<DOCUMENT>
<TYPE>SB-2/A
<SEQUENCE>1
<FILENAME>v011567_sb2a.txt
<TEXT>

    AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 24, 2005
                                                     REGISTRATION NO. 333-121738
--------------------------------------------------------------------------------


                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                      -------------------------------------


                               AMENDMENT NO. 1 TO
                                    FORM SB-2
             REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933


                      -------------------------------------

                           DYADIC INTERNATIONAL, INC.
                 (Name of small business issuer in its charter)

    DELAWARE                          8731                        45-0486747
    (State or             (Primary Standard Industrial         (I.R.S. Employer
 jurisdiction of           Classification Code Number)          Identification
incorporation or                                                   Number)
 organization)

                    140 INTRACOASTAL POINTE DRIVE, SUITE 404
                             JUPITER, FLORIDA 33477
                                 (561) 743-8333
         (Address and telephone number of principal executive offices)

                      -------------------------------------

                    140 INTRACOASTAL POINTE DRIVE, SUITE 404
                             JUPITER, FLORIDA 33477
                    (Address of principal place of business)

                      -------------------------------------

                                MARK A. EMALFARB
                             CHIEF EXECUTIVE OFFICER
                      140 INTRACOASTAL POINTE DRIVE, SUITE
                                       404
                             JUPITER, FLORIDA 33477
                                 (561) 743-8333

                       (Name, address and telephone number
                              of agent for service)


             Copy to:                                       Copy to:
     ROBERT I. SCHWIMMER, ESQ.                      DARYL B. ROBERTSON, ESQ.
       JENKENS & GILCHRIST,                           JENKENS & GILCHRIST,
    A PROFESSIONAL CORPORATION                     A PROFESSIONAL CORPORATION
  225 WEST WASHINGTON, SUITE 2600                 1445 ROSS AVENUE, SUITE 3200
      CHICAGO, ILLINOIS 60606                         DALLAS, TEXAS 75202
          (312) 425-3900                                (214) 855-4500


                      -------------------------------------

         APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As
soon as practicable after effective date of this Registration Statement.

         If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. |X|

         If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|

         If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. |_|

         If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. |_|

         If delivery of the prospectus is expected to be made pursuant to Rule
434, check the following box. |_|

                      -------------------------------------

<PAGE>

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT SHALL
BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(A), MAY DETERMINE.

================================================================================

<PAGE>

The information in this prospectus is not complete and may be changed. Our
selling stockholders may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities, and it is not soliciting
offers to buy these securities in any state where the offer or sale is not
permitted.


                SUBJECT TO COMPLETION, DATED JANUARY 24, 2005.


                                 [DYADIC LOGO]

                           DYADIC INTERNATIONAL, INC.

                                28,369,878 SHARES

                                  COMMON STOCK

                                ----------------

                   TO BE OFFERED BY HOLDERS OF COMMON STOCK OF
                           DYADIC INTERNATIONAL, INC.

                                ----------------

         This prospectus relates to the sale of up to 28,369,878 shares of our
common stock, par value $0.001 per share, by certain selling stockholders. The
shares offered by this prospectus include 20,577,967 presently outstanding
shares of our common stock and a maximum of 7,791,911 shares of our common stock
issuable upon the exercise of outstanding options and warrants to purchase our
common stock, upon the conversion of outstanding promissory notes that may be
converted into shares of our common stock and in satisfaction of a contractual
obligation to issue shares in connection with our purchase of certain real
estate. See "The Offering." These shares may be sold by the selling stockholders
from time to time in the over-the-counter market or such other national
securities exchange or automated interdealer quotation system on which our
common stock is then listed or quoted, through negotiated transactions or
otherwise at market prices prevailing at the time of sale or at negotiated
prices. See "Plan of Distribution."

         Under various agreements, we are obligated to register the shares held
of record and shares acquirable upon the exercise of warrants by the selling
stockholders. The distribution of the shares by the selling stockholders is not
subject to any underwriting agreement. We will receive none of the proceeds from
the sale of the shares by the selling stockholders. We will bear all expenses of
registration incurred in connection with this offering, but all selling and
other expenses incurred by the selling stockholders will be borne by the selling
stockholders.


         Our common stock is traded in the over-the-counter, or OTC, market and
quoted through the OTC Bulletin Board under the symbol "DYAD.OB." We expect it
to continue to trade in that market. The range of high and low bids for shares
of our common stock since the closing of the merger on October 29, 2004, through
January 20, 2005, have been $5.30 and $7.35, respectively, based upon bids that
represent prices quoted by broker-dealers on the OTC Bulletin Board System. The
closing bid for shares of our common stock on January 20, 2005, was $6.50, based
upon bids that represent prices quoted by broker-dealers on the OTC Bulletin
Board System. These quotations reflect inter-dealer prices, without retail
mark-up, mark-down or commissions, and may not represent actual transactions.
The market for shares of our common stock is characterized generally by low
volume and broad price and volume volatility. We cannot give any assurance that
a stable trading market will develop for our common stock.



<PAGE>

         The selling stockholders, and any broker-dealer executing sell orders
on behalf of the selling stockholders, may be deemed to be "underwriters" within
the meaning of the Securities Act of 1933. Commissions received by any
broker-dealer may be deemed to be underwriting commissions under the Securities
Act of 1933. See "Plan of Distribution."


                       -----------------------------------

                 THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK.
 PLEASE CAREFULLY REVIEW THE SECTION TITLED "RISK FACTORS" BEGINNING ON PAGE 5.

                       -----------------------------------

          NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
      SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES
         OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY
              REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

                         -------------------------------



             THE DATE OF THIS PROSPECTUS IS _________________, 2005.



<PAGE>

         YOU SHOULD RELY ONLY ON THE INFORMATION  CONTAINED IN THIS  PROSPECTUS.
WE HAVE NOT  AUTHORIZED  ANYONE TO PROVIDE YOU WITH  INFORMATION  DIFFERENT FROM
THAT CONTAINED IN THIS PROSPECTUS. THIS PROSPECTUS IS NOT AN OFFER TO SELL, OR A
SOLICITATION  OF AN OFFER TO BUY,  SHARES  OF COMMON  STOCK IN ANY  JURISDICTION
WHERE  OFFERS AND SALES WOULD BE  UNLAWFUL.  THE  INFORMATION  CONTAINED IN THIS
PROSPECTUS  IS COMPLETE AND  ACCURATE  ONLY AS OF THE DATE ON THE FRONT COVER OF
THIS PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF THIS PROSPECTUS OR OF ANY
SALE OF THE SHARES OF COMMON STOCK.

                      -------------------------------------

                                TABLE OF CONTENTS

                                                                            PAGE
                                                                            ----


Special Note Regarding Forward-Looking Statements........................... ii
Where You Can Find More Information......................................... ii
Summary  ...................................................................  1
Risk Factors................................................................  5
Use of Proceeds............................................................. 22
Market for Our Common Stock and Related Stockholder Matters................. 22
Management's Discussion and Analysis or Plan of Operation .................. 24
Business ................................................................... 36
Description of Property..................................................... 57
Management.................................................................. 58
Stock Ownership............................................................. 67
Certain Relationships and Related Transactions.............................. 68
Selling Stockholders........................................................ 71
Plan of Distribution........................................................ 83
Description of Securities................................................... 85
Shares Eligible for Future Sale............................................. 89
Legal Matters............................................................... 90
Experts  ................................................................... 90
Changes in Accountants...................................................... 90
Index to Consolidated Financial Information................................. 92



                      -------------------------------------


         We obtained statistical data, market data and certain other industry
data and forecasts used throughout this prospectus from market research,
publicly available information and industry publications. Industry publications
generally state that they obtain their information from sources that they
believe to be reliable, but they do not guarantee the accuracy and completeness
of the information. Similarly, while we believe that the statistical data,
industry data and forecasts and market research are reliable, we have not
independently verified the data, and we do not make any representation as to the
accuracy of the information. We have not sought the consent of the sources to
refer to their reports in this prospectus.




                                       i
<PAGE>

                SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

         Included in this prospectus, exhibits and associated documents are
"forward-looking" statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934, as well as
historical information. Forward-looking statements include those that use
forward-looking terminology, such as the words "anticipate," "believe,"
"estimate," "expect," "intend," "may," "project," "plan," "will," "shall,"
"should," and similar expressions, including when used in the negative. Although
we believe that the expectations reflected in these forward-looking statements
are reasonable and achievable, these statements involve risks and uncertainties
and no assurance can be given that actual results will be consistent with these
forward-looking statements. Important factors that could cause our actual
results, performance or achievements to differ from these forward-looking
statements include the factors described in the "Risk Factors" section and
elsewhere in this prospectus.

         All forward-looking statements attributable to us are expressly
qualified in their entirety by these and other factors. We undertake no
obligation to update or revise these forward-looking statements, whether to
reflect events or circumstances after the date initially filed or published, to
reflect the occurrence of unanticipated events or otherwise.

                       WHERE YOU CAN FIND MORE INFORMATION

         We have filed a registration statement with the Securities and Exchange
Commission, or the SEC, on Form SB-2 to register the shares of our common stock
being offered by this prospectus. In addition, we file annual, quarterly and
current reports, proxy statements and other information with the SEC. You may
read and copy any reports, statements or other information that we file at the
SEC's public reference facilities at 450 Fifth Street, N.W., Washington, D.C.
20549. Please call the SEC at 1-800-SEC-0330 for further information regarding
the public reference facilities. The SEC maintains a web site,
http://www.sec.gov., that contains reports, proxy statements and information
statements and other information regarding registrants that file electronically
with the SEC, including us. Our SEC filings are also available to the public
from commercial document retrieval services. Information contained on our web
site should not be considered part of this prospectus.

         You may also request a copy of our filings at no cost, by writing,
telephoning or emailing us at:

                           Dyadic International, Inc.
                    140 Intracoastal Pointe Drive, Suite 404
                             Jupiter, Florida 33477
                 Attention: Mark A. Emalfarb, President and CEO
                                 (561) 743-8333
                           http://www.Dyadic-Group.com
                          shareholders@Dyadic-Group.Com



                                       ii
<PAGE>

                                     SUMMARY

         You should read the following summary together with the more detailed
information contained elsewhere in this prospectus, including the section titled
"Risk Factors," regarding us and the common stock being sold in this offering.

         Unless the context otherwise requires, "Dyadic," the "Company," "we,"
"our," "us" and similar expressions refer to either Dyadic International, Inc.,
a Delaware corporation formerly known as CCP Worldwide, Inc., or Dyadic
International (USA), Inc., a Florida corporation formerly known as Dyadic
International, Inc., separately, prior to the acquisition by Dyadic
International, Inc. of Dyadic International (USA), Inc. by means of a merger
consummated on October 29, 2004, and refer to Dyadic International, Inc. and its
consolidated subsidiaries, including Dyadic International (USA), Inc., after
giving effect to the merger.

OUR BUSINESS

         Introduction. We are a biotechnology company engaged in the
development, manufacture and sale of proteins, enzymes, peptides and other
bio-molecules derived from genes, and the collaborative licensing of our
enabling proprietary technologies. We use our proprietary technologies to
develop and manufacture biological products, and intend to collaboratively
license them for research, development and manufacturing of biological products,
for two categories of applications:

     o    enzymes and other biological products for a variety of industrial and
          commercial applications, which we refer to as our Industrial Enzymes
          Business; and

     o    human therapeutic proteins for use by pharmaceutical and biotechnology
          companies in pre-clinical and clinical drug development applications
          and commercialization following drug approval, which we refer to as
          our BioSciences Business.

         Our Biotechnology and Business. We have developed and use a number of
proprietary fungal strains to produce enzymes and other biomaterials, but the
one on which we have principally focused is a patented system for protein
production, or protein expression, which we call the C1 Expression System. This
System is based on our patented Chrysosporium lucknowense fungus, known as C1,
as its host production organism. A host production organism has been genetically
altered to express genes to produce targeted protein products. We discovered the
C1 microorganism in the mid-1990's and initially developed it, without the
application of molecular biology, to produce neutral cellulases for our textile
manufacturing customers. By 1998, we began to apply molecular genetic biology
and other proprietary biotechnology tools to C1 to create a technology, which we
refer to as the C1 Host Technology. The C1 Host Technology, once fully
developed, is expected to be capable of performing:

     o    two screening functions for:

          o    the discovery of genes and the proteins they express; and

          o    the identification of improved protein variants resulting from
               modifications to their genes; and

     o    three expression functions for:

          o    the expression of proteins in commercial volumes for industrial
               enzyme applications;

          o    the expression of human therapeutic proteins in small volumes for
               pre-clinical and clinical testing for drug development
               applications; and

          o    the expression of human therapeutic proteins for drugs in
               commercial volumes.

We have been, over the last several years, principally focused on the expression
capabilities of the C1 Host Technology. These efforts culminated in our first
commercially successful application - our C1 Expression System.


                                       1
<PAGE>

         Using the C1 Expression System, as well as other biological systems,
our Industrial Enzymes Business develops and produces commercial quantities of
enzymes for sale to textile, pulp and paper, animal feed, chemical,
agricultural, and other industries. These industries, in turn, use our products
to enhance their own products or to improve production efficiency. In 2003, we
began to use our C1 Expression System to complete the development and market
roll-out of several new, and higher profit margin, industrial and agricultural
enzyme products, including for example the following products: MPE, NCE 2X,
Fibrezyme LBI, and Fibrezyme LBR. The development of our C1 Expression System
has substantially contributed to our revenues growing at over 30% per year
between 2001 and 2003, from $9.25 million in 2001 to $16.8 million in 2003. The
consolidation, effective July 1, 2002, of the results of operations of our Far
East subsidiary into our financial statements also contributed to this growth.
We currently sell more than 45 liquid and dry enzyme products to more than 150
industrial customers in 50 countries.

         We believe, however, even larger market opportunities exist for our C1
Expression System. We believe our C1 Expression System can be successfully
harnessed to help solve the protein expression problem confronting the global
drug industry - its inability, despite enormous historic investment, to harness,
cost-effectively and expeditiously, existing genomic knowledge to develop new
specialized biological products, or therapeutic proteins. For the past four
years, we have been developing our C1 Expression System to serve the drug
industry, with our primary focus on the production of human biopharmaceuticals,
or human therapeutic proteins. Still in the development stage, we refer to these
activities as our BioSciences Business. These activities have thus far generated
nominal revenues of only $150,000 in 2003. We have also conducted research and
development, or R&D, activities to expand the production capabilities of our C1
Expression System to include production of human therapeutic proteins in
commercial volumes.

         Though currently a lower priority than our C1 Expression System, we
have also been developing the screening potential of our C1 Host Technology for
gene discovery and the identification of protein variants resulting from
modifications to their genes, which we refer to as our C1 Screening System.
These efforts have included our purchase of state-of-the-art robotics equipment
and a collaborative partnership with a Netherlands-based scientific
organization, TNO Voeding, to enable fully-automated high throughput screening,
or HTS. We believe that if our BioSciences Business' application of our C1
Expression System and our C1 Screening System can each be perfected, we will be
able to offer a potentially unique end-to-end solution for drug companies: a
single host production organism usable throughout the discovery, pre-clinical
and clinical testing and commercial production phases of drug development that
would greatly increase drug development efficiency, economy and speed to market.

         Currently, we own three issued U.S. patents and 57 U.S. and
International filed and pending patent applications which we believe provide
broad protection for our C1 Expression System, our underlying C1 Host
Technology, our C1 Screening System and their products and commercial
applications.

         Our History. Our operating subsidiary, Dyadic International (USA),
Inc., was founded by our Chief Executive Officer, Mark A. Emalfarb, in 1979, and
was throughout the 1980's a leading supplier of both domestic pumice stones and
pumice stones imported from overseas for use in the stone washing of denim
garments. In the 1990's, we evolved from serving only the denim industry to the
development and manufacture of specialty enzymes and chemicals and, by 1995,
were generating revenues of $8,500,000 and annual profits of approximately
$1,300,000. In the mid-1990's, we discovered the C1 microorganism in connection
with our efforts to develop improved industrial enzymes. By 1998, we began
investing significant financial resources in the application of molecular
genetic technology to the development of the C1 Host Technology.

         In the first half of 2001, we raised capital of approximately
$13,635,000, prior to expenses of approximately $200,000, largely to fund the
development of our C1 Screening System. At that time, we thought we were within
one year of being able to find collaboration partners to help us complete its
development, though we continued to develop our C1 Expression System. However,
between 2001 and 2003, even as our Industrial Enzymes Business began to grow
rapidly, we experienced a major shift in market demand for our C1 Screening
System. First, we found that large pharmaceutical companies, financially
exhausted by their investment in unproven screening technologies like our C1
Screening System, began requiring theretofore unprecedented levels of
accumulated scientific data as a pre-condition to partnering with us. Second, we
found that the interest of these large pharmaceutical companies had moved away
from gene discovery and screening applications, to an interest in the expression
of therapeutic proteins for testing, clinical trials and drug commercialization.


                                       2
<PAGE>

         We adjusted our strategy accordingly, and between May 2003 and March
2004, we began to focus principally on our C1 Expression System, even as we
continued to develop our C1 Screening System and related HTS hardware and
assemble more scientific data to support our claims regarding that System's
potential. During this interval of time, we also continued to grow our
Industrial Enzymes Business, as we used our C1 Expression System and other
proprietary technologies to successfully develop several industrial enzymes,
while continuing to seek equity financing.

         Between April and July 31, 2004, we raised common equity capital of
approximately $6,740,000, prior to expenses of approximately $118,000, through a
private placement and two transactions with one of our long-term R&D contractors
and a real estate developer. Between October 1 and November 4, 2004, we raised
additional common equity capital of approximately $25,400,000, prior to
estimated expenses of approximately $2.3 million, in a private placement we
conducted companion to the merger of our wholly owned subsidiary into Dyadic
International (USA), Inc., in which its shareholders received shares of our
stock representing a majority of our outstanding shares.

         We derive almost all of our revenues from the conduct of our Industrial
Enzymes Business, and have thus far generated only nominal revenues from our
conduct of our BioSciences Business. We have incurred losses every year since we
began developing our C1 Host Technology, in 1999. Those losses resulted
primarily from expenses associated with research and development activities and
general and administrative expenses. To become profitable, we must continue to
grow our Industrial Enzymes Business, and generate income from the conduct of
our BioSciences Business, either directly or through potential future license
agreements and collaborative partnerships with drug companies.

         Our Future. Despite our Industrial Enzymes Business' history of revenue
generation and growth, the combination of its reliance upon the expansion of the
capabilities of our C1 Expression System and the early-stage, developmental
nature of our BioSciences Business require that we be characterized as an
early-stage company. Our conduct of the BioSciences Business is subject to the
risks customarily attending the operations of any early-stage company, including
the development of new technologies and products, the assembly and development
of production and R&D capabilities, the construction of channels of distribution
and the management of rapid growth, as discussed in the following Risk Factors.
Our BioSciences Business has not achieved, and may never achieve, profitability.
In addition, we expect to incur net losses in the foreseeable future, and those
losses may be substantial. Moreover, we have significant future capital
requirements related to the completion of the development of our C1 Host
Technology, our C1 Expression System and our C1 Screening System for use by our
BioSciences Business. As noted above, between October 1 and November 4, 2004, we
raised additional common equity capital of approximately $25,400,000 prior to
estimated expenses of approximately $2.3 million, in a private placement. We
believe that we have sufficient equity capital to fund our operations and meet
our obligations for the next two years. If we are unable to fund these
requirements, our business could be seriously harmed.

CORPORATE INFORMATION

         We were organized, under the name CCP Worldwide, Inc., as a Delaware
corporation on September 23, 2002. On October 29, 2004, we completed the merger
of our newly created and wholly owned subsidiary, CCP Acquisition Corp., a
Florida corporation, with and into a Florida corporation formerly known as
Dyadic International, Inc., which was the surviving corporation of the merger
and became our wholly owned subsidiary. Following the merger, our new subsidiary
changed its name to Dyadic International (USA), Inc from Dyadic International,
Inc., and our name was changed to Dyadic International, Inc. from CCP Worldwide,
Inc.

         Our principal executive offices are located at 140 Intracoastal Pointe
Drive, Suite 404, Jupiter, Florida 33477, and our telephone number at that
address is (561) 743-8333.


                                       3
<PAGE>

                                  THE OFFERING

<TABLE>
<S>                                                             <C>
Common stock offered by our selling stockholders(1):
     Presently outstanding shares............................                 20,577,967 shares
     Maximum number of shares that may be issued upon
          closing of purchase of certain real estate(2)......                    300,300 shares
     Maximum number of shares that may be issued upon
          exercise of outstanding stock options(3)...........                     65,000 shares
     Maximum number of shares that may be issued upon
          conversion of outstanding convertible notes(4).....                    473,835 shares
     Maximum number of shares that may be issued upon
      exercise of outstanding warrants.......................                  6,952,776 shares
                                                                          ----------------------
      TOTAL..................................................                 28,369,878 shares


Common stock outstanding(5) .................................                 22,231,105 shares


         Use of Proceeds.....................................   We will receive none of the proceeds from
                                                                the sale of the shares by the selling
                                                                stockholders.

OTC Bulletin Board symbol....................................   DYAD.OB
</TABLE>

----------
(1)  Subject to change if shares become issuable by reason of any stock
     dividend, stock split, recapitalization or other similar transaction.

(2)  Shares reserved for issuance incident to closing of purchase of certain
     real estate. See the section captioned "Description of Property."


(3)  Does not include 5,133,823 shares of our common stock reserved for issuance
     under the Dyadic International Inc. 2001 Equity Compensation Plan.


(4)  Shares reserved for issuance upon the conversion of convertible promissory
     notes outstanding on the date hereof.


(5)  Includes 1,653,138 shares of our common stock that were outstanding prior
     to the merger and that are not covered by this prospectus.



                                       4
<PAGE>

                                  RISK FACTORS

         An investment in our common stock involves a high degree of risk. You
should carefully consider the following material risks, together with the other
information contained in this prospectus, before you decide to buy our common
stock. If any of the following risks actually occur, our business, results of
operations and financial condition would likely suffer. In these circumstances,
the market price of our common stock could decline, and you may lose all or part
of your investment. Additional risks and uncertainties, including those that are
not yet identified or that we currently believe are immaterial, may also
adversely affect our business, financial condition or results of operations.

RISKS GENERAL TO OUR BUSINESSES

         DESPITE THE HISTORICAL OPERATING RESULTS OF OUR INDUSTRIAL ENZYMES
BUSINESS, WE SHOULD NONETHELESS BE VIEWED AS AN EARLY-STAGE COMPANY, WITH ALL OF
THE RISKS CUSTOMARILY ASSOCIATED WITH AN EARLY-STAGE COMPANY.

         Despite our Industrial Enzymes Business's history of revenue generation
and growth, the combination of its reliance upon the expansion of the
capabilities of our C1 Expression System and the early-stage, developmental
nature of our BioSciences Business require that we be characterized as an
early-stage company. Our conduct of the BioSciences Business is subject to the
risks customarily attending the operations of any early-stage company, including
the development of new technologies and products, the assembly and development
of production and R&D capabilities, the construction of channels of distribution
and the management of rapid growth, as discussed in the following Risk Factors.

         WE HAVE A HISTORY OF NET LOSSES. WE EXPECT TO CONTINUE TO INCUR NET
LOSSES, AND WE MAY NOT ACHIEVE OR MAINTAIN PROFITABILITY.


