Dyadic International, Inc. ("Dyadic") (OTCQX: DYAI), a global biotechnology company whose patented and proprietary technologies are used to develop, manufacture and sell enzymes and other proteins for the bioenergy, bio-based chemical, biopharmaceutical and industrial enzyme industries, today announced financial results for the second quarter ended June 30, 2014.
Chief Executive Officer, Mark Emalfarb, stated, "The past quarter continued to be an extremely exciting time at dyadic from both a business and technology perspective. Our business performance has been strong with year-over-year product related revenue growth of 28% and R&D revenue growth of 56% through the first six months of 2014. The margins in our enzyme product sales have improved by 18% during the first half of this year. In the second generation biofuel space, we are looking forward to and expect to start receiving milestone and royalty revenue in the second half of 2014 as Abengoa reported that they have already begun producing their enzymes and is shortly expected to start up their Hugoton Cellulosic Ethanol plant. Additionally, we recently signed a collaboration agreement with CIMV, a leading biofuel pretreatment technology company. We have, or expect to have, R&D project extensions with several of our major partners including Sanofi, BASF and our confidential animal feed licensee. We are continuing our commitment to building a world-class team by hiring a new CFO and new member Board of Directors this past quarter. We are also continuing our commitment to shareholders to become a fully SEC reporting company, and expect that our Form 10 registration documents will be filed today after close of business"
Q2 2014 Financial Results
Net product related revenue for the six months increased 28% to $4.9 million from $3.8 million for the same period a year ago. The relatively high growth rate for the period was driven by increased sales in nearly all of our market segments, with the animal food and nutrition (24% growth), starch and alcohol (65% growth) and brewing (63% growth) markets showing the largest increase for the six months.
License fee revenue for the six months decreased $5.0 million as no license fee contracts were signed in the first half of 2014. In Q2 2013, we entered into a license agreement with BASF which had a $5.0 million upfront license fee.
Research and development revenue for the six months increased 56% to $1.1 million compared to $725,000 for 2013. The increase was due in part to several projects meeting certain milestone targets and objectives sooner than originally anticipated. Additionally, a number of projects accounted for on the completed contract basis, met their technological milestones and deliverables.
Total revenue for the six months decreased $3.6 million to $6.0 million compared to $9.6 million for the same period last year. The decrease in license fee revenue of $5.0 million previously discussed was offset by increases in product related revenue of $1.1 million and research and development revenue of $405,000 for the six months ended June 30, 2014.
Gross profit for the six months decreased to $1.9 million compared to $5.7 million for the same period a year ago. The decrease came primarily from the decrease in license fee revenue of $5.0 million and the related margin that a license transaction would recognize. Excluding the effects of the decrease in license fee revenues, gross profit for the six months ended June 30th increased from 14% in 2013 to 32% for the six months ended June 30, 2014. The increase was due to a combination of higher fermentation and recovery yields for our enzyme products, lower raw material costs, and meeting certain contractual milestones sooner on a number of our research and development projects.
General and Administrative Expenses
General and administrative expenses were $3.6 million for the six months ended June 30, 2014 as compared to $2.4 million for the six months ended June 30, 2013, an increase of 51%. A significant portion of the increase in G&A expenses were attributable to the $1.1 million in continued and ongoing legal and expert work in connection with our lawsuit against our former outside legal counsel.
Sales and Marketing
Sales and Marketing expenses for the six months ended June 30, 2014 rose 39% to $583,000. The increase was due in part to the addition of a new animal feed enzyme salesman in June 2013, and additional compensation and travel costs which were incurred in support of new more aggressive sales initiatives. Additionally, new sales resources were brought in late in the second quarter of 2014.
Research and Development
Research and Development expenses for the six month period ending June 30, 2014 was up 15% to $655,000. The increase was originally expected to be higher as resources were being allocated to internal research projects, however, a number of externally funded research projects required additional resources for certain periods of time, which increased our research and development revenue.
As a result of the above discussion, overall operating expenses for the six months ended June 30, 2014 increased 42% to $4.9 million compared to $3.4 million for the same period last year.
Net Income (Loss)
Net loss for the six months was $3.2 million, or ($0.10) per basic diluted share, compared to a net income of $1.9 million, or $0.06 per basic and $0.05 per diluted share, for the same period a year ago. Exclusive of litigation related legal fees, the net loss for the six months ended June 30, 2014 would have been $2.2 million, or ($0.06) per basic and fully diluted share, as compared to net income of $2.3 million, or $0.07 per basic and fully diluted share, for the six months ended June 30, 2013.
Financial Position and Cash Flow Analysis
At June 30, 2014, cash and cash equivalents were $4.3 million compared to $8.9 million at December 31, 2013. During the six months ended June 30, 2014, the Company used approximately $4.6 million in cash and cash equivalents versus generating $3.1 million for the same period in 2013. A significant portion of the $4.6 million reduction in cash and cash equivalents for the six months ended June 30, 2014 was to fund the litigation against outside legal counsel and restock our inventory levels to ensure we had adequate inventory levels on hand to service our customers.
Capital expenditures for the six months ended June 30, 2014 were approximately $147,000 and cash generated from the exercise of warrants and stock options was $40,000 through the repayment of stock subscriptions receivable.
Cash Flow From Operating Activities
As reflected in our condensed consolidated financial statements, we incurred a loss of approximately $3.2 million and a profit of $1.9 million for the six months ended June 30, 2014 and 2013, respectively. Net cash used in operating activities was approximately $4.5 million for the six months ended June 30, 2014. Net cash provided by operating activities for the six months ended June 30, 2013 was $3.1 million.
From Investing Activities
For the six months ended June 30, 2014, our net cash used in investing activities was approximately $164,000 as compared to approximately $132,000 for the six months ended June 30, 2013. This increase of approximately $32,000 is mainly due to the increase in our capital expenditures at our research center in The Netherlands in support of our new product development initiatives. The expansion of the lab was completed in January 2014.
From Financing Activities
For the six months ended June 30, 2014, net cash provided by financing activities was $40,000. This amount was received as a repayment of a stock subscription receivable under our 2013 Employee Loan Program (the "Loan Program"), in connection with their exercise of stock options to purchase 250,000 shares of common stock.
Stockholder's Equity at June 30, 2014 and 2013
Our history of operating losses has resulted in an accumulated deficit of approximately $81.8 million and total negative stockholders' equity of approximately $245,000 as of June 30, 2014. Total stockholders' equity was approximately $2.7 million as of December 31, 2013.
Dyadic International, Inc.