Dyadic International Inc: Form 10-Q for the period ended Sep 30, 2025

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

Overview

Description of Business

Dyadic International, Inc. (“Dyadic”, “we”, “us”, “our”, or the “Company”), d/b/a, Dyadic Applied BioSolutions, is a global biotechnology platform company headquartered in Jupiter, Florida, with operations in the U.S. and the Netherlands. We aim to develop and commercialize scalable, non-animal protein production platforms to meet growing global demand across the life sciences, food and nutrition, and bio-industrial markets.

Our proprietary platforms—Dapibus™ and C1—are designed for rapid, cost-effective, and flexible production of high-value proteins, enabling partners to reduce development timelines and manufacturing costs. While Dyadic’s primary focus is on non-therapeutic applications, both platforms retain the capability to produce biologics, such as vaccines and therapeutic proteins, for external partners.

Platform Capabilities

Dyadic’s Dapibus™ and C1 platforms are engineered microbial protein production systems optimized for high-yield, low-cost, and scalable protein production. Built on decades of industrial experience, these platforms support applications in:

• Cell culture media (e.g., albumin, transferrin, fibroblast growth factor (“FGF”))
• Diagnostics and research reagents
• Functional food ingredients (e.g., alpha-lactalbumin, caseins, lactoferrin)
• Sustainable industrial enzymes (e.g., biomass and dairy enzymes)

By targeting high-value proteins in expanding non-pharmaceutical markets, Dyadic is building a commercial pipeline that aligns with global trends in sustainability, animal-free manufacturing, and bio-based innovation. Simultaneously, we continue to explore partnering opportunities for the use of our platforms in pharmaceutical development where appropriate.

Dapibus™ Protein Production Platform

To accelerate commercialization and reduce regulatory risk, Dyadic developed the Dapibus™ platform—a proprietary protein production system designed to produce high-value, non- animal proteins and enzymes for non-pharmaceutical markets including life sciences, food and nutrition, and bio-industrial sectors.

Dapibus™ is expected to enable faster development, lower production costs, and simplified regulatory pathways compared to therapeutic biologics, which Dyadic believes will allow it to address growing demand for sustainable, functional ingredients across a range of industries. The platform supports applications in bioprocessing, product formulation, diagnostics, and nutrition.

Dyadic expects to commercialize multiple Dapibus™-enabled products starting in 2025 through a combination of strategic partnerships and internal manufacturing initiatives.

C1 Protein Production Platform

Dyadic’s proprietary C1 protein production system is a patented, thermophilic fungal platform (Thermothelomyces heterothallica fungus) developed for the cost-effective, large-scale production of proteins. Originally used to manufacture industrial enzymes, Dyadic has engineered C1 into a high-yield, scalable platform for both biopharmaceutical and non- pharmaceutical applications.

Following the 2015 sale of its industrial enzyme business to Danisco USA (a DuPont subsidiary), Dyadic retained co-exclusive rights to the C1 platform for human and animal pharmaceutical use, including the exclusive ability to sub-license C1 for human and animal pharmaceutical use (subject to specific conditions). Danisco holds certain retained rights but is obligated to pay Dyadic royalties on any future pharmaceutical commercialization. Dyadic may owe downstream royalties to Danisco or its licensors depending on specific patent usage.

Pharmaceutical Applications

While Dyadic is focused on non-therapeutic markets, the C1 platform remains a validated solution for biopharmaceutical manufacturing and continues to attract interest from pharma, CDMOs, academic institutions, and government agencies.

C1 addresses key bottlenecks in biologics manufacturing—reducing cost, shortening development cycles, and enabling higher yields—positioning it as a competitive alternative to CHO, yeast, and insect cell systems.

Strategic opportunities include:

• Recombinant vaccines and therapeutics (human and animal)
• Biobetters and biosimilars
• Drug formulation and diagnostic reagents
• Cost-effective production of difficult-to-express proteins

Dyadic continues to evaluate licensing, collaboration, and commercialization opportunities to unlock C1’s full potential in the biologics sector.

