphazyme Sub-License Agreement”) with Alphazyme, LLC (“Alphazyme”). Under the terms of
the Alphazyme Sub-License Agreement, the Company has granted to Alphazyme, subject to the terms of the license agreement entered into between the Company and Danisco
US, Inc. on December 31, 2015, a sub-license to certain patent rights and know-how related to Dyadic’s proprietary C1-cell protein production platform for the purpose of
commercializing certain pharmaceutical products that are used as reagents to catalyze a chemical reaction to detect, measure, or be used as a process intermediate to produce a
nucleic acid as a therapeutic or diagnostic agent.
On June 24, 2020, the Company entered into an Amended and Restated Non-Exclusive Sub-License Agreement (the “Amended Sub-License Agreement”) with
Alphazyme. Pursuant to the Amended Sub-License Agreement and in consideration of Dyadic’s transfer of its C1-cell protein production platform, Alphazyme issued 2.50% of the
Class A shares of Alphazyme to Dyadic, and Dyadic became a party to the Alphazyme Limited Liability Company Agreement pursuant to which the Company has agreed to certain
customary rights, covenants, and obligations. In addition, and subject to achieving certain milestones, Alphazyme is obligated to pay a potential milestone payment and royalties,
based on net sales, if any, which incorporate Dyadic’s proprietary C1-cell protein production platform.
On December 1, 2020, the Company entered into an Amended and Restated Limited Liability Company Agreement with Alphazyme (the “Amended Alphazyme LLC
Agreement”). Under the Amended Alphazyme LLC Agreement, Alphazyme obtained an additional capital contribution and Dyadic’s ownership was diluted to 1.99%.
On January 18, 2023, the Company entered into a Securities Purchase Agreement, under which the Company agreed to sell its equity interest in Alphazyme, LLC (the
"Alphazyme Sale Agreement”). After taking into account the adjustments for the transaction and legal expenses, payments to the Company were approximately $1.27 million in
connection with the sale. The Company also has the potential to receive additional payments based on the future sales of Alphazyme’s existing products, pursuant to the
Alphazyme Sale Agreement.
The Amended Sublicense Agreement between Dyadic and Alphazyme, which was previously entered on June 24, 2020, remains in effect. Under the Amended Alphazyme
Sub-License Agreement, Dyadic is entitled to potential milestone and royalty payments upon the commercialization of Alphazyme products using Dyadic’s proprietary C1-cell
protein production platform.
Other Third Parties Collaborations
● NIIMBL Coronavirus Grant – Dyadic received 1 of 32 project grants awarded by the National Institute for Innovation in Manufacturing Biopharmaceuticals
("NIIMBL") funded through the White House's American Rescue Plan ("ARP"). Under the $690,000 NIIMBL grant, the Company has received approximately 75% of
the funding to engineer the Company's proprietary and patented C1-cell thermophilic fungal (Thermothelomyces heterothallica) protein production platform to
produce two different coronavirus antibodies.
● Third Party C1 Produced COVID-19 Antibody – A non-human primate challenge study completed dosing of a C1 produced COVID-19 monoclonal antibody (mAb)
that had previously demonstrated broad neutralization and protection against Omicron (BA.1 and BA.2) and the other earlier variants of concern in hamsters.
Preliminary results obtained from the challenge study with the SARS-CoV-2 Delta virus on non-human primates demonstrated potential high protection. This was the
first time a C1 produced monoclonal antibody was used in a non-human primate study validating the safety and efficacy of a C1 produced antibody for infectious
diseases.
● Recombinant Serum Albumin – An animal free recombinant serum albumin project was initiated in late 2022 using Dyadic pharmaceutical cell lines for use in potential
therapeutic, product development, research, and/or diagnostic human and animal pharmaceutical applications. C1-cell lines have been developed and Dyadic expects
to start sampling potential customers who have expressed interest in Dyadic's C1 serum albumin products.
● University of Oslo – During 2021, Dyadic expanded its influenza vaccine collaboration with the University of Oslo.
o Mice vaccinated with C1 antigen combined with an adjuvant (AS03) challenged with a lethal dose of the homologous influenza A/H1N1 showed no clinical signs,
no body weight loss, and were fully protected.
o Other mice trials are ongoing with C1 produced hemagglutinin (HA) and neuraminidase (NA) antigens for influenza, including H1N1, H5N1 (Bird Flu), H7, NA
alone and combined with one or more C1 produced SARS-CoV-2 antigens. The current and future data is expected to support the development of seasonal and
pandemic influenza vaccine candidates alone or in combination with other infectious respiratory diseases such as coronaviruses.
● Virovax – Dyadic has been working with Virovax to develop the next generation vaccine candidates, including COVID-19, that may provide durable and broader
protection against COVID-19 variants as they emerge as well as other infectious diseases.
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o More than a half dozen animal trials have been carried out and additional animal trials are ongoing and/or scheduled with C1 produced antigens for influenza
(H5N1/Bird Flu), COVID-19 and other infectious diseases.
● UC Davis
o
Successful production of the SARS-CoV-2 Spike S2 protein reaching ~1g/L and 97% purity which showed the same ACE2 binding affinity as CHO produced
spike S2 protein.
o UC Davis is carrying out additional research and development work related to expanding the potential applications of the C1-cell protein production platform
including diagnostics.
(4) Alternative Protein Programs
Dyadic’s newly developed Dapibus™ filamentous fungal based microbial protein production platform is reengineered to enable the rapid development and large-scale
manufacture of low-cost proteins, metabolites, and other biologic products for use in non-pharmaceutical applications, such as food, nutrition, and wellness. Given Dyadic’s
industrial heritage, the expertise to rapidly achieve commercial scale within margin sensitive markets such as food and nutrition enzymes, provides our partners with the ability to
move from demonstration to commercial production quickly and efficiently.
We are actively applying our proprietary Dapibus™ platform and other technologies to address the unmet need of reducing the production cost in the global market for
non-pharmaceutical recombinant proteins.
Food and Nutrition:
● In May 2022, we launched a strategic partnership with a global food ingredient company. The Company is making progress with the joint development agreement
to develop and manufacture several animal free ingredient products using the Company’s biotechnology. The Company has achieved the first milestone, for
which payment is expected in the second quarter of 2023.
● We are exploring internal and partnership opportunities for enzymes, growth factors, and cell culture media components for food industries, such as the dairy
and cultured meat markets.
Health and Wellness:
● Development work has been established for select primary and secondary metabolites, such as nicotinamide riboside, which may have potential cardiovascular
and other health benefits.
● Dyadic has also developed Intellectual Property regarding the production of cannabinoids in its technology, with a focus on the production of rare cannabinoids
unfeasible from plants.
Product Development in Alternative Proteins:
● We are currently expanding our portfolio of recombinant proteins and media components for use in food and other applications.
● Animal free recombinant serum albumin projects were initiated for use in potential non-pharmaceutical applications such as a component of cell
culture media in nutrition, health, and food.
Government Regulation and Product Approval
As a small biotechnology company that operates in the United States, we are subject to extensive regulation. Government authorities in the United States (at the federal,
state and local level) and in other countries extensively regulate, among other things, the research, development, testing, manufacturing, quality control, approval, labeling,
packaging, storage, record-keeping, promotion, advertising, distribution, post-approval monitoring and reporting, marketing and export and import of drug products such as those
we are developing. Product candidates that we develop must be approved by the FDA, before they may be legally marketed in the United States and by the appropriate foreign
regulatory agency before they may be legally marketed in foreign countries. Generally, our activities in other countries will be subject to regulation that is similar in nature and
scope as that imposed in the United States, although there can be important differences.
Intellectual Property
Patents are important to developing and protecting our competitive position. Our general policy is to seek patent protection in the United States, major European
countries, and other jurisdictions as appropriate for our compounds and methods. U.S. patents, as well as most foreign patents, are generally effective for 20 years from the date
the earliest patent application was filed. In some cases, the patent term may be extended to recapture a portion of the term lost during the U.S. FDA regulatory review or because of
U.S. Patent and Trademark Office (“USPTO”) delays in prosecuting the application. The duration of foreign patents varies similarly, in accordance with local law.
Currently, Dyadic owns or has exclusive rights to seven (7) patent families, of which four (4) entered the national phase. The other three (3) applications are at the
international (Patent Cooperation Treaty, PCT) phase. There are currently four (4) pending patent applications in the United States, and nineteen (19) additional patent applications
in a variety of jurisdictions including Europe and China.
Our success is significantly dependent on our ability to obtain and maintain patent protection for C1 and Dapibus™, both in the United States and abroad. Our patent
position and proprietary rights are subject to various risks and uncertainties. Please read the “Risk Factors” in Item 1A of this Annual Report for information about certain risks
and uncertainties that may affect our patent position and proprietary rights.
We also rely upon unpatented confidential information to remain competitive. We protect such information principally through confidentiality agreements with our
employees, consultants, outside scientific collaborators, and other advisers. In the case of our employees, these agreements also provide, in compliance with relevant law, that
inventions and other intellectual property conceived by such employees during their employment shall be our exclusive property.
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Item 1A.
Risk Factors
Investing in our common stock involves a high degree of risk. You should carefully consider the following material risks, together with the other matters described in
this Annual Report and in our financial statements and the related notes thereto in evaluating our current business and future performance. We cannot assure you that any of
the events discussed in the risk factors below will or will not occur. If we are not able to successfully address any of the following risks, we could experience significant changes
in our business, operations and financial performance. In such circumstances, the trading price of our common stock could decline, and in some cases, such declines could be
significant, and you could lose part or all of your investment. In addition to the risks described below, other unforeseeable risks that we currently believe are immaterial may
arise that adversely affect our operating results. Certain statements contained in this Annual Report (including certain statements used in the discussion of our risk factors)
constitute forward-looking statements. Please refer to the section entitled “Cautionary Note Regarding Forward-Looking Statements” appearing on page 4 of this Annual
Report for important information regarding reliance on forward-looking statements.
Risk Factor Summary
The following is a summary of the material risks to which we may be exposed. These risks are more fully described after this summary.
Risks Related to Our Business and Financial Condition
● We may not succeed in implementing our business strategy.
● We have a history of net losses, and we may not achieve or maintain profitability.
● We could fail to manage our growth.
● Our revenue growth depends in part on market and regulatory acceptance of the C1-cell protein production platform and our other technologies to develop and
manufacture animal and/or human biopharmaceutical products and non-pharmaceutical products.
● We may fail to commercialize the C1-cell protein production platform or our other technologies for the expression of therapeutic proteins, antibodies, vaccines, and
metabolites or other non-pharmaceutical biologic products.
● If our competitors develop technologies and products more quickly and market more effectively than our product candidates, our commercial opportunity will be
reduced or eliminated.
● Alternative technologies may not require microbial or other cell produced proteins, such as our proprietary C1 cells.
● Our SARS-CoV-2 vaccine candidates are at the Phase 1 clinical stage and have not been approved for sale. We have not developed, manufactured or commercialized
any vaccine product in the past, and we may be unable to produce a vaccine that can be used to successfully prevent the SARS-CoV-2 virus or its variants of concern,
in a timely and economical manner, if at all.
● The results of nonclinical studies and early-stage clinical trials may not be predictive of future results.
● We may need substantial additional capital in the future to fund our business.
● Changes in global economic and financial markets may have a negative effect on our business.
● We face risks related to health epidemics, pandemics and other widespread outbreaks of contagious disease or other biological threats, as well as
armed conflict escalated between Russia and Ukraine, any of which could significantly disrupt our operations and have a material adverse effect on
our business, employees, directors, consultants, collaborators and other third parties, including business development activities and research and
development projects conducted by third party contract research organizations parties.
● Our sales and operations are subject to the risks of doing business internationally.
● If we lose key personnel, including key management or board members, or are unable to attract and retain additional personnel, it could delay our technology and
product development programs and harm our R&D efforts, and we may be unable to pursue research funding, licenses and other forms of collaborations or develop our
own products.
● We may be sued for product liability.
● Foreign currency fluctuations could adversely affect our results.
● Our ability to use our net operating loss carryforwards to offset future taxable income may be subject to certain limitations.
● We may make acquisitions, investments and strategic alliances that may use significant resources, result in disruptions to our business or distractions of our
management, may not proceed as planned, and could expose us to unforeseen liabilities.
● We rely significantly on information technology and any failure, inadequacy, interruption or security lapse of that technology, including any cybersecurity incidents,
could harm our ability to operate our business effectively.
Risks Related to Dependence on Third Parties
● We are dependent on collaborations with third parties, and if we fail to maintain or successfully manage existing, or enter into new, strategic collaborations, we may not
be able to develop and commercialize many of our technologies and products and achieve profitability.
● We have limited or no control over the resources that any collaborator or licensee may devote to our programs, and reductions in collaborators’ R&D budgets may
affect our businesses.
● We heavily rely on contracts with third-party contract research organizations (“CROs”) and other third-party service providers to conduct our research and
development, pre-clinical, CMC and cGMP manufacturing, fill and finish, and potential clinical trials, which may not be available to the Company on commercially
reasonable terms or at all.
● Conflicts with the CROs, other service providers, collaborators and/or licensees could harm our business.
● We rely on our collaborators and other third parties to deliver timely and accurate information in order to accurately report our financial results as required by law.
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Risks Related to Government Regulations and Environmental, Social, and Governance Issues
● Potential future regulations limiting our ability to sell genetically engineered products could harm our business.
● Public views on ethical and social issues may limit use of our technologies.
● Our results of operations may be adversely affected by environmental, health and safety laws, regulations and liabilities.
● Increasing scrutiny and changing expectations from customers, regulators, investors, and other stakeholders with respect to our environmental, social and governance
practices may impose additional costs on us or expose us to new or additional risks.
● We have no experience submitting applications to the FDA or similar regulatory authorities in the past and could be subject to lengthy and/or unfavorable regulatory
proceedings.
Risks Relating to Intellectual Property
● Failure to protect our intellectual property and the intellectual property of certain third parties could harm our competitive position.
● Litigation or other proceedings or third-party claims of intellectual property infringement could require us to spend significant time and resources and could prevent us
and our collaborators from commercializing our or their technologies and products or negatively impact our stock price.
● Confidentiality agreements with employees and others may not adequately prevent disclosures of trade secrets and other proprietary information.
Risks Related to Our Common Stock
● The price of our shares of common stock is likely to be volatile, and you could lose all or part of your investment.
● Our quarterly and annual operating results may be volatile.
● We do not expect to pay cash dividends in the future.
● Our anti-takeover defense provisions may deter potential acquirers and depress our stock price.
● Concentration of ownership among our existing officers, directors and principal stockholders may prevent other stockholders from influencing significant corporate
decisions and depress our stock price.
● Future issuances of shares of our common stock may negatively affect our stock price.
● The Company is exposed to credit risk and fluctuations in the values of its investment portfolio.
● We are a smaller reporting company, and the reduced disclosure requirements applicable to smaller reporting companies may make our common stock less attractive to
investors.
Risks Related to Our Business and Financial Condition
We may not succeed in implementing our business strategy.
In connection with the December 31, 2015 sale of substantially all of the assets of our industrial technology business to Danisco (the “DuPont Transaction”),
Danisco obtained certain rights to utilize the C1-cell protein production platform for development and production of pharmaceutical products, for which it will make royalty
payments to Dyadic upon commercialization. At the same time, Dyadic retained the co-exclusive rights to the C1-cell protein production platform for use in all human and animal
pharmaceutical applications, with Dyadic currently having the exclusive ability to enter into sub-license agreements in that field (subject to the terms of the license and certain
exceptions). We cannot predict whether Danisco intends to or will pursue the use of the C1-cell protein production platform to develop or manufacture pharmaceutical products or
whether or when we might receive royalties from Danisco. 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 owned or licensed by Danisco. Consequently, our business has changed dramatically as compared to the past, as we no longer
have any product revenue related to our enzyme business. We also now apply the C1-cell protein production platform in the biopharmaceutical market, which has higher risks and
a higher barrier to entry.
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As we attempt to adapt the C1-cell protein production platform and our other technologies for use in the biopharmaceutical and other markets, our business is subject to
the execution, integration, and research and development risks that early-stage companies customarily face with new technologies, products and markets. These risks relate to,
among other things, our ability to successfully further develop the C1-cell protein production platform and our other technologies, products and processes, assemble and maintain
adequate production and research and development (“R&D”) capabilities, comply with regulatory requirements, construct effective channels of distribution and manage growth.
We have encountered and will continue to encounter risks and difficulties frequently experienced by early-stage companies in expanding and upgrading our intellectual property,
regulatory, marketing, sales and R&D capabilities, improving our accounting and financial reporting and internal controls infrastructure, and adapting to the rapidly evolving
industries in which we operate. Additionally, we are subject to competition from much larger companies with more resources than we have. Also, the market for developing and
manufacturing pharmaceutical proteins produced from a filamentous fungus, such as the C1 fungus, is a market that is not yet established and is subject to a high level of
regulatory hurdles from the U.S. Food and Drug Administration (the “FDA”) and other governmental bodies, and there is a risk that such technologies will not be adopted by the
pharmaceutical industry or governmental agencies and therefore not succeed and/or not grow at the rates projected or at all.
We have also developed the Dapibus™ filamentous fungal based microbial protein production platform use in non-pharmaceutical applications, such as food,
nutrition, and wellness.
We have not yet commercialized any products based on our platforms and technologies, and we may never be able to do so.
We do not know when or if we and/or our current and/or future collaborators and licensees will complete any of our or their product development efforts, obtain
regulatory approval for any product candidates incorporating our technologies or successfully commercialize any approved products. Even if we and/or our licensees and
collaborators are successful in developing products that are approved for marketing, we and they will still require that these products gain regulatory approval and market
acceptance. The biopharmaceutical industry is a high-risk industry in that even if we are successful at expressing certain proteins, these proteins may fail to be advanced or
approved for use or sale for many reasons including their characteristics, biological activity, biological comparability, biological similarity, stability, glycosylation structures,
containments, purity, performance, safety and regulatory reasons.
Because of the numerous risks and uncertainties associated with pharmaceutical product development, we are unable to predict the timing or amount of increased
expenses or when, or if, we will be able to achieve certain technology, product and/or commercial milestones, access fees and royalties, launch products and/or processes, or
achieve profitability. In addition, our expenses could increase if we are required by the FDA or other domestic and foreign regulatory authorities to perform studies or trials in
addition to those currently expected, or if there are delays in completing additional safety studies such as toxicology and pathogenicity studies, clinical trials, preclinical studies,
animal or human studies or the development of any of our or our collaborators’ product candidates.
We have a history of net losses, and we may not achieve or maintain profitability.
As of December 31, 2022, we have an accumulated deficit of approximately $73.5 million. Our profitability has strongly relied on, and will be even more reliant going
forward on, third party industry and government research funding, licensing partnerships and other forms of collaborations. We believe that it is likely that if we do not sign
license agreements or other forms of collaborations, we will incur losses because of our planned levels of R&D and additional general and administrative expenditures that we
believe are necessary to operate our business and further develop the C1-cell protein production platform and our other technologies for use in the pharmaceutical and non-
pharmaceutical industries. The amount of our future net losses will depend, in part, on the rate of increase in our expenses along with other potential cost of unforeseen
circumstances, our ability to generate research funding, government grants, receipt of access fees, milestones, royalty and other payments, and whether we are able to generate
revenues by entering into license agreements or other forms of collaborations, launch new products and/or processes from future licensees or collaborators, and our ability to raise
additional capital. The net losses we anticipate incurring over the next several years will have an adverse effect on our stockholders’ equity and working capital.
The R&D efforts needed to enhance and leverage the C1-cell protein production platform and our other technologies, such as Dapibus™, for use in developing and
manufacturing human and animal biopharmaceuticals and other non-pharmaceutical products will require significant funding and increased staffing. Therefore, we expect near-term
operating and research expenses to continue, and maybe even accelerate, as we further develop our research and business plans, and our goals and objectives. Consequently, we
will require significant additional revenue to achieve profitability. We cannot provide assurance that we will be able to generate any revenues from our focus and efforts as we
intend to apply the C1-cell protein production platform and our other technologies into the biopharmaceutical and non-pharmaceutical industries. If we fail to enter into new license
agreements or other forms of collaborations or generate revenues and profit from additional research projects and government grants, the market price of our common stock will
likely decrease. Further regulatory complications, competition from other technologies, or delays in our research programs and the adoption and use of the C1-cell protein
production platform and our other technologies by the biopharmaceutical and non-pharmaceutical industries may force us to reduce our staffing and research and development
efforts, which may further affect our ability to generate cash flow.
We could fail to manage our growth.
We will need to take the following steps, among others, to manage our growth. If we fail to achieve one or more of these, it could have a material adverse effect on our
business, financial condition and results of operations.
● Balance our cash burn with technology and product development;
● Maintain and add additional CROs (Contract Research Organizations), other third-party service providers or other technology collaborators;
● Maintain and add additional collaborators, strategic partners technology licensees or other forms of structures;
● Recruit, hire and maintain the required employees necessary to maintain and grow our business and to advance our technologies and products;
● Achieve technical and commercial success in our research and product development programs;
● Access required manufacturing capacity;
● Access additional capital;
● Recruit and maintain consultants, board members and scientific advisory board members; and
● Manage scientific risks and uncertainties that may arise during our R&D and regulatory programs.
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Our revenue growth depends in part on market and regulatory acceptance of the C1-cell protein production platform and our other technologies to develop and manufacture
animal and/or human biopharmaceutical and non-pharmaceutical products.
