DYADIC INTERNATIONAL INC

CONSOLIDATED BALANCE SHEETS

CONSOLIDATED STATEMENTS OF OPERATIONS

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’** EQUITY**

CONSOLIDATED STATEMENTS OF CASH FLOWS

Notes to Consolidated Financial Statements

Note1: 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 severalthird-party consultants and contract research organizations to carry out the Company’s activities. Over the pasttwo plus decades, the Company developed a gene expression platform for producing commercial quantities of industrial enzymes and other proteins, and previously licensed this technology tothird parties, such as Abengoa Bioenergy SA, BASF SE, Codexis, Inc. and others, for use in industrial (non-pharmaceutical) applications. This technology is based on theThermothelomyces heterothallica (formerly known asMyceliophthora thermophila) fungus, which the Company namedC1.

For the pastnine years since the Company sold its industrial technology business to Danisco USA (“Danisco”), the industrial biosciences business of DuPont (NYSE: DD) (the “DuPont Transaction”), the Company has been focused on building innovative microbial protein production platforms to address the growing demand for global protein bioproduction and unmet clinical needs for effective, affordable, and accessible biopharmaceutical products for human and animal health and for other biologic products for use in non-pharmaceutical applications. As part of the DuPont Transaction, Dyadic retained co-exclusive rights to its proprietary and patentedC1 protein production platform (the*“C1* platform”) for use in all human and animal pharmaceutical applications, and currently, the Company has the exclusive ability to enter into sub-license agreements (subject to the terms of the license and to certain exceptions) for use in all human and animal pharmaceutical applications. Danisco retained certain rights to utilize theC1 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 directed its efforts towards advancing theC1 platform to address the increasing global demand for the development and manufacturing of prophylactic and therapeutic biopharmaceuticals for human and animal health. The Company’s biopharmaceutical development efforts have been centered on enhancing the capability of theC1 platform to produce stable, properly folded, and functional proteins for pharmaceutical applications, including vaccines and monoclonal antibodies. In addition to improving the quality and productivity of theC1 platform, the Company has sought to validate its platform for human use through a series of fully funded biopharmaceutical projects, extensive animal studies utilizingC1-produced proteins, and, in2024, the successful completion of a Phase1 first-in-human study for a vaccine antigen produced usingC1, which demonstrated its safety for human applications.

Recognizing the longer development timelines, clinical testing, and regulatory requirements associated with human and animal pharmaceutical products, the Company has refined its core business strategy to expand into functional recombinant (non-animal derived) solutions for non-pharmaceutical applications in research, nutrition, and industrial markets. To address these opportunities, the Company has developed and launched the Dapibus™ Protein Production Platform (“Dapibus™”), which supports various applications within the functional recombinant protein and enzyme field, namely in Life Sciences, Bioactives & Ingredients, and Bioindustrial applications. Given the reduced developmental costs, shorter timelines, and fewer regulatory requirements associated with functional recombinant solutions, Dapibus™ has enabled the Company to generate near- term recurring revenue while continuing to build long-term value throughC1 for pharmaceutical applications. The Company anticipates achieving commercialization of certain functional recombinant products in2025 through a combination of existing collaborations and internal manufacturing efforts.

Liquidity and Capital Resources

In accordance with FASB Accounting Standards Codification (“ASC”)205-40, Presentation of Financial Statements – Going Concern (“Topic205-40”), management is required to evaluate whether there are conditions and events, considered in the aggregate that raise substantial doubt about the Company’s ability to continue as a going concern for at least12 months from the issuance date of the Company’s condensed interim financial statements. This evaluation doesnot take into consideration the potential mitigating effect of management’s plans that havenot been fully implemented or arenot within control of the Company as of the date the financial statements are issued. When substantial doubt exists under this methodology, management evaluates whether the mitigating effect of its plans sufficiently alleviates substantial doubt about the Company’s ability to continue as a going concern. The mitigating effect of management’s plans, however, is only considered if both (1) it is probable that the plans will be effectively implemented withinone year after the date that the financial statements are issued, and (2) it is probable that the plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern withinone year after the date that the financial statements are issued.

The Company expects to incur losses and have negative net cash flows from operating activities as it continues developing its microbial protein production platforms and related products, and as it expands its pipelines and engages in further research and development activities for internal products as well as for itsthird-party collaborators and licensees. The success of the Company depends on its ability to develop its technologies and products to the point of regulatory approval and subsequent revenue generation or through the sublicensing of the Company’s technologies and products, and its ability to raise capital to finance these developmental efforts.

On* March 8, 2024,the Company issued an aggregate principal amount of $6.0 million of its 8.0% Senior Secured Convertible Promissory Notes due March 8, 2027 (the “Convertible Notes”) in a private placement. The purchasers of the Convertible Notes included immediate family members and family trusts related to Mark Emalfarb, our President and Chief Executive Officer and a member of our Board of Directors, including The Francisco Trust, an existing holder of more than5%* of the Company’s outstanding common stock, (collectively, the “Purchasers”). The net proceeds from the sale of the Convertible Notes, after deducting offering expenses, were $5,824,000. The Company intends to use the net proceeds from the offering of the Convertible Notes for working capital and general corporate purposes.

