Good day and welcome to the Dyadic International Incorporated Second Quarter 2022 Financial Results Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Ping Rawson, Chief Financial Officer. Please go ahead.

Thank you. Good evening and welcome everyone to Dyadic International's second quarter 2022 conference call. I hope you have had opportunity to review Dyadic's press release announcing financial results for the quarter ended June 30, 2022 and the recent company highlights. You may access our release and Form 10-Q under the Investors section of the company's website at dyadic.com. On today's call our President and CEO, Mark Emalfarb will give a review of our second quarter 2022 business and corporate highlights, including a brief summary of our research and the business development efforts. Our Chief Business Officer, Joe Hazelton will join Mark for the business update. I will follow with a review of our financial results in more detail. We'll then hold a brief Q&A session. At this time, I would like to inform you that certain commentary made in this conference call may be considered forward-looking statements, which involve risks and uncertainties and other factors that could cause Dyadic's actual results performance, scientific or otherwise, or achievements to be materially different from those expressed or implied by these forward-looking statements. Dyadic expressly disclaims any duty to provide updates to its forward-looking statements whether as a result of new information future events or otherwise. Participants are directed to the risk factors set forth in Dyadic's reports filed with the SEC. It is now my pleasure to pass the call to our CEO, Mark Emalfarb. Mark?

Thank you, Ping. Hello, everyone. And thank you for joining Dyadic second quarter update call. As you will hear on today's call, there is much to be excited about here at Dyadic. In Q1, we discussed the company's intent to focus on our core business. The company now has commercial agreements in each of its three core verticals, human health, animal health and alternative proteins. Today, I would like to discuss the progress we've made in each of these areas, and how we believe that the progress will shape the future of dyadic. At the fundamental level, Dyadic's mission is to help make protein for World Health. The foundation of dyadic is and will continue to be our science and our highly efficient microbial platforms and the advancement of that science to create revenue, profits, long-term shareholder value, while simultaneously helping to increase access to biologic vaccines and drugs globally. The commitment to build a protein production platform to support life science manufacturing. It takes an unwavering belief that the potential monetary and social impact outweighs the significant investment of not just capital, but persistence, focus and the determination to see the process through. To the many scientists, we continue to work with in academia, industry and government, our collaborators, shareholders and board members, I want to thank you for your support during this critical journey. While admittedly, it has been an arduous at times as you will hear today, we are on the verge of several transformational milestones in life sciences. As we get closer to demonstrating that producing proteins using our C1 technology are safe for use in humans. Doing so will lead to our ability to open opportunities within our core verticals and capitalize on existing and new revenue opportunity for Dyadic and our collaborators. First, I'd like to focus on the significant milestone we have achieved in human health. I'm proud to announce the recent submission of our first in human clinical trial application CTA with the South African Health Products Regulatory Authority SAHPRA. To initiate a Phase-1 study to support clinical safety and to demonstrate preliminary efficacy of our DYAI-100 COVID-19 recombinant protein booster vaccine. This is an important step towards establishing C1 as a safe and transformative option as a protein production platform for the development and manufacture of a growing number of biopharmaceuticals for infectious and other diseases, including oncology, arthritis, and diabetes. Our Chief Business Officer, Joe Hazleton has been overseeing our efforts in regard to this submission. I'll now turn the call over to Joe to discuss the timing and relevant aspects of the clinical trial application CTA for Dyadic.

Thank you, Mark. The primary purpose of the Phase-1 study is to evaluate the safety of the new drug candidate before it proceeds to further clinical studies. When joining Dyadic what was most surprising wasn't just the amount of preclinical safety data that had already been generated across animal species regarding the C1 platform for a smaller biotech organization. But unlike E coli, CHO, insect or baculovirus cells, the C1 cells themselves are free of viruses and endotoxins. Many of the most common cell lines used for biologic vaccines and drug production inherently have viruses and/or endotoxins that must be removed during downstream processing, impacting productivity, cost of purification, and ultimately delaying product release. Additionally, in 2009, Dyadic C1 cells were used to produce an enzyme that received generally recognized as safe or GRAS status from the U.S. FDA, which means safe for use as an additive in food and feed for animals and humans. Essentially, we're starting the bio manufacturing process with what we and a growing number of scientists believe is an extremely safe micro organism. Data from vaccines produced from C1 proteins have repeatedly demonstrated safety and efficacy in a range of infectious diseases in animal trials with cattle, lambs, chicken, rabbits, hamsters and mice, again, demonstrating the preliminary safety of proteins produced from the C1 protein production system. Specifically with our DYAI-100 vaccine candidate, we have demonstrated safety in mice studies, and our successful rabbit toxicology study performed at [in Vigo] [ph]. In Vigo has extensive experience in conducting GLP toxicology studies to help establish safety and dosing protocols, which are required for an IND or IMD regulatory filing. Which brings me to today's announcement of our submission of a CTA or Clinical Trial Application with South Africa to initiate a Phase-1 study to support clinical…

