Michael Faby - CFO Mark Emalfarb - Chairman, President and CEO Danai Brooks - Executive Vice President and COO Robert Burke - Member, Board of Directors

Luke Smith - Chapin Davis Richard Deutsch - Ladenburg Thalmann

Good afternoon, ladies and gentlemen, and thank you for holding. Welcome to Dyadic International’s Third Quarter 2013 Financial Results Conference Call. At this time, all participants are in a listen-only mode. My name is Robert, and I will be your conference coordinator today. As a reminder, please note that this call is being recorded. At this time, I would like to introduce your host for today’s call, Michael Faby, Dyadic’s Chief Financial Officer. Please go ahead.

Thank you, Robert. Good afternoon. And thank you for joining today’s conference call to discuss Dyadic’s financial and operating results for the third quarter of 2013, which were reported in a press release issued earlier this afternoon. The press release and Dyadic’s quarterly financial statements have been posted to both the Dyadic and OTC Markets websites. I’m joined today by Dyadic’s Chairman, President and Chief Executive Officer, Mark Emalfarb; our Executive Vice President and Chief Operating Officer, Danai Brooks; and Dr. Robert Burke, Member of our Board of Directors. On today’s call Mark and Danai will cover operating highlights, business development and corporate strategy, and I will review our financial results in more detail. We will then give you an opportunity to ask questions. Each caller will be allowed one question and one follow-up question in order to provide all callers an opportunity to participate. If time permits the operator will allow additional questions from those who have already spoken. Before we begin, we would like to remind you that certain statements made in this conference call maybe forward-looking statements, which 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 these forward-looking statements. Dyadic expressly disclaims any intent or obligation to update any forward-looking statements except as required by law. We will now turn the call over to our Chairman, President and CEO, Mark Emalfarb.

Thank you, Mike, and I want to thank all of you for joining us on today’s call. Our long time shareholders have closely followed our licensing activity, but this quarter was a testament to the opportunities we have in our own proprietary enzyme business. Several initiatives to build this business are starting to bear fruit, resulting in Q3 product revenue growth of 55% year-over-year. We believe we are gaining market share as new customers appreciate our superior quality control, traceability and North American production location. Furthermore, we have developed a strong sales team with representative located in North America, South America, Europe and Asia. We have made key new hires and expect to continue to grow the sales team’s capabilities. Our largest segment of animal feed and food led our robust growth. In animal feed, some demand increase has been driven by recovering poultry market after the N1H1 scare. In addition, one of our key customers received additional regulatory approvals to sell animal feed products in EU. Our penetration in the market is broad, key accounts that are all growing. We anticipate continued growth in this market in the quarters ahead. New distribution channels further accelerated our growth in the food end markets. We have been working in this market for sometime in efforts to demonstrate our superior product quality and cost effectiveness has finally paid off. We are taking market share with several key formulators that supply the industry, anticipate plenty of growth in the quarters ahead. We are excited about the potential profitability of our proprietary product segment. We have built a solid infrastructure for this business with substantial operating leverage and it’s just now starting to pay off. We are implementing a new customer relationship management system on with several other marketing initiatives. These initiatives along with our new product offerings and operational improvements will make our proprietary product segment a profitable growth engine for Dyadic. We also made significant progress with our licensees and strategic partners during the quarter. Obviously, the BASF deal last quarter was huge news and we continue to make meaningful progress with our partner this quarter. The announcement of our deal with BASF was only the beginning of what we expect to be a long and hopefully profitable relationship. After the deal was signed the next step was to educate and train their scientist on C1 to and transfer our C1 technology to their labs. Those milestones were completed in early October, entitling us to an additional $1 million milestone payment which we booked in Q4. Although, the existing BASF license is focused on their product development, we are now exploring other ways to leverage our relationship with them. We believe there are attractive markets for our existing proprietary enzymes, that could be reached through their extensive distribution system. While there are no guarantees we will put a deal in place, we are enthused that additional opportunities are emerging in this relationship. Along those lines we are very excited to learn of BASF’s acquisition of Verenium, another enzyme producer based in San Diego. Besides demonstrating BASF’s commitment to developing its enzyme business, we expect the deal to create more opportunities for Dyadic’s C1 technology. Verenium is a great company with an expressive -- impressive scientific capability and broad genetic portfolio enable to increase with our C1 platform. We are optimistic that BASF may use C1 to commercialize to a number of products derived in the Verenium gene laboratory which may potentially lead to future royalties for Dyadic. Our scientists have successful purified and delivered a target protein to Sanofi. We are now finalizing the purification process for second target of protein. We believe that Sanofi has or will soon begin the preclinical testing phase using delivered protein. We have learned first hand that the development cycle in the pharmaceutical space is uncertain, so we believe that 2014 will continue to yield positive progress in this relationship. We are also pleased to report that we have been working with one of our confidential animal nutrition licenses in preparing the necessary documentation for the new C1 product registration at the EU’s FDA equivalent. Our time in the market is still few years away, this further validates our C1 product development capability, we expect this to provide us with consistent future royalties. Based on the anticipated success of this initial project, we are exploring an additional collaboration with his licensee a new enzyme. Additionally, in regard to our intellectual property portfolio, during the quarter we were granted U.S. Patent No. 8,551,751 B2, further leveraging our success and our research and development effort. We now have 13 U.S. patent, 41 international patent with another 34 pending. Latest patent address among other things, a capability of the great lignocellulosic material which releases fermentable sugars is important for the production of biofuels such as cellulosic ethanol and bio-based chemicals. Let me now turn the call over to our COO, Danai Brooks to discuss business development and operations.