Legacy Biopharma Programs Support Strategic Growth and Platform Validation

Dyadic’s legacy pharmaceutical initiatives continue to drive platform validation, unlock non-dilutive funding, and support strategic collaborations without diverting focus from its core commercial goals.

Advancing C1 Vaccine Capabilities

• Ferritin Nanoparticle Vaccine Candidates (with ViroVax):
• H5 Avian Influenza: Demonstrated cross-protection in early trials; commercial interest in poultry, cattle, and human markets.
• Mpox: Early-stage preclinical development reinforcing C1’s rapid response and low-cost manufacturing potential.

Diagnostics and Animal Health Expansion

• C1-produced H5 antigens show strong neutralizing antibody response in poultry and promising cross-protection in cattle — with the potential to open new opportunities in animal health and diagnostics.

Strategic Platform Partnerships

• Cygnus Technologies® (Maravai LifeSciences®): C1 Host Cell Protein (HCP) ELISA Kit to support C1/Dapibus™ regulatory workflows commercially launched.
• Rabian BV: We are awaiting funding from the Eurostars program for a rabies vaccine project using the C1 platform; Dyadic is expected to receive equity in Rabian BV, certain milestone payments, and royalties on commercial sales.

Peer-Reviewed Validation and Clinical Progress

• Nature Communications: C1-produced mAb showed protection against Omicron and Delta variants in non-human primates.
• DYAI-100 Vaccine Candidate: Phase 1 clinical trial met safety and immunogenicity endpoints. Future development paused to focus on emerging variants in collaboration with Rubic One Health (“Rubic”).

These legacy programs provide critical third-party validation of the C1 platform’s biopharmaceutical potential while generating non-dilutive capital and enabling future commercial opportunities.

Licensing and Strategic Collaborations

In April 2023, Dyadic expanded its license agreement with Rubic to include vaccines and therapeutic proteins for both human and animal health in underserved African markets. The C1 platform tech transfer is complete. Dyadic is eligible to receive milestone payments, royalties, and marketing rights under the agreement. In 2024, Rubic initiated development of several livestock vaccines.

Dyadic entered an exclusive sublicense agreement with ABIC, an affiliate of Phibro Animal Health Corporation, in February 2022. The agreement was expanded in March 2024 to include additional vaccines and treatments for livestock diseases.

Research and Development

Dyadic conducts internal and collaborative R&D to advance its microbial platforms across both pharmaceutical and non-pharmaceutical applications.

VTT Technical Research Centre of Finland

Since 2016, Dyadic has partnered with VTT, a leading European research institute, to enhance C1’s safety, productivity, and efficiency. VTT supports critical initiatives including glycoengineering, protease deletion, and therapeutic protein expression. Many projects at VTT are co-funded by Dyadic’s third-party collaborators.

Other CRO and CDMO Partnerships

Dyadic works with a global network of research providers and manufacturers, including 53Biologics (Spain), Fermbox Bio (India), and Eleszto Genetika (Hungary). These partners support the Company’s R&D and scale-up activities across its platforms. While typically structured as work-for-hire engagements, disruptions to these collaborations could impact timelines or development outcomes.

