The following discussion and analysis of financial condition and results of operations should be read in conjunction with the financial statements and the notes to those statements appearing in this Quarterly Report. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks, assumptions and uncertainties. Important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis include, but are not limited to, those set forth in "Item 1A. Risk Factors" in this Quarterly Report. All forward-looking statements included in this Quarterly Report are based on information available to us as of the time we file this Quarterly Report and, except as required by law, we undertake no obligation to update publicly or revise any forward-looking statements.





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Overview



Description of Business


Dyadic International, Inc. ("Dyadic", "we", "us", "our", or the "Company") is a global biotechnology platform company based in Jupiter, Florida with operations in the United States and a satellite office in the Netherlands, and it utilizes a number of third-party consultants and research organizations to carry out the Company's activities. Over the past two plus decades, the Company has developed a gene expression platform for producing commercial quantities of industrial enzymes and other proteins, and has previously licensed this technology to third parties, such as Abengoa Bioenergy, BASF, Codexis and others, for use in industrial (non-pharmaceutical) applications. This technology is based on the Thermothelomyces heterothallica (formerly known as Myceliophthora thermophila) fungus, which the Company named C1. The C1-cell protein production platform is a robust and versatile thermophilic filamentous fungal expression system for the development and production of biologic products including enzymes and other proteins.

On December 31, 2015, the Company sold its industrial technology business to Danisco USA ("Danisco"), the industrial biosciences business of DuPont (NYSE: DD) (the "DuPont Transaction"). As part of the DuPont Transaction, Dyadic retained co-exclusive rights to the C1-cell protein production platform for use in all human and animal pharmaceutical applications, and currently the Company has the exclusive ability to enter into sub-license agreements (subject to the terms of the license and to certain exceptions) for use in all human and animal pharmaceutical applications. Danisco retained certain rights to utilize the C1-cell protein production platform in pharmaceutical applications, including the development and production of pharmaceutical products, for which it will be required to make royalty payments to Dyadic upon commercialization. In certain circumstances, Dyadic may owe a royalty to either Danisco or certain licensors of Danisco, depending upon whether Dyadic elects to utilize certain patents either owned by Danisco or licensed in by Danisco.

After the DuPont Transaction, the Company has primarily been focused on the animal and human biopharmaceutical industries, specifically in further improving and applying the proprietary C1-cell protein production platform into a safe and efficient protein production platform to help speed up the development, lower production costs and improve the performance of biologic vaccines and drugs and other biological products at flexible commercial scales. Some examples of human and animal vaccines and drugs which have the potential to be produced from C1-cells are protein antigens, virus-like particles ("VLPs"), monoclonal antibodies ("mAbs"), Bi/Tri-specific antibodies, Fab antibody fragments, Fc-fusion proteins, as well as other therapeutic enzymes and proteins. The Company is involved in multiple funded research collaborations with animal and human pharmaceutical companies which are designed to leverage its C1-cell protein production platform to develop innovative vaccines and drugs, biosimilars and/or biobetters. Additionally, the Company has begun to develop other technologies that have potential applications in non-pharmaceutical markets.





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          Recent Developments



  ? Food Industry - On May 10, 2022, the Company entered into a new research,
    license, and collaboration agreement with a Global Food Ingredients
    Company for the manufacture of a number of animal free ingredient products
    using Dyadic's proprietary biotechnologies.


  ? Epygen Biotech - On April 13, 2022, Epygen Biotech, Dyadic's licensee,
    received funding from India government to further development, manufacture and
    conduct Phase I/II clinical trial(s) of COVID-19 vaccine candidate produced
    from C1 cells.


  ? Phibro Animal Health - On February 10, 2022, Dyadic entered into an exclusive
    license agreement for a Phibro targeted disease. The agreement follows the
    successful proof of concept development work, including animal trials
    previously completed. The parties are discussing developing additional animal
    vaccine candidates to be produced from Dyadic's C1-cells.


  ? National Institute for Innovation in Manufacturing Biopharmaceuticals
    ("NIIMBL") Coronavirus Grant - Dyadic received 1 of 32 project grants awarded
    by NIIMBL funded through the White House's American Rescue Plan ("ARP"). Under
    the NIIMBL grant, the Company will receive up to $690,000 in funding to
    engineer the Company's proprietary and patented C1-cell thermophilic fungal
    (Thermothelomyces heterothallica) protein production platform to produce two
    different antibodies, one of which is a COVID-19 antibody.


  o The Company has successfully completed the initial phase of the project and is
    currently moving into the second phase to further increase productivity.