Thank you, Mark, and good afternoon, everyone. Last quarter I mentioned that we would be providing additional detail on our biofuels strategy in the coming month. I would like to spend some time doing that now. We have accelerated and refined our approach to this market over the past half year. Our belief is that we are a leader in the field of enzymes for second-generation biofuel and bio-based chemical production. One of a very few companies with competitive enzyme product offering and with what we believe is viable business plan. In fact, last month we were recognized in Biofuels Digest 50 hottest names in biofuels. As a small company competing in field with much larger corporation we believe that we have variety of strategic initiatives. First, our CMAX biofuel enzyme is host organism, which we believe is by far the best organism for this application. C1 for this is highly effective and robust enzymes that works at broader temperatures and pH ranges than Trichoderma enzymes from our competitors. Further, C1’s richer genetic makeup and ability to reliably scale from the lab to commercial production gets Dyadic and our licensees the competitive advantage in lowering development cost and improving time to market. Second, Dyadic has a capability and flexibility to work closely with our commercial partners to tailor our enzymes to their specific applications. We have tested our newest generation CMAX4 products against competitors using a broad variety of feedstock and pretreatment. Nearly all cases, we have found that our product is equivalent or superior to other tier 1 products in the market. Importantly, during this testing, we have found significant variations in enzyme performance with different feedstocks and pretreatment. These are all several variance of our fourth-generation CMAX product line to address these different conditions. As a small company, every potential customer regardless that they plan on building [one planar 50] are important to us rather than one product for everyone, we are committed to highly customized enzyme solutions. Third, our business model is unique in the space. To our knowledge, Dyadic is the only company with the tier 1 enzyme product that has both the willingness and ability to provide licenses for customers to produce enzymes on-site at our biorefineries. Based on our analysis between 30% and 50% or more, the delivered biofuel enzyme cost comes from downstream processing, stabilization, shipping, handling and warehousing. On-site production avoid new costs. In addition, it provides the customers more secured supply chain, produce inventory requirement and confident in long-term enzyme cost control. Once the customer pays for license, they receive a commercial strength that they can produce enzyme on-site subject to royalty. In addition, similar to Microsoft’s model in periodically upgrading operating systems, we will continue to develop newest trends in our customers we have and at their option, customers may purchase during upgrade and both parties may share in the upside of reduced cost and improved performance. Finally, our research and development center has a demonstrated track record of developing leading products in a cost-efficient manner. Our scientist have achieved four-fold cost decrease in our biofuel enzymes over the past four years, while achieving significant improvement in glucose conversion rate. We have achieved -- we have to achieve this at a fraction of the development costs of all of our competitors in the market. We’re able to do this because Dyadic has been working on C1 since early 1990s and the core Dutch research team has been in place for over a decade. Our scientists are talented, highly productive and extremely adapted in manipulating C1 organism. On Tuesday, Codexis, one of our licensees announced they will not continue to fund their biofuel program. In contrast, we believe the quality of our CMAX product, on-site licensing model and cost-efficient R&D team makes us uniquely positioned to be successfully in this market. We have received extremely strong feedback from many potential customers on both our business model and our enzyme performance. While companies continue to commit capital at building facilities for biofuels and bio-based chemicals and we are in early-stage discussion with several of these companies, their long lead times for planning and building these biorefineries. C1-based biofuel enzymes are being further validated by Abengoa Bioenergy, a biofuel licensee. They made their final license payment of $2.5 million in the quarter and are now about to ramp up their cellulosic ethanol plant in Hugoton, Kansas. Publicly available information indicates that operations will start in earliest in Q1 of 2014 and production is expected -- with expected royalties are coming in the second or third quarter of 2014. In business development outside of biofuels, we continue to pursue opportunities in the biopharmaceutical space. In addition, the financially significant cost reductions in producing vaccine, therapeutic proteins and other drugs, C1 has the potential of expressing protein of interest that may have been unsuccessful in other hubs. We are greatly -- we are recently agreeing with our new program to develop a new vaccine and we are in discussions with other large pharmaceutical companies about a variety of potential opportunities. We look forward to reporting further progress in the pharma space in the quarters ahead. In other end markets, we are pursuing partnerships with such producers, consumer product companies, pulp and paper suppliers and this is in several novel end markets, some of which we have not previously explored. We continue on our theme of seeking high-quality partners of commercialized C1 at a large scale and we continue to expand discussion beyond western markets to blue chip companies in the emerging markets of Asia and South America. Changing our gears to our operation, we are focused this quarter on expanding our R&D center in the Netherlands, cutting cost, implementing improvements to our IT and marketing strategies and further executing upon our product development process. The foundation of success for our business is a continued focus on our R&D capability. In support of the new product development initiative discussed in the last earnings call, we are continuing to execute our plan to expand R&D facilities in the Netherlands. In addition, we continue to focus on improving our core C1 technology platform capabilities, which will have a positive impact on all aspects of our business. The expansion plan calls for increases to our facilities and headcount by approximately 40% and should be completed by the end of this year. To offset the additional cost in the Netherlands, we are closing our Greensboro, North Carolina facility, and relocating the capabilities. In addition, we took cost reduction actions in IT and with certain external service providers during the quarter. The full financial impact of these cost reductions will be seen in the next fiscal year. Dyadic has a long track record of cost control and we plan to continue that with that philosophy. On the new product development front, we expect to launch a next-generation C1 enzyme in the second half of 2014 that we anticipate has applicability across several end markets. We currently -- we’re currently in late-stage product testing and should finalize the associated safety studies for few of the applications during Q2 or Q3 of next year. We expect the C1-based product to be significantly more effective and efficient in the product that it replaces. While the focus of our proprietary enzyme business will remain in food and animal feed initially this new C1 enzyme product should be a nice niche product for sale in the textile and pulp and paper industries. Let me now turn the call over to our CFO, Mike Faby to discuss our third quarter financial results. Mike?