Recent Operational Highlights

Corporate Development

• CRISPR License Agreement: Dyadic entered into a non-exclusive CRISPR/Cas9 license with ERS Genomics, expanding its genetic engineering capabilities to accelerate strain optimization and pathway enhancement across its proprietary production platforms. The agreement strengthens Dyadic’s ability to improve productivity, product quality, and innovation for both internal programs and partner-driven applications.
• Corporate Rebrand and Website Overhaul: Dyadic rebranded as Dyadic Applied BioSolutions and launched a redesigned corporate website to support commercial growth. The new platform enhances online ordering capabilities for research products, strengthens investor and business development engagement, and expands the company’s digital presence and social media outreach.
• Expanding Commercial Efforts in Asia: Dyadic advanced its international growth strategy by partnering with Intralink to expand in Japan and South Korea, both seen as growing biopharma markets. The initiative focuses on commercializing Dyadic’s high-value animal-free proteins, including DNase1 and Transferrin, to address what is seen as rising regional demand for biologics and cell and gene therapy manufacturing inputs.
• Peer-Reviewed Publication Validates C1 Platform for Vaccine Antigen Production: A study published in “Vaccine” (October 24, 2025) demonstrated the successful production and characterization of full-length SARS-CoV-2 spike protein using Dyadic’s Thermothelomyces heterothallica (C1) platform. The C1-produced spike exhibited comparable structure, stability, and immunogenicity to mammalian cell–derived antigens, highlighting the platform’s potential as a scalable and cost-efficient system for manufacturing complex glycoproteins and vaccine candidates.

Life Sciences

• Non-Animal Cell Culture Media
• Recombinant Serum Albumin: Dyadic, in collaboration with Proliant Health and Biologicals (“Proliant”), has supported the development of animal-free serum albumin which is expected to be commercially launched in late 2025 or early 2026 for use in diagnostic and research markets. Dyadic has received $1.5 million in milestone payments to date, including the third milestone payment of $0.5 million received in October 2025, and anticipates ongoing revenue sharing from future sales in 2026.
• Recombinant Transferrin: Dyadic’s animal-free transferrin has performed consistently with leading recombinant reference standards in cell proliferation testing for animal muscle cell growth. Designed as a high-quality, cost-effective, non-animal derived alternative to serum-derived transferrin, it targets applications in cell culture media, diagnostics, research, and bioprocessing. The Company is actively expanding validation efforts for diagnostic, research, and cell culture uses, with initial purchase orders expected by the end of 2025.
• Recombinant Growth Factors: Dyadic’s recombinant Fibroblast Growth Factor (FGF) has shown comparable efficacy to reference standards in supporting animal muscle cell growth. Optimization and validation are ongoing, with initial purchase orders received in October 2025 within the cultured meat segment.
• Reagent Proteins & DNA/RNA Enzymes
• DNase-1 (RNase-free): Dyadic has completed production validation and is now manufacturing research-grade RNase-free DNase-1 for molecular diagnostics, biopharma, and related applications. Following successful scale-up, sampling is actively underway with initial purchase orders expected by the end of 2025.
• Expanded Nucleic Acid Enzymes Portfolio: Dyadic continues to advance its portfolio of DNA/RNA manipulation enzymes, including RNase Inhibitors and T7 RNA Polymerase. Prototype development and validation have shown encouraging results, with ongoing optimization expected to yield additional improvements and data through late 2025 and into 2026.

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Food and Nutrition

• Non-animal Dairy Applications
• Alpha-Lactalbumin: A key nutritional whey protein that supports healthy growth and cellular function in both infant and adult nutrition applications. Dyadic has agreed to terms with a non-animal dairy development company for the development of recombinant alpha-lactalbumin targeting the infant nutrition segment. The protein has demonstrated positive results in product qualification and application testing, with characterization ongoing and sampling for research and nutritional markets expected early 2026.
• Human Lactoferrin: An iron-binding glycoprotein found in milk and other secretions, valued for its antimicrobial and immune-supporting properties and widely used in nutritional and health-related research. Dyadic has developed a stable cell line, with continued optimization and characterization underway, and sampling for research use will begin in early 2026.
• Non-Animal Dairy Enzymes: In Q3 2025, Dyadic received a $250,000 milestone payment from Inzymes for productivity achievements for a second enzyme, bringing total payments received from Inzymes to $1.275 million. Scale-up and commercialization efforts for the first enzyme are progressing toward a late 2025 or early 2026 launch, with additional enzymes in development under the existing license agreement.