The success of our biopharmaceutical business will depend on our ability to develop, register, and introduce similar, new and improved technologies and products in a
timely manner, at significantly lower manufacturing costs that address the evolving requirements of the pharmaceutical industry and potential customers. There is no assurance
that the C1-cell protein production platform or any product expressed from C1, or our other technologies, will perform the same or better, save our customers money relative to
existing gene expression technologies or those of our competitors, provide our customers with other benefits, obtain governmental safety and regulatory approvals, be registered
or gain market acceptance. If we fail to develop similar, new and better performing technologies, products and processes at significantly lower manufacturing costs, make
fermentation yield improvements on our existing production processes, generate the necessary safety and regulatory data or gain registration and market acceptance of the C1-cell
protein production platform, or our other technologies, products or processes, we could fail to recoup our R&D investments and fail to capitalize on potential opportunities or gain
market share from our competitors. Any failure, for technological, quality, safety, regulatory, or other reasons, to develop and launch improved technologies and new products,
could negatively impact our business, financial condition and results of operation.
The dynamic and conservative nature of the biopharmaceutical industry, the unpredictable nature of the product development process and the time and cost of new
technology adoption in the biopharmaceutical industry may affect our ability to meet the requirements of the marketplace or achieve market and/or regulatory acceptance.
The expenses or losses associated with unsuccessful technology and product development activities or lack of market acceptance of our new technologies and products
could harm our business, financial condition and results of operations.
We may fail to commercialize the C1-cell protein production platform or our other technologies for the expression of therapeutic proteins, antibodies, vaccines, and
metabolites or other non-pharmaceutical biologic products.
We have not yet completed the necessary safety, efficacy, cost and regulatory studies, or the commercialization of any therapeutic proteins, antibodies and vaccines, and
metabolites or other non-pharmaceutical biologic products based on C1 or our other technologies, such as Dapibus™.
To date, drug companies have developed and commercialized only a small number of gene-based products in comparison to the total number of drug molecules available
in the marketplace. Our biopharmaceutical business should be evaluated as having the same risks as those inherent to early-stage biotechnology companies because the
application of the C1-cell protein production platform for the expression of pre-clinical and clinical quantities of therapeutic proteins, antibodies and vaccines is still in early
development.
Successful development of the C1-cell protein production platform and our other technologies, such as Dapibus™, for biopharmaceutical and non-pharmaceutical
purposes will require significant research, development and capital investment, including testing, to prove its safety, efficacy and cost-effectiveness. In general, our experience has
been that each step in the process has been longer and costlier than originally projected, and we anticipate that this is likely to remain the case with respect to the continuing
development efforts of our biopharmaceutical and non-pharmaceutical business.
If our competitors develop technologies and products more quickly and market more effectively than our product candidates, our commercial opportunity will be reduced or
eliminated.
The biopharmaceutical industry is characterized by rapid technological change, and the area of gene and protein research and platform development is a rapidly evolving
field. Any biopharmaceutical products we or our current or collaborators or licensees develop through the C1-cell protein production platform, or through our other technologies,
will compete in highly competitive and regulated markets. Many of the organizations competing with us in the market for such products have more capital resources, larger R&D
and marketing staff, facilities and capabilities, and greater experience in research and development, regulatory approval, manufacturing and commercialization of technology and
products. Accordingly, our competitors may be able to develop technologies and products more rapidly. Our future success will depend on our ability to maintain a competitive
position with respect to technological advances in terms of product and process quality, stability, safety, productivity and cost. If a competitor develops superior technology or
products, or more cost-effective alternatives to our and our collaborators’ or licensees’ technologies, products or processes, it could have a material adverse effect on our
business, financial condition and results of operations. Well-known and highly competitive biotechnology companies offer comparable or alternative technologies for the same
products and services as our biopharmaceutical and non-pharmaceutical business. We anticipate that we and our current or future collaborators and licensees will continue to
encounter increased competition as new companies enter these markets and as the development of biological processes and products evolves.
Alternative technologies may not require microbial or other cell produced proteins, such as our proprietary C1 cells.
Research is being conducted with cell or gene-based therapies and other technologies that offer a possible alternative to producing proteins as they are being produced
today based on microbial, organic matter containing Carbon, Hydrogen, and Oxygen or other organisms, such as our proprietary C1 cells. Alternative methods may allow genes to
be directly inserted into cells that can be implanted into animals and humans directly, displacing the need for the existing methods used for the development of biologic vaccines
and drugs. If they are successful, these new methods may supplant or greatly reduce the need for microorganisms, Carbon, Hydrogen, and Oxygen or other organisms, including
our C1 cells, to produce these proteins externally as the injected cells in animals and humans may be able to do so internally.
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Our SARS-CoV-2 vaccine candidates are at the Phase 1 clinical stage and have not been approved for sale. We have not developed, manufactured or commercialized
any vaccine product in the past, and we may be unable to produce a vaccine that can be used to successfully prevent the SARS-CoV-2 virus or its variants of concern, in a
timely and economical manner, if at all.
Our DYAI-100, SARS-CoV-2 vaccine candidate has received regulatory approval for Phase 1 clinical trial in South Africa, and we have completed dosing of all patients by
the end of February 2023. However, we could experience delays in clinical trials or unsatisfactory clinical trial results. Moreover, adverse events, or the perception of adverse
events, relating to vaccine product candidates and delivery technologies may negatively impact our ability to develop commercially successful products and also may lead to
greater government regulation, which could have a material effect on our ability to develop and market our SARS-CoV-2 vaccine product candidates.
Uncertainties exist surrounding the longevity and severity of COVID-19 as a global health concern. The success of our efforts to develop and commercialize our vaccine
product candidates could fail for a number of reasons. Accordingly, we may be unable to produce a vaccine that successfully targets SARS-CoV-2 in a timely and economical
manner, if at all. For example, we expect to commit significant financial resources and personnel to the development of SARS-CoV-2 vaccine product candidates, which may cause
delays in or otherwise negatively impact our other product candidate development program. The outcome of any research and development program is highly uncertain. Only a
small fraction of biotechnology and vaccine development programs ultimately result in commercial products or even product candidates, and a number of events could delay our
development efforts and negatively impact our ability to obtain regulatory approval for, and to manufacture, market and sell, a vaccine. Additionally, our ability to develop an
effective vaccine will depend on our ability to work on an accelerated timeline, with limited access to financial resources beyond those that we currently possess, and in
competition with a significant number of better-funded and more experienced vaccine-development companies. Moreover, given the COVID-19 pandemic is now relatively
contained and the risk of further spread is diminished, we may be unable to identify strategic partners willing to work with and support us in our development efforts and/or the
market that we anticipate for this product candidate may not exist or may be much smaller than we previously anticipated. Alternatively, even if a market exists, our vaccine product
candidates could be found to be ineffective or unsafe, or otherwise fail to receive necessary regulatory clearances. Our vaccine product candidates, even if safe and effective,
could be difficult to manufacture on a large scale or uneconomical to market, or our competitors could develop superior products more quickly and efficiently or more effectively
market their competing products. Accordingly, our inability to develop a commercially-successful vaccine product could materially harm our business.
The results of nonclinical studies and early-stage clinical trials may not be predictive of future results.
The results of nonclinical studies may not be predictive of the results of clinical trials, and the results of any early-stage clinical trials we commence may not be predictive
of the results of the later-stage clinical trials. Vaccine and drug candidates in later stages of clinical trials may fail to show the desired safety and efficacy despite having progressed
through nonclinical studies and initial clinical trials. There is a high failure rate for drugs proceeding through clinical trials, and a number of companies in the pharmaceutical and
biotechnology industries have suffered significant setbacks in clinical development even after achieving promising results in earlier studies. There can be no assurance that any of
our current or future clinical trials will ultimately be successful or support further clinical development of any of our vaccine and drug candidates. Even if our clinical trials are
completed, the results may not be sufficient to obtain regulatory approval of any products. Any such setbacks in our clinical development could have a material adverse effect on
our business and operating results.
We may need substantial additional capital in the future to fund our business.
Our future capital requirements may be substantial, particularly as we continue to further develop, engineer and optimize the C1-cell protein production platform and our
other proprietary technologies, products and processes for licensing for research and development, and commercialization of potential animal and human pharmaceutical products.
We currently have very little leverage, and if our capital resources are insufficient to meet our capital requirements, we will have to raise additional funds to continue the
development of our technologies and complete the development and commercialization of products, if any, resulting from our technologies. If the acquisition of additional funds is
not possible or if we engage in future equity financings, dilution to our existing stockholders may result. If we raise capital through debt financing, we may be subject to restrictive
covenants that limit our ability to conduct our business. We may not be able to raise funds on terms that are favorable to us, if at all. If we fail to raise sufficient funds and incur
losses, our ability to fund our operations, take advantage of strategic opportunities, develop products or technologies, or otherwise respond to competitive pressures could be
significantly limited. If this happens, we may be forced to delay or terminate research or development programs or the commercialization of products resulting from our
technologies, curtail or cease operations or obtain funds through collaborative and licensing arrangements that may require us to relinquish commercial rights, sell certain assets of
the company which will limit future opportunities, or grant licenses on terms that are not favorable to us. Without sufficient funding or revenue, we may have to curtail, cease, or
dispose of one or more of our operations, which would have a material adverse effect on our business, financial condition, and future prospects.
Changes in global economic and financial markets may have a negative effect on our business.
Our business is subject to a variety of market forces including, but not limited to, domestic and international economic, political and social conditions. Many of these
forces are beyond our control. Any change in market conditions that negatively impacts our operations or the demand of our current or prospective customers could adversely
affect our business operations.
Changes in the global financial, pharmaceutical and biotech markets may make it difficult to accurately forecast operating results. These changes have had, and may
continue to have, a negative effect on our business, results of operations, financial condition and liquidity. In the event of a downturn in global economic activity, current or
potential business partners may go out of business, may be unable to fund purchases or determine to reduce purchases, all of which could lead to reduced demand for our
products and increased payment delays or defaults. We are also limited in our ability to reduce costs to offset the results of a prolonged or severe economic downturn given
certain fixed costs associated with our operations and difficulties if we over strained our resources. The timing and nature of a sustained recovery in the credit and financial
markets remains uncertain, and there can be no assurance that market conditions will significantly improve in the near future or that our results will not continue to be materially
and adversely affected.
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We face risks related to health epidemics, pandemics and other widespread outbreaks of contagious disease or other biological threats, as well as armed conflict escalated
between Russia and Ukraine, any of which could significantly disrupt our operations and have a material adverse effect on our business, employees, directors, consultants,
collaborators and other third parties, including business development activities and research and development projects conducted by third party contract research
organizations parties.
Significant outbreaks of contagious diseases, and other adverse public health developments, could have a material impact on our business operations, financial
condition, and operating results. The COVID-19 pandemic has significantly impacted the operation of business in the United States and Europe, where several of our key executive
management members and our third-party contract research organizations are located. The COVID-19 pandemic and various governmental responses in the United States and
Europe has adversely affected our ability to carry on certain business development activities in the past, including restrictions in business-related travel, delays or disruptions in
our on-going research projects, and unavailability of the employees of the Company or third-party contract research organizations with whom we conduct business, due to illness
or quarantines, among others, and it may adversely affect our business operations if any health epidemics and pandemics and other widespread outbreaks of contagious disease or
other biological threats in the future.
In addition, we rely on third parties in the United States and Europe to conduct our research and development projects and to provide other services, and COVID-19 has
affected and may continue to affect service providers of such third-party contract research organizations and therefore negatively affect the operations of our on-going research
projects, which could materially and negatively affect our business, financial condition, and results of operations.
The COVID-19 pandemic has adversely affected and may continue to adversely affect the economies and financial markets worldwide, resulting in an economic
downturn that could impact our business, financial condition and results of operations. As a result, our ability to fund through public or private equity offerings, debt financings,
and through other means at acceptable terms, if at all, may be disrupted, in the event our financing needs for the foreseeable future are not able to be met by our existing balances
of cash, cash equivalents and investments. In addition, the COVID-19 pandemic has posed and may continue to pose significant challenges for our supply chains, particularly as a
result of mandatory shutdowns in locations where our products are manufactured or held for distribution. The extent to which COVID-19 could impact our business and research
and development activities will depend on future developments, which are uncertain and cannot be predicted with confidence, and will depend on many factors. As such, we
cannot presently predict the scope and extent of any potential business shutdowns or disruptions.
The Company is currently working on several COVID-19 related vaccine and antibody opportunities. However, there is no assurance that any of these opportunities will
materialize or that the C1-cell protein production platform or any product expressed from C1 or any of the various other steps in a vaccine or drug development process will
perform, provide benefits, obtain governmental safety and regulatory approvals, be registered or gain market acceptance. In addition, our C1-cell protein production platform has
yet to be used to produce a vaccine, antibody or other biologic product that has entered the clinical trial phase, and we are competing with more experienced companies for grants
or funding of this type. As a result, there is no assurance that we will receive these grants or funding resulting from these proposals.
In February 2022, armed conflict escalated between Russia and Ukraine. The sanctions announced by the U.S. and other countries following Russia’s invasion of
Ukraine against Russia to date include restrictions on selling or importing goods, services, or technology in or from affected regions and travel bans and asset freezes impacting
connected individuals and political, military, business, and financial organizations in Russia. The U.S. and other countries could impose wider sanctions and take other actions
should the conflict further escalate. It is not possible to predict the broader consequences of this conflict, which could include further sanctions, embargoes, regional instability,
geopolitical shifts and adverse effects on macroeconomic conditions, currency exchange rates and financial markets, all of which could impact our business, financial condition,
and results of operations. Our business is not directly impacted by the war as we do not operate in either Russia or the Ukraine. However, the war might potentially amplify the
disruptive impact of the COVID pandemic.
Our sales and operations are subject to the risks of doing business internationally.
Our sales and operations are subject to the risks of doing business internationally, as we have customers and partners located outside of the United States. Conducting business
internationally exposes us to a variety of risks, including:
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changes in or interpretations of foreign regulations that may adversely affect our ability to sell our products, repatriate profits to the United States or operate our
foreign-located facilities;
the imposition of tariffs;
the imposition of limitations on, or increase of, withholding and other taxes on remittances and other payments by foreign subsidiaries or joint ventures;
uncertainties relating to foreign laws, regulations and legal proceedings including tax, import/export, anti-corruption and exchange control laws;
the availability of government subsidies or other incentives that benefit competitors in their local markets that are not available to us;
increased demands on our limited resources created by our operations may constrain the capabilities of our administrative and operational resources and restrict our
ability to attract, train, manage and retain qualified management, technicians, scientists and other personnel;
economic or political instability in foreign countries;
difficulties associated with staffing and managing foreign operations; and
the need to comply with a variety of United States and foreign laws applicable to the conduct of international business, including import and export control laws and
anti-corruption laws.
If we lose key personnel, including key management or board members, or are unable to attract and retain additional personnel, it could delay our technology and product
development programs and harm our R&D efforts, and we may be unable to pursue research funding, licenses and other forms of collaborations or develop our own products.
Our planned activities will require retention, and ongoing recruiting of additional expertise in specific areas applicable to our industries, technologies and products being
developed. These activities will not only require the development of additional expertise by existing management personnel, but also the addition of new research and scientific,
regulatory, licensing, sales, marketing, management, accounting and finance and other personnel. The inability to acquire or develop this expertise or the loss of principal members
of our management, board of directors, consultants, accounting and finance, sales, and scientific staff could impair the growth, if any, of our business. Competition for experienced
personnel from numerous companies, academic institutions and other research facilities may limit our ability to attract and retain qualified management, directors, consultants, and
scientific personnel on acceptable terms. Failure to attract and retain qualified personnel would inhibit our ability to maintain and pursue collaborations and develop our products
and core technologies.
Personnel changes may disrupt our operations. Hiring and training new personnel will entail costs and may divert our resources and attention from revenue-generating
efforts. In addition, we periodically engage consultants to assist us in our business and operations. These consultants operate as independent contractors, and we therefore do
not have as much control over their activities as we do over the activities of our employees. Our directors and consultants may be affiliated with or employed by other parties, and
some may have consulting or other advisory arrangements with other entities that may conflict or compete with their obligations to us.
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We may be sued for product liability.
We or our current and future collaborators and licenses may be held liable if any product we or they develop, or any product which is made with the use or incorporation
of, any of our technologies, causes injury or is found otherwise unsuitable or unsafe during product testing, manufacturing, marketing or sale. These claims could be brought by
various parties, including other companies who purchase products from our current and future collaborators and licenses or by end users of the products.
While we maintain product liability insurance, it may not fully cover all of our potential liabilities and our liability could in some cases exceed our total assets, which would
have a material adverse effect on our business, results of operations, financial condition and cash flows, or cause us to go out of business. Further, insurance coverage is
expensive and may be difficult to obtain and may not be available to us or to our collaborators and licensees in the future on acceptable terms, or at all. Inability to obtain sufficient
insurance coverage at an acceptable cost to protect against potential product liability claims could prevent or inhibit the commercialization of products developed by us, or our
collaborators and licensees.
Foreign currency fluctuations could adversely affect our results.
In the conduct of our business, in certain instances, we are required to receive payments or pay our obligations in currencies other than U.S. dollars. Especially since a
large portion of our research and development is done in Europe, our CROs and certain consultants request payments in Euros. As a result, we are exposed to changes in currency
exchange rates with respect to our business transactions denominated in non-US dollars. Fluctuations in currency exchange rates have in the past and may in the future negatively
affect our revenue, expenses and our financial position and results of operations as expressed in U.S. dollars.
Our ability to use our net operating loss carryforwards ( “ NOLs ” ) to offset future taxable income may be subject to certain limitations.
In general, under Section 382 of the Internal Revenue Code, a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its NOLs,
to offset future taxable income. If the Internal Revenue Service challenges our analysis that our existing NOLs are not subject to limitations arising from previous ownership
changes, our ability to utilize NOLs could be limited by Section 382 of the Internal Revenue Code. Future changes in our stock ownership, some of which are outside of our control,
could result in an ownership change under Section 382 of the Internal Revenue Code. Furthermore, our ability to utilize NOLs of companies that we may acquire in the future may
be subject to limitations.
We may make acquisitions, investments and strategic alliances that may use significant resources, result in disruptions to our business or distractions of our management,
may not proceed as planned, and could expose us to unforeseen liabilities.
We may seek to expand our business through the acquisition of, investment in and strategic alliances with companies, technologies, products, and services. If we are able
to identify suitable acquisition, investment or strategic alliance targets, we may be unable to successfully negotiate their acquisition at a price or on terms and conditions
acceptable to us.
We cannot assure you that, following an acquisition, investment or strategic alliance, we will achieve expected research and development results, anticipated synergies,
revenues, specific net income or loss levels that justify such transaction or that the transaction will result in increased earnings, or reduced losses, for the combined company in
any future period. Moreover, we may need to raise additional funds through public or private debt or equity financing to acquire any businesses or to provide funding for such
business, which would result in dilution for stockholders or the incurrence of indebtedness and may not be available on terms which would otherwise be acceptable to us. We may
not be able to oversee such investments nor operate acquired businesses profitably or otherwise implement our growth strategy successfully.
We rely significantly on information technology and any failure, inadequacy, interruption or security lapse of that technology, including any cybersecurity incidents, could
harm our ability to operate our business effectively.
Despite the implementation of security measures, our internal computer systems and those of third parties with which we contract are vulnerable to damage from cyber-
attacks, computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. System failures, accidents or security breaches could
cause interruptions in our operations and could result in a material disruption of our research activities and business operations, in addition to possibly requiring substantial
expenditures of resources to remedy. To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate
disclosure of confidential or proprietary information, we could incur liability and delays in our research efforts and financial reporting compliance, as well as significant increase in
costs to recover or reproduce the data.
Risks Related to Dependence on Third Parties
We are dependent on collaborations with third parties, and if we fail to maintain or successfully manage existing, or enter into new, strategic collaborations, we may not be
able to develop and commercialize many of our technologies and products and achieve profitability.
Our R&D revenue is generated from a small number of research collaborations. These collaborations could be delayed or be discontinued, as they have in the past, at any
time with little advance notice. If these research collaborations are lost or do not perform as expected, it could have a material adverse effect on our business, financial condition
and operating results.
Our ability to enter into, maintain and manage collaborations in our target markets is fundamental to the success of our business. We currently rely on, and expect to
continue to rely on, our current and future partners, in part, for research and development, manufacturing and distribution, sales and marketing services, and application and
regulatory know how. In addition, we intend to enter into additional collaborations to conduct research, develop, produce, market, license and sell our technologies and products
and processes we anticipate developing. However, we may not be successful in entering into collaborative arrangements with third parties. Any failure to enter into such
arrangements on favorable terms could delay or hinder our ability to develop and commercialize our technologies, products and processes and could increase our costs of research
and development and commercialization.
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We have limited or no control over the resources that any collaborator or licensee may devote to our programs, and reductions in collaborators’ R&D budgets may affect our
businesses.
Any of our current or future collaborators or licensees may breach or terminate their agreements with us or otherwise fail to perform and conduct their required activities
successfully and in a timely manner. Our collaborators or licensees may elect not to develop products arising out of our collaborative or license arrangements or may choose not to
devote sufficient resources to the development, manufacture, market or sale of these products. If any of these events occur, we or our collaborators or licensees may not develop
our technologies or commercialize our or their products.
Fluctuations in the R&D budgets of government agencies, our customers, licensees, collaborators and research partners could have a significant impact on the interest in
and demand for our technology. Our businesses could be seriously damaged by significant decreases in life sciences and/or pharmaceutical R&D expenditures by government
agencies and existing and potential partners.
We heavily rely on contracts with third-party contract research organizations (“CROs”) and other third party service providers to conduct our research and development, pre-
clinical, CMC and cGMP manufacturing, fill and finish, and potential clinical trials, which may not be available to the Company on commercially reasonable terms or at all.