The Convertible Notes are senior, secured obligations of Dyadic and its affiliates, and interest is payable quarterly in cash on the principal amount equal to 8% per annum. The Convertible Notes will mature on* March 8, 2027 (*the “Maturity Date”), unless earlier converted, repurchased, or redeemed in accordance with the terms of the Convertible Notes. The Convertible Notes can be converted into shares of Dyadic’s Class A common stock (the “Common Stock”), at the option of the holders of the Convertible Notes (the “Noteholders”) at any time prior to the Maturity Date.

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

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On* October 4, 2024,the Company entered into an amendment (the “Amendment”) to the Convertible Notes. Pursuant to the Amendment, (i) the conversion price upon which the Convertible Notes will be convertible into shares of the Company’s common stock is $1.40 per share of common stock, and (ii) the Redemption Date (as defined in the Amendment) will fall on any of the26,* 29 and32-month anniversaries of the original issue date of the Convertible Notes.

During the year ended* December 31, 2024,$910,000 of the Convertible Notes were converted into 556,623 shares of Common Stock. For more information regarding the Convertible Notes, including the covenants related thereto, see Note4* to the Consolidated Financial Statements.

On* May 1, 2025,the Company entered into asecond* amendment (the “Second Amendment”) to the Form of Senior Secured Convertible Promissory Note due* March 8, 2027 (the “Convertible Notes”) with a majority of the current holders of the Convertible Notes. Pursuant to the Second Amendment, the Redemption Date (as defined in the Second Amendment) now will fall on December 1, 2026.*

The Convertible Notes contain customary covenants, and the Securities Purchase Agreement relating to the Convertible Notes also contains certain affirmative and negative covenants (including, without limitation, restrictions on our ability to incur indebtedness, permit liens, make dividends or certain debt payments or consummate certain affiliate transactions). The Company was in compliance with its covenants with respect to the Convertible Notes as of* March 31, 2025*.

On* November 16, 2024,Dyadic entered into an agreement with the Gates Foundation relating to a grant in the amount of $3,092,136 awarded from the Gates Foundation for the cell line development of monoclonal antibodies targeting respiratory syncytial virus and malaria utilizing the Company’sC1* platform to provide globally accessible treatment options for underserved populations (the “Gates Foundation Grant”).

On March20, 2025, the Company received a funding award from Coalition for Epidemic Preparedness (“CEPI”) to advance Dyadic’sC1 platform through a $4.5 million grant through Fondazione Biotecnopolo di Siena (“FBS”) to accelerate recombinant protein vaccine development and manufacturing. The funding will support antigen design, cell line development, optimization, characterization, and scale-up to cGMP manufacturing. If successful, the next phase will focus on selecting a CEPI-priority pathogen antigen. Dyadic, as a subcontractor, will receive up to $2.4 million of the total grant funding.

As of* March 31, 2025*, the Company had $5,064,941 cash and $2,307,685 short-term investment securities (including accrued interest) totaling*$7,349,413.* The Company expects its existing cash, cash equivalents and its investment securities will be sufficient to meet its operational, business, and other liquidity requirements for at least the nexttwelve (12) months from the date of issuance of the financial statements contained in this Quarterly Report. However, the Company has based this estimate on assumptions that* mayprove to be wrong, and its operating plan maychange as a result of many factors currently unknown to it. In the event our financing needs arenot* able to be met by our existing cash, cash equivalents and investments, we would seek to raise additional capital through strategic financial opportunities that could include, but arenot limited to, future public or private equity offerings, collaboration agreements, convertible notes or other debt instruments, and/or other means. Any amounts raised* maybe used for the further development and commercialization of product candidates, and for other working capital purposes. There isno* guarantee that any of these strategic or financing opportunities will be executed or realized on favorable terms, if at all, and some could be dilutive to existing shareholders.

Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements, including the accounts of the Company and its wholly owned subsidiaries, have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) as found in the Accounting Standards Codification (“ASC”), Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and footnote disclosures normally included in consolidated financial statements have been condensed or omitted pursuant to such rules and regulations. All significant intra-entity transactions and balances have been eliminated in consolidation. The information included in this Quarterly Report should be read in conjunction with the audited consolidated financial statements and footnotes as of and for the year ended* December31,* 2024, included in our Annual Report.* ***

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In the opinion of management, the accompanying unaudited interim consolidated financial statements reflect all adjustments, which are of a normal recurring nature, considered necessary for a fair presentation of all periods presented. The results of the Company’s operations for any interim periods arenot necessarily indicative of the results of operations for any other interim period or for a full fiscal year.

The Company conducts business inone 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.

Segment Information

Operating segments are defined as components of an entity about which separate discrete information is available for evaluation by the chief operating decision maker, or CODM, in deciding how to allocate resources and in assessing performance. The CODM is the Company's senior management team that includes the Chief Executive Officer, Chief Operating Officer, and Chief Financial Officer. The Company views its operations as and manages its business inone operating segment, which is the business of developing and commercializing synthetic protein products using the Company’s proprietary microbial platforms, includingC1 and Dapibus™. Segment information is further described in Note8 to the consolidated financial statements included in this Quarterly Report on Form10-Q.