Bio Industrial Products

• In partnership with Fermbox Bio, Dyadic launched EN3ZYME™ in May 2024—an enzyme cocktail for converting agricultural residue into fermentable cellulosic sugars, produced using the Dapibus™ production platform. Initial enzyme deliveries have been completed under Fermbox’s purchase order, Dyadic is to receive a 50/50 profit share from commercial sales.
• Sampling efforts are currently underway and have expanded into healthcare applications, with ongoing negotiations in the biomass processing, biofuels, and pulp & paper markets to broaden adoption and explore new enzyme development opportunities.

Biopharmaceutical Programs

• Gates Foundation Collaboration: Dyadic has achieved key milestones in developing low-cost monoclonal antibodies (mAbs) for malaria and RSV receiving a total of approximately $2.4 million funding from a $3 million grant. Early data show C1-produced mAbs perform comparably to mAbs produced from traditional CHO cell lines.
• CEPI–Fondazione Biotecnopolo di Siena: Advancing under a $4.5 million CEPI grant, Dyadic is eligible for up to $2.4 million to support antigen design, cell line development, and cGMP scale-up for vaccines and antibodies.
• European Vaccines Hub: The €170 million EU-backed initiative led by Dr. Rino Rappuoli is assessing C1 for its potential to accelerate timelines, boost productivity, and reduce costs in vaccine and antibody manufacturing.
• Uvax Bio Collaboration: Backed by a $2.6 million CEPI grant, this program is evaluating C1 for rapid, cost-effective MERS vaccine production.
• AdaptVac Consortium: A $12.4 million CEPI and Horizon Europe–funded initiative integrating C1 to develop broad-spectrum filovirus vaccines, underscoring C1’s speed, scalability, and cost-efficiency.

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Nasdaq Deficiency Notices and Remediation

Our common stock is currently listed on the Nasdaq Capital Market, which has minimum requirements that a company must meet in order to remain listed. These requirements include maintaining a minimum Market Value of Listed Securities (“MVLS”) of $35 million, which MVLS cannot fall below $35 million for a period of more than 30 consecutive trading days (the “MVLS Requirement”), and a minimum bid price of at least $1 per share, which cannot fall below $1 for a period more than 30 consecutive trading days (the “Minimum Bid Price Requirement”). Earlier this year, we were notified that we did not comply with either of the MVLS Requirement or the Minimum Bid Price Requirement and could become subject to delisting if we did not cure these deficiencies during specified cure periods. In October, we were notified by Nasdaq that we have since cured these deficiencies within the applicable cure periods and have regained compliance with the applicable continued listing requirements. Thus, these Nasdaq deficiency matters are now closed.

Critical Accounting Estimates

The preparation of these consolidated financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates that affect the reported amount of assets and liabilities and related disclosure of contingent assets and liabilities at the date of our consolidated financial statements and the reported amounts of revenues and expenses during the applicable period. Actual results may differ from these estimates under different assumptions or conditions. Such differences could be material to the consolidated financial statements.

We define critical accounting estimates as those that are reflective of significant judgments and uncertainties and which may potentially result in materially different results under different assumptions and conditions. In applying these critical accounting estimates, our management uses its judgment to determine the appropriate assumptions to be used in making certain estimates. These estimates are subject to an inherent degree of uncertainty. Our critical accounting estimates include the following:

Revenue Recognition

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

Revenue related to research collaborations and agreements: The Company typically performs research and development services as specified in each respective agreement on a best-efforts basis, and recognizes revenue from research funding under collaboration agreements in accordance with the 5-step process outlined in ASC Topic 606 (“Topic 606”): (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. We recognize revenue when we satisfy a performance obligation by transferring control of the service to a customer in an amount that reflects the consideration that we expect to receive. Depending on how the performance obligation under our license and collaboration agreements is satisfied, we recognize the revenue either at a point in time or over time by using the input method under Topic 606 to measure the progress toward complete satisfaction of a performance obligation.