As a result of the DuPont Transaction, we no longer own a research and development laboratory and we became dependent upon the performance and research capacity
of a number of third-party contract research organizations and other service providers to conduct our research and development projects, pre-clinical, CMC and cGMP
manufacturing, fill and finish, and potential clinical trials, which include services and programs in connection with the modification and enhancement of the Company’s C1-cell
protein production platform and to support our business development efforts for C1’s use in biopharmaceutical applications. The licensing and service arrangements with these
third parties are not guaranteed to be obtained, renewed or continued on reasonable terms, if at all. The Company may be unable to obtain, maintain or expand its access to third
party CROs and other service providers to conduct these services. Failure to obtain, maintain and expand access to certain third party CROs and other service providers could
have a material adverse impact on the Company’s research projects, financial condition and operating results. In addition, from time to time there are disagreements with such third
parties that if not resolved can have a material adverse effect on our business, financial condition and operating results.
We are heavily dependent upon the availability and performance of third-party research organizations. If we require research capacity and/or capabilities and are unable to
obtain it in sufficient quantity, and quality or at terms and conditions that are acceptable to the Company or our third party collaborators, we may not be able to offer our
technologies or products for license, or sale, or we may be required to make substantial capital investments to build out that capacity or to contract with other research
organizations on terms that may be less favorable than our current arrangements. In addition, if we contract with other research organizations, we may experience delays of several
months in qualifying them or in starting up research programs at these facilities, which could harm our relationships with our licensees, collaborators or customers, and we may be
required to make a capital investment in connection with these arrangements. This could have a material adverse effect on our business, revenues or operating results.
Additionally, if we were to be unsuccessful in retaining a CRO with the requisite experience and skills we require and were required to build our own research facility, it
could take a year or longer before such owned research facility were able to be brought online to carry out the necessary technology and product development efforts of the
Company.
Conflicts with the CROs, other service providers, collaborators and/or licensees could harm our business.
An important part of our strategy includes involvement in proprietary research programs. We may pursue opportunities in the pharmaceutical field that could conflict with
those of our collaborators and licensees. Moreover, disagreements with Danisco, our current and/or future CROs, other service providers, collaborators or licensees could develop
over rights to our intellectual property, over further licensing of our technologies to other parties in certain pharmaceutical fields, or for other reasons. Any conflict with Danisco,
our current and/or future CROs, other service providers, collaborators or licensees could reduce our ability to obtain future collaboration agreements and negatively impact our
relationship with existing collaborators or licensees, which could reduce our revenues and profits.
Some of our current and/or future CROs, other service providers, collaborators and/or licensees could also become competitors in the future. Our current and/or future
CROs, other service providers, collaborators and/or licensees could develop competing technologies or products, preclude us from entering into collaborations or license
agreements with their customers, fail to obtain timely regulatory approvals, terminate their agreements with us prematurely or fail to devote sufficient resources to the development
and commercialization of their technology and products and processes. Any of these developments could harm our technology development and value, product development
efforts, revenue, profits and overall business.
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We rely on our collaborators and other third parties to deliver timely and accurate information in order to accurately report our financial results as required by law.
We need to receive timely, accurate and complete information from a number of third parties in order to accurately and timely report our financial results. We rely on third
parties to provide us with complete and accurate information regarding research developments and data, revenues, expenses and payments owed to or by us on a timely basis. We
rely on the proper controls and procedures related to obtaining and reporting information from our CROs, licensees and collaborators related to research results and other data,
when milestones are earned, if any, when royalties are earned, if any, as well as other types of potential revenues and expenses. If the information that we receive is not accurate,
our consolidated financial statements may be materially incorrect and may require restatement. As a result, we may have difficulty in completing accurate and timely financial
disclosures, which could have a material adverse effect on our business, financial condition and results of operations and the market price of our common stock.
Risks Related to Government Regulations and Environmental, Social, and Governance Issues
Potential future regulations limiting our ability to sell genetically engineered products could harm our business.
We, our current and future collaborators and licensees expect to develop biologic products using genetically engineered microorganisms (“GMOs”). Products derived
from GMOs may in some instances be subject to bans or additional regulation by federal, state, local and foreign government agencies. These agencies may not allow us or our
collaborators and licensees to produce and market products derived from GMOs in a timely manner or under technically or commercially feasible conditions.
Compliance with FDA, Environmental Protection Agency (“EPA”) and EU regulations could result in expenses, delays or other impediments to our product development
programs or the commercialization of resulting products. The FDA currently applies the same regulatory standards to products made through genetic engineering as those applied
to products developed through traditional methodologies. Regardless of GMO status, a product may be subject to lengthy FDA reviews and unfavorable FDA determinations due
to safety concerns or changes in the FDA’s regulatory policy. The EPA regulates biologically-derived enzyme-related chemical substances not within the FDA’s jurisdiction. An
unfavorable EPA ruling could delay commercialization or require modification of the production process or product in question, resulting in higher manufacturing costs, thereby
making the product uneconomical. The EU and other countries also have regulations regarding the development, production and marketing of products from GMOs, which may be
as or more restrictive than U.S. regulations.
Further, we, Danisco, and our current and future collaborators and licensees are subject to regulations in the other countries in which we operate outside of the U.S. and
EU, which may have different rules and regulations depending on the jurisdiction. Different countries have different rules regarding which products qualify as GMOs. If any of
these countries expand the definition of GMO and increase the regulatory burden on GMO products, our business could be harmed.
Other changes in regulatory requirements, laws and policies, or evolving interpretations of existing regulatory requirements, laws and policies, may result in increased
compliance costs, delays, capital expenditures and other financial obligations that could adversely affect our business or financial results.
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Public views on ethical and social issues may limit use of our technologies.
Our success will depend in part upon our ability, and our current and future collaborators’ or licensees’ ability, to develop pharmaceutical and non-pharmaceutical
products discovered, developed and manufactured through the C1-cell protein production platform, and our other technologies. Governmental authorities could, for social, ethical
or other purposes, limit the use of genetic processes or prohibit the practice of using a modified C1 organism to produce biologic vaccines, drugs and other biologic products.
Concerns about the C1-cell protein production platform and our other technologies, and particularly about the expression of genes from C1 for pharmaceutical purposes, could
adversely affect their market acceptance.
The commercial success of our current and future collaborations and our licensees’ potential products will depend in part on public acceptance of the use of genetically
engineered products including enzymes, vaccines, drugs and other protein products produced in this manner. Claims that genetically engineered products are unsafe for
consumption or pose a danger to the environment, animals or humans may influence public attitudes. Our and our licensees’ genetically engineered products may not gain public
acceptance. Negative public reaction to GMOs and products could result in increased government regulation of genetic research and resulting products, including stricter labeling
laws or other regulations, and could cause a decrease in the demand for our products. If we and/or our collaborators are not able to overcome the ethical, legal, and social concerns
relating to genetic engineering, some or all of our products and processes may not gain public acceptance, which could have a material adverse effect on our business, financial
condition and results of operations.
Our results of operations may be adversely affected by environmental, health and safety laws, regulations and liabilities.
We and the CROs, collaborators and licensees are subject to various federal, state and local environmental laws and regulations relating to the discharge of materials into
the air, water and ground, the generation, storage, handling, use, transportation and disposal of hazardous materials, and the health and safety of our employees. These laws,
regulations and permits can often require expensive pollution control equipment or operational changes to limit actual or potential impacts to the environment. A violation of these
laws and regulations or permit conditions could result in substantial fines, criminal sanctions, permit revocations and/or facility shutdowns.
In addition, new laws, new interpretations of existing laws, increased government enforcement of environmental laws, or other developments could require us or our CROs
or other service providers to make additional significant expenditures. Present and future environmental laws and regulations and interpretations thereof, more vigorous
enforcement of policies and discovery of currently unknown conditions may require substantial expenditures that could have a material adverse effect on our results of operations
and financial position. Additionally, any such developments may have a negative impact on our contract manufacturers, which could harm our business.
Increasing scrutiny and changing expectations from customers, regulators, investors, and other stakeholders with respect to our environmental, social and governance
practices may impose additional costs on us or expose us to new or additional risks.
Companies are facing increasing scrutiny from customers, regulators, investors, and other stakeholders related to their environmental, social and governance practices.
Investor advocacy groups, investment funds and influential investors are also increasingly focused on these practices, especially as they relate to the environment, health and
safety, supply chain management, diversity and human rights. Failure to adapt to or comply with regulatory requirements or investor or stakeholder expectations and standards
could negatively impact our reputation and the price of our common stock.
In addition, our customers may adopt policies that include social and environmental requirements, or may seek to include such provisions in their contract terms and
conditions. These social and environmental responsibility provisions and initiatives are subject to change and vary from jurisdiction to jurisdiction, and certain elements may be
difficult and/or cost prohibitive for us to comply with given the inherent complexity and the global scope of our operations. In certain circumstances, in order to meet the
requirements or standards of our customers, we may be obligated to modify our sourcing practices or make other operational choices which may require additional investments and
increase our costs or result in inefficiencies.
Any of the factors mentioned above, or the perception that we or those with whom we conduct business have not responded appropriately to the growing concern for
such issues, regardless of whether we are legally required to do so, may damage our reputation and have a material adverse effect on our business, financial condition, results of
operations cash flows and/or the price of our common stock.
We have no experience submitting applications to the FDA or similar regulatory authorities in the past and could be subject to lengthy and/or unfavorable regulatory
proceedings.
While we understand that many of our current and future collaborators or licensees may have a proven track record of experience submitting application to the FDA or
other applicable regulatory authorities, we have no such experience in the past. Neither we nor any collaborator or licensee has yet submitted any application with the FDA or any
other regulatory authority for any product candidate generated through the use of the C1-cell protein production platform as it relates to the development and manufacture of
pharmaceutical products. The FDA may not have substantial experience with technology similar to ours, which could result in delays or regulatory action against us. We and our
current and future collaborators and licensees may not be able to able to obtain regulatory approval for C1 expressed products, which would harm our business.
The C1-cell protein production platform has been tested for use in the manufacturing of an enzyme in the production of wine, beer and fruit juices, and has generated
promising safety and toxicity data for that enzyme. The C1-cell protein production platform could produce vaccines, antibodies, or therapeutic products and enzymes that have
safety, toxicity, pathogenicity, immunogenicity and other issues associated with them. The C1-cell protein production platform and our other technologies may be subject to
lengthy regulatory reviews and unfavorable regulatory determinations if they raise safety questions which cannot be satisfactorily answered or if results from studies do not meet
regulatory requirements. An unfavorable regulatory ruling could be difficult to resolve and could delay or possibly prevent a product from being commercialized, or even delay or
prevent the use of the C1-cell protein production platform or our other technologies to produce future products, which would have a material adverse effect on our growth and
prospects. Additionally, future products produced by us or our current and future collaborators or licensees using the C1-cell protein production platform or our other
technologies may not be approved by the FDA or other regulatory agencies in the U.S. or worldwide. There is no assurance that safety, toxicity, pathogenicity, immunogenicity
and other issues will not arise in current or future product development and manufacturing programs due to media, fermentation, inherent properties or genetic changes in the C1
and other strains and fermentation processes.
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If these therapeutic protein products, antibodies or vaccines or other non-pharmaceutical products are not approved by regulators, we or our current and future
customers or collaborators and licensees will not be able to commercialize them, and we may not receive research funding, upfront license fees, milestone and royalty payments,
which are based upon the successful advancement of these products through the drug development and approval process. Even after investing significant time and expense, any
regulatory approval may also impose limitations on the uses for which we can market a product, and any marketed product and its manufacturer are subject to continual review.
Discovery of previously unknown problems with a product or manufacturer may result in new restrictions on the product, manufacturer and manufacturing facility, including
withdrawal of the product from the market. In certain countries, regulatory agencies also set or approve prices, which may result in low or unprofitable margins and would have a
material adverse effect on our business, financial condition and results of operations.
Risks Relating to Intellectual Property
Failure to protect our intellectual property and the intellectual property of certain third parties could harm our competitive position.
Our success will depend in part on our ability to obtain patents and on our and Danisco’s (as part of the DuPont Transaction, patents were assigned to Danisco) and our
current and future collaborators’ and licensees’ ability to maintain adequate protection of our and their intellectual property. If we, Danisco, or our current and future collaborators
and licensees do not adequately protect our intellectual property, competitors may be able to practice our technologies and erode our competitive advantage. The laws of some
foreign countries do not protect proprietary rights to the same extent as the laws of the United States, and many companies have encountered significant problems in protecting
their proprietary rights in these foreign countries.
However, the patent positions of biotechnology companies, including our patent position, are generally uncertain and involve complex legal and factual questions. We
will be able to protect our proprietary rights from unauthorized use by third parties only to the extent that our, and in certain instances the C1 patents assigned to Danisco, and our
current and future collaborators’ and licensees’ proprietary technologies, are covered by valid and enforceable patents or are effectively maintained as trade secrets. We intend,
from time to time, to apply for patents covering both our technologies and our products, while at other times, we only maintain such knowledge as trade secrets without applying
for patents, as we deem appropriate. However, existing and future patent applications may be challenged and are not guaranteed to result in the issuing of patents. Even if a patent
is obtained, it may not be sufficiently broad to prevent others from practicing our technologies or from developing competing products. Others, including Danisco and our current
and future collaborators and licensees, may independently develop similar or alternative technologies or design around our, Danisco’s or our current and future collaborators’ and
licensees’ patented technologies. In addition, Danisco, our current and future collaborators, licensees, or other third parties may challenge or invalidate our patents, or our patents
may fail to provide us with any competitive advantages. If any third party is able to gain intellectual property protections for technology similar to our own, they may be successful
in blocking us and our licensees from using the C1-cell protein production platform or our other technologies and/or commercializing products derived from them.
We cannot ensure that any of our pending patent applications will result in issued patents, or even if issued, predict the breadth of the claims upheld in our and other
companies’ patents. Given that the degree of future protection for our proprietary rights is uncertain, we cannot ensure that we were the first to invent the inventions covered by
our pending patent applications, or that we were the first to file patent applications for these inventions or the patents we have obtained.
In addition, Dyadic will continue to review its existing and potential patent positions and rights. Based on our analysis if and when the commercial opportunities and
patent enforceability are questionable, we may abandon certain patents in some countries. There is a risk that we will abandon potentially valuable patents.
Litigation or other proceedings or third-party claims of intellectual property infringement could require us to spend significant time and resources and could prevent us and
our collaborators from commercializing our or their technologies and products or negatively impact our stock price.
Our commercial success depends in part on neither infringing patents and proprietary rights of third parties, nor breaching any licenses that we have entered into with
regard to our technologies and products. Others have filed, and in the future are likely to file, patent applications covering genes or gene fragments, genetic elements, screening,
gene expression and fermentation processes and other intellectual property that we may wish to utilize with the C1-cell protein production platform or our other technologies or
products and systems that are similar to those developed with its use. If these patent applications result in issued patents and we wish to use the claimed technology, we may need
to obtain a license from the appropriate third party.
Third parties do and may continue to assert that we and/or our current and future collaborators and licensees are employing their proprietary technology without
authorization. In addition, third parties may obtain patents in the future and claim that use of our technologies infringes these patents. We could incur substantial costs and
diversion of management and technical personnel in defending ourselves against any of these claims or enforcing our patents and other intellectual property rights. Parties making
claims against us may be able to obtain injunctive or other equitable relief, which could effectively block our ability to further develop, commercialize and sell products, and could
result in the award of substantial damages against us. If a claim of infringement against us is successful, we may be required to pay damages and obtain one or more licenses from
third parties. In the event that we are unable to obtain these licenses at a reasonable cost, we and/or current and future collaborators and licensees could encounter delays in
product commercialization while we attempt to develop alternative methods or products. Defense of any lawsuit or failure to obtain any of these licenses could prevent us from
commercializing available products.
In addition, unauthorized parties may attempt to steal, copy or otherwise obtain and use our C1 microbial strains, genetic elements, development and manufacturing
processes, other technology or products. Monitoring unauthorized use of our intellectual property is difficult, and we cannot be certain that the steps we have taken will prevent
unauthorized use of our technologies, particularly in certain foreign countries where the local laws may not protect our proprietary rights as fully as in the United States. Moreover,
third parties could practice our inventions in territories where we do not have patent protection. Such third parties may then try to import into the United States or other territories
products, or information leading to potentially competing products, made using our inventions in countries where we do not have patent protection for those inventions. If
competitors are able to use our technologies, our ability and our current and future collaborators’ and licensees’ ability to compete effectively could be harmed. Moreover, others
may independently develop and obtain patents for technologies that are similar to or superior to our technologies. If that happens, we may need to license these technologies, and
we may not be able to obtain licenses on reasonable terms, if at all, which could harm our business, financial condition and results of operations.
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Confidentiality agreements with employees and others may not adequately prevent disclosures of trade secrets and other proprietary information.
We rely in part on trade secret protection to protect our confidential and proprietary information and processes. However, trade secrets are difficult to protect. We have
taken measures to protect our trade secrets and proprietary information, but these measures may not be effective. We require employees and consultants to execute confidentiality
agreements upon the commencement of an employment or consulting arrangement with us. These agreements generally require that all confidential information developed by the
individual or made known to the individual by us during the course of the individual’s relationship with us be kept confidential and not disclosed to third parties. These
agreements also generally provide that inventions conceived by the individual in the course of rendering services to us shall be our exclusive property. Nevertheless, our
proprietary information may be disclosed, third parties could reverse engineer our biocatalysts and others may independently develop substantially equivalent proprietary
information and techniques or otherwise gain access to our trade secrets. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our
proprietary rights, and failure to obtain or maintain trade secret protection could adversely affect our competitive business position.
Risks Related to Our Common Stock
The price of our shares of common stock is likely to be volatile, and you could lose all or part of your investment.
The trading price of our common stock has been, and is likely to continue to be, volatile. Biotechnology company stocks generally tend to experience extreme price
fluctuations. The valuations of many biotechnology companies without consistent product sales and earnings are extraordinarily high based on conventional valuation standards
such as price-to-earnings and price-to-sales ratios. These trading prices and valuations may not be sustained. Factors that may result in fluctuations in our stock price include, but
are not limited to, the following:
Changes in the public’s perception of the prospects of biotechnology companies;
Sales of our common stock in the public market by such stockholders or other significant stockholders, executive officers, or directors;
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• Announcements of new technological innovations, patents or new products or processes by us, Danisco or our current or future collaborators, licensees and
competitors;
Coverage of, or changes in financial estimates by us or securities and industry analysts;
Conditions or trends in the biotechnology industry;
Changes in investor interest in the areas in which we and/or our collaborators and licensees are applying our technologies, such as COVID-19;
Changes in the state of the COVID-19 pandemic or other diseases and/or types of vaccines and/or treatments related thereto;
Changes in the market valuations of other biotechnology companies;
Limitations or expanded uses in the areas within the biopharmaceutical or other industries into which we can apply our technologies and products;
• Announcements by us, Danisco or our collaborators and licensees relating to our relationships with third parties;
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• Actual or anticipated changes in our growth rate relative to our competitors;
• Developments in domestic and international governmental policy or regulations;
• Announcements by us, Danisco, our current and future collaborators and licensees, or our competitors of significant acquisitions, divestures, strategic partnerships,
license agreements, joint ventures or capital commitments;
The position of our cash, cash equivalents and marketable securities;
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• Any changes in our debt position;
• Developments in patent or other proprietary rights held by us, Danisco or by others;
• Negative effects related to the stock or business performance of Danisco, our current and future collaborators and licensees, or the abandonment of projects using
our technology by our collaborators and/or licensees;
Scientific risks inherent to emerging technologies such as the C1-cell protein production platform or our other technologies;
Set-backs, and/or failures, and or delays in our or our current and future collaborators’ and licensees’ R&D and commercialization programs;
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• Delays or failure to receive regulatory approvals by us, Danisco and/or our current and future collaborators and licensees;
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Loss or expiration of our or Danisco’s intellectual property rights;
Theft, misappropriation or expiration of owned or licensed proprietary and intellectual property, genetic and biological material owned by us and/or Danisco US, Inc.,
and VTT Technical Research Centre of Finland Ltd;
Lawsuits initiated by or against us, Danisco, or our current and future collaborators and licensees;
Period-to-period fluctuations in our operating results;
Future royalties from product sales, if any, by Danisco, our current or future strategic partners, collaborators or licensees;
Future royalties may be owed to Danisco by us, our collaborators, licenses, or sub-licensees under certain circumstances related to our Danisco Pharma License;
Short positions taken in our common stock;
Sales of our common stock or other securities in the open market;
Stock buy-back programs;
Stock splits; and
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• Decisions made by the board related to potential registration of Dyadic’s stock under the Securities Act of 1933 (as amended (the “Securities Act”), and/or up listing
to another stock exchange.
If we were to become party to a securities class action suit, we could incur substantial legal fees and our management’s attention and resources could be diverted from
operating our business to responding to litigation.
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Our quarterly and annual operating results may be volatile.
