DIL Dyadic International

Dyadic International, Inc. (AMEX:DIL), a biotechnology company, today announced financial results for its second quarter ended June 30, 2005. Second Quarter 2005 and Subsequent Highlights: -- Second quarter 2005 revenue from higher-margin industrial enzyme industries, such as pulp & paper and animal feed, increased by 46% over net sales for the three-months ended June 30, 2004, and represented 29% of net sales, as compared to 19% of net sales in the 2004 second quarter. Sales to the pulp & paper industry comprised 13% of total net sales for the quarter as compared with 7% for the same period in 2004, while sales to the textile industry comprised 69% and 82% for the corresponding periods. Continued margin pressure in the textile industry and aggressive pricing by competitors validates the company's decision to aggressively diversify its revenue base from textiles. -- Achieved significant progress in meeting one of the company's top priorities for 2005 - to sharply expand the introduction of the company's new pulp & paper enzyme products to that industry. Currently, the company's enzymes are undergoing trials in a number of paper companies throughout the world. The trials seek to evaluate the economic impact the company's products have on the bleach-boosting, bio-refining and de-inking processes. Some of these potential improvements include significant cost-savings in the use of chemicals and energy, improvements in paper quality, and reduction in effluent streams. -- Successfully recruited and assembled a team of seasoned sales and marketing executives and technical salesmen with relevant pulp & paper industry experience in promoting and maintaining sales relationships involving substantial ongoing sales and technical servicing. The new team includes a Vice President of Sales & Marketing - Enzymes, a Vice President - Pulp & Paper Division, and 5 technical sales representatives. The team's composition reflects the company's understanding of the company's products exceptional value proposition to the pulp & paper industry as well as the understanding of complexities of the sales process into this industry, where its customer decision makers are responsible for the physical plants costing, in many instances, several hundred million dollars or more, and are accustomed to dealing with highly technical sales teams with strong support competencies, following long-term trials of new products. -- Continued the development of the C1 Host Technology for the production of a wider variety of proteins from diverse sources, potentially including human therapeutic proteins. Using gene knock-out technology, the company successfully eliminated several genes suspected of limiting expression of foreign proteins in C1 and is in the process of testing the effect of these knock-outs on the expression levels. Through the removal of unwanted or interfering genes, our gene knock-out technology has shown some promise of producing human proteins at higher yields. Although the initial results are not at the levels we ultimately desire, the results of expression experiments in the improved strains suggest higher stability of the expressed proteins. Second Quarter 2005 and Year to Date Financial Results: -- Revenue for the quarter ended June 30, 2005, was $4.0 million, as compared to $4.4 million for the quarter ended June 30, 2004. The decline in revenue was primarily a result of the continued, although decreasing, concentration of the company's sales to the textile markets, adverse effects of competition in the textiles market and the inability of the company to expand its sales staff prior to raising capital in the latter half of 2004. The company is endeavoring to transition its revenue base from the lower margin textile enzymes to higher margin areas such as enzymes for the pulp & paper, food and feed industries. -- Net loss for the quarter ended June 30, 2005, was $2.3 million, or $0.10 per share, as compared to a $1.1 million net loss, or $0.07 per share, for the quarter ended June 30, 2004. The higher net loss was primarily a result of the company's increased selling, general and administrative expenses to meet increased financial reporting requirements of being a public company, expenses associated with hiring additional personnel to support new marketing initiatives for the company's Enzyme Business and a $340,000 provision for slow moving inventory items due to the decrease in textile industry net sales. -- Research and development expenses for the quarter ended June 30, 2005, were $1.0 million, as compared to $0.9 million for the quarter ended June 30, 2004. The increase was partially due to our hiring of additional R&D personnel and outside contract labor. -- Selling, general and administrative expenses for the quarter ended June 30, 2005, were $2.0 million, as compared to $1.1 million for the quarter ended June 30, 2004. The increase in expenses was partially a result of the addition of personnel to comply with public company requirements and in an effort to expand the company's Enzyme Business into new markets. Professional