Under the input method, revenue will be recognized based on the entity’s efforts or inputs to the satisfaction of a performance obligation (e.g., resources consumed, labor hours expended, costs incurred, or time elapsed) relative to the total expected inputs to the satisfaction of that performance obligation. The Company believes that the cost-based input method is the best measure of progress to reflect how the Company transfers its performance obligation to a customer. In applying the cost-based input method of revenue recognition, the Company uses actual costs incurred relative to budgeted costs to fulfill the performance obligation. These costs consist primarily of full-time equivalent effort and third-party contract costs. Revenue will be recognized based on actual costs incurred as a percentage of total budgeted costs as the Company completes its performance obligations.

A cost-based input method of revenue recognition requires management to make estimates of costs to complete the Company’s performance obligations. In making such estimates, significant judgment is required to evaluate assumptions related to cost estimates. The cumulative effect of revisions to estimated costs to complete the Company’s performance obligations will be recorded in the period in which changes are identified, and amounts can be reasonably estimated. A significant change in these assumptions and estimates could have a material impact on the timing and amount of revenue recognized in future periods.

Revenue related to grants: The Company receives 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, is expected to be earmarked for third parties to advance the research required, including preclinical and clinical trials for vaccines and/or antibodies candidates. Revenue related to 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 allocated to the license when technology is transferred to the customer and the customer can use and benefit from the license.

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

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

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 the royalty has been allocated has been satisfied (or partially satisfied). To date, the Company has not recognized any royalty revenue resulting from any of its sublicensing arrangements.

We invoice customers based on our contractual arrangements with each customer, which may not be consistent with the period that revenues are recognized. When there is a timing difference between when we invoice customers and when revenues are recognized, we record either a contract asset (unbilled accounts receivable) or a contract liability (deferred research and development obligations), as appropriate. If upfront fees or considerations related to a sublicensing agreement are received prior to the technology transfer, the Company will record the amount received as deferred revenue from the licensing agreement.

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

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

Accrued Research and Development Expenses

In order to properly record services that have been rendered but not yet billed to the Company, we review open contracts and purchase orders, communicate with our personnel and we estimate the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of the actual cost. The majority of our service providers invoice us monthly or quarterly in arrears for services performed or when contractual milestones are met. We make estimates of our accrued expenses as of each balance sheet date in our consolidated financial statements based on facts and circumstances known to us at that time. We periodically confirm the accuracy of our estimates with the service providers and adjust if necessary. Examples of accrued research and development expenses include amounts owed to contract research organizations, to service providers in connection with research and development activities.

Stock-Based Compensation

We have granted stock options to employees, directors, and consultants. The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model. The Black-Scholes model considers volatility in the price of our stock, the risk-free interest rate, the estimated life of the option, the closing market price of our stock and the exercise price. For purposes of the calculation, we assumed that no dividends would be paid during the life of the options. We also used the weighted-average vesting period and contractual term of the option as the best estimate of the expected life of a new option, except for the options granted to certain contractors (i.e., 2 to 5 years). The expected stock price volatility was calculated based on the Company’s own volatility. The Company reviews its volatility assumption on an annual basis and has used the Company’s historical volatilities since 2016.

The estimates utilized in the Black-Scholes calculation involve inherent uncertainties and the application of management judgment. These estimates are neither predictive nor indicative of the future performance of our stock. As a result, if other assumptions had been used, our recorded share-based compensation expense could have been materially different from that reported. In addition, because some of the performance-based options issued to employees, consultants, and other third-parties vest upon the achievement of certain milestones, the total ultimate expense of share-based compensation is uncertain.

Accounting for Income Taxes

The Company accounts for income taxes under the asset and liability method in accordance with ASC Topic 740, “Income Taxes”. Under this method, income tax expense / (benefit) is recognized for: (i) taxes payable or refundable for the current year and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of the available positive and negative evidence, it is more likely than not some portion or all the deferred tax assets will not be realized.