Our quarterly and annual operating results have fluctuated in the past and are likely to do so in the future. These fluctuations could cause our stock price to vary
significantly or decline. Some of the factors that could impact our operating results include:
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Expiration of or cancellations of our research contracts with current and future collaborators and/or licensees, which may not be renewed or replaced;
Setbacks or failures in our and our current and future collaborators’ and licensees’ research, development and commercialization efforts;
Setbacks, or delays in our research and development efforts to develop and produce biologics;
Setbacks, or delays in our research and development efforts to re-engineer the C1-cell protein production platform or our other technologies for their applications and
use in developing and producing biologics;
The speed, and success rate of our discovery and research and development efforts leading to potential licenses, or other forms of collaborations, access fees,
milestones and royalties;
The timing and willingness of current and future collaborators and licensees to utilize C1 to develop and commercialize their products which would result in potential
upfront fees, milestones and royalties;
• General and industry specific economic conditions, which may affect our current and future collaborators’ and licensees’ R&D expenditures;
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The adoption and acceptance of the C1-cell protein production platform and our other technologies by biopharmaceutical and non-pharmaceutical companies and
regulatory agencies;
The addition or loss of one or more of the collaborative partners, grants, research funding, or licensees we are working with to further develop and commercialize our
technologies and products in the pharmaceutical industry;
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The improvement and advances made by our competitors to CHO, E.coli, yeast, inset cells, plant and other expression systems;
The introduction by our competitors of new discovery and expression technologies competitive with the C1-cell protein production platform;
• Our ability to file, maintain and defend our intellectual property and to protect our proprietary information and trade secrets;
• Our ability to develop technology, products and processes that do not infringe on the intellectual property of third parties;
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• Our ability to enter into new research projects, grants, licenses or other forms of collaborations and generate revenue from such parties;
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Scientific risk associated with emerging technologies such as the C1-cell protein production platform;
Failure to bring on the necessary research and manufacturing capacity, e.g., CRO, CMO (contract manufacturing organization), and CDMO (contract development
and manufacturing organization), if required;
• Uncertainty regarding the timing of research funding, grants or upfront license fees for new C1-cell protein production platform, our other
technologies, collaborations, license agreements or expanded license agreements; and
• Delays or failure to receive upfront fees, milestones and royalties and other payments.
Due to the possibility of fluctuations in our revenues and expenses, we believe that quarter-to-quarter comparisons of our operating results are not necessarily a good
indication of our future performance. Our operating results in some quarters, or even in some years, may not meet the expectations of stock market analysts and investors,
potentially causing our stock price to decline.
We do not expect to pay cash dividends in the future.
We have never paid cash dividends on our stock and do not anticipate paying any dividends for the foreseeable future. The payment of dividends on our stock, if ever,
will depend on our earnings, financial condition and other business and economic factors deemed relevant for consideration by our board of directors. If we do not pay dividends,
our stock may be less valuable because a return on investment will only occur if and to the extent that our stock price appreciates.
Our anti-takeover defense provisions may deter potential acquirers and depress our stock price.
Certain provisions of our certificate of incorporation, bylaws and Delaware law, as well as certain agreements we have with our executives, could make it substantially
more difficult for a third party to acquire control of us. These provisions include the following:
• We may issue preferred stock with rights senior to those of our common stock;
• We have a classified board of directors;
• Action by written consent by stockholders is not permitted;
• Our board of directors has the exclusive right to fill vacancies and set the number of directors;
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• We require advance notice for nomination of directors by our stockholders and for stockholder proposals.
Cumulative voting by our stockholders is not allowed; and
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These provisions may discourage certain types of transactions involving an actual or potential change in control. These provisions may also limit our stockholders’
ability to approve transactions that they may deem to be in their best interests and discourage transactions in which our stockholders might otherwise receive a premium for their
stock over the current market price.
Concentration of ownership among our existing officers, directors and principal stockholders may prevent other stockholders from influencing significant corporate
decisions and depress our stock price.
Our executive officers, directors and principal stockholders (5% stockholders) together control approximately 34.5% of our 28,563,100 shares of outstanding common
stock as of December 31, 2022.
Our Founder and Chief Executive Officer Mark Emalfarb, through the Mark A. Emalfarb Trust U/A/D October 1, 1987, as amended (the “MAE Trust”) of which he is the
trustee and beneficiary, owned approximately 15.4% of our outstanding common stock as of December 31, 2022. Further, the Francisco Trust U/A/D February 28, 1996 (the
“Francisco Trust”), whose beneficiaries are the descendants and spouse of Mr. Emalfarb, owned approximately 12.4% of our outstanding common stock as of December 31, 2022.
We have historically been partially controlled, managed and partially funded by Mr. Emalfarb, and affiliates of Mr. Emalfarb. Collectively, Mr. Emalfarb and stockholders affiliated
with Mr. Emalfarb controlled approximately 27.8% of our outstanding common stock as of December 31, 2022.
Mr. Emalfarb may be able to control or significantly influence all matters requiring approval by our stockholders, including the election of directors and the approval of
mergers or other business combination transactions. The interests of Mr. Emalfarb may not always coincide with the interests of other stockholders, and he may take actions that
advance his personal interests and are contrary to the desires of our other stockholders.
If our existing officers, directors and principal stockholders act together, they will be able to exert a significant degree of influence over our management and affairs and
over matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions. In addition, this concentration of ownership may
delay or prevent a change in control and might affect the market price of our stock, even when a change may be in the best interests of all stockholders. Certain of our principal
stockholders may elect to increase their holdings of our common stock, which may have the impact of delaying or preventing a change of control. Moreover, the interests of this
concentration of ownership may not always coincide with our interests or the interests of other stockholders, and, accordingly, they could cause us to enter into transactions or
agreements, which we would not otherwise consider.
Future issuances of shares of our common stock may negatively affect our stock price.
The sale of additional shares of our common stock, or the perception that such sales could occur, could harm the prevailing market price of shares of our common stock.
These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem
appropriate.
As of December 31, 2022, there were 28,563,100 shares of our common stock outstanding. Approximately 34.5% of these outstanding common shares are beneficially
owned or controlled by our executive officers, directors and principal stockholders.
Our common stock has a relatively small public float. As a result, sales of substantial amounts of shares of our common stock, or even the potential for such sales, may
materially and adversely affect prevailing market prices for our common stock. In addition, any adverse effect on the market price of our common stock could make it difficult for us
to raise additional capital through sales of equity securities.
The Company is exposed to credit risk and fluctuations in the values of its investment portfolio.
The Company’s investments can be negatively affected by liquidity, credit deterioration, financial results, market and economic conditions, political risk, sovereign risk,
interest rate fluctuations or other factors. As a result, the value and liquidity of the Company’s cash, cash equivalents, and marketable and non-marketable securities may fluctuate
substantially, which could result in significant losses and could have a material adverse impact on the Company’s financial condition and operating results.
We are a smaller reporting company, and the reduced disclosure requirements applicable to smaller reporting companies may make our common stock less attractive to
investors.
We are a smaller reporting company and are therefore entitled to rely on certain reduced disclosure requirements, such as an exemption from providing selected financial
data and executive compensation information. We are also exempt from the requirement to obtain an external audit on the effectiveness of internal control over financial reporting
provided in Section 404(b) of the Sarbanes-Oxley Act. These exemptions and reduced disclosures in our filings with the Securities and Exchange Commission due to our status as a
smaller reporting company mean our auditors do not review our internal control over financial reporting, and may make it harder for investors to analyze our results of operations
and financial prospects. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common
stock less attractive as a result, there may be a less active trading market for our common stock, and our stock prices may be more volatile.
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Item 1B.
Unresolved Staff Comments
None.
Item 2.
Properties
Leases
Jupiter, Florida Headquarters
The Company’s corporate headquarters are located in Jupiter, Florida. The Company occupies approximately 2,000 square feet with a monthly rental rate and common area
maintenance charges of approximately $4,500. The lease will expire on September 1, 2023. The Company will reconsider the square footage of the leased space to align with the
staffing requirements of the future operations of the Company.
The Netherlands Office
The Company maintains a small satellite office in Wageningen, The Netherlands. The Company occupies a flexible office space for an annual rental rate of approximately
$4,000. The lease expires on January 31, 2024, and thereafter, the Company will reconsider the leased space to align with the future operations of the Company.
We believe that our current and anticipated facilities are adequate to meet our needs for the immediate future, and that, should it be needed, suitable additional space is
available to accommodate any expansion of our operations, but such space may not be available in the same building if and when such space is needed.
Item 3.
Legal Proceedings
We are not currently involved in any litigation that we believe could have a materially adverse effect on our financial condition or results of operations. There is no action,
suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the
executive officers of our Company or any of our subsidiaries, threatened against or affecting our Company, our common stock, any of our subsidiaries or of our Company’s or our
Company’s subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.
However, from time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. Litigation is subject to
inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.
Item 4.
Mine Safety Disclosures
Not applicable for our operations.
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PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchase of Equity Securities
Principal Market or Markets
As of December 31, 2022, Dyadic had two classes of capital stock authorized, common stock and preferred stock. Effective April 17, 2019, our common stock began trading
on the NASDAQ Stock Market LLC’s NASDAQ Capital Market, under the symbol “DYAI”. There were no shares of preferred stock outstanding for the reported period. The
number of record holders of our common stock as of December 31, 2022 was 51. There have been no stock dividends within the last three years. Any future determination to pay
dividends will be at the discretion of our Board of Directors (the “Board”).
Securities Authorized for Issuance Under Equity Compensation Plans
See Part III, Item 12.
Treasury Stock
As of December 31, 2022 and 2021, there were 12,253,502 shares of common stock held in treasury, at a cost of approximately $18.9 million, representing the purchase price
on the date the shares were surrendered to the Company.
Issuer Purchases of Equity Securities
Stock Repurchase Programs
There were no repurchases of any class of the Company’s capital stock in 2022.
Open Market Sale Agreement℠
On August 13, 2020, we entered into an Open Market Sale Agreement℠ with Jefferies LLC, (“Jefferies”), with respect to an at the market offering program under which we
may offer and sell, from time to time at our sole discretion, shares of our common stock, par value $0.001 per share, having an aggregate offering price of up to $50.0 million through
Jefferies as our sales agent or principal.
We have not and are not obligated to sell any shares under the sale agreement. Subject to the terms and conditions of the sale agreement, Jefferies will use commercially
reasonable efforts, consistent with its normal trading and sales practices and applicable laws and regulations, to sell shares of our common stock from time to time based upon our
instructions, including any price, time or size limits or other customary parameters or conditions we specify, subject to certain limitations. Under the sale agreement, Jefferies may
sell shares of our common stock by any method permitted by law deemed to be an “at the market offering” as defined in Rule 415(a)(4) under the Securities Act of 1933, as
amended.
We will pay Jefferies a commission equal to 3.0% of the gross proceeds from each sale of shares of our common stock sold through Jefferies under the sale agreement and
will provide Jefferies with customary indemnification and contribution rights. In addition, we agreed to reimburse certain legal expenses and fees by Jefferies in connection with the
offering up to a maximum of $50,000, in addition to certain ongoing disbursements of Jefferies’ counsel, if required. The sale agreement will terminate upon the sale of all
$50.0 million of shares under the sale agreement, unless earlier terminated by either party as permitted therein.
The issuance and sale, if any, of shares of our common stock by us under the sale agreement will be made pursuant to a registration statement on Form S-3 filed with the
SEC on August 13, 2020 and declared effective by the SEC on August 25, 2020 and the accompanying Prospectus, as supplemented by a Prospectus Supplement. As of the date of
this filing, there have been no sales made under the Open Market Sale Agreement℠.
Item 6.
[Reserved]
Item 7.
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.
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Overview
Description of Business
Dyadic International, Inc. (“Dyadic”, “we”, “us”, “our”, or the “Company”) is a global biotechnology platform company based in Jupiter, Florida with operations in the
United States and a satellite office in the Netherlands, and it utilizes several third-party consultants and research organizations to carry out the Company’s activities. Over the past
two plus decades, the Company has developed a gene expression platform for producing commercial quantities of industrial enzymes and other proteins, and has previously
licensed this technology to third parties, such as Abengoa Bioenergy, BASF, Codexis and others, for use in industrial (non-pharmaceutical) applications. This technology is based
on the Thermothelomyces heterothallica (formerly known as Myceliophthora thermophila) fungus, which the Company named C1.
On December 31, 2015, the Company sold its industrial technology business to Danisco USA (“Danisco”), the industrial biosciences business of DuPont (NYSE: DD) (the
“DuPont Transaction”). As part of the DuPont Transaction, Dyadic retained co-exclusive rights to the C1-cell protein production platform for use in all human and animal
pharmaceutical applications, and currently the Company has the exclusive ability to enter into sub-license agreements (subject to the terms of the license and to certain exceptions)
for use in all human and animal pharmaceutical applications. Danisco retained certain rights to utilize the C1-cell protein production platform in pharmaceutical applications,
including the development and production of pharmaceutical products, for which it will be required to make royalty payments to Dyadic upon commercialization. In certain
circumstances, Dyadic may owe a royalty to either Danisco or certain licensors of Danisco, depending upon whether Dyadic elects to utilize certain patents either owned by
Danisco or licensed in by Danisco.
After the DuPont Transaction, the Company has been focused on building innovative microbial platforms to address the growing demand for global protein
bioproduction and unmet clinical needs for effective, affordable, and accessible biopharmaceutical products for human and animal health and for other biologic products for use in
non-pharmaceutical applications.
The C1-cell protein production platform is a robust and versatile thermophilic filamentous fungal expression system for the development and production of biologic
products including enzymes and other proteins for human and animal health. Some examples of human and animal vaccines and drugs which have the potential to be produced
from C1-cells are protein antigens, ferritin nanoparticles, virus-like particles (“VLPs”), monoclonal antibodies (“mAbs”), Bi/Tri-specific antibodies, Fab antibody fragments, Fc-
fusion proteins, as well as other therapeutic enzymes and proteins. The Company is involved in multiple funded research collaborations with animal and human pharmaceutical
companies which are designed to leverage its C1-cell protein production platform to develop innovative vaccines and drugs, biosimilars and/or biobetters.
The Company also developed the Dapibus™ thermophilic filamentous fungal based microbial protein production platform to enable the rapid development and large-scale
manufacture of low-cost proteins, metabolites, and other biologic products for use in non-pharmaceutical applications, such as food, nutrition, and wellness.
Critical Accounting Policies, Estimates, and Judgments
The preparation of these consolidated financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”) requires management to make
estimates and judgments that affect the reported amount of assets and liabilities and related disclosure of contingent assets and liabilities at the date of our consolidated financial
statements and the reported amounts of revenues and expenses during the applicable period. Actual results may differ from these estimates under different assumptions or
conditions. Such differences could be material to the consolidated financial statements.
We define critical accounting policies 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 policies, 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 policies include the following:
Revenue Recognition
The Company has no pharmaceutical products approved for sale at this point. All of our revenue to date has been research revenue from third-party collaborations and
government grants, as well as revenue from sublicensing agreements and collaborative arrangements, which may include upfront payments, options to obtain a license, payment
for research and development services, milestone payments and royalties, in the form of cash or non-cash considerations (e.g., minority equity interest).
Revenue related to research collaborations and agreements: The Company typically performs research and development services as specified in each respective
agreement on a best efforts basis, and recognizes revenue from research funding under collaboration agreements in accordance with the 5-step process outlined in ASC Topic 606
(“Topic 606”): (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction
price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. We recognize revenue when we satisfy a
performance obligation by transferring control of the service to a customer in an amount that reflects the consideration that we expect to receive. Depending on how the
performance obligation under our license and collaboration agreements is satisfied, we elected to recognize the revenue either at a point in time or over time by using the input
method under Topic 606 to measure the progress toward complete satisfaction of a performance obligation.
28
Under the input method, revenue will be recognized based on the entity’s efforts or inputs to the satisfaction of a performance obligation (e.g., resources consumed, labor
hours expended, costs incurred, or time elapsed) relative to the total expected inputs to the satisfaction of that performance obligation. The Company believes that the cost-based
input method is the best measure of progress to reflect how the Company transfers its performance obligation to a customer. In applying the cost-based input method of revenue
recognition, the Company uses actual costs incurred relative to budgeted costs to fulfill the performance obligation. These costs consist primarily of full-time equivalent effort and
third-party contract costs. Revenue will be recognized based on actual costs incurred as a percentage of total budgeted costs as the Company completes its performance
obligations.
A cost-based input method of revenue recognition requires management to make estimates of costs to complete the Company’s performance obligations. In making such
estimates, significant judgment is required to evaluate assumptions related to cost estimates. The cumulative effect of revisions to estimated costs to complete the Company’s
performance obligations will be recorded in the period in which changes are identified and amounts can be reasonably estimated. A significant change in these assumptions and
estimates could have a material impact on the timing and amount of revenue recognized in future periods.
Revenue related to grants: The Company may receive grants from governments, agencies, and other private and not-for-profit organizations. These grants are intended to
be used to partially or fully fund the Company’s research collaborations, including opportunities arising in connection with COVID-19 that the Company is pursuing with certain
collaborators. However, most, if not all, of such potential grant revenues, if received, is expected to be earmarked for third parties to advance the research required, including
preclinical and clinical trials for SARS-CoV-2 vaccines and/or antibodies candidates.
Revenue related to sublicensing agreements: If the sublicense to the Company’s intellectual property is determined to be distinct from the other performance obligations
identified in the arrangement, the Company recognizes revenue allocated to the license when technology is transferred to the customer and the customer is able to use and benefit
from the license.
Customer options: If the sublicensing agreement includes customer options to purchase additional goods or services, the Company will evaluate if such options are
considered material rights to be deemed as separate performance obligations at the inception of each arrangement.
Milestone payments: At the inception of each arrangement that includes development, commercialization, and regulatory milestone payments, the Company evaluates
whether the achievement of the milestones is considered probable and estimates the amount to be included in the transaction price. If the milestone payment is in exchange for a
sublicense and is based on the sublicensee’s subsequent sale of product, the Company recognizes milestone payment by applying the accounting guidance for royalties. To date,
the Company has not recognized any milestone payment revenue resulting from any of its sublicensing arrangements.
Royalties: With respect to licenses deemed to be the predominant item to which thesales-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 owed 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, except for the options granted to the CEO (i.e., 5 or 10 years) and certain
contractors (i.e., 1 or 3 years). 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.
29
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”. 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.
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.
federal, state and local tax examinations by tax authorities for the years before 2017. See Note 4 to the Consolidated Financial Statements.
Non-Marketable Investments
The Company also holds investments in non-marketable equity securities of privately-held companies, which usually do not have a readily determinable fair value. Our
policy is to measure these investments at cost less impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a
similar investment of the same issuer. Such observable price changes may include instances where the investee issues equity securities to new investors, thus creating a new
indicator of fair value, as an example. On a quarterly basis, we perform a qualitative assessment considering impairment indicators to evaluate whether these investments are
impaired and also monitor for any observable price changes. If indicators of impairment exist, we will prepare a quantitative assessment of the fair value of our equity investments,
which may include using both the market and income approaches which require judgment and the use of estimates, including discount rates, investee revenues and costs, and
available comparable market data of private and public companies, among others. Valuations of such privately-held companies are inherently complex and uncertain due to the lack
of liquid market for the company’s securities. In addition, such investments are inherently risky in that such companies are typically at an early stage of development, may have no
or limited revenues, may not be or may never become profitable, may not be able to secure additional funding or their technologies, services or products may not be successfully
developed or introduced into the market.
The Company bases its fair value estimates on assumptions it believes to be reasonable, but which are unpredictable and inherently uncertain. Actual future results may
differ from those estimates.
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.
30
Results of Operations
Year Ended December 31, 2022 Compared to the Year Ended December 31, 2021
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, 2022 and 2021:
Research and development revenue
License revenue
Cost of research and development revenue
Year Ended December 31,
2022
2021
$
$
$
2,683,244 $
247,059 $
2,123,193 $
2,403,831
—
1,944,438
For each of the years ended December 31, 2022 and 2021, the Company’s revenue was generated from fourteen collaborations. The increase in revenue and cost of
research and development revenue was due to a number of larger research collaborations conducted during 2022. The license revenue recorded in the year ended December 31,
2022 was in connection with the Phibro/Abic and Janssen license agreements.
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, 2022 decreased to approximately $4,501,000 compared to $8,392,000 for the year ended December 31,
2021. The decrease primarily reflected the winding down of activities for contract research organization and pharmaceutical quality and regulatory consultants to manage and
support the pre-clinical and clinical development as well as a decrease in cGMP manufacturing costs as the Company started the dosing of Phase 1 clinical trial of DYAI-100
COVID-19 vaccine candidate in January 2023.
General and Administrative Expenses
General and administrative expenses for the year ended December 31, 2022, decreased to approximately $6,422,000 compared to $6,698,000 for the year ended December 31,
2021. The decrease principally reflected a decrease in legal expenses of $500,000, offset by increases in incentives of $133,000, insurance premiums of $56,000, business
development and investor relations costs of $16,000, and other increases of $19,000.
Foreign Currency Exchange
Foreign currency exchange loss for the year ended December 31, 2022, was approximately $50,000 compared to $97,000 for the year ended December 31, 2021. The decrease
reflected the currency fluctuation of the Euro in comparison to the U.S. dollar.
Interest Income
Interest income for the year ended December 31, 2022, increased to approximately $180,000 compared to $52,000 for the year ended December 31, 2021. The increase was
primarily due to an increase in interest rates and yield on the Company’s investment grade securities, which are classified as held-to-maturity.
Other Income
For the year ended December 31, 2022, the Company recorded $250,000 related to a settlement payment we received from the termination of a proposed license and
collaboration. For the year ended December 31, 2021, the Company recorded a gain from the sale of its investment in BDI in the amount of approximately $1,606,000.
Income Taxes
The Company had net operating loss (“NOL”) carryforwards available as of December 31, 2022 and 2021, in the amount of approximately $44.0 million and $39.9 million,
respectively. Approximately $41.1 million of the net operating loss carryforwards will be carried forward indefinitely and will be available to offset 80% of taxable income. The
remaining amount of the net operating loss carryforwards will expire at varying dates through 2037.