Use of Estimates

The preparation of these consolidated financial statements in accordance with GAAP requires management to make estimates and judgments that affect the reported amount of assets and liabilities and related disclosure of contingent assets and liabilities at the date of our consolidated financial statements and the reported amounts of revenues and expenses during the applicable period. Estimates inherent in the preparation of these consolidated financial statements include, but arenot limited to, estimates related to revenue recognition, accrued expenses, stock-based compensation expense, and income taxes. The Company bases its estimates on historical experience and other market specific or other relevant assumptions it believes to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates as there are changes in circumstances, facts, and experience. Actual results* may*differ from these estimates under different assumptions or conditions. Such differences could be material to the consolidated financial statements.

Concentrations and Credit Risk

The Company’s financial instruments that are potentially subject to concentrations of credit risk consist primarily of cash and cash equivalents, investment securities, and accounts receivable. At times, the Company has cash, cash equivalents, and investment securities at financial institutions exceeding the Federal Depository Insurance Company (“FDIC”) and the Securities Investor Protection Corporation (“SIPC”) insured limit on domestic currency and the Netherlands’ FDIC counterpart for foreign currency. The Company currently deals withfour reputable financial institutions and hasnot experienced any losses in those accounts.

For thethree months ended* March 31, 2025and2024*, the Company’s revenue was generated from seven andten customers, respectively. Significant customers are those that account for greater than10% of the Company’s revenues. For thethree months ended* March 31, 2025and2024*, four significant customers accounted for $350,000 or 89.0% and $225,000 or 67.2% of revenue, respectively.

As of* March 31, 2025* and* December 31, 2024*, accounts receivable was fromten andfour customers, of which, four customers accounted for $191,000 or 86.0% and $146,000 or 61.5% of total accounts receivable, respectively. The loss of business fromone 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 thethree months ended* March 31, 2025and2024*, the Company hadone andeight customers outside of the United States (i.e., European customers) that accounted for$48,000 or 65.8% and$274,000 or 81.8% of revenue, respectively.

As of* March 31, 2025* and* December 31, 2024*, the Company hadtwo andfour customers outside of the United States (i.e., European customers) that accounted for$39,000 or 17.3% and $146,000 or 61.5% of accounts receivable, respectively.

The Company uses several contract research organizations (“CROs”) to conduct its research projects. For thethree months ended* March 31, 2025and2024*, two andthree CROs accounted for$483,000 or 77.9% and$359,000 or 81.4% of total research services we purchased, respectively. As of* March 31, 2025* and* December 31, 2024*, two CROs accounted for$184,000 or 40.9% and $284,000 or 58.9% of accounts payable, respectively. The loss ofone 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 ofthree months or less when purchased as cash equivalents, including money market funds, which are unrestricted for withdrawal or use.

Investment Securities

The Company’s investment policy requires investment securities to be investment grade and held to maturity with the primary objective to maintain a high degree of liquidity while maximizing yield. The Company invests excess cash balances in short-term and long-term investment grade securities. Short-term investment securities mature withintwelve (12) months or less, and long-term investment securities mature overtwelve (12) months from the applicable reporting date. Management determines the appropriate classification of each investment at the time of purchase and reevaluates the classifications at each balance sheet date.

The Company classifies its investments in debt securities as held-to-maturity. Held-to-maturity securities are those securities that the Company has the ability and intent to hold until maturity. Held-to-maturity securities are recorded at amortized cost, net of allowance for credit losses if applicable, and adjusted for the amortization or accretion of premiums or discounts. Premiums and discounts are amortized over the life of the related held-to-maturity security. When a debt security is purchased at a premium, both the face value of the debt and premium amount are reflected as investing outflow.

When evaluating an investment for other-than-temporary impairment, the Company reviews factors such as the length of time and extent to which fair value has been below its cost basis, the financial condition of the issuer and any changes thereto, changes in market interest rates, and whether it is more likely thannot the Company will be required to sell the investment before recovery of the investment’s cost basis. The Company measures expected credit losses on held to maturity debt securities on an individual security basis. The estimate of expected credit losses considers historical credit information from external sources. The impairment of the investment that is related to the credit loss, if any, is expensed in the period in which the event or change occurred.

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The Company classifies its investments in money market funds as available-for-sale securities and presented as cash equivalents on the consolidated balance sheets. As of * March 31, 2025* and* December 31, 2024,*all of our money market funds were invested in U.S. Government money market funds, for which the risk of loss is minimal.

As of* March 31, 2025*, and* December 31, 2024*, the Company didnot have any investment securities classified as trading.

Accounts Receivable

Accounts receivable consist of billed receivables currently due from customers and unbilled receivables. Unbilled receivables represent the excess of contract revenue (or amounts reimbursable under contracts) over billings to date. Such amounts become billable in accordance with the contract terms, which usually consider the passage of time, achievement of certain milestones or completion of the project.

