| Organization and Summary of Significant Accounting Policies | Organization and Summary of Significant Accounting Policies Description of Business Dyadic International, Inc. (“Dyadic”, “we”, or the “Company”) is a global biotechnology platform company based in Jupiter, Florida with operations in the United States, a satellite office in the Netherlands and research organizations performing services under contract to Dyadic in Finland and Spain. Over the past two 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 Myceliophthora thermophila fungus, which the Company named C1. The C1 technology is a robust and versatile fungal expression system for the development and production of enzymes and other proteins. On December 31, 2015, the Company sold its industrial technology business to DuPont Danisco (“DuPont”), the industrial biosciences business of DuPont (NYSE: DD) for $75.0 million (the “DuPont Transaction”). As part of the DuPont Transaction, Dyadic retained co-exclusive rights to the C1 technology for use in all human and animal pharmaceutical applications, and currently has the exclusive ability to enter into sub-license agreements (subject to the terms of the license and to certain exceptions). DuPont retained certain rights to utilize the C1 technology 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 DuPont or certain licensors of DuPont, depending upon whether Dyadic elects to utilize certain patents either owned by DuPont or licensed in by DuPont. After the DuPont Transaction, the Company has been focused on the biopharmaceutical industry, specifically in further improving and applying the proprietary C1 technology into a safe and efficient gene expression platform to help speed up the development, lower production costs and improve the performance of biologic vaccines and drugs at flexible commercial scales. We believe that the C1 technology could be beneficial in the development and manufacturing of human and animal vaccines (such as virus-like particles (VLPs) and antigens), monoclonal antibodies (mAbs), Bi-Specific antibodies, Fab antibody fragments, Fc-Fusion proteins, and other therapeutic enzymes and proteins. Summary of Significant Accounting Policies Basis of Presentation The accompanying audited consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intra-entity transactions and balances have been eliminated in consolidation. The Company has reclassified certain 2017 amounts previously reported to conform to the 2018 consolidated financial statement presentation. These consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”). Since concluding the DuPont Transaction, the Company has conducted business in one operating segment, which is identified by the Company based on how resources are allocated, and operating decisions are made. Management evaluates performance and allocates resources based on the Company as a whole. Use of Estimates 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. Concentrations The Company’s financial instruments that are potentially subject to concentrations of credit risk consist primarily of cash and cash equivalents, and investment securities. At times, the Company has cash, cash equivalents, and investment securities at financial institutions exceeding the Federal Depository Insurance Company (“FDIC”) and the Securities Investor Protection Corporation (“SIPC”) insured limit on domestic currency and the Netherlands FDIC counterpart for foreign currency. The Company only deals with reputable financial institutions and has not experienced any losses in such accounts. For the years ended December 31, 2018 and 2017 , the Company's revenue was generated from six and three customers, respectively. At December 31, 2018 and 2017 , the Company’s account receivable was from four and three customers, respectively. The loss of business from one or a combination of the Company's customers could adversely affect its operations. The Company conducts operations in The Netherlands through its foreign subsidiary and generates a portion of its revenues from customers that are located outside of the United States. As of and for the year ended December 31, 2018 , the Company only had one customer outside of the United Sates (i.e. European customer) that accounted for approximately 21.7% or $281,000 of total revenue and no accounts receivable. As of and for the year ended December 31, 2017 , the Company only had one customer outside of the United States (i.e., European customer) that accounted for approximately 22.7% or $172,000 of total revenue and approximately 14.9% of total accounts receivable. Cash, Cash Equivalents and Restricted Cash We treat highly liquid investments with original maturities of three months or less when purchased as cash equivalents, including money market funds, which are unrestricted for withdrawal or use. Restricted cash includes escrowed funds from the sale of assets due to the DuPont Transaction. As a result of adopting ASU 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash”, the Company is no longer required to present transfers between cash and restricted cash, and between cash equivalents and restricted cash equivalents on its statements of cash flows. Please refer to “Recently Adopted Accounting Pronouncements” for details. Investment Securities The Company invests excess cash balances in short-term and long-term investment grade securities. Management determines the appropriate classification of its investments at the time of purchase and reevaluates the classifications at each balance sheet date. The Company’s investments in debt securities have been classified and accounted for as held-to-maturity. Held-to-maturity securities are those securities that the Company has the ability and intent to hold until maturity. Held-to-maturity securities are recorded at amortized cost, adjusted for the amortization or accretion of premiums or discounts. Premiums and discounts are amortized over the life of the related held-to-maturity security. When a debt security is purchased at