DYADIC INTERNATIONAL INC

Previous wording

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.

Current wording

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 are not limited to those set forth in “Item 1A. Risk Factors” in this Annual Report. All forward-looking statements included in this Annual Report are based on information available to us as of the time we file this Annual Report and, except as required by law, we undertake no obligation to update publicly or revise any forward-looking statements.

Previous wording

Dyadic International, Inc. (“Dyadic”, “we”, “us”, “our”, or the “Company”) is a global biotechnology platform company based in Jupiter, Florida with operations in the United States and a satellite office in the Netherlands, and it utilizes several third-party consultants and contract research organizations to carry out the Company’s activities. Over the past two plus decades, the Company developed a gene expression platform for producing commercial quantities of industrial enzymes and other proteins, and previously licensed this technology to third parties, such as Abengoa Bioenergy SA, BASF SE, Codexis, Inc. and others, for use in industrial (non-pharmaceutical) applications. This technology is based on theThermothelomyces heterothallica(formerly known asMyceliophthora thermophila) fungus, which the Company named C1.

Current wording

Dyadic is a global biotechnology platform company based in Jupiter, Florida with operations in the United States and a satellite office in the Netherlands, and it utilizes several third-party consultants and contract research organizations to carry out the Company’s activities. Over the past two plus decades, the Company developed a gene expression platform for producing commercial quantities of industrial enzymes and other proteins, and previously licensed this technology to third parties, such as Abengoa Bioenergy SA, BASF SE, Codexis, Inc. and others, for use in industrial (non-pharmaceutical) applications. This technology is based on theThermothelomyces heterothallica(formerly known asMyceliophthora thermophila) fungus, which the Company named C1.

Previous wording

The Company has no products approved for sale. All our revenue to date has been research revenue from third-party collaborations and government grants, as well as revenue from sublicensing agreements and collaborative arrangements, which may include upfront payments, options to obtain a license, payment for research and development services, milestone payments and royalties, in the form of cash or non-cash considerations (e.g., minority equity interest).

Current wording

The Company has no products approved for sale. All our revenue to date has been research revenue from third-party collaborations and grants, as well as revenue from sublicensing agreements and collaborative arrangements, which may include upfront payments, options to obtain a license, payment for research and development services, milestone payments and royalties, in the form of cash or non-cash considerations (e.g., minority equity interest).

Previous wording

*Revenue related to grants:*The Company may receive grants from governments, agencies, and other private and not-for-profit organizations. These grants are intended to be used to fund the Company’s research collaborations partially or fully, including opportunities and projects that the Company is pursuing with certain collaborators. However, most, if not all, of such potential grant revenues, if received, is expected to be earmarked for third parties to advance the research required, including preclinical and clinical trials for vaccines and/or antibodies candidates.

Current wording

*Revenue related to grants:*The Company receives grants from governments, agencies, and other private and not-for-profit organizations. These grants are intended to be used to partially or fully fund the Company’s research collaborations. However, most, if not all, of such grant revenues, is expected to be earmarked for third parties to advance the research required, including preclinical and clinical trials. Revenue related to grants is presented on a gross basis on the Consolidated Statements of Operations.

Previous wording

*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.

Current wording

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

Previous wording

*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.

Current wording

*Royalties:*With respect to licenses deemed to be the predominant item to which the sales-based royalties relate, including milestone payments based on the level of sales, the Company recognizes revenue at the later of (i) when the related sales occur or (ii) when the performance obligation to which some or all of the royalty has been satisfied (or partially satisfied). To date, the Company has not recognized any royalty revenue resulting from any of its sublicensing arrangements.

Previous wording

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.

Current wording

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 a sublicensing agreement are received prior to the technology transfer, the Company will record the amount received as deferred revenue from the licensing agreement.

Previous wording

General and administrative expenses for the year ended December 31, 2024 increased to $6,135,000 compared to $5,817,000 for the year ended December 31, 2023. The increase reflected increases in business development and investor relations expenses of $294,000, share-based compensation expenses of $109,000, professional service expenses of $82,000, and other increases of $84,000, partially offset by decreases in management incentive expenses of $124,000, legal expenses of $65,000 and insurance expenses of $64,000.