Accounts receivable are stated net of an allowance for credit losses, if deemed necessary based on the Company’s evaluation of collectability and potential credit losses. Management assesses the collectability of its accounts receivable using the specific identification of account balances and considers the credit quality and financial condition of its significant customers, historical information regarding credit losses and the Company’s evaluation of current and expected future economic conditions and changes in our customer collection trends. If necessary, an allowance for credit losses is recorded against accounts receivable such that the carrying value of accounts receivable reflects the net amount expected to be collected. Accounts receivable balances are written off against the allowance for credit losses when the potential for collectability is considered remote. Substantially all of our accounts receivable were current and include unbilled amounts that will be billed and collected over the nexttwelve (12) months. Management determined thatno allowance for credit losses was required as of* March 31, 2025*, and* December 31, 2024*.

Accounts receivable consist of the following:

Accounts Payable

Accounts payable consist of the following:

Accrued Expenses

Accrued expenses consist of the following:

Deferred Financing Costs

Deferred financing costs represent costs incurred in connection with the issuance of debt instruments and equity financings. Deferred financing costs related to the issuance of debt are amortized over the term of the financing instrument using the effective interest method and are presented in the consolidated balance sheets as an offset against the related debt. Offering costs from equity financings are netted against the gross proceeds received from the equity financings. See Note4 for the amortization amount.

Revenue Recognition

The Company hasno products approved for sale. All our revenue to date has been research revenue fromthird-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 the5-step process outlined in ASC Topic606 (“Topic606”): (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) a locate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. We recognize revenue when we satisfy a performance obligation by transferring control of the service to a customer in an amount that reflects the consideration that we expect to receive. Depending on how the performance obligation under our license and collaboration agreements is satisfied, we recognize the revenue either at a point in time or over time by using the input method under Topic606 to measure the progress toward complete satisfaction of a performance obligation.

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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 fulfil the performance obligation. These costs consist primarily of full-time equivalent effort andthird-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 receives grants from governments, agencies, and other private andnot-for-profit organizations. These grants are intended to be used to partially or fully fund the Company’s research collaborations. However, most, ifnot all, of such grant revenues, is expected to be earmarked forthird parties to advance the research required, including preclinical and clinical trials. Revenue related to grants are presented on a gross basis on the Consolidated Statements of Operations.

*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 a located to the license when technology is transferred to the customer and the customer can use and benefit from the license.

Customer options: If the sublicensing agreement includes customer options to purchase additional goods or services, the Company will evaluate if such options are considered material rights to be deemed as separate performance obligations at the inception of each arrangement.

Milestone payments: At the inception of each arrangement that includes development, commercialization, and regulatory milestone payments, the Company evaluates whether the achievement of the milestones is considered probable and estimates the amount to be included in the transaction price. If the milestone payment is in exchange for a sublicense and is based on the sublicensee’s subsequent sale of product, the Company recognizes milestone payment by applying the accounting guidance for royalties.

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

Research and Development Costs

Research and development (“R&D”) costs are expensed as incurred. R&D costs are for 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, including related party, for thethree months ended* March 31, 2025and2024* were as follows:

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Foreign Currency Transaction Gain or Loss

The Company and its foreign subsidiary use the U.S. dollar as its functional currency and initially measure the foreign currency denominated assets and liabilities at the transaction date. Monetary assets and liabilities are then re-measured at exchange rates in effect at the end of each period, and property and non-monetary assets and liabilities are carried 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 intothree levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

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, deposits, and the Company's8% Senior Secured Convertible Promissory Notes (the “Convertible Notes”), due* March 2027.The carrying amount of these financial instruments, except for investment in debt securities and Convertible Notes, 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 thethird*-party broker service for disclosure purposes. See Note4 for additional information related to the Convertible Notes.

Income Taxes

For thethree months ended* March 31, 2025*, there wasno provision for income taxes or unrecognized tax benefits recorded. As of* March 31, 2025* and* December 31, 2024*, deferred tax assets were $19.1 million and $17.6 million, respectively. Due to the Company’s history of operating losses and the uncertainty regarding our ability to generate taxable income in the future, the Company has established a 100% valuation allowance against deferred tax assets as of* March 31, 2025* and* December 31, 2024*.

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 expenses 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 stock shares outstanding during the reporting period. Diluted net loss per share adjusts the weighted average number of common stock shares outstanding for the potential dilution that could occur if common stock equivalents, such as stock options were exercised and converted into common stock, calculated by applying the treasury stock method.

For thethree months ended* March 31, 2025*, a total of 6,401,581 shares of potentially dilutive securities, including 96,984 shares of unvested restrict stock units and options to purchase 6,304,597 shares of common stock, were excluded from the computation of diluted net loss per share as their effect would have been anti-dilutive. For thethree months ended* March 31, 2024*, a total of 6,100,857 shares of potentially dilutive securities, including 191,510 shares of unvested restrict stock units and options to purchase 5,909,347 shares of common stock, were excluded from the computation of diluted net loss per share as their effect would have been anti-dilutive.