  ? DYAI-100, RBD (Receptor Binding Domain) COVID-19 Vaccine Candidate


  o The Company continues to progress toward its first-in-human clinical trial
    application (CTA) for its DYAI-100 COVID vaccine candidate to be filed with
    the South African Health Products Regulatory Authority (SAHPRA).


  o First-in-human trial data is expected to (i) generate safety and preliminary
    efficacy to demonstrate that proteins produced from Dyadic's proprietary
    C1-cell protein production platform are safe for use in humans and (ii)
    further accelerate the C1-cell protein production platform for global
    adoption.


  o South Africa, Rubic Consortium - This collaboration is intended to develop
    end-to-end solutions for vaccine discovery, development, and manufacture for
    the African market. Tech transfer of the C1-cell protein production platform
    has been substantially completed. Rubic has begun engineering and growing
    C1-cells to prepare for the development of affordable vaccines and drugs for
    the African continent.
    Sorrento Therapeutics - Due to a disagreement between the parties concerning
  o the timing, and terms and conditions, for the entry into a definitive license
    agreement, both parties mutually agreed not to proceed, effective March 17,
    2022.


  ? Scientific Project Updates


  o Infectious Disease Projects and Related Preclinical Trials


  ? The Company has multiple ongoing research projects which have generated
    positive preliminary data on several C1 produced antigens and antibodies for a
    portfolio of infectious diseases, including Rabies and Zika. The primary
    objective of these projects is to validate the application of C1 as a
    designated platform for infectious diseases.


  ? Third Party C1 Produced COVID-19 Antibody - C1 produced COVID-19 monoclonal
    antibody (mAb) has demonstrated broad neutralization and protection against
    Omicron (BA.1 & BA.2) and other variants of concern based on recent hamster
    trial.


  ? Influenza and COVID-19 Vaccines - Additional mice trials and analysis are
    ongoing with C1 produced antigens for a potential combined influenza and
    SARS-CoV-2 vaccine.


  ? Multi-Valent RBD Vaccine Candidates - Additional animal data is being
    generated through several preclinical mice trials using a placebo and five
    mono and multi-valent blends of C1 produced SARS-CoV-2 RBD variants of
    concern. The mice trials have been completed, other than the placebo, which
    have generated neutralizing antibodies.


  o Metabolites - The Company has developed a novel method of producing
    metabolites, such as synthetic cannabinoids and precursors utilizing the
    Company's proprietary technologies.


  ? Three Manuscripts Published in Leading Scientific Journals


  o May 5, 2022 - Peer reviewed manuscript demonstrating safety and persistence of
    C1 produced DYAI-100 COVID-19 vaccine candidate was published in "Toxicologic
    Pathology".


  o In the first quarter of 2022, two peer reviewed manuscripts were published in
    the leading scientific journals, "Vaccines" and "Vaccine", relating to
    antigens produced from C1-cells showing safety and efficacy in animal models
    against influenza and SARS-CoV-2.



On April 22, 2022, the Company decided not to renew the consulting agreement the Company entered into with Novaro Ltd to engage Matthew Jones as its Managing Director of Business Development and Licensing. Accordingly, Mr. Jones will cease providing services to the Company as its Managing Director of Business Development and Licensing, effective July 21, 2022. Mr. Jones' responsibilities for commercialization and business development will be transitioning to our Chief Business Officer, Joe Hazelton.





Impact of COVID-19


The outbreak of COVID-19 has led to adverse impacts on the U.S. and global economies and created uncertainty regarding the potential impact to the Company's employees, operations, and research projects.

The extent to which the COVID-19 pandemic will directly or indirectly impact our business will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning the severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2) and its variants and the actions taken and the level of success to contain or treat the SARS-CoV-2 virus and its variants, the economic impact on local, regional, national and international business partners and markets, delays or disruptions in our on-going research projects, and unavailability of the employees of the Company or third-party contract research organizations with whom we conduct business, due to illness or quarantines, all of which are highly uncertain and cannot be predicted at this time. Management is actively monitoring this situation and the possible effects on its financial condition, liquidity, operations, vendors, industry, and workforce. Even after the COVID-19 pandemic has subsided, the Company may continue to experience adverse impacts to its business because of economic recession or depression that has occurred or may occur in the future. Given the daily evolution of the COVID-19 outbreak and the ongoing response to curb its spread (including government travel and meeting restrictions), currently we are not able to accurately estimate the effects of the COVID-19 outbreak to our results of operations, financial condition, or liquidity.