Current wording

General and administrative expenses for the year ended December 31, 2025 decreased to $5,762,000 from $6,135,000 for the year ended December 31, 2024. The decrease reflected reductions in management incentive expenses of $225,000, share-based compensation expenses of $166,000, and insurance expenses of $51,000, partially offset by increases in professional service expenses of $51,000 and other expenses of $18,000.

Previous wording

Foreign currency exchange loss for the year ended December 31, 2024 was $23,000 compared to $38,000 for the year ended December 31, 2023. The decrease reflected the currency fluctuation of the Euro in comparison to the U.S. dollar.

Current wording

Foreign currency exchange losses for the year ended December 31, 2025 were $47,000, compared to $23,000 for the year ended December 31, 2024. The increase was primarily due to fluctuations in the Euro relative to the U.S. dollar.

Previous wording

For the year ended December 31, 2024, the total other income, net, of $92,000 compared to $1,434,000 for the year ended December 31, 2023. The decrease was largely due to an increase in interest expenses of $428,000 related to the Convertible Notes in 2024 and a gain on the sale of the Company’s equity interest in Alphazyme, LLC of $1,018,000 in 2023.

Current wording

For the year ended December 31, 2025, total other expenses, net, were $172,000, compared to other income, net, of $92,000 for the year ended December 31, 2024. The decrease in other income was primarily due to an increase in interest expense related to the Convertible Notes, which totaled $456,000 in 2025 compared to $428,000 for the partial year in 2024, and the absence of a $63,000 gain on the sale of the Company’s equity interest in Alphazyme, LLC recognized in 2024. The decrease was also partially attributable to a reduction in interest income.

Previous wording

The Company had net operating loss (“NOL”) carryforwards available as of December 31, 2024 and 2023, in the amount of approximately $49,903,000 and $45,850,000, respectively. Approximately $46,965,000 of the NOL carryforwards will be carried forward indefinitely and will be available to offset 80% of taxable income. The remaining amount of the net operating loss carryforwards will expire at varying dates through 2038.

Current wording

The Company had federal and state net operating loss (“NOL”) carryforwards available as of December 31, 2025 and 2024*,* in the amount ofapproximately $53,011,000 and $49,903,000, respectively. Approximately $50,073,000 of the federal net operating loss carryforwards will be carried forward indefinitely and will be available to offset 80% of taxable income. The remaining amount of the net operating loss carryforwards will expire at varying dates through 2037.

Previous wording

Net loss for the year ended December 31, 2024 was $5,809,000 compared to a net loss of $6,795,000 for the year ended December 31, 2023. The decrease in net loss of $986,000 was principally due to an increase in license revenue of $1,537,000 and a decrease in research and development expenses of $1,253,000, partially offset by an increase in general and administrative expenses of $318,000 and a decrease in other income of $1,343,000.

Current wording

Net loss for the year ended December 31, 2025 was $7,364,000, compared to a net loss of $5,809,000 for the year ended December 31, 2024. The increase in net loss of $1,555,000 was primarily attributable to a decrease in license and milestone revenue of $1,625,000 and an increase in research and development expenses of $110,000, partially offset by a decrease in general and administrative expenses of $373,000.

Previous wording

In accordance with FASB Accounting Standards Codification (“ASC”) 205-40, Presentation of Financial Statements – Going Concern (“Topic 205-40”), management is required to evaluate whether there are conditions and events, considered in the aggregate that raise substantial doubt about the Company’s ability to continue as a going concern for at least 12 months from the issuance date of the Company’s condensed interim financial statements. This evaluation does not take into consideration the potential mitigating effect of management’s plans that have not been fully implemented or are not within control of the Company as of the date the financial statements are issued. When substantial doubt exists under this methodology, management evaluates whether the mitigating effect of its plans sufficiently alleviates substantial doubt about the Company’s ability to continue as a going concern. The mitigating effect of management’s plans, however, is only considered if both (1) it is probable that the plans will be effectively implemented within one year after the date that the financial statements are issued, and (2) it is probable that the plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued.