New and Recently Adopted Accounting Pronouncements as of March 31, 2025**

In* December 2023,the FASB issued ASU2023*-09 – Income Taxes (Topic ASC740) Income Taxes. The ASU improves the transparency of income tax disclosures by requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction. It also includes certain other amendments to improve the effectiveness of income tax disclosures. The amendments in ASU2023-09 will become effective beginning with our2025 fiscal year. We donot expect that this guidance will have a material impact on our financial position and our results of operations.

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Note2: Cash, Cash Equivalents, and Investments

The Company’s investments in debt securities are classified as held-to-maturity and are recorded at amortized cost, net of allowance for credit losses, and its investments in money market funds are classified as available-for-sale securities and presented as cash equivalents on the consolidated balance sheets. The following table shows the Company’s cash, available-for-sale securities, and investment securities by major security type as of* March 31, 2025*, and* December 31, 2024*:

Notes:

(1) Definition of thethree-level fair value hierarchy:

(2) All our money market funds were invested in U.S. Government money market funds.

(3) Short-term investment securities will mature within12 months or less, from the applicable reporting date.

(4) For thethree months ended* March 31, 2025and2024*, the Company received discounts of $6,104 and $1,547 to purchase held-to-maturity investment securities, respectively. For the year ended* December 31, 2024*, the Company received discounts of $78,770 to purchase held-to-maturity investment securities.

(5) The Company considers the decline in market value of its investment portfolio to be temporary in nature. As of* March 31, 2025* and* December 31, 2024,the Company didnot* consider any of its investments to be other-than-temporarily impaired andno allowance for credit losses was recorded.

Note3: Research and Collaboration Agreements, Sublicense Agreements, and Investments in Privately Held Companies

Gates Foundation Grant

In* November 2024,Gates Foundation (the “Gates Foundation”) awarded the Company a grant in the amount of $3,092,136 for the cell line development of monoclonal antibodies targeting respiratory syncytial virus and malaria utilizing the Company’sC1* platform to provide globally accessible treatment options for underserved populations (the “Gates Foundation Grant”).

In* December 2024,the Company received approximately $0.8 million of the Gates Foundation Grant, and the remaining award will be received later in2025* and2026 in the amounts of approximately $1.5 million and $0.7 million, respectively, subject to potential modifications of timing and amounts. For thethree months ended* March 31, 2025,*the Company has recognized $176,000 grant revenue and $143,000 in cost of grant revenue, in connection with the Gates Foundation Grant.

Coalition for Epidemic Preparedness Innovations (CEPI) Grant

On March20, 2025, the Company received a funding award from CEPI to advance Dyadic’sC1 platform through a $4.5 million grant through Fondazione Biotecnopolo di Siena (“FBS”) to accelerate recombinant protein vaccine development and manufacturing. The funding will support antigen design, cell line development, optimization, characterization, and scale-up to cGMP manufacturing. If successful, the next phase will focus on selecting a CEPI-priority pathogen antigen. Dyadic, as a subcontractor, will receive up to $2.4 million of the total grant funding. For thethree months ended* March 31, 2025*, the Company has recognized $34,000 in grant revenue and $28,000 in cost of grant revenue, in connection with the CEPI Grant.

Proliant

On* June 27, 2024**,* the Company entered into a License and Development Agreement (the “Proliant Agreement”) with Proliant Biologicals, LLC d/b/a Proliant Health and Biologicals (“Proliant”), pursuant to which, Proliant will license Dyadic’s proprietary fungal microbial expression and production platforms and microbial strains for the production of recombinant serum albumin, for an initial period of 10 years with an option to extend for an additional 3 years under certain circumstances. Under the terms of the Proliant Agreement, Dyadic has received an initial upfront payment of $500,000 and asecond payment of $500,000 upon the completion of the transfer of a Production Strain (as defined in the Proliant Agreement.) for the year ended* December 31, 2024.The Company will receive a final payment of $500,000 upon the meeting of a certain productivity threshold. For thethree months ended March 31, 2025*, the Company didnot receive any additional payments under the Proliant Agreement. Upon commencing commercial sales of animal-free recombinant serum albumin products produced pursuant to the Proliant Agreement, the Company will receive royalties based on a certain percentage of the gross margin received by Proliant, as defined in the Proliant Agreement.

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Inzymes ApS

On* September 18, 2023,Dyadic International (USA) Inc., a subsidiary of the Company, signed a Development and Exclusive License Agreement (the “Inzymes Agreement”) with Inzymes ApS (“Inzymes”), a Denmark corporation, to develop and commercialize certain non-animal dairy enzymes used in the production of food products using Dyadic’s proprietary Dapibus™ platform. In October 2023,*the Company received an upfront payment of $0.6 million in accordance with the terms of the Inzymes Agreement.

On* October 11, 2024,the Inzymes Agreement was amended (“the Amended Inzymes Agreement”) to change the scope of research and development services required under the agreement as well as adjust the success fees upon the achievement of certain target yields, milestone payments uponfirst* commercial sale of each product and royalties.