Thank you, Joe. Each project we undertake is selected with a specific objective to either further the advancement of our science or enhance the breadth and scope of where we and our collaborators may be able to apply the C1 platform. The output of these projects and collaborations validates the application of C1 as a differentiated bio manufacturing platform for developing and producing vaccines, antibodies, and other therapeutic proteins rapidly at higher yields, and lower costs for the prevention and treatment of infectious and other diseases such as oncology, arthritis, and diabetes. For example, we are in discussion with potential partners for rabies vaccine candidates highlighted in today's press release that is a collaboration with EU scientists to prevent rabies infection in humans after an exposure. This opportunity is similar to neuraminidase, Joe, highlighted earlier. As INA opportunity was born from a collaboration with an academic institution. In addition to DYAI-100, we believe neuraminidase and HA, both influenza antigens will anchor and further support our business development opportunities in infectious disease. We have additional animal trials ongoing, with C1 producing antigens for potentially more effective seasonal influenza vaccine. Additionally, in conjunction with others, we're evaluating if and how we may use C1 to develop and manufacture a COVID-19 seasonal and our pandemic vaccine candidate. Expanding our vaccine licensing as early reported, Epygen, one of Dyadic’s non-exclusive licensees received funding from the Indian Government to advance development, manufacture and conduct Phase-1 two clinical trials using Dyadic C1 protein production platform for their COVID-19 vaccine candidate produced from C1 cells. To update our efforts in adoption of the C1 vaccine platform in South Africa, our collaboration with the Rubic consortium is intended to develop end-to-end solutions for vaccine discovery, development and manufacture for the African market. Tech transfer of the C1 protein…

Thank you, Mark. As you know that the animal health vaccine market is an attractive segment for Dyadic. Like human health, the demand is increasing for the rapid production of large quantities of vaccines and antibodies to address the feed independent animal markets alike. The global animal health market overall was nearly a 50 billion market in 2021. The rising demand for animal food protein and therefore livestock, rising pet ownership, and increases in zoonotic diseases are driving increased interest in vaccines and therapeutics for animals as well as humans. As I discussed earlier, we have demonstrated the safety and efficacy of our vaccines in many animal models. For example, we have successfully tested a vaccine to protect livestock from zoonotic diseases such as rift valley fever. Initially, we're exploring opportunities within animal vaccines for zoonotic diseases, we have already expressed and tested within the C1 platform for fully funded collaborations targeting companion animals, which is the next fastest growing animal vaccine market. We are also currently in discussions with several potential partners for therapeutic proteins for livestock and companion animals. Our focus is to speed the acceptance of our C1 protein production platform, which we believe can serve as an accelerator to drug and vaccine development and commercialization by shortening the time from preclinical to phase trials, increasing productivity, and improving cost efficiencies within animal health. Back to you Mark.

Finally, I would like to speak about our alternative proteins. This core vertical is home to our nutrition and wellness initiatives and partnerships, driven by our fully funded joint development agreement with our global food ingredients collaborator. Dyadic is dedicating resources and support for [just-in] [ph] projects within this rapidly growing market. Today, we announced the launch of the death of this platform, which is a fungal base microbial platform for use in non-pharmaceutical applications, such as food, nutrition, health and wellness. Joe will describe our strategy for maximizing the potential of this core vertical.