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Climate Change


We believe that neither climate change, nor governmental regulations related to climate change, have had, or are expected to have, a material effect on our operations.

Open Market Sale Agreement?

On August 13, 2020, we entered into an Open Market Sale Agreement? with Jefferies LLC, or Jefferies, with respect to an at the market offering program under which we may offer and sell, from time to time at our sole discretion, shares of our common stock, par value $0.001 per share, having an aggregate offering price of up to $50.0 million through Jefferies as our sales agent or principal.

We have not and are not obligated to sell any shares under the sale agreement. Subject to the terms and conditions of the sale agreement, Jefferies will use commercially reasonable efforts, consistent with its normal trading and sales practices and applicable laws and regulations, to sell shares of our common stock from time to time based upon our instructions, including any price, time or size limits or other customary parameters or conditions we specify, subject to certain limitations. Under the sale agreement, Jefferies may sell shares of our common stock by any method permitted by law deemed to be an "at the market offering" as defined in Rule 415(a)(4) under the Securities Act of 1933, as amended.

We will pay Jefferies a commission equal to 3.0% of the gross proceeds from each sale of shares of our common stock sold through Jefferies under the sale agreement and will provide Jefferies with customary indemnification and contribution rights. In addition, we agreed to reimburse certain legal expenses and fees by Jefferies in connection with the offering up to a maximum of $50,000, in addition to certain ongoing disbursements of Jefferies' counsel, if required. The sale agreement will terminate upon the sale of all $50.0 million of shares under the sale agreement, unless earlier terminated by either party as permitted therein.

The issuance and sale, if any, of shares of our common stock by us under the sale agreement will be made pursuant to a registration statement on Form S-3 filed with the SEC on August 13, 2020 and declared effective by the SEC on August 25, 2020 and the accompanying Prospectus, as supplemented by a Prospectus Supplement. As of the date of this filing, there have been no sales made under the Open Market Sale Agreement?.

Critical Accounting Policies, Estimates, and Judgments

The preparation of these consolidated financial statements in accordance with GAAP requires management to make estimates and judgments that affect the reported amount of assets and liabilities and related disclosure of contingent assets and liabilities at the date of our consolidated financial statements and the reported amounts of revenues and expenses during the applicable period. Actual results may differ from these estimates under different assumptions or conditions. Such differences could be material to the consolidated financial statements.

We define critical accounting policies as those that are reflective of significant judgments and uncertainties and which may potentially result in materially different results under different assumptions and conditions. In applying these critical accounting policies, our management uses its judgment to determine the appropriate assumptions to be used in making certain estimates. These estimates are subject to an inherent degree of uncertainty. Our critical accounting policies include the following:





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Revenue Recognition


The Company has no products approved for sale at this point. All of our revenue to date has been research revenue from third-party collaborations and government grants, as well as revenue from sublicensing agreements and collaborative arrangements, which may include upfront payments, options to obtain a license, payment for research and development services, milestone payments and royalties, in the form of cash or non-cash considerations (e.g., minority equity interest).

Revenue related to research collaborations and agreements: The Company typically performs research and development services as specified in each respective agreement on a best efforts basis, and recognizes revenue from research funding under collaboration agreements in accordance with the 5-step process outlined in ASC Topic 606 ("Topic 606"): (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. We recognize revenue when we satisfy a performance obligation by transferring control of the service to a customer in an amount that reflects the consideration that we expect to receive. Depending on how the performance obligation under our license and collaboration agreements is satisfied, we elected to recognize the revenue either at a point in time or over time by using the input method under Topic 606 to measure the progress toward complete satisfaction of a performance obligation.