In determining taxable income for the Company’s consolidated financial statements, we are required to estimate income taxes in each of the jurisdictions in which we operate. This process requires the Company to make certain estimates of our actual current tax exposure and assessment of temporary differences between the tax and financial statement recognition of revenue and expense. In evaluating the Company’s ability to recover its deferred tax assets, the Company must consider all available positive and negative evidence including its past operating results, the existence of cumulative losses in the most recent years and its forecast of future taxable income. Significant management judgment is required in determining our provision for income taxes, deferred tax assets and liabilities and any valuation allowance recorded against our net deferred tax assets.

The Company is required to evaluate the provisions of ASC 740 related to the accounting for uncertainty in income taxes recognized in a company’s financial statements. ASC 740 prescribes a comprehensive model for how a company should recognize, present, and disclose uncertain positions that the company has taken or expects to take in its tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. Differences between tax positions taken or expected to be taken in a tax return and the net benefit recognized and measured pursuant to the interpretation are referred to as “unrecognized benefits.” A liability should be recognized (or amount of net operating loss carry forward or amount of tax refundable is reduced) for unrecognized tax benefits, because it represents a company’s potential future obligation to the taxing authority for a tax position that was not recognized because of applying the provision of ASC 740.

The Company classifies accrued interest and penalties related to its tax positions as a component of income tax expense. The Company currently is not subject to U.S. federal, state, and local tax examinations by tax authorities for the years before 2022.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Recent Accounting Pronouncements

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

Results of Operations

Three and Nine months Ended September 30, 2025 Compared to the Same Periods in 2024

Revenue and Cost of Revenue

The following table summarizes the Company’s revenue and cost of revenue for the three and nine months ended September 30, 2025 and 2024:

For the three months ended September 30, 2025, the decrease in research and development revenue and cost of research and development revenue was due to a reduction in the number of active collaborations to four compared to ten for the same period a year ago.

For the nine months ended September 30, 2025, the decrease in research and development revenue and cost of research and development revenue was due to a reduction in the number of active collaborations to seven compared to twenty for the same period a year ago.

The grant revenue and cost of grant revenue for the three and nine months ended September 30, 2025, were related to the Gates Foundation and CEPI grants. There was no grant revenue for the three and nine months ended September 30, 2024.

For the nine months ended September 30, 2025, the license and milestone revenue of $250,000 was related to the Inzymes Agreement. There was no license revenue for the three months ended September 30, 2025. For the three and nine months ended September 30, 2024, the license revenue was related to the licensing fee from the Proliant agreement of $1.0 million, and a success fee payment from the Inzyme agreement of $425,000.

Research and Development Expenses

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

Research and development expenses for the three months ended September 30, 2025, increased to $572,000 compared to $460,000 for the same period a year ago. The increase was driven by a rise in the number of active internal research initiatives undertaken to expedite product development.

Research and development expenses for the nine months ended September 30, 2025, increased to $1,696,000 compared to $1,499,000 for the same period a year ago. The increase was driven by a rise in the number of active internal research initiatives undertaken to expedite product development.

General and Administrative Expenses

General and administrative expenses for the three months ended September 30, 2025, increased by 14.1% to $1,481,000 compared to $1,298,000 for the same period a year ago. The increase reflected increases in rebranding and business development expenses of $176,000, legal and accounting expenses of $83,000, and other expenses of $3,000, offset by a decrease in share-based compensation expenses of $79,000.

General and administrative expenses for the nine months ended September 30, 2025, decreased by 3.8% to $4,514,000 compared to $4,694,000 for the same period a year ago. The decrease reflected reductions in share-based compensation expenses and management and board expenses of $168,000, legal and accounting expenses of $49,000, insurance expenses of $46,000, offset by increases in rebranding and business development expenses of $47,000 and other expenses of $36,000.