         While we have, prior to the commencement of our investment in the
development of the C1 Host Technology and the C1 Expression System, had
profitable years, since we began developing the C1 Host Technology in 1998, we
have incurred net losses of approximately $17,046,000 through December 31, 2003,
including net losses of approximately $7,263,000 for the year ended December 31,
2003, inclusive of a non-cash charge of approximately $3.2 million to recognize
the fair value of a warrant issued in connection with a May 2003 bridge loan
financing transaction, and approximately $3,373,000 of losses for the nine
months ended September 30, 2004. As of September 30, 2004, we had an accumulated
deficit of approximately $20,786,000. Because we intend to accelerate our R&D
activities and expand both our sales and marketing and technical support staffs,
we expect to have increased levels of net losses and negative cash flow. Whether
we achieve profitability, and the size of our net losses prior to that time,
will depend, in large part, on the rate of growth, if any, of our Industrial
Enzymes Business, whether our BioSciences Business is able to generate contract
revenues or other revenues and on the level of our expenses. To date, we have
derived almost 100% of our revenues from the operations of our Industrial
Enzymes Business. We do not anticipate material revenues from the operation of
the BioSciences Business sooner than 2006. Our Industrial Enzymes Business may
not be able to penetrate new markets or enjoy the improved profit margins it
anticipates, which could materially adversely impact that Business's growth
potential and profitability. Revenues from our BioSciences Business are
uncertain because our ability to secure future collaboration agreements will
depend upon the ability of the BioSciences Business to perfect our C1 Host
Technology to address the needs of the pharmaceutical and biotech industries. We
expect to spend significant amounts to fund R&D and enhance our core
technologies. As a result, we expect that our operating expenses will increase
significantly in the near term and, consequently, that we will need to generate
significant additional revenues to achieve profitability. Even if we do achieve
profitability, we may not be able to sustain or increase profitability on a
quarterly or annual basis.


         WE COULD FAIL TO MANAGE OUR GROWTH, WHICH WOULD IMPAIR OUR BUSINESS.


                                       5
<PAGE>

         Our business plan contemplates that we will grow at a rapid rate, both
in terms of revenues and personnel. It is difficult to manage this rapid growth,
and our future success depends on our ability to efficiently and effectively
implement:

     o    research and product development programs which overcome scientific
          challenges and develop new products and processes;

     o    sales, marketing, technical service and customer support programs;

     o    expansion of our manufacturing operations to appropriate capacity
          levels consistent with our projected and actual rates of growth;

     o    operational and financial control systems;

     o    recruiting and training programs; and

     o    currency risk management strategies.

Our ability to offer products and services successfully and to implement our
business plan in a rapidly evolving global market requires effective planning,
reporting and management processes. We expect that we will need to continue to
improve our financial and managerial controls, reporting systems and procedures
and to expand and train our workforce worldwide. We also need to continue to
manufacture our products efficiently and to control or adjust the expenses
related to R&D, marketing, sales and general and administrative activities in
response to changes in revenues. If we are not successful in efficiently
manufacturing our products or managing such expenses, there could be an adverse
impact on our earnings and the continued viability of our business.

RISKS SPECIFIC TO OUR INDUSTRIAL ENZYMES BUSINESS

         OUR INDUSTRIAL ENZYMES BUSINESS'S MARKET SHARE GROWTH DEPENDS ON COSTLY
NEW PRODUCT INTRODUCTIONS AND MARKET ACCEPTANCE.

         The future success of our Industrial Enzymes Business will depend
greatly on our ability to continuously and timely develop and introduce new
products that address evolving market requirements and are attractive to
customers. We are relying on our C1 Expression System and our other proprietary
technologies to expand our Industrial Enzymes product line and improve our gross
margins on those products. If we fail to introduce new and innovative products,
we could fail to obtain an adequate return on our R&D investments and could lose
market share to our competitors, which might be difficult or impossible to
regain. Any inability, for technological or other reasons, to develop
successfully and introduce new products could reduce our growth rate or
otherwise damage our business.

         Further, in the past we have experienced, and we are likely in the
future to experience, delays in the development and introduction of products. We
may not be able to keep pace with the rapid rate of change in our markets or to
develop new products or processes that will meet the requirements of the
marketplace or achieve market acceptance. Some of the factors affecting market
acceptance of our products include:

     o    availability, quality, performance and price as compared to
          competitive products;

     o    the functionality of new and existing products;

     o    the timing of introduction of our products as compared to competitive
          products;

     o    scientists' and customers' opinions of our products' utility and our
          ability to incorporate their feedback into our future products; and

     o    citation of the products in published research.

The expenses or losses associated with unsuccessful product development
activities or lack of market acceptance of our new products could seriously harm
our business, financial condition and results of operations.


                                       6
<PAGE>

         OUR INDUSTRIAL ENZYMES BUSINESS CURRENTLY RELIES ON TWO CONTRACT
MANUFACTURERS FOR ALL OF ITS MANUFACTURING. IF WE REQUIRE ADDITIONAL
MANUFACTURING CAPACITY AND ARE UNABLE TO OBTAIN IT IN SUFFICIENT QUANTITY, WE
MAY NOT BE ABLE TO INCREASE OUR SALES, OR MAY BE REQUIRED TO MAKE VERY
SUBSTANTIAL CAPITAL INVESTMENTS TO BUILD THAT CAPACITY.

         Our manufacturing capabilities, and any current or future arrangements
with third parties for these activities, may not be adequate for the successful
commercialization of our industrial enzyme products. In the operation of the
Industrial Enzymes Business, all of our industrial enzymes have over the past
decade, and are expected over the foreseeable future to be, produced at the
manufacturing facilities of contract manufacturers. As a result, we are
dependent upon the performance and plant capacity of third-party manufacturers.
We currently use two contract manufacturers, though our agreement with one of
those contract manufacturers is close to expiring and will not be renewed. Our
Industrial Enzymes Business, therefore, faces risks of difficulties with, and
interruptions in, performance by these third parties of their manufacturing
responsibilities, the occurrence of which could adversely impact the launch
and/or sales of our products in the future. For example, our principal contract
manufacturer, Polfa Tarchomin, S.A., which has been producing a number of our
products since 2001 without interruption, has agreed to fund the modernization
and expansion of its manufacturing facilities for our benefit. Though we have,
in the past, received assurances from this contract manufacturer that it will
have available to it the required funding to accomplish this modernization and
expansion, if that funding were to be unavailable, and we presently have
concerns on this issue, or if that contract manufacturer is otherwise unable to
construct the needed modernization and expansion of production capacity, as it
is contractually obligated to, our ability to meet our production requirements
and growth plans would likely be very negatively affected. We could be forced
to:

     o    furnish or secure for that contract manufacturer the capital necessary
          to enable it to expand production capacity to meet our future
          production needs;

     o    find manufacturing capacity from another contract manufacturer, which
          might be at higher cost to us; or

     o    build our own manufacturing facilities, necessitating significant
          capital expenditures not currently included in our capital spending
          plans.

         With the imminent termination in May 2005 of our contract manufacturing
agreement with our second, and only other, contract manufacturer, all of our
production requirements will more than likely be satisfied by the single
manufacturing facility operated by our Polish contract manufacturer, leaving us
even more vulnerable to a failure of performance by it. In addition, presently
certain of our products can only be produced by the contract manufacturer whose
contract will terminate in May 2005. While we expect those products to be in
production by the Polish contract manufacturer prior to May 2005, our ability to
meet our production requirements and growth plans for those products could be
negatively affected if Polish governmental authorities were to delay the
approval of certain manufacturing processes for genetically engineered
microorganisms, or GMOs, that we intend to transfer to the Polish contract
manufacturer, or if the Polish contract manufacturer is unable to master
production of these additional products.

         REGULATIONS MAY LIMIT OUR PROVISION OF GENETICALLY ENGINEERED PRODUCTS
IN THE FUTURE. THESE REGULATIONS COULD LIMIT OUR ABILITY TO SELL THESE PRODUCTS.

         Our Industrial Enzyme Business develops enzyme products using both
non-genetically engineered micro-organisms and GMOs. The production and
marketing of products derived from GMOs are subject to federal, state, local and
foreign governmental regulation. Regulatory agencies administering existing or
future regulations or legislation may not allow us to produce and market our
products derived from GMOs in a timely manner or under technically or
commercially feasible conditions. In addition, regulatory action or private
litigation could result in expenses, delays or other impediments to our product
development programs or the commercialization of resulting products.

         The U.S. Food and Drug Administration, or FDA, currently applies the
same regulatory standards to products made through genetic engineering as those
applied to products developed through traditional methodologies. However,
genetically engineered products will be subject to premarket review if these


                                       7
<PAGE>

products raise safety questions or are deemed to be food additives. Our products
may be subject to lengthy FDA reviews and unfavorable FDA determinations if they
raise questions, are deemed to be food additives, or if the FDA changes its
policy. The European Union, or the EU, has similar regulations regarding the
development, production and marketing of products from GMOs. In many cases the
regulations are more restrictive than present U.S. regulations. In particular,
the EU requires efficacy testing as well as toxicological testing of all enzyme
products, including products from non-GMO microorganisms, sold into the animal
feed market. The regulatory agencies administering these and future regulations
may not allow us to produce and market some products in a timely manner or under
technically or commercially feasible conditions.

         For more information, see the section captioned "Business - Government
Regulation."

         ALTERNATIVE TECHNOLOGIES UNDER DEVELOPMENT MAY DIMINISH THE NEED FOR
PRODUCING SOME ENZYMES IN FERMENTERS - THE PROCESS WE USE.

         Bio-ethanol and other bio-fuels production represents a considerable
market opportunity for enzymes. Research being conducted within the auspices of
major seed producers, U.S. federal government and corn growers association may
supplant the need for enzymes produced in fermenters, which is the enzyme
production process we currently use.

RISKS SPECIFIC TO OUR BIOSCIENCES BUSINESS

         ALTHOUGH OUR INDUSTRIAL ENZYMES BUSINESS HAS DEVELOPED AND SOLD
INDUSTRIAL ENZYME PRODUCTS AND HAS USED OUR C1 EXPRESSION SYSTEM TO DEVELOP SUCH
PRODUCTS, OUR BIOSCIENCES BUSINESS HAS NOT YET COMPLETED COMMERCIALIZATION OF
OUR C1 EXPRESSION SYSTEM FOR THE EXPRESSION OF THERAPEUTIC PROTEINS. IF OUR
BIOSCIENCE BUSINESS FAILS TO DO THIS, WE MAY BE FORCED TO TERMINATE THE
BIOSCIENCES BUSINESS'S OPERATIONS AND LIQUIDATE IT.

         Our BioSciences Business must be evaluated as having the same risks
inherent in early-stage biotechnology companies because the application of our
C1 Expression System to the expression of pre-clinical and clinical quantities
of therapeutic proteins is still in development. We may not be able to
successfully harness the C1 Expression System to achieve those objectives.
Further, we may not be able to expand the capabilities of the C1 Expression
System to produce commercial volumes of therapeutic proteins at reasonable
costs. Also, even if the BioSciences Business is able to achieve either of those
accomplishments, we may not be able to successfully develop the C1 Screening
System to serve the functions of gene discovery or the development of new and/or
improved protein drugs. Successful development of the C1 Host Technology for
these purposes will require significant development and investment, including
testing, to prove its efficacy and cost-effectiveness. To date, drug companies
have developed and commercialized only a small number of gene-based products in
comparison to the total number of drug molecules available in the marketplace.
In this connection, we are heavily dependent upon our use of third-party
research organizations to assist us in the development of the C1 Host
Technology. In general, our experience has been that each step in the process
has taken longer and cost more to accomplish then we had originally projected,
and we anticipate that this is likely to remain the case with respect to our
BioSciences Business' continuing development efforts.

         COMMERCIALIZATION OF OUR C1 EXPRESSION SYSTEM BY OUR BIOSCIENCES
BUSINESS DEPENDS ON COLLABORATIONS WITH OTHER COMPANIES. IF WE ARE NOT ABLE TO
FIND COLLABORATORS IN THE FUTURE, THE BIOSCIENCES BUSINESS MAY NOT BE ABLE TO
DEVELOP THE C1 EXPRESSION SYSTEM OR THERAPEUTIC PROTEIN PRODUCTS.

         In the operation of our BioSciences Business, our business model relies
on a revenue stream derived from collaboration projects to be conducted with our
customers to express laboratory-testing quantities of therapeutic proteins. A
large portion of the anticipated financial reward depends on those therapeutic
proteins progressing through drug development and into commercially successful
drugs. Apart from risks relating to whether our BioSciences Business can capture
such customers, or capture them on satisfactory terms, we will have no control
over post-collaboration project drug development and commercialization. Further,
conflicts could arise between us and our customers or among them and third
parties that could discourage or impede the activities of our BioSciences
Business.


                                       8
<PAGE>

         Since we do not currently possess the financial resources necessary to
develop and commercialize potential drug products that may result from our C1
Expression System, or the resources to complete any approval processes which may
be required for these products, we must enter into collaborative arrangements to
develop and commercialize drug products. It is expected that these arrangements
will be for fixed terms and will expire after a fixed period of time. If they
are not renewed or if we do not enter into new collaborative agreements, our
revenues will be reduced and our products may not be commercialized.

         WE HAVE LIMITED OR NO CONTROL OVER THE RESOURCES THAT ANY COLLABORATOR
MAY DEVOTE TO OUR PRODUCTS. ANY OF OUR FUTURE COLLABORATORS MAY NOT PERFORM
THEIR OBLIGATIONS AS EXPECTED. THESE COLLABORATORS MAY BREACH OR TERMINATE THEIR
AGREEMENT WITH US OR OTHERWISE FAIL TO CONDUCT THEIR COLLABORATIVE ACTIVITIES
SUCCESSFULLY AND IN A TIMELY MANNER. FURTHER, OUR COLLABORATORS MAY ELECT NOT TO
DEVELOP PRODUCTS ARISING OUT OF OUR COLLABORATIVE ARRANGEMENTS OR DEVOTE
SUFFICIENT RESOURCES TO THE DEVELOPMENT, MANUFACTURE, MARKET OR SALE OF THESE
PRODUCTS. IF ANY OF THESE EVENTS OCCUR, WE MAY NOT BE ABLE TO DEVELOP OUR
TECHNOLOGIES OR COMMERCIALIZE OUR PRODUCTS.

         Potential therapeutic products developed by us or with our customers or
collaborators are subject to a lengthy and uncertain regulatory process. If
these therapeutic protein products are not approved, we or our customers or
collaborators will not be able to commercialize them, and we may not receive the
milestone and royalty payments which are based upon the successful advancement
of these products through the drug development and approval process.

         The FDA must approve any therapeutic product before it can be marketed
in the United States. Before our collaborators can file a new drug application
or biologic license application with the FDA, the product candidate must undergo
extensive testing, including animal and human clinical trials, which can take
many years and require substantial expenditures. Data obtained from such testing
are susceptible to varying interpretations which could delay, limit or prevent
regulatory approval. In addition, changes in regulatory policy for product
approval during the period of product development and regulatory agency review
of each submitted new application or product license application may cause
delays or rejections.

         Because these products involve the application of new technologies and
may be based upon new therapeutic approaches, they may be subject to substantial
review by government regulatory authorities and, government regulatory
authorities may grant regulatory approvals more slowly for these products than
for products using more conventional technologies. While we anticipate that most
of our collaborators will have experience submitting an application to the FDA
or any other regulatory authority, we have no such experience, and neither we
nor any collaborator has yet submitted an application with the FDA or any other
regulatory authority for any product candidate generated through the use of our
C1 Expression System, nor has the FDA nor any other regulatory authority
approved any therapeutic product candidate developed using our C1 Expression
System for commercialization in the United States or elsewhere. Our
collaborators may not be able to conduct clinical testing or obtain the
necessary approvals from the FDA or other regulatory authorities for our
products. The regulatory agencies of foreign governments must also approve our
therapeutic products before the products can be sold in those other countries.

         Even after investing significant time and expenditures, our
collaborators may not obtain regulatory approval for their products. Even if
they receive regulatory approval, this approval may entail limitations on the
indicated uses for which we can market a product. Further, once regulatory
approval is obtained, a marketed product and its manufacturer are subject to
continual review, and discovery of previously unknown problems with a product or
manufacturer may result in restrictions on the product, manufacturer and
manufacturing facility, including withdrawal of the product from the market. In
certain countries, regulatory agencies also set or approve prices.

         HEALTH CARE REFORM AND RESTRICTIONS ON REIMBURSEMENTS MAY LIMIT THE
RETURNS THAT OUR BIOSCIENCES BUSINESS AND ITS CUSTOMERS EARN ON PHARMACEUTICAL
PRODUCTS.

         Our C1 Host Technology is being developed to assist our customers or
collaborators in the development of future therapeutic products, including
pharmaceutical products. The ability of our collaborators to commercialize
pharmaceutical products developed with our C1 Host Technology may depend in part


                                       9
<PAGE>

on the extent to which reimbursement for the cost of those products will be
available from government health administration authorities, private health
insurers and other organizations. Third-party payers are increasingly
challenging prices of medical products and services. Significant uncertainty
exists as to the reimbursement status of newly approved health care products,
and there can be no assurance that adequate third party coverage will be
available for any product to enable us to maintain price levels sufficient to
realize an appropriate return on our investment in research and product
development.

         ADVERSE EVENTS IN THE FIELD OF THERAPEUTIC PRODUCTS MAY NEGATIVELY
IMPACT REGULATORY APPROVAL OR PUBLIC PERCEPTION OF ANY THERAPEUTIC PRODUCTS WE
OR OUR COLLABORATORS MAY DEVELOP.

         Currently, we are not engaged in developing therapeutic products for
our own account, but instead intend to collaborate with drug companies to
express therapeutic products requested by them for the ultimate purpose of their
development, testing and introduction as new drugs. We may, however, engage in
these activities in the future for our own account. If we or our collaborators
develop therapeutic products, these products may encounter substantial delays in
development and approval due to the government regulation and approval process.
Adverse events reported in gene therapy clinical trials may lead to more
government scrutiny of proposed clinical trials of therapeutic products,
stricter labeling requirements for these products and delays in the approval of
other types of products for commercial sale.

         Our C1 Expression System has been tested for use in pulp and paper
production, which requires FDA approval as generally regarded as safe, or GRAS,
and has generated promising safety and toxicity data for one enzyme. A risk
nonetheless exists that the C1 Expression System will produce therapeutic
products and enzymes that have safety and toxicity issues associated with them.

         Also, the complete genome sequence of our C1 host organism - which
could help to mitigate our risk that there were unexpected safety and toxicity
issues associated with our C1 Expression System and facilitate our ability to
find and express new genes of bio-therapeutic and other commercial value - has
not yet been determined. This fact places us at a distinct competitive
disadvantage to some of our competitors, whose host organisms have been more
thoroughly researched and whose genomes have been sequenced.

RISKS APPLICABLE TO OUR INDUSTRIAL ENZYMES BUSINESS AND OUR BIOSCIENCES BUSINESS

         REDUCTIONS IN R&D BUDGETS MAY AFFECT THE SALES OF BOTH OF OUR
BUSINESSES.

         Our customers include researchers at customers of our Industrial
Enzymes Business and potential drug company customers of our BioSciences
Business. Fluctuations in the R&D budgets of these researchers and their
organizations could have a significant effect on the demand for our products.
Research and development budgets fluctuate due to changes in available
resources, mergers of drug companies, spending priorities and institutional
budgetary policies. Our Businesses could be seriously damaged by any significant
decrease in life sciences R&D expenditures by these existing and potential
customers, academic institutions, government laboratories or private
foundations.

         WE INTEND TO CONDUCT PROPRIETARY RESEARCH PROGRAMS, AND ANY CONFLICTS
WITH OUR COLLABORATORS OR ANY INABILITY TO COMMERCIALIZE PRODUCTS RESULTING FROM
THIS RESEARCH COULD HARM OUR BUSINESS.

         An important part of our strategy involves conducting proprietary
research programs. We may pursue opportunities in fields that could conflict
with those of our collaborators. Moreover, disagreements with our collaborators
could develop over rights to our intellectual property. Any conflict with our
collaborators could reduce our ability to obtain future collaboration agreements
and negatively impact our relationship with existing collaborators, which could
reduce our revenues.

         Certain of our collaborators could also become competitors in the
future. Our collaborators could develop competing products, preclude us from
entering into collaborations with their competitors, fail to obtain timely
regulatory approvals, terminate their agreements with us prematurely or fail to
devote sufficient resources to the development and commercialization of
products. Any of these developments could harm our product development efforts.


                                       10
<PAGE>

         We will either commercialize products resulting from our proprietary
programs directly or through licensing to other companies. We have limited
experience in manufacturing and marketing products for the pharmaceutical and
biotechnology industries. In order for us to commercialize these products
directly, we would need to develop, or obtain through outsourcing arrangements,
the capability to market and sell these products. We do not have these
capabilities, and we may not be able to develop or otherwise obtain the
requisite marketing and sales capabilities. If we are unable to successfully
commercialize products resulting from our proprietary research efforts, we will
continue to incur losses.

         PUBLIC PERCEPTION OF ETHICAL AND SOCIAL ISSUES MAY LIMIT THE USE OF OUR
TECHNOLOGIES, WHICH COULD REDUCE OUR REVENUES.

         Our success will depend in part upon our ability to develop products
discovered through our C1 Host Technology. Governmental authorities could, for
social or other purposes, limit the use of genetic processes or prohibit the
practice of our C1 Host Technology. Ethical and other concerns about our C1 Host
Technology, particularly the use of genes from nature for commercial purposes,
and products resulting therefrom, could adversely affect their market
acceptance.

         IF THE PUBLIC DOES NOT ACCEPT GENETICALLY ENGINEERED PRODUCTS, WE MAY
HAVE LESS DEMAND FOR OUR PRODUCTS IN THE FUTURE.

         The commercial success of our potential products will depend in part on
public acceptance of the use of genetically engineered products including drugs,
plants and plant products. Claims that genetically engineered products are
unsafe for consumption or pose a danger to the environment may influence public
attitudes. Our genetically engineered products may not gain public acceptance in
the various industrial, pharmaceutical or biotechnology industries. Negative
public reaction to genetically modified organisms and products could result in
greater government regulation of genetic research and resultant products,
including stricter labeling laws or regulations, and could cause a decrease in
the demand for our products.

         The subject of genetically modified organisms has received negative
publicity in Europe and other countries, which has aroused public debate. The
adverse publicity in Europe could lead to greater regulation and trade
restrictions on imports of genetically altered products. If similar adverse
public reaction occurs in the United States, genetic research and resultant
products could be subject to greater domestic regulation, and a decrease in the
demand for our products could result.

         OUR COLLABORATIONS WITH OUTSIDE SCIENTISTS MAY BE SUBJECT TO CHANGE
WHICH COULD LIMIT OUR ACCESS TO THEIR EXPERTISE.

         We rely upon the services of a number of research organizations,
scientific advisors and collaborators at academic and other institutions. These
scientists are not our employees and may have other commitments that would limit
their availability to us. Although our scientific advisors generally agree not
to perform services on competing technologies, if a conflict of interest between
their services for us and their services for another entity were to occur, we
might lose their services. Although our scientific advisors and collaborators
sign agreements not to disclose our confidential information, it is possible
that certain of our valuable proprietary knowledge may become publicly known
through them.

         DESTRUCTIVE ACTIONS BY ACTIVISTS OR TERRORISTS COULD DAMAGE OUR
FACILITIES, INTERFERE WITH OUR RESEARCH ACTIVITIES AND CAUSE ECOLOGICAL HARM.
ANY SUCH ADVERSE EVENTS COULD DAMAGE OUR ABILITY TO DEVELOP PRODUCTS AND
GENERATE ADEQUATE REVENUE TO CONTINUE OPERATIONS.

         Activists and terrorists have shown a willingness to injure people and
damage physical facilities, equipment and biological materials to publicize or
further their ideological causes. Biotechnology companies could be a specific
target of certain groups. Our operations and research activities could be


                                       11
<PAGE>

adversely impacted depending upon the nature and extent of such acts. Such
damage could include disability or death of our personnel, damage to physical
facilities that we contract with to perform R&D activities or to manufacture our
products, destruction of animals and biological materials, disruption of our
communications and data management software used for R&D or destruction of R&D
records. Any such damage could delay our R&D projects or the manufacture of our
products and decrease our ability to conduct future R&D and to develop future
products. Damage caused by activist or terrorist incidents could also cause the
release of hazardous materials, including chemicals and biological materials,
which could create liabilities for us or damage our reputation in the community.
Clean up of any such releases could also be time consuming and costly. Any
significant interruptions in our ability to conduct our business operations or
R&D activities could reduce our revenue and increase our expenses.

