DIL Dyadic International

Dyadic International, Inc. (AMEX:DIL), a biotechnology company, today announced financial results for the first quarter ended March 31, 2006. First Quarter 2006 and Subsequent Highlights: Net sales for the quarter ended March 31, 2006, were approximately $3.8 million, as compared to approximately $3.7 million for the quarter ended March 31, 2005. First quarter 2006 net sales to customers in the pulp & paper industry were more than double those in the same quarter last year and totaled $479,000 which represented 13% of net sales, as compared to 6% in the 2005 first quarter. First quarter 2006 net sales to customers in the animal feed industry also increased significantly and represented 8% of net sales as compared to 5% last year. Textile industry net sales were approximately $2.7 million in the first quarter of 2006 versus approximately $3.1 million in the first quarter of 2005. As previously discussed, 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 March 31, 2006, was approximately $2.3 million, or $0.10 per share (basic and diluted), as compared to a net loss of approximately $3.1 million, or $0.14 per share (basic and diluted), for the quarter ended March 31, 2005. Cash and cash equivalents were approximately $9.1 million as of March 31, 2006. In addition, to date in the second quarter of 2006, Dyadic has received approximately $3.5 million in gross proceeds from the exercise of warrants and stock options. In May 2006, Dyadic announced that the Company's two largest stockholders -- the Emalfarb Trust, an affiliate of Mark Emalfarb, and the Francisco Trust, which was established for the benefit of Mr. Emalfarb's immediate family -- converted promissory notes which had combined principal and accrued interest of approximately $1.6 million into an additional 473,835 shares of Dyadic common stock. Subsequent to the conversion of the convertible promissory notes, in the aggregate, these two trusts own approximately 44.2% of Dyadic's outstanding shares of common stock as of May 1, 2006. In addition, Dyadic announced the extension of the maturity date of the Revolving Note held by the Emalfarb Trust to January 1, 2008 from January 1, 2007. The Revolving Note has a combined principal and accrued interest balance of approximately $2.4 million. Additional Highlights: -- Strengthened our management team and Board of Directors with the addition of Dr. Glenn Nedwin, co-founder and former President of Novozymes, Inc., a California-based R&D subsidiary of Danish-based Novozymes A/S, who joined Dyadic as Chief Scientific Officer and President of the BioSciences Business. -- 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. -- Partnered with The Scripps Research Institute to work with Dyadic scientists to provide a complete annotation of the genome of Dyadic's proprietary C1 fungal organism, which was sequenced by another vendor in 2005. We expect this knowledge 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. -- Purchased the remaining 17.5% of the equity that Dyadic did not already own in its Asian subsidiary. -- Expanded our international reach with the addition of distributors in several countries where we do not currently sell direct. -- Added capacity at our manufacturing facility in Poland to meet the growth we expect in our pulp & paper and feed enzyme businesses. "We believe that we have made great strides during the first quarter in expanding our Enzyme Business, and in the continued development of our patented C1 Host Technology platform as well as other proprietary technologies for enzyme, biofuel and pharmaceutical applications. We see a significant opportunity to use our technologies for the design and large-scale production of proprietary enzymes to convert various agricultural products and waste products into fermentable sugars, which can then be used in the production of traditional and cellulosic ethanol. We also moved forward in the development of our C1 Host Technology to facilitate the discovery, development and large-scale production of human antibodies and other high-value therapeutic proteins," said President and CEO Mark Emalfarb. "These and other developments significantly enhance Dyadic and the company's financial flexibility, simplify our balance sheet, and represent a strong vote of confidence in Dyadic's future," commented Mr. Emalfarb. "Our initiatives to increase sales of Dyadic's proprietary enzymes to the pulp & paper and animal feed industries are delivering the results we anticipated. We made our first shipment of products to a U.S.-based paper customer in the first quarter, and are optimistic that further successful mill trials will position Dyadic for greatly increased sales volume in the future in what we estimate is a $1 billion market opportunity," Emalfarb said. About Dyadic Dyadic International, Inc. 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 and animal feed 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 Quarterly Report on Form 10-QSB for the quarter ended March 31, 2006. 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 March 31, 2006 (Unaudited) Assets Current assets: Cash and cash equivalents $ 9,104,190 Restricted cash 34,658 Accounts receivable, net of allowance for uncollectible accounts of $523,326 2,788,882 Inventory 5,952,959 Prepaid expenses and other current assets 1,030,927 ------------ Total current assets 18,911,616 ------------ Fixed assets, net 1,787,766 Intangible assets, net 135,143 Goodwill 467,821 Other assets 121,038 ------------ Total assets $21,423,384 ============ Liabilities and stockholders' equity Current liabilities: Accounts payable $ 2,689,922 Accrued expenses 1,100,027 Accrued interest payable to stockholders 143,592 Current portion of notes payable to stockholders 1,557,960 Short term notes payable 104,250 Income taxes payable 54,269 ------------ Total current liabilities 5,650,020 ------------ Long-term liabilities: Notes payable to stockholders, net of current portion 2,338,487 Other liabilities 111,471 Minority interest 104,556 ------------ Total long-term liabilities 2,554,514 ------------ Total liabilities 8,204,534 ------------ 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 - 22,467,577 22,468 Additional paid-in capital 49,763,907 Notes receivable from exercise of stock options (212,500) Accumulated deficit (36,355,025) ------------ Total stockholders' equity 13,218,850 ------------ Total liabilities and stockholders' equity $21,423,384 ============ *T -0- *T Dyadic International, Inc. Condensed Consolidated Statements of Operations (Unaudited) Three Months Ended March 31, 2006 2005 ------------ ------------ Net sales $ 3,825,756 $ 3,734,360 Cost of goods sold 2,940,383 2,984,756 ------------ ------------ Gross profit 885,373 749,604 ------------ ------------ Expenses: Research and development 907,679 1,568,006 Sales and marketing 802,930 569,431 General and administrative 1,334,569 1,449,322 Foreign currency exchange losses (gains), net 31,261 (61,262) ------------ ------------ Total expenses 3,076,439 3,525,497 ------------ ------------ Loss from operations (2,191,066) (2,775,893) ------------ ------------ Other income (expense): Interest expense (173,954) (173,402) Investment income (loss), net 102,034 (71,259) Minority interest (663) (7,424) Other expense, net (58,050) (68,010) ------------ ------------ Total other expense (130,633) (320,095) ------------ ------------ Loss before income taxes (2,321,699) (3,095,988) Provision for income taxes 25,609 12,307 ------------ ------------ Net loss $(2,347,308) $(3,108,295) ============ ============ Net loss per common share: Basic and Diluted $ (0.10) $ (0.14) ============ ============ Weighted average common shares used in calculating net loss per share: Basic and diluted 22,431,596 21,934,583 ============ ============ *T