Thank you, Danai. Before reviewing the third quarter financial results, I'd like to refer you again to our press release and financial statements which are posted on the Dyadic and OTC Markets websites. I will begin with a review of the financial statement. For the quarter ended September 30, 2013, total revenue was $3.5 million, a 30% year-over-year increase. As Mark mentioned earlier, product-related revenue for the quarter was up 55% to $3.2 million. Research and development revenues were down 50% to $215,000. There was no licensing revenue in the quarter. Total year-to-date revenue was $13 million, up from $12.9 million for the same period last year again on the strength of our product related revenues, which were up 22% when compared to the year-to-date revenue of last year. Product related revenue was driven by strong growth in our animal feed market, the development of new distribution channels in our food and brewing markets, and new customer wins in nutraceuticals. R&D revenues were down as several projects were down in the first half of the year, and other project starts were delayed. Additionally in support of our new product development initiatives announced last quarter, we have redirected some of our R&D resources that would normally be working on externally funded projects at the development of new proprietary C1 products for our own enzyme business. Gross profit of $691,000 for the quarter was up 13% over last year, mainly due to the growth in our product-related revenues. Gross margin of 20% was down from 24% in the year-earlier quarter, due to lower R&D revenues and the changing product mix and [obtaining] [ph] more lower margin brewing revenues. Food and Brewing is relatively new market for us, so it still has a higher cost of goods. However, through anticipated fermentation optimization and volume increases over time we expect to bring the cost of goods sold down. Operating expenses for the quarter were up 20%, from the same quarter last year to $2 million. R&D and selling expenses grew at a slower rate than revenues, but general and administrative expenses were up 59% from the same quarter last year and are up 23% year-to-date. This increase is mainly attributable to higher legal expenses related to our lawsuit against former outside legal counsel. Although, our attorneys are working on contingency, we incur costs related to expert witnesses and other incidentals, which we expect to be about $1.5 million this year. Fortunately, most of the expert witness costs will have been incurred by year-end, so going forward we expect these costs to be reduced by 50% to 75% in 2014. We are hopeful, 2014 trial date will be assigned by year-end, but don’t know the answer to this for another month or so. Research and development expense of $226,000, was up 9% year-over-year and was up 18% year-to-date. The growth reflects the redirection of some of our resources to internally funded proprietary product developments for our own industrial enzyme business. Selling and marketing expenses for the quarter were $241,000, which was up 19% year-over-year, as we invest more resources in developing additional distribution channels for our proprietary products. Early indications are that this money is well spent, as you saw the immediate impact in our topline results. Since our Dutch subsidiary operates mostly in euros, fluctuations in the exchange rates between the U.S. dollar and euro impacts our results. During the quarter, we had a net gain from exchanges rates swings between the dollar and the euro of, $80,000, as the U.S. dollar strengthened against the euro. Year-to-date, this gain is $47,000. As you know, we are a very cost conscious company and are always looking for ways to work more efficiently for holding our operating expenses in check. For instance, we are implementing some information technology contract rationalizations such as reducing external support cost and implementing new systems to support our sales and marketing initiatives and streamline many of our current internal processes. We are also closing our lab in Greensboro, North Carolina, as we continue to consolidate our research and development efforts in Holland. On October 22, 2013, the arbitration proceedings brought by Mr. Emalfarb in 2007 against the company were dismissed. And consideration for the dismissal, the company agreed to reimburse Mr. Emalfarb approximately $313,000 for past expenses incurred. This amount is included in other expense and the income statement for the quarter and as a component of accrued expenses in the balance sheet as of September 30, 2013. In addition to this reimbursement, Mr. Emalfarb will be entitled to receive a small percentage of the net proceeds, if any, received by the company related to the professional liability lawsuit against our former outside legal counsel. During the third quarter last year, we received a $525,000 settlement for certain claims against two defendants in our professional liability lawsuit against our former outside legal counsel. This settlement is included in other income for the three months ended September 30, 2012. Net loss for the quarter was $1.4 million, or $0.04 per basic and diluted share. This compares to a net loss of $392,000 or $0.01 per common and diluted share in the year-earlier quarter. Year-to-date, net income was $121,000, compared to $2.8 million last year at this time. Let me now turn to the balance sheet. As of September 30, 2013, cash and cash equivalents were $8.5 million, compared to $4 million as of December 31, 2012. Year-to-date, we have generated approximately $4.5 million in cash against the use of $828,000 for the same period last year. During the quarter, we received the final installment of $2.5 million due under the Abengoa license extension agreement announced in April 2012. With regard to the BASF license agreement, we completed the technology transfer on October 11 and received $842,000 of the $1 million payment due. Additionally, the remaining $950,000 from the total $6 million from upfront license portion of the BASF agreement is due from the German tax authorities and is expected to be received by year-end, but could actually go into next year due to the backlog at the German tax authority office. Because of the high growth in our product revenues, account receivable was up 50% to $1.9 million and inventories are down 39% from December 31, 2012. Generally, receivables are collected in 45 to 60 days. Inventory balances generally run from $2.5 million to $3 million and were replenished in the first part of the fourth quarter of 2013. Total convertible subordinated debt as of September 30th, was unchanged at $6.8 million and total debt was $8.2 million. We announced in October that we extended the maturity dates of all of our debt of one year to January 1, 2015. We can call the convertible debt at anytime after March 31, 2014, without penalty with 30-days written notice. The $1.4 million note to a stockholder is non-convertible and is not subject to the call provision. Obviously, these extensions give us additional working capital flexibility to manage the business going forward. Looking forward, we are comfortable that our cash position combined with expected operating cash flow and potential new licensing deals will be more than sufficient for Dyadic to conduct its operations for the next several years. We intend to rely on our current balance sheet and operations for all near-term cash needs. We have no plans to raise additional capital at anytime in the near future. Based on these other expectations, we expect to be in a strong financial position as we enter next year. Let me conclude with our outlook. We do not offer specific guidance, but based on the BASF license transaction, the expected growth in product-related revenues and other strategic partnerships, we expect 2013 revenues to increase versus 2012. Because of the increased non-recurring litigation costs, we may breakeven or generate a small loss for the year. Net of non-recurring litigation costs, we expect to be profitable for 2013. Now, I would like to turn the call back to Mark Emalfarb for some additional comments. Mark?