         WE USE HAZARDOUS CHEMICALS AND RADIOACTIVE AND BIOLOGICAL MATERIALS IN
OUR BUSINESS. ANY CLAIMS RELATING TO IMPROPER HANDLING, STORAGE OR DISPOSAL OF
THESE MATERIALS COULD BE TIME CONSUMING AND COSTLY.

         Our R&D processes involve the controlled use of hazardous materials,
including chemicals, radioactive and biological materials. Our operations also
produce hazardous waste products. We cannot eliminate the risk of accidental
contamination or discharge and any resultant injury from these materials.
Federal, state and local laws and regulations govern the use, manufacture,
storage, handling and disposal of these materials. We could be subject to
criminal liability or claims for damages in the event of an improper or
unauthorized release of, or exposure of individuals to, hazardous materials. In
addition, claimants may sue us for injury or contamination that results from our
use or the use by third parties of these materials, and our liability may exceed
our total assets. Compliance with these laws and regulations may be expensive,
and current or future laws and regulations may impair our research, development,
or production efforts. We believe that our current operations comply in all
material respects with applicable laws and regulations.

         In addition, our collaborators may work with these types of hazardous
materials in connection with our collaborations. To our knowledge, the work is
performed in accordance with these laws and regulations. In the event of a
lawsuit or investigation, we could be held responsible for any injury caused to
persons or property by exposure to, or release of, these hazardous materials.
Further, under certain circumstances, we may agree to indemnify our
collaborators against damages and other liabilities arising out of development
activities or products produced in connection with these collaborations.

OTHER BUSINESS RISKS THAT WE FACE

         MANY POTENTIAL COMPETITORS WHO HAVE GREATER RESOURCES AND EXPERIENCE
THAN WE DO MAY DEVELOP PRODUCTS AND TECHNOLOGIES THAT MAY MAKE OURS OBSOLETE.

         The industrial enzymes and biotechnology industries are characterized
by rapid technological change, and the area of gene research is a rapidly
evolving field. Our future success will depend on our ability to maintain a
competitive position with respect to technological advances. Rapid technological
development by others may result in our products and technologies becoming
obsolete.

         Any products that we develop through our C1 Host Technology will
compete in highly competitive markets. Many of the organizations competing with
us in the markets for such products have greater capital resources, R&D and
marketing staffs and facilities and capabilities, and greater experience in
obtaining regulatory approvals, manufacturing products and marketing.
Accordingly, our competitors may be able to develop technologies and products
more easily which would render our technologies and products and those of our
collaborators obsolete and noncompetitive. If a competitor develops superior
technology or cost-effective alternatives to our products or processes, our
business, operating results and financial condition could be seriously harmed.
In addition, demand for our products may weaken due to reduction in R&D budgets
or loss of distributors, any of which might have an adverse effect on our
financial condition.

         The markets for our Industrial Enzymes Business's products are, in many
cases, very competitive and price sensitive. Our Industrial Enzymes Business
currently competes with five much larger competitors, each with dominant market
positions in segments in which we compete and who, as a group, hold
approximately 70% market share in the present industrial enzymes marketplace.
Each of these competitors has substantially greater financial, operational,
sales and marketing resources than we do, and very significant experience in
R&D. Further, these competitors may possess other complementary technologies,


                                       12
<PAGE>

such as proprietary directed molecular evolution technology, which may be more
effective at implementing their technologies to develop commercial products than
our complementary technologies implement our C1 Host Technology. Also, some of
these competitors have entered into collaborations with leading companies within
our Industrial Enzymes Business's target markets to produce enzymes for
commercial purposes.

         Well-known, and better financed, biotechnology companies offer
competing technologies for the same products and services as our BioSciences
Business plans to offer using our C1 Host Technology. Customers may prefer
existing competing technologies over our C1 Host Technology. Our BioSciences
Business also faces, and will continue to face, intense competition from
organizations such as large biotechnology companies, as well as academic and
research institutions and government agencies that are pursuing competing
technologies to enable production of therapeutic and other proteins and
bio-molecules of commercial interest at economically viable costs. These
organizations may develop technologies that are superior alternatives to our C1
Host Technology. We anticipate that our BioSciences Business will face increased
competition as new companies enter our markets and as development of biological
products evolves.

         WE MAY NEED ADDITIONAL CAPITAL IN THE FUTURE. IF ADDITIONAL CAPITAL IS
NOT AVAILABLE, AND WE ARE UNABLE TO GENERATE SUFFICIENT LEVELS OF PROFITABILITY
FROM OUR INDUSTRIAL ENZYMES BUSINESS, WE MAY NEED TO CURTAIL OR CEASE, OR
DISPOSE OF, ONE OR MORE OF OUR OPERATIONS.

         Our future capital requirements will be substantial, particularly if we
require significant additional capital to develop manufacturing capacity for our
Industrial Enzymes Business, completion of the development of our C1 Expression
System for our BioSciences Business takes longer or requires greater resources
than we had expected, we continue to develop the C1 Expression System to expand
its production capabilities to manufacture commercial volumes of therapeutic
proteins, we continue to develop a C1 Screening System, or our BioSciences
Business develops a number of therapeutic products. Our need for additional
capital will depend on many factors, including the financial success of our
Industrial Enzymes Business, whether our Polish contract manufacturer modernizes
and expands its manufacturing facility as it is required to by its contract with
us, whether we are successful in obtaining payments from BioSciences Business
customers under collaborative agreements, the progress and scope of our
collaborative and independent R&D projects performed by our customers and
collaboration partners, the effect of any acquisitions of other businesses that
we may make in the future, and the filing, prosecution and enforcement of patent
claims.

         If our capital resources are insufficient to meet future capital
requirements, we will have to raise additional funds to continue the development
of our technologies and complete the commercialization of products, if any,
resulting from our technologies. We may not be able to raise additional funds on
terms that are acceptable to us or on any terms whatsoever, or we may be unable
to raise sufficient additional capital. If we fail to raise sufficient funds,
and our Industrial Enzymes Business is unable to generate sufficient levels of
profitability, we will have to curtail or cease, or dispose of, one or more of
our operations.

         WE WILL NEED TO EXPAND OUR EXISTING MARKETING AND SALES RESOURCES.

         We will need to expand our marketing and sales resources for our
Industrial Enzymes Business to achieve our contemplated annual rates of growth
and for our BioSciences Business to successfully market the C1 Expression
System, and our contemplated C1 Screening System, for that Business's
contemplated applications. Currently, we rely primarily on our direct sales
force for the United States market and contract with professional sales agents
and distributors for the international market, including two controlled foreign
subsidiaries. Direct salespeople are our employees and are paid a salary plus
commissions on sales they make within their assigned territories. Contracted
sales agents are paid a base rate of compensation plus commissions on sales they
make within their assigned territories. Distributors purchase products from us
and then resell our products and services to third parties. Our officers and
employees develop and implement our marketing strategy, although we do
periodically engage non-employee consultants, acting as independent contractors,
to assist us in these efforts.

         Market forces, such as increasing competition, increasing cost
pressures on our customers and general economic conditions, may require us to
devote more resources to our sales and marketing efforts than we currently
contemplate, such as changing the composition of our sales and marketing staff


                                       13
<PAGE>

and changing our marketing methods. These changes may result in additional
expenses. In addition, we will incur additional salary expenses because we
intend to increase our direct sales force after completing the Offering. We also
may hire direct sales representatives to replace independent sales
representatives or distributors that we use. Similarly, if we increase our
reliance on marketing consultants to assist us, we will incur greater costs. If
we decide to increase our advertising, we will also incur higher sales and
marketing costs. Our incurrence of increased costs will make it more difficult
for us to operate profitably, and we may not have sufficient funds to support
all of these costs.

         If we expand our sales force and increase our marketing activities, we
can offer no assurances that those efforts will result in more sales or higher
revenue. Also, the increased costs we incur by expanding our sales and marketing
resources may not result in greater sales or in higher revenue. Further, even if
we increase our spending on sales and marketing, we may not be able to maintain
our current level of sales and revenue.

         IF WE LOSE OUR KEY PERSONNEL OR ARE UNABLE TO ATTRACT AND RETAIN
ADDITIONAL PERSONNEL, WE MAY BE UNABLE TO PURSUE COLLABORATIONS OR DEVELOP OUR
OWN PRODUCTS.

         We are highly dependent on the principal members of our management and
scientific staff, the loss of whose services might adversely impact the
achievement of our objectives. In addition, recruiting and retaining qualified
scientific personnel to perform future R&D work will be critical to our success.
We do not currently have sufficient executive management personnel to fully
execute our business plan. Although we believe we will be successful in
attracting and retaining qualified management and scientific personnel,
competition for experienced scientists from numerous companies and academic and
other research institutions may limit our ability to do so on acceptable terms.
Failure to attract and retain scientific personnel would prevent us from
pursuing collaborations or developing our products or core technologies.

         Our planned activities will require additional expertise in specific
industries and areas applicable to the products developed through our
technologies. These activities will require the addition of new personnel,
including management, and the development of additional expertise by existing
management personnel. The inability to acquire these services or to develop this
expertise could impair the growth, if any, of our business.

         We are also planning to increase and upgrade our accounting staff. The
inability to add these staff members could impair our financial reporting
activities and the functioning of our internal controls over financial
reporting. In that event, our business could be impaired due to errors in
accounting or reports and possible resulting restatements of previously
published financial statements.

         In addition, our directors and senior officers are likely to require
that we maintain directors and officers insurance at levels comparable to those
of similar sized public companies. We have purchased such directors' and
officers' liability insurance. Our efforts to recruit additional directors could
be impeded if the amount of insurance coverage is viewed to be insufficient.
Further, if we are unable to provide adequate compensation or are unable to
maintain sufficient directors and officers insurance coverage, we may not be
able to attract or retain key personnel.

         Personnel changes may disrupt our operations. Hiring and training new
personnel will entail costs and may divert our resources and attention from
revenue-generating efforts. From time to time, we also engage consultants to
assist us in our business and operations. These consultants serve as independent
contractors, and we, therefore, do not have as much control over their
activities as we do over the activities of our employees. Our consultants may be
affiliated with or employed by other parties, and some may have consulting or
other advisory arrangements with other entities that may conflict or compete
with their obligations to us. Inventions or processes discovered by these
persons will not necessarily become our property.

         ANY INABILITY TO ADEQUATELY PROTECT OUR PROPRIETARY TECHNOLOGIES COULD
HARM OUR COMPETITIVE POSITION.

         Our success will depend in part on our ability to obtain patents and
maintain adequate protection of our other intellectual property for our
technologies and products in the United States and other countries. If we do not
adequately protect our intellectual property, competitors may be able to
practice our technologies and erode our competitive advantage. The laws of some


                                       14
<PAGE>

foreign countries do not protect proprietary rights to the same extent as the
laws of the United States, and many companies have encountered significant
problems in protecting their proprietary rights in these foreign countries.
These problems can be caused by, for example, a lack of rules and methods for
defending intellectual property rights.

         We hold three issued U.S. patents, including claims that cover the C1
Expression System and various other aspects of the C1 Host Technology, and three
international patent applications which expand that coverage and include the C1
Screening System. We also have 57 pending patent applications which we expect,
if issued, will also cover various aspects of the C1 Host Technology in addition
to the C1 Expression System. The patent positions of biotechnology companies,
including our patent position, are generally uncertain and involve complex legal
and factual questions. We will be able to protect our proprietary rights from
unauthorized use by third parties only to the extent that our proprietary
technologies are covered by valid and enforceable patents or are effectively
maintained as trade secrets. We intend to apply for patents covering both our
technologies and products as we deem appropriate. However, existing and future
patent applications may be challenged and may not result in issued patents. Our
existing patents and any future patents we obtain may not be sufficiently broad
to prevent others from practicing our technologies or from developing competing
products. Furthermore, others may independently develop similar or alternative
technologies or design around our patented technologies. In addition, others may
challenge or invalidate our patents, or our patents may fail to provide us with
any competitive advantages.

         We rely upon trade secret protection for our confidential and
proprietary information. We have taken security measures to protect our
proprietary information. These measures may not provide adequate protection for
our trade secrets or other proprietary information. We seek to protect our
proprietary information by entering into confidentiality agreements with
employees, collaborators and consultants. Nevertheless, employees, collaborators
or consultants may still disclose our proprietary information, and we may not be
able to meaningfully protect our trade secrets. In addition, others may
independently develop substantially equivalent proprietary information or
techniques or otherwise gain access to our trade secrets.

         LITIGATION OR OTHER PROCEEDINGS OR THIRD PARTY CLAIMS OF INTELLECTUAL
PROPERTY INFRINGEMENT COULD REQUIRE US TO SPEND TIME AND MONEY AND COULD
ADVERSELY AFFECT SOME OF OUR OPERATIONS.

         Our commercial success depends in part on neither infringing patents
and proprietary rights of third parties, nor breaching any licenses that we have
entered into with regard to our technologies and products. Others have filed,
and in the future are likely to file, patent applications covering genes or gene
fragments that we may wish to utilize with our C1 Host Technology, or products
that are similar to products developed with the use of our C1 Host Technology.
If these patent applications result in issued patents and we wish to use the
claimed technology, we would need to obtain a license from the third party.

         Third parties may assert that we are employing their proprietary
technology without authorization. In addition, third parties may obtain patents
in the future and claim that use of our technologies infringes these patents. We
could incur substantial costs and diversion of management and technical
personnel in defending ourselves against any of these claims or enforcing our
patents or other intellectual property rights against others. Furthermore,
parties making claims against us may be able to obtain injunctive or other
equitable relief which could effectively block our ability to further develop,
commercialize and sell products, and could result in the award of substantial
damages against us. If a claim of infringement against us is successful, we may
be required to pay damages and obtain one or more licenses from third parties.
We may not be able to obtain these licenses at a reasonable cost, if at all. In
that event, we could encounter delays in product commercialization while we
attempt to develop alternative methods or products. Defense of any lawsuit or
failure to obtain any of these licenses could prevent us from commercializing
available products.

         Further, the taxonomic classification of our C1 host organism was
determined using classical morphological methods. More modern taxonomic
classification methods have indicated that our C1 host organism will be
reclassified as a different genus and species. Some of the possible species that
the C1 host could be reclassified as could be the subject of patent rights owned
by others. We believe, based on our evaluation of the relevant field of science
and our discussions with our consulting professionals, that any such patent
rights would be invalid, and were litigation over the issue to ensue, we believe
we should prevail. If we did not prevail, to settle any such litigation or
pre-litigation claims, we could be required to enter into a cross-licensing
arrangement, pay royalties or be forced to stop commercialization of some of our
activities.


                                       15
<PAGE>

         We do not fully monitor the public disclosures of other companies
operating in our industry regarding their technological development efforts. If
we did evaluate the public disclosures of these companies in connection with
their technological development efforts and determined that they violated our
intellectual property or other rights, we would anticipate taking appropriate
action, which could include litigation. However, any action we take could result
in substantial costs and diversion of management and technical personnel.
Furthermore, the outcome of any action we take to protect our rights may not be
resolved in our favor or may not be resolved for a lengthy period of time.

         WE MAY BE SUED FOR PRODUCT LIABILITY.

         We may be held liable if any product we develop, or any product which
is made with the use or incorporation of, any of our technologies, causes injury
or is found otherwise unsuitable during product testing, manufacturing,
marketing or sale. These risks are inherent in the development of chemical,
agricultural and pharmaceutical products. While we maintain product liability
insurance, it may not fully cover our potential liabilities. Inability to obtain
sufficient insurance coverage at an acceptable cost or otherwise to protect
against potential product liability claims could prevent or inhibit the
commercialization of products developed by us or our collaborators. If we are
sued for any injury caused by our products, our liability could exceed our total
assets.

         SINCE A SUBSTANTIAL PORTION OF OUR REVENUES TO DATE HAS COME FROM
INTERNATIONAL SALES, EVENTS AFFECTING INTERNATIONAL COMMERCE MAY ADVERSELY
AFFECT OUR FUTURE INTERNATIONAL REVENUES AND OUR PRODUCTS' FUTURE PROFITABILITY.


         International revenues accounted for approximately 74% of our total
revenues in 2002 and 87% of our total revenues in 2003. Our key international
markets are the European Union, Hong Kong, the Peoples Republic of China and
India. Our international sales are made through international distributors and
their wholly owned subsidiaries, including our Far East subsidiary, and direct
to end-user plants with payments to us, in many cases, denominated in currencies
other than U.S. dollars. In the conduct of our business, in a number of
instances, we are required to pay our obligations in currencies other than U.S.
dollars. Accordingly, we are exposed to changes in currency exchange rates with
respect to our international sales and payment obligations. We experienced
currency losses in 2002 and 2003 and in the first nine months of 2004.


         Fluctuations in currency exchange rates have in the past and may in the
future negatively affect our ability to price competitively against products
denominated in local currencies. Also, changes in foreign currency exchange rate
may have an adverse effect on our financial position and results of operations
as expressed in U.S. dollars. Our management monitors foreign currency exposures
and may, in the ordinary course of business, enter into foreign currency forward
contracts or options contracts related to specific foreign currency transactions
or anticipated cash flows. We do not hedge, and have no current plans to hedge
in the future, the translation of financial statements of consolidated
subsidiaries whose local books and records are maintained in foreign currency.

         The imposition of duties or other trade barriers, trade embargoes, acts
of terrorism, wars and other events outside our control may adversely affect
international commerce and impinge on our ability to manufacture, transport or
sell our products in international markets.

         BUSINESS INTERRUPTIONS COULD KEEP US FROM DEVELOPING OUR PRODUCTS AND
INCREASING OUR REVENUES.

         Natural or man-made disasters, such as fires, earthquakes, hurricanes,
power losses, telecommunications failures, terrorist attacks, military
operations and other events beyond our control may interrupt our operations. We
do not have a detailed disaster recovery plan. In addition, we may not carry
sufficient business interruption insurance to compensate us for losses that may
occur and any losses or damages we incur could have a material adverse effect on
our cash flows and success as an overall business.

         ALTHOUGH WE HAVE TAKEN AND CONTINUE TO TAKE STEPS TO IMPROVE OUR
INTERNAL CONTROLS, THERE MAY BE MATERIAL WEAKNESSES OR SIGNIFICANT DEFICIENCIES
THAT WE HAVE NOT YET IDENTIFIED.


                                       16
<PAGE>

         During the course of its review of our financial statements for the
nine months ended September 30, 2004, but subsequent to the completion of the
audit of, our financial statements for the year ended December 31, 2003, Ernst &
Young LLP, our independent registered public accounting firm, reported to our
board of directors and management that it had identified a significant
deficiency that it considered to be a material weakness in our internal controls
over financial reporting under standards established by the Public Company
Accounting Oversight Board, which became applicable to us on October 29, 2004,
when the merger was completed. As a consequence, our consolidated financial
statements as of and for the year ended December 31, 2003, which had not
previously been filed with the Commission, were materially misstated and have
been restated, resulting in a decrease in our net loss of approximately
$126,000. See Note 2 of Notes to Consolidated Financial Statements included
elsewhere in this filing. In general, reportable conditions are significant
deficiencies in our internal controls that, in the judgment of our independent
registered public accounting firm, could adversely affect our ability to record,
process, summarize and report financial data consistent with the assertions of
management in the financial statements. A material weakness is a reportable
condition in which our internal controls do not reduce to a low level the risk
that undetected misstatements caused by error or fraud may occur in amounts that
are material to our audited financial statements. The reported material weakness
related to the recording of foreign currency denominated revenue, inventory
purchasing and research and development expenditure transactions during 2003 and
through September 30, 2004. We have taken and are taking steps to remediate this
material weakness.

         The process of designing and implementing effective internal controls
and procedures is a continuous effort that requires us to anticipate and react
to changes in our business and the economic and regulatory environments and to
expend significant resources to maintain a system of internal controls that is
adequate to satisfy our reporting obligations as a public company. The
effectiveness of the steps that we take to improve the reliability of our
financial statements will be subject to continued management review supported by
confirmation and testing as well as board and audit committee oversight. We
cannot assure you that we will not in the future identify further material
weaknesses or significant deficiencies in our internal control over financial
reporting that we have not discovered to date. If any such material weakness or
significant deficiency were to exist, we may not be able to prevent or detect a
material misstatement of our annual or interim consolidated financial
statements. We are taking steps to strengthen control processes in order to
identify and rectify past accounting errors and to prevent the situations that
resulted in the need to restate prior period financial statements from
recurring.

         Beginning with the year ending December 31, 2005, pursuant to Section
404 of the Sarbanes-Oxley Act, our management will be required to deliver a
report that assesses the effectiveness of our internal control over financial
reporting, and we will be required to deliver an attestation report of our
independent registered public accounting firm on our management's assessment of
and operating effectiveness of internal controls. Before then, we must complete
documentation of our internal control system and financial processes,
information systems, assessment of their design, remediation of control
deficiencies identified in these efforts and management testing of the design
and operation of internal controls. An inability to complete and document this
assessment could result in a scope limitation qualification or a scope
limitation disclaimer by our independent registered public accounting firm on
their attestation of our internal controls. In addition, if a material weakness
were identified with respect to our internal control over financial reporting,
we would not be able to conclude that our internal controls over financial
reporting were effective, which could result in the inability of our independent
registered public accounting firm to deliver an unqualified report, or any
report, on our internal controls. Inferior internal controls could also cause
investors to lose confidence in our reported financial information, which could
have a negative effect on the trading price of our stock.

         WE DEPEND ON SEVERAL KEY CUSTOMERS FOR MORE THAN 10% OF OUR REVENUES
AND THE LOSS OF A KEY CUSTOMER COULD RESULT IN A SUBSTANTIAL DECLINE IN OUR
REVENUES AND INCREASE IN OUR LOSSES.


         Sales to certain customers have accounted for 10% or more of the
Company's net sales for the years ended December 31, 2003 and 2002. See Note 3
of Notes to Consolidated Financial Statements included elsewhere in this
prospectus.



                                       17
<PAGE>

RISKS RELATED TO OUR COMMON STOCK

         THERE IS NO ESTABLISHED TRADING MARKET FOR OUR SHARES OF COMMON STOCK.
THE LIQUIDITY OF OUR COMMON STOCK WILL BE AFFECTED BY ITS LIMITED TRADING
MARKET.

         Bid and ask prices for our common stock are quoted on the
Over-the-Counter Bulletin Board under the symbol "DYAD.OB." There is currently
no broadly followed, established trading market for our common stock. An
established trading market for our shares may never develop or be maintained.
Although we intend, as soon as is practicable, to undertake the process to
become listed on one of the national stock exchanges or with Nasdaq, there is no
assurance as to when or if those events will occur. Active trading markets
generally result in lower price volatility and more efficient execution of buy
and sell orders. The absence of an active trading market reduces the liquidity
of our shares. Prior to the consummation of the merger, we had no reported
trading volume in our common stock. Since then, we have had sporadic reported
trading in our shares. As a result of this lack of trading activity, the quoted
price for our common stock on the Over-the-Counter Bulletin Board is not
necessarily a reliable indicator of its fair market value. Further, if we cease
to be quoted, holders would find it more difficult to dispose of, or to obtain
accurate quotations as to the market value of, our common stock, and the market
value of our common stock would likely decline.

         IF AND WHEN A TRADING MARKET FOR OUR COMMON STOCK DEVELOPS, BECAUSE WE
ARE A BIOTECHNOLOGY COMPANY, WE EXPECT THAT THE TRADING PRICES WILL BE EXTREMELY
VOLATILE, AND YOU MAY NOT BE ABLE TO RESELL YOUR SHARES AT OR ABOVE THE OFFERING
PRICE.