fees of $393,000 in connection with the company's transition to a public company and an increase in insurance premiums of $78,000 for directors and officers insurance also impacted the company's results. -- Cash and cash equivalents were $14.4 million as of June 30, 2005, as compared to $1.1 million at June 30, 2004. The Company anticipates that the rate at which it has used cash to fund its operations in the first two quarters of 2005 will likely decrease in the near term. -- Revenue for the six-months ended June 30, 2005 was approximately $7.7 million, as compared to approximately $8.4 million for the comparable period ended June 30, 2004. The decline in revenue was primarily a result of the continued, although decreasing concentration of the company's sales to the textiles market, adverse effects of competition in the textiles market and the inability of the company to expand its sales staff prior to raising capital in the latter half of 2004. -- Net loss for the six-months ended June 30, 2005, was $5.4 million, or $0.25 per share, as compared to a $2.1 million net loss, or $0.14 per share, for the six-months ended June 30, 2004. The higher loss was primarily a result of the company's increased selling, general and administrative expenses to meet increased financial reporting requirements of being a public company, expenses associated with hiring additional personnel to support new marketing initiatives for the company's Enzyme Business, increased R&D expenses to continue the development of the company's proprietary C1 Host Technology, including the one-time expense of sequencing the C1 genome, and a $331,000 provision for slow moving inventory items due to the decrease in textile industry net sales. "In the second quarter of 2005, we completed our transition to a public company, listed our common stock on the American Stock Exchange, were added to the Russell Microcap Index, and put in place a solid infrastructure to accelerate our pulp & paper sales effort," said Mark Emalfarb, Dyadic's President and CEO. "During the second half of 2005 and into 2006 we intend to expand our pulp & paper sales and marketing initiatives, as we work to capture both an increasing number of new customer trials and convert existing and new customer trials into significant and sustained levels of pulp & paper product sales. We continue to estimate the addressable market for our existing enzyme products in the pulp & paper industry and potential enzyme products for the pulp & paper industry currently in our research and development pipeline to be in excess of $1.0 billion." "We are encouraged by the opportunities created from the sequencing of the C1 genome and have identified a number of enzymes that have the potential to become new products for several industries, such as pulp & paper, food and feed," continued Mr. Emalfarb. "Additional value will come later when the genome is fully annotated. The fully annotated sequence will serve as a blueprint for the C1 host strain and will facilitate further development of C1-based technology as a platform for discovery and production of a wider variety of proteins from diverse sources, including high-value therapeutics. With an annotated genome, the genes and proteins involved with these various processes can be identified, isolated, and ultimately manipulated to provide a system of optimal utility." About Dyadic Dyadic International, Inc., is engaged in the development, manufacture and sale of biological products (proteins, enzymes, peptides and other bio-molecules), as well as the licensing of its enabling proprietary technology to business collaborators for the discovery, development and manufacture of biological products from genes. Dyadic markets its products and services for applications in the textile, chemical, agricultural, pulp & paper, pharmaceutical, biotechnology and other industries, using its proprietary C1 Host Technology and C1 Expression and Screening Systems for the discovery, development and production of biological products. Cautionary Statement for Forward-Looking Statements Statements contained in this press release may contain information that includes or is based upon certain "forward-looking statements" relating to our business. For a discussion of the factors that could cause actual results to vary from these forward-looking statements, 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, 2004, which was filed with the SEC on April 15, 2005, and our Quarterly Report for the quarter ended June 30, 2005 on Form 10-QSB, which was filed on August 15, 2005. Except as required by law, we expressly disclaim any intent or obligation to update any forward-looking statements. Our Quarterly Report on Form 10-QSB Information contained in this press release should be read in conjunction with our Quarterly Report on Form 10-QSB for the quarter ended June 30, 2005, that was filed with the Securities and Exchange Commission on August 15, 2005, which contains our unaudited financial statements and other information for the quarter ended June 30, 2005 and the six month period ended June 30, 2005.