Dyadic International Reports Second Quarter 2013 Financial Results

JUPITER, Fla., Aug. 8, 2013 /PRNewswire/ -- Dyadic International, Inc. (OTC Pink: DYAI), a global leader in the commercial application of biotechnology for the discovery, development and production of enzymes and other proteins, today announced financial results for the quarter ended June 30, 2013.

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Dyadic's President and Chief Executive Officer, Mark Emalfarb, stated, "The second quarter represented yet another milestone in the emergence of Dyadic as a world leader in the economically and scientifically important business of industrial biotechnology.  Adding to our already world-class stable of partners such as Sanofi and Abengoa, we signed a major license with German chemical giant BASF.  The BASF deal further validates the effectiveness and value of our C1 production technology for commercializing enzymes and other proteins."

Operating Highlights

During the quarter, Dyadic announced that it entered into a non-exclusive worldwide license agreement with BASF, the world's leading chemical company with over $90 billion in annual sales.  Under the terms of the agreement, BASF will be able to use Dyadic's patented C1 platform technology to develop, produce, distribute, and sell industrial enzymes in certain fields for a variety of applications.  Additionally, BASF will fund research and development at Dyadic's research lab in The Netherlands.  In addition to this research funding, BASF has agreed to pay Dyadic a $6.0 million upfront license fee, and certain research and commercial milestone fees, as well as royalties upon commercialization.  During the quarter, $4.2 million of the $5.0 million first installment was received, contributing to a significant increase in cash on hand.  The balance of the $1.8 million cash, consisting of a $1.0 million second installment from BASF and $0.8 million in tax reimbursement, is expected to be received in the second half of 2013 along with additional research funding, some of which Dyadic has already started to receive.

The Company strengthened its management team with the addition of Danai Brooks as Executive Vice President and Chief Operating Officer.  Mr. Brooks joined Dyadic from J.P. Morgan, where he advised clients across a broad spectrum of sectors, including chemical, renewable energy and industrial companies.  Prior to J.P. Morgan, Mr. Brooks worked in a variety of senior operating and engineering roles at Dell, Mars and Ford.

In addition to the BASF research and license agreement noted above, other business highlights include:

• In the biopharmaceutical field, Dyadic is nearing its next milestone with Sanofi, which we anticipate will enable the project to move into the pre-clinical testing phase of a specific vaccine. The protein of interest has been successfully expressed from C1 and Dyadic's R&D team is making further progress on the purification step that is necessary for Dyadic to be able to provide Sanofi with the required quantities of purified protein for them to carry out their intended pre-clinical trials. 

• After the close of the quarter, the company collected the final $2.5 million payment from Abengoa Bioenergy related to the expanded license agreement signed in 2012.  Dyadic expects Abengoa to begin production at its Hugoton, Kansas cellulosic ethanol plant in the first quarter of 2014.  The nameplate capacity of the plant is 25 million gallons per year.  In 2014, Dyadic expects to receive royalty payments for the use of C1 technology at the plant.

• Dyadic has initiated plans to expand its new product development capabilities, with a focus on both biofuels and industrial enzymes.  We have approved an expansion of our research and development facility in the Netherlands, hired additional scientists and purchased new equipment.

Financial Results for the Quarter Ended June 30, 2013 vs. June 30, 2012

Total revenue for the second quarter decreased to $7.1 million compared to $7.8 million for the second quarter last year.  The decrease in total revenue as compared to the same period last year was due to decreases in all three revenue streams, product related revenue, license fee revenue and research and development revenue. 

Net product related revenue for the second quarter decreased 11% to $1.7 million compared to $2.0 million for the second quarter last year. The decrease was primarily due to the effects of the bird flu epidemic in the Asian animal feed markets. 

License fee revenue for the second quarter decreased to $5.0 million compared to $5.5 million for the same period last year. The decrease was due to the fact that in Q2 we booked only $5.0 million of the $6.0 million in revenue recognized from the BASF license agreement versus the license fee recognized in the second quarter of 2012 of $5.5 million from Abengoa Bioenergy New Technologies, Inc. ("Abengoa") for the expansion of its license rights.  The Company expects to recognize the remaining $1.0 million from the BASF license agreement upon certain successful technology transfers, which are expected to be completed in the second half of 2013.

Research and development revenue for the second quarter decreased 11% to $338,000 compared to $381,000 for the second quarter of 2012.  However, in Q3 we are now generating additional R&D revenue from the ongoing research project being funded by BASF.

Gross profit for the second quarter decreased to $5.1 million compared to $6.0 million for the second quarter last year.  The decrease was due, in part, to revenue decreases and the related margins these revenues normally generate, in the three segments of the business.  Additionally, changes to the product mix, and margins relative to product related revenue were negatively impacted.  The animal feed and nutrition markets were particularly impacted, largely due to the bird flu outbreak in Asia mentioned previously.

Operating expenses for the second quarter decreased 9% to $1.6 million compared to $1.8 million for the same period last year.  The decrease was primarily due to the recovery of a doubtful account during the period of $300,000.