Net Loss
Net loss for the year ended December 31, 2022 was approximately $9.7 million compared to a net loss of $13.1 million for the year ended December 31, 2021. The decrease in net
loss of approximately $3.4 million was principally due to an increase in revenue of $0.5 million, decreases in research and development expenses of $3.9 million and general and
administrative expenses of $0.3 million, partially offset by a decrease in other income of $1.2 million.
31
Liquidity and Capital Resources
Our primary source of cash has been the cash received from the DuPont Transaction in December 2015, interest income received from investment grade securities,
revenues from our research collaboration agreements and license agreements, and funds from the exercise of employee stock options. In addition, in August 2021, the Company
received approximately $1.6 million from the BDI Sale, In December 2021, the Company received an upfront payment of $0.5 million for a non-exclusive license from Janssen. In
January 2023, the Company received cash payment of approximately $1.27 million from the sale of its equity interest in Alphazyme, LLC.
Our ability to achieve profitability depends on many factors, including our scientific results and our ability to continue to obtain funded research and development
collaborations from industry and government programs, as well as sub-license agreements. We may continue to incur substantial operating losses even if we begin to generate
revenues from research and development and licensing. Our primary future cash needs are expected to be for general operating activities, including our business development and
research expenses, Phase 1 clinical trial, as well as legal and administrative costs as an SEC reporting and NASDAQ listed company.
On August 13, 2020, we entered an Open Market Sale Agreement℠ with Jefferies LLC, or Jefferies, with respect to an at the market offering program under which we may
offer and sell, from time to time at our sole discretion, shares of our common stock at an aggregate offering price of up to $50.0 million through Jefferies as our sales agent or
principal. This program adds to our financial flexibility to pursue additional opportunities that leverage the broad application potential of C1. However, as of the date of this filing,
there have been no sales made under the Open Market Sale Agreement℠.
We rely on our existing cash and cash equivalents, investments in debt securities, and operating cash flows to provide the working capital needs for our operations. We
believe that our existing cash position and investments in investment grade securities will be adequate to meet our operational, business, and other liquidity requirements for at
least the next twelve (12) months. However, in the event our financing needs are not able to be met by our existing cash, cash equivalents and investments, we would seek to raise
funds through public or private equity offerings, and/or other means to meet our financing requirements. The Company has self-funded the development and cGMP manufacturing
costs of its proprietary COVID-19 vaccine candidate, DYAI-100 and in February 2023 completed the dosing of its related Phase 1 clinical trial to demonstrate the safety in humans
of a protein produced from the C1-cell protein production platform. The Company does not anticipate the need to spend significant additional capital to support the continued
development, manufacturing and testing of DYAI-100 in 2023 and beyond.
At December 31, 2022, cash and cash equivalents were approximately $5.8 million compared to $15.7 million at December 31, 2021. The carrying value of investment grade
securities, including accrued interest at December 31, 2022 was approximately $6.9 million compared to $4.6 million at December 31, 2021.
Net cash used in operating activities for the year ended December 31, 2022 of approximately $8.1 million resulted from a net loss of $9.7 million adjusted for share-based
compensation expenses of $1.9 million, offset by changes in operating assets and liabilities of $0.3 million.
Net cash used in operating activities for the year ended December 31, 2021 of approximately $11.3 million resulted from a net loss of $13.1 million adjusted by a gain from
the sale of investment in BDI of $1.6 million, offset by share-based compensation expenses of $1.8 million, amortization of held-to-maturity securities of $0.3 million, and changes in
operating assets and liabilities of $1.3 million.
Net cash used in investing activities for the year ended December 31, 2022 was approximately $2.4 million compared to net cash provided by investing activities
of $5.2 million for the year ended December 31, 2021. Cash flows from investing activities in 2022 were primarily related to proceeds from maturities, net of purchases of investment
grade debt securities. Cash flows from investing activities in 2021 were primarily related to proceeds from maturities, net of purchases of investment grade debt securities, and
proceeds from the sale of our equity interest in BDI.
Net cash provided by financing activities for the year ended December 31, 2022 was approximately $0.5 million compared to $1.2 million for the year ended December 31,
2021. Cash flows from financing activities in 2022 and 2021 were primarily related to proceeds received from the exercise of stock options.
Item 7A.
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.
Item 8.
Financial Statements and Supplementary Data
All financial statements required pursuant to this item, including the report of our independent registered public accounting firm, are presented beginning on page F-1.
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
32
Item 9A.
Controls and procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and
procedures as of December 31, 2022. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as
amended, or the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the
reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms. Based on the
evaluation of our disclosure controls and procedures as of December 31, 2022, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our
disclosure controls and procedures were effective.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate “internal control over financial reporting,” as defined in Rule 13a-15(f) under the Exchange Act.
Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2022 based on the criteria set forth in the Internal Control-Integrated
Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on the assessment, our management has concluded that our internal
control over financial reporting was effective as of December 31, 2022. This Report does not include an attestation report of our independent registered public accounting firm
regarding internal control over financial reporting. Management’s report was not subject to attestation by our independent registered public accounting firm pursuant to the rules
of the SEC that permit us to provide only management’s report in this Report because we are a “smaller reporting company.”
Changes in Internal Controls Over Financial Reporting
There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d- 15(d) of the
Exchange Act that occurred during the year ended December 31, 2022 that materially affected, or are reasonably likely to materially affect, our internal control over financial
reporting. We have not experienced any material impact to our internal controls over financial reporting despite the fact that most of our employees are working remotely due to the
COVID-19 pandemic. We are continually monitoring and assessing the COVID-19 situation on our internal controls to minimize the impact on their design and operating
effectiveness.
Inherent Limitation on Effectiveness of Controls
A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.
Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of
the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our Company
have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or
mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The
design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed
in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with
policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
Item 9B.
Other Information
None.
Item 9C. Disclosure regarding foreign jurisdictions that prevent inspections
Not applicable
33
PART III
Item 10.
Directors, Executive Officers and Corporate Governance
The information required by this item is incorporated by reference to the Company’s definitive proxy statement relating to the 2023 annual meeting of shareholders. The
definitive proxy statement will be filed with the Securities and Exchange Commission within 120 days after the end of the 2022 fiscal year.
Item 11.
Executive Compensation
The information required by this item is incorporated by reference to the Company’s definitive proxy statement relating to the 2023 annual meeting of shareholders. The
definitive proxy statement will be filed with the Securities and Exchange Commission within 120 days after the end of the 2022 fiscal year.
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this item is incorporated by reference to the Company’s definitive proxy statement relating to the 2023 annual meeting of shareholders. The
definitive proxy statement will be filed with the Securities and Exchange Commission within 120 days after the end of the 2022 fiscal year.
Item 13.
Certain Relationships and Related Transactions, and Director Independence
The information required by this item is incorporated by reference to the Company’s definitive proxy statement relating to the 2023 annual meeting of shareholders. The
definitive proxy statement will be filed with the Securities and Exchange Commission within 120 days after the end of the 2022 fiscal year.
Item 14.
Principal Accounting Fees and Services
The information required by this item is incorporated by reference to the Company’s definitive proxy statement relating to the 2023 annual meeting of shareholders. The
definitive proxy statement will be filed with the Securities and Exchange Commission within 120 days after the end of the 2022 fiscal year.
34
Item 15.
Financial Statement and Exhibits
(a) Financial Statement
PART IV
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
Exhibit
No.
2.1*#
2.2#
2.3#
2.4#
3.1#
3.2#
4.1#
4.2#
10.1**#
10.2**#
10.3**#
10.4**#
10.5**#
10.6**#
10.6.1**#
10.7**#
10.8**#
10.9**#
10.10#
10.11#
10.11.1
10.12†#
10.13†#
10.13.1†#
10.14†#
10.15†#
10.16†#
10.17†#
10.18†#
Description of Exhibit
Investment Shareholders Agreement with respect to Biotechnology Developments for
Industry, S.L, and VLP The Vaccines Company, S.L.U. dated June 30, 2017
Sale and Purchase of Shares Agreement of Biotechnology Developments for Industry, S.L.
dated July 26, 2021
Sale and Purchase of Shares Agreement of VLP The Vaccine Company, S.L.U. dated July
26, 2021
Amendment No. 1 dated July 26, 2021 to the Service Framework Agreement dated June 30,
2017
Restated Certificate of Incorporation dated November 1, 2004
Third Amended and Restated Bylaws dated March 28, 2023
Specimen Stock Certificate Evidencing Shares of Common Stock
Description of Securities
Dyadic International, Inc. 2011 Equity Incentive Plan
Dyadic International, Inc. 2021 Equity Incentive Plan
POST-EFFECTIVE AMENDMENT NO. 1 TO FORM S-8 for Dyadic International, Inc. 2006
Stock Option Plan, Dyadic International, Inc. 2011 Equity Incentive Plan, and Dyadic
International, Inc. 2021 Equity Incentive Plan
Form of Restricted Stock Unit Agreement Pursuant to the Dyadic International, Inc. 2011
Equity Incentive Plan
Form of Stock Option Agreement Pursuant to the Dyadic International, Inc. 2011 Equity
Incentive Plan
Employment Agreement, dated June 16, 2016, and First Amendment dated January 23, 2017,
by and between Dyadic International, Inc. and Mark A. Emalfarb
Second Amendment to Employment Agreement between Dyadic International, Inc. and
Mark A. Emalfarb, dated as of November 12, 2019
Consulting Agreement, dated January 1, 2016, by and between Dyadic Netherlands B.V.
and Sky Blue Biotech kft on behalf of Ronen Tchelet
Compensation Letter, dated March 26, 2018, by and between Dyadic International, Inc. and
Ping W. Rawson
Employment Agreement between Dyadic International Inc. and Joseph Hazelton dated
November 9, 2021
Form of Director and Officer Indemnification Agreement
Intracoastal Pointe Office Building Lease Agreement by and between Dyadic International,
Inc. and Quentin Partners Co. dated December 30, 2010 and Renewal of Lease dated June 8,
2018
Intracoastal Pointe Office Building Lease Agreement by and between Dyadic International,
Inc. and Quentin Partners Co. dated December 30, 2010 and Renewal of Lease dated August
29, 2022
Pharma License Agreement with Danisco US, Inc. dated December 31, 2015
Commission Contract with VTT Technical Research Centre of Finland Ltd dated September
2, 2016
Commission Contract with VTT Technical Research Centre of Finland Ltd dated June 28,
2019
Research Services Agreement with Biotechnology Developments for Industry in
Pharmaceuticals, S.L.U. dated June 30, 2017
Service Framework Agreement with Biotechnology Developments for Industry in
Pharmaceuticals, S.L.U. dated June 30, 2017
Feasibility Study Agreement with Sanofi-Aventis Deutschland GmbH dated September 7,
2018
Incorporated by Reference
Form
10-12G
Original No.
2.1
Date Filed
January 14, 2019
Filed
Herewith
8-K
8-K
8-K
10-12G
8-K
10-12G
S-3
10-12G
S-8
S-8 POS
10-12G
10-12G
10-12G
8-K
10-12G
10-12G
8-K
10.1
10.2
10.3
3.1
3.1
4.1
10.2
4.3
10.3
10.4
10.5
10.1
10.7
10.9
10.1
July 27, 2021
July 27, 2021
July 27, 2021
January 14, 2019
March 29, 2023
January 14, 2019
August 13, 2020
January 14, 2019
August 12, 2021
August 12, 2021
January 14, 2019
January 14, 2019
January 14, 2019
November 13, 2019
January 14, 2019
January 14, 2019
November 9, 2021
10-12G
10-K
10.10
10.11
January 14, 2019
March 30, 2020
10-12G
10-12G
10.12
10.13
January 14, 2019
January 14, 2019
X
8-K
10-12G
10-12G
10-12G
10.1
July 5, 2019
10.14
10.15
10.16
10.17
10.1
January 14, 2019
January 14, 2019
January 14, 2019
January 14, 2019
May 11, 2022
License Agreement with VTT Technical Research Centre of Finland Ltd dated July 17, 2017
Joint Development Agreement
10-12G
8-K
35
10.19†#
10.20†#
10.20.1†#
10.21†#
10.21.1†#
10.22#
10.23#
10.24†#
10.25†#
14
21.1#
23.1
31.1
31.2
32.1
32.2
Research and Commercialization Collaboration Agreement with Serum Institute of India Pvt.
Ltd., dated May 7, 2019
Non-Exclusive Sublicense Agreement among Dyadic International, Inc., Alphazyme, LLC,
dated May 5, 2019
Amended and Restated Non-Exclusive Sublicense Agreement among Dyadic International,
Inc., Alphazyme, LLC, dated June 24, 2020
Sub-License Agreement among Dyadic International (USA), Inc., Luina Bio Pty Ltd. and
Novovet Pty Ltd, dated April 26, 2019
Shareholders Agreement among Dyadic International (USA), Inc., JCL Biologics Pty Ltd and
Novovet Pty Ltd, dated April 26, 2019
Open Market Sale Agreement by and between the Company and Jefferies LLC, dated
August 13, 2020
Master Services Agreement and Work Order, between Dyadic International (USA), Inc. and
CR2O B.V., Dated May 28, 2021
Research, License, and Collaboration Agreement with Janssen dated December 16, 2021
Alphazyme Sale Agreement dated January 18, 2023
Code of Ethics (1)
Subsidiaries of the Registrant
Consent of Independent Registered Public Accounting Firm
Certification of Chief Executive Officer of Dyadic Pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002
Certification of Chief Financial Officer of Dyadic Pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002
Certification of Chief Executive Officer of Dyadic Pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002
Certification of Chief Financial Officer of Dyadic Pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002
Exhibit No.
101.INS
101.SCH
101.CAL
101.DEF
101.LAB
101.PRE
104
Description
Inline XBRL Instance Document
Inline XBRL Taxonomy Extension Schema Document
Inline XBRL Taxonomy Extension Calculation Linkbase Document
Inline XBRL Taxonomy Extension Definition Linkbase Document
Inline XBRL Taxonomy Extension Labels Linkbase Document
Inline XBRL Taxonomy Extension Presentation Linkbase Document
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)
8-K
8-K
8-K
8-K
8-K
S-3
8-K
8-K
8-K
10-12G
10.1
10.1
10.1
10.1
10.2
May 8, 2019
May 8, 2019
June 29, 2020
May 2, 2019
May 2, 2019
1.2
August 13, 2020
10.1
10.1
10.1
21.1
June 3, 2021
December 16, 2021
January 23, 2023
January 14, 2019
(1)
x
x
x
x
x
Notes:
* This filing excludes schedules and similar attachments pursuant to Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule will be furnished supplementary to the
SEC upon request; provided, however, that the parties may request confidential treatment pursuant to Rule 24b-2 of the Exchange Act for any document so furnished.
** Identifies each management contract or compensatory plan or arrangement.
† Portions of the exhibits have been omitted pursuant to a request for confidential treatment.
# Previously filed with the SEC.
(1) The Company elect to satisfy Regulation S-K §229.406(c) by posting its Code of Ethics on its website at www.dyadic.com.
Item 16.
Form 10-K Summary
Not applicable.
36
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.
SIGNATURES
March 29, 2023
March 29, 2023
DYADIC INTERNATIONAL, INC.
By:
By:
/s/ Mark A. Emalfarb
Mark A. Emalfarb
President and Chief Executive Officer
(Principal Executive Officer)
/s/ Ping W. Rawson
Ping W. Rawson
Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer)
Pursuant to the requirements of Securities Exchange Act of 1934, as amended, this Annual Report has been signed below by the following persons on behalf of the
registrant in the capacities and on the dates indicated.
Signature
Title
/s/ Mark A. Emalfarb
Mark A. Emalfarb
/s/ Ping W. Rawson
Ping W. Rawson
/s/ Michael P. Tarnok
Michael P. Tarnok
/s/ Jack L. Kaye
Jack L. Kaye
/s/ Seth J. Herbst
Seth J. Herbst, MD
/s/Arindam Bose
Arindam Bose, Ph.D.
/s/Barry C. Buckland
Barry C. Buckland, Ph.D.
/s/ Patrick Lucy
Patrick Lucy
Chief Executive Officer, Director
(Principal Executive Officer)
Chief Financial Officer
(Principal Financial Officer and Principal Accounting Officer)
Chairman, Director
Director
Director
Director
Director
Director
37
Date
March 29, 2023
March 29, 2023
March 29, 2023
March 29, 2023
March 29, 2023
March 29, 2023
March 29, 2023
March 29, 2023
Index to Consolidated Financial Statements
Financial Statements:
Report of Independent Registered Public Accounting Firm (PCAOB ID 199)
Consolidated Balance Sheets as of December 31, 2022 and 2021
Consolidated Statements of Operations for the Years Ended December 31, 2022 and 2021
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2022 and 2021
Consolidated Statements of Cash Flows for the Years Ended December 31, 2022 and 2021
Notes to Consolidated Financial Statements
F-1
Page
F-2
F-3
F-4
F-5
F-6
F-7
Report of Independent Registered Public Accounting Firm
To the Board of Directors and
Stockholders of Dyadic International, Inc.:
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Dyadic International, Inc. and Subsidiaries (“Company”) as of December 31, 2022 and 2021, and the related
consolidated statements of operations, stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2022, and the related notes (collectively
referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31,
2022 and 2021, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2022, in conformity with accounting principles
generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our
audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with
respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of
its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of
expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe
that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee
and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We
determined that there are no critical audit matters.
/s/Mayer Hoffman McCann P.C.
We have served as the Company’s auditor since 2008.
St. Peterburg, Florida
March 29, 2023
F-2
DYADIC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
$
$
$
December 31,
2022
2021
5,794,272 $
6,847,270
58,285
330,001
392,236
13,422,064
284,709
6,045
13,712,818 $
1,276,313 $
955,081
40,743
176,471
2,448,608
176,471
2,625,079
15,748,480
4,511,780
94,375
277,831
375,830
21,008,296
284,709
6,117
21,299,122
1,547,953
709,560
151,147
147,059
2,555,719
352,941
2,908,660
Assets
Current assets:
Cash and cash equivalents
Short-term investment securities
Interest receivable
Accounts receivable
Prepaid expenses and other current assets
Total current assets
Non-current assets:
Investment in Alphazyme
Other assets
Total assets
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable
Accrued expenses
Deferred research and development obligations
Deferred license revenue, current portion
Total current liabilities
Deferred license revenue, net of current portion
Total liabilities
Commitments and contingencies (Note 5)
Stockholders’ equity:
Preferred stock, $.0001 par value:
Authorized shares - 5,000,000; none issued and outstanding
Common stock, $.001 par value:
Authorized shares - 100,000,000; issued shares - 40,816,602 and 40,482,659, outstanding shares - 28,563,100 and 28,229,157
as of December 31, 2022 and 2021, respectively
Additional paid-in capital
Treasury stock, shares held at cost - 12,253,502
Accumulated deficit
Total stockholders’ equity
Total liabilities and stockholders’ equity
$
—
—
40,817
103,458,697
(18,929,915)
(73,481,860)
11,087,739
13,712,818 $
40,483
101,026,496
(18,929,915)
(63,746,602)
18,390,462
21,299,122
The accompanying notes are an integral part of these audited consolidated financial statements.
F-3
DYADIC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Revenues:
Research and development revenue
License revenue
Total revenue
Costs and expenses:
Costs of research and development revenue
Research and development
General and administrative
Foreign currency exchange loss
Total costs and expenses
Loss from operations
Other income:
Interest income
Other income
Total other income
Net loss
Basic and diluted net loss per common share
Basic and diluted weighted-average common shares outstanding
$
$
$
Years Ended December 31,
2022
2021
2,683,244 $
247,059
2,930,303
2,123,193
4,501,365
6,421,505
49,918
13,095,981
2,403,831
—
2,403,831
1,944,438
8,392,370
6,697,617
96,893
17,131,318
(10,165,678)
(14,727,487)
180,420
250,000
430,420
51,704
1,605,532
1,657,236
(9,735,258) $
(13,070,251)
(0.34) $
(0.47)
28,364,482
27,838,047
The accompanying notes are an integral part of these audited consolidated financial statements.
F-4
DYADIC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
Common Stock
Treasury Stock
Shares
Amount
Shares
Amount
Additional
paid-in capital
Accumulated
deficit
Total
Balance at December 31, 2020
39,747,659 $
39,748
(12,253,502) $ (18,929,915) $
98,013,079 $ (50,676,351) $
28,446,561
Stock-based compensation expenses
—
—
—
—
1,784,102
—
1,784,102
Issuance of common stock upon exercise of stock
options
Net loss
735,000
—
735
—
—
—
—
1,229,315
—
1,230,050
—
—
(13,070,251)
(13,070,251)
Balance at December 31, 2021
40,482,659 $
40,483
(12,253,502) $ (18,929,915) $ 101,026,496 $ (63,746,602) $
18,390,462
Stock-based compensation expenses
—
—
—
—
1,888,944
—
1,888,944
Issuance of common stock upon exercise of stock
options
Net loss
333,943
—
334
—
—
—
—
543,257
—
543,591
—
—
(9,735,258)
(9,735,258)
Balance at December 31, 2022
40,816,602 $
40,817
(12,253,502) $ (18,929,915) $ 103,458,697 $ (73,481,860) $
11,087,739
The accompanying notes are an integral part of these audited consolidated financial statements.