Thank you, Mark. As was stated in our press release our recently developed Dapibus microbial cell line is gaining interest across multiple applications and industries for the development and manufacture of alternative proteins. As an example, we're currently in discussions with several companies in the cultured meat and seafood industry. These companies represent and product bio design and cell culture media and share a commonality, the need for a large quantity of high-quality yet affordable recombinant proteins. This is a $3 billion market that is still in the demonstration scale, with a significant cost and production bottlenecks that the entire industry is trying to solve and saw over $1.3 billion invested in 2021 alone. This will be a key area of focus for a Dyadic as we believe our Dapibus microbial cell line provides our partners the ability to meet scale and cost demands for recombinant proteins within the global cultured meat industry. Beyond cultured meat, we are in active discussions and actively seeking partnerships and collaborations for non-animal food proteins, nutraceuticals and metabolites. As I turn it back to Mark to close out our business update, hopefully Mark and I have been able to share with you today is through the dramatic and continuing advances in our science and the focus on clear business objectives. The monetizable opportunities are multiplying and coming to the forefront where we can apply our microbial technologies to address several emerging and growing market opportunities to drive value for shareholders. Mark back to you.

Development of a protein expression platform for use in life sciences is lengthy and challenging process. What I'm most proud of is that we have leveraged the learnings of C1 in commercial scale, industrial manufacturing to accelerate that development process. In parallel, we remain fiscally responsible and R&D partnerships and collaborations defined advancement of our science and critical areas. Result is it seen was much further along, its lifecycle development for life sciences than the industrial cell line development was within the same timeframe at a fraction of the costs, with equally high prospects for success. We've refined our business development focus and objectives with the core areas or technologies can have the greatest impact. The results of this focus is being realized, as dyadic is gaining industry recognition to further develop the platform to human and animal health organizations worldwide. At the same time, we're evaluating new opportunities aligned with our verticals in targeted markets of high potential return. With that, I'd like to turn the call over to our CFO to run our financials.

Thank you, Mark. In addition to the financial results I'll be discussing now, you can find additional information in our Form-10Q which we filed earlier today. Research and development revenue and the license revenue for the second quarter of 2022 was approximately 659,000 compared to 937,000 for the same period a year ago. R&D revenue and the license revenue for the six months ended June 30, 2022, was approximately $1,306,000 compared to $1,397,000 for the same period a year ago. Cost of R&D revenue for the second quarter was approximately $411,000 compared to $830,000 for the same period a year ago. Cost of R&D revenue for the six months ended June 30, 2022, was approximately $816,000 compared to $1,220,000 for the same period a year ago. The decrease in revenue and cost of revenue was due to the decrease in the number of ongoing research collaborations as a result of our strategic refocus on the company's core business. R&D expenses for the second quarter decreased to approximately $1,831,000 compared to $2,209,000 for the same period a year ago. R&D expenses for the six months ended June 30, 2022 decreased to approximately $3,174,000 compared to $4,017,000 for the same period a year ago. The decrease in R&D expense is primarily due to the winding down of activities of contract research, organization, and pharmaceutical quality and the regulatory consultants to manage and support the preclinical and the clinical development as well as a decrease in cGMP manufacturing costs as the company moves towards its anticipated Phase-1 clinical trial of our DYAI-100 COVID-19 vaccine candidates. G&A expenses for the second quarter decreased to approximately $1,714,000 compared to $1,748,000 for the same period a year ago. G&A expenses for six months ended June 30, 2022, increased to approximately $3,370,000 compared to $3,302,000 for the same period a year ago. Net loss for the second quarter was approximately $3,288,000 or $0.12 per share, compared to $3,846,000 or $0.14 per share for the same period a year ago. Net loss for the six months ended June 30, 2022 was approximately $5,780,000 or $0.20 per share, compared to $7,141,000 or $0.26 per share for the same period a year ago. Our cash, cash equivalents and the carrying value of investment grade securities as of June 30, 2022, including accrued interests were approximately $15.7 million compared to $20.4 million as of December 31, 2021. Based on our current plans, the company expects that its existing cash, cash equivalents and investment grade securities will be sufficient to fund Phase-1 clinical trials of DYAI-100 and is operating expenses into 2024. With that, I will now ask the operator to begin our Q&A session. Senior management team will join Mark and I to answer your questions. Each caller will be allowed one question and one follow up question to provide all callers an opportunity to participate. If time permits, the operator will allow additional questions from those who have already spoken. Operator?