Under the input method, revenue will be recognized based on the entity's efforts or inputs to the satisfaction of a performance obligation (e.g., resources consumed, labor hours expended, costs incurred, or time elapsed) relative to the total expected inputs to the satisfaction of that performance obligation. The Company believes that the cost-based input method is the best measure of progress to reflect how the Company transfers its performance obligation to a customer. In applying the cost-based input method of revenue recognition, the Company uses actual costs incurred relative to budgeted costs to fulfill the performance obligation. These costs consist primarily of full-time equivalent effort and third-party contract costs. Revenue will be recognized based on actual costs incurred as a percentage of total budgeted costs as the Company completes its performance obligations.

A cost-based input method of revenue recognition requires management to make estimates of costs to complete the Company's performance obligations. In making such estimates, significant judgment is required to evaluate assumptions related to cost estimates. The cumulative effect of revisions to estimated costs to complete the Company's performance obligations will be recorded in the period in which changes are identified and amounts can be reasonably estimated. A significant change in these assumptions and estimates could have a material impact on the timing and amount of revenue recognized in future periods.

Revenue related to grants: The Company may receive grants from governments, agencies, and other private and not-for-profit organizations. These grants are intended to be used to partially or fully fund the Company's research collaborations, including opportunities arising in connection with COVID-19 that the Company is pursuing with certain collaborators. However, most, if not all, of such potential grant revenues, if received, is expected to be earmarked for third parties to advance the research required, including preclinical and clinical trials for SARS-CoV-2 vaccines and/or antibodies candidates.

Revenue related to sublicensing agreements: If the sublicense to the Company's intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenue allocated to the license when technology is transferred to the customer and the customer is able to use and benefit from the license.

Customer options: If the sublicensing agreement includes customer options to purchase additional goods or services, the Company will evaluate if such options are considered material rights to be deemed as separate performance obligations at the inception of each arrangement.

Milestone payments: At the inception of each arrangement that includes development, commercialization, and regulatory milestone payments, the Company evaluates whether the achievement of the milestones is considered probable and estimates the amount to be included in the transaction price. If the milestone payment is in exchange for a sublicense and is based on the sublicensee's subsequent sale of product, the Company recognizes milestone payment by applying the accounting guidance for royalties. To date, the Company has not recognized any milestone payment revenue resulting from any of its sublicensing arrangements.

Royalties: With respect to licenses deemed to be the predominant item to which the sales-based royalties relate, including milestone payments based on the level of sales, the Company recognizes revenue at the later of (i) when the related sales occur or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). To date, the Company has not recognized any royalty revenue resulting from any of its sublicensing arrangements.

We invoice customers based on our contractual arrangements with each customer, which may not be consistent with the period that revenues are recognized. When there is a timing difference between when we invoice customers and when revenues are recognized, we record either a contract asset (unbilled accounts receivable) or a contract liability (deferred research and development obligations), as appropriate. If upfront fees or considerations related to sublicensing agreement are received prior to the technology transfer, the Company will record the amount received as deferred revenue from licensing agreement.

We are not required to disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed.

The Company adopted a practical expedient to expense sales commissions when incurred because the amortization period would be one year or less.





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Accrued Research and Development Expenses

In order to properly record services that have been rendered but not yet billed to the Company, we review open contracts and purchase orders, communicate with our personnel and we estimate the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of the actual cost. The majority of our service providers invoice us monthly or quarterly in arrears for services performed or when contractual milestones are met. We make estimates of our accrued expenses as of each balance sheet date in our consolidated financial statements based on facts and circumstances known to us at that time. We periodically confirm the accuracy of our estimates with the service providers and adjust if necessary. Examples of accrued research and development expenses include amounts owed to contract research organizations, to service providers in connection with research and development activities.





Stock-Based Compensation



We have granted stock options to employees, directors and consultants. The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model. The Black-Scholes model considers volatility in the price of our stock, the risk-free interest rate, the estimated life of the option, the closing market price of our stock and the exercise price. For purposes of the calculation, we assumed that no dividends would be paid during the life of the options. We also used the weighted-average vesting period and contractual term of the option as the best estimate of the expected life of a new option, except for the options granted to the CEO (i.e., 5 or 10 years) and certain contractors (i.e., 1 or 3 years). The expected stock price volatility was calculated based on the Company's own volatility since the DuPont Transaction. The Company reviews its volatility assumption on an annual basis and has used the Company's historical volatilities since 2016, as the DuPont Transaction resulted in significant changes in the Company's business and capital structure.