         The trading prices of biotechnology company stocks in general tend to
experience extreme price fluctuations. The valuations of many biotechnology
companies without consistent product revenues and earnings are extraordinarily
high based on conventional valuation standards such as price to earnings and
price to sales ratios. These trading prices and valuations may not be sustained.
Any negative change in the public's perception of the prospects of biotechnology
companies could depress our stock price regardless of our results of operations
if a trading market for our stock develops. Other broad market and industry
factors may decrease the trading price of our common stock, regardless of our
performance. Market fluctuations, as well as general political and economic
conditions such as war, recession or interest rate or currency rate
fluctuations, also may decrease the trading price of our common stock. In
addition, our stock price could be subject to wide fluctuations in response to
factors including, but not limited to, the following:

     o    announcements of new technological innovations or new products by us
          or our competitors;

     o    changes in financial estimates by securities analysts;

     o    conditions or trends in the biotechnology industry;

     o    changes in the market valuations of other biotechnology companies;

     o    developments in domestic and international governmental policy or
          regulations;

     o    announcements by us or our competitors of significant acquisitions,
          strategic partnerships, joint ventures or capital commitments;

     o    developments in patent or other proprietary rights held by us or by
          others;

     o    loss or expiration of our intellectual property rights;

     o    lawsuits initiated by or against us;

     o    period-to-period fluctuations in our operating results;

     o    future royalties from product sales, if any, by our strategic
          partners; and

     o    sales of our common stock or other securities in the open market.

In the past, stockholders have often instituted securities class action
litigation after periods of volatility in the market price of a company's
securities. If a stockholder files a securities class action suit against us, we
would incur substantial legal fees and our management's attention and resources
would be diverted from operating our business to respond to the litigation.


                                       18
<PAGE>

         A SIGNIFICANT NUMBER OF OUR SHARES ARE ELIGIBLE FOR SALE, AND THEIR
SALE COULD DEPRESS THE MARKET PRICE OF OUR COMMON STOCK.

         Sales of a significant number of shares of our common stock in the open
market could harm the market price of our common stock. A reduced market price
for our shares could make it more difficult to raise funds through future
offerings of common stock. In connection with this prospectus, more than 20
million shares are eligible for resale by selling shareholders. As shares become
available for resale in the open market, including new shares issued upon the
exercise of our outstanding options, warrants, convertible notes and contractual
obligations to issue shares, the number of our publicly tradable shares will
increase, which could decrease their trading price. In addition, some of our
shares may be offered from time to time in the open market pursuant to Rule 144,
and these sales may have a depressive effect on the market for our shares. In
general, a person who has held restricted shares for a period of one year may,
upon filing with the SEC a notification on Form 144 and satisfying certain other
conditions to the application of Rule 144, sell into the market shares up to an
amount equal to 1% of the outstanding shares of common stock. These sales may be
repeated once each three months. In addition, any of the restricted shares may
be sold by a non-affiliate after they have been held for two years pursuant to
Rule 144(k). At the date of this prospectus, 1,653,138 shares have been
outstanding for more than two years and are eligible for sale under Rule 144(k).
7,950,471 shares, or approximately 35.8% of our outstanding shares, are subject
to restrictions on transfers set forth in lock-up agreements between their
holders and us. Under these lock-up agreements, 1,180,510 shares will be
released from restriction after the earlier of six months after the date of this
prospectus or October 29, 2005 and the remainder of the restricted shares will
be released from the lock-up agreements after the earlier of one year following
the date of this prospectus or April 29, 2006. We may, with the consent of the
placement agents who assisted us in the completion of our most recent private
placement of common stock, also elect to waive the lock-up agreement
restrictions as to any resale of these restricted shares. The release of shares
from lock-up agreements may have a negative impact on our stock price if the
released shares are sold by the holders.

         WE MAY BE SUBJECT TO THE SEC'S PENNY STOCK RULES.

         Broker-dealer practices in connection with transactions in "penny
stocks" are regulated by certain rules adopted by the SEC. Penny stocks
generally are equity securities with a price of less than $5.00, other than
securities registered on certain national securities exchanges or quoted on the
Nasdaq Stock Market if current price and volume information with respect to
transactions in such securities is provided by the exchange or system. The rules
require that a broker-dealer, prior to a transaction in a penny stock not
otherwise exempt from the rules, deliver a standardized risk disclosure document
that provides information about penny stocks and the risks in the penny stock
market. The broker-dealer also must provide the customer with current bid and
offer quotations for the penny stock, the compensation of the broker-dealer and
its salesperson in connection with the transaction and monthly account
statements showing the market value of each penny stock held in the customer's
account. In addition, the rules generally require that prior to a transaction in
a penny stock, the broker-dealer must make a special written determination that
the penny stock is a suitable investment for the purchaser and receive the
purchaser's written agreement to the transaction. These disclosure requirements
may have the effect of reducing the liquidity of penny stocks. If our securities
become subject to the penny stock rules, holders of our shares of common stock
may find it more difficult to sell their securities.

         WE EXPECT THAT OUR QUARTERLY RESULTS OF OPERATIONS WILL FLUCTUATE, AND
THIS FLUCTUATION COULD CAUSE OUR STOCK PRICE TO DECLINE, CAUSING INVESTOR
LOSSES.

         Our quarterly operating results have fluctuated in the past and are
likely to do so in the future. These fluctuations could cause our stock price to
fluctuate significantly or decline. Some of the factors which could cause our
operating results to fluctuate include:

     o    expiration of research contracts with collaborators, which may not be
          renewed or replaced;

     o    the success rate of our discovery efforts leading to milestones and
          royalties;

     o    the timing and willingness of collaborators to commercialize our
          products which would result in royalties;


                                       19
<PAGE>

     o    general and industry specific economic conditions, which may affect
          our collaborators' R&D expenditures;

     o    the adoption and acceptance of our industrial enzymes and other
          products by customers of our Industrial Enzymes Business;

     o    the adoption and acceptance of our C1 Host Technology, C1 Expression
          System and C1 Screening System by biotechnology and pharmaceutical
          companies being marketed to by our BioSciences Business;

     o    the introduction by our competitors of new industrial enzyme products
          or lower prices of existing products to our Industrial Enzymes
          Business's customers;

     o    the introduction by our competitors of new expression technologies
          competitive with our C1 Expression System; and

     o    disruption in our manufacturing capacity or our failure to bring on
          additional manufacturing capacity required to meet our projected
          growth.

         A large portion of our expenses are relatively fixed, including
expenses for facilities, equipment and personnel. Accordingly, if revenues
decline or do not grow as anticipated due to expiration of research contracts or
government research grants, failure to obtain new contracts or other factors, we
may not be able to correspondingly reduce our operating expenses. In addition,
we plan to significantly increase operating expenses in 2005. Failure to achieve
anticipated levels of revenues could, therefore, significantly harm our
operating results for a particular fiscal period.

         Due to the possibility of fluctuations in our revenues and expenses, we
believe that quarter-to-quarter comparisons of our operating results are not a
good indication of our future performance. Our operating results in some
quarters may not meet the expectations of stock market analysts and investors.
In that case, our stock price would probably decline.

         WE HAVE NOT PAID DIVIDENDS IN THE PAST AND DO NOT EXPECT TO PAY
DIVIDENDS IN THE FUTURE. ANY RETURN ON INVESTMENT MAY BE LIMITED TO POTENTIAL
FUTURE APPRECIATION IN THE VALUE OF OUR STOCK.

         We have never paid cash dividends on our stock and do not anticipate
paying cash dividends on our stock in the foreseeable future. The payment of
dividends on our shares, if ever, will depend on our earnings, financial
condition and other business and economic factors affecting us at such time as
the board of directors may consider relevant. If we do not pay dividends, our
stock may be less valuable because a return on investment will only occur if and
to the extent that our stock price appreciates, and if the price of our stock
does not appreciate, then there will be no return on investment.

         OUR ANTI-TAKEOVER DEFENSE PROVISIONS MAY DETER POTENTIAL ACQUIRERS AND
DEPRESS OUR STOCK PRICE.

         Certain provisions of our certificate of incorporation, bylaws and
Delaware law, as well as certain agreements we have with our executives, could
be used by our incumbent management to make it substantially more difficult for
a third party to acquire control of us. These provisions include the following:

     o    we may issue preferred stock with rights senior to those of our common
          stock;

     o    we have a classified Board of Directors;

     o    action by written consent by stockholders is not permitted;

     o    our Board of Directors has the exclusive right to fill vacancies and
          set the number of directors;



                                       20
<PAGE>

     o    cumulative voting by our stockholders is not allowed; and

     o    we require advance notice for nomination of directors by our
          stockholders and for stockholder proposals.

         These provisions may discourage certain types of transactions involving
an actual or potential change in control. These provisions may also limit our
stockholders' ability to approve transactions that they may deem to be in their
best interests and discourage transactions in which our stockholders might
otherwise receive a premium for their shares over the then current market price.

         SOME OF OUR EXISTING STOCKHOLDERS CAN EXERT CONTROL OVER US, AND MAY
NOT MAKE DECISIONS THAT ARE IN THE BEST INTERESTS OF ALL STOCKHOLDERS.

         Our officers, directors and principal stockholders together control
approximately 46.7% of our outstanding common stock. Our founder and chief
executive officer, Mark Emalfarb, through a trust of which he is the trustee and
beneficiary, the Mark A. Emalfarb Trust, owns approximately 25% of our
outstanding common stock. Further, the Francisco Trust, whose beneficiaries are
the spouse and descendants of Mark Emalfarb, owns approximately 20% of our
outstanding common stock, while friends and relatives of Mr. Emalfarb, who are
not officers, directors, or principal stockholders, own approximately an
additional 5% of our outstanding common stock. As a result, these stockholders,
if they act together, will be able to exert a significant degree of influence
over our management and affairs and over matters requiring stockholder approval,
including the election of directors and approval of significant corporate
transactions. In addition, this concentration of ownership may delay or prevent
a change in control of us and might affect the market price of our shares, even
when a change may be in the best interests of all stockholders. Moreover, the
interests of this concentration of ownership may not always coincide with our
interests or the interests of other stockholders, and, accordingly, they could
cause us to enter into transactions or agreements which we would not otherwise
consider.

         WE OWE DEBTS TO OUR LARGEST STOCKHOLDERS THAT ARE SECURED BY ALL OF OUR
ASSETS. IF WE DEFAULT UNDER THOSE DEBTS, THESE STOCKHOLDERS MAY FORECLOSE ON OUR
ASSETS.

         As of September 30, 2004, we owed the Mark A. Emalfarb Trust and the
Francisco Trust an aggregate indebtedness of approximately $5.2 million, under
four separate promissory notes. In connection with the transactions completed in
late October 2004, the Mark A. Emalfarb Trust cancelled $1,225,000 of the
indebtedness represented by one of these notes in exchange for the issuance of
shares of common stock and warrants, and we extended the maturity date of the
remaining indebtedness to the Mark A. Emalfarb Trust and the Francisco Trust.
All of our assets are mortgaged or pledged to secure the indebtedness owed the
Mark A. Emalfarb Trust and the Francisco Trust. If we were unable to generate
sufficient cash flow or otherwise obtain funds necessary to pay this
indebtedness when due, we would be in default, and these debt holders would have
the right to foreclose on their liens and security interests that secure the
defaulted debt. Because the Mark A. Emalfarb Trust and the Francisco Trust are
our largest stockholders and have a conflict in interest in their dealings with
us with respect to these loans, we expect that they will take into account their
investments in us and any duties that they may have to us when deciding whether
to pursue their default remedies and that they would attempt to work out an
acceptable payment arrangement for their debts. However, there is a risk that,
due to changes in circumstances or for other reasons currently unknown to us,
the Mark A. Emalfarb Trust and the Francisco Trust may elect to exercise their
default remedies rather than work out a solution that is in our best interests.
Further, not only is this indebtedness evidenced by promissory notes that are
transferable by their holders, but we could decide to refinance this
indebtedness through similar secured borrowings from banks or other commercial
lenders. Any transferee or new lender, no longer constrained by the stockholder
interests of the Mark A. Emalfarb Trust and the Francisco Trust, may not have
the same attitude about any failure on our part to meet our binding repayment
obligations as the Mark A. Emalfarb Trust and the Francisco Trust might.


                                       21
<PAGE>

                                 USE OF PROCEEDS

         The selling stockholders will receive all of the proceeds from the sale
of the shares offered for sale by the selling stockholders under this
prospectus. We will receive none of the proceeds from the sale of the shares by
the selling stockholders. We will bear all expenses incident to the registration
of the shares of our common stock under the Federal and state securities laws,
other than expenses incident to the delivery of the shares to be sold by the
selling stockholders. Any transfer taxes payable on these shares and any
commissions and discounts payable to underwriters, agents, or brokers-dealers
will be paid by the selling stockholders.

           MARKET FOR OUR COMMON STOCK AND RELATED STOCKHOLDER MATTERS

         Bid and ask prices for our shares are quoted on the Over-the-Counter
Bulletin Board under the symbol "DYAD.OB." No bid or ask information or public
trades were reported with respect to our shares prior to our merger consummated
on October 29, 2004. As a result, the range of high and low bid information for
shares of our common stock for each full quarterly period within the two most
recent fiscal years is not available. The following table sets forth the high
and low bids for Dyadic common stock for the period indicated as reported by the
OTC Bulletin Board System:


<TABLE>
<CAPTION>
                                                                        HIGH                LOW
                                                                     -------------      --------------
<S>                                                                     <C>                 <C>
         Third Quarter of 2004 (October 29 to December 31, 2004)        $7.35               $5.95
         First Quarter of 2005 (January 1 to January 20, 2005)          $6.50               $5.30
</TABLE>


These bids represent prices quoted by broker-dealers on the OTC Bulletin Board
System. These quotations reflect inter-dealer prices, without retail mark-up,
mark-down or commissions, and may not represent actual transactions.

         The stock of Dyadic International (USA), Inc., prior to the merger, was
not traded on a public trading market, and that corporation had no registered
securities outstanding.


         As of January 19, 2005, there were 22,231,105 shares of Dyadic common
stock outstanding with approximately 213 stockholders of record.


         This prospectus covers 28,369,878 shares of our common stock offered
for sale by existing shareholders and holders of rights to purchase share of our
common stock. The shares offered by this prospectus include 20,577,967 presently
outstanding shares of our common stock and a maximum of 7,791,911 shares of our
common stock issuable upon the exercise of presently outstanding options,
warrants and convertible notes which may be exercised to purchase our common
stock as well as a contractual obligation to issue shares in connection with the
purchase of certain real estate. See "Selling Stockholders." There are
agreements with a number of selling stockholders restricting or limiting the
sale of the shares included in this prospectus. See "Selling Stockholders -
Restrictions on Transfer."

DIVIDEND POLICY

         While there are no restrictions on the payment of dividends, Dyadic has
not declared or paid any cash or other dividend on shares of Dyadic common stock
in the last two fiscal years, and we presently have no intention of paying any
cash dividend in the foreseeable future. Our current policy is to retain
earnings, if any, to finance the expansion of our business. The future payment
of dividends will depend on the results of operations, financial condition,
capital expenditure plans and other factors that we deem relevant and will be at
the sole discretion of our board of directors.

EQUITY COMPENSATION PLAN INFORMATION


         The following table provides information regarding the status of our
existing equity compensation plans at January 19, 2005.


                                       22
<PAGE>

<TABLE>
<CAPTION>
                                                                                                  Number of securities
                                                                                                   remaining available
                                                                                                   for future issuance
                                              Number of securities        Weighted-average            under equity
                                                to be issued upon        exercise price of         compensation plans
                                                   exercise of              outstanding                (excluding
                                               outstanding options,       options, warrants        securities reflected
            Plan Category                      warrants and rights           and rights           in the second column)
                                              ---------------------       -----------------       ---------------------
<S>                                                    <C>                    <C>                     <C>
Equity compensation plans approved by
security holders (1)......................             821,000                $ 4.27                  4,312,823(2)

Equity compensation plans not approved by
security holders..........................                   0                     0                          0
                                              ----------------------    ---------------------     ----------------------
Total.......................................           821,000                $ 4.27                  4,312,823(2)
</TABLE>

---------
(1)  Consists of Dyadic International, Inc. 2001 Equity Compensation Plan, which
     we assumed in connection with the merger consummated on October 29, 2004.

(2)  Excludes 18,624 shares that were awarded to Dyadic-Florida employees under
     the Dyadic International, Inc. 2001 Equity Compensation Plan in 2004.



                                       23
<PAGE>

            MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

         You should read the following  description  of our financial  condition
and  results  of  operations  in  conjunction  with the  consolidated  financial
statements and accompanying notes included in this prospectus  beginning on page
F-1.  All  dollar  amounts  presented  in this  section  have  been  rounded  to
thousands, except per share amounts.

OVERVIEW

Merger


         On September 29, 2004, Dyadic International,  Inc., or Dyadic, formerly
known as CCP Worldwide,  Inc., a newly created,  wholly owned subsidiary of ours
and Dyadic International  (USA), Inc., or Dyadic-Florida,  a Florida corporation
formerly known as Dyadic  International,  Inc., entered into a merger agreement,
or the Merger  Agreement.  On October 29, 2004, our newly created,  wholly owned
subsidiary was merged with and into Dyadic-Florida, with Dyadic-Florida becoming
a wholly owned subsidiary of Dyadic. We refer to this transaction as the Merger.



         All references to "Dyadic," "we," "us," "our," or the "Company" mean
Dyadic-Florida prior to the Merger, and Dyadic, as successor to the business of
Dyadic-Florida, after giving effect to the Merger.

         In connection with the Merger, Dyadic disposed of its packaging
business in a sale of all of the shares of the Dyadic subsidiary engaged in
those operations to its founder, all of the officers and directors of Dyadic
resigned from their positions and were replaced with Dyadic-Florida's officers
and directors, and Dyadic succeeded to the business of Dyadic-Florida. For
accounting purposes, the Merger was accounted for in a manner identical to a
reverse acquisition, except that no goodwill or other intangible has been
recorded. Accordingly, Dyadic-Florida was deemed to be the accounting acquirer
of Dyadic because the former stockholders of Dyadic-Florida owned a majority of
the issued and outstanding shares of common stock of Dyadic after the Merger,
including those shares issued in the initial closing of the private placement
that occurred on that date. For reporting purposes, the transaction is
equivalent to the issuance of stock by Dyadic-Florida for the net monetary
assets of Dyadic, which after the transactions effected on October 29, 2004 were
nil, accompanied by a recapitalization. Therefore, all financial information
included in this prospectus for periods prior to the Merger is that of
Dyadic-Florida as if Dyadic-Florida had been the reporting entity.


The Business

         We are a biotechnology company engaged in the development,  manufacture
and  sale of  proteins,  enzymes,  peptides  and  other  bio-molecules,  and the
collaborative licensing of our proprietary technologies.

         We have  developed a C1 Host  Technology  for both the  production,  or
expression,  of  proteins  and the  discovery  and  screening  of genes and gene
variants.  We have completed,  and are now successfully  using the C1 Expression
System derived from the C1 Host Technology, among other technologies, to produce
and sell enzymes to the agricultural, industrial, chemical and other industries.
We  refer  to this  market  as the  Industrial  Enzymes  Business.  With  the C1
Expression System, our Industrial Enzymes Business has been able to develop new,
and substantially higher profit-margined  products, and we believe our increased
penetration of these markets will be greatly  assisted by both the C1 Expression
System and the C1 Host Technology.

         Additionally,  the C1 Host Technology and the C1 Expression System have
also enabled us to begin to focus on the production of therapeutic protein drugs
for  humans.  Our  goal for this  market,  which we refer to as the  BioSciences
Business,  is  to  become  the  leading  provider  of  expression  solutions  to
pharmaceutical  companies  and  biotechnology   companies.   Initially,  we  are
concentrating on completing  development of our C1 Expression  System to express
pre-clinical  and  clinical  quantities  of  proteins  for  drug  testing,   and
eventually,  for  commercial-scale  production of therapeutic proteins and other
bio-molecules.  We are also working to develop our C1  Screening  System for the
discovery of genes and the performance of gene  modification  for improvement of
properties of the expressed proteins, which, when completed,  would enable us to
combine  the C1  Expression  System  and the C1  Screening  System  to  offer an
integrated screening and expression system to the drug development industry.


                                       24
<PAGE>

         To date we have derived  almost 100% of our revenues  from sales to the
Industrial Enzymes Business sector. In 2003, our BioSciences  Business generated
revenues of only  $150,000.  We do not  anticipate  material  revenues  from the
operation  of our  BioSciences  Business  sooner  than 2006.  Revenues  from our
BioSciences  Business are uncertain because,  among other things, our ability to
secure collaboration agreements with drug development companies will depend upon
our  ability to  perfect  either the C1  Expression  System or the C1  Screening
System to address the needs of that industry.

Consolidation of Subsidiary Beginning in July 2002

         Our results of operations  for the year ended December 31, 2002 include
the results of operations from our Far East subsidiary  after July 1, 2002, when
we became the owner of a majority of the voting  securities of that  subsidiary.
Our Far East subsidiary was not  consolidated in our financial  statements prior
to that date, and that fact has a significant impact on the comparability of our
results of operations for 2002 and 2003. Although not necessarily  indicative of
the  consolidated  results of operations that we would have achieved had our Far
East subsidiary been consolidated since January 1, 2002, our Far East subsidiary
generated  $2,524,000 of net sales,  $615,000 of gross profit and $99,000 of net
income for the period from January 1, 2002  through June 30, 2002.  Our share of
these  results of  operations  is included as share of income of  unconsolidated
affiliate in the accompanying  consolidated statement of operations for the year
ended December 31, 2002.  See Note 7 to our  consolidated  financial  statements
for additional details regarding the accounting for our Far East subsidiary.

Future Expectations

         We expect to  continue  to spend  significant  amounts  to fund R&D and
enhance  our core  technologies.  As a result,  we expect to  continue  to incur
losses as we develop the C1 Expression  System,  complete  development of the C1
Screening System, and build other required infrastructure to exploit our C1 Host
Technology, our C1 Expression System and our C1 Screening System. See "Liquidity
and Capital  Resources" below for a discussion of our expected cash resources to
fund our operations  for the next 24 months.  There can be no assurance that our
efforts with regard to these objectives will be successful.

RESULTS OF OPERATIONS - YEAR ENDED  DECEMBER 31, 2003 COMPARED TO THE YEAR ENDED
DECEMBER 31, 2002

         As  more  fully  described  above  under  "Overview,"  our  results  of
operations for 2002 reflect the financial  results of operations of our Far East
subsidiary  for only the  second  half of 2002,  when we  became  the owner of a
majority of the voting securities of that subsidiary.

Net Sales

         For the year  ended  December  31,  2003,  we  generated  net  sales of
$16,780,000 as compared to net sales of $10,027,000  for the year ended December
31, 2002,  representing  an increase of $6,753,000,  or 67.3%. A portion of this
increase,  $2,527,000 or 25.2%, is due to the acquisition of outstanding  voting
stock of our Far East  subsidiary,  effective  July 1,  2002,  as  discussed  in
"Overview" above. The remaining increase in net sales is the result of increases
in both the number of customers and in the volume of purchases made by customers
across all of the market  segments  served by the Industrial  Enzymes  Business,
including  textiles,  pulp & paper and animal feed among  others.  In 2003,  our
BioSciences Business generated revenues of $150,000,  as compared to no revenues
for 2002.

Cost of Goods Sold

         For  the  year  ended  December  31,  2003,  cost  of  goods  sold  was
$12,597,000  as compared to  $7,992,000  for the year ended  December  31, 2002,
representing  an increase of  $4,605,000.  This 57.6%  increase in cost of goods
sold was the result of the consolidation of our Far East subsidiary beginning in
July 2002,  resulting  in  $1,826,000  of the  increase,  and an increase in the
volume of purchases made by customers  across all of the market  segments served
by the Industrial Enzymes Business,  including textiles, pulp & paper and animal
feed among others.