Thank you. [Operator Instructions]. And we will go first to John Vandermosten with Zacks.

Hey, good evening, everyone. I saw that global cultured meat note and wanted to know what the regulatory requirements are for getting that out there?

Joe, you want to answer that?

Hey, these are all standard the USDA Food grades and requirements that there are no, I guess, additional requirements that we would expect, I guess, [indiscernible] have.

Okay. All right. Yes, I mean, definitely I'm not too familiar with. So I'm sure that there's some kind of hurdles that are required to get that cleared, I guess, to be used with food product.

Yes, for all GMP manufacturing processes. And obviously, you'd have to have your USD certification for any of the plants that you'd be producing these materials at. But the areas that we're looking at would be more on wholesale. So the organizations that we would be partnering with would already have their certifications and licenses.

Okay. So it sounds like a lot, definitely a lot easier than going down the former route.

Yes.

Second question for me is on South Africa, and possibly also India as well, in terms of the Phase-1, and the next steps there? I mean, I think for South Africa, you submitted the CTA, which I assume is similar to an IND in the United States, is there some kind of time period there? And maybe can you differentiate that relative to an IND, and kind of what's required and to start the trial after that submitted?

Yes. It’s Joe Hazelton, it's very similar to an IND, there is an eight-week review period after submission, or at least for COVID. In South Africa, there is an eight-week review period at the current time. And after following the review period, if approved, then you are given the green light to begin initiation of your trial. So in the U.S., it's a little bit different when you file an IND, you provide your data package and if you do not hear back from the FDA, within 30 days, you can start your trial. So it's a little bit -- a little different. But the specifications or the requirements are roughly the same of what you're asked to provide. It's just a little different process.

Okay. And then last thing is just on Epygen, for the same -- I'm sorry, Mark, you're saying something.

I think it's important to know that we basically produce this material, the drug substance and drug products under EMA and FDA quality standards, to produce CMC, so to overcome in the future, not only for this particular product, but we've demonstrated now, proof that we can produce CMC quality materials for future products as well.

It's the same data package that you would submit to any regulatory authority. Yes, absolutely.

So there's no cutting corners and no cutting out quality. We spend the time and the money and the effort with the quality consultants, regulatory and CMC consultants like our [indiscernible] and others to make sure that we would be able to use this knowledge and expertise and leverage it for decades to come.

Great. And then is that kind of IND type of thing the next step in India?

Well, I think in India, they're not as far advanced as we are, because they just started later. But they're in the process of doing their qualification for their CMC package right now. And from there, have been moving towards finishing some of their preclinical studies that they have to do, and then moving into their potential Phase-1, Phase-2 clinical trial funded by BIRAC for the Indian government, but we certainly expect to be into the clinic much faster than they are with SAHPRA, South African filing that we made on the 22nd of July.

Okay. Great. Thank you, Mark, and thank you, Joe.

And we will go next to Vernon Bernardino with HC Wainwright.

Hi, Mark, Ping and Joe. Thanks for taking my question. Congrats on the process with all the efforts and business development and especially the DYAI-100. Regarding the latter, I was just wondering, besides safety, what kind of early efficacy data, as Joe mentioned, Mark, you announce perhaps later this year?

I'm sorry, Vernon. Related to the vaccine, correct?

Yes.

Like the Immunogenicity data, so there are endpoints in the trial. I don't think I can give those on the call, but we do have those in the trial. The preliminary efficacy will be part of the endpoints, but specifically, that we will be looking at, so there will be parts of those.

Yes. So what we're going to be looking at, obviously, neutralizing antibodies, T cells and all the things we would normally do, but in general we can't get into the details. But everything you would expect in detail we're getting into in serology.

Perfect. Then regarding the programs and the collaboration with Janssen, just wondering if you could provide a little more detail as far as any kind of progress they've made. Not specifically, for example, targets, but perhaps the amount of activity that they have been involved in and what maybe you see next year as far as milestones regarding that program.

