DIL Dyadic International

Dyadic International, Inc. (AMEX:DIL), a biotechnology company, today announced financial results for the second quarter and six-months ended June 30, 2006. Second Quarter 2006: Net sales for the quarter ended June 30, 2006, were approximately $4.0 million, as compared to approximately $4.0 million for the quarter ended June 30, 2005. Second quarter 2006 net sales in the pulp & paper industry increased by 35% over those in the same quarter last year, and totaled approximately $723,000, which represented 18% of net sales, as compared to 13% in the 2005 second quarter. Textile industry net sales were approximately $2.6 million in the second quarter of 2006 versus approximately $2.8 million in the second quarter of 2005. As previously reported, the market for enzymes for applications in the textile industry continues to be affected by global pressure on pricing and margins. Net loss for the quarter ended June 30, 2006, was approximately $3.0 million, or $0.13 per share (basic and diluted), as compared to a net loss of approximately $2.3 million, or $0.10 per share (basic and diluted), for the quarter ended June 30, 2005. Cash and cash equivalents were approximately $10.0 million as of June 30, 2006. First Half 2006: Net sales for the six months ended June 30, 2006, were approximately $7.8 million as compared to approximately $7.7 million for the comparable period last year. Net sales for the six months ended June 30, 2006, in the pulp & paper industry increased by 57% over those in the same period last year, and totaled approximately $1.2 million. Textile industry net sales were approximately $5.3 million in the first six months of 2006 versus approximately $5.8 million in the same period last year. Net sales of higher-margin products to industries such as pulp & paper, animal feed and others, in the aggregate were approximately $2.5 million for the six months ended June 30, 2006, as compared to approximately $1.8 million for the comparable period last year, representing an increase of 35% over net sales for the six-months ended June 30, 2005. Net loss for the six months ended June 30, 2006, was approximately $5.4 million, or $0.23 per share (basic and diluted), as compared to approximately $5.4 million, or $0.25 per share (basic and diluted), for the six months ended June 30, 2005. Additional Highlights: -- CELLULOSIC ETHANOL. In a presentation last month at the BIO World Congress on Industrial Biotechnology and Bioprocessing, Dyadic scientists updated the Company's progress in the development of enzymes for conversion of lignocellulosic biomass to ethanol. Capitalizing on our investment in research and development (R&D) in this area over the last decade, recent experiments show that proprietary Dyadic enzyme mixes rapidly and efficiently degraded the cellulosic substrates tested, and we anticipate these results to guide us to develop commercially efficient strains and processes for the production of cellulosic ethanol. The presentation slides are available on the Company's website at http://www.dyadic.com. -- CORN TO ETHANOL. Dyadic has continued working with the Iowa Corn Promotion Board on a Department of Energy-funded program, where Dyadic is providing enzymes to convert cellulose and hemicellulose, which comprise as much as half the weight of Dried Distillers' Grains (DDG's), to fermentable sugars. These sugars can be utilized to produce additional ethanol and other chemicals that have historically been petroleum-derived. -- THERAPEUTIC PROTEINS. In a presentation last month at the Society of Industrial Microbiology conference, Dyadic updated its progress in the expression and biological activity of therapeutic antibodies in the C1 Expression System. Subsequent to our successful development of C1 strains with reduced protease activity, initial results from the latest experiments indicate that C1 is capable of producing biologically active full length antibodies at good yields. We intend to focus our further efforts in this area on biochemically characterizing antibody products produced from C1 and further improving yields and protein structures through gene, strain and fermentation development. The presentation slides are available on the Company's website at http://www.dyadic.com. -- C1 GENOME ANNOTATION. In partnership with The Scripps Research Institute, we completed initial computer algorithm-driven annotation of Dyadic's proprietary C1 genome. Through this effort, we located over 11,000 genes and are in the process of further identifying them and refining the computer results with human-led annotation. We expect the resulting comprehensive genetic and biochemical blueprint of C1 to facilitate further development of our proprietary C1 Host Technology as a robust platform for the discovery, development and production of biotherapeutics, enzymes and other biomolecules for medical and industrial applications. "We continue to make progress in all areas core to the Company's growth strategy - pulp & paper, cellulosic ethanol and biotherapeutic proteins," commented President and CEO of Dyadic, Mark Emalfarb. "We are beginning to see results from our significant investment in the pulp & paper effort, especially in such geographic regions as Asia and South America, where we have had a sustained effort the longest. We have a host of trials under way with pulp & paper plants around the world and expect to see improved financial results in all geographies, including North America, by year-end." "With the preliminary annotation of the C1 proprietary genome in hand, we are quickly gaining knowledge about the cellular mechanism of our patented C1 fungus, which serves as a biofactory for our products. Through this knowledge we expect to continue to make our production system more versatile and robust," added Dr. Glenn Nedwin, Dyadic's Chief Scientific Officer and President of the Biosciences Business. "In the cellulosic ethanol area, we are in discussions with a number of potential partners and are considering other options to commercialize our technology to exploit this major opportunity," added Dr. Nedwin. "We are very cognizant of the potential