The estimates utilized in the Black-Scholes calculation involve inherent uncertainties and the application of management judgment. These estimates are neither predictive nor indicative of the future performance of our stock. As a result, if other assumptions had been used, our recorded share-based compensation expense could have been materially different from that reported. In addition, because some of the performance-based options issued to employees, consultants and other third-parties vest upon the achievement of certain milestones, the total ultimate expense of share-based compensation is uncertain.





Accounting for Income Taxes


The Company accounts for income taxes under the asset and liability method in accordance with ASC Topic 740 ("Topic 740"), "Income Taxes". Under this method, income tax expense/(benefit) is recognized for: (i) taxes payable or refundable for the current year and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity's financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of the available positive and negative evidence, it is more likely than not some portion or all the deferred tax assets will not be realized.

In determining taxable income for the Company's consolidated financial statements, we are required to estimate our income taxes in each of the jurisdictions in which we operate. This process requires the Company to make certain estimates of our actual current tax exposure and assessment of temporary differences between the tax and financial statement recognition of revenue and expense. In evaluating the Company's ability to recover its deferred tax assets, the Company must consider all available positive and negative evidence including its past operating results, the existence of cumulative losses in the most recent years and its forecast of future taxable income. Significant management judgment is required in determining our provision for income taxes, deferred tax assets and liabilities and any valuation allowance recorded against our net deferred tax assets.

The Company is required to evaluate the provisions of Topic 740 related to the accounting for uncertainty in income taxes recognized in a company's financial statements. Topic 740 prescribes a comprehensive model for how a company should recognize, present, and disclose uncertain positions that the company has taken or expects to take in its tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. Differences between tax positions taken or expected to be taken in a tax return and the net benefit recognized and measured pursuant to the interpretation are referred to as "unrecognized benefits." A liability should be recognized (or amount of net operating loss carry forward or amount of tax refundable is reduced) for unrecognized tax benefit because it represents a company's potential future obligation to the taxing authority for a tax position that was not recognized because of applying the provision of Topic 740.





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Non-Marketable Investments


The Company also holds investments in non-marketable equity securities of privately held companies, which usually do not have a readily determinable fair value. Our policy is to measure these investments at cost less impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. Such observable price changes may include instances where the investee issues equity securities to new investors, thus creating a new indicator of fair value, as an example. On a quarterly basis, we perform a qualitative assessment considering impairment indicators to evaluate whether these investments are impaired and also monitor for any observable price changes. If indicators of impairment exist, we will prepare a quantitative assessment of the fair value of our equity investments, which may include using both the market and income approaches which require judgment and the use of estimates, including discount rates, investee revenues and costs, and available comparable market data of private and public companies, among others. Valuations of such privately held companies are inherently complex and uncertain due to the lack of liquid market for the company's securities. In addition, such investments are inherently risky in that such companies are typically at an early stage of development, may have no or limited revenues, may not be or may never become profitable, may not be able to secure additional funding or their technologies, services or products may not be successfully developed or introduced into the market.

The Company bases its fair value estimates on assumptions it believes to be reasonable, but which are unpredictable and inherently uncertain. Actual future results may differ from those estimates.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Recent Accounting Pronouncements

See Note 1 to the Consolidated Financial Statements for information about recent accounting pronouncements.





Results of Operations


Three Months Ended March 31, 2022 Compared to the Same Period in 2021

Revenue and Cost of Research and Development Revenue

The following table summarizes the Company's revenue and cost of research and development revenue for the three months ended March 31, 2022 and 2021:





                                              Three Months Ended March 31,
                                                2022                 2021
Research and development revenue           $      533,721       $      460,520
License revenue                            $      114,706       $            -

Cost of research and development revenue $ 404,746 $ 390,762

The increase in revenue and cost of research and development revenue for the three months ended March 31, 2022, was due to a number of larger research collaborations compared to the three months ended March 31, 2021. The license revenue recorded in the three months ended March 31, 2022 was in connection with the Phibro/Abic and Janssen license agreements.

Research and Development Expenses

Research and development costs are expensed as incurred and primarily include salary and benefits of research personnel, third-party contract research organization services and supply costs.