a premium, both the face value of the debt and premium amount are reflected as investing outflow. Other-than-temporary impairment charges, if incurred, will be included in other income (expense). The Company’s investments in money market funds have been classified and accounted for as available-for-sale securities and presented as cash equivalents on the consolidated balance sheet. As of December 31, 2018 and 2017 , all of our money market funds were invested in U.S. Government money market funds. The Company did not have any investment securities classified as trading as of December 31, 2018 and 2017 . The Company classifies its investment securities as either short-term or long-term based on each instrument’s underlying contractual maturity date. Investment securities with maturities of 12 months or less are classified as short-term, and investment securities with maturities greater than 12 months are classified as long-term, from the applicable reporting date. Accounts Receivable Accounts receivable consist of billed receivables currently due from customers and unbilled receivables. Unbilled receivables represent the excess of contract revenue (or amounts reimbursable under contracts) over billings to date. Such amounts become billable in accordance with the contract terms, which usually consider the passage of time, achievement of certain milestones or completion of the project. Outstanding account balances are reviewed individually for collectability. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable. Substantially all of our accounts receivable were current and include unbilled amounts that will be billed and collected over the next twelve months. There was no allowance for doubtful accounts as of December 31, 2018 and 2017 . Accounts receivable consist of the following: December 31, 2018 2017 Billed receivable $ 193,065 $ 208,475 Unbilled receivable 125,679 62,554 $ 318,744 $ 271,029 Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets consist of the following: December 31, 2018 2017 Prepaid insurance $ 91,725 $ 89,760 Prepaid expenses - various 77,249 63,678 Prepaid taxes 3,027 1,170 $ 172,001 $ 154,608 Accounts Payable Accounts payable consist of the following: December 31, 2018 2017 Research and development expenses $ 240,064 $ 459,141 Legal expenses — 6,865 Other 68,996 54,255 $ 309,060 $ 520,261 Accrued Expenses Accrued expenses consist of the following: December 31, 2018 2017 Employee wages and benefits $ 268,287 $ 83,674 Research and development expenses 49,666 60,188 Other 81,623 4,097 $ 399,576 $ 147,959 Provision for Contract Losses The Company assesses the profitability of our collaboration agreements to provide research services to our contracted business partners and identifies those contracts where current operating results or forecasts indicate probable future losses. If the anticipated contract cost exceeds the anticipated contract revenue, a provision for the entire estimated loss on the contract is recorded and then accreted into the statement of operations over the remaining term of the contract. The provision for contract losses is based on judgment and estimates, including revenues and costs, where applicable, the consideration of our business partners' reimbursement, and when such loss is deemed probable to occur and is reasonable to estimate. Research and Development Costs Research and development (“R&D”) costs are expensed as incurred. R&D costs are related to the Company’s internally funded pharmaceutical programs and other governmental and commercial projects. Research and development costs consist of personnel-related costs, facilities, research-related overhead, services from independent contract research organizations, and other external costs. Research and development costs, including related party, during the years ended December 31, 2018 and 2017 were as follows: Years Ended December 31, 2018 2017 Outside contracted services $ 1,637,953 $ 1,299,072 Contracted services - related party 1,215,536 437,621 Personnel related costs 376,312 362,060 Facilities, overhead and other 87,363 104,342 $ 3,317,164 $ 2,203,095 Foreign Currency Transaction Gain or Loss The Company’s foreign subsidiary uses the U.S. dollar as its functional currency, and it initially measures the foreign currency denominated assets and liabilities at the transaction date. Monetary assets and liabilities are then re-measured at exchange rates in effect at the end of each period, and property and non-monetary assets and liabilities are converted at historical rates. Litigation Settlement On March 1, 2017, the Company and Greenberg Traurig, LLP, and Greenberg Traurig, P.A. (collectively, “Greenberg Traurig”) reached a settlement before the case went to the jury. On April 14, 2017, the Company received the full settlement payment in the amount of $4,500,000 , net of legal fees and expenses. In connection with a settlement agreement dated October 22, 2013 between Mark A. Emalfarb (“MAE”), and Dyadic, Dyadic agreed to pay MAE 5% of any net settlement proceeds up to $25 million , and 8% in excess of $25 million provided that the maximum amount payable under the agreement be limited to $6 million . In the second quarter of 2017, the Company made a payment of $141,777 to MAE to satisfy this prior contractual obligation. The net litigation settlement gain of $4,358,223 was reported in the Company’s consolidated statement of operations, in other income, in the first quarter of 2017. Fair Value Measurements The Company applies fair value accounting for certain financial instruments that are recognized or disclosed at fair value in the financial statements. The Company defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement: • Level 1 – Quoted prices in active markets for identical assets or liabilities. • Level 2 – Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. • Level 3 – Inputs that are generally unobservable and typically reflect management’s estimate of assumptions that market participants would use in pricing the asset or