For the year ended* December 31, 2024,the Company has completed all product research and development services and satisfied all related performance obligations under the Amended Inzymes Agreement, and recognized $890,169 in license revenues, including success fees upon the achievement of target yield ofone* related product. For the year ended* December 31, 2024,the Company also recognized research and development revenues of $25,000 related to the Amended Inzymes Agreement. For thethree* months ended * March 31, 2025* , there wasno research and development revenue recognized related to the Inzymes Agreement.

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

Alphazyme

In2019 the Company entered into a sub-licensing agreement with Alphazyme, LLC (“Alphazyme”) that was subsequently amended (the “Amended Alphazyme LLC Agreement”). Under the Amended Alphazyme LLC Agreement, Alphazyme obtained additional capital contribution and Dyadic’s ownership was diluted to 1.99%.

The Company evaluated the nature of its equity interest investment in Alphazyme and determined that Alphazyme is a VIE due to the capital structure of the entity. However, the Company isnot the primary beneficiary of Alphazyme as Dyadic doesnot have the power to control or direct the activities of Alphazyme that most significantly impact the VIE. As a result, the Company doesnot consolidate its investment in Alphazyme. The Company reports its investment in Alphazyme under the cost method of accounting, given that it doesnot have the ability to exercise significant influence or control over Alphazyme.

On* January 18, 2023,*the Company entered into a Securities Purchase Agreement, under which the Company agreed to sell its equity interest in Alphazyme, LLC (the “Alphazyme Sale Agreement”). The Company continues to have the potential to receive additional payments based on the future sales of Alphazyme’s existing products, pursuant to the Alphazyme Sale Agreement.

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 milestoneand royalty payments upon the commercialization of Alphazyme products using Dyadic’s proprietaryC1*-cell protein production platform.

For the year ended* December 31, 2024,the Company received a total cash payment of $1.3 million from the sale of its equity interest in Alphazyme, LLC. In thefirst* quarter of2024, the Company received an additional cash payment of $60,977, which was recorded as gain on sale of Alphazyme in the consolidated statement of operations. There wasno revenue recognized related to Alphazyme in2025.

Note4: Convertible Notes Payable

On* March 8, 2024,*the Company issued senior secured convertible promissory notes (the “Convertible Notes”) with an aggregate principal amount of $6.0 million, of which,$2.0 million were sold to related parties, including immediate family members and family trusts related to Mark Emalfarb, our President and Chief Executive Officer and a member of our Board of Directors.

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The Convertible Notes are senior, secured obligations of the Company and its affiliates, and interest is payable quarterly in cash on the principal amount equal to 8% per annum, and guaranteed by its subsidiary, Dyadic International (USA), Inc. under a subsidiary guarantee for the benefit of the holders of the Convertible Notes (each such holder, a “Holder”).

The Convertible Notes mature on* March 8, 2027,unless earlier converted or redeemed in accordance with the terms of the Convertible Notes. The Convertible Notes are secured by afirst* priority lien on substantially all assets of the Company and Dyadic International (USA), Inc.

The Convertible Notes are accounted for in accordance with ASC470-20, Debt with Conversion and Other Options and ASC815-15, Derivatives and Hedging. Under ASC815, contracts that are both indexed to its own stock and classified in stockholders’ equity in its statement of financial position arenot considered to be derivative instruments. Based on the Company’s analysis, it is determined that the Convertible Notes contain embedded features that are indexed to the Company’s own stock and are classified in stockholders’ equity in the Company’s statement of financial position, but donot meet the requirements for bifurcation and recognition as derivatives, and therefore, donot need to be accounted for separately. Accordingly, the proceeds received from the issuance of the Convertible Notes were recorded as a single liability in accordance with ASC470 on the Company’s consolidated balance sheets.

The Company incurred $175,674 of debt issuance costs associated with the Convertible Notes, which were recorded as a reduction of the Convertible Notes on the consolidated balance sheets. The debt issuance costs are being amortized and recognized as additional interest expense over the expected life of the Convertible Notes using the effective interest method. We determined the expected life of the debt is equal to thethree-year term of the Convertible Notes.

On* October 4, 2024,the Company entered into an amendment (the “Amendment”) to the Convertible Notes. Under the Amendment, (i) the conversion price upon which the Convertible Notes will be convertible into shares of the Company’s common stock is $1.40 per share of common stock, and (ii) the Redemption Date (as defined in the Amendment) will fall on any of the26,* 29 and32-month anniversaries of the original issue date of the Convertible Notes.

On* May 1, 2025,the Company entered into asecond* amendment (the “Second Amendment”) to the Form of Senior Secured Convertible Promissory Note due* March 8, 2027 (the “Convertible Notes”) with a majority of the current holders of the Convertible Notes. Pursuant to the Second Amendment, the Redemption Date (as defined in the Second Amendment) now will fall on December 1, 2026.*

The Company assessed the Amendment and Second Amendment for a debt extinguishment or modification in accordance with ASC470-50. As both the change in the present value of future cash flows of the modified Convertible Notes to that of the original Convertible Notes (including callable features) and the change in fair value of the embedded conversion option to that of the carrying value of the Convertible Notes immediately before modification resulted in a less than10% change, neither Amendments was deemed substantial and they are regarded as a note modifications. The Company didnot incur any gain or loss relating to the modifications and any incremental costs related to the Amendments were expensed.