Research and development expenses for the three months ended March 31, 2022, decreased to approximately $1,343,000 compared to $1,808,000 for the same period a year ago. The decrease primarily reflected the winding down of activities of contract research organization and pharmaceutical quality and regulatory consultants to manage and support the pre-clinical and clinical development as well as a decrease in cGMP manufacturing costs as the Company moves towards its anticipated Phase 1 clinical trial of DYAI-100 COVID-19 vaccine candidate in the amount of approximately $165,000 and costs associated with our other internal research projects of $300,000.

General and Administrative Expenses

General and administrative expenses for the three months ended March 31, 2022, increased by 6.6% to approximately $1,656,000 compared to $1,554,000 for the same period a year ago. The increase principally reflected increases in insurance expenses of $69,000 and business development and investor relations expenses of $53,000, offset by other decreases of $20,000.





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Interest Income


Interest income for the three months ended March 31, 2022, was approximately $3,000 compared to $26,000 for the same period a year ago. The decrease was primarily due to the lower balance of held-to-maturity securities and less reinvestment due to the decrease in interest rate.





Other Income


Other income for the three months ended March 31, 2022, was $250,000 compared to $0 for the same period a year ago. The other income recognized in the first quarter of 2022 was related to a settlement payment we received from the termination of term sheet of a proposed license and collaboration.





Net Loss


Net loss for the three months ended March 31, 2022, was approximately $2,492,000 compared to $3,295,000 for the same period a year ago.

Liquidity and Capital Resources

Our primary source of cash has been the cash received from the DuPont Transaction in December 2015, interest income received from investment grade securities, revenues from our research collaboration agreements and license agreements, and funding from the exercise of employee stock options. In addition, in August 2021, the Company received approximately $1.6 million from the BDI Sale, In December 2021, the Company received an upfront payment of $0.5 million for a non-exclusive license from Janssen.

Our ability to achieve profitability depends on many factors, including our scientific results and our ability to continue to obtain funded research and development collaborations from industry and government programs, as well as sub-license agreements. We may continue to incur substantial operating losses even if we begin to generate revenues from research and development and licensing. Our primary future cash needs are expected to be for general operating activities, including our business development and research expenses, Phase 1 clinical trial, as well as legal and administrative costs as an SEC reporting and NASDAQ listed company.

On August 13, 2020, we entered an Open Market Sale Agreement? with Jefferies LLC, or Jefferies, with respect to an at the market offering program under which we may offer and sell, from time to time at our sole discretion, shares of our common stock at an aggregate offering price of up to $50.0 million through Jefferies as our sales agent or principal. This program adds to our financial flexibility to pursue additional opportunities that leverage the broad application potential of C1. However, as of the date of this filing, there have been no sales made under the Open Market Sale Agreement?.

We rely on our existing cash and cash equivalents, investments in debt securities, and operating cash flow to provide the working capital needs for our operations. We believe that our existing cash position and investments in investment grade securities will be adequate to meet our operational, business, and other liquidity requirements for at least the next twelve (12) months. However, in the event our financing needs for the foreseeable future are not able to be met by our existing cash, cash equivalents and investments, we would seek to raise funds through public or private equity offerings, and through other means to meet our financing requirements. Currently, the Company is self-funding the development and cGMP manufacturing costs of its proprietary COVID-19 vaccine candidate, DYAI-100 towards a Phase 1 clinical trial to demonstrate the safety in humans of a protein produced from the C1-cell protein production platform.

As of March 31, 2022, cash and cash equivalents were approximately $12.4 million compared to $15.7 million as of December 31, 2021. The carrying value of investment grade securities, including accrued interest as of March 31, 2022, was approximately $5.0 million compared to $4.6 million as of December 31, 2021.

Net cash used in operating activities for the three months ended March 31, 2022, of approximately $2.9 million was principally attributable to a net loss of approximately $2.5 million, offset by share-based compensation expenses of approximately $0.5 million, and changes in operating assets and liabilities of approximately $0.9 million.





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Net cash used in investing activities for the three months ended March 31, 2022, was approximately $0.5 million compared to $5.8 million for the three months ended March 31, 2021. Cash flows from investing activities during the three months ended March 31, 2022 and 2021 were primarily related to proceeds from maturities and purchases of investment grade debt securities.

Net cash provided by financing activities for the three months ended March 31, 2022, was approximately $42,000 compared to $116,000 for the three months ended March 31, 2021. Cash flows from financing activities during the three months ended March 31, 2022 and 2021 were primarily related to proceeds from exercise of stock options.

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