Dyadic third quarter total revenue decreases to $2.0 million

Nov 15 2010

Dyadic International, Inc. ("Dyadic") (Pink Sheets: DYAI), a global biotechnology company focused on the discovery, development, manufacture and sale of specialty enzyme and protein products and solutions for the bioenergy, industrial enzyme and biopharmaceutical industries, today announced financial results for the third quarter ended September 30, 2010. The financial information contained in this press release should be read in conjunction with the financial statements and related footnotes which have been posted on the Pink Sheets website at www.pinksheets.com and on Dyadic's website at www.dyadic.com.

Dyadic's President and Chief Executive Officer, Mark Emalfarb, stated, "During the third quarter, we improved our cash position, increased our enzyme sales and made progress in further developing our internal and external efforts to identify, negotiate and secure new licensing opportunities and other strategic collaborations for our core technologies."

Recent Company Highlights

In the third quarter of 2010, Dyadic made progress in the following areas:

Cash Position

• Improved cash position by raising an aggregate of $4,000,000 through the private placement of convertible subordinated secured promissory notes

Industrial Enzymes

• Increased sales by 15% in the third quarter as compared to the same period a year ago
• Improved product mix resulting in increased product margins of 31% for the year to date as compared to 22% for the same period a year ago
• Expanded distribution network to increase product availability in remote markets
• Introduced ROCKSOFT BioACE 5X, a new acid cellulase product for the Asian textile market

Biofuels

• Developed an improved seventh generation of a C1 biofuels strain which produces a mix of enzymes that is more efficient in releasing sugars from waste streams containing ligno-cellulosic materials than previous C1 biofuels strains
• Initiated discussions with new potential partners and continued ongoing dialogue with companies for the potential license of Dyadic's C1 technology for the development and commercialization of biofuels and biochemicals

Biopharmaceuticals

• Continued discussions with several companies and investors regarding the potential funding of EnGen Bio, Inc., Dyadic's prospective exclusive licensee of its C1 platform technology for biopharmaceutical applications, which was recently awarded a cash grant of approximately $250,000 under the U.S. Government's Qualifying Therapeutic Discovery Project program

Research & Development

• Demonstrated the capability of Dyadic's C1 platform technology in third party-funded research and development projects to over-express heterologous genes for the production of certain proteins and enzymes at substantially higher levels than the original producing organism and are leveraging these results through further collaborations to improve the cost structure of new and existing products in a variety of industries
• Continued to improve the efficiency and performance of Dyadic's enzymes for use in creating new industrial enzyme products and enhancing Dyadic's current product offerings in the areas of animal feed, pulp and paper, starch and alcohol, food and brewing, textiles and alternative fuels
• Continued to enhance our C1 technology and mine for novel genes through the annotation project that was conducted in collaboration with Scripps Florida, a division of the Scripps Research Institute, and Dyadic Netherlands, for greater applicability in producing higher enzyme yields at lower cost for the benefit of our licensing and research partners
• Initiated several provisional patent applications on genes and the enzymes they encode which resulted from ongoing research generated through the Scripps annotation program

Intellectual Property

• Sixth U.S. patent issued to Dyadic in October 2010

Financial Results

Total revenue for the third quarter ended September 30, 2010 decreased to approximately $2.0 million as compared to approximately $2.1 million for the third quarter ended September 30, 2009. Total revenue for the nine months ended September 30, 2010 decreased to approximately $6.2 million as compared to approximately $19.0 million for the nine months ended September 30, 2009. The decrease in total revenue for the three and nine month periods ended September 30, 2010 as compared to the three and nine month periods ended September 30, 2009 was due to a decrease in license fee revenue and research and development revenue as described below.

Net product related revenue for the third quarter increased approximately 15% to approximately $2.0 million as compared to approximately $1.7 million for the third quarter of 2009. Net product related revenue for the nine months ended September 30, 2010 increased approximately 14% to approximately $5.5 million as compared to approximately $4.9 million for the same period a year ago.

Gross margins for net product related revenue (exclusive of shipping and other costs) for the nine months ended September 30, 2010 increased to approximately 31% as compared to approximately 22% for the nine months ended September 30, 2009 as a result of the continued focus on more profitable product lines and improvements to inventory management and overall operating efficiencies.

There was no license fee revenue for the third quarter ended September 30, 2010 as compared to license fee revenue of $125,000 for the third quarter ended September 30, 2009. License fee revenue for the nine months ended September 30, 2010 decreased to $32,000 as compared to approximately $10.2 million for the nine months ended September 30, 2009. The decrease in license fee revenue for the three and nine month periods ended September 30, 2010 as compared to the same periods in 2009 was due to license fee revenue recognized in the third quarter of 2009 of approximately $9.9 million from Codexis, Inc. ("Codexis") pursuant to a non-exclusive license agreement between Codexis and Dyadic.

Research and development revenue for the third quarter ended September 30, 2010 decreased to approximately $64,000 as compared to approximately $298,000 for the third quarter ended September 30, 2009. Research and development revenue for the nine months ended September 30, 2010 decreased to approximately $618,000 as compared to approximately $3.9 million for the nine months ended September 30, 2009. The decrease in research and development revenue for the nine months ended September 30, 2010 as compared to the nine months ended September 30, 2009 was due to research and development revenue recognized in the first quarter of 2009 of approximately $3.3 million from Abengoa Bioenergy R&D, Inc. ("Abengoa") pursuant to a securities purchase agreement between Dyadic and Abengoa.

Net loss for the third quarter ended September 30, 2010 was approximately $1.4 million, or $(0.04) per basic and diluted share as compared to a net loss of approximately $654,000, or $(0.02) per basic and diluted share for the third quarter ended September 30, 2009. Net loss for the nine months ended September 30, 2010 was approximately $3.9 million, or $(0.13) per basic and diluted share as compared to net income of approximately $10.2 million, or $0.34 per basic and $0.31 per diluted share, for the nine months ended September 30, 2009.

At September 30, 2010, cash and cash equivalents were approximately $5.9 million as compared to approximately $8.4 million at December 31, 2009. A significant portion of this decrease in cash and cash equivalents was due to costs incurred by Dyadic to resolve the stockholder class action lawsuit.  Cash and cash equivalents during the third quarter of 2010 were positively affected by the private placement by Dyadic of an aggregate principal amount of $4,000,000 of convertible subordinated secured promissory notes.