                                       25
<PAGE>

Gross Profit


         For the year ended December 31, 2003,  gross profit was $4,183,000,  or
24.9% of net sales,  as compared to $2,034,000,  or 20.3% of net sales,  for the
year ended December 31, 2002,  representing an increase of $2,149,000.  The 106%
increase in gross profit and increase in gross profit  percentage is due to both
the consolidation of our Far East subsidiary for a full year in 2003, as well as
a combination of a more favorable mix of higher profit-margined enzyme sales and
better  pricing.  It is our goal to in fact try and  develop  products,  or sell
existing  products,  for  markets  in  which we can  improve  our  gross  profit
percentages.  We have started to do so already by developing better products and
applying  existing products to new markets.  However,  there can be no assurance
that our efforts will successfully lead to improved gross profit percentages. In
addition,  we expect to experience  fluctuations  in margins in future  periods,
primarily  resulting  from changes in foreign  currency  rates and the resultant
effect  on the  cost of  inventory  and  certain  contract  manufacturing  costs
denominated in Euros.



Expenses

         Research and Development


         For  the  year  ended  December  31,  2003,  research  and  development
expenses,  or R&D,  were  $3,571,000,  or 21.3% of net  sales,  as  compared  to
$3,144,000,  or 31.4%  of net  sales  for the  year  ended  December  31,  2002,
representing  an increase of $427,000.  This 13.6% increase was due primarily to
the 2003 start-up of our subsidiary in The  Netherlands,  in connection with the
development  of the C1 Screening  System.  However,  R&D as a percentage  of net
sales  decreased  substantially  because,  despite  the large  increase in sales
volume,  liquidity  constraints  required  that we hold  R&D  costs  steady.  As
discussed  above, we expect to continue to spend  significant  amounts on R&D to
fund our core  technologies,  at least in the near term.  In fact,  we expect to
significantly increase the R&D of both new product and technology development in
2005,  in order to  generate a wider  subset of  products  across  more  diverse
industries.  We anticipate  this effort will bring us greater profit margins and
additional business opportunities.  However, there can be no assurance that such
R&D efforts will be successful.


         Sales and Marketing

         For the year ended December 31, 2003, sales and marketing expenses were
$1,749,000, or 10.4% of net sales, compared to $1,141,000, or 11.4% of net sales
for the year ended December 31, 2002, representing an increase of $608,000. This
53.3% increase,  which was less than the percentage  increase in net sales,  was
due  principally  to the full  year  effect  of the Far East  subsidiary's  2003
results of  operations,  as well as  enhancements  in  customer  service and the
addition of one regional sales person.

         General and Administrative

         For the year  ended  December  31,  2003,  general  and  administrative
expenses were  $2,308,000,  or 13.8% of net sales,  compared to  $2,420,000,  or
24.1% of net sales for the year ended December 31, 2002, representing a decrease
of  $112,000.  This 4.6%  decrease  was  attributable  to the  retirement  of an
executive  who was not replaced and a related 100% accrual in 2002 of a two-year
severance  agreement.  Liquidity  constraints required us to hold G&A relatively
steady, despite the increase in net sales we experienced in 2003.

Other Income (Expense)

         Interest Expense

         For the year ended December 31, 2003,  interest  expense was $3,498,000
as compared to $205,000 for the year ended  December 31, 2002,  representing  an
increase of  $3,293,000.  This  increase  was due  primarily  to the issuance of
warrants in  connection  with a $3,000,000  Bridge Loan made in May 2003. A fair
value of  $3,195,000  was placed on the  warrants.  This amount was amortized to
interest   expense   in  2003  with  a   corresponding   credit  to   additional
paid-in-capital.  Interest  expense relates almost entirely to our notes payable
to stockholders, including the Bridge Loan.


                                       26
<PAGE>

         In connection with the Merger and a series of related transactions more
fully discussed in Note 1 to our consolidated  financial statements,  the Bridge
Loan  maturity  date and the Bridge Loan warrants were modified in November 2004
and, as a result,  we will recognize an additional  $350,000 in interest expense
through the new  maturity  date,  January 1, 2007.  Also in November  2004,  our
$1,225,000  note payable to the Mark A. Emalfarb Trust was cancelled in exchange
for the purchase of 367,868  Investment Units, as discussed more fully in Note 1
to the  consolidated  financial  statements,  and the  conversion  prices on our
convertible  notes  due to the  Emalfarb  Trust  and the  Francisco  Trust  were
modified to fix the conversion price at $3.33 per share,  which will result in a
beneficial conversion feature of $554,000 to be recognized in October 2004.

         Interest Income

         For the year ended  December 31, 2003,  interest  income was $13,000 as
compared  to $189,000  for the year ended  December  31,  2002,  representing  a
decrease of $176,000.  This decrease was primarily due to the interest earned in
2002 on the cash remaining from the $10 million  preferred stock issuance in May
2001.  Interest  income is expected to increase  again  beginning  in the fourth
quarter of 2004 due to the net  proceeds  from our  private  placement  offering
completed in early November 2004,  which were placed in short-term  investments.
The amount of this  increase will depend upon,  among other  things,  the return
that we can obtain on our short-term investments.


         Minority Interest/Share of Income of Unconsolidated Affiliate

         As discussed above, we began  consolidating  our Far East subsidiary in
July 2002.  Prior to July 1,  2002,  we  accounted  for our  investment  in that
subsidiary  using the equity method of accounting.  As a result,  the changes in
our equity interest, representing our 82.5% ownership portion in the earnings of
the subsidiary, are shown in share of income of unconsolidated affiliate through
June 30, 2002. Minority interest of $14,000 for the year ended December 31, 2003
as compared to $40,000 for the six months  between  July 1 and December 31, 2002
primarily  reflects the fact that the subsidiary  generated higher net income in
2002 than it did in 2003.

         Foreign Currency Exchange Losses, Net

         For the year ended  December  31,  2003,  we had net  foreign  currency
exchange  losses of $236,000 as compared to $93,000 for the year ended  December
31,  2002,  representing  an  increase  of  $143,000.  This  increase in foreign
currency  exchange  losses is  primarily  due to the decline in the value of the
United States dollar as compared to the Euro between periods. A large portion of
our  business  is  transacted  with  foreign  customers  and  vendors in foreign
currency denominations.  Accordingly,  fluctuations in foreign currency exchange
rates,  primarily relating to the Euro, can greatly impact the amount of foreign
currency  losses (or gains) we  recognize  in future  periods  relating to these
transactions.

Provision for Income Taxes

         We have  no  provision  for  U.S.  income  taxes  as we  have  incurred
operating losses in all periods presented. For the year ended December 31, 2003,
we had a foreign  income tax  provision  of $93,000  compared to $44,000 for the
year ended December 31, 2002. Our Far East subsidiary  operates in Hong Kong. We
also have operations in Poland and The Netherlands. Our Far East subsidiary and,
to a lesser extent,  the Poland operations  generate profits that are taxable in
their local  jurisdictions.  The increase from 2002 to 2003  resulted  primarily
from net operating loss carryforwards utilized by our Far East subsidiary during
2002 that lowered its effective tax rate.

Net Loss

         For the year ended  December  31,  2003,  our net loss was  $7,263,000,
compared to a net loss of $4,820,000 for the year ended December 31, 2002.  This
increase in net loss was due  primarily to the 2003 interest  expense  charge on
the issuance of the Bridge Loan warrants of $3,195,000,  as well as increases in
research and development and sales and marketing  expenses,  as discussed above.
Although  the increase in expenses was at least in part offset by an increase in
revenue and gross  profit,  we believe that we will continue to incur net losses
in the near term future primarily  because of our planned levels of research and
development expenditures.


                                       27
<PAGE>

RESULTS OF OPERATIONS -NINE MONTHS ENDED SEPTEMBER 30, 2004 COMPARED TO NINE
MONTHS ENDED SEPTEMBER 30, 2003

Net Sales

         For the nine months ended September 30, 2004, we generated net sales of
$12,944,000  as  compared  to  $11,400,000  for the  comparable  period of 2003,
representing an increase of $1,544,000.  This 13.5% increase in net sales is the
result  of  increases  in both the  number  of  customers  and in the  volume of
purchases  made by customers,  but was below the increase we  experienced in the
prior year due to the  unavailability  of capital in 2003 and early 2004 that we
believe was required to support our  increases in sales  through the addition of
sales  assistance  personnel,  the increased  working capital  requirements  for
accounts  receivable and inventory and price  reductions to induce larger volume
purchases from customers.

Cost of Goods Sold

         For the nine months ended  September  30, 2004,  cost of goods sold was
$9,819,000  as  compared  to  $8,571,000  for the  comparable  period  in  2003,
representing  an increase of  $1,248,000.  This 14.6%  increase in cost of goods
sold is  primarily  the  result  of the  increase  in net  sales.  Additionally,
approximately  $270,000  of  the  increase  is due to  fluctuations  in  foreign
currency related to Euro-denominated  payments made to our contract manufacturer
in Poland for product sold during the period.

Gross Profit


         For the  nine  months  ended  September  30,  2004,  gross  profit  was
$3,125,000,  or 24.1% of net sales,  as compared to $2,829,000,  or 24.8% of net
sales, for the comparable period in 2003,  representing an increase of $296,000.
Our gross profit  increased  10.5% due to the increase in volume.  However,  the
exchange loss  discussed  above resulted in a slight decline in our gross profit
percentage.  We expect to experience fluctuations in margin caused by changes in
foreign currency  exchange rates in future periods.  As noted above, our goal is
to develop  products,  or sell  existing  products,  for markets in which we can
improve  our gross  profit  percentages.  We have  started  to do so  already by
developing  better  products  and  applying  existing  products to new  markets.
However,  there can be no assurance that our efforts will  successfully  lead to
improved gross profit percentages.


Expenses

         Research and Development


         Research  and  development  expenses  for the  nine-month  period ended
September  30,  2004  were  $2,534,000,  or  19.6%  of net  sales,  compared  to
$2,609,000,  or 22.9% of net sales for the comparable nine month period in 2003,
representing a decrease of $75,000,  or 2.9%. This decrease was primarily due to
constraints  placed on our R&D  efforts  due to working  capital  needs,  offset
somewhat by unfavorable foreign currency losses on an R&D contract with a vendor
in The  Netherlands.  As noted above,  we expect that R&D costs will increase in
future periods. In fact, we expect to significantly increase the R&D of both new
product and technology  development in 2005, in order to generate a wider subset
of products  across more diverse  industries.  We  anticipaate  this effort will
bring us greater profit margins and additional business opportunities.  However,
there can be no assurance that such R&D efforts will be successful.


         Sales and Marketing

         Sales and marketing  expenses for the nine-month period ended September
30, 2004 were  $1,374,000,  or 10.6% of net sales,  compared to  $1,249,000,  or
11.0% of net sales for the comparable nine-month period in 2003, representing an
increase  of  $125,000.  This 10.0%  increase  was due  primarily  to  personnel
increases during the end of the first quarter of 2003 and higher commissions due
to increases in net sales in 2004. We expect to increase our sales and marketing
staff  significantly  beginning  in 2005 in order  to allow us to sell  existing
products to a wider customer base. The completion of our private  placement,  as
discussed below under "Subsequent Events Affecting Liquidity," has enabled us to
plan this approach.  There can be no assurance,  however,  that additional sales
support will,  in fact,  be  successful in increasing  our customer base and net
sales.


                                       28
<PAGE>

         General and Administrative

         General and  administrative  expenses for the  nine-month  period ended
September  30,  2004  were  $2,056,000,  or  15.9%  of net  sales,  compared  to
$1,864,000, or 16.4 % of net sales for the comparable nine-month period in 2003.
The  increase  was  primarily  due to an increase  of  $206,000 in  compensation
expense  relating  to  nonemployee   stock  options.   Otherwise,   general  and
administrative  expenses were  relatively  stable,  and were  constrained by our
working capital needs during both periods.  However,  we expect that our general
and  administrative  expenses  will  increase  significantly  in 2005 due to the
addition  of  executives,  including  a  Chief  Financial  Officer  and  support
personnel, required by a public reporting company as well as support to meet our
anticipated growth.

Other Income (Expense)

         Interest Expense

         Interest expense for the nine-month period ended September 30, 2004 was
$347,000  as  compared  to  $2,197,000  for  the  comparable   period  in  2003,
representing  a decrease of  $1,850,000.  This decrease was due primarily to the
2003  amortization of debt issuance costs in connection with the issuance of the
Bridge  Loan  warrants  in May 2003,  offset  somewhat  by a full nine months of
interest  expense  on the  Bridge  Loan in 2004  (compared  to 4 months  for the
comparable period in 2003).

         Interest Income

         For the nine months  ended  September  30,  2004,  interest  income was
$3,000 as compared to $10,000 for the comparable period in 2003. Interest income
continued to decline as cash  availability  declined during 2004, until our July
private  placement;  however,  such cash was used in operations  and to fund the
redemption of our Series A Preferred  Stock. We expect that interest income will
increase  somewhat  in  future  periods  due to  our  second  private  placement
completed in October and November 2004.

         Minority Interest

         Minority  interest was $67,000 for the nine months ended  September 30,
2004, as compared to $6,800 for the nine months ended  September  30, 2003.  The
increase  is due to the  increase  in  profit  from  our  consolidated  Far East
subsidiary.

         Foreign Currency Exchange Losses, Net

         For the nine  months  ended  September  30,  2004,  we had net  foreign
currency  exchange  losses of $56,000 as compared to $132,000 for the comparable
period in 2003,  representing  a  decrease  of  $76,000.  The  amount of foreign
currency  gains or losses  recognized  in any given period  depends a great deal
upon the  timing of  transaction  payments,  among  other  things.  We conduct a
considerable  amount of our business  with  overseas  customers and vendors (see
Note 3 to our consolidated financial statements). As such, we expect to continue
to see fluctuations in foreign currency exchange gains or losses. Such period to
period  changes  can be  expected  to be even  greater  if the value of the U.S.
dollar fluctuates with the foreign currencies used by our customers and vendors,
especially the Euro.

Provision for Income Taxes

         We have  no  provision  for  U.S.  income  taxes  as we  have  incurred
operating  losses in all periods  presented.  For the  nine-month  period  ended
September 30, 2004, we had a foreign income tax provision of $85,000 compared to
$59,000 for the comparable period in 2003,  representing an increase of $26,000.
The increase  resulted  primarily from the increase in our Far East subsidiary's
taxable income.


                                       29
<PAGE>

Net Loss

         Net  loss  for the nine  month  period  ended  September  30,  2004 was
$3,373,000,  compared to a net loss of $5,272,000 for the  comparable  period in
2003,  representing  a decrease  of  $1,899,000.  This  decrease in net loss was
primarily due to $1,997,000 in interest  expense relating to the issuance of the
Bridge Loan warrants in May 2003.

LIQUIDITY AND CAPITAL RESOURCES

Capital Raising Activities

         Since  inception,  we  have  financed  our  operations  primarily  with
proceeds  from the sales of the  products of our  Industrial  Enzymes  Business,
external borrowings, borrowings from our stockholders and sales of preferred and
common  equity  securities.  In May 2003,  we received a $3,000,000  loan from a
syndicate of our  stockholders,  including  our  controlling  stockholder,  Mark
Emalfarb.  In the first  half of 2004,  we raised  approximately  $4,740,000  in
private  offerings of our equity  securities,  of which  $1,500,000  was used to
redeem all outstanding  shares of our Series A preferred stock, and we also paid
for $1,000,000 of R&D services to be performed by one of our  long-standing  R&D
vendors in shares of our common  stock (to be released  from escrow when earned)
and an  additional  $250,000 in cash.

Cash Flow

         From Operating Activities

         As reflected in our consolidated financial statements, we have incurred
losses from operations during each of the last two years,  resulting in net cash
used in operating activities of approximately  $4,009,000 and $4,927,000 in 2003
and 2002,  respectively.  Additionally,  for the nine months ended September 30,
2004, we had net cash used in operating  activities of $2,820,000 as compared to
$4,224,000  for the  comparable  period in 2003. The decline in net cash used in
operating  activities  was  primarily  due to the lower net loss in 2004 and the
management of trade  payables,  which  increased cash from operating  activities
approximately $1.5 million over the comparable 2003 period.

         From Investing Activities


         For the year ended  December 31,  2003,  our net cash used in investing
activities  was $140,000 as compared to $1,278,000  for the year ended  December
31,  2002.  This  decline was due  primarily  to the  substantial  reduction  in
purchases of fixed assets after 2002.  For the nine months ended  September  30,
2004,  we had net cash used in  investing  activities  of $44,000 as compared to
$64,000 for the comparable period of 2003. Cash constraints during 2003 and 2004
did not allow for significant  investments in fixed assets in those years. There
are no immediate  plans for large  increases in capital  expenditures;  however,
management  is  continually  assessing  such  requirements  concurrent  with our
growth.


         From Financing Activities

         For the  year  ended  December  31,  2003,  our net  cash  provided  by
financing  activities  was  $2,746,000 as compared to net cash used in financing
activities  of $337,000 for the year ended  December  31,  2002.  This change is
primarily due to the  $3,000,000  Bridge Loan obtained by us from a syndicate of
our  shareholders  in May 2003. For the nine months ended September 30, 2004, we
had  net  cash  provided  by  financing   activities  of  $2,968,000   primarily
representing  receipt of $4,617,000 in proceeds from a private  placement of our
common  stock (of which  $1,500,000  was used to redeem our  Series A  Preferred
stock), as compared to $2,748,000 for the comparable  period of 2003,  primarily
representing proceeds from the Bridge Loan.


                                       30
<PAGE>

         Changes in Cash Positions

         We experienced net decreases in cash and cash equivalents of $6,542,000
in 2002 as compared to $1,403,000 in 2003.  For the nine months ended  September
30,  2004,  we had a net  increase in cash and cash  equivalents  of $104,000 as
compared to a net decrease in cash and cash  equivalents  of $1,540,000  for the
comparable  period  in 2003.  We were  unable  to raise  capital  in 2002 due to
economic  conditions,  while in 2003 and 2004 we were  able to raise  additional
capital as summarized above under "Capital Raising Activities" and, accordingly,
reduce our net cash outflows.

Financial Condition and Liquidity at September 30, 2004

         Our 2002 and  2003 net  losses,  when  combined  with  losses  incurred
through December 31, 2001,  resulted in an accumulated  deficit of approximately
$17,046,000,  and a  stockholders'  deficit of  approximately  $9,727,000  as of
December  31, 2003.  As of  September  30,  2004,  our  accumulated  deficit had
increased to approximately $20,786,000 with a total stockholders' equity balance
of  $2,417,000.  The  improvement in  stockholders'  equity is due to the equity
capital we raised in July 2004 and the  redemption  of our Series A  convertible
preferred stock at a substantial discount from its carrying value.

         As of September 30, 2004, we had a total of $1,753,000 in cash and cash
equivalents.  Our outstanding  indebtedness was  approximately  $6,326,000 as of
September 30, 2004, and consisted of notes payable to certain  stockholders  and
the Bridge Loan.  We are  committed to make annual  minimum  payments  under our
Florida  office  lease  and  equipment  leases  aggregating  $132,000  for 2004,
$117,000  for 2005 and $11,000 for 2006.  We also are  committed  to make annual
minimum payments under our Polish contract  manufacturing  agreement of $353,000
for 2004,  $345,000 for 2005 and $766,000  thereafter through 2008. We have also
entered into various  agreements with  independent  third parties to conduct R&D
activities on our behalf.  One such  agreement,  entered into in July 2004,  has
committed a third party to provide research and development assistance valued at
approximately $1.25 million. The consideration  includes $250,000 in cash, which
was paid upon signing the agreement,  and 300,300 shares of our common stock, to
be released  from escrow as the shares are earned.  The agreement is with one of
our long-standing third party R&D vendors.


         We have an  employment  agreement  with  Mark A.  Emalfarb,  our  chief
executive  officer,  pursuant to which Mr.  Emalfarb is entitled to receive base
annual  compensation  of $300,000  and is  eligible to receive a bonus  annually
based upon goals and  objectives  agreed upon by him and our board of directors.
This employment  agreement expires in April 2006, subject to the termination and
renewal  provisions  of the  agreement.  We have an  employment  agreement  with
Ratnesh   (Ray)   Chandra,   the  Vice   President,   Marketing-BioSciences   of
Dyadic-Florida, pursuant to which Mr. Chandra is entitled to receive base annual
compensation  of $151,300  and is entitled to earn a bonus  annually  based upon
goals and objectives  mutually  agreed upon by him and the board of directors of
Dyadic-Florida.  This employment  agreement expires in May 2005,  subject to the
termination  and  renewal  provisions  of  the  agreement.   See  "Management  -
Employment Agreements."


Subsequent Events Affecting Liquidity

         In October  and  November  2004,  in  connection  with the  Merger,  we
completed a series of additional transactions, including (1) the completion of a
Private  Placement of Investment  Units (each  consisting of one share of common
stock and one five-year  callable  warrant to purchase one share of common stock
at $5.50 per share, for every two Investment  Units purchased)  resulting in net
proceeds of approximately $23.1 million,  (2) the cancellation of our $1,225,000
note payable to the Mark A. Emalfarb Trust,  in exchange for 367,868  Investment
Units and (3) the  extension of the due date on our Bridge Loan and  convertible
notes payable to January 1, 2007.  These  subsequent  events have  substantially
improved our liquidity and financial condition.

Funding of Future Operations

         We believe  that our  operating  losses  will  continue  this year.  In
addition,  our future capital  requirements  will be substantial.  We believe we
have sufficient  capital to fund our operations and meet our obligations for the
next two years.  However, it is possible that we will seek additional  financing
within this timeframe.  We may raise  additional funds through public or private
financing,   collaborative  relationships  or  other  arrangements.   Additional
funding, if sought, may not be available on terms favorable to us. Further,  any
additional equity financing may be dilutive to stockholders, and debt financing,
if available,  may involve restrictive  covenants.  Our failure to raise capital
when needed may harm our business and operating results.


                                       31
<PAGE>

OFF-BALANCE SHEET ARRANGEMENTS

         We do not have any off-balance sheet arrangements.

CONCENTRATIONS, CRITICAL ACCOUNTING POLICIES AND ESTIMATES

         The preparation of  consolidated  financial  statements  requires us to
make  estimates  and  judgments  that  affect  the  reported  amounts of assets,
liabilities,  revenues and expenses, and related disclosure of contingent assets
and  liabilities.  On an on-going basis, we evaluate our estimates.  We base our
estimates on current  information,  historical  experience  and on various other
assumptions  that are believed to be  reasonable  under the  circumstances,  the
results of which form the basis for making  judgments  about the carrying values
of assets and  liabilities  that are not readily  apparent  from other  sources.
Actual  results  may  differ  from  the  estimates  used by us  under  different
assumptions or conditions.  We believe the following concentrations and critical
accounting policies relate to our more significant  judgments and estimates used
in the preparation of our consolidated financial statements:

Foreign Operations

         We have  significant  operations  and  revenues  generated  in  foreign
countries.  Revenues derived from foreign customers  accounted for approximately
87% and 74% of our total revenues in 2003 and 2002,  respectively.  Our Far East
subsidiary is located in Hong Kong, and we have two other subsidiaries in Poland
and The Netherlands.  Estimates relating to our inventory valuation,  receivable
allowances and possible  impairments  to goodwill  (which all relates to our Far
East  subsidiary),  and  long-lived  assets could be  significantly  impacted by
international events.

Stock-Based Compensation

         We have issued warrants and options to  non-employees  for services and
in connection  with obtaining debt in the past several years. We have recognized
significant  expense  relating  to the  issuance  of these  equity  instruments,
including  $3,195,000  relating to a warrant issued in connection  with debt and
classified  as interest  expense in 2003.  We estimated  the fair value of those
securities  using the  Black-Scholes  option-pricing  model,  and  expensed  the
estimated  fair value over the service period or through the debt maturity date.
The Black-Scholes model uses critical  assumptions that significantly affect the
estimated fair value of those awards, such as an estimated  volatility factor of
our common  stock,  the  estimated  lives of the  awards  (which is equal to the
maximum  contractual  term for awards to  non-employees)  and presumed  discount
rates.  Additionally,  as further  discussed below, we are required to recognize
compensation  expense on options  issued to employees  beginning in 2006, and we
expect that we will use similar estimation methods. Changes in the volatility of
our common stock and other estimation  factors used in the  Black-Scholes  model
can significantly impact the estimated value and resultant  compensation cost on
similar equity instruments issued in the future.