Thanks, Mike. I want to make a couple of additional comments and we will go to Q&A. First, I want to reiterate our commitment to creating a better trading environment for our stock, which we believe can add shareholder value. We are nearing completion of the process of uplifting to the OTCQX market. The QX is a higher tier market. It reflects greater financial reporting standards. Process is quite extensive and has required significant planning and execution. The listing requires a company to assign a Designated Advisor for Disclosure or DAD. We interviewed many law firms and investment banks before selling our partner, which will be disclosed upon completion of the process. The Form 211 has been filed with FINRA. It came back for some additional clarifications, which they have responded to. Upon FINRA approval, we would send a detailed disclosure statement further describing the business to the OTC market for final review. We cannot guarantee the timing but we hope to have the uplist completed by year end if not sooner. After that we will set aside on the eventual NASDAQ listing. It is also a very extensive process, it will take some time since it requires us to become a fully reporting company with the SEC. We do believe it is achievable to complete in 2014. Second, we often get asked about our licensing deal pipeline. How many parties are we talking to? What sort of flow will we have? How many deals should investors expect us to sign each year? While we would like to give a definitive answers. Unfortunately, the element of our business is lumpy and unpredictable. Deal similar to BASF take months if not years to negotiate for instance. Furthermore, as we establish the value of C1 we are becoming more selective both in our partners and in turn we will accept. However, we must console patience and trust that we are working hard attempting to get the best deals possible for the company. Third, as you know, Dyadic notified Codexis of our intent to terminate the license with Codexis to our C1 proprietary technology on July 30, 2013 due to an alleged breach. Codexis has requested an extension of time because of breach and we have decided to grant this request. Codexis has now until January 17, 2014 to clear the breach to our satisfaction. This extension allows Codexis additional time to continue the ongoing negotiations with other parties and to explore strategic transaction and alternatives. Now I would like to turn the call back to our operator to take your questions.

Thank you. (Operator Instructions) And we’ll take our first question from Luke Smith of Chapin Davis.

Hi, Luke. Luke Smith - Chapin Davis: Hi, Mark. Hi. Regarding your success with Sanofi with the purification of one vaccine target, when do you get paid for this or do you get paid for this now upon this plus the second or just eventually with royalties?

We can’t give you the definitive terms but we will get paid from Sanofi if and when they exercise an option for a first payment, which would be fairly significant, if they do that, and then ultimately the second payment will come in beyond that, which again would be fairly significant, and if you added those two together it would be one of the most significant dollar values that we have gotten over the years in license agreement. And I think more importantly is I think developing relationship with Sanofi and understanding of C1’s capabilities and the breadth and scope of the possibilities of where that can be applied in addition to this let’s say initial program. Luke Smith - Chapin Davis: Okay. And I think last time you have said that if you were successful with Sanofi that you might attract other licensees, is that live now or do you have further to go to reach your previous expectation?

Hi, Luke. It’s Danai. We are in active discussion with other pharmaceutical companies and I think that as we have success with Sanofi that’s going to further the discussions with those companies. There is a lot of interest in C1 in this space and we are pretty positive in looking at pharma going forward. Luke Smith - Chapin Davis: Good. Good. Thank you.

And we will take our next question from [George Frable] [ph] who is a private investor.

Hi, George.

So gentlemen thank you. Hi, Mark and Danai and forgot the other fellows name. But question related to the Hugoton facility start up. I guess it’s a question that has a couple of aspects to it but, are they going to include anything besides corn and corn stover into their mix of raw material going in or do you know, if it will include for example miscanthus or any other grasses, specifically to be used for ethanol production?

