Thomas Dubinski - Chief Financial Officer Mark Emalfarb - Chairman, President and Chief Executive Officer Danai Brooks - Executive Vice President and Chief Operating Officer Thomas Dubinski - Chief Financial Officer

Richard Deutsch - Ladenburg Thalmann

Good afternoon, ladies and gentlemen and thank you for holding. Welcome to Dyadic International’s Fourth Quarter 2014 Financial Results Conference Call. At this time, all participants are in a listen-only mode. My name is Jamie, 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, Tom Dubinski, Dyadic’s Vice President and Chief Financial Officer.

Thank you, Jamie. Good afternoon and thank you for joining today’s conference call to discuss Dyadic’s financial and operating results for the fourth quarter of 2014, 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 the OTC Markets’ websites. I am joined today by Dyadic’s President and Chief Executive Officer, Mark Emalfarb; and our Executive Vice President and Chief Operating Officer. On today’s call, Mark and Danai will cover operating highlights, business development and corporate strategy, and I’ll review our financial results in more detail. We will 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. I will now turn the call over to our President and CEO, Mark Emalfarb.

Thank you, Tom. 2014 was a turning point for Dyadic. We’ve improved the operations of our Enzyme business to enhance manufacturing processes, cost controls, higher-margin, product mix, resulting in record margins. Over the past two years, we brought on a new Chairman of the Board, Chief Operating Officer, Chief Financial Officer, Director of Research and Development, Sales Director for Animal Nutrition, and Sales Director for Europe. We’ve begun the second expansion of our Dutch research laboratory, which has been largely funded through increased R&D revenue and the science behind C1 has never been better. During the year, we received our first milestone payments associated with our BASF and Abengoa C1 license agreements. The $500,000 milestone payment from Abengoa is the first payment associated with their newly opened 25 million gallon Hugoton facility. We expect to receive royalty revenues from that facility in 2015 and beyond. The $200,000 project milestone payment from BASF is the first payment associated with our research project being performed in our Dutch lab. We expect to receive additional milestone payments from BASF in 2015. We believe that these milestones and the expected royalty payments are the first of many ongoing revenue streams that we are already starting to realize the C1 license agreements. Highlighting the commercial benefits of each arrangement in this agreement, beyond a one-time upfront licensing fee that they have already paid. The C1 expression system continues to prove itself as one of the industry-leading systems for turning DNA into products. Our C1 White Strain sometimes referred to as the LC Strain are achieving record high yields in some of our research programs. We’ve achieved over 50 grams per liter of the target protein using the C1 White Strains. The High Cellulase strains or HC strains were used to produce our CMAX product for second-generation biofuel applications continue to reach record productivity with more than a 100 grams per liter of total protein. These high yields translate directly into lower-cost manufacturing processes for ourselves, our licensees, and collaborators. At the [Subsequent] Event at the end of the year, Mike Tarnok was appointed as the Chairman of the Board of Directors. As a former senior executive in manufacturing and finance at Pfizer, and with experience as the Chairman of Keryx, Mike has very relevant pharmaceutical and industry knowledge. Mike has been an asset to the company since joining the board last year. And his insight and leadership continues to be a great value to Dyadic, our employees and our shareholders. Mike’s expanded role has allowed me to spend more time in commercializing our C1 technology platform, grow our enzyme revenue, and accelerate the company’s timeline to profitability. Earlier this week, we completed a new $2 million private placement of a convertible note. We expect that this financing will help to bridge us to a cash flow breakeven point at some time in 2016. This loan was from an existing third-party Dyadic note holder and highlights investor confidence in the management team, the C1 technology and our business. Finally, with regard to the professional liability lawsuit we filed against our former legal counsel, the court is holding case management and scheduling conferences on March 30th, 2015 this month and April 20 of 2015. The court has not yet set a trial date for 2015. However at this time, we anticipate that the trial will reschedule in the second half of 2015. And so our current legal counsel is working under contingency arrangement, and the case is very far along. We expect that the legal cost to be significantly lower in 2015 as compared to the $1.4 million we spent in expert witness or expert testimony witness fees into 2014. Now let me turn the call over to Danai.