Long-Lived Assets

         We review our long-lived  assets,  including fixed assets that are held
and used for our  operations,  for  impairments  whenever  events or  changes in
circumstances  indicate  that  the  carrying  amount  of the  asset  may  not be
recoverable,  as required  by SFAS No. 144,  Accounting  for the  Impairment  or
Disposal of Long-Lived  Assets.  If such an event or change in  circumstances is
present,  we will estimate the undiscounted  future cash flows,  less the future
outflows  necessary to obtain these inflows,  expected to result from the use of
the asset and its eventual  disposition.  If the sum of the undiscounted  future
cash  flows is less than the  carrying  amount of the  related  assets,  we will
recognize an impairment  loss to the extent the carrying  value exceeds the fair
value. Our judgments  related to the expected useful lives of long-lived  assets
and our  ability to realize  undiscounted  cash flows in excess of the  carrying
amounts of the assets are  affected by factors  such as the ongoing  maintenance
and  improvements  of the  assets,  changes in  domestic  and  foreign  economic
conditions and changes in operating performance.  While we have not to date been
required to recognize an  impairment  in  long-lived  assets,  as we make future
assessments  of the  ongoing  expected  cash flows and  carrying  amounts of our
long-lived assets,  these factors could cause us to realize material  impairment
charges.


                                       32
<PAGE>

Evaluation of Potential Goodwill Impairment

         In accordance  with SFAS No. 142, we were required to perform an annual
impairment  review  of the  goodwill  which  is  associated  with  our Far  East
subsidiary,  as of  January  1,  2003 and 2004 . This test  involved  the use of
estimates to determine the estimated  fair value of our Far East  subsidiary and
the  comparison  of that  estimated  fair  value  to the  carrying  value of the
reporting unit. There are significant  assumptions used in this impairment test,
such as estimated  cash flows,  discount  rates of return and  terminal  values.
Several  factors can change these  assumptions,  such as economic  conditions or
instability  in foreign  governments,  among other things.  Our estimates of the
fair value  indicated that it exceeded the carrying value of the reporting unit.
Accordingly,  no goodwill impairment charge was recorded. If the estimate of the
fair value of the reporting  unit is less than the carrying  value at any future
measurement dates, we may be required to record a goodwill impairment charge.

Income Taxes

         We have recorded  deferred tax assets  relating to net  operating  loss
carryforwards  for United States  federal and state tax  purposes,  inventories,
depreciation and amortization,  and accounts receivable  allowance,  among other
items.  We record a valuation  allowance  equal to 100% of the carrying value of
our net deferred tax assets to reduce our deferred tax assets to the amount that
is more likely than not to be realized.  While we have considered future taxable
income  and  ongoing  tax  planning  strategies  in  assessing  the need for the
valuation allowance,  in the event we were to determine that we would be able to
realize our  deferred  tax assets in the future in excess of their net  recorded
amounts,  a resulting  reduction of the valuation  allowance  would increase our
income in the period such  determination  was made.  As of December 31, 2003, we
had  approximately  $3,978,000  in gross  deferred tax assets,  which were fully
offset by a valuation allowance.

         We have net operating losses of approximately  $10.1 million for United
States  federal and state income tax purposes that expire between 2021 and 2023.
The amounts of and benefits from net  operating  losses  carried  forward may be
impaired or limited in certain circumstances. Events which may cause limitations
in the  amount  of net  operating  losses  that we may  utilize  in any one year
include,  but are not limited to, a cumulative ownership change of more than 50%
over a three-year period.

Allowance for Doubtful Accounts

         We maintain an allowance  for doubtful  accounts for  estimated  losses
resulting  from the inability of our customers to make  required  payments.  Our
accounting for doubtful accounts contains  uncertainty  because  management must
use judgment to assess the  collectibility  of these  accounts.  When  preparing
these estimates,  management considers a number of factors,  including the aging
of a customer's account,  past transactions with customers,  creditworthiness of
specific  customers,  historical  trends  and other  information.  We review our
accounts receivable reserve policy periodically,  based on current risks, trends
and changes in industry  conditions.  The  allowance  for doubtful  accounts was
approximately  $349,000 at December 31, 2003. Although we believe this allowance
is sufficient,  if the financial condition of our customers were to unexpectedly
deteriorate,  resulting  in an  impairment  of their  ability to make  payments,
additional   allowances  may  be  required  that  could  materially  impact  our
consolidated financial statements. Concentrations of credit risk can impact this
risk  considerably.  We have two major customers that comprised 32% of net sales
in 2003 and 32% of accounts receivable as of December 31, 2003. Additionally, as
noted above, we have significant sales to customers outside the U.S.


                                       33
<PAGE>

Inventory Valuation


         Inventory, representing approximately 37% of our consolidated assets at
December 31, 2003,  primarily  consists of finished goods  including  industrial
enzymes used in the industrial,  chemical and agricultural markets and is stated
at the lower of cost or market using the first-in,  first-out  method.  Finished
goods include raw materials and manufacturing costs,  substantially all of which
are incurred pursuant to agreements with independent  manufacturers.  As part of
the valuation process,  excess,  slow-moving and damaged inventories are reduced
to their estimated net realizable value. Our accounting for excess,  slow-moving
and damaged inventory contains  uncertainty because management must use judgment
to estimate when the  inventory  will be sold and the  quantities  and prices at
which the inventory will be sold in the normal course of business. We review our
inventory  reserve  policy  periodically,  based on  current  risks,  trends and
changes in  industry  conditions.  We also  maintain a provision  for  estimated
inventory  shrinkage  and conduct  periodic  physical  inventories  to calculate
actual  shrinkage  and  inventory  on  hand.  When  preparing  these  estimates,
management considers historical results,  inventory levels and current operating
trends.  We  have  established   valuation  reserves   associated  with  excess,
slow-moving  and  damaged   inventory  and  estimated   shrinkage   reserves  of
approximately $75,000 at December 31, 2003. These estimates can be affected by a
number of factors,  including  general  economic  conditions  and other  factors
affecting  demand for our  inventory.  In the event our  estimates  differ  from
actual results,  the allowance for excess,  slow-moving and damaged  inventories
may  be  adjusted  and  could  materially  impact  our  consolidated   financial
statements.


RECENT ACCOUNTING PRONOUNCEMENTS

         In January 2003, the FASB issued  Interpretation No. 46,  Consolidation
of Variable Interest  Entities (FIN No. 46) and a revised  interpretation of FIN
No. 46 (FIN No. 46-R) in December 2003, to expand upon and  strengthen  existing
accounting  guidance  that  addresses  when  a  company  should  include  in its
financial  statements the assets,  liabilities and activities of another entity.
Prior to FIN No. 46, one company  generally has included  another  entity in its
consolidated  financial  statements  only if it  controlled  the entity  through
voting  interest.  FIN No. 46 changed  that by  requiring  a  variable  interest
entity,  as  defined,  to be  consolidated  by a company  if it is  subject to a
majority of the risk of loss from the variable interest  entity's  activities or
entitled to receive a majority of that entity's  residual  returns or both.  FIN
No. 46 also requires disclosures about variable interest entities that a company
is not  required  to  consolidate  but in  which it has a  significant  variable
interest.  The  consolidation  requirements of FIN No. 46-R apply immediately to
variable  interest  entities  created after  December 31, 2003,  and to existing
variable  interest  relationships  in the first reporting period that ends after
March 15, 2004.  Certain of the disclosure  requirements  apply to all financial
statements  issued  after  December 31,  2003,  regardless  of when the variable
interest  entity  was  established.  We do not have any  entities  that  require
disclosure or new consolidation under FIN No. 46-R. As a result, the adoption of
FIN No. 46-R did not impact our financial condition or results of operations.

         In  May  2003,  the  FASB  issued  Statement  of  Financial  Accounting
Standards (SFAS) SFAS No. 150, Accounting for Certain Financial Instruments with
Characteristics  of both  Liabilities  and  Equity.  The  statement  establishes
standards  for  how  an  issuer   classifies  and  measures  certain   financial
instruments with  characteristics  of both  liabilities and equity.  It requires
that an issuer  classify a  financial  instrument  that is within its scope as a
liability (or an asset in some cases),  whereas many of those  instruments  were
previously  classified as equity.  We adopted the  provisions of SFAS No. 150 in
2003. Although we had redeemable Series A convertible preferred stock classified
in the  mezzanine  equity  section of the balance sheet as of December 31, 2003,
that preferred stock did not fall within the scope of SFAS No. 150. Accordingly,
the  adoption  of SFAS  No.  150 had no  impact  on our  consolidated  financial
statements.  The Series A preferred  was  redeemed in June 2004 for  $1,500,000,
using proceeds from a private placement offering completed in July 2004.

         In November 2004, the FASB issued SFAS No. 151,  Inventory Costs, which
amends previous authoritative guidance and clarifies the accounting for abnormal
amounts of idle facility expense,  freight,  handling costs, and wasted material
(spoilage).  SFAS No. 151  requires  that items such as idle  facility  expense,
excessive  spoilage,  double  freight,  and  rehandling  costs be  recognized as
current-period charges regardless of whether they meet the previous criterion of
"so abnormal." The provisions of SFAS No. 151 are effective for inventory  costs
incurred by us beginning  January 1, 2006, and are to be applied  prospectively.
The  adoption of SFAS No. 151 is not  expected to have a material  effect on our
financial position or results of operations.


                                       34
<PAGE>

         In  December  2002,  the FASB  issued  SFAS  No.  148,  Accounting  for
Stock-Based   Compensation-Transition   and  Disclosure  an  amendment  of  FASB
Statement  No.  123.  This  statement  amends  SFAS  No.  123,   Accounting  for
Stock-Based  Compensation,  to provide  alternative  methods of transition for a
voluntary  change to the fair value based method of accounting  for  stock-based
employee  compensation.   In  addition,  the  statement  amends  the  disclosure
requirements of SFAS No. 123 to require prominent disclosures in both annual and
interim  financial  statements  about the method of accounting  for  stock-based
employee  compensation  and the effect of the method used on  reported  results.
SFAS No. 148 also does not  permit  the  prospective  method of  transition  for
changes to the fair value method, previously allowed in SFAS No. 123. We adopted
the  disclosure  provisions  of SFAS No.  148 in 2002.  We  currently  apply the
intrinsic-value method for accounting for employee stock-based compensation. See
discussion   below  regarding   further   developments  in  the  accounting  for
stock-based compensation.

         In  December  2004,  the FASB  issued  SFAS  No.  123  (revised  2004),
Share-Based  Payment  (SFAS No.  123R).  SFAS No. 123R  revises SFAS No. 123 and
supersedes APB Opinion No. 25, and its related implementation guidance. SFAS No.
123R  establishes  standards for the  accounting  for  transactions  in which an
entity exchanges its equity instruments for goods or services. It also addresses
transactions  in which an entity  incurs  liabilities  in exchange  for goods or
services that are based on the fair value of the entity's equity instruments, or
that may be settled by the issuance of those equity  instruments.  SFAS No. 123R
focuses  primarily on accounting  for  transactions  in which an entity  obtains
employee services in share-based  payment  transactions.  SFAS No. 123R does not
change the accounting guidance for share-based payment transactions with parties
other than employees  provided in SFAS No. 123 as originally  issued, and as set
forth in EITF Issue No. 96-18, which we already follow.

         SFAS No. 123R  requires a public entity to measure the cost of employee
services  received in exchange for an award of equity  instruments  based on the
grant-date  fair value of the award (with limited  exceptions)  and to recognize
that cost over the  period  during  which an  employee  is  required  to provide
service in exchange for the award (usually the vesting  period).  Currently,  we
use the intrinsic  value method for  accounting  for employee  stock options and
include a pro forma  disclosure,  as allowed by SFAS No. 123, for this estimated
compensation cost on employee stock options.

         As a small business  issuer,  we are required to adopt SFAS No. 123R on
January 1, 2006.  SFAS 123R  applies to all awards  granted  after the  required
effective  date and to awards  modified,  repurchased,  or cancelled  after that
date. Because the statement was recently released,  we have not yet assessed the
potential  impact of the  adoption  of SFAS 123R on our  financial  position  or
results of  operations.  However,  pro forma  compensation  expense for employee
stock  options  calculated  under SFAS No. 123 was  approximately  $101,000  and
$104,000 for the nine months ended September 30, 2004 and 2003, respectively and
approximately  $133,000  and $28,000 for the years ended  December  31, 2003 and
2002, respectively.


                                       35
<PAGE>

                                    BUSINESS

GENERAL

         We are a biotechnology company engaged in the development, manufacture
and sale of proteins, enzymes, peptides and other bio-molecules derived from
genes, and the collaborative licensing of our enabling proprietary technologies.
We use our proprietary technologies to develop and manufacture biological
products, and intend to collaboratively license them for research, development
and manufacturing of biological products, for two categories of applications:


     o    enzymes and other biological  products for a variety of industrial and
          commercial  applications,  which we refer to as our Industrial Enzymes
          Business; and


     o    human therapeutic proteins for use by pharmaceutical and biotechnology
          companies in pre-clinical and clinical drug development applications
          and commercialization following drug approval, which we refer to as
          our BioSciences Business.

         We have developed and use a number of proprietary fungal strains to
produce enzymes and other biomaterials, but the one on which we have principally
focused is a patented system for protein production, or protein expression,
which we call the C1 Expression System. This System is based on the use of the
Chrysosporium lucknowense fungus, known as C1, as its host production organism.
A host production organism has been genetically altered to express genes to
produce targeted protein products. We discovered the C1 microorganism in the
mid-1990's and initially developed it, without the application of molecular
genetic technology, to produce neutral cellulases for our textile manufacturing
customers. By 1998, we began to apply molecular biology and other proprietary
biotechnology tools to C1 to create a technology, which we refer to as the C1
Host Technology. The C1 Host Technology, once fully developed, is expected to be
capable of performing:

     o    two screening functions for:

          o    the discovery of genes and the proteins they express; and

          o    the identification of improved protein variants resulting from
               modifications to their genes; and

     o    three expression functions for:

          o    the expression of proteins in commercial volumes for industrial
               enzyme applications;

          o    the expression of human therapeutic proteins in small volumes for
               pre-clinical and clinical testing for drug development
               applications; and

          o    the expression of human therapeutic proteins for drugs in
               commercial volumes.

We have been, over the last several years, principally focused on the expression
capabilities of the C1 Host Technology. These efforts culminated in our first
commercially successful application - our C1 Expression System.

         Using the C1 Expression System, as well as other biological systems,
our Industrial Enzymes Business develops and produces commercial quantities of
enzymes for sale to textile, pulp and paper, animal feed, chemical,
agricultural, and other industries. These industries, in turn, use our products
to enhance their own products or to improve production efficiency. In 2003, we
began to use our C1 Expression System to complete the development and market
roll-out of several new, and higher profit margin, industrial and agricultural
enzyme products, including for example the following products: MPE, NCE 2X,
Fibrezyme LBI, and Fibrezyme LBR. The development of our C1 Expression System
has substantially contributed to our revenues growing at over 30% per year
between 2001 and 2003, from $9.25 million in 2001 to $16.8 million in 2003. The
consolidation, effective July 1, 2002, of the results of operation of our Far
East subsidiary into our financial statements also contributed to this growth.
We currently sell more than 45 liquid and dry enzyme products to more than 150
industrial customers in 50 countries.


                                       36
<PAGE>

         We believe, however, an even larger market opportunity exists for our
C1 Expression System. We believe our C1 Expression System can be successfully
harnessed to help solve the protein expression problem confronting the global
drug industry - its inability, despite enormous historic investment, to harness,
cost-effectively and expeditiously, existing genomic knowledge to develop new
specialized biological products, or therapeutic proteins. For the past four
years, we have been developing our C1 Expression System to serve the drug
industry, with our primary focus on the production of human biopharmaceuticals,
or human therapeutic proteins. Still in the development stage, we refer to these
activities as our BioSciences Business. These activities have thus far generated
nominal revenues of only $150,000 in 2003. We have also conducted research and
development, or R&D, activities to expand the production capabilities of our C1
Expression System to include production of human therapeutic proteins in
commercial volumes.

         Though currently a lower priority than our C1 Expression System, we
have also been developing the screening potential of our C1 Host Technology for
gene discovery and the identification of protein variants resulting from
modifications to their genes, which we refer to as our C1 Screening System.
These efforts have included our purchase of state-of-the-art robotics equipment
and a collaborative partnership with a Netherlands-based scientific
organization, TNO Voeding, to enable fully-automated high throughput screening,
or HTS. We believe that if our BioSciences Business' application of our C1
Expression System and our C1 Screening System can each be perfected, we will be
able to offer a potentially unique end-to-end solution for drug companies: a
single host production organism usable throughout the discovery, pre-clinical
and clinical testing and commercial production phases of drug development that
would greatly increase drug development efficiency, economy and speed to market.

         Currently, we own three issued U.S. patents and 57 U.S. and
International filed and pending patent applications which we believe provide
broad protection for our C1 Expression System, our underlying C1 Host
Technology, our C1 Screening System and their products and commercial
applications.

HISTORY OF DYADIC

         Our operating subsidiary, Dyadic International (USA), Inc., or
Dyadic-Florida, was founded by our Chief Executive Officer, Mark A. Emalfarb, in
1979, and was throughout the 1980's a leading supplier of both domestic pumice
stones and pumice stones imported from overseas for use in the stone washing of
denim garments. In the 1990's, we evolved from serving only the denim industry
to the development and manufacture of specialty enzymes and chemicals and, by
1995, were generating revenues of $8,500,000 and annual profits of $1,300,000.
In the mid-1990's, we discovered the C1 microorganism in connection with our
efforts to develop improved industrial enzymes. By 1998, we began investing
significant financial resources in the application of molecular genetic
technology to the development of the C1 Host Technology.

         In the first half of 2001, we raised approximately $13,635,000 in
capital largely to fund the development of our C1 Screening System. At that
time, we thought we were within one year of being able to find collaboration
partners to help us complete its development, though we continued to develop our
C1 Expression System. However, between 2001 and 2003, even as our Industrial
Enzymes Business began to grow rapidly, we experienced a major shift in market
demand for our C1 Screening System. First, we found that large pharmaceutical
companies, financially exhausted by their investment in unproven screening
technologies like our C1 Screening System, began requiring theretofore
unprecedented levels of accumulated scientific data as a pre-condition to
partnering with us. Second, we found that the interest of these large
pharmaceutical companies had moved away from gene discovery and screening
applications, to an interest in the expression of therapeutic proteins for
testing, clinical trials and drug commercialization.

         We adjusted our strategy accordingly, and between May 2003 and March
2004, we began to focus principally on our C1 Expression System, even as we
continued to develop our C1 Screening System and related HTS hardware and
assemble more scientific data to support our claims regarding that System's
potential. During this interval of time, we also continued to grow our
Industrial Enzymes Business, as we used our C1 Expression System to successfully
develop several industrial enzymes, while continuing to seek equity financing.
Between April and July 31, 2004, we raised equity capital of approximately
$6,740,000, prior to expenses of approximately $118,000, through a private
placement and two transactions with an R&D contractor and a real estate
developer. Between October 1 and November 4, 2004, we raised an additional
$25,400,000 of common equity capital, receiving net proceeds of approximately
$23,100,000, in the private placement we conducted companion to the merger of


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<PAGE>

our wholly owned subsidiary into Dyadic-Florida, in which its shareholders
received shares of our stock representing a majority of our outstanding shares.

OUR MARKETS

Industrial Enzymes

         Industrial manufacturers and the agricultural and food sectors have
long used biological products, such as proteins, enzymes, peptides and other
bio-molecules, to enhance the functionality or durability of their products and
to improve production yields and efficiency. As examples:

     o    the textile industry uses enzymes to soften and fade denim, as well as
          to prevent pilling and improve smoothness, softness and color
          brightness of cotton and other cellulosic fabrics;

     o    pulp and paper manufacturers use specialty enzymes as substitutes for
          harsh chemicals and other additives in bleaching and de-inking to
          improve whiteness, brightness and fiber strength, to increase
          production rates and to decrease wastewater treatment burdens;

     o    agricultural companies use biological products to increase and enhance
          crop traits and yields and to encourage disease resistance;

     o    animal feed producers use biological products to improve the
          nutritional value of animal feeds and to improve production efficiency
          by combating the adverse effects of the high temperatures used in
          processing foods for consumption by animals; and

     o    other industries, including starch processing, cosmetics, detergents,
          flavorings and bio-fuels, also use enzyme products for a wide variety
          of applications.

It is our understanding that the current potential market for biological
products in the industrial, chemical and agricultural sectors exceeds $100
billion. We are also aware of estimates of the size of the industrial enzymes
market of between $2.0 and $3.6 billion.

BioSciences

         Pharmaceutical companies have also taken note of the emerging
importance of cost-effective, enabling production of therapeutic proteins in the
drug R&D process. Drug development is an expensive, time-consuming and risky
process. The Pharmaceutical Research and Manufacturing Association estimates
that pharmaceutical companies spent approximately $29 billion on R&D during
2001, an increase of $7 billion over 2000. Of the potentially hundreds of
thousands of compounds screened in a drug discovery program, less than 1 in
1,000 will become new drug candidates and only about 20% of these will complete
human clinical trials and receive regulatory approval. Only about 30% of drugs
that are commercialized ever recover their development costs. Pharmaceutical and
biotechnology companies have realized that to stay competitive and meet their
goals for growth, they will have to significantly increase the number of new
drugs introduced each year and employ new, sophisticated biotechnologies to
increase the probability of success in R&D. Because government agencies rigidly
define and highly regulate the pre-clinical and clinical trial phases of the
development of new drugs, drug companies can impose little control over the
costs of these phases. As a result, drug companies are increasing their focus on
the drug discovery stage to enhance productivity and reduce costs.

         The biopharmaceuticals market has progressed significantly since 1982
when the first biopharmaceutical product, recombinant human insulin, was
launched. Now, over 120 biopharmaceuticals are marketed around the world,
including nine "blockbuster" drugs, such as EPO and Factor III. From information
published by pharmaceutical market consulting firms such as IMS Health, Inc.,
Dyadic understands the total market for such drugs to be currently valued at
approximately $41 billion or nearly 10% of the world pharmaceuticals market, and
it has been growing at an annual growth rate of 21% over the past five years.
With over one-third of all pipeline products in active development being
biopharmaceuticals, the biopharmaceutical segment could continue to outperform
the total pharmaceutical market and reach $100 billion in annual sales by the


                                       38
<PAGE>

end of the decade. We believe that this growth is fueled by many factors,
including the following:

     o    Most biological processes in the human body are carried out by
          proteins. Therefore, a significant amount of current R&D activity is
          focused on finding therapeutic proteins which could be cures for
          various human diseases. This has resulted in approximately 500
          therapeutic proteins, or biopharmaceuticals, currently under active
          development.

     o    With the complete sequence of the human genome now available, many new
          human genes have been identified, and based on this knowledge,
          companies are finding new promising drug targets.

     o    Due to the shorter path to drug development for biopharmaceuticals as
          compared to small molecules, pharmaceutical companies are now more
          focused on biopharmaceuticals than before.

     o    With many large biopharmaceutical proteins and the manufacturing
          processes for producing them losing patent protection, drug companies
          are developing modified versions of these molecules using alternative,
          more efficient production hosts.

         It is our understanding that roughly one-third of the nearly 500
therapeutic proteins under active development could be targets for expression in
a suitable host production organism. We also believe that number is likely to
increase significantly as new biopharmaceuticals are added to the pipeline of
drug companies every year. However, while many potential products are being
developed, it is not clear how they will be produced, often due to the drug
companies' inability to find a suitable host to recombinantly produce the target
protein for animal and human testing and/or commercial launch at a viable cost.
We believe that many pharmaceutical research programs at these companies have
been put on hold or canceled due to these problems.