I think the best place to get an answer is to go the Abengoa website for some of the articles that they’ve published. But I do think in addition to corn stover, there are other things they plan on using, I do not remember exactly but wheat straw, if they are growing switch grass, or some kind of a energy crop, but I do recall those two other possibilities, as well as potentially other types of feedstock.

Okay. Have they turned on, are there any of process - whether they started debugging if you know or…

I think, from what I read recently, there was, I think, they just had the Q the other day, but they mentioned that the facility is about 90% complete.

Okay.

And they expect to turn it on I think in the first quarter and that to be operating in almost let’s say commercial capacity in the second quarter.

Okay. Yes. They are behind schedule from what they originally said by about a quarter or quarter plus and I didn’t know whether or not you had anyone on staff there to assist them with debug during the struggle phase or not. So it sounds like you do not have some?

Yeah. Well, I think the debugging, they are one of the largest engineering firms in the world.

Yeah. Okay.

I don’t think it would add much value in terms of the engineering aspect of what they doing and all the synergies and the way this all goes and puts - all comes together.

Yeah. I didn’t really know if there was any tweaking as you could do or not, I didn’t think so, but anyway, all right.

Keep in mind that Abengoa has a group of about 40 R&D people we have trained.

Okay.

They have their ongoing R&D facilities in Spain to continue to improve and expand C1’s capabilities for what they are trying to do with it. I think recently there was a either part of the Q or press release, an article that they talk about their success and how they view their enzyme capabilities are giving them a competitive advantage.

Okay. I will go back in the queue here. I got one more question later on at the end of this one. Thank you.

And we will take our next question from private investor, [William Baine].

Hey Bill.

The Hugoton plant, if the plant does run at full capacity say for three quarters, next year, can you talk about the economics of the royalties a little bit?

I wish I could, but because of the confidentiality with Abengoa, we really can’t, but the royalty rate is a very attractive rate at that timeframe, so there might also be some milestone payment depending on what happens as well in addition to the royalty rates. But it will be nice revenue for Dyadic, it’s not monumental, but when you consider it’s one plant it’s fairly significant and then if they continue to go out and build more and more plants and license the technology across the globe it will build in a significant high rate of potential royalty for us.

Okay. Okay. The follow up question, different topic, you guys published a great article and Mark I think you actually wrote in the pulp and paper industry magazine and talked about production efficiencies gained by using C1 generated enzymes to various paper products. Can you talk about the extent to which you think the paper industry could be adopting those products? I mean it seems like efficiency is on the range of 10% to 15% benefit, it just seems kind of like, like a no-brainer if it’s fair to assume that you could extrapolate those benefits to, at least some portion of the pulp and paper market? I mean is that something that we can extrapolate, not say that you would obviously get certain percentage of the pulp and paper market, but like are there gains that could be seen with a decent percentage of the market? Can you just talk about that article a bit more?

Well, I think, as you know, we have talked on past calls, we have very difficult time to getting in and getting trials around with this industry because they do the same thing they have done for 20 years and they are very difficult to change. So where we have been in discussion with and are trying to sort of collaborate with the potential partners that actually has access to worldwide pulp and paper business, where they have feet on the ground and they have products they sell to these people everyday, and so we think that approach might be much more beneficial to help get these products in place and get them to use these products. So that’s the potential that we have been, sort of, I guess, in the last 30 to 60 days had active discussions with one of the largest companies in the world that actually have their marketing and distribution systems in place to that industry. And we think that could be a lot better approach than the one of us trying to attack it on our own.

Okay.

Bill, it’s Danai. We have a very good product, FibreZyme G200 in place today, and the new product I was talking about is going to be a significant upgrade to that, and we will ready with that at the end of the next year.

Okay. Okay, guys. Thanks very much.

We will take our next question from investor, [Tim Quinlisk] [ph].

Hey Mark, how are you?

Good. How about you?

Good. Thanks. I wanted to ask you about Codexis, I guess, as I think about it, it was clearly one of the legs of the stool as you thought about your entry into second gen, what -- how do you look at that going forward and if you could just give me a sense as to why you would give them extension on this agreement particularly given that any -- there is probably no reason to cure if there is no prospective action on their part? So I am just trying to understand that, kind of, nuance as well?

Yes, I want to be sort of vague here because of course, we know things that you don’t…

Yes.

…from our discussions with Codexis, but I believe that Codexis’ CodeXyme product, is equal to or better than Novo’s CTec3 both in performance and costs. And I believe that it has been demonstrated time and time again not only by ourselves but by people in the marketplace. And I don’t think that their product and their technology is inferior. I think it is a just matter of our resources and where they want to allocate them. And so, I think they’ve said they are looking for strategic alternatives and we were hopeful that they would have executed on that by a deadline of November 15 that we actually gave them in the first place. And so we are hopeful that in fact that if they still can pull something off and they will benefit both their company and their shareholders as well as ours. And, if they don’t, I think there’s maybe other opportunities and avenues to pursue with them for Dyadic and Codexis to finally to capitalize on this huge amount of money they’ve spent to create what I think is the best platform out there today in the marketplace.

So in any event, they are not able to sort of find a partner, is that kind of an asset that you might find interesting to sort of bring back into Dyadic if possible on -- certainly on an economic basis?