Well, I think we've seen significant progress. As I mentioned in the earlier part of the call, we've had some scientific milestones and achievements that are truly amazing in terms of yield increases and modifications in the glycoengineering. So I think we're on target to achieve the goals and objectives in that program. And so I think Janssen is very happy about that. I can't really get into much more detail at the moment due to confidentiality but we have two different products that we're working on there, which we mentioned. One, the monoclonal antibody, and the other one is bispecific. So I think we have both of them on target, moving forward, to get towards those milestones that you referred to, which are development milestones and the seven figures potentially. Then, of course, the nine-figure per product, ultimately, upon commercialization, if successful.

I know you have lots of programs, and so definitely have demonstrated you can speak into them at the same time. But which of the programs, besides the DYAI-100 because it's the most advanced -- other programs you think would produce the next milestone for the company?

Well, keep in mind DYAI-100 is a vaccine solely-owned product of Dyadic itself, our own pipeline. We mentioned the COVID-19 monoclonal antibody that's working with conjunction with the European scientists just finishing the non-human primate study just concluded in terms of the actual application of it. And by the way, the animals all look healthy, but they need to go into the data now, which is taking some time. But also, what we're doing here with the safety of DYAI-100. We are in discussions with more than half a dozen big pharma companies. That we're talking to them about all kinds of things. The NA, neuraminidase, to potentially enhance influenza to go along with either rHA or HA that they already produced for themselves. And then, in addition to that, the platform in general, we think that the doors are going to open up very wide, very quickly with potentially some of the big pharma companies for some of the other advancements that we're demonstrating through the scientific data and achievements. Some of which we've talked about today and some which we intend to talk about maybe some time between now and Q3 or in the third quarter, that we're starting to see some of the results from.

[Operator Instructions] We'll go next to [indiscernible] with 21st Century Investment Group.

Hi, Mark. How are you?

Hi, [Kerry] [ph]. How about you?

I'm doing fine. Thanks. Appreciate the update. I wanted to ask you what kind of interest, well, it has to do with the cultured meat. What was the genesis for moving in that direction? What kind of interest are you getting? Can you elaborate a little bit maybe on market size or the opportunity in cultured meat?

Yes, I'll start, and then I'll let Joe chime in. It came from an initial getting our feet wet, if you remember, with TurtleTree in about a year ago, when we started looking at evaluating CMC one we used to produce non-animal protein for cultured meat and other applications. That led into the Food Ingredients project that we have, which is multinational company, one of the largest in the space, as you know, about a $1.5 billion revenue company, but it's a private company. And so that kind of led that, and that's the foundation as we see, and we've been engineering the Dapibus microbial platform technology in the last year or two to try to move into the non-pharmaceutical space, as well, because of the C1 potential to produce proteins. You know the world of proteins is emerging in all kinds of industries and applications. In cultured meat, we've got people reaching into us and we're reaching out to others that are looking to use our technology to produce what's called media that's used for the feeding of the cultured meat, cells so they can produce these cells economically in a viable manner. If you don't bring that media cost down, which means larger volumes and lower-cost production, which is obviously our expertise. That's where we entered that space. It's where we dragged into it in some ways but now taking advantage and reaching out. And Joe, maybe you can talk about the size of it.

Yes, the size of it. The size of it also depends on, I guess the way you want to look at it, but the market potential has been estimated anywhere from $150 billion to $500 billion, which I'm not sure I would put it that high, but you can see the amount of dollars flowing in. The investment level doubled in the last year alone, and I think you're going to continue to see as you look at the companies that are entering into the space on the supply side, you'll see pharmaceutical companies in there. When you see that happening, you can definitely tell this is a market that is going to continue to expand and grow. As we look at it, it's also a market in need of a significant portion of high-quality recombinant proteins, but the cost is what's prohibiting the real takeoff of this market, and that's where I think we have a significant advantage. I think, Mark, hit it right on the head, that we're in hopefully the right place at the right time and people realize what we have to offer.

I think if you think about Impossible Foods, Beyond Meat, they kind of cracked open the door, but people want better flavors. They want better textures. We can also help with texture, as well as cultured meat, so there's a very wide opportunity for us to apply our technology to really drive the cost down of these components that are going to be critical if that industry is going to succeed.

Great. Thanks so much, Mark.

And we'll hear next from Robert Smith with Center for Performance Investing.

Good afternoon. Thanks for taking my questions. So Mark, can you give us some idea of the timeline to the next milestone with Janssen?