Net income for the second quarter was $3.3 million, or $0.10 per basic and diluted share, compared to a net income of $4.0 million, or $0.13 per basic and $0.12 per diluted share for the second quarter last year.

2013 Financial Results for the Six Months Ended June 30, 2013 vs. June 30, 2012

Total revenue for the six months decreased $807,000 to $9.6 million compared to $10.4 million for the same period last year.  The decreases in license fee revenue and research and development revenue for the six months of $939,000, were offset by increased product related revenue of $132,000. 

Net product related revenue for the six months increased 4% to $3.8 million from $3.7 million for the same period a year ago.  The relatively low growth rate for the period was driven by the decreased sales in the animal food and nutrition market resulting from the Asian bird flu mentioned previously.

License fee revenue for the six months decreased to $5.0 million compared to $5.5 million for the same period last year. No license fees were recognized in Q1 of 2012 or 2013, however we expect to recognize the remaining $1.0 million access fee from BASF in 2013.

Research and development revenue for the six months decreased 38% to $725,000 compared to $1.2 million for 2012.  The decrease was due to the delay in the start of certain external research and development projects, some of which have now either begun or are expected to begin in the third and fourth quarters of 2013. Additionally, the Company has started to shift a portion of its R&D resources away from conducting third party funded contract R&D in order to accelerate the Company's internal enzyme product development efforts, as well as to accelerate the continued enhancements and improvements to our C1 Platform Technology. 

Gross profit for the six months decreased to $5.7 million compared to $6.7 million for the same period a year ago.  The decrease came primarily from the second quarter revenue decreases and their related margins previously mentioned, as well as the delay in recognizing the remaining $1.0 million in revenue from the BASF license agreement.

Total operating expenses for the six months increased 9% to $3.4 million compared to $3.1 million for the same period a year ago.  The increase was due primarily to increased costs associated with litigation against the Company's former outside legal counsel of approximately $500,000, which was partially offset by the recovery of a doubtful accounts receivable balance of $300,000 that was previously reserved as of December 31, 2012.  The increased litigation costs were anticipated and are expected to continue through trial. 

Net income for the six months was $1.9 million, or $0.06 per basic and $0.05 per diluted share, compared to a net income of $3.2 million, or $0.10 per basic and $0.09 per diluted share, for the same period a year ago.

2013 Financial Position and Cash Flow Analysis

At June 30, 2013, cash and cash equivalents were $7.0 million compared to $4.0 million at December 31, 2012.  During the six months ended June 30, 2013, the Company generated approximately $3.1 million in cash and cash equivalents.  The Company used $1.4 million for the same period in 2012.

In January 2013, the Company received the second installment of $1.0 million due under the Abengoa license agreement announced in April 2012.  Subsequent to June 30, 2013, the Company received the final payment of $2.5 million due under the Abengoa license agreement expansion.

Total Convertible Subordinated Debt ("Debt") as of June 30, 2013 was $6.8 million.  In January 2013, the Debt decreased by $182,000 from $7.0 million as of December 31, 2012, due to the conversion of Debt to common stock.

Capital expenditures for the six months ended June 30, 2013 were approximately $100,000 and cash generated from the exercise of warrants and stock options was $123,000 for the same period.

2013 Outlook

As a result of the BASF license transaction, and the associated upfront fees, as well as expected continued growth in Product Related Revenues and Research and Development Revenues from the BASF project, as well other potential strategic partnerships. Dyadic expects 2013 Total Revenues to increase versus 2012, and the Company expects to be profitable for the full 2013 year.

The financial information contained in this press release should be read in conjunction with the financial statements and related footnotes which have been posted on the OTC market website at http://www.otcmarkets.com/stock/DYAI/filings and on Dyadic's website at http://dyadic.com/investorinfo/financials/.

Conference Call

A conference call to discuss second quarter 2013 results is scheduled for 5:00 p.m. Eastern Time on Thursday, August 8, 2013.  The conference call may be accessed by dialing +1 (888) 204-4520 (from the United States or Canada) or +1 (913) 312-0711 (from other countries) five to ten minutes prior to start time and providing the confirmation code 8083027.  A replay of the conference call will also be available on the Dyadic website shortly after the live event.

About Dyadic

Dyadic International, Inc. is a global biotechnology company that uses its patented and proprietary technologies to conduct research, development and commercial activities for the discovery, development, manufacture and sale of enzymes and other proteins for the bioenergy, bio-based chemicals, biopharmaceutical and industrial enzyme industries.

Dyadic trades on the OTC Pink tier of the OTC market. Investors can find real-time quotes, market information and financial reports for Dyadic on the OTC market website (www.otcmarkets.com/stock/DYAI/quote).

Cautionary Statement for Forward-Looking Statements

Certain statements contained in this press release are forward-looking statements. These forward-looking statements involve risks and uncertainties that could cause Dyadic's actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.  Except as required by law, Dyadic expressly disclaims any intent or obligation to update any forward-looking statements.

SOURCE Dyadic International, Inc.