         To solve this dilemma, a number of existing biotechnology companies
have developed expertise in the discovery, optimization and/or expression of
novel genes, proteins, enzymes and other biologically active molecules.
Nevertheless, such companies have experienced extraordinary difficulties in
producing sufficient quantities of proteins from genes for use in laboratory and
clinical testing and, subsequently, in commercializing drug product leads
through low cost, high volume production. Thus, despite the extraordinary
investment in genomic research over the past decade and the attendant increased
number of available therapeutic protein targets, the pharmaceutical industry has
not yet experienced an improvement in the speed of drug discovery and
development, nor any significant decrease in its cost, due in significant part
to the inability of current protein production methods to create sufficient
quantities of biological products on demand.

ALTERNATIVE TECHNOLOGIES

         Proteins are made by "translating" or "expressing" genes. Genes are the
basic units of heredity and are found in DNA, a fundamental molecule found in
the cells of all living organisms. DNA consists of a code of instructions by
which each gene encodes a specific protein. These proteins are the functional
molecules that control the processes of living cells. The extraordinary
bio-diversity of living things in the world is the result of the extraordinary
number of different genes and the different proteins they produce. Some of these
proteins have properties or characteristics which offer great functional and
commercial utility. For example, one type of protein - enzymes - can be used to
catalyze reactions that are difficult to perform using traditional chemistry,
employing much milder and less energy-intense conditions. Enzymes can be used in
various industrial processes to replace harsh chemicals and save energy, in
foods and feeds to improve their nutritional quality, and to generate fuels from
renewable resources. Other types of proteins can be used as therapeutic drugs to
improve the health of patients afflicted with debilitating conditions, such as,
for example, insulin for diabetics. It is this diversity of properties that
cause proteins, enzymes and other biomaterials to have such great potential to
impact our lives.

         Traditional methods of discovering proteins do not utilize a DNA-based
approach, but are accomplished by screening biological extracts or culturing
microorganisms for the activity of interest. Once a biological activity of
interest is identified, purification is performed and the relevant protein is
isolated. This process is followed by the difficult and time-consuming task of


                                       39
<PAGE>

determining the biochemical properties of the molecule, which requires producing
sufficient quantities of the molecule by culturing a sample in the laboratory.
Because relatively few proteins have been successfully produced in the
laboratory, only a small fraction of the billions of different proteins and
their corresponding genes have been classified, or characterized. Among the
reasons for this modest number of characterized proteins are inordinate
difficulties in obtaining extracts from those organisms and the extraordinary
challenges in recovering the genes of targeted proteins. In consequence, the
universe of potentially useful biomaterials derived from the world's
biodiversity remains largely untapped.

         Despite the tremendous utility of proteins, there are limitations on
their use. Proteins generally are functional only under specific conditions of
temperature, pH, and salinity. Outside of those conditions, the proteins may not
be functional or stable. In order to overcome these limitations, proteins are
often sought from organisms that live in extreme environments - high
temperature, acid or alkaline, high salt environments, for example. Another way
to obtain proteins with improved properties outside their normal operating
conditions is to introduce variations in the laboratory. The genetic sequence
corresponding to the protein can be studied and genetic variation may be
introduced in an attempt to modify its functional properties through a process
known as molecular evolution. The generation of improved variants has, to date,
remained inefficient and laborious. Once genetic variants are created, the
improved molecules must be selected from large numbers of variants to find those
with the desired properties. This selection process requires the ability to
quickly screen large numbers of genes to distinguish the improved versions.

         Through the application of recombinant DNA molecular biology,
scientists can now insert genes from one organism into another and direct the
production of a desired bio-molecule encoded by the gene. Once a desired gene is
found and optimized, commercial production requires the insertion of the gene
into a production system, or host production organism, that has been adapted to
express the gene and produce proteins from that gene. However, genes encoding
unique bio-molecules may not be able to be expressed and commercially produced
in traditional systems.

         At an enormous cost, drug companies have attempted to use a number of
different protein discovery and expression systems to assist with drug
discovery, each of which, we believe, suffers from significant limitations.

                  Bacterial Expression Systems: Bacterial expression systems
         cannot express many of the native genes from eukaryotic sources, which
         consist of larger cells from higher order organisms that encompass
         linear DNA strands associated with proteins to form true chromosomes,
         primarily due to their inability to appropriately process introns, the
         portions of genetic sequences not involved in coding for protein. In
         addition, bacteria are unable to perform glycosylation - the process of
         attaching sugar molecules in the correct arrangement as required to
         translate many eukaryotic genes into functional, active proteins.

                  Yeast Expression Systems: Yeast systems are not able to
         express many native eukaryotic genes as effectively as filamentous
         fungal systems due to hyperglycosylation and ineffective intron
         processing.

                  Filamentous Fungal Expression Systems: Most fungi have the
         capability of expressing and secreting higher levels of protein per
         unit volume in fermentors than either bacteria or yeast, but yields are
         still low without significant development work on the host. Moreover,
         these systems also have glycosylation issues similar to those in yeast,
         and their high viscosity makes commercial scale-up difficult. Moreover,
         most fungi are cultivated at acidic conditions, which can lead to
         instability of some human proteins, as these conditions are not the
         normal physiological conditions under which those proteins are stable.
         The biological properties of commercial fungal expression systems also
         typically result in dense mats of fibers and highly viscous cultures
         that are difficult to work with, especially in the small volumes
         required for high throughput screening. In industrial fermentations,
         the agitation necessary to adequately mix and aerate viscous cultures
         introduces large shear forces to the fermentation broth, making the
         production of shear-sensitive proteins difficult or impossible.

                  Transgenic Plants and Animal Systems: Transgenic plants and
         animals have long development time lines. While scale up is relatively
         easily achieved by raising larger herds or planting more acreage, the
         ability to produce product on demand is limited, especially in plants.
         Also, containment is an issue, especially for pharmaceuticals where
         there are strict regulations regarding consistency and efficacy.


                                       40
<PAGE>

                  Insect Cell Systems: Insect cell systems have many of the
         advantages of mammalian cells -- for example, the ability to
         glycosylate proteins in a similar fashion. However, insect cell
         cultures are more difficult to scale up and do not produce the high
         protein yields that fungal cultures do. Also, permanent cell lines are
         difficult to maintain.

Due to the shortcomings of these current technologies, drug companies have been
plagued by substantial capital spending requirements due to the expensive nature
of the fixed assets required to manufacture biological products, including very
expensive fermentation and purification equipment, shortfalls in manufacturing
capacity, high cost and low yield production, and significant delays in bringing
drugs to market.

DYADIC'S SOLUTION

         We have developed a protein expression system - our C1 Expression
System - which we are now successfully using in our Industrial Enzymes Business.
However, we believe our C1 Expression System, in combination with our successful
development of the C1 Screening System, will eventually permit drug companies to
fill major gaps in the drug development process by having both an available gene
discovery library and a single suitable host production organism usable
throughout the discovery, pre-clinical and clinical testing and commercial
production phases of drug development.

         Our patent protected C1 Expression System is based on Chrysosporium
lucknowense, or C1, a fungal host production organism with superior genetic and
fermentation characteristics that we discovered, developed and patented for use
in manufacturing of cellulase enzymes for applications in the textile industry.
We first encountered C1 during the course of a program to develop that cellulase
enzyme for textile manufacturing applications. Out of that program, we developed
C1 strains and processes which resulted in a several hundred fold increase in
protein production, compared to those originally obtained with the culture
isolated from nature. These results caused us to decide to apply genetic
molecular technology to the further development of C1. We learned that the
unique morphology of the C1 culture allows the use of culture conditions that
are not normally attainable with fungi and which lead to increased protein
yields and more protein-friendly production processes. This ability to grow
under non-acidic conditions and under low viscosity in culture allow
fermentation conditions characterized by neutral pH and low agitation and
aeration rates. This allows the production of acid-sensitive and shear-sensitive
human proteins that may otherwise be unstable in fungal fermentation conditions.

         We believe that our C1 Expression System is particularly advantageous
in the rapid development of new biological products from genes and in the
commercial-scale production of various biological products at economically
viable costs, using a single host organism. As the following table indicates, we
believe our C1 Expression System overcomes many of the limitations of existing
commercial expression methods by offering significant advantages in expressing
certain classes of proteins.

               CAPABILITIES OF CURRENT PROTEIN EXPRESSION SYSTEMS

<TABLE>
<CAPTION>
----------------------- --------------- --------------- --------------- ------------ --------------- ----------
                          Mammalian       Bacterial         Yeast          Insect     Other Fungi       C1
                             Cells         Systems                          Cell
----------------------- --------------- --------------- --------------- ------------ --------------- ----------
<S>                        <C>           <C>            <C>                  <C>     <C>                <C>
Intron Processing            Yes             None          Limited           Yes          Yes           Yes
----------------------- --------------- --------------- --------------- ------------ --------------- ----------
Expression of                Yes         Very Limited      Limited           Yes          Yes           Yes
Eukaryotic Proteins
----------------------- --------------- --------------- --------------- ------------ --------------- ----------
Compatibility with HTS        No             Yes           Limited           No            No           Yes
----------------------- --------------- --------------- --------------- ------------ --------------- ----------
                                                            Over-                        Over-
Glycosylation                Yes             None       glycosylation        Yes     glycosylation      TBD*
----------------------- --------------- --------------- --------------- ------------ --------------- ----------
Output Optimizable
for Large-Scale            Limited           Yes             Yes             No           Yes           Yes
Manufacturing
----------------------- --------------- --------------- --------------- ------------ --------------- ----------
</TABLE>

---------
*   To be determined.


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<PAGE>

         We believe that our C1 Expression System offers many differentiating
advantages over commonly used protein expression systems, including:

     o    Use with Eukaryotic Genes; Flexibility: The C1 Expression System is
          the product of the C1 Host Technology out of which we believe we will
          also be able to develop the C1 Screening System. We believe the C1
          Host Technology can spawn the C1 Screening System to discover
          proteins, enzymes and bio-molecules of commercial interest rapidly
          from eukaryotic sources, which some scientists estimate constitute up
          to 90% of the entire gene pool in nature, and with genes originating
          from prokaryotic sources, which constitute the remaining gene pool. We
          believe that the use of a single host production organism usable
          throughout the discovery, pre-clinical and clinical testing and
          commercial production phases of drug development would greatly
          increase efficiency, economy and speed to market.

     o    Greater and Faster Expression: Our C1 Expression System has the
          ability to express higher levels of total protein in a shorter amount
          of time than other host organisms commonly used for pharmaceutical
          protein production. The reduction in the number of fermentation days
          generally results in lower production and capital costs associated
          with the production of protein products.

     o    Favorable Fermentation Characteristics: Our C1 Expression System
          possesses more favorable fermentation characteristics, including low
          viscosity and wider operating temperature and pH ranges, allowing
          optimal culturing under human physiological conditions, or 37 degrees
          celsius and neutral pH. Also, because the high levels of agitation
          that are necessary to provide oxygen to fungal and other
          microorganisms during high viscosity fermentations may destroy
          shear-sensitive proteins, the ability of the C1 Expression System to
          culture shear-sensitive proteins under lower viscosity conditions will
          increase the probability of successfully producing human therapeutic
          proteins.

     o    Acidity: The protein products of many genes, especially those of
          pharmaceutical interest, may be sensitive to being cultured under
          acidic conditions. Therefore, the ability of our C1 Expression System
          to produce acid-sensitive proteins under human physiological
          conditions will provide a greater likelihood of commercializing those
          proteins.

     o    Superior Glycosylation: Our C1 Expression System appears to have
          superior glycosylation biochemistry compared to other fungi or yeast.
          The latter organisms tend to hyperglycosylate, generating proteins
          with 7-11 or more mannosyl residues in their glycan structures.
          However, no such hyperglycosylation has been observed in our C1
          Expression System, suggesting that C1-produced proteins are more
          amenable to in vivo and in vitro approaches to glycan remodeling than
          those from other expression hosts.

DYADIC'S STRATEGY

         We are pursuing a four-part business strategy to commercialize our C1
Expression System, our C1 Host Technology, our C1 Screening System and our
products, which may be generally summarized as follows:

     o    Grow our market share and penetration for existing and new enzyme
          products, with an emphasis on increased sales of higher margin
          products;

     o    Leverage our C1 Expression System for commercial and industrial
          applications by developing new products for various industrial and
          commercial markets and by securing collaborator-funded R&D from third
          parties, and enabling us to earn milestone and royalty payments on
          target products expressed using the C1 Expression System;

     o    Build and grow our BioSciences Business by serving as a collaboration
          partner and service provider to large pharmaceutical companies for
          promising therapeutic proteins; and


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<PAGE>

     o    Exploit the power and versatility of our C1 Host Technology as well as
          our manufacturing capabilities, by forming strategic partnerships,
          such as joint ventures and product co-development and co-marketing
          ventures with leading companies in various industries and various
          parts of the world. In addition, we also hope to eventually spin-off
          new businesses emanating from the application of our C1 Host
          Technology, when we believe more value can be created for our
          stockholders by doing so rather than keeping them within our umbrella.

Industrial Enzymes Business Strategy

         Our C1 Expression System already is functional for the production of
many enzymes and proteins for the industrial markets. We have already developed
and manufactured a number of enzymes in large quantities using our C1 Expression
System in 150,000 liter fermentors and sold those products commercially
worldwide. Additionally, there are several enzymes in our R&D pipeline emanating
from the C1 organism and the C1 Expression System. We expect to commercialize an
even wider variety of new enzymes and proteins for the industrial markets with
better functional properties and improved cost performance through our efforts,
alone, and in collaboration with leading companies in industry sectors such as
pulp and paper, agricultural products for animals and humans, chemicals,
textiles, and personal care products.

         Using our C1 Host Technology and capitalizing on our strong position in
the textile market, our goal for our Industrial Enzymes Business is to become a
top-tier provider of industrial enzymes to broader markets, including pulp and
paper, animal feed, starch, food and other markets. To accomplish this goal, we
intend to:

     o    Diversify sales away from the commoditized textile market to other
          less competitive fast-growing markets;

     o    Register existing products in large new markets for sales to
          identified customers;

     o    Discover and develop new enzyme products for new applications in
          existing and new markets;

     o    Obtain the DNA sequence of the C1 genome. This resource will
          facilitate the identification of many product leads from C1 genes and
          provide better understanding of the biochemistry and physiology of C1,
          enabling us to develop strategies to improve carbon flow toward
          proteins and other bio-molecules of interest and to rationally
          construct better host strains for both our C1 Expression System and
          our C1 Screening System;

     o    Continue to expand and utilize the low-cost production capacity of our
          contract manufacturer;

     o    Establish additional manufacturing capacity;

     o    Leverage investment in R&D to continue to improve yields and to drive
          revenue and profits though the launch of innovative products;

     o    Add sales and technical staff to support significant marketing
          initiative into new industrial markets;

     o    Add corporate infrastructure and staff to support projected revenue
          growth and SEC reporting requirements; and

     o    Partner with leading companies to develop and manufacture enzymes and
          other bio-products under an appropriate business arrangement, such as
          joint venture, co-development and co-marketing of products.

BioSciences Business Strategy

         While we believe that our C1 Expression System has created great
opportunity for our Industrial Enzymes Business, we believe a much greater
opportunity exists to develop our C1 Expression System for the production of


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<PAGE>

higher value proteins, such as human therapeutic proteins. We have been
developing and refining our molecular tools to deal with the more complex issues
involved in the production of those proteins, such as glycosylation, protein
degradation and high purity level requirement, which are critical for human
therapeutic protein production. Once fully developed, we believe our C1 Host
Technology can integrate our C1 Expression System with our C1 Screening System
now also under development, to create a fully-integrated discovery and
expression system that will help companies in diverse industries - including
pharmaceuticals - to discover, develop and bring to market new and improved
protein and enzyme products from a wider range of DNA sources and with better
properties than has been possible with other systems. Since the same cell line,
C1, will enable all R&D steps involved in bringing a DNA product to market, we
believe that the probability of success will be higher and the R&D cycle time
will be shorter.

         Our goal for our BioSciences Business is to become the leading provider
of expression solutions to pharmaceutical and biotechnology companies.
Initially, we will concentrate on enabling the C1 Expression System to express
pre-clinical and clinical quantities of therapeutic proteins for drug testing,
and eventually, for commercial-scale production of therapeutic proteins and
other bio-molecules. In particular, we expect that our C1 Expression System will
facilitate the production of biopharmaceuticals that might otherwise be shelved,
and will enable development of functionally improved drugs using molecular
evolution techniques in conjunction with the C1 Screening Technology we are
developing.

         We believe that increased profitability can arise from the anticipated
capabilities of the C1 Host Technology to use a single host organism for both
discovery and commercial production, which should lead to:

     o    shortened preclinical R&D timelines;

     o    the development of therapeutic protein drugs with better properties;

     o    possible enablement of shelved new drug candidates;

     o    improved prospects for an increase in probabilities for drug
          candidates advancement from discovery through development;

     o    reduced production costs; and

     o    reduced capital expenditures.

         To this end, we intend to:

     o    establish a flexible technology out-licensing program and enter into
          strategic partnerships and collaborations to facilitate adoption of
          the C1 Expression System, the C1 Screening System and the C1 Host
          Technology;

     o    continue and expand our R&D efforts both:

          o    in partnership with leading academic and technology development
               centers to develop and improve our C1 host strain and expression
               processes for large scale manufacturing by us and by our
               collaboration partners, and

          o    to apply the C1 Expression System for customer projects in
               exchange for technology access fees, research fees, milestone
               achievement success fees and royalties;

     o    leverage expression competencies to develop capabilities to develop
          our own biopharmaceuticals in the future; and


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<PAGE>

     o    partner with pharmaceutical companies and biotechnology companies to
          develop higher yield, more efficient production methods for many
          blockbuster biopharmaceuticals for which the applicable patent
          protection is expiring.

DYADIC'S PRODUCTS AND SERVICES

Industrial Enzymes Business

         Our Industrial Enzymes Business addresses major needs in diverse
industrial enzymes markets, including textiles, animal feed, pulp and paper,
starch, food, beverage and brewing and other markets. Though we have experienced
growth in our sales to the textiles market, we recognized the mature market
dynamics in that segment and chose to diversify our revenue base by launching
several products for other industries. We have invested significantly in R&D
over the past several years to develop new products and to perfect our C1
Expression System for industrial enzyme applications. As a result, we have
recently launched several new, and higher profit margin products for industrial
applications, including:

           PRODUCT                          APPLICATION
     --------------------- -----------------------------------------------------
     CeluStar              Wheat processing for high fructose syrup
     FibreZyme LDI         Improved brightness and softness of tissue
     FibreZyme LBR         Improved energy savings in paper and pulp production
     FibreZyme LBL         Improved paper strength
     Beta Glucanase BG     Animal feed-weight gain - barley
     Xylanase 2XP CONC     Animal feed-weight gain - wheat
     BrewZyme BG PLUS      Beer production

         Textiles Industry

         Since the early 1980s, we have enjoyed success and, we believe,
technology leadership, in the textile industry. Today we continue to have a
significant market position developing, manufacturing and marketing cellulase
enzymes for a variety of textile production and fabric finishing applications,
including softening, fading and treating of denim garments. Our first
proprietary textile enzyme, or ACE, has been produced regularly in 150 cubic
meter commercial fermentors since 1994. A major breakthrough came in late 1996
when we successfully commercialized our patented neutral cellulase enzyme, or
NCE, which is used in the stonewashing, or softening and fading, of denim jeans.
NCE was our first product manufactured using our C1 Expression System. We now
offer a wide range of cellulase enzyme products for applications such as:

     o    denim finishing where cellulases are used to soften and fade the denim
          fabric, including Rocksoft ACE series and numerous other Rocksoft
          series; and

     o    biofinishing of cotton and cellulosics using BioACE series, which is a
          biofinishing process to prevent pilling and improve smoothness,
          softness and color brightness, and biopolishing.

An example of a cellulosic fabric is Tencel(TM), a new high performance
cellulosic fiber made by Acordis. Its inherent strength, handle properties,
tendency to fibrillate, as well as its environmentally positive manufacturing
processes, makes Tencel(TM) more desirable than other regenerated cellulosics.
Our BioACE series, a modified acid cellulase derived from Trichoderma
longibrachiatum, offers a cellulase that has been approved and recommended by
Acordis for the treatment of 100% Tencel(TM) and its blends. Our textile enzymes
are formulated in various forms, including granular, liquid, and powder.

         We continue to seek improvements in the economics and performance of
our cellulases with the following ongoing research projects for the
over-expression of a number of advanced enzymes for the textile industry:


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<PAGE>

     o    cellulase endoglucanases, currently in pre-commercial stages, provide
          denim finishing with a soft feel and stonewashed appearance or
          depilling at lower cost or more favorable processing conditions;

     o    laccase enzymes provide a high level of efficiency for de-coloring
          denim fabrics;

     o    catalase enzymes, when used during fabric manufacturing processes,
          enable dyers to reduce their process time, consumption of energy and
          water as well eliminate residual hydrogen peroxide quickly, safely and
          easily; and

     o    pectin lyase enzymes, when used in the fabric manufacturing process,
          eliminate the use of harsh chemical additives and eliminate the need
          for high volume water consumption because of their ability to safely
          degrade pectin present in the fiber, enabling dyers to produce high
          quality color treatments without defects.

         In 2003, using our C1 Expression System, we launched two new products,
created by isolating genes and reintroducing them into our C1 host organism, to
increase the productivity of the enzymes: the resulting superior product
performance has both improved our profit margins and increased our revenues. One
or our products, NCE2X, replaced one of our standard neutral cellulase products
by offering a better and cleaner look on denim. The second product, MPE and MPL
(powder and liquid forms from the same fermentation), which was launched in the
fourth quarter of 2003, is being well received by the market, and is expected to
make a positive contribution to our revenues in calendar year 2004 and beyond.

         Pulp and Paper Industry

         Enzymes offer significant environmental and processing benefits for the
pulp and paper industry. We serve this market by developing, producing and
selling enzymes for bio-bleaching, de-inking and bio-refining processes which
produce significant improvements in the quality of paper products, including
increased strength, brightness and whiteness. In addition, our products reduce
the environmental impact of the paper manufacturing processes by reducing the
use of harsh chemicals and the volume of solid waste in the discharged waste
water. Other elements of the value proposition of our enzymes offer to the pulp
and paper market include reduction in production costs, increase in plant
throughput and considerable energy savings resulting from improved process
efficiency. We estimate that approximately one-quarter of the $8.0 billion pulp
and paper chemicals market, including bio-bleaching, de-inking and bio-refining,
is available to be penetrated by our enzyme products.

         Capitalizing on a growing trend in recycling, we recently launched
three commercial products for this application, FibreZyme LBL, FibreZyme LDI and
FibreZyme LBR, which are enzyme products used in paper making processes to:

     o    lower the use of expensive or environmentally unfriendly chemicals;

     o    increase both brightness and whiteness of the final product;

     o    lower energy consumption;

     o    increase the strength of the final product; and

     o    improve productivity and reduce overall operating costs.

Currently, these products are being tested by prospective customers, and in
recent mill trials with one prospective customer on both eucalyptus and acacia
hardwood fiber sources initial data from the mill have shown increased pulp
quality and quantity from the same amount of feedstock. In addition, lower harsh
chemical usage and lower chemical and biological waste in the discharged
effluent was observed.


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<PAGE>

         We also expect to develop other products for the paper and pulp
industry to address industry process conditions, including Alkaline Xylanase for
the environmental biobleaching of kraft paper and Alkaline Cellulase for the
process of removing print from recycled paper and newsprint.