Current wording

In accordance with FASB Accounting Standards Codification (“ASC”) 205-40, Presentation of Financial Statements – Going Concern (“Topic 205-40”), management is required to evaluate whether there are conditions and events, considered in the aggregate that raise substantial doubt about the Company’s ability to continue as a going concern for at least 12 months from the issuance date of the Company’s financial statements. This evaluation does not take into consideration the potential mitigating effect of management’s plans that have not been fully implemented or are not within control of the Company as of the date the financial statements are issued. When substantial doubt exists under this methodology, management evaluates whether the mitigating effect of its plans sufficiently alleviates substantial doubt about the Company’s ability to continue as a going concern. The mitigating effect of management’s plans, however, is only considered if both (1) it is probable that the plans will be effectively implemented within one year after the date that the financial statements are issued, and (2) it is probable that the plans, when implemented, will mitigate the relevant conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued.

Previous wording

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

Current wording

The Company expects to incur losses and have negative net cash flows from operating activities as it continues developing its Dapibus TM and C1 microbial protein production platforms and related products, and as it expands its pipelines and engages in further research and development activities for internal products as well as for its third-party collaborators and licensees. The success of the Company depends on its ability to develop its technologies and products to the point of regulatory approval, commercialization, and subsequent revenue generation or through the sublicensing of the Company’s technologies and products, and its ability to raise capital to finance these developmental efforts.

Previous wording

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

Current wording

On March 8, 2024, the Company issued an aggregate principal amount of $6.0 million of its 8.0% Senior Secured Convertible Promissory Notes (the “Convertible Notes”) in a private placement. The purchasers of the Convertible Notes included immediate family members and family trusts related to Mark Emalfarb, our President and Chief Executive Officer and a member of our Board of Directors, including The Francisco Trust, an existing holder of more than 5% of the Company’s outstanding common stock (collectively, the “Purchasers”). The net proceeds from the sale of Convertible Notes, after deducting offering expenses, were $5,824,326. The Company intends to use the net proceeds from the offering of the Convertible Notes for working capital and general corporate purposes.

Previous wording

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.

Current wording

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, as amended, will mature on December 31, 2027 (the “Maturity Date”), unless earlier converted, repurchased, or redeemed in accordance with the terms of the Convertible Notes. The Convertible Notes can be converted into shares of common stock, at the option of the holders of the Convertible Notes (the “Noteholders”) at any time prior to the Maturity Date.

Previous wording

As of December 31, 2024, $910,000 of the Convertible Notes were converted into 556,623 shares of Common Stock. For more information regarding the Convertible Notes, including the covenants related thereto, see Note 5 to the Consolidated Financial Statements.

Current wording

During the year ended December 31, 2024, $910,000 of Convertible Notes were converted into 556,623 shares of common stock. For more information regarding the Convertible Notes, including the covenants related thereto, see Note 5 to the Consolidated Financial Statements.

Previous wording

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 anyof the 26, 29 and 32-month anniversaries of the original issue date of the Convertible Notes, which are May 8, 2026, August 8, 2026 and November 8, 2026.

Current wording

On December 23, 2025, the Company entered into an additional amendment to the Convertible Notes, pursuant to which (i) the Maturity Date (as defined in the Convertible Notes) was extended from March 8, 2027 to December 31, 2027, (ii) the conversion price at which the Convertible Notes are convertible into shares of the Company’s common stock was set at $1.05 per share of common stock, and (iii) except in the case of an Event of Default (as defined in the Convertible Notes), the holders no longer have the right to elect to have the Company redeem all, or any part, of the principal amount then remaining under the Convertible Note.

Previous wording

In addition, on November 16, 2024, Dyadic entered into an agreement with the Bill & Melinda Gates Foundation (the “Gates Foundation”) relating to a grant in the amount of $3,092,136 awarded from the Gates Foundation for the cell line development of monoclonal antibodies targeting respiratory syncytial virus and malaria utilizing the Company’s C1 platform to provide globally accessible treatment options for underserved populations (the “Gates Foundation Grant”).

Current wording

On November 16, 2024, Dyadic entered into an agreement with the Gates Foundation relating to a grant in the amount of $3,092,000 awarded from the Gates Foundation for the cell line development of monoclonal antibodies targeting respiratory syncytial virus and malaria utilizing the Company’s C1 platform to provide globally accessible treatment options for underserved populations (the “Gates Foundation Grant”). Funds received in advance that have not been spent are recorded as restricted cash in the Company’s consolidated balance sheets.