For thethree months ended* March 31, 2025*, $107,173 of interest was paid and debt issuance costs of $11,762 were amortized and recorded in interest expense in the consolidated statements of operations. As of* March 31, 2025*, the accrued interest on the Convertible Notes to related parties and otherthird parties were $21,800 and $80,000, respectively. As of* March 31, 2025*, accumulated amortized debt issuance costs are $48,138. For thethree months ended* March 31, 2024,there wereno payments of interest made and debt issuance costs of $4,000 were amortized and recorded in interest expenses on the consolidated statements of operations. As of March 31, 2024,*accumulated amortized debt issuance costs are $3,125.

During the year ended* December 31, 2024,$910,000 of the Convertible Notes were converted into 556,623 shares of the Company’s common stock. As of March 31, 2025*, convertible notes payable consisted of the following:

Notes:

(1) Mr. Thomas Emalfarb, nephew of Mr. Mark A. Emalfarb, our President and Chief Executive Officer, is the Trustee of the Francisco Trust. Mr. Thomas Emalfarb* maybe deemed to have voting, dispositive and investment power with respect to the shares of common stock held by the Francisco Trust and disclaims any such beneficial ownership other than to the extent of any pecuniary interest he mayhave therein, directly or indirectly. The amount of accrued interest as of March 31, 2025*, is $20,000.

(2) Mark A. Emalfarb, our President and Chief Executive Officer, is the Trustee of the Irrevocable Trust and the brother of Mr. Bradley S. Emalfarb, who is the sole beneficiary of the Irrevocable Trust. Mr. Bradley S. Emalfarb, as sole beneficiary of the Irrevocable Trust, therefore,* maybe deemed to have voting, dispositive and investment power with respect to the shares of common stock held by the Irrevocable Trust and disclaims any such beneficial ownership other than to the extent of any pecuniary interest he mayhave therein, directly or indirectly. In2024,* $500,000 of the Convertible Notes held by Mr. Bradley S. Emalfarb were converted into 294,891 shares of the Company’s common stock and $410,000 of the Convertible Notes held by Bradley Scott Emalfarb Irrevocable Trust were converted into 261,732 shares of the Company’s common stock. As of* March 31, 2025*, there isno accrued interest for Bradley Emalfarb and Bradley Scott Emalfarb Irrevocable Trust.

(3) Messrs. Thomas Emalfarb, Scott Emalfarb and Michael Emalfarb, nephews of Mr. Mark A. Emalfarb, our President and Chief Executive Officer, are co-trustees of the Descendant Trust and* maytherefore be deemed to have shared voting, dispositive and investment power over the shares of common stock held by the Descendant Trust. The amount of accrued interest as of March 31, 2025*, is $1,800.

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Note5: Commitments and Contingencies

Legal Proceedings

We arenot 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 ofone 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.

VTT Research Contract

On* January 31, 2024,the Company entered into a Third Amendment to the commission contract concerning VTT Technical Research Centre of Finland Ltd. (“VTT”) to develop Dyadic’sC1* fungal expression system for therapeutic protein production (the “Third Amendment”). The original contract was entered on* June 28, 2019,and subsequently amended by the First Amendment on June 21, 2022,and the Second Amendment on September 9, 2022.Under the terms of the Third Amendment, the contract duration was extended to January 31, 2025,and Dyadic has paid VTT a total of EUR€186,000 to continue developing Dyadic’sC1*-cell protein production platform for therapeutic protein production, including ourC1 host system. Dyadic has the right to terminate the contract with90 days’ notice. As of* March 31, 2025,*the Company has completed its obligation under the Third Amendment.

Note6: Share-Based Compensation

Description of Equity Plans

The2021 Equity Incentive Award Plan (the*“2021* Plan”) was adopted by the Company’s Board of Directors on* April 9, 2021and approved by the Company’s Annual Meeting of Shareholders (the “Annual Meeting”) on June 11, 2021.The2021* Plan serves as a successor to the Company’s2011 Equity Incentive Plan (the*“2011* Plan”). Since the adoption of the2021 Plan, all equity awards were made from the2021 Plan andno additional awards will be granted under the2011 Plan. The2021 Plan provides for the issuance of a variety of share-based compensation awards, including stock options, restricted stock awards, restricted stock unit awards, performance awards, dividend equivalents awards, deferred stock awards, stock payment awards and stock appreciation rights. As of* April 16, 2021,the2021* 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 the2011 Plan.