That's a hard thing to give you a timeline from Janssen, because big pharma has their own timelines they operate on. It could be as early as sometime, my guess would be either late this year or early next year for the first milestone, but at any given moment they may decide to step up after seeing the data on some of the other technologies, in addition to their own project. Some of the other discussions we have ongoing with different aspects of Janssen that have nothing to do with therapeutic proteins but potentially vaccines and other areas where they have had some trouble sort of applying their technology platform. We think C1 is ideally suited for that. I think we're getting attention on the other side of their organization and I think that C1 is the answer to a lot of the problems and issues that they came and we can help them overcome that. And they know, because they've worked with us in past and they're working with us now, that we're dedicated. The technology is real. It's producing fabulous results. On the other side of the equation, when they see the data -- and we'll talk about some of that, I hope, somewhere between now and Q3 conference call and some of the advances we're making. That they're just almost mind-blowing, in the case of the vaccines out of the equation, in terms of improving yields and demonstrating safety. If we can demonstrate safety with SAHPRA, I think the sky is the limit.

Then just circling back to South Africa. The work you're doing with your own vaccine, that's targeted at a certain variant. With the variants coming fast and furious, so to speak, over time, where does that lead you with what you're working with them?

I think it leaves us in the driver's seat, to be honest with you. I think, if you really look at the speed in which we can develop a new cell line and the yield and productivity. Think about seasonal flu. You have to be able to rapidly, at least twice a year, or once a year in the Northern Hemisphere, once a year in the Southern Hemisphere, to be able to develop hemagglutinin, potentially neuraminidase. We're in that space as well. But for the COVID-19 vaccine opportunity, we already have Wuhan, Alfa, Beta, Gamma, Delta, BA.1, BA.2. We're starting to work on BA.5, so we can keep up with what's called a multivalent, or bivalent. If you look at what the FDA and the vaccine conference that they had and the discussions they're talking about bivalent vaccines with Omicron and Wuhan, or Omicron and Delta. So I think that we can actually bring those forward faster in a global population and of course, here in America. I believe that the recombinant protein vaccines are coming of age. It's the right time with Novavax getting approved, albeit not adopted widely, and that's because, again, it's a Wuhan-based vaccine in an Omicron world. I think we're going to be able to do that. And then, again, what are they looking for? They're looking for what's called a pan-coronavirus vaccine variant. There are things going on, I'm not at liberty to discuss right now, but it's intimated that sometime between now and Q3, in our conference call, we're seeing some data on a potential next-generation pan-coronavirus opportunity being produced in C1. We're not the only ones seeing it. The data has been shared with several of big pharmaceutical vaccine players, as well as biotechnology companies and governmental agencies, from the top of the FDA to BARDA down. So we're on the radar screen and I think we have the ability to mass produce things at levels, but mass producing the right thing is the key. I think we have the opportunity to mass produce the right things and, hopefully, we can get a big pharma partner, governmental support to move us into the next level, beyond safety. Safety is coming. It can open the doors, but the scientific data on the yields, on the technology, and the diversity and breadth and scope of what C1 is producing for vaccines, recombinant protein vaccines, is what's going to carry the day.

With no other questions in the queue at this time, I would like to turn the call to Mark Emalfarb, Dyadic's CEO, for closing remarks.

We have exciting prospects for the balance of 2022 and beyond as we continue advancing our first-inhuman Clinical Trial Application, CTA, to South Africa Health Products Regulatory Authority, SAHPRA, to support clinical safety of C1 produced proteins. Hopefully what you take from this call is, we're not only focused on improving the value of Dyadic to the life science industry, which will in turn and proving valuable for shareholders and for populations around the globe. We've taken definitive action by reorganizing our infrastructure and focused on strategies in order to prepare Dyadic for exploiting existing and emerging new opportunities for commercialization to enable us to fulfill our mission as a global biotechnology company in order to improve the way we feed fuel and heal the world. Thank you once again for joining us in today's Q2 2022 conference call, and we look forward to keeping you updated as we advance our commercial and scientific initiatives across the companies and our collaborators' programs. We also look forward to seeing you on the next call, and I hope you keep an eye out for our periodic updates.

And so this concludes today's call. Thank you for your participation. You may now disconnect.