liability. Assets and liabilities on the audited consolidated balance sheets are measured at carrying values, which approximate fair values due to the short-term nature of these balances. Such items include cash and cash equivalents, accounts receivable, accounts payable, prepaid expenses, and accrued expenses. Investments in debt securities are recorded at amortized cost, and their estimated fair value amounts are provided by the third-party broker service for disclosure purposes. Income Taxes The Company accounts for income taxes under the asset and liability method in accordance with ASC 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 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 ASC 740 related to the accounting for uncertainty in income taxes recognized in a company’s financial statements. ASC 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 benefits, because it represents a company’s potential future obligation to the taxing authority for a tax position that was not recognized as a result of applying the provision of ASC 740. The Company classifies accrued interest and penalties related to its tax positions as a component of income tax expense. The Company is not subject to U.S. federal, state and local tax examinations by tax authorities for the years before 2014. Comprehensive Income (Loss) Comprehensive income (loss) includes net income (loss) and other revenue, expenses, gains and losses that are recorded as an element of shareholders’ equity but are excluded from net income (loss) under U.S. GAAP. The Company does not have any significant transactions that are required to be reported in other comprehensive income (loss), and therefore, does not separately present a statement of comprehensive income (loss) in its consolidated financial statements. Stock-Based Compensation We recognize all share-based payments to employees and our board of directors, as non-cash compensation expense, in research and development expenses or general and administrative expenses in the consolidated statement of operations based on the grant date fair values of such payments. Stock-based compensation expense recognized each period is based on the value of the portion of share-based payment awards that is ultimately expected to vest during the period. Forfeitures are recorded as they occur. Net Loss Per Share Basic net loss per share is computed by dividing net loss available to common shareholders by the weighted average number of common shares outstanding during the reporting period. Diluted net loss per share adjusts the weighted average number of common shares outstanding for the potential dilution that could occur if common stock equivalents, such as stock options, warrants, restricted stock and convertible debt, were exercised or converted into common stock, calculated by applying the treasury stock method. For the years ended December 31, 2018 and 2017 , the effect of the potential exercise of options to purchase 3,552,890 and 2,712,390 shares of common stock, respectively, were excluded from the computation of diluted net loss per share as their effect would have been anti-dilutive. Recent Accounting Pronouncements Not Adopted as of December 31, 2018 In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842). Under the new guidance, lessees will be required to recognize the assets and liabilities that arise from operating leases. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. Companies are required to recognize and measure leases using a modified retrospective approach at either the beginning of the earliest comparative period presented or the beginning of the reporting period in which the entity first applies the new standard. ASU 2016-02 was effective for the Company beginning in the first quarter of 2019. The adoption of this standard will not have a material impact on the Company’s consolidated financial statements and related disclosures. In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which modifies the measurement of expected credit losses of certain financial instruments. ASU 2016-13 will be effective for the Company beginning in the first quarter of 2020. The Company is currently evaluating the impact, if any, of this newly issued guidance. In March 2017, the FASB issued ASU 2017-08, Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization of Purchased Callable Debt Securities. The amendments in this ASU shorten the amortization period for certain callable debt securities held at a premium. The amendments require the premium to be amortized to the earliest call date. The amendments do not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. The amendments will be effective for the Company beginning in the first quarter of 2019. The Company does not expect the standard to have a material impact on its consolidated financial statements and related disclosures. In February 2018, the FASB issued ASU 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The new guidance allows a reclassification from accumulated other comprehensive income to retained earnings for any stranded tax effects resulting from the Tax Cuts and Jobs Act that was enacted on December 22, 2017. The new guidance will be effective for the Company beginning in the first quarter of 2019. The Company does not expect the standard to have a material impact on its consolidated financial statements and related disclosures. In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820) which modifies the disclosure requirements on fair value measurements. The effective date for the standard is fiscal years beginning after December 15, 2019, which for the Company is January 1, 2020. Early adoption is permitted. The new disclosure requirements for changes in unrealized gains and losses in other comprehensive income for recurring Level 3 measurements, the range and weighted average of significant unobservable inputs and the amended requirements for the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively. The Company does not expect ASU 2018-13 to have a material