That’s a good possibility if we could come to terms of the (inaudible) but we are hoping that in fact that they do find a partner and the partner that they did have may in fact be bigger and better than -- not big and better than Shell but bigger and better than maybe other people expect.

Okay. And just a follow-up question, you have got Abengoa that’s clearly start to go to market, do you feel like you need to enhance that capability with another partner, and secondly, can you speak to any of the opportunities potentially to go into first gen in terms of -- with the product that you currently have available, if there is even an opportunity for that?

Yes, I mean there is an opportunity to go in to first gen. We in fact are exploring the possibility with what products that we have today. They can be used there now. What we can develop that can be used in that industry as well. I think that in the case of Abengoa they are marching on a path, as you know, they are one of the best engineering firms in the world. They have been doing cellulose like ethanol development for over a decade. The plant is nearly complete. I think -- from what I am reading, we feel very confident that they would be able to deliver on their promise, and Danai and I have had discussions with a variety of other people in a variety of countries all over the world that have an interest in on-site which is a completely different model than what Codexis was offering. And I think that there is room to find ways to create value not only with our own CMAX line but potentially what CodeXyme in some kind of a strategic relationship but in fact they don’t get to where they want to go.

Okay. Great. I will be back in the queue. Thanks a lot.

We will take our next question from investor, [Chad Brown].

Hi Chadd.

Sir your line is open. (Operator Instructions)

Okay. Can you hear me now?

Yes, we can. Hi Chadd.

Sorry, Mark, I was curious if you could give us some more color on the open paper prospects that you referred to in the press release for the first half of next year?

Let me let Danai pick up there and I will chime in if necessary, how is that?

Okay.

So for pulp and paper as Mark mentioned really the way that we are going to attack the market I think is probably to find big distributor that’s already inside the pulp and paper plant to sell the product. We are talking to a very large one. We are talking to one or two small ones as well. And again, we have a nice product but we don’t have a big sales team to get into these facilities to run trials. So once we are able to do that through other parties then I think we should get some nice traction there.

Am I correct in recalling that it was the tissue sector that you are targeting?

Well, it’s tissue but it is also by refining a pulp and that one of our major areas that our products G200 were very well and I think somebody mentioned earlier that’s actually a publication out there. And if you want to read that publication, we can forward that on to you as to performance and the benefit that this product will offer at that marketplace. And as Danai pointed out, it isn’t so much of a product. It is performing in certain applications. It is a matter of getting into these mills and getting them to give us the attention and to actually run these trials. And we are hoping to work with some very, very large companies or company that has that situation and marketing skill and to put us in those facilities through their sales and marketing force and relationships they have had for years.

Okay. I am assuming that it’s difficult to get them to shut down their whole mill, but you have to shut down the whole mill in order to broadcast?

No, they don’t shut down the whole mill, actually but one of the problems is that there are lot of times when you go to the mill because we are not there all the time and instead of a trial, a boil that might break, the day before we get there, they cancel a trial or somebody else is testing a different chemical at the same time. And it just becomes very problematic. So when you have feet on the ground in a facility where you have been working with a plant manager for years with some of the big chemical and other distributors have been doing, they have a much better chance of getting these trials run than we do.

Of course.

And so we have to gear up some margin to do that. But we think it’s a much better approach than attacking it alone.

Okay. Thank you.

We mentioned before it makes a ton of economic sense for these guys to be using enzymes in their plants but they just couldn’t move industry and they are taking on risks if they are changing their technology. So they really need -- it’s really a relationship sale, not just an economic sale and so that’s really why we -- one of the key reasons why we are looking for a partner.

Okay.

And we will take our next question from Richard Deutsch, Ladenburg Thalmann. Richard Deutsch - Ladenburg Thalmann: Yes, hi.

Hi, Rick. Richard Deutsch - Ladenburg Thalmann: Thank you for taking my call. Hi, Mark. As usual you got such a broad power to work with, I will just ask a couple of questions, and just get back in the queue or just carry it on some other time, but a broad picture here, I have been mystified over the years, over the dislocation between your miniscule market capitalization and the work that I have done evaluating some of the progress you have announced and some of the values that I attribute to what you have already done. And I am trying to figure out what’s happening, and it’s obvious that it is two issues here, Mark, for the shareholders to sit back and I think it would be unfairly getting poor market prices for the stock. It seems that there’s two issues now. Number one is the slow progress. So over the years -- that you’ve made and coming up with significant milestone announcements and even modernization. You are already talking again this year about maybe breaking even. I understand the different elements more than anybody else, but I still believe that you are vastly undervalued, from what is already clearly on the record in terms of the clients that you forgot in the past. And the relationships you’ve already build over the last decade. And going into just one or two of these things is the highlight and I will leave it there. We’ll start with the biggest chemical company in the world, BASF. You announced the actual signing of the deal back in May and yet five months later, you are telling us you finally made the technology perhaps. It’s fair that you have done it and I applaud you on the success moving forward with them, but that’s an awful long time and it just appears as if you can’t do it by yourself. You are going to have to bring on some people that can like deny, to go ahead and push these things forward. It’s just -- money lost by not getting recognitions for these things happening. The other thing that I feel that you’ve lacked full disclosure of really the values are there. You are always telling us, what you can’t tell us, if we only knew. Well, I would like to know, if in your negotiations with BASF, which put down $6 million for a non-exclusive license in one particular area. Did they ever have an interest in a larger deal, that would have been more significant then you decided, you weren’t going so further? So that’s my first question.