F-5
DYADIC INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Cash flows from operating activities
Net loss
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense
Amortization of held-to-maturity securities, net
Gain on investment in BDI
Foreign currency exchange loss
Changes in operating assets and liabilities:
Interest receivable
Accounts receivable
Prepaid expenses and other current assets
Accounts payable
Accrued expenses
Deferred license revenue
Deferred research and development obligations
Net cash used in operating activities
Cash flows from investing activities
Purchases of held-to-maturity investment securities
Proceeds from maturities of investment securities
Proceeds from the sale of investment in BDI
Net cash (used in) provided by investing activities
Cash flows from financing activities
Proceeds from exercise of options
Net cash provided by financing activities
Effect of exchange rate changes on cash
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Years Ended December 31,
2022
2021
$
(9,735,258) $
(13,070,251)
1,888,944
33,790
—
49,918
36,090
(83,265)
(13,925)
(248,128)
245,521
(147,058)
(110,404)
(8,083,775)
(9,869,280)
7,500,000
—
(2,369,280)
543,591
543,591
(44,744)
(9,954,208)
15,748,480
5,794,272 $
1,784,102
329,612
(1,605,532)
96,893
17,872
(31,792)
(95,366)
549,562
219,824
500,000
28,131
(11,276,945)
(11,283,940)
14,900,000
1,605,532
5,221,592
1,230,050
1,230,050
(63,262)
(4,888,565)
20,637,045
15,748,480
$
The accompanying notes are an integral part of these audited consolidated financial statements.
F-6
Notes to Consolidated Financial Statements
Note 1: Organization and Summary of Significant Accounting Policies
Description of Business
Dyadic International, Inc. (“Dyadic”, “we”, “us”, “our”, or the “Company”) is a global biotechnology platform company based in Jupiter, Florida with operations in the
United States and a satellite office in the Netherlands, and it utilizes several third-party consultants and research organizations to carry out the Company’s activities. Over the past
two plus decades, the Company has developed a gene expression platform for producing commercial quantities of industrial enzymes and other proteins, and has previously
licensed this technology to third parties, such as Abengoa Bioenergy, BASF, Codexis and others, for use in industrial (non-pharmaceutical) applications. This technology is based
on the Thermothelomyces heterothallica (formerly known as Myceliophthora thermophila) fungus, which the Company named C1.
On December 31, 2015, the Company sold its industrial technology business to Danisco USA (“Danisco”), the industrial biosciences business of DuPont (NYSE: DD) (the
“DuPont Transaction”). As part of the DuPont Transaction, Dyadic retained co-exclusive rights to the C1-cell protein production platform for use in all human and animal
pharmaceutical applications, and currently the Company has the exclusive ability to enter into sub-license agreements (subject to the terms of the license and to certain exceptions)
for use in all human and animal pharmaceutical applications. Danisco retained certain rights to utilize the C1-cell protein production platform in pharmaceutical applications,
including the development and production of pharmaceutical products, for which it will be required to make royalty payments to Dyadic upon commercialization. In certain
circumstances, Dyadic may owe a royalty to either Danisco or certain licensors of Danisco, depending upon whether Dyadic elects to utilize certain patents either owned by
Danisco or licensed in by Danisco.
After the DuPont Transaction, the Company has been focused on building innovative microbial platforms to address the growing demand for global protein
bioproduction and unmet clinical needs for effective, affordable, and accessible biopharmaceutical products for human and animal health and for other biologic products for use in
non-pharmaceutical applications.
The C1-cell protein production platform is a robust and versatile thermophilic filamentous fungal expression system for the development and production of biologic
products including enzymes and other proteins for human and animal health. Some examples of human and animal vaccines and drugs which have the potential to be produced
from C1-cells are protein antigens, ferritin nanoparticles, virus-like particles (“VLPs”), monoclonal antibodies (“mAbs”), Bi/Tri-specific antibodies, Fab antibody fragments, Fc-
fusion proteins, as well as other therapeutic enzymes and proteins. The Company is involved in multiple funded research collaborations with animal and human pharmaceutical
companies which are designed to leverage its C1-cell protein production platform to develop innovative vaccines and drugs, biosimilars and/or biobetters.
The Company also developed the Dapibus™ thermophilic filamentous fungal based microbial protein production platform to enable the rapid development and large-scale
manufacture of low-cost proteins, metabolites, and other biologic products for use in non-pharmaceutical applications, such as food, nutrition, and wellness.
Liquidity and Capital Resources
We rely on our existing cash and cash equivalents, investments in debt securities, and operating cash flows to provide the working capital needs for our operations. We
believe that our existing cash position and investments in investment grade securities will be adequate to meet our operational, business, and other liquidity requirements for at
least the next twelve (12) months. However, in the event our financing needs are not able to be met by our existing cash, cash equivalents and investments, we would seek to raise
funds through public or private equity offerings, and/or other means to meet our financing requirements. The Company has self-funded the development and cGMP manufacturing
costs of its proprietary COVID-19 vaccine candidate, DYAI-100, and in February 2023 completed the dosing of its related Phase 1 clinical trial to demonstrate the safety in humans
of a protein produced from the C1-cell protein production platform. We do not expect that significant amounts of additional capital will be needed to support the continued
development, manufacturing and testing of DYAI-100 in 2023 and beyond.
In January 2023, the Company received cash payment of approximately $1.27 million from the sale of its equity interest in Alphazyme, LLC. See Note 8 Subsequent Events
for details.
Summary of Significant Accounting Policies
Basis of Presentation
The accompanying audited consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. Dyadic consolidates entities in
which we have a controlling financial interest. We consolidate subsidiaries in which we hold and/or control, directly or indirectly, more than 50% of the voting rights. All
significant intra-entity transactions and balances have been eliminated in consolidation. These consolidated financial statements have been prepared in conformity with U.S.
generally accepted accounting principles (“GAAP”).
The Company conducts business in one operating segment, which is identified by the Company based on how resources are allocated, and operating decisions are made.
Management evaluates performance and allocates resources based on the Company as a whole.
F- 7
Use of Estimates
The preparation of these consolidated financial statements in accordance with GAAP requires management to make estimates and judgments that affect the reported
amount of assets and liabilities and related disclosure of contingent assets and liabilities at the date of our consolidated financial statements and the reported amounts of revenues
and expenses during the applicable period. Actual results may differ from these estimates under different assumptions or conditions. Such differences could be material to the
consolidated financial statements.
Concentrations and Credit Risk
The Company’s financial instruments that are potentially subject to concentrations of credit risk consist primarily of cash and cash equivalents, investment securities, and
accounts receivable. At times, the Company has cash, cash equivalents, and investment securities at financial institutions exceeding the Federal Depository Insurance Company
(“FDIC”) and the Securities Investor Protection Corporation (“SIPC”) insured limit on domestic currency and the Netherlands FDIC counterpart for foreign currency. The Company
only deals with reputable financial institutions and has not experienced any losses in such accounts.
For each of the years ended December 31, 2022 and 2021, the Company’s revenue was generated from fourteen customers. As of December 31, 2022 and 2021, the
Company’s accounts receivable was from six and eight customers, respectively. The loss of business from one or a combination of the Company’s customers could adversely
affect its operations.
The Company conducts operations in the Netherlands through its foreign subsidiary and generates a portion of its revenues from customers that are located outside of
the United States. For the years ended December 31, 2022 and 2021, the Company had six and eight customers outside of the United Sates (i.e. European and Asian customers) that
accounted for approximately $586,000 or 21.8% and $1,716,000 or 71.3% of total revenue, respectively. As of December 31, 2022 and 2021, the Company had four and four
customers outside of the United Sates (i.e. European and Asian customers) that accounted for approximately $91,000 or 27.4% and $157,000 or 56.4% of accounts receivable,
respectively.
The Company uses several contract research organizations (“CROs”) to conduct its research projects and manage its clinical trial. For the years ended December 31, 2022
and 2021, three CROs accounted for approximately $5,575,000 or 97.9% and $9,061,000 or 95.1% of total research services we purchased, respectively. As of December 31, 2022,
three CROs accounted for approximately $1,018,000 or 79.7% of accounts payable. As of December 31, 2021, two CROs accounted for approximately $1,312,000 or 84.8% of
accounts payable. The loss of business from any CRO or a combination of the Company’s CROs could adversely affect its operations.
Cash and Cash Equivalents
We treat highly liquid investments with original maturities of three months or less when purchased as cash equivalents, including money market funds, which are
unrestricted for withdrawal or use.
Investment Securities
The Company invests excess cash balances in short-term and long-term investment grade securities. Short-term investment securities mature within twelve (12) months or
less, and long-term investment securities mature over twelve (12) months from the applicable reporting date. Management determines the appropriate classification of its
investments at the time of purchase and reevaluates the classifications at each balance sheet date. The Company’s investments in debt securities have been classified and
accounted for as held-to-maturity. Held-to-maturity securities are those securities that the Company has the ability and intent to hold until maturity. Held-to-maturity securities are
recorded at amortized cost, adjusted for the amortization or accretion of premiums or discounts. Premiums and discounts are amortized over the life of the related held-to-maturity
security. When a debt security is purchased at a premium, both the face value of the debt and premium amount are reflected as investing outflow. Other-than-temporary impairment
charges, if incurred, will be included in other income (expense).
As of December 31, 2022 and 2021, all of our money market funds were invested in U.S. Government money market funds. The Company did not have any investment
securities classified as trading as of December 31, 2022 and 2021.
Accounts Receivable
Accounts receivable consist of billed receivables currently due from customers and unbilled receivables. Unbilled receivables represent the excess of contract revenue (or
amounts reimbursable under contracts) over billings to date. Such amounts become billable in accordance with the contract terms, which usually consider the passage of time,
achievement of certain milestones or completion of the project.
Outstanding account balances are reviewed individually for collectability. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable
credit losses in the Company’s existing accounts receivable. Substantially all our accounts receivable were current and include unbilled amounts that will be billed and collected
over the next twelve (12) months. There was no allowance for doubtful accounts as of December 31, 2022 and 2021.
F- 8
Accounts receivable consist of the following:
Billed receivable
Unbilled receivable
Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consist of the following:
Prepaid insurance
Prepaid expenses - various
Prepaid taxes
Accounts Payable
Accounts payable consist of the following:
Research and development expenses
Legal expenses
Other
Accrued Expenses
Accrued expenses consist of the following:
Employee wages and benefits
Research and development expenses
Other
Revenue Recognition
December 31,
2022
2021
115,469 $
214,532
330,001 $
101,175
176,656
277,831
December 31,
2022
2021
265,429 $
124,273
2,534
392,236 $
326,712
45,839
3,279
375,830
December 31,
2022
2021
1,067,958 $
56,514
151,841
1,276,313 $
1,363,889
27,675
156,389
1,547,953
December 31,
2022
2021
580,264 $
343,457
31,360
955,081 $
405,758
194,250
109,552
709,560
$
$
$
$
$
$
$
$
The Company has no pharmaceutical products approved for sale at this point. All of our revenue to date has been research revenue from third-party collaborations and
government grants, as well as revenue from sublicensing agreements and collaborative arrangements, which may include upfront payments, options to obtain a license, payment
for research and development services, milestone payments and royalties, in the form of cash or non-cash considerations (e.g., minority equity interest).
F- 9
Revenue related to research collaborations and agreements: The Company typically performs research and development services as specified in each respective
agreement on a best efforts basis, and recognizes revenue from research funding under collaboration agreements in accordance with the 5-step process outlined in ASC Topic 606
(“Topic 606”): (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction
price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. We recognize revenue when we satisfy a
performance obligation by transferring control of the service to a customer in an amount that reflects the consideration that we expect to receive. Depending on how the
performance obligation under our license and collaboration agreements is satisfied, we elected to recognize the revenue either at a point in time or over time by using the input
method under Topic 606 to measure the progress toward complete satisfaction of a performance obligation.
Under the input method, revenue will be recognized based on the entity’s efforts or inputs to the satisfaction of a performance obligation (e.g., resources consumed, labor
hours expended, costs incurred, or time elapsed) relative to the total expected inputs to the satisfaction of that performance obligation. The Company believes that the cost-based
input method is the best measure of progress to reflect how the Company transfers its performance obligation to a customer. In applying the cost-based input method of revenue
recognition, the Company uses actual costs incurred relative to budgeted costs to fulfill the performance obligation. These costs consist primarily of full-time equivalent effort and
third-party contract costs. Revenue will be recognized based on actual costs incurred as a percentage of total budgeted costs as the Company completes its performance
obligations.
A cost-based input method of revenue recognition requires management to make estimates of costs to complete the Company’s performance obligations. In making such
estimates, significant judgment is required to evaluate assumptions related to cost estimates. The cumulative effect of revisions to estimated costs to complete the Company’s
performance obligations will be recorded in the period in which changes are identified and amounts can be reasonably estimated. A significant change in these assumptions and
estimates could have a material impact on the timing and amount of revenue recognized in future periods.
Revenue related to grants: The Company may receive grants from governments, agencies, and other private and not-for-profit organizations. These grants are intended to
be used to partially or fully fund the Company’s research collaborations, including opportunities arising in connection with COVID-19 that the Company is pursuing with certain
collaborators. However, most, if not all, of such potential grant revenues, if received, is expected to be earmarked for third parties to advance the research required, including
preclinical and clinical trials for SARS-CoV-2 vaccines and/or antibodies candidates.
Revenue related to sublicensing agreements: If the sublicense to the Company’s intellectual property is determined to be distinct from the other performance obligations
identified in the arrangement, the Company recognizes revenue allocated to the license when technology is transferred to the customer and the customer is able to use and benefit
from the license.
Customer options: If the sublicensing agreement includes customer options to purchase additional goods or services, the Company will evaluate if such options are
considered material rights to be deemed as separate performance obligations at the inception of each arrangement.
Milestone payments: At the inception of each arrangement that includes development, commercialization, and regulatory milestone payments, the Company evaluates
whether the achievement of the milestones is considered probable and estimates the amount to be included in the transaction price. If the milestone payment is in exchange for a
sublicense and is based on the sublicensee’s subsequent sale of product, the Company recognizes milestone payment by applying the accounting guidance for royalties. To date,
the Company has not recognized any milestone payment revenue resulting from any of its sublicensing arrangements.
Royalties: With respect to licenses deemed to be the predominant item to which the sales-based royalties relate, including milestone payments based on the level of sales,
the Company recognizes revenue at the later of (i) when the related sales occur or (ii) when the performance obligation to which some or all of the royalty has been allocated has
been satisfied (or partially satisfied). To date, the Company has not recognized any royalty revenue resulting from any of its sublicensing arrangements.
We invoice customers based on our contractual arrangements with each customer, which may not be consistent with the period that revenues are recognized. When there
is a timing difference between when we invoice customers and when revenues are recognized, we record either a contract asset (unbilled accounts receivable) or a contract liability
(deferred research and development obligations), as appropriate. If upfront fees or considerations related to sublicensing agreement are received prior to the technology transfer,
the Company will record the amount received as deferred revenue from licensing agreement.
We are not required to disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for
which we recognize revenue at the amount to which we have the right to invoice for services performed.
The Company adopted a practical expedient to expense sales commissions when incurred because the amortization period would be one year or less.
F- 10
Research and Development Costs
Research and development (“R&D”) costs are expensed as incurred. R&D costs are related to the Company’s internally funded pharmaceutical programs and other
governmental and commercial projects.
Research and development costs consist of personnel-related costs, facilities, research-related overhead, services from independent contract research organizations, and
other external costs. Research and development costs, during the years ended December 31, 2022 and 2021 were as follows:
Outside contracted services
Personnel related costs
Facilities, overhead and other
Foreign Currency Transaction Gain or Loss
Years Ended December 31,
2022
2021
$
$
3,707,269 $
743,051
51,045
4,501,365 $
7,607,035
773,823
11,512
8,392,370
The Company and its foreign subsidiary use the U.S. dollar as its functional currency, and initially measure the foreign currency denominated assets and liabilities at the
transaction date. Monetary assets and liabilities are then re-measured at exchange rates in effect at the end of each period, and property and non-monetary assets and liabilities are
converted at historical rates.
Fair Value Measurements
The Company applies fair value accounting for certain financial instruments that are recognized or disclosed at fair value in the financial statements. The Company defines
fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair
value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy
upon the lowest level of input that is available and significant to the fair value measurement:
•
•
•
Level 1 – Quoted prices in active markets for identical assets or liabilities.
Level 2 – Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in
inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 – Inputs that are generally unobservable and typically reflect management’s estimate of assumptions that market participants would use in pricing the asset or
liability.
The Company’s financial instruments included cash and cash equivalents, investment in debt securities, accounts receivable, accounts payable and accrued expenses,
accrued payroll and related liabilities, deferred research and development obligations and deposits. The carrying amount of these financial instruments, except for investment in
debt securities, approximates fair value due to the short-term maturities of these instruments. The Company’s short-term and long-term investments in debt securities are recorded
at amortized cost, and their estimated fair value amounts are provided by the third-party broker service for disclosure purposes.
Non-Marketable Investments
The Company also holds investments in non-marketable equity securities of privately-held companies, which usually do not have a readily determinable fair value. Our
policy is to measure these investments at cost less impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a
similar investment of the same issuer such observable price changes may include instances where the investee issues equity securities to new investors, thus creating a new
indicator of fair value, as an example. On a quarterly basis, we perform a qualitative assessment considering impairment indicators to evaluate whether these investments are
impaired and also monitor for any observable price changes. If indicators of impairment exist, we will prepare a quantitative assessment of the fair value of our equity investments,
which may include using both the market and income approaches which require judgment and the use of estimates, including discount rates, investee revenues and costs, and
available comparable market data of private and public companies, among others. Valuations of such privately-held companies are inherently complex and uncertain due to the lack
of liquid market for the company’s securities. In addition, such investments are inherently risky in that such companies are typically at an early stage of development, may have no
or limited revenues, may not be or may never become profitable, may not be able to secure additional funding or their technologies, services or products may not be successfully
developed or introduced into the market.
On January 18, 2023, the Company entered into a Securities Purchase Agreement, under which the Company agreed to sell its equity interest in Alphazyme, LLC (the
“Alphazyme Sale Agreement”). After taking into account the adjustments for the transaction and legal expenses, payments to the Company were approximately US$1.27 million in
connection with the sale. See Note 8 Subsequent Events for details.
For the year ended December 31, 2021, the Company recorded a gain from the sale of its investment in BDI in other income in the amount of approximately $1.6 million, net
of transaction and legal expenses.
F- 11
Income Taxes
The Company accounts for income taxes under the asset and liability method in accordance with ASC Topic 740, “Income Taxes”. Under this method, income tax expense
/(benefit) is recognized for: (i) taxes payable or refundable for the current year and (ii) deferred tax consequences of temporary differences resulting from matters that have been
recognized in an entity’s financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years
in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of
operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of the available
positive and negative evidence, it is more likely than not some portion or all the deferred tax assets will not be realized.
In determining taxable income for the Company’s consolidated financial statements, we are required to estimate income taxes in each of the jurisdictions in which we
operate. This process requires the Company to make certain estimates of our actual current tax exposure and assessment of temporary differences between the tax and financial
statement recognition of revenue and expense. In evaluating the Company’s ability to recover its deferred tax assets, the Company must consider all available positive and
negative evidence including its past operating results, the existence of cumulative losses in the most recent years and its forecast of future taxable income. Significant management
judgment is required in determining our provision for income taxes, deferred tax assets and liabilities and any valuation allowance recorded against our net deferred tax assets.
The Company is required to evaluate the provisions of ASC 740 related to the accounting for uncertainty in income taxes recognized in a company’s financial statements.
ASC 740 prescribes a comprehensive model for how a company should recognize, present, and disclose uncertain positions that the company has taken or expects to take in its tax
return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. Differences between tax positions
taken or expected to be taken in a tax return and the net benefit recognized and measured pursuant to the interpretation are referred to as “unrecognized benefits.” A liability
should be recognized (or amount of net operating loss carry forward or amount of tax refundable is reduced) for unrecognized tax benefits, because it represents a company’s
potential future obligation to the taxing authority for a tax position that was not recognized as a result of applying the provision of ASC 740.
Comprehensive Income (Loss)
Comprehensive income (loss) includes net income (loss) and other revenue, expenses, gains and losses that are recorded as an element of shareholders’ equity but are
excluded from net income (loss) under U.S. GAAP. The Company does not have any significant transactions that are required to be reported in other comprehensive income (loss),
and therefore, does not separately present a statement of comprehensive income (loss) in its consolidated financial statements.
Stock-Based Compensation
We recognize all share-based payments to employees, consultants, and our Board of Directors (the “Board”), as non-cash compensation expense, in research and
development expenses or general and administrative expenses in the consolidated statement of operations based on the grant date fair values of such payments. Stock-based
compensation expense recognized each period is based on the value of the portion of share-based payment awards that is ultimately expected to vest during the period. Forfeitures
are recorded as they occur.
For performance-based awards, the Company recognizes related stock-based compensation expense based upon its determination of the potential likelihood of
achievement of the specified performance conditions at each reporting date.
Net Loss Per Share
Basic net loss per share is computed by dividing net loss available to common shareholders by the weighted average number of common shares outstanding during the
reporting period. Diluted net loss per share adjusts the weighted average number of common stock outstanding for the potential dilution that could occur if common stock
equivalents, such as stock options, warrants, restricted stock, restricted stock units and convertible debt, were exercised and converted into common stock, calculated by applying
the treasury stock method.
For the years ended December 31, 2022 and 2021, the effect of the potential exercise of options to purchase 5,031,097 and 4,774,215 shares of common stock, respectively,
were excluded from the computation of diluted net loss per share as their effect would have been anti-dilutive.
Recently Accounting Pronouncements
In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments - Credit Losses
(Topic 326): Measurement of Credit Losses on Financial Instruments, which modifies the measurement of expected credit losses of certain financial instruments. ASU 2016-13 will
be effective for the Company beginning in the first quarter of 2023. The Company does not expect ASU 2016-13 to have a material impact on our consolidated financial positions,
results of operations, and cash flows.
Other pronouncements issued by the FASB or other authoritative accounting standards group with future effective dates are either not applicable or not significant to our
consolidated financial statements.