impact on our consolidated financial statements. Other pronouncements issued by the FASB or other authoritative accounting standards group with future effective dates are either not applicable or not significant to our consolidated financial statements. Recently Adopted Accounting Pronouncements In January 2016, the FASB issued ASU 2016-01, Financial Instruments - Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, which updates certain aspects of recognition, measurement, presentation and disclosure of financial instruments. The Company adopted this ASU effective January 1, 2018. The impact of adopting of this ASU on our consolidated financial statements was not material. In May 2017, the FASB issued ASU 2017-09, Compensation - Stock Compensation (Topic 718): Scope and Modification Accounting. An entity may change the terms or conditions of a share-based payment award for many different reasons, and the nature and effect of the change can vary significantly. Modification is currently defined as “a change in any of the terms or conditions of a share-based payment award.” The amendments in this ASU provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in accordance with Topic 718. The Company adopted this ASU effective January 1, 2018. The impact of adopting of this ASU on our consolidated financial statements was not material. Revenue Recognition On January 1, 2018, we adopted Accounting Standards Codification, or ASC, Topic 606, “Revenue from Contracts with Customers”, and all related amendments, using the full retrospective transition method. This standard applies to all contracts with customers, except for contracts that are within the scope of other standards, such as leases, insurance, collaboration arrangements and financial instruments. Topic 606 establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most prior revenue recognition guidance. This new standard requires an entity to recognize revenue for the transfer of promised goods or services to a customer in an amount that reflects the consideration that the entity expects to receive and consistent with the delivery of the performance obligation described in the underlying contract with the customer. We have determined that the impact of adopting this new standard is not material to our revenue recognition model, and therefore, no adjustment was made to our previously reported consolidated financial statements. As a result of the adoption of Topic 606, the Company’s accounting policy for revenue recognition is as follows: The Company has no pharmaceutical products approved for sale at this point, and all of our revenue to date has been research revenue from third party collaborations and government grants. The Company may generate future revenue from license agreements and collaborative arrangements, which may include upfront payments for licenses or options to obtain a license, payment for research and development services and milestone payments. 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 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. Since the performance obligation under our collaboration agreements is generally satisfied over time, we elected to use the input method under Topic 606 to measure the progress toward complete satisfaction of a performance obligation. Under the input methods, revenue will be recognized on the basis of 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. 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. The Company adopted the following practical expedients and exemptions: We generally expense sales commissions when incurred because the amortization period would be one year or less. We do not 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. Statement of Cash Flows In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash,” which modifies the presentation of the statement of cash flows and requires reconciliation of the overall change in the total of cash, cash equivalents, restricted cash and restricted cash equivalents. As a result, the statement of cash flows will no longer present transfers between cash and cash equivalents and restricted cash and restricted cash equivalents. The ASU is effective for annual reporting periods, and interim periods within those annual periods, beginning after December 15, 2017. The Company early adopted this ASU effective July 1, 2017. The adoption of this ASU impacted the Company’s presentation of its statement of cash flows but did not have a material impact on the Company’s consolidated balance sheet or consolidated statement of operations. Accordingly, the Company has retrospectively adjusted the presentation of its consolidated statement of cash flows for all periods presented. In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments,” which made eight targeted changes to how cash receipts and cash payments are presented and classified in the statement of cash flows. The ASU further clarified how the predominance principle should be applied to cash receipts and payments relating to more than one class of cash flows. The Company adopted this ASU effective January 1, 2018. In accordance with this ASU, the Company retrospectively adjusted the presentation of its consolidated statement of cash flows for all periods presented by reclassifying the cash outflows of premium on held-to-maturity securities from operating cash flows to investing cash flows. The following table summarizes, by financial statement line item, the adjusted presentation upon the adoption of ASU 2016-15, in the Company’s consolidated statement of cash flows as of December 31, 2017 : As Filed Adjustments Adjusted Operating Activities: Amortization of premium on held-to-maturity securities $ 192,293 $ 915,084 $ 1,107,377 Net cash used in operating activities $ (2,606,258 ) $ 915,084 $ (1,691,174 ) Investing activities: Purchase of held-to-maturity securities, including premiums $ (50,548,000 ) $ (915,084 ) $ (51,463,084 ) Net cash provided by (used in) investing activities $ 103,000 $ (915,084 ) $ (812,084 ) |