Thank you, Mark. I’ll focus today on the business opportunities, new product development, and the performance of our Industrial Enzyme business. As Mark mentioned, the management team has been extremely focused this past year in obtaining cash flow breakeven by 2015, which we define as operating our business profitably without the need for new financings or technology out-licensing to fund our capital needs. To that end, we set out to; one, improve the profitability of the Industrial Enzyme business, which generated a record $3 million in gross profit last year; two, pay for expanded R&D capabilities through increased R&D revenue; and three, execute on our BASF research project, so that our milestones are achieved. We believe that we were successful with all three initiatives in 2014 and are building upon that momentum as we focus on the same themes this year. Industrial Enzyme product sales for 2014 were $9.8 million flat versus 2013. However underlying sales is a strong performance in higher-margin animal feed products, our largest end market, and starch applications, our fastest-growing end market. We made a strategic decision to reduce our exposure to several lower margin customers during the past two years, particularly in textile enzymes which has led to higher margins, but flat sales last year. In addition to the favorable mix shift, improved manufacturing processes and cost controls led to a year-over-year increase in gross margins. From an 18% gross margin in 2013 to a record 31% gross margin in 2014 for that business. There are currently sixteen third-party projects ongoing at our Dyadic Netherlands research lab, of which five are with large commercial partners and 11 are with European Union government-backed programs. Half of these projects are new and R&D revenue increased 54% in 2014. In addition, we've improved for all four of our EU funded project applications for 2015, which is focused on second-generation biofuels, pharmaceuticals, agricultural waste and chemical intermediary markets. In aggregate, these four programs represent over $2 million in additional revenue over a two or three year period, and give us additional benefits of funding technological advancements a our C1 platform, building relationships with our partners, and improving our ability to bring new products to market. We will provide additional details on these projects as they are formally announced. For new product development, we’re continuing to focus on animal feed enzymes, baking enzymes, [indiscernible] enzymes, and products for biofuels and biogas. For the baking market, through our experience in several EU funded programs, including Healthbread and Bakenzyme we believe that, we are developing a class [indiscernible] portfolio of products for that market. We’re currently seeking distribution partners for our baking enzyme portfolio. Our animal feed enzyme program continues to be on track for a 2017 or 2018 product launch. When we go to market, we believe the C1-based feed enzyme may become one of the most competitive products in a $500 million market. The extension of our research and development capabilities has allowed for the creation of our new product development program, an increase in funded research projects, and a significant leap forward in the power of the C1 expression system. While we’ve significantly increased our scientific staff and the operating budget of the lab, the additional revenue offset means that the overall cost which we measure as R&D expense less R&D Gross profit increased by only a $150,000 last year or 11%. In business development area, we’ve a variety of late-stage discussions and negotiations ongoing. And we anticipate that these will lead to further strengthening of our balance sheet. The focus on our discussions are around new industrial enzyme partners, license extensions with existing partners, and joint venture opportunities in the industrial and biopharmaceutical spaces. With the help of Mike Tarnok, and the knowledge we’ve gained in working with Sanofi we’re turning more of our attention towards leveraging the C1 expression system into a platform to produce biosimilars and other biopharmaceuticals. Generic versions of biologic drugs or biosimilars are gaining acceptance worldwide. And the first biosimilar drug, a replacement for [Neupogen] was approved earlier this year for by the FDA for use in the US. We continue to believe that C1 compares very favorably to other biologic drug production systems. And we’re evaluating our alternatives on how to further commercialize in the space. And now I’ll turn it over to Tom Dubinski, our Chief Financial Officer to discuss the financial performance.