opportunity in this area and view it as just the beginning of the Carbohydrate Economy, where many bio-based products are expected to be produced from carbohydrates (sugars) contained within cellulosic substrates, similar to the way in which many different products are produced from oil at petroleum refineries around the world." Dr. Nedwin continued, "We are also pleased by the R&D progress in the development of our C1 Host Technology for the production of therapeutic proteins and expect the new biological activity and yield data to enhance our dataset, potentially leading to collaborations with biotech and pharma companies." "Today we are carefully managing our resources, prioritizing among the significant opportunities in front of us and are focused on optimizing the Company's growth potential in ways to maximize shareholder value," added Mr. Emalfarb. About Dyadic Dyadic International, Inc., based in Jupiter, Florida, with operations in the United States of America, Hong Kong and mainland China, Poland and The Netherlands, is engaged in the development, manufacture and sale of biological products using a number of proprietary fungal strains to produce enzymes and other biomaterials, principally focused on a system for protein production based on the patented Chrysosporium lucknowense fungus, known as C1. Dyadic is applying its technologies to produce enzymes for use in converting various agricultural products (e.g. corn) and waste products (e.g. switch grass, wheat straw, sugar cane bagasse, etc.) into fermentable sugars, which can then be used in the production of traditional and cellulosic ethanol as well as other products currently derived from petroleum. Dyadic's C1 technology also is being developed to facilitate the discovery, development and large-scale production of human antibodies and other high-value therapeutic proteins. Dyadic currently sells more than 45 liquid and dry enzyme products to more than 200 industrial customers in approximately 50 countries for the textile, pulp & paper, animal feed, alcohol, starch, and food and beverage industries. 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 our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. For a discussion of these risks and uncertainties, please see our filings from time to time with the Securities and Exchange Commission, which are available free of charge on the SEC's web site at http://www.sec.gov, including our Annual Report on Form 10-KSB for the year ended December 31, 2005, and our subsequent filings with the SEC. Except as required by law, we expressly disclaim any intent or obligation to update any forward-looking statements. -0- *T Dyadic International, Inc. Condensed Consolidated Balance Sheet June 30, 2006 (Unaudited) Assets Current assets: Cash and cash equivalents $10,001,638 Restricted cash 34,887 Accounts receivable, net of allowance for uncollectible accounts of $559,492 3,355,105 Inventory 6,501,296 Prepaid expenses and other current assets 1,605,996 ------------ Total current assets 21,498,922 ------------ Fixed assets, net 1,809,973 Intangible assets, net 122,111 Goodwill 1,808,458 Other assets 125,394 ------------ Total assets $25,364,858 ============ Liabilities and stockholders' equity Current liabilities: Accounts payable $1,869,427 Accrued expenses 1,378,873 Short term note payable 121,625 Income taxes payable 81,359 ------------ Total current liabilities 3,451,284 ------------ Long-term liabilities: Note payable to stockholder 2,355,778 Other liabilities 75,380 ------------ Total long-term liabilities 2,431,158 ------------ Total liabilities 5,882,442 ------------ Stockholders' equity: Preferred stock, $.0001 par value: Authorized shares - 5,000,000; none issued and outstanding -- Common stock, $.001 par value, Authorized shares - 100,000,000; issued and outstanding - 24,507,104 24,507 Additional paid-in capital 59,031,044 Notes receivable from exercise of stock options (212,500) Accumulated deficit (39,360,635) ------------ Total stockholders' equity 19,482,416 ------------ Total liabilities and stockholders' equity $25,364,858 ============ *T -0- *T Dyadic International, Inc. Condensed Consolidated Statements of Operations (Unaudited) Three Months Ended Six Months Ended June 30, June 30, 2006 2005 2006 2005 ------------ ------------ ------------ ------------ Net sales $3,969,566 $3,988,077 $7,795,322 $7,722,437 Cost of goods sold 2,893,030 3,210,890 5,833,413 6,195,648 ------------ ------------ ------------ ------------ Gross profit 1,076,536 777,187 1,961,909 1,526,789 ------------ ------------ ------------ ------------ Expenses: Research and development 990,278 954,188 1,897,958 2,509,162 Selling and marketing 812,948 616,966 1,615,878 1,186,397 General and administrative 2,077,169 1,436,899 3,411,738 2,899,251 Foreign currency exchange losses (gains), net 65,481 (38,503) 96,742 (36,481) ------------ ------------ ------------ ------------ Total expenses 3,945,876 2,969,550 7,022,316 6,558,329 ------------ ------------ ------------ ------------ Loss from operations (2,869,340) (2,192,363) (5,060,407) (5,031,540) ------------ ------------ ------------ ------------ Other income (expense): Interest expense (273,796) (176,360) (447,750) (349,761) Investment income, net 87,816 94,516 189,850 23,258 Minority interest (12,692) (3,147) (13,355) (10,571) Other (expense) income, net 69,669 711 11,620 (4,016) ------------ ------------ ------------ ------------ Total other expense (129,003) (84,280) (259,635) (341,090) ------------ ------------ ------------ ------------ Loss before income taxes (2,998,343) (2,276,643) (5,320,042) (5,372,630) Provision for income taxes 7,267 15,571 32,876 27,878 ------------ ------------ ------------ ------------ Net loss $(3,005,610) $(2,292,214) $(5,352,918) $(5,400,508) ============ ============ ============ ============ Net loss per common share: Basic and diluted $(0.13) $(0.10) $(0.23) $(0.25) ============ ============ ============ ============ Weighted average common shares used in calculating net loss per share: Basic and diluted 23,726,130 22,060,371 23,082,443 21,997,824 ============ ============ ============ ============ *T