Loss from Operations

Loss from operations for the three months ended September 30, 2025, increased to $1,925,000 compared to $203,000 for the same period a year ago. The increase in loss from operations was largely attributable to a decrease in total revenue of $793,000, an increase in cost of grant revenue of $769,000, an increase in general and administrative expenses of $183,000, and an increase in research and development expenses of $112,000, partially offset by a decrease in cost of research and development revenue of $141,000.

Loss from operations for the nine months ended September 30, 2025, increased to $5,657,000 compared to $4,371,000 for the same period a year ago. The increase in loss from operations was largely attributable to an increase in cost of grant revenue of $1,406,000, an increase in research and development expenses of $198,000, and a decrease in total revenue of $153,000, partially offset by a decrease in cost of research and development revenue of $312,000 and a decrease in general and administrative expenses of $180,000.

Other Income (Expenses), Net

For the three months ended September 30, 2025, total other income (expenses), net, was an expense of $51,000 compared to an expense of $1,000 for the same period a year ago. The decrease in other income was due to a reduction of $64,000 in interest income, partially offset by a decrease in interest expenses of $14,000 related to the Convertible Notes.

For the nine months ended September 30, 2025, total other income (expenses), net, was an expense of $140,000 compared to an income of $112,000 for the same period a year ago. The decrease in other income was due to a decrease in interest income of $152,000 and an increase in interest expenses related to the Convertible Notes of $40,000.

Net Loss

Net loss for the three months ended September 30, 2025, was $1,976,000 compared to $203,000 for the same period a year ago. The increase reflected an increase of $1,722,000 in loss from operations, and a decrease in interest income of $50,000.

Net loss for the nine months ended September 30, 2025, was $5,797,000 compared to $4,258,000 for the same period a year ago. The increase reflected an increase of $1,286,000 in loss from operations, and a decrease in interest income and increase in interest expenses of $253,000.

Liquidity and Capital Resources

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

On March 8, 2024, the Company issued an aggregate principal amount of $6.0 million of its 8.0% Senior Secured Convertible Promissory Notes due March 8, 2027 (the “Convertible Notes”) in a private placement. The purchasers of the Convertible Notes included immediate family members and family trusts related to Mark Emalfarb, our 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. 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.

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 common stock, par value $0.001 per share (the “Common Stock”), at the option of the holders of the Convertible Notes (the “Noteholders”) at any time prior to the Maturity Date. On October 4, 2024, the Company entered into an amendment (the “Amendment”) to the Convertible Notes. Pursuant to the Amendment, (i) the conversion price upon which the Convertible Notes will be convertible into shares of the Company’s Common Stock is $1.40 per share of Common Stock, and (ii) the Redemption Date (as defined in the Amendment) will fall on any of the 26, 29 and 32-month anniversaries of the original issue date of the Convertible Notes.

On May 1, 2025, the Company entered into a second amendment (the “Second Amendment”) to the Convertible Notes. Pursuant to the Second Amendment, the Redemption Date (as defined in the Second Amendment) will now fall on December 1, 2026.

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 4 to the Consolidated Financial Statements.

On September 15, 2025, Mark A. Emalfarb Trust dated October 1, 1987, as amended and restated on June 28, 2019 (the “MAE Trust”), purchased and was assigned $1,000,000 of the Convertible Notes from an existing note holder. Mr. Mark A. Emalfarb, our Chief Executive Officer, is the sole beneficiary and serves as sole trustee of the MAE Trust and has sole voting and dispositive power over the shares of Common Stock held by the MAE Trust. As of September 30, 2025, the amount of accrued interest for the MAE Trust was $3,334.

On August 1, 2025, the Company completed an underwritten offering of 6,052,000 shares of the Company’s Common Stock pursuant to an underwriting agreement, dated July 30, 2025, between the Company and Craig-Hallum Capital Group LLC. The public offering price in the Offering was $0.95 per share of Common Stock. The net proceeds to the Company from the Offering were $4.9 million, after deducting legal expenses, underwriting discounts and commissions, and other offering expenses. The Company intends to use the net proceeds of the Offering for working capital and general corporate purposes, such as product development, sales and marketing.