Thank you, Danai. I will walk you through our 2014 year end financial results. Total revenue for the calendar year ending December 31st 2014 decreased $4.6 million to $12.5 million compared to $17.1 million for fiscal year 2013. The decrease in total revenue is primarily due to the $6 million BASF upfront license fee in 2013. Excluding the 2013 upfront BASF license fee, revenue increased $1.4 million or 12.5% to $12.5 million compared to $11.1 million for the same period last year. This increase reflects growth in research and development project revenue of $710,000 or a 53% increase at our expanded research facility in the Netherlands, and $700,000 in milestone payments from Abengoa and BASF that Mark Emalfarb discussed. Net product revenues remained flat at $9.8 million. The sales for the period was driven by growth in the starch and alcohol markets, offset by lower sales in the textile markets. Gross profit for the calendar year ended December 31st 2014 decreased to $4.3 million compared to $7.3 million for fiscal year 2013. The decrease is primarily due to the reduction of the 100% margin BASF upfront license fee of $6 million in 2013. Excluding the 2013 BASF upfront license fee, gross profit increased $2.9 million or 208% to $4.3 million compared to $1.4 million for the same period last year. The increase reflects improved gross margins in our enzyme products, due to the fermentation and downstream processing improvements, lower raw material costs, exiting of lower margin textile enzyme products, new research and development projects and the payments related to Abengoa, the milestone payments from Abengoa and BASF. General and administrative expenses were $6.1 million for calendar year ending December 31, 2014 compared to $5.0 million for the same period last year, reflecting an increase of 22%. Litigation costs increased year-over-year to $1.4 million from $1.3 million in 2013, an increase of 6%. The non-litigation-related G&A cost increased year-over-year to $4.7 million from $3.7 million reflecting an increase of a $1 million. The increase primarily reflects staff additions, and related costs for hiring a new Chief Operating Officer, Chief Financial Officer, Vice President of Business Development and a board member of approximately $700,000. The impact of a 2013 bad debt recovery of $300,000; SEC registration and related costs of approximately $250,000, and a patent abandonment charge of approximately $100,000 partially offset by a reduction in our other legal and third-party advisory fees of approximately $350,000. Sales and marketing expenses for the calendar year ended December 31, 2014 increased 32% to $1.2 million. The increase is primarily due to the addition of the Sales Directors in Europe and in the USA to strengthen our sales leadership team. Research and Development for the fiscal year ended 12/31, increased a 119% to $2.2 million. The increase reflects our continued investment in product development and the C1 platform improvements. As a result of the above discussion, overall operating expenses for the fiscal year ended December 31st 2014 increased 41% to $9.7 million compared to $6.9 million for the same period last year. Net loss for the calendar year ended 12/31 2014 was $6 million or $0.18 per basic and diluted share compared to a net loss of $428,050 or $0.01 per basic and diluted share for the same period a year ago. At December 31st 2014, cash and cash equivalents were $2.5 million compared to $8.9 million at December 31, 2013. During the calendar year ending December 31, 2014, the company used approximately $6.4 million in cash and cash equivalents versus generating $4.9 million for fiscal year 2013. The use of cash and cash equivalents for the calendar year 2014 reflects the following funding needs: one, our operating losses of $3.3 million; two, changes in working capital of $1.7 million, primarily due to an increase in inventory and a reduction in accounts payable; and three, litigation costs against our outside former legal counsel of $1.2 million; and investing activities of approximately $200,000, primarily capital and patent expenditures. In the fourth quarter of 2014, the cash used in operating activities was reduced to approximately $800,000. Lastly I would like to provide an SEC Form 10 registration update. Our objective is to re-file our Form 10 once we have strengthened our balance sheet. We expect additional liquidity to come from one or more license agreements, clarity from the lawsuit, and/or capital fundraising when and if necessary. Our current focus is on achieving cash flow breakeven by 2016 and investing to accelerate our growth and value creation for shareholders. We anticipate providing a registration roadmap when there is more clarity on one or more of the milestones I’ve discussed. Now I’d like to turn the call back to our operator to take your questions. Jamie? Question-and:

[Operator Instructions]. Our first question comes from [Walter Shanker] with MAG Partners.

In regard therefore to the SEC registration in getting the shares registered, I take the conclusion from your comments that it is some indefinite claim of future subject to a significant capital influx from one of the items you mentioned, and it is not a near term event?