F- 12
Note 2: Cash, Cash Equivalent, and Investments
The Company’s investments in debt securities are classified as held-to-maturity and are recorded at amortized cost, and its investments in money market funds are
classified as cash equivalents. The following table shows the Company’s cash, available-for-sale securities, and investment securities by major security type as of December 31,
2022 and 2021:
Cash and Cash Equivalents
Cash
Money Market Funds
Subtotal
Short-Term Investment Securities (2)
Corporate Bonds (3)
Total
Cash and Cash Equivalents
Cash
Money Market Funds
Subtotal
Short-Term Investment Securities (2)
Corporate Bonds (3)
Total
Level
(1)
1
2
Level
(1)
1
2
December 31, 2022
Gross
Unrealized
Holding Gains
Gross
Unrealized
Fair Value
Holding Losses Adjusted Cost
$
26,782 $
5,767,490
5,794,272
$
6,800,062
12,594,334 $
— $
—
—
—
— $
— $
—
—
(47,208)
(47,208) $
26,782
5,767,490
5,794,272
6,847,270
12,641,542
December 31, 2021
Gross
Unrealized
Holding Gains
Gross
Unrealized
Fair Value
Holding Losses Adjusted Cost
$
$
1,377,094 $
14,371,386
15,748,480
4,509,285
20,257,765 $
— $
—
—
—
— $
— $
—
—
(2,495)
(2,495) $
1,377,094
14,371,386
15,748,480
4,511,780
20,260,260
Notes:
(1) Definition of the three-level fair value hierarchy:
• Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities
• Level 2 - Other inputs that are directly or indirectly observable in the markets
• Level 3 - Inputs that are generally unobservable
(2) Short-term investment securities will mature within 12 months or less, from the applicable reporting date.
(3) For the years ended December 31, 2022 and 2021, the Company received discounts of $6,280 and paid premiums of $283,940 to purchase held-to-maturity investment
securities, respectively.
The Company considers declines in market value of its investment portfolio to be temporary in nature. The Company’s investment policy requires investment securities to
be investment grade and held to maturity with the primary objective to maintain a high degree of liquidity while maximizing yield. When evaluating an investment for other-than-
temporary impairment, the Company reviews factors such as the length of time and extent to which fair value has been below its cost basis, the financial condition of the issuer and
any changes thereto, changes in market interest rates, and whether it is more likely than not the Company will be required to sell the investment before recovery of the investment’s
cost basis. As of December 31, 2022, the Company does not consider any of its investments to be other-than-temporarily impaired.
F- 13
Note 3: Research and Collaboration Agreements, Sublicense Agreements, and Investments in Privately-Held Companies
A Global Food Ingredient Company
On May 10, 2022, the Company entered into a Joint Development Agreement (the “JDA”) with a Global Food Ingredient Company (“GFIC”) to develop and manufacture
several animal free ingredient products using the Company’s biotechnologies.
Under the terms of the JDA, Dyadic is to develop its proprietary production cell lines for the manufacture of animal free ingredient product candidates. The research
collaboration will be fully funded by the GFIC in an amount approximating $4.1 million over two years. Dyadic will receive certain defined “Success Fees” (the “Success Fees”),
upon researching certain productivity and activity levels and milestones at different stages of the collaboration. Dyadic will also receive a “Commercialization Fee” (the
“Commercialization Fee”) of low eight figures upon commercialization, and a royalty payment of low single digits based on commercial sales.
The JDA can be terminated in its entirety along with any sublicense granted, with or without cause by either party, within 90 business days after receipt of written
termination notice.
Accounting Treatment
The Company considered the guidance in ASC 808, Collaborative Arrangements (ASC 808) and determined the JDA is not applicable to such guidance. The Company
concluded that GFIC represented a customer and applied relevant guidance from ASC 606, Revenue from Contracts with Customers (ASC 606) to evaluate the appropriate
accounting for the JDA.
The Company identified the following promises under the JDA: (1) to provide agreed-upon research and development services with GFIC’s proteins; (2) to nominate a
project manager and two additional steering committee members to meet at least quarterly to review the project’s status; (3) to grant a R&D license in consideration of GFIC’s
payment of Service Fees and its other project obligations; and (4) to grant a commercial license in consideration of and subject to GFIC’s payment of the commercialization fee and
royalties.
The Company concluded that, while participation on the joint steering committee was capable of being distinct from other promises, such participation is considered to be
part of the research and development services and does not constitute the transfer of a good or service within the context of the JDA. Additionally, the Company concluded that
the promise to grant a commercial license is a contingent promise based upon the success of the research project which is outside the control of both the Company and the GFIC,
and therefore, it should be accounted for in the same way as a customer option. The Company further concluded that the contingent promise to grant a commercial license is not
considered a material right and does not give rise to a separate performance obligation.
Based on management’s assessment, the Company concluded the agreed-upon research and development services and the R&D license under the R&D plan should be
combined and accounted for as one single performance obligation in consideration of the service fees. Accordingly, the Company recorded the service fees as research and
development revenue using the cost-based input method in accordance with the Company’s policy (Note 1).
Under the JDA, the Company is also eligible to receive Success Fees upon certain milestones, a Commercialization Fee upon commercialization, and future sales-based
royalty payments. The Success Fees are considered constrained variable considerations and excluded from the transaction price at inception. The Company will re-evaluate the
Success Fees and estimate the transaction price in each reporting period and as uncertain events are resolved or other changes in circumstances occur. The Company
will not recognize revenue related to the Commercialization Fee and sales-based royalty until the associated event occurs.
For the year ended December 31, 2022, the Company recorded research and development revenues of approximately $790,000 in connection with the JDA.
F- 14
Phibro/Abic
On February 10, 2022, the Company entered into an exclusive sub-license agreement with Abic Biological Laboratories Ltd. (“Abic”), an affiliate of Phibro Animal Health
Corporation (“Phibro”) to provide services for a targeted disease (the “Phibro/Abic Agreement”). The Phibro/Abic Agreement was an addendum to the initially non-exclusive sub-
license agreement the Company signed with Phibro on July 1, 2020. According to the Phibro/Abic Agreement, the Company received an exclusivity payment in April 2022. In July
2022, the Company expanded the license agreement to include an additional research project to develop another animal vaccine for livestock.
Phibro/Abic may terminate the Phibro/Abic Agreement in its entirety, or any sublicense granted, in each case with or without cause at any time upon 90 days’ prior
written notice to Dyadic.
Accounting Treatment
The Company considered the guidance in ASC 808, Collaborative Arrangements (ASC 808) and determined the Phibro Agreement is not applicable to such guidance. The
Company concluded that Phibro/Abic represented a customer and applied relevant guidance from ASC 606, Revenue from Contracts with Customers (ASC 606) to evaluate the
appropriate accounting for the Phibro/Abic Agreement.
The Company identified the following obligations under the Phibro/Abic Agreement: (1) an exclusive right to utilize the C1-cell protein production platform for certain
disease; (2) our obligation to provide agreed-upon research and development services; (3) research report to be provided to Phibro/Abic based on the requirements of
the agreement.
Based on management’s assessment, the Company concluded two performance obligations should be accounted for separately: (1) the agreed-upon research and
development services, and (2) the right to exclusively access and use C1-cell protein production platform for certain disease.
Accordingly, the Company records the R&D services as research and development revenue using the cost-based input method in accordance with the Company’s policy
(Note 1).
Under the Phibro/Abic Agreement, the Company has received an exclusivity payment in April 2022 and is elgible to receive certain milestone payment upon regulatory
approval, and future sales-based royalty payments. The milestone payment is considered constrained variable consideration and excluded from the transaction price at inception.
The Company will re-evaluate the transaction price in each reporting period and as uncertain events are resolved or other changes in circumstances occur. The Company will not
recognize revenue related to sales-based royalty until the associated event occurs.
Janssen
On December 16, 2021, the Company entered into a Research, License, and Collaboration Agreement (the “Janssen Agreement”) for the manufacture of therapeutic protein
candidates using its C1-cell protein production platform with Janssen Biotech, Inc., one of the Janssen Pharmaceutical Companies of Johnson & Johnson (“Janssen”). Pursuant to
the terms of the Janssen Agreement: (i) Janssen will pay Dyadic an upfront payment of $500,000 for a non-exclusive license to utilize the C1-cell protein production platform to
develop C1 production cell lines for the manufacturing of Janssen’s therapeutic protein candidates against several biologic targets, (ii) Janssen will provide R&D funding up to
€1.6 million to develop and assess C1 production cell lines for its product candidates, (iii) Janssen will have an option to pay a mid-seven figure payment for an exclusive license
from Dyadic to use the C1-cell protein production platform for the manufacturing of therapeutic proteins directed to one specific target, and upon exercise, Janssen would have the
right to add additional non-exclusive targets to the collaboration and Dyadic would complete the technology transfer of the C1-cell protein production platform, fully enabling
Janssen to internally develop C1 cell lines against licensed targets, and upon successful completion of the technology transfer, Dyadic is eligible to receive a milestone payment in
the low seven figures, (iv) for each product candidate, Dyadic could receive development and regulatory milestones in the mid-seven figures, and (v) Dyadic could receive
aggregate commercial milestone payments in the low nine figures per product, subject to a limit on the number of such products, with the amount depending on the cumulative
amount of active pharmaceutical ingredient produced by Janssen for each product manufactured with Dyadic’s C1-cell protein production platform.
Janssen may terminate the Janssen Agreement in its entirety, or on a country-by-country or other jurisdiction-by-other jurisdiction basis, for any or no reason, upon 90
days’ prior written notice to Dyadic.
F- 15
Accounting Treatment
The Company applied ASC 808, Collaborative Arrangements (ASC 808) and determined the Janssen Agreement is not applicable to such guidance. The Company
concluded that Janssen represented a customer and applied relevant guidance from ASC 606, Revenue from Contracts with Customers (ASC 606) to evaluate the appropriate
accounting for the Janssen Agreement.
The Company identified the following promises under the Janssen Agreement: (1) A right to access the C1-cell protein production platform; (2) our obligation to provide
agreed upon research and development services under the R&D Funding; (3) participation in the joint steering committee; (4) the reservation of targets; (5) the grant of option to
obtain a research license of intellectual property and know-how rights of its C1-cell protein production platform to produce target proteins; (6) our obligation to complete tech
transfer activities upon the exercise of a research license; and (7) the options to obtain a commercial license and an exclusive license on specific targets.
The Company concluded that the research and development services under the R&D Funding represents a separate unit of account, because it is a prerequisite to the
license agreement and a third-party contract research organization will be used to conduct the research. The Company also concluded that, while participation on the joint
steering committee was capable of being distinct, participation is part of the research and development services and does not constitute the transfer of a good or service to
Janssen within the context of the contract.
Other promises including the reservation of targets and tech transfer are not capable of being distinct from the licenses within the context of the contract and should
therefore not be treated as a separate performance obligation. Additionally, at contract inception, the Company evaluated Janssen’s options for a research license, commercial
license and to exercise exclusive rights on certain targets in order to determine whether these options to purchase additional license rights at their standalone selling prices
provide a material right (i.e., an optional good or service offered for free or at a discount) to the customer. The Company concluded that these options in the Janssen Agreement
are not material rights and do not give rise to a separate performance obligation. Instead, these options are deemed as marketing offers, and additional option fee payments are
recognized or being recognized as revenue when Janssen exercises the option. The exercise of an option that does not represent a material right is treated as a separate contract
for accounting purposes.
Based on management’s assessment, the Company concluded two performance obligations should be accounted for separately: (1) the agreed-upon research and
development services, and (2) the right to access C1-cell protein production platform under the research plan. Accordingly, the Company will record the €1.6 million of R&D
Funding as research and development revenue using the cost-based input method in accordance with the Company’s policy (See Note 1).
As noted above, the Company received a non-refundable upfront payment of $0.5 million to reserve the initial protein targets until Janssen decides to exercise an option to
license in the future, which represents a right to access the C1-cell protein production platform prior to using it. The Company will recognize the upfront payment of $0.5 million
over the target reservation period, during which Janssen can obtain a research and/or commercial license and/or an exclusive license on specific targets, or recognize in full when
the contract is terminated.
The Company also excluded option exercise fees and future milestone payments that the Company was eligible to receive under the Janssen Agreement, from the initial
transaction price. The Company will not recognize revenue related to option exercise payments and future milestone payments until the associated event occurs, or relevant
thresholds are met. The Company will re-evaluate the transaction price in each reporting period and as uncertain events are resolved or other changes in circumstances occur.
As of December 31, 2022, the deferred license revenue, current and non-current portion were approximately $176,000 and $176,000, respectively. For the years ended
December 31, 2022 and 2021, the Company recorded research and development revenues of $539,000 and $0, respectively, in connection with the Janssen Agreement. As of
December 31, 2022 and 2021, approximately $121,000 and $0 of accounts receivable were related to the Janssen Agreement, respectively.
IDBiologics, Inc.
On July 8, 2020, the Company entered into a Common Stock Purchase Agreement (the “IDBiologics Agreement”) with IDBiologics, Inc (“IDBiologics”). IDBiologics is a
private biotechnology company focused on the development of human monoclonal antibodies for the treatment and prevention of serious infectious diseases. The Company was
founded in 2017 and seeded by Vanderbilt University Medical Center in response to the repeated threats of epidemics around the world including Ebola in West Africa and Zika in
the Americas. IDBiologics is developing a portfolio of monoclonal antibodies against SARS-CoV-2, influenza and Zika viruses.
Pursuant to the term of the IDBiologics Agreement, on July 8, 2021, Dyadic received 129,661 shares of IDBiologics’ common stock, which represent 0.37% of IDBiologics’
outstanding equity, in exchange of a feasibility study performed by Dyadic. Dyadic provided services including the use of Dyadic’s C1-cell technology to express a SARS-CoV-2
monoclonal antibody which IDBiologics licensed from the Vanderbilt Vaccine Center. The Company determined not to record the basis for its equity interest
in IDBiologics because the fair value amount of the service provided is considered immaterial.
The Company evaluated the nature of its equity interest in IDBiologics and determined that IDBiologics is a VIE due to the capital structure of the entity. However, the
Company is not the primary beneficiary of IDBiologics as Dyadic does not have the power to control or direct the activities of IDBiologics that most significantly impact the VIE.
As a result, the Company does not consolidate its investment in IDBiologics.
On April 25, 2021, the Company entered into a project agreement (the “Project Agreement”) to provide additional research services to IDBiologics.
For the years ended December 31, 2022 and 2021, the Company recorded research and development revenues of approximately $109,000 and $194,000, respectively, in
connection with IDBiologics. As of December 31, 2022 and 2021, $0 and approximately $27,000 of unbilled accounts receivable were related to IDBiologics, respectively.
F- 16
Alphazyme
On May 5, 2019, the Company entered into a sub-license agreement (the “Alphazyme Sub-License Agreement”) with Alphazyme, LLC (“Alphazyme”). Under the terms of
the Alphazyme Sub-License Agreement, the Company has granted to Alphazyme, subject to the terms of the license agreement entered into between the Company and Danisco
US, Inc. on December 31, 2015, a sub-license to certain patent rights and know-how related to Dyadic’s proprietary C1-cell protein production platform for the purpose of
commercializing certain pharmaceutical products that are used as reagents to catalyze a chemical reaction to detect, measure, or be used as a process intermediate to produce a
nucleic acid as a therapeutic or diagnostic agent.
On June 24, 2020, the Company entered into an Amended and Restated Non-Exclusive Sub-License A greement (the “Amended Sub-License Agreement”) with Alphazyme
to amend and restate the Alphazyme Sub-License Agreement. Pursuant to the Amended Sub-License Agreement and in consideration of Dyadic’s transfer of its C1-cell protein
production platform, Alphazyme issued 2.50% of the Class A shares of Alphazyme to Dyadic, and Dyadic became a party to the Alphazyme Limited Liability Company Agreement
pursuant to which the Company will agree to certain customary rights, covenants and obligations. In addition, and subject to achieving certain milestones, Alphazyme is obligated
to pay a potential milestone payment and royalties on net sales, if any, which incorporate Dyadic’s proprietary C1-cell protein production platform.
On December 1, 2020, an Amended and Restated Limited Liability Company Agreement with Alphazyme (the “Amended Alphazyme LLC Agreement”) was entered
into. Under the Amended Alphazyme LLC Agreement, Alphazyme obtained additional capital contribution and Dyadic’s ownership was diluted to 1.99%.
The Company evaluated the nature of its equity interest investment in Alphazyme and determined that Alphazyme is a VIE due to the capital structure of the entity.
However, the Company is not the primary beneficiary of Alphazyme as Dyadic does not have the power to control or direct the activities of Alphazyme that most significantly
impact the VIE. As a result, the Company does not consolidate its investment in Alphazyme. The Company reports its investment in Alphazyme under the cost method of
accounting, given that it does not have the ability to exercise significant influence or control over Alphazyme.
For the year ended December 31, 2020, the Company recorded a gain of $284,709 from its investment in Alphazyme resulting from a third-party capital contribution
obtained by Alphazyme. As of December 31, 2021, the Company does not consider its investment in Alphazyme to be impaired, as there was no event or transaction that would
change the value of this investment.
On January 18, 2023, the Company entered into a Securities Purchase Agreement, under which the Company agreed to sell its equity interest in Alphazyme, LLC (the
“Alphazyme Sale Agreement”). Net proceeds to the Company were approximately $1.27 million in connection with the sale. The Company also has the potential to receive
additional payments based on the future sales of Alphazyme’s existing products, pursuant to the Alphazyme Sale Agreement.
The Amended Sublicense Agreement between Dyadic and Alphazyme, which was previously entered on June 24, 2020, remains in effect. Under the Amended Alphazyme
Sub-License Agreement, Dyadic is entitled to potential milestone and royalty payments upon the commercialization of Alphazyme products using Dyadic’s proprietary C1-cell
protein production platform.
BDI
On June 30, 2017, the Company entered into a strategic Research Services Agreement (the “RSA”) with Biotechnology Developments for Industry in Pharmaceuticals,
S.L.U. (“BDI Pharma”), and with VLP The Vaccines Company, S.L.U. (“VLPbio”), both of which are subsidiaries of Biotechnology Developments for Industry, S.L., a Spanish
biotechnology company (“BDI Holdings” and together with BDI Pharma and VLPbio, “BDI”).
The Company paid EUR €1.0 million (the “RSA Initial Payment”) in cash to engage BDI to develop designated C1 based product candidates and further improve the C1
manufacturing process, in consideration of which Dyadic also received a 16.1% equity interest in BDI Holdings and a 3.3% equity interest in VLPbio. Under the RSA, BDI is
obligated to spend a minimum amount of EUR €936,000 over two years for the research and development project.
The Company concluded that BDI is not a Variable Interest Entity (“VIE”), because BDI has sufficient equity to finance its activities without additional subordinated
financial support and its at-risk equity holders have the characteristics of a controlling financial interest. Additionally, Dyadic is not the primary beneficiary of BDI as Dyadic does
not have the power to control or direct the activities of BDI or its operations. As a result, the Company does not consolidate its investments in BDI, and the financial results of BDI
are not included in the Company’s consolidated financial results.
The Company performed a valuation analysis of the components of the transaction and concluded that the fair value of BDI equity interest was considered immaterial, the
RSA Initial Payment of approximately USD $1.1 million (EUR €1.0 million) was accounted for as a prepaid research and development collaboration payment on our consolidated
balance sheet, and the collaboration payment under the RSA paid by Dyadic were expensed as the related research services were performed by BDI.
On July 26, 2021, the Company entered (i) a Sale and Purchase of Shares Agreement under which the Company agreed to sell its 16.1% equity interest in BDI Holdings,
and (ii) a Sale and Purchase of Shares Agreement under which the Company agreed to sell its 3.3% equity interest in VLPBio (together the “BDI Sale”). In connection with the
closing of the BDI Sale, the Company received approximately $1.6 million, net of transaction and legal expenses in August 2021. The gain generated from the BDI Sale was recorded
in other income.
In connection with the BDI Sale, the Company also entered into an amendment to the Service Framework Agreement (the “Amended SFA”) with BDI Pharma. Under the
Amended SFA, the Company maintains the right to engage in research and development projects at BDI Pharma until June 30, 2025, with the non-compete term extending to June
30, 2030, without any other material terms and conditions changed.
For the years ended December 31, 2022 and 2021, there was no research and development revenue or research and development expenses associated with the Amended
SFA.
Novovet and Luina Bio
On April 26, 2019, the Company entered into a sub-license agreement (the “Luina Bio Sub-License Agreement”) with Luina Bio Pty Ltd. (“Luina Bio”) and Novovet Pty Ltd
(“Novovet”). Under the terms of the Luina Bio Sub-License Agreement, the Company granted to Novovet, subject to the terms of the license agreement entered into between the
Company and Danisco US, Inc. on December 31, 2015, a worldwide sub-license to certain patent rights and know-how related to Dyadic’s proprietary C1-cell protein
production platform for the exclusive and sole purpose of commercializing certain targeted antigen and biological products for the prevention and treatment of various ailments for
companion animals.
F- 17
In consideration of the license granted pursuant to the Luina Bio Sub-License Agreement, Dyadic received a 20% equity interest in Novovet (“Novovet Up-Front
Consideration”) in accordance with the terms of Novovet’s Shareholder Agreement (“Shareholders Agreement”) and will receive a percentage of royalties on future net sales and
non-sales revenue, if any, which incorporates Dyadic’s proprietary C1-cell protein production platform.
The Company evaluated the nature of its equity interest investment in Novovet and determined that Novovet is a VIE, because Novovet does not have sufficient equity
to finance its activities without additional financial support from third party investors or lenders. However, the Company is not the primary beneficiary of Novovet as Dyadic does
not have the power to control or direct the activities of Novovet that most significantly impact the VIE. As a result, the Company will not consolidate its investment in Novovet,
but account for under the equity method investment, given that it has the ability to exercise significant influence, but not control, over Novovet.