Well, I think we had a question before that. I’m trying to figure out what it was, I’m kind of lost.

Timing of the technology transfer.

Let me address the technology transfer timing. That has absolutely nothing to do with Dyadic Netherlands. It’s not denied. Nothing real -- we don’t have those skills. We’re not the scientist in the labs. That had to do with BASF’s people and their ability to update in a timely manner. A specific aspect of the transfer probably, 85% to 90% of that was done within a month. But they then ran into some issues that they wanted to verify and come through, but they had nothing to do with us. It was just a validation of our result and ultimately they did that and that really, was not lack of resources on Dyadic’s part. It was not lack of effort on Dyadic’s part. It was in fact, BASF taking their time and their diligence and they wanted to make damn sure that not only did they bought work, but what they bought, they know how to use it going forward to create a variety of products for various industries over many, many years. So, I think that they put us through a lot of excruciating things that maybe had nothing to with the validation of result. But they wanted to make sure, they got the benefit of the bargain for the next kind of 20 years and so it took longer and I think they had us jump over hurdles that maybe we could have argued about and get done earlier. But for the length of the relationship and the size of the relationship, we decided to work with them under their case, under their schedule, under their time. So this has nothing to do with our resources or our people. In terms of BASF, whether we had a larger deal on the table, so we could have or couldn’t have had, that’s something you will have to speculate and obviously in a competence here, we can discuss that. But I can tell you that, BASF, in addition to the $6 million and we've now received other than the German taxes that they are still holding back and it will ultimately receive. We are doing research for BASF and have been funding that research. Their people are using C1. We anticipate that they will leverage C1 into the variety of operations as well, so it’s another positive benefit. We’re talking to BASF about the variety of other ways to work together to expand the relationship, maybe marketing sales from our existing products, for example. So, our relation with BASF is good. We are feeling better and just as it is with lot of our licensees, so we hope to expand those relationships and we hope to help enable their product development and commercial launches at the timeframe where we can get them to work. So it’s not our resources. We are almost back in that particular case.

Rick, it’s Danai. Keep in mind and you know this already, but C1 -- we’ve been developing this technology for 20 years and it’s a complex technology. We think it’s our cutting edge. And so, just extending all of the information in the strain, it didn’t take a lot of time but to really get somebody comfortable, this technology hasn’t been able to grow the strain and have high expression and to validate the results. That’s not an easier thing to do, so I think all of that training and validation, five months is not unreasonable. Richard Deutsch - Ladenburg Thalmann: Okay. I will buy that. But I’m trying to get a cost, a order of magnitude of what industry people think you are worth, like Abengoa paid you $15.5 million for non-exclusive licensing. And just are tired of seeing this stock trade at such diminish levels, because of lack of ability to transform the views that I have and apparently you have internally to the marketplace. Part of that is this published thing and we were seeing at the stock, which is excruciatingly slow, like you’ve explained it and it looks like we are on the verge of finally moving forward. But just to stick on the BASF, I am just asking you whether they were interested in a bigger deal, but because of your expectations of ultimate value to your shoulders, you narrowed it down to a license deal. Is that a reason to case? Were they’re interested in a larger deal or not?

Rick, I think, we believe the deal that they’ve struck is a big deal already. The $6 million was just an initial fee and there is milestones, royalties, R&D agreements, potentially other opportunities with them. So it’s relative to the size of the deal and we just don’t look at the licensee fee upfront only.

Well, I think you are asking a different question but we can’t answer. It’s a different question you are asking. Richard Deutsch - Ladenburg Thalmann: If you’ve got an offer to sell your company and you decide not to, that’s fine. But you can answer the question, whether there was a request to get into that kind of discussion from anybody much less, BASF?

And the answer to that question is no. We cannot tell you that information. And it’s not that we are being unreasonable what you may think. We weigh everything on any every aspect and if somebody came to us, obviously we would entertain an offer. Richard Deutsch - Ladenburg Thalmann: Alright. Well. I’m not going to beat it do death. In this expanded R&D that you're talking about with BASF, would that be flowing into your R&D, starting your income statement or is it just rolled into the license agreement?

Well, what I said here was, we got the $6 million minus the German taxes, which we haven’t got back yet but we will. And then they are funding additional R&D, which is additional, which is going into our R&D funding in Wageningen, part of Netherlands for a single project that we have knowing today and we anticipate their project to do well and see that we are doing pretty well on the phase today. So we will continue to fund their project, and hopefully a few more. But more importantly as in the case of proteases, which you know we put in several $100 million of their own or sales money and to developing the things that they wanted to make C1 do. So we’ve -- it’s a long tedious transfer of technology you are talking about. We spent the time and effort and as I pointed out, it doesn’t take a month to do transformation, fermentation. It takes several months to validate that. And we painstakingly made sure that they knew what they were doing, so that they -- not only can they use in their own facilities and put their own resources on it, to create their own products. But example, in Verenium, we are hoping -- now that they will transfer that knowledge to that facility and all those scientists that they have there and they will hopefully chose C1 as one of the horses that they’ve put in the race. They developed new products out of their genetic library. So it is in just about our R&D, its about training these people in the right way, in the best possible way to enable them to developed a slew of products over the next several years with their money. Richard Deutsch - Ladenburg Thalmann: You are saying that we expect to see some more R&D money is coming from them?