Previous wording

The Company expects its existing cash and cash equivalents and cash raised from the Convertible Notes, the Gates Foundation Grant, investments in debt securities, and operating cash flows from its existing and future license agreement(s) will be sufficient to meet its operational, business, and other liquidity requirements for at least the next twelve (12) months from the date of issuance of the financial statements contained in this Annual Report. However, the Company has based this estimate on assumptions that may prove to be wrong, and its operating plan may change as a result of many factors currently unknown to it. In the event our financing needs are not able to be met by our existing cash, cash equivalents and investments, we would seek to raise additional capital through strategic financial opportunities that could include, but are not limited to, future public or private equity offerings, collaboration agreements, convertible notes or other debt instruments, and/or other means. Any amounts raised may be used for the further development and commercialization of product candidates, and for other working capital purposes. There is no guarantee that any of these strategic or financing opportunities will be executed or realized on favorable terms, if at all, and some could be dilutive to existing shareholders

Current wording

The Company expects its existing cash, cash equivalents, restricted cash and its investment securities, including accrued interest, totaling approximately $8.6 million as of December 31, 2025, will be sufficient to meet its operational, business, and other liquidity requirements for at least the next twelve (12) months from the date of issuance of the financial statements contained in this Annual Report. For more information on recent equity raises by the Company, see Notes 7 and 10. However, the Company has based this estimate on assumptions that may prove to be wrong, and its operating plan may change as a result of many factors currently unknown to it. In the event our financing needs are not able to be met by our existing cash, cash equivalents and investments, we would seek to raise additional capital through strategic financial opportunities that could include, but are not limited to, future public or private equity offerings, collaboration agreements, convertible notes or other debt instruments, and/or other means. Any amount raised may be used for the further development and commercialization of product candidates, and for other working capital purposes. There is no guarantee that any of these strategic or financing opportunities will be executed or realized on favorable terms, if at all, and some could be dilutive to existing shareholders.

Previous wording

At December 31, 2024, cash and cash equivalents were $6,507,000 compared to $6,515,000 at December 31, 2023. The carrying value of investment grade securities, including accrued interest at December 31, 2024 was $2,781,000 compared to $758,000 at December 31, 2023.

Current wording

As of December 31, 2025, cash, cash equivalents, and restricted cash were $5,853,000 compared to $6,507,000 as of December 31, 2024. The carrying value of investment grade securities, including accrued interest as of December 31, 2025, was $2,734,000 compared to $2,781,000 as of December 31, 2024.

Previous wording

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

Current wording

Net cash used in operating activities for the year ended December 31, 2025 of $5,702,000, resulting from a net loss of $7,365,000, adjusted for share-based compensation expenses of $930,000, and partially offset by changes in operating assets and liabilities of $661,000.

Previous wording

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

Current wording

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

Previous wording

Net cash used in investing activities for the year ended December 31, 2024 was $1,876,000 compared to net cash provided by investing activities of $7,450,000 for the year ended December 31, 2023. Cash flows from investing activities in 2024 and 2023 were primarily related to proceeds from maturities, net of purchases of investment grade debt securities, and proceeds from the sale of investment in Alphazyme.

Current wording

Net cash provided by investing activities for the year ended December 31, 2025 was $82,000, compared to net cash used in investing activities of $1,876,000 for the year ended December 31, 2024. Cash flows from investing activities in both years were primarily related to proceeds from maturity, net of purchases of investment grade debt securities. Additionally, the Company received proceeds of $61,000 from the sale of investment in Alphazyme in 2024.

Previous wording

Net cash provided by financing activities for theyear ended December 31, 2024 was $5,849,000, which was related to net proceeds from issuance of convertible notes, and proceed from exercise of options. There were no cash flows from financing activities in 2023.

Current wording

Net cash provided by financing activities for theyear ended December 31, 2025 was $4,965,000, primarily related to net proceeds from the issuance of convertible notes and proceeds from the exercise of stock options. For theyear ended December 31, 2024, net cash provided by financing activities was $5,849,000, similarly related to net proceeds from the issuance of convertible notes and proceeds from the exercise of stock options.