To date Novovet has not raised the capital required to move this opportunity forward, and therefore, the Company has not transferred its C1-cell protein production
platform to Novovet. Therefore, the Novovet Up-Front Consideration received under the Luina Bio Sub-License Agreement, in the form of a 20% equity interest in Novovet, does
not yet meet the revenue recognition criteria under ASC 606.
On February 15, 2022, the Company sent a letter to Luina Bio Pty Ltd and Novovet Pty Ltd, indicating its intention to terminate the Luina Bio Sub-License Agreement.
On June 29, 2022, the Company sent a letter to Luina Bio Pty Ltd and Novovet Pty Ltd, to transfer our shares of Novovet Pty Ltd back to Novovet pursuant to the
Shareholders Agreement.
Note 4: Income Taxes
For the year ended December 31, 2022, there was no provision for income taxes or unrecognized tax benefits recorded.
The significant components of gain (loss) before income taxes are as follows:
U.S. operations
Foreign operations
Total loss before provision for income taxes
Years Ended December 31,
2022
2021
$
$
(9,828,427) $
93,169
(9,735,258) $
(13,115,869)
45,618
(13,070,251)
The Company has no current or deferred income tax for the years ended December 31, 2022 and 2021.
The income tax provision differs from the expense amount that would result from applying the federal statutory rates to income before income taxes due to permanent
differences, state income taxes and a change in the deferred tax valuation allowance.
The reconciliation between the statutory tax rate and the Company’s actual effective tax rate is as follows:
Tax at U.S. statutory rate
State taxes, net of federal benefit
Non-deductible items
Change in valuation allowance
True-up adjustment
Foreign operations
Change in tax rate
Other
Effective income tax rate
Years Ended December 31,
2022
2021
(21.00)%
(4.35)
—
24.77
0.34
0.24
—
—
—%
(21.00)%
(4.52)
(0.84)
28.09
0.06
0.09
(1.88)
—
—%
F- 18
The significant components of the Company’s net deferred income tax assets are as follows:
Stock option expense
NOL carryforward
Research and development credits
Section 174 - R&D expenses
Unrealized gain from investment in Alphazyme
Other
Deferred tax asset, net of deferred tax liabilities
Valuation allowance
Net deferred tax asset
December 31,
2022
2021
$
$
1,341,900 $
11,524,900
1,623,100
1,046,400
—
(78,200)
15,458,100
(15,458,100)
— $
947,400
10,509,900
1,656,500
—
(72,100)
(6,100)
13,035,600
(13,035,600)
—
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the
amounts used for income tax purposes. In assessing the realizability of deferred tax assets, Management evaluates whether it is more likely than not that some portion or all of the
deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those
temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in
making this assessment. Based on Management’s evaluation, the net deferred tax asset, was offset by a full valuation allowance as of December 31, 2022 and 2021.
The Company had net operating loss (“NOL”) carryforwards available as of December 31, 2022, and 2021, in the amount of approximately $44.0 million and $39.9 million,
respectively. Approximately $41.1 million of the net operating loss carryforwards will be carried forward indefinitely and will be available to offset 80% of taxable income. The
remaining amount of the net operating loss carryforwards will expire at varying dates through 2037.
The Tax Cuts and Jobs Act eliminated the current year deduction election for research and experimental expenditures. Instead, a taxpayer must charge such expenditures
to a capital account and is allowed to amortize such expenditures ratably over a five-year period (or fifteen-year period for expenditures attributable to foreign research), beginning
with the midpoint of the tax year in which such expenditures are paid or incurred.
Note 5: Commitments and Contingencies
Leases
Jupiter, Florida Headquarters
The Company’s corporate headquarters are located in Jupiter, Florida. The Company occupies approximately 2,000 square feet with a monthly rental rate and common area
maintenance charges of approximately $4,500. The lease will expire on September 1, 2023. The Company will reconsider the square footage of the leased space to align with the
staffing requirements of the future operations of the Company.
The Netherlands Office
The Company maintains a small satellite office in Wageningen, The Netherlands. The Company occupies a flexible office space for an annual rental rate of approximately
$4,000. The lease expires on January 31, 2024, and thereafter, the Company will reconsider the leased space to align with the future operations of the Company.
VTT Research Contract Extension
On September 12, 2022, the Company extended its research contract (“Amendment”) through December 2023 with VTT Technical Research Centre of Finland Ltd.
(“VTT”). Under the terms of this Amendment, Dyadic will pay VTT a total of approximately EUR €1.1 million over fifteen months to continue developing Dyadic’s C1-cell protein
production platform for therapeutic protein production, including C1 host system improvement, glycoengineering, and management of third-party target protein projects. Dyadic
retains the right to terminate the Contract with 90 days’ notice.
Purchase Obligations
The following table provides a schedule of commitments related to agreements to purchase certain services in the ordinary course of business, as of December 31, 2022:
2023
2024
2025
Total
$
$
2,912,761
164,794
40,951
3,118,506
The purchase obligations in the table above are primarily related to our contracts with the Company’s contract research organizations to provide certain research services.
The contracts set forth the Company’s minimum purchase requirements that are subject to adjustments based on certain performance conditions. All contracts expire in or prior to
2024.
F- 19
Legal Proceedings
We are not currently involved in any litigation that we believe could have a materially adverse effect in our financial condition or results of operations. From time to time,
the Company is subject to legal proceedings, asserted claims and investigations in the ordinary course of business, including commercial claims, employment and other matters,
which management considers immaterial, individually and in the aggregate. The Company makes a provision for a liability when it is both probable that a liability has been incurred
and the amount of the loss can be reasonably estimated. The requirement for these provisions is reviewed at least quarterly and adjusted to reflect the impact of negotiations,
settlements, rulings, advice of legal counsel and other information and events pertaining to a particular case. Litigation is inherently unpredictable and costly. Protracted litigation
and/or an unfavorable resolution of one or more of proceedings, claims or investigations against the Company could have a material adverse effect on the Company’s consolidated
financial position, cash flows or results of operations.
Note 6: Share-Based Compensation
Description of Equity Plans
The 2021 Equity Incentive Award Plan (the “2021 Plan”) was adopted by the Company's Board of Directors on April 9, 2021, and approved by the Company’s Annual
Meeting of Shareholders (the “Annual Meeting”) on June 11, 2021. The 2021 Plan serves as a successor to the Company’s 2011 Equity Incentive Plan (the “2011 Plan”). Since the
effective date of the 2021 Plan, all equity awards were made from the 2021 Plan, and no additional awards will be granted under the 2011 Plan. The 2021 Plan is reserved for issuance
of a variety of share-based compensation awards, including stock options, restricted stock awards, restricted stock unit awards, performance award, dividend equivalents award,
deferred stock awards, stock payment awards and stock appreciation rights. The 2021 Plan increased the number of shares available for grant by 3,000,000 in addition to the number
of shares remaining available for the grant of new awards under the 2011 Plan as of April 16, 2021.
As of December 31, 2022, the Company had 5,031,097 stock options outstanding and an additional 3,672,561 shares of common stock available for grant under the 2021
Plan. As of December 31, 2021, there were 4,774,215 stock options outstanding and an additional 4,263,386 shares of common stock available for grant under the 2021 Plan.
Stock Options
Options are granted to purchase common stock at prices that are equal to the fair value of the common stock on the date the option is granted. Vesting is determined by
the Board of Directors at the time of grant. The term of any stock option awards under the Company’s 2011 Plan and 2021 Plan is ten years, except for certain options granted to the
contractors which are either one or three years.
The grant-date fair value of each option grant is estimated using the Black-Scholes option pricing model and amortized on a straight-line basis over the requisite service
period, which is generally the vesting period, for each separately vesting portion of the award as if the award was, in substance, multiple awards. Use of a valuation model requires
management to make certain assumptions with respect to selected model inputs, including the following:
Risk-free interest rate. The risk-free interest rate is based on U.S. Treasury rates with securities approximating the expected lives of options at the date of grant.
Expected dividend yield. The expected dividend yield is zero, as the Company has never paid dividends to common shareholders and does not currently anticipate
paying any in the foreseeable future.
Expected stock price volatility. The expected stock price volatility was calculated based on the Company’s own volatility. The Company reviews its volatility assumption
on an annual basis and has used the Company’s historical volatilities.
Expected life of option. The expected life of option was based on the contractual term of the option and expected employee exercise and post-vesting employment
termination behavior. The Company uses the weighted average vesting period and contractual term of the option as the best estimate of the expected life of a new option, except
for the options granted to the CEO (i.e., 5 or 10 years) and certain contractors (i.e., 1 or 3 years).
The assumptions used in the Black-Scholes option pricing model for stock options granted for the years ended December 31, 2022 and 2021 are as follows:
Risk-free interest rate
Expected dividend yield
Expected stock price volatility
Expected life of options (in years)
F- 20
Years Ended December 31,
2022
1.40% - 3.24%
—%
61.30% - 61.58%
5.5 - 6.25
2021
0.05% - 1.24%
—%
54.52% - 60.80%
0.5 - 6.25
The following table summarizes the combined stock option activity under the Company’s Equity Compensation Plans:
Outstanding at December 31, 2020
Granted
Exercised
Expired
Canceled
Outstanding at December 31, 2021
Granted (1)
Exercised (2)
Expired (3)
Canceled (4)
Outstanding at December 31, 2022
Exercisable at December 31, 2022
Weighted-
Average
Remaining
Contractual
Exercise Price Term (Years)
Weighted-
Average
Shares
Aggregate
Intrinsic
Value
4,638,390 $
870,825
(735,000)
—
—
4,774,215 $
865,825
(333,943)
(200,000)
(75,000)
5,031,097 $
3,655,280 $
2.44
5.11
1.67
—
—
3.04
4.43
1.63
5.47
4.81
3.25
2.80
5.64 $
13,701,610
6.14. $
8,413,444
5.75 $
4.75 $
13,000
13,000
Notes:
(1) Represents the following stock options granted:
•
•
Annual share-based compensation awards on January 3, 2022, including: (a)325,000 stock options with an exercise price of $4.81 per share granted to executives and key
personnel, upon one year anniversary, or vesting annually in equal installments over four years, (b) 75,000 performance-based stock option to a key personnel with an
exercise price of $4.81 per share, vesting upon the achievement of specified performance conditions, (c) 277,500 stock options with an exercise price of $4.81 per share
granted to members of the Board of Directors, vesting upon one year anniversary, (d) 23,325 stock options with an exercise price of $4.81 per share granted to employees,
vesting annually in equal installments over four years and (e) 15,000 stock options with an exercise price of $4.81 per share granted to a consultant, vesting upon one year
anniversary.
One-time award on June 10, 2022, 150,000 stock options with an exercise price of $2.60 per share granted to the Board of Directors, vesting in one year from the grant date as
a result of a reduction in director cash compensation.
(2) Represents the following stock options exercised:
•
150,000 stock options exercised at $1.87, 40,000 stock options exercised at $1.63, 8,943 stock options exercised at $1.57, and 50,000 stock options exercised at $1.44,
50,000 stock options exercised at $1.39, and 35,000 stock options exercised at $1.21.
(3) Represents the following stock options expired: 30,000 stock options with exercise price of $6.87, 90,000 stock options with exercise price of $5.27, 80,000 stock option with
exercise price of $5.16.
(4) Represents the cancellation of performance-based stock options granted to the Company’s former Managing Director of Business Development and Licensing, who
separated from the Company on April 22, 2022.
The weighted average grant-date fair market value of stock options granted for the years ended December 31, 2022 and 2021 was $2.49 and $2.49, respectively, bas ed on
the Black-Scholes option pricing model. The intrinsic value of options exercised for the years ended December 31, 2022 and 2021 was $365,000 and $1,730,000, respectively.
As of December 31, 2022 and 2021, total unrecognized compensation cost related to non-vested stock options granted under the Company’s equity compensation plans
was $919,000 and $857,000, respectively, which is expected to be recognized over a weighted average period of 2.76 years and 3.07 years, respectively. The Company will adjust
unrecognized compensation cost for actual forfeitures as they occur.
Compensation Expenses
We recognize all share-based payments to employees, consultants, and our Board, as non-cash compensation expense, in research and development expenses or general
and administrative expenses in the consolidated statement of operations, and these charges had no impact on the Company’s reported cash flows. Stock-based compensation
expense is calculated on the grant date fair values of such awards, and recognized each period based on the value of the portion of share-based payment awards that is ultimately
expected to vest during the period. Forfeitures are recorded as they occur.
F- 21
For performance-based awards, the Company recognizes related stock-based compensation expenses based upon its determination of the potential likelihood of
achievement of the specified performance conditions at each reporting date. There was no performance-based award recognized during the years ended December 31, 2022 and
2021.
Total non-cash stock option compensation expense was allocated among the following expense categories:
General and administrative
Research and development
Total
Note 7: Shareholders’ Equity
Issuances of Common Stock
Years Ended December 31,
2022
2021
$
$
1,661,025 $
227,919
1,888,944 $
1,571,328
212,774
1,784,102
For the years ended December 31, 2022 and 2021 there were 333,943 and 735,000 shares of the Company's common stock issued, as a result of the exercise of stock
options, with a weighted average issue price per share of $1.63 and $1.67, respectively.
Treasury Stock
As of December 31, 2022, and 2021, there were 12,253,502 shares of common stock held in treasury, at a cost of approximately $18.9 million, representing the purchase price
on the date the shares were surrendered to the Company.
Open Market Sale Agreement℠
On August 13, 2020, we entered into an Open Market Sale Agreement℠ with Jefferies LLC (“Jefferies”), with respect to an at the market offering program under which we
may offer and sell, from time to time at our sole discretion, shares of our common stock, par value $0.001 per share, having an aggregate offering price of up to $50.0 million through
Jefferies as our sales agent or principal.
We have not and are not obligated to sell any shares under the sale agreement. Subject to the terms and conditions of the sale agreement, Jefferies will use commercially
reasonable efforts, consistent with its normal trading and sales practices and applicable laws and regulations, to sell shares of our common stock from time to time based upon our
instructions, including any price, time or size limits or other customary parameters or conditions we specify, subject to certain limitations. Under the sale agreement, Jefferies may
sell shares of our common stock by any method permitted by law deemed to be an “at the market offering” as defined in Rule 415(a)(4) under the Securities Act of 1933, as
amended.
We will pay Jefferies a commission equal to 3.0% of the gross proceeds from each sale of shares of our common stock sold through Jefferies under the sale agreement and
will provide Jefferies with customary indemnification and contribution rights. In addition, we agreed to reimburse certain legal expenses and fees by Jefferies in connection with the
offering up to a maximum of $50,000, in addition to certain ongoing disbursements of Jefferies’ counsel, if required. The sale agreement will terminate upon the sale of all
$50.0 million of shares under the sale agreement, unless earlier terminated by either party as permitted therein.
The issuance and sale, if any, of shares of our common stock by us under the sale agreement will be made pursuant to a registration statement on Form S-3 filed with the
SEC on August 13, 2020 and declared effective by the SEC on August 25, 2020 and the accompanying Prospectus, as supplemented by a Prospectus Supplement. As of the date of
this filing, there have been no sales made under the Open Market Sale Agreement℠, and we have no immediate plans to sell any securities under this program to fund our near-
term business plan.
F- 22
Note 8: Subsequent Events
For purpose of disclosure in the consolidated financial statements, the Company has evaluated subsequent events through March 29, 2023, the date the consolidated
financial statements were available to be issued. Except as discussed below, management is not aware of any material events that have occurred subsequent to the balance sheet
date that would require adjustment to, or disclosure in the accompanying financial statements.
Stock Option Grant
On January 3, 2023, the Company granted an annual stock option award with an exercise price of $1.38, including: (a) 406,250 stock options granted to executives and key
personnel, vesting upon one year anniversary, or annually in equal installments over four years, (b) 262,500 stock options granted to members of the Board of Directors, vesting
upon one year anniversary, (c) 24,100 stock options granted to employees, vesting annually in equal installments over four years, and (d)15,000 stock options granted to a
consultant, vesting upon one year anniversary.
On January 3, 2023, the Company granted 247,961 restricted stock units (“RSUs”) vested in full, to executives and key personnel in lieu of cash bonus earned for the year
ended 2022. The Company also granted 163,044 RSUs, vesting upon one year anniversary, to the Board of Directors as a result of reduction in director cash compensation of
2023. The grant of these RSUs has been approved by the Compensation Committee of the Board of Directors in November 2022.
Sale of Equity Interest in Alphazyme
On January 18, 2023, the Company entered into a Securities Purchase Agreement, under which the Company agreed to sell its equity interest in Alphazyme, LLC. After
taking into account the adjustments for the transaction and legal expenses, payments to the Company were approximately $1.27 million in connection with the sale. The Company
also has the potential to receive additional payments based on the future sales of Alphazyme’s existing products, pursuant to the Alphazyme Sale Agreement.
The Amended and Restated Non-Exclusive Sublicense Agreement between Dyadic and Alphazyme, which was previously entered on June 24, 2020, remains in effect,
under which, Dyadic is entitled to potential milestone and royalty payments upon the commercialization of Alphazyme products using Dyadic’s proprietary C1-cell protein
production platform.
F-23
INTRACOASTAL POINTE OFFICE BUILDING
AMENDMENT TO OFFICE LEASE
Exhibit 10.11.1
This Amendment to Office Lease Agreement made and entered in to this 29th day of August, 2022 by and between Quentin Partners Co. as Agent for Intracoastal Pointe, Inc.
(both Florida corporations), as "Landlord;” and Dyadic International, Inc., as "Tenant.”
WITNESSETH
WHEREAS, Landlord and Tenant entered into that Office Lease dated December 30, 2010, and the subsequent Amendments; relative to the Leased Premises set forth therein.
Premises currently consist of Suite 405 (2,087 ± s.f.) which is currently known as Suite 404; and
WHEREAS, Tenant now desires to extend the term of the lease by twelve months until August 31, 2023; and
TERM: Term will begin on September 1, 2022 and end on August 31, 2023 (unless otherwise terminated as provided in the Lease).
TOTAL RENT FOR SUITE 405 (2,078 ± s.f.):
9/01/22-8/31/23: $14.50 per square foot; $30,131.00 / year; $2,510.92 / month*
*All rates plus CAM (which shall never be less than $10.00 psf) plus sales tax (currently at 6.5%).
PREMISES: Landlord will deliver premises in an "as is” condition.
During the Term, Tenant shall use the number Suite "404”. Tenant shall be responsible for all expense related to the adjustment of Suite numbers.
Except as set forth herein, all other terms, conditions, provisions and requirements of the Lease remain unchanged and in full force and effect.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed on the day and year first above written.
LANDLORD:
QUENTIN PARTNERS CO.
As Agent for: Intracoastal Pointe Inc.
/s/ James Q Riordan, Jr
By: James Q Riordan, Jr., President
witness
/s/ Sharon L Wood
Sharon Wood
TENANT:
DYADIC INTERNATIONAL, INC
/s/ Mark Emalfarb
By: Mark Emalfarb, CEO
WITNESS:
/s/ Heidi Zosiak
Exhibit 23.1
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the Registration Statements on Form S-3 (File No. 333-245687) and Form S-8 (File No. 333-258755 and 231712) of our report dated
March 29, 2023, with respect to the consolidated financial statements of Dyadic International, Inc. and Subsidiaries as of December 31, 2022 and 2021 and for the two years ended
December 31, 2022 included in this annual report on Form 10-K.
/s/ Mayer Hoffman McCann P.C.
St. Petersburg, Florida
March 29, 2023
Certification of Principal Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
and Securities and Exchange Commission Release 34-46427
Exhibit 31.1
I, Mark A. Emalfarb, certify that:
1.
I have reviewed this annual report on Form 10-K of Dyadic International Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light
of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-
15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:
a.
b.
c.
d.
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the
period in which this report is being prepared;
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the
registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal
control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors
and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.
b.
Date:
By:
Name:
Title:
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely
affect the registrant’s ability to record, process, summarize and report financial information; and
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial
reporting.
March 29, 2023
/s/ Mark A. Emalfarb
Mark A. Emalfarb
Chief Executive Officer
Certification of Principal Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
and Securities and Exchange Commission Release 34-46427
Exhibit 31.2
I, Ping W. Rawson, certify that:
1.
I have reviewed this annual report on Form 10-K of Dyadic International Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light
of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-
15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:
a.
b.
c.
d.
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that
material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the
period in which this report is being prepared;
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;
evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the
registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal
control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors
and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a.
b.
Date:
By:
Name:
Title:
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely
affect the registrant’s ability to record, process, summarize and report financial information; and
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial
reporting.
March 29, 2023
/s/ Ping W. Rawson
Ping W. Rawson
Chief Financial Officer
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1
In connection with the Annual Report of Dyadic International Inc. (the "Company") on Form 10-K for the year ended December 31, 2022 as filed with the Securities and Exchange
Commission on the date hereof (the "Report"), I, Mark A. Emalfarb, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that to
my knowledge:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date:
By:
Name:
Title:
March 29, 2023
/s/ Mark A. Emalfarb
Mark A. Emalfarb
Chief Executive Officer
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.2
In connection with the Annual Report of Dyadic International Inc. (the "Company") on Form 10-K for the year ended December 31, 2022 as filed with the Securities and Exchange
Commission on the date hereof (the "Report"), I, Ping W. Rawson, certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that to
my knowledge:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date:
By:
Name:
Title:
March 29, 2023
/s/ Ping W. Rawson
Ping W. Rawson
Chief Financial Officer