Well, yes. More likely than that, we do want to go register without the strength of balance sheet to sustain our uplifting.

Okay, and so therefore my conclusion is right, either a significant licensing agreement or a litigation result is the way, you would like, you are likely to do that or totally a meaningful equity raise?

Yes, sir.

And how long have you been working on this, you know if at all you were discussing it, year and a half or two years?

I’ll answer that because Tom wasn’t here at that point. Walter, you know again we did get some funding in, but we got that funding last in 2013, yeah 2013. And then we started working on getting the Form 10 ready and we got the Form 10 ready and then we filed the Form 10. And then the capital position of the company wasn’t in we felt in a strong enough position to move forward with that. On top of it, we talked about we weren’t done with our conversation back and forth with the SEC from filing of the Form 10. So as Tom pointed out, one of three things need to happen. One is a significant licensing fee, where we bring in more capital. Two is obviously either a settlement and/or some kind of any award in the lawsuit against the professional liability lawsuit that we’re going to hopefully find out very soon, when our court date is going to be for that. And well as Tom mentioned, the expenses for that are significantly reduced going forward, because all we really have left there to do since our lawyer is on a contingency, is pay the experts if and when they need to go to court. And then obviously the last thing which of course have been avoiding and we would like to avoid to do is to have to raise more money just in order to go as an uplifting, when we think that we have a variety of negotiations and discussions with licensees to bring in capital [non-dilutive] as we speak.

Our next question comes from Richard Deutsch with Ladenburg Thalmann.

Yes, thank you for taking my call. You are in so many areas of early and advanced development. I’ll just limit my focus right now to animal feed, in which you’ve several, a couple of different initiatives. The first one was announced with a quote from your literature, a major animal health nutrition company. The second one was in 2012 with a quote again, a leading animal health nutrition company. And it appears from tonight’s presentation that internally you’ve targeted one of your new product developments also to be in animal feed enzyme. Could you be more specific about you know why it’s taken so long and what your progress has been, what the likely outcome is going to be, and what the possible payoff is going to be? Specifically in your financial statement, you state that despite achieving higher expression levels, the target performance objectives of our partner have not been met. You know now that you’ve put this in writing, why don’t you tell us what it means by target performance objectives? Is that price? Is that the actual performance of the enzyme? Just give us some clarity on exactly which of those two, if not both, and what the likelihood is for you know developments in the next 6 to twelve months.

Alright, let me take these things one by one. Our existing animal feed enzyme Business is growing and is very strong and we’re picking up additional sales by internal growth from existing customers for our existing products. We’ve, our salespeople are out on the road pounding on doors, trying to accelerate the growth of that. A lot of that industry, we’re just going to start seeing some of the benefits of that we believe this year with expanded growth. Because it takes one to two years, but the time they try and they do the [feed] studies and they get all the data, and they start using the products. So on our existing feed enzyme business, it’s a very nice part of our business. It’s a growing part of our business and we expect in fact to grow that in an accelerated rate in 2015 and 2016 very profitably. Second of all, I’ll talk about our own internal R&D feed enzyme development program. We’re feeding off of the biofuel investment that was made by a variety of DISCO, NEMO all the EU projects, the library of enzymes, our own development of CMAX. We’ve a variety of really, really good NSP enzymes that we’ve created on our own, that we’ve tested, we’ve evaluated, and we’re moving forward. But we can only do that at a certain pace with the capital that we’ve and that's one of things that's held us back at moving that at a faster pace on our own. In terms of BASF, obviously they are one of the major players in the animal feed industry and they are funding research and development for a product, which I can’t really get into whether it’s animal feed or not. But anyways, it’s one of the areas that they are certainly interested in moving forward with. So right there, there’s basically three efforts, and then we can talk about the one that you want to talk about, to some degree is the animal nutrition company. And that’s exactly what I've told you in the past. I mean last, if you go back to the conference call is, we’ve achieved significant improvements in yield, activity, performance. But these things get registered and once you register a product, you're stuck with that strain and that process for years. And we’ve not hit the target that they have set for that particular aspect. And there’s a variety of reasons why one is the initial assay and the activity that they initially set forth. We in fact did hit and received and then they changed that in the middle-of-the-road. But there’s no excuses, the fact is we think that we can still achieve that. But we have to use obviously more improved technology that we’ve created over the last year or two. So we’ll take a step back to take three steps forward, and so we’re in discussion with them to see if they want to continue to do that and how to move forward. So that's something that's going on as we mentioned in the -- I think in the financial statement.

