- – Achieved Major Milestones With Two Licensees-
- -Year-to-Date Research and Development Revenues up 60%-
- -Year-to-Date Product Related Revenue increased 8%-
- -Extended Convertible Subordinated Debt to January 1, 2016-
Jupiter, Fla., November 13, 2014/PR Newswire/ – Dyadic International, Inc. (“Dyadic”) (OTCQX: DYAI), a global biotechnology company whose patented and proprietary technologies are used to develop, manufacture and sell enzymes and other proteins for the bioenergy, bio-based chemical, biopharmaceutical and industrial enzyme industries, today announced financial results for the third quarter ended September 30, 2014.
Chief Executive Officer, Mark Emalfarb, stated, “The past quarter continues to be an extremely exciting time at Dyadic. Our business performance has been strong with year-over-year product related revenue growth of 8% and R&D revenue growth of 60% through the first nine months of 2014. The gross margins in our enzyme product business have improved by 13% during the first nine months of this year. We are also very excited that our pioneering C1 technology platform is playing an important role in the emerging commercialization of cellulosic ethanol. Following the recent opening of Abengoa’s new 25 million gallon cellulosic ethanol plant in Hugoton, Kansas, Dyadic entered into the next phase of its relationship with Abengoa. Royalty revenues are expected beginning as early as this quarter, as a result of proprietary enzymes developed by Abengoa under their C1 license agreement with Dyadic. Additionally, we recently extended our vaccine research project with Sanofi Pasteur and we expect additional R&D project extensions with other partners. Furthermore, we are in various stages of negotiations with several potential new prospects and collaborators in the second generation biofuel space, as well as a variety of other markets. Lastly, the Dyadic team is continuing to focus on becoming a full SEC reporting company in early 2015.”
Q3 2014 Financial Results
Total revenue for the nine months decreased $3.2 million to $9.8 million compared to $13.0 million for the same period last year. The decrease in total revenue is primarily due to licensing revenue of $700,000 versus $5.0 million in the first nine months of 2013 reflecting the BASF upfront license fee. The remaining $1.0 million BASF license payment of the total $6.0 million was received in the fourth quarter of 2013. This decrease was partially offset by growth in product related revenues of $547,000, or 8%, and an increase in research and development revenue of $563,000, or 60%, for the nine months ended September 30, 2014.
Net product related revenue for the nine month period increased to $7.6 million from $7.1 million for the same period a year ago. The increase in sales for the period was driven by growth in the animal nutrition, brewing, starch and alcohol markets.
License fee revenue for the nine months decreased $4.3 million primarily due to licensing revenue of $700,000 in 2014 versus $5.0 million in the first nine months of 2013 reflecting the BASF upfront licensing fee. The $700,000 received in the third quarter of 2014 represents a license payment of $500,000 from Abengoa for the opening of their new facility, and a $200,000 payment from BASF for achieving a project milestone.
Research and development revenue for the nine months increased to $1.5 million compared to $941,000 for the first nine months of 2013. The increase was due to a higher number of externally funded projects performed at our expanded research facility in the Netherlands. Additionally, a number of other projects accounted for on the completed contract basis, met their technological milestones and deliverables.
Gross profit for the nine months decreased to $3.5 million compared to $6.4 million for the same period a year ago. The decrease is primarily due to reduction in 100% margin of licensing revenue of $4.3 million. Partially offsetting the effect of the decrease in license fee revenues, gross profit of the product related and research and development businesses increased $1.4 million for the nine months ended September 30, 2014. The increase reflects improved product margins through higher fermentation and recovery yields, and lower raw material costs for our enzyme products, and meeting certain project milestones on a number of our research and development projects.
General and Administrative Expenses
General and administrative expenses were $4.7 million for the nine months ended September 30, 2014 as compared to $3.5 million for the period last year, reflecting an increase of 33%. Litigation costs are flat year-over-year at $1.2 million. The G&A increase of $1.2 million, or 49%, reflected staff additions and related costs for hiring a new Chief Operating Officer, Chief Financial Officer, and Vice President Business Development in Europe of approximately $600,000, SEC registration and related costs of approximately $300,000 and the impact of a 2013 bad debt recovery of $300,000.
Sales and Marketing
Sales and Marketing expenses for the nine months ended September 30, 2014 rose 32% to $899,000. The increase is due to the addition of a Sales Director in Europe and in the USA to strengthen our sales leadership team.
Research and Development
Research and Development for the nine month period ending September 30, 2014 was up 29% to $1.6 million. The increase reflects our continued investment in product development and C1 platform improvements.
As a result of the above discussion, overall operating expenses for the nine months ended September 30, 2014 increased 35% to $7.3 million compared to $5.4 million for the same period last year.