The Company expects its existing cash and cash equivalents, and cash raised from the Convertible Notes and the Offering on August 1, 2025, investments in debt securities, and operating cash flows 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 Quarterly 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, 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.

As of September 30, 2025, cash, cash equivalents, and restricted cash and cash equivalents were $7.2 million compared to $6.5 million as of December 31, 2024. The carrying value of investment grade securities, including accrued interest as of September 30, 2025, was $3.2 million compared to $2.8 million as of December 31, 2024.

Net cash used in operating activities for the nine months ended September 30, 2025 was $3.9 million, which was principally attributable to a net loss of $5.8 million, partially offset by changes in operating assets and liabilities of $1.1 million and share-based compensation expenses of $0.7 million.

Net cash used in operating activities for the nine months ended September 30, 2024 was $3.3 million, which was principally attributable to a net loss of $4.3 million, partially offset by changes in operating assets and liabilities of $0.2 million and share-based compensation expenses of $0.9 million.

Net cash used in investing activities for the nine months ended September 30, 2025 was $0.4 million, compared to $3.1 million for the nine months ended September 30, 2024. The change in investing activities was attributable to a reduction in purchases of held-to maturity investment securities of $0.9 million, an increase in proceeds received from maturities of investment securities of $1.9 million and proceeds from the sale of investment in Alphazyme in 2024 of $0.1 million.

Net cash provided by financing activities for the nine months ended September 30, 2025 was $5.0 million, which was mainly related to net proceeds from public offering, compared to $5.8 million for the nine months ended September 30, 2024, which was related to net proceeds from the issuance of Convertible Notes.

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

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms. Based on the evaluation of our disclosure controls and procedures as of the end of the period covered by this report, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective.

Changes in Internal Controls Over Financial Reporting

There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rules 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the three months ended September 30, 2025, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitation on Effectiveness of Controls

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Other than as set forth below, there have been no changes to our risk factors from those disclosed in our Annual Report for the 2024 fiscal year filed on March 26, 2025.

We have in the past, and may in the future, be unable to comply with the listing standards of the Nasdaq Stock Market LLC (“Nasdaq”). While we have since regained compliance, if we again fail to comply with listing standards in the future, our common stock may be delisted.

Our common stock is currently listed on the Nasdaq Capital Market, which has minimum requirements that a company must meet in order to remain listed. These requirements include maintaining a minimum MVLS of $35 million, which MVLS cannot fall below $35 million for a period of more than 30 consecutive trading days, and a minimum bid price of at least $1 per share, which cannot fall below $1 for more than 30 consecutive trading days. Earlier this year, we were notified that we did not comply with either of the MVLS Requirement or the Minimum Bid Price Requirement and could become subject to delisting if we did not cure these deficiencies within specified cure periods. We have since cured these deficiencies within the applicable cure periods and regained compliance with the applicable continued listing requirements.

However, in the event that we fail to comply with these or other continued listing requirement in the future, our common stock could be delisted from Nasdaq. If so, the trading of our common stock could be conducted in the over-the-counter market established for unlisted securities such as the OTCQX, the OTCQB, the OTCID Basic Market or the Pink Limited Market, but there can be no assurance that our common stock will be eligible for trading on any such alternative market. Additionally, if our common stock is delisted from Nasdaq, the liquidity of our common stock would be adversely affected, the market price of our common stock could decrease, our ability to obtain sufficient additional capital to fund our operations and to continue to operate as a going concern would be substantially impaired and transactions in our common stock could lose federal preemption of state securities laws. Furthermore, there could also be a reduction in our coverage by securities analysts, and the news media and broker-dealers may be deterred from making a market in or otherwise seeking or generating interest in our common stock, which could cause the price of our common stock to decline further. Moreover, delisting may also negatively affect our collaborators’, vendors’, suppliers’ and employees’ confidence in us and employee morale.