Hey and when you say assay, can you define that for a layman? What are you talking about? Is it price? Is it the purity? What is it that you are --?

No, no, it’s not performance, it’s not purity. It’s a little -- there’s a variety of different assays that you can use for different enzymes. So I’ll just use a cellulase as an example, okay. There’s an endoglucanase assay that measures a certain type of endoglucanase reaction. There is a cellobiohydrolase reaction which is CBH. They are completely different. They do different things and you measure them differently. So initially let’s just say in this case, they targeted the endoglucanase and later on they decided that they wanted a cellobiohydrolase. So it’s completely different from what they initially started and set us down to achieve and accomplish. But that's only part of the story is let’s say the changing of an assay or an activity that somebody thought they wanted. And they found out later that something else may be better or more correlate to the performance in an animal feed study. So I don’t know if that helps you. I am using cellulase as an example, that's not necessarily the product.

Yeah, that does help explain, but what we’ve always been unclear about is you know what is the timeline and potential profit from all of this long-term, continuous investment? How big could the income to the Dyadic shareholders be? And how certain or uncertain is that? We just don’t have an idea. Can you give us a little bit more of the internal not promises or projections, but what are your expectations? What can we expect, you know that you are seeing and looking at is out of the company?

Well what we’re seeing is number one, this company has a major addition in the animal feed industry. They are one of the major players. And what we see is that if we can deliver on our promise and they can actually target us in the right direction together and then by way, we worked well together with this company. They have been paying research and development for several years. And in a lot of ways, they are happy, but we haven't achieved the end result that they want to be able to go spend multimillions of dollars in registration and regulatory, and all the pre-trials that they need to do to support and grow that business. So in a typical, which we, I think we’ve given guidance from 0% to 5% in terms of growth. It is a range that we can get in the industrial enzyme business. And so you know they have a significant portion of the animal feed industry business, so you’ll have to look at and put those numbers together. You know because we’re not giving guidance, but it’s a substantial number to us in terms of; one, we’re getting research funding; two, we’re learning a lot; three is we’re working on getting a product to market to replace an existing product. So it's not something that they got to start it over from ground zero. They are just going to their customers. If it performs better and cheaper, then they start swapping them up. But they need the regulatory data. They need to have hit the target to go forward with the regulatory data, and then we’ll start getting royalties and revenues from that.

Yeah, Rick, Tom Dubinski. You know I would prefer Mark not provide any guidance there. It is a major market player and trying to anticipate or project their market share and the [cannibalization] of their existing products or competitor’s products would be very speculative on our part. So as that develops, this situation develops we’ll provide an update.

Yeah, I understand. I appreciate the comments you’ve made. Could you clarify on the same ground, your strategy that you know has been somewhat mysterious to people, how you could be developing your own enzyme products? And also licensing multiple different companies, how do you explain how this is a conflict and how this actually you know could work, where you could be licensing the same technology to multiple people without them having concerns over or the conflict of interest, or lack of you know exclusivity? How is your business plan envision being able to market to new people and continuing relationships with existing customers, all working on animal nutrition enzymes?

[Indiscernible]. First of all, some of those people are working on different enzymes for different reasons, for different applications of the industry, okay. Second of all, you know we’ve a very incredibly powerful system that's getting better and faster and quicker at hitting higher productivity and lower cost. We’ve invested for twenty years in developing this platform. Other companies don't have that technology. And if you don't have the technology, you would then have to start from ground zero, and try to play catch up and take the risks and spend the money to do so or you come to a company that has it. And there’s very few people that actually will do what we do. The big companies are not out-licensing their technology. You know the ones like Novozymes and DuPont and DSM that have spent hundreds of millions, if not a billion dollars in creating these platforms, so.