We’re already seeing it. Richard Deutsch - Ladenburg Thalmann: Okay. Right and just the one follow-up question on Sanofi, which you’ve been working with for almost three years right now. What is the trigger for the next option for them?

I can’t speak for Sanofi but I can give you a general thought. So we know purify it as one protein. We’ve delivered it. There -- I believe is they have already injected it into the animal trials and they expected those results in the not too distant future and those results look good. Then obviously their decision is to either move forward and then pull one of those triggers or both of those triggers or continue on the few more validation of things they may want to see, I don’t know. We don’t know how good it’s going to react in terms of the vaccination. So the good new is that we have delivered one of the protein. It’s in pure enough form that they were able to inject that. And so we are waiting for the results. And the other one -- and we think we’ll have in the not-too-distant future and they may learn enough from the first one, they may want to wait for the second one, I don't know. But it is advancing and I can tell you that this is a very, very difficult chain to, let me call that chain because it's something that maybe one other company in the entire world that I know has actually brought the product out similar to it and that’s a very expensive way of doing it. Richard Deutsch - Ladenburg Thalmann: That alone sounds amazingly but Mark, it has a lot of potential to it. So thank you. I’ll get back in the queue.

(Operator Instruction) Our next question is a follow-up from Tim Quinlisk.

Hey, Mark. I am I wanted to go through your enzymes base cells, your enzyme sells, you can see 3.2 million a quarter and it seems like from everything you said that’s kind of a major initiative internally to ramp that up as you go out next couple of years. Is that a good number for me to be thinking about as a base to grow from. I know it’s up pretty substantially year-on-year. But can you give me a sense of what your expectations are internally and what kind of visibility around product offerings you’ve got out there that give you comfort as you got the next couple of years?

Yes, I think that one of the things that we have done is we have some very good products today and this is getting more of those sales to more people. But as we mentioned, I think I know it was in this conference call or any press release whenever, let say, formulator. So animal nutrition is being getting EU registrations and that’s taken time, many years and its like years, years, and years. And going from layers to [hen, cigarettes] and then more and more of these registrations they get, the better their business grows and better our business grows with it. And so some of it is picking up new customers, some of it is our existing customers. The are growing their business and then we’re developing new product for ourselves in that market as well. And so I think that at $3.2 million number in this quarter of 55% growth is not something we think we’re going to do every quarter obviously. But we expected that the fourth quarter will be significantly better and the fourth quarter was last year and whether that’s 55% growth or less. Some sales might have come in this quarter, but then we will not get in next quarter, but we do expect to grow the business and I think the baseline is moving up which you can see and we’ve been waiting for long time to get some adoption on this products and I think it’s there, and as some of these companies continue to get more and more registrations, I think that’s one of the gate keeping item. I know we have a distributor in Asia that we've been working with for years. It’s buying some of these but they can never get that gate keeping registration over there and should help grow dramatically as well. I don’t know that answers your question or not...

No. It does. I mean, if I am to think about for 2014 a number in the $10 million to $12 million range? Is that kind of level in which this is business could actually be profitable and it could sort of sound right in term of able to get gross margins and just sort of carrying some weight if you will within your business?

Yeah. Hi, Tim. It’s Mike.

Yeah.

When you look at our financial and some of the things that have been going out with the litigation, I think that that the question really comes is, the revenues going to grow unstabilized, these are costs that are non-operating nature are going to continue. So I think when you looking at a breakeven scenario, you are probably looking somewhere between $14 million to $15 million on an annualized basis, provided everything stabilizes. Obviously, some things happen product mix has change but I think that’s probably where you are looking.

And I think why our number little higher than you are thinking is that we’re going to be spending more money on product development, so that we can take that number and exponentially grow it three to four, five years up. So remember we talked about expanding the touch facility.

Yeah.

And getting more access to research from our product lines as developing our own products, generate lot more profit than just getting royalties and up until this year, we haven’t had ability to layout that cash to do that, but now we do in a methodical way and so we want to develop from our own products exponentially growth to our existing markets and some new market opportunities.

Tim, it’s Danai.

Yeah.

We have a very nice product up today and there are niche products in the market. We didn’t do lot of blocking and tackling to grow those markets with existing products.

Yeah.

We have that product that we are going to launch next year that we mentioned. It’s going to be a nice product as well. And I think what we are doing with the new product enrollment process, you are going to see the fruit in a couple of years, not immediately, but we hope those -- we hope that those would be a lot bigger and you will see a much, hopefully step function in fact to our P&L once those new products that we are just starting to develop now, hit the market in the few years.

And I think one of the things that work side with us that most companies don’t have, certainly development companies. I think we’ve got customers in 35 countries. We have got tremendous distribution with some really major customers and so we can actually developed better performing products at lower costs. We have access to these markets and I think that’s key, where we don’t have in pulp and paper business, we have a pretty good outlet in the animal feed business for example.

Sure. Okay. Okay. Great. Thanks a lot. I appreciate it.

And I am showing no further questions at this time and we’ll now turn the call back to Mr. Emalfarb for closing comments.

Okay. I want to thank all of you for being shareholders and supported Dyadic and for participating in today’s conference call. We look forward to reporting our progress to you during our next quarter, end of the year in some time in March. Thank you.

And this concludes our program for today. You may all now disconnect.