Net Income (Loss)
Net loss for the nine months was $4.3 million, or ($0.13) per basic and diluted share, compared to a net income of $121,000, or $0.00 per basic and diluted share, for the same period a year ago.
Financial Position and Cash Flow Analysis
At September 30, 2014, cash and cash equivalents were $3.4 million compared to $8.9 million at December 31, 2013. During the nine months ended September 30, 2014, the Company used approximately $5.5 million in cash and cash equivalents versus generating $4.5 million for the same period in 2013. The use of cash and cash equivalents for the nine month period ended September 30, 2014 reflects the following funding needs: (i) our operating losses of $2.2 million; (ii) changes in working capital of $2.0 million, primarily due to an increase in inventory and a reduction in accounts payable; and (iii) litigation costs against our outside former legal counsel of $1.2 million.
Extension of Convertible Subordinated Debt (Subsequent Event)
As reported in our press release on October 30, 2014, the Company entered into agreements with the holders of all of its outstanding 2010 and 2011 8% convertible subordinated notes (the “Convertible Debt”) to extend their maturity dates to January 1, 2016. The Convertible Debt, represents $6.7 million and may be prepaid by Dyadic at any time, in whole or in part, after March 31, 2015 with 30 days’ notice. The extended Convertible Debt includes a warrant provision in the event Dyadic elects to call the Convertible Debt early, in whole or in part, after March 31, 2015 and prior to the January 1, 2016 maturity date. Should the Convertible Debt holder(s), upon such call notice, elect not to convert their notes into common shares, Dyadic will pay the Convertible Debt holders’ their current outstanding Convertible Debt balance, and issue warrants to purchase common stock equal to 25% of the redeemed Convertible Debt balance at $1.48 per common share. If such warrants are issued, the warrants will have a three year term. In addition, in connection with the extension of the 2010 Convertible Debt, the share conversion price has been reduced from $1.82 to $1.48. The share conversion price of the 2011 Convertible Debt remains unchanged. All other terms and conditions of the Convertible Debt remain unchanged.
Dyadic’s 2014 third quarter financial results conference call is scheduled for 5:00 p.m. Eastern Standard Time on November 13th, 2014. The conference call may be accessed by dialing 888-244-2414 (from the United States or Canada) or 913-312-0419 (from other countries) five to ten minutes prior to start time and providing the passcode 5299505. A replay of the conference call will be available on Dyadic’s website (www.dyadic.com) shortly after the live event.
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 chemical, biopharmaceutical and industrial enzyme industries. Dyadic utilizes an integrated technology platform based on its patented and proprietary C1 microorganism, which enables the development and large scale manufacture of low cost enzymes and other proteins for diverse market opportunities. The C1 platform technology can also be used to screen for the discovery of novel genes. In addition to the sale of proprietary enzyme products, Dyadic actively pursues licensing arrangements and other commercial opportunities to leverage the value of these technologies by providing its partners and collaborators with the benefits of manufacturing and/or utilizing the enzymes and other proteins which these technologies help produce. Please visit Dyadic’s website at www.dyadic.com. Dyadic trades on the OTCQX tier of the OTC marketplace. Investors can find real-time quotes, market information and financial reports for Dyadic on the OTC marketplace website at www.otcmarkets.com/stock/DYAI/quote.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements contained in this earnings press release are “forward-looking statements” within the meaning of the federal securities laws. Statements about our beliefs and expectations regarding our technology platform, our licensing strategy, our ability to create higher margin products, expected litigation costs, our ability to continue past success and the enormous potential and value of C1 as well as statements containing the words “may,” “could,” “would,” “should,” “believe,” “expect,” “anticipate,” “plan,” “estimate,” “target,” “project,” “intend” and similar expressions may constitute forward-looking statements. These forward-looking statements involve risks, uncertainties and other factors 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 in this earnings press release. Investors are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. Any forward-looking statements speak only as of the date of this earnings press release and, except as required by law, Dyadic expressly disclaims any intent or obligation to update or revise any forward-looking statements to reflect actual results, any changes in expectations or any change in events. If Dyadic does update one or more forward-looking statements, no inference should be drawn that it will make additional updates with respect to those or other forward-looking statements. Factors that could cause results to differ materially include, but are not limited to: (1) general economic conditions, including the recent conditions in the global markets; (2) Dyadic’s ability to obtain additional debt or equity funding sources; (3) (Dyadic’s ability to retain and attract employees; (4) competitive pressures and reliance on key customers and collaborators; (5) Dyadic’s research and development efforts, (6) the outcome of the current litigation by Dyadic against its former counsel and (7) other factors discussed in Dyadic’s publicly available filings, including the risk factors included in Dyadic’s Annual Report filed with the OTC Markets Group on March 31, 2014.
Investor Relations Contact:
Dyadic International, Inc.
Thomas L. Dubinski
Chief Financial Officer