As of* March 31, 2025*, the Company had 6,304,597 stock options outstanding and 96,984 unvested restricted stock units in addition to 1,255,606 shares of common stock available for grant under the2021 Plan. As of* December 31, 2024,the Company had 5,788,597 stock options outstanding and 117,925 unvested restricted stock units in addition to 2,056,629 shares of common stock available for grant under the2021* 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’s2011 Plan and2021 Plan isten years, except for certain options granted to the contractors which are eithertwo orfive 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 doesnot 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 since the DuPont Transaction in2015. The Company reviews its volatility assumption on an annual basis and has used the Company’s historical volatilities since2016, as the DuPont Transaction resulted in significant changes in the Company’s business and capital structure.

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*Expected life of option.*The expected life of option was based on the contractual term of the option and expected employee exercise and post-vesting employment termination behavior. The Company uses the weighted average vesting period and contractual term of the option as the best estimate of the expected life of a new option.

The assumptions used in the Black-Scholes option pricing model for stock options granted for thethree months ended* March 31, 2025*, are as follows:

The following table summarizes the stock option activities for thethree months ended* March 31, 2025*:

Notes:

(1) Represents the following options granted:

(2) Repre sents the following options exercised:

(a) 25,000 stock options with an exercise price of $0.97 per share exercised by a board member (b) 30,000 stock options with an exercise price of $1.33 per share exercised by a board member.

(3) Repre sents the following options canceled:

(a) 27,500 stock options with an exercise price of $1.75 per share granted to a consultant and (b) 75,000 stock option with an exercise price of $4.10 per share granted to key personnel.

Restricted Stock Units

Restricted stock units (the “RSUs”) are granted subject to certain restrictions. Vesting conditions are determined at the discretion of the Board of Directors. The fair market value of RSUs is generally determined based on the closing market price of the stock on the grant date.

The following table summarizes the restricted stock award activity for thethree months ended* March 31, 2025*:

Notes:

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Compensation Expenses

We recognize all share-based payments to employees and our Board of Directors, as non-cash compensation expense, in research and development expenses or general and administrative expenses in the consolidated statement of operations, and these charges hadno impact on the Company’s reported cash flows. Stock-based compensation expense is calculated on the grant date fair values of such awards, and recognized each period based on the value of the portion of share-based payment awards that is ultimately expected to vest during the period. Forfeitures are recorded as they occur. For thethree months ended* March 31, 2025*, there were forfeitures of $16,880.

For performance-based awards, the Company recognizes related stock-based compensation expenses based upon its determination of the potential likelihood of achievement of the specified performance conditions at each reporting date.

Total non-cash share-based compensation expense was allocated among the following expense categories:

The following table summarizes the Company’s non-cash share-based compensation expense allocation between options and restricted stock units:

Note7: Shareholders’ Equity

Issuances of Common Stock

For thethree months ended* March 31, 2025*, there were 227,379 shares from the vesting of restricted stock units with a weighted average issue price of $1.67 per share and 27,483 shares from the exercise of stock options. For thethree months ended* March 31, 2024*, there were 375,753 shares of the Company’s common stock issued resulting from the vesting of restricted stock units with a weighted average issue price of $1.50 per share.

Treasury Stock

As of* March 31, 2025*, there were 12,253,502 shares of common stock held in treasury, at a cost of $18.9 million, representing the purchase price on the date the shares were surrendered to the Company.

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Note8: ** Segment**

The Company operates and manages its business asone reportable segment andone operating segment, which is the business of developing and commercializing synthetic protein products using the Company’s proprietary microbial platforms, includingC1 and Dapibus TM. The Company's chief operating decision maker, or CODM, is the Company's senior management team that includes the Chief Executive Officer, Chief Operating Officer and Chief Financial Officer. The CODM assesses performance for the segment and decides how to allocate resources based on consolidated net loss that is also reported on the consolidated statements of operations.

The measure of segment assets is reported on the consolidated balance sheets as total consolidated assets. The Company operates in the U.S. and Europe. All material long-lived assets of the Company reside in the U.S. For geographic information about the Company’s product revenues, see Note1, Concentration. Long-lived assets primarily consist of operating lease right-of-use assets.

The CODM uses consolidated net loss to evaluate the Company's spending and monitor budget versus actual results. The monitoring of budgeted versus actual results is used in assessing the performance of segment and in establishing resource allocation across the organization. Factors used in determining the reportable segment include the nature of the Company's operating activities, the organizational and reporting structure and the type of information reviewed by the CODM to allocate resources and evaluate financial performance. The accounting policies of the segment are the same as those described in Note1 of the notes to the consolidated financial statements included in this Annual Report on Form10-K.

The CODM reviews cash, cash equivalents and investment securities as a measure of segment assets. As of * March 31, 2025* and* December 31, 2024*, the Company’s cash, cash equivalents and investment securi ties were $7.3 million and$9.3 million, respectively.

The following table presents information about segment revenue, significant segment expenses and segment operating loss for thethree months ended* March 31, 2025and2024*:

Note9: Subsequent Events

For purpose of disclosure in the consolidated financial statements, the Company has evaluated subsequent events through* May 14, 2025*, the date the consolidated financial statements were available to be issued. Except for items mentioned in the notes, management isnot 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.

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