I appreciate that, I understand. That did answer my question. Just two housekeeping and I’ll jump back in the queue. Just quickies on what’s the nominal number that you're actually suing in this upcoming lawsuit? And number two, what’s your current loss carry forward operating loss that could be used for future tax benefit?

Rich, what we need to do is, Richard we need to move forward to other questions. If so at the end, if there’s room for that question, please we’ll respond to it.

Our next question comes from [Brian Hatch].

Hi, I just had a simple question. You had mentioned, you used the term significant licensing deal or I forgot the other. But my question was what would you -- what’s the threshold that you consider there as significant license, you know?

Well in the past, what I gave you, you know we’ve obviously gone anywhere between $1 million and $10 million in upfront fees, and then continued research and development in some of those there have brought in millions of dollars of additional research fees. And of course ultimately the big amount of money is over the years in the royalties, in the milestones that could pay from them. So that's what we define as significant. And it’s possible that in fact it may be even greater, but those are sort of what we've done in the past.

Yeah, I was just -- the reference was you were talking about, what will it take for you to you know go ahead and file the Form 10. And you said one of the things was a significant licensing deal. You know, so I was just wondering well how -- how big of a level would you consider as sufficient for you to want to make, pull the trigger on that?

Right, okay. Well I don't think we’re going to give guidance on that. But you know there’s things cooking and brewing that we’re working on, that could take us to that position that we just execute on one or more of those.

Our next question comes from [Steve Novak].

Yeah, I’ve two questions regarding Sanofi. First, can you bring us up to date on the work on the vaccine? And second, do you have an agreement with Sanofi regarding biosimilars?

First of all, we can’t give you the details of the confidentiality agreement we’ve with Sanofi. But, so I can't tell you whether we do or don't have biosimilars, because of that reason and not because we don’t want to. But because we’ve confidentiality of what we do or don’t have with them. But what we do -- what I can do is bring you out the data as to where we’re with the Sanofi project. So it did, and I don’t remember whether it was last quarter, somewhere last year they re-upped the research and development funding agreement with us. We’ve carried on research and development work for Sanofi, and I think we've done a very good job in that context. And we’ve provided Sanofi, we’ve provided Sanofi with protein for them to inject into their mice. And so that's the next step in the project and we’re hoping that if they see the reaction that we expect on the immunoassays that we've seen in our laboratory, and if the mice give the right response, that that will continue to move forward. And that could lead into one of those substantial, potential opportunities that the last person talked about.

Is this taking longer than expected?

Well, I think it's taking longer than we expected. In the biopharmaceutical industry, things take forever. But to be honest with you, we’ve had some good results. It’s taken time to get those results. We’ve learned from the experience and the time of getting those results. And though in my mind, it’s taken longer than I would have expected. But in other people 's mind, and it’s probably on a good timeline of what they expected. It’s hard to answer that question.

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

Well, I want to thank all our investors and shareholders for joining us on today's call, for your support. Hopefully you'll get a better picture of what it is that we’re doing when you read our financial statements. We’ll be providing you with an update on our next financial statements, which will be the second-quarter call in May first -- yeah from sorry, first quarter conference call will be some time in May. And I think that everybody should get a good feeling as to the power and the technology that we’ve created here using C1. And we’re starting to see the fruits of that labor in BASF and Abengoa. And it’s being applied as [indiscernible] pointed out in a variety of markets and opportunities in those markets. And opportunities are growing and expanding on a yearly basis. It’s not shrinking market opportunities. They are growing and expanding and we’ve a slew of people that we’re in discussions with for a variety of usage for C1. And we’re driving our company towards profitability in terms of our enzyme business, so that we don't have these one-off license deals to live on or live off of. So thank you for joining us, and we’ll see you some time in May.

This concludes our program for today. You may all now disconnect.