         Animal Feed Industry

         We develop and produce specialty enzymes for customers who process
agricultural raw materials such as barley, corn, wheat, rye and soybeans to
produce animal feed and other related products. Many feed ingredients currently
used are not efficiently digested by poultry or livestock. However, by adding
enzymes to feed, the digestibility can be improved. Our feed enzymes are used as
additives that allow feed producers to supplement lower cost raw materials and
also to improve the efficiency of existing formulations. The main benefits of
supplementing feed with enzymes, as revealed by feed trials carried out to date,
are faster growth of the animal, better feed utilization, or feed conversion
ratio, more uniform production, better health status and reduced environmental
waste.

         Presently, we make and sell two animal feed enzyme products offered in
different activity levels and formats: our Beta Glucanase BP CONC, a
beta-glucanase, is used in conjunction with barley-based diets, and our Xylanase
2XP CONC, a xylanase, is used in conjunction with wheat based diets.
Additionally, we intend to develop other animal feed enzymes for specific diets
in which highly effective enzymes are not commercially available today:

     o    Enzymes to improve corn/soybean meal diets that are commonly used for
          poultry and swine in the U.S.;

     o    Phytase, an animal feed enzyme additive that is designed to increase
          the absorption of organic phosphorous, lowering the environmental
          impact of fecal matter, and to increase the digestibility of
          carbohydrates as well as the promotion of weight gain in livestock;
          and

     o    Keratinase, an enzyme that facilitates degradation of keratin, an
          important component in feather meal diets used by birds.

         One of the challenges in the use of enzymes in the animal feed market
has been the ability to retain enzymes' potency during the pelletization process
that is performed at high temperatures. As an example of our ability to leverage
our C1 Host Technology and C1 Expression System, we discovered and
commercialized a native thermo-stable enzyme which retains a commercially
significant amount of its activity at such high temperatures. Customer trials
are currently being performed in Europe to confirm this product's competitive
advantage. The European Union, or EU, is the current largest market for
non-soluble polysaccharide, or NSP, enzymes in the world.

         Food Industry

         We are presently marketing products to significant markets in the food
industry. We produce and sell the product CeluStar XL to the wheat starch
processing plants in Europe for the production of high fructose syrups and other
starch based products. This product has a competitive advantage over other
enzymes through its ability to drop viscosity during the first stages of the
starch production process. We produce and sell GlucoStar 400L and ViscoStar 150L
to the brewing and alcohol production market in Europe. We produce and sell
BrewZyme Series and FoodCel Series products to the brewing and fruit juice
production markets in Europe, North and South America and Asia. China has become
a large and rapidly growing market for brewing enzymes as the disposable income
of its population increases. Through one of our subsidiaries, two regional
distributors and one national distributor, we expect to significantly increase
our rate of penetration of this market.

         Other Industries

         Enzyme products are being used in many other industries and for a wide
variety of applications. Some notable applications are in cosmetics, flavorings,
and biofuels, where we anticipate that our products, when developed and
introduced, would reduce industry's dependence on petroleum feedstock with
glucose and other agricultural derived products that are created through enzyme
hydrolysis.


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<PAGE>

BioSciences Business

         We expect our BioSciences Business to generate revenue by using our C1
Expression System to enable its business partners to successfully make
sufficient quantities of promising therapeutic proteins for preclinical and
clinical testing, thereby improving prospects for a drug candidate's advancement
from discovery through development, accelerating development time and reducing
R&D costs. Relationships with business partners will vary, ranging from pure
contract research, to collaborations, to strategic business partnerships such as
joint ventures and product co-development and co-marketing on a project by
project basis.

         When we license our technology to its customers, we anticipate that the
revenues to be derived from projects will be comprised of:

     o    licensing fees earned for deploying the C1 Expression System, or
          Technology Access Fees,

     o    research reimbursement fees for the performance of project research,
          or Research Fees,

     o    payments based on the customer's successful achievement of drug
          development milestones with the biological product after the
          completion of the project, from initial lead optimization to approval
          by regulatory authorities, or Milestone Achievement Success Fees, and

     o    royalties on those biological products that have been successfully
          enabled by our proprietary technologies.

         In addition, although the mix of Technology Access Fees, Research Fees,
Milestone Achievement Success Fees and royalties will vary from project to
project, depending on whether the customer is a biotechnology company, which
involve lower Technology Access Fees and higher royalties, or a pharmaceutical
company, which provide the opposite types of fees and payments, we contemplate
that in some cases our customer may take an equity interest in us, or that we
may take a joint venture interest in the biological product.

         Initially, our BioSciences Business will be focused on the C1
Expression System's performance of its role as an enabling technology for drug
companies. Specifically, each project will involve a protein already
characterized by the customer, or, in other words, one that has been discovered
and is believed by the customer to have high commercial potential. The customer
will deliver to us the gene encoding this protein. Using our C1 Expression
System, we will attempt to express, or in other words produce,
laboratory-testing quantities of the protein for the customer.

         We also have several other technologies under development, including
our C1 Screening System, which will incorporate a high throughput screening, or
HTS, technology for discovery of new genes and/or screening for improved
variants of previously or newly discovered genes. Should these technologies be
successfully developed, they may serve as additional revenue streams for the
BioSciences Business.

RESEARCH AND DEVELOPMENT

         Our scientific staff has specialized knowledge in the areas of
biotechnology R&D, enzymology, quality control, textile chemistry, and pulp &
paper technology. Our laboratories are located in Jupiter, Florida, Greensboro,
North Carolina, Zeist, The Netherlands and in Southern China. Our R&D activities
include the discovery, development, improvement, and characterization of new and
existing enzyme products; and the development of our technologies in the areas
of gene expression, fungal molecular genetics, bioinformatics, and fermentation
process development for the production of proteins for a variety of industries,
including pharmaceuticals. Enzyme discovery and development utilizes a number of
fungal organisms, including Trichoderma longibrachiatum for the Acid Cellulase
and Xylanase lines of products, Aspergillus niger for the Glucoamylase products,
and Chrysosporium lucknowense C1 for Cellulase and related products.


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<PAGE>

         Our C1 Host Technology also forms the basis for our C1 Screening
System, which incorporates robotic HTS hardware. This C1 Screening System has
advantages over other screening systems in its use of the C1 filamentous fungal
host, thereby permitting the efficient expression and screening of eukaryotic
genes, and the secretion and glycosylation of their protein products, which
other screening systems developed in yeast and bacteria are unable to
efficiently perform. The most promising use of the C1 Screening System may be in
conjunction with molecular evolution technologies, which offer a means of
generating improved variants of proteins. For example, enzymes with higher
temperature optimum or stability, higher activity, altered specificity, or
altered pH optima can be obtained. In the pharmaceutical area, antibodies with
improved binding capability, or protein therapeutics with reduced immunogenicity
or improved efficacy, can be produced. In addition to its use in conjunction
with molecular evolution, we expect that our C1 Screening System will, in the
longer term, also be useful for discovery of novel activities in a variety of
eukaryotic organisms: it will screen for proteins by the expression of libraries
of expressed genes and will be especially useful for genes and proteins that
have not been previously well-characterized and for which the only discovery
tool is demonstration of the protein's function.


         Our R&D expenses for 2003 and 2002 were $3,571,242 and $3,144,462,
respectively.


RESEARCH AND DEVELOPMENT CAPABILITIES OF CONSULTING R&D VENDORS

         For over a decade, we have supplemented our internal R&D capabilities
with focused strategic industry collaborations with leading scientific
organizations such as Moscow State University, the Russian Academy of Sciences,
TNO Nutrition and Food Research Institute, and Bio-Technical Resources, as well
as outsourced R&D and manufacturing relationships via our exclusive agreements
and collaborations with Polfa Tarchomin in Europe, which provides low-cost
manufacturing capacity, and FermPro in the U.S. When combined with our internal
staff of 14 scientists, we currently have approximately 50 scientists working in
laboratories across the globe on a variety of R&D programs for us. The following
is a summary description of our main scientific collaborators:

Bio-Technical Resources, Manitowoc, Wisconsin

         Bio-Technical Resources, a division of Arkion Life Sciences LLC, or
BTR, is a contract research organization with expertise in areas of strain and
process development for fermentation of microbial products. We have worked with
BTR since 1995 on a variety of development programs for the production of
several commercial enzyme products, most notably our C1 host organism, for the
commercial scale production of neutral cellulase enzymes. BTR also has worked on
the development and commercialization of products utilizing our C1 Expression
System.

         In July 2004, Dyadic-Florida entered into a development agreement with
BTR under which Dyadic-Florida agreed to pay for 80% of $1.25 million worth of
R&D services, out of a total of $1.8 million, it was contracting to purchase
over a two year period from BTR by issuing shares of Dyadic-Florida common
stock, representing 300,300 shares valued at $3.33 per share. The Dyadic-Florida
shares were issued and held in an escrow. Incident to the consummation of the
merger, we assumed Dyadic-Florida's obligations with respect to the shares of
common stock deliverable to BTR under the development agreement, and our shares
were exchanged for the Dyadic-Florida shares in escrow. We must utilize, and BTR
is obligated to furnish, a minimum of 1.1 full-time equivalent BTR scientists
per month. BTR's rights to the shares of our common stock vest and may be
withdrawn from the escrow pro rata to the dollar value of BTR's actual
performance of R&D services, as such services are billed by BTR on a regular
monthly basis over a period expected to be approximately two years. In addition,
the development agreement provides for the imposition of cash penalties on BTR
should it fail to perform its obligations.

TNO Nutrition and Food Research Institute, Zeist, The Netherlands

         TNO Nutrition and Food Research Institute, or TNO, is a contract
research organization sponsored by the Dutch government and is one of the
Institutes comprising the Netherlands Organization for Applied Scientific
Research. We have worked with TNO since 1998 on the development of technologies
for gene expression and gene discovery. The TNO scientists working with us are
widely recognized as leaders in the area of fungal genetics and molecular
biology.

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<PAGE>


         In January 2003, Dyadic-Florida formed a wholly owned Dutch subsidiary
and entered into a cooperation and license agreement with TNO to cooperate on an
exclusive basis in the development, use and marketing of a high throughput
robotic screening system utilizing fungal organisms. Under this agreement,
Dyadic-Florida and TNO have each granted the Dutch subsidiary a worldwide
license to exploit certain patents and technologies, for which the Dutch
subsidiary will make royalty and revenue sharing payments to Dyadic-Florida and
TNO on revenue generated from the Dutch subsidiary's business operations. TNO
was also granted an option to acquire shares of Dyadic-Florida's common stock
beginning on the two-year anniversary of the formation of the Dutch subsidiary,
or earlier in certain circumstances. Incident to the consummation of the merger,
we assumed Dyadic-Florida's obligations to TNO in respect of this option. The
number of shares which TNO is entitled to purchase is based upon a formula fixed
by the terms of the agreement. No shares were purchasable under this option as
of December 31, 2004.


Moscow State University, Moscow, Russia

         We have had our longest research collaboration with groups at Moscow
State University led by Dr. Arkady Sinitsyn in the Department of Chemical
Biology. Dr. Sinitsyn is recognized as an expert in industrial enzymology and in
1992 initiated the development of our first enzyme product, an acid cellulase,
which was commercialized in 1994. Dr. Sinitsyn's group also isolated and
initially characterized the C1 fungal strain. Dr. Sinitsyn, in collaboration
with the Russian Academy of Sciences, has been instrumental in the discovery of
new enzyme products for us and in the detailed characterization and analysis of
existing enzyme products.

MANUFACTURING

         We do not own enzyme manufacturing facilities, but instead have in the
past employed two contract manufacturers who have produced all of our products
for us. We have been phasing-out one of those contract manufacturers, whose
agreement will terminate in May 2005 and will not be renewed. Our key contract
manufacturer is Polfa Tarchomin, SA, or Polfa, located in Warsaw, Poland, which
has been producing commercial enzymes for us continuously, and without
interruption, since 2001 under a 10-year contract, with several 10-year renewal
options exercisable in our discretion.

         The Polfa contract manufacturing agreement provides for a tolling fee
based upon the actual utilization of the fermentation time, and also requires
Dyadic-Florida to pay a fixed monthly fee to compensate Polfa for its capital
investment in the initial modernization of the plant and equipment, which ends
after seven years. Under the Polfa agreement, Polfa has committed fermentation
capacity substantially in excess of our current needs, and is obligated to make
additional capacity available upon our request and Polfa's completion of
necessary modernization of that requested additional capacity in accordance with
its contractual commitments to make those expenditures. We believe that the
capacity of Polfa's facility should exceed the requirements for our current
business plan, though increased fermentation capacity utilization is dependent
upon Polfa's modernizing capital improvements, at its expense, to meet the
growing process requirements for our production. We intend to stage the capacity
expansion of Polfa's facility to cover our production requirements based on
sales projections derived from our Industrial Enzymes Business' sales plans,
though utilization of this additional capacity will ultimately depend upon
product demand. Nonetheless, we are always evaluating the alternative of having
manufacturing conducted in a new facility. In February 2004, Dyadic-Florida
negotiated for additional Polfa fermentation capacity which we expect to be
operational in early to mid 2005. Additional Polfa's fermentation capacity is,
however, expected to be required to meet our requirements for later years.

         When combined with our internal staff of four manufacturing personnel,
headed by our Vice President of Manufacturing, we currently employ, or retain as
independent contractors, more than 60 persons to manufacture over 45 different
liquid and dry enzyme products, including employees of our Polish subsidiary,
whose main responsibility is oversight of Polfa's production, warehousing and
shipping of our products.


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<PAGE>

SALES AND MARKETING

Industrial Enzymes Business

         Our Industrial Enzymes Business has an established customer base in
more than 50 countries, including the United States. We sell our enzyme and
other biomaterial products directly, through our own sales force, and indirectly
through approximately 120 distributors, including one our subsidiaries. We have
deployed our sales force to effectively target the main markets and customers
for our products, including locations in Europe, North America, South and
Central America, and North and South Asia. We employ distributors to sell our
textile and food and feed enzymes, and sell starch and pulp and paper enzymes
both directly and through resellers. To meet the projected revenue growth over
the next five years, we intend to expand our manufacturing, sales and technical
service support staff to approach a larger number of customers in existing and
new markets. This expansion should facilitate our rapid penetration into the
higher value pulp and paper and feed markets.

         In 1998, Dyadic-Florida purchased 70% of the outstanding shares of its
existing Far East subsidiary. The Far East subsidiary serves as one of our
primary distributors to foreign textile, pulp and paper, chemical and enzyme
businesses. At the time of the original purchase, Dyadic-Florida could only vote
25% of the outstanding shares of the Far East subsidiary. By subsequent
agreements, Dyadic-Florida increased its ownership interest in the Far East
subsidiary from 70% to 82.5% of the outstanding shares and its voting rights
from 25% to 62.5% of the outstanding shares. Under the original purchase
agreement, Dyadic-Florida has an option to purchase additional voting rights
with respect to 20% of the total outstanding shares of the Far East subsidiary,
by paying $20,000 for each 1% of such voting rights. Dyadic-Florida is obligated
to purchase the entire 20% for an aggregate price of $400,000 if the Far East
subsidiary's cumulative profits since October 19, 1998, as defined, aggregate to
$900,000. As of September 30, 2004, the Far East subsidiary had $697,000 of
cumulative profits, as defined. In addition to this right to acquire 82.5%
voting control over the Far East subsidiary, Dyadic-Florida also has a call
option to purchase an additional 12.5% of the Far East subsidiary's outstanding
shares which is exercisable over a 20 year term that began on October 21, 1998,
but only after Dyadic-Florida has purchased the 20% voting interest for
$400,000. The exercise price of the call option will be based on the results of
operation of the Far East subsidiary for the 12 months preceding the date of the
exercise of the call option. The call option can be exercised no later than
October 2018. The Far East subsidiary became a consolidated subsidiary of
Dyadic-Florida effective July 1, 2002.

BioSciences Business

         Given the potentially significant differentiating advantages of our C1
Expression System over other expression systems, our marketing strategy is to
focus on those biopharmaceutical, agricultural and chemical companies that are
looking for alternative expression systems for the production of sufficient
quantities of proteins for animal/human or field tests or large-scale
manufacturing at an economically viable cost.

         Our BioSciences Business currently employs business development
professionals trained in marketing high-technology service offerings, such as
the BioSciences Business' expression projects, as well as licensing, joint
venturing and other forms of business collaboration. These two professionals
will be responsible for the BioSciences Business's market launch. In addition to
soliciting business from our headquarters and European subsidiary offices, these
business development professionals will promote the C1 Expression System's
enabling capabilities through presentations and presence at scientific and
business conferences targeted at the pharmaceutical, biotechnology, chemical,
agricultural and other industrial sectors, supplemented with the presentations
of research papers and seminars at those conferences. Further, we intend to
conduct large-scale promotional activities aimed at target industries, with an
emphasis on individual visits to target companies to expose them to the unique
capabilities of the C1 Expression System and the C1 Screening System. As the
business volume expands, we intend to expand our staff of business development
professionals for both its U.S. headquarters and its European subsidiary, Dyadic
Nederland BV in the Netherlands.

EMPLOYEES

         As of October 29, 2004, we and our consolidated subsidiaries had
approximately 90 full-time employees. None of our employees are represented by
labor unions or covered by collective bargaining agreements. We have not
experienced any work stoppages and consider our employee relations to be good.


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COMPETITION

Industrial Enzymes Business

         According to Novozymes, the worldwide market for industrial enzymes is
$2.0 billion, while another of our competitors, Diversa Corporation, has sized
the combined industrial and specialty enzymes market at approximately $3.6
billion. Our Industrial Enzymes Business faces several major competitors in its
industry, both on a global and regional basis. Principal global competitors are
Novozymes (Danish: all markets), Genencor (U.S.: all markets), DSM (Dutch: food
and animal feed), AB Enzymes (British: all markets) and BASF (German: animal
feed). Together, these five companies control more than 70% of the industrial
enzyme market, with Novozymes being the largest enzyme maker having 2003
revenues estimated at $900 million, although additional competitors, such as
Diversa, do, and in the future, can be expected to, enter the market. Other
smaller regional producers, located primarily in Japan, India and China, are
also participants in this industry and, from time to time, can directly compete
with us in those regions. Each of the major competitors, particularly Novozymes,
currently enjoys competitive advantages associated with their much larger size:
developed technologies, more resources, strong distribution systems and dominant
market positions.

BioSciences Business

         There are many companies, such as DSM, Invitrogen, Genencor
International, Novozymes, Lonza Biologics, Rhein Biotech, Protein Sciences
Corporation, Biolex, Paradigm Genetics and Exelexis, with proprietary protein
expression systems that compete with our C1 Expression System. Most of them are
developmental stage companies, although DSM, Invitrogen, Genencor International,
Novozymes and Lonza Biologics are medium to large size, well-established
companies with substantial financial resources. Nonetheless, because we believe
our C1 Expression System will overcome many of the limitations of the expression
systems being used by our competitors, we believe our C1 Expression System will
provide the drug development industry with a superior, low-cost production
alternative for human therapeutic and other proteins.

         When completed, our C1 Screening System will face competition from a
large number of technologies in use and under development for the discovery of
new genes. In addition to many development stage companies, such as Direvo and
Nautilus Biotechnology, competitors of our C1 Screening System include many
well-known companies: Celera, Human Genome Sciences, Incyte Genomics, Novozymes,
Exelexis, Diversa, and Maxygen. There are also many well-known companies, such
as Diversa, Maxygen, Codexis, as well as lesser-known companies such as Direvo
and Nautilus Biotechnology, which are very active in the field of directed
evolution and, therefore, have an interest in fungi-based screening systems or
other eukaryotic hosts capable of functioning in a high-throughput robotic mode
with eukaryotic genes.

INTELLECTUAL PROPERTY

         We hold three issued U.S. patents and 57 U.S. and International filed
and pending patent applications which we believe provide us with broad patent
protection for the C1 Host Technology, the C1 Expression System, the C1
Screening System and their commercial products and applications.

         Over the years in which we have been in business, we have also
developed trade secrets and know-how involving its industrial enzyme products.
Our employment and other agreements with our employees contain provisions that
protect and require confidential treatment for our trade secrets and developed
inventions, for both our Industrial Enzymes and our BioSciences Business.

GOVERNMENT REGULATION

         Regulation by the governmental authorities in the United States and
other countries is a significant factor in the development, production and
marketing of our products.


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<PAGE>

Non-Drug Products

         Non-drug, biologically derived products are regulated, in the United
States, based on their application, by either the FDA, the Environmental
Protection Agency, or EPA, or, in the case of plants and animals, the United
States Department of Agriculture, or USDA. In addition to regulating drugs, the
FDA also regulates food and food additives, feed and feed additives and
generally recognized as safe, or GRAS, substances used in the processing of
food. The EPA regulates biologically derived chemicals not within the FDA's
jurisdiction. Although the food and industrial regulatory process can vary
significantly in time and expense from application to application, EPA's
timelines generally are shorter in duration than the drug regulatory process,
that range from six months to three years.

         The European regulatory process for these classes of biologically
derived products has undergone significant change in the recent past, as the EU
attempts to replace country-by-country regulatory procedures with a consistent
EU regulatory standard in each case. Some country-by-country regulatory
oversight remains. Other than Japan, most other regions of the world generally
accept either a United States or a European clearance together with associated
data and information for a new biologically derived product.

Human Therapeutic Products

         The FDA, in the United States, and similar health authorities, in
foreign countries, subject human therapeutic products to rigorous preclinical
and clinical testing and other approval procedures. Various federal statutes and
regulations also govern or influence the testing, manufacturing, quality
control, safety, labeling, storage, record-keeping and marketing of human
therapeutic products. The process of obtaining these approvals and the
subsequent compliance with appropriate federal and foreign statutes and
regulations require the expenditure of substantial resources. Any failure by us
or our collaborators or licensees to obtain, or any delay in obtaining,
regulatory approval could adversely affect the marketing and revenue generating
potential of our products. We have neither applied for nor received regulatory
approval to market any human therapeutic products.

         The steps required before a pharmaceutical agent may be marketed in the
United States include:

     o    preclinical laboratory, in vivo and formulation studies;

     o    the submission to the FDA of an investigational new drug, or IND,
          application that must become effective before human clinical trials
          may commence;

     o    adequate and well controlled human clinical trials to establish safety
          and efficiency of the proposed drug in its intended indication;

     o    the submission of a new drug application, or NDA, to the FDA; and

     o    the FDA approval of the NDA.

         To clinically test, produce and market products for diagnostic or
therapeutic use, a company must comply with mandatory procedures and safety
standards established by the FDA and comparable agencies in foreign countries.
Before beginning human clinical testing of a potential new drug, a company must
file an IND and receive clearance from the FDA. The IND is a summary of the
preclinical studies which were carried out to characterize the drug, including
toxicity and safety studies, as well as an in-depth discussion of the human
clinical studies which are being proposed. Approval of a local institutional
review board, or IRB, and informed consent of trial subjects is also required.

         Human clinical trials are typically conducted in three sequential
phases which may overlap. Phase I involves the initial introduction of the drug
into human subjects or patients where the product is tested for safety, dosage,
tolerance, absorption, metabolism, distribution and excretion. Phase II involves
studies in a limited patient population to:


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<PAGE>

     o    identify possible adverse effects and safety risks;

     o    determine the efficiency of the product for specific, targeted
          indications; and

     o    adequately determine dosage tolerance and optimal dosage.

         When Phase II evaluation demonstrates that the product may be effective
and has an acceptable safety profile, Phase III trials are undertaken to further
evaluate dosage and clinical efficacy and to further test for safety in an
expanded patient population at multiple clinical study sites. A pivotal Phase
III trial is an adequate and well-controlled study which provides the primary
basis for determining whether there is substantial evidence to support the
claims of effectiveness for new drugs and forms the basis for an NDA. The
regulatory authority or the sponsor may suspend clinical trials at any point in
this process if either entity concludes that clinical subjects are being exposed
to an unacceptable health risk, that the trials are not being conducted in
compliance with applicable regulatory requirements, or for other reasons.

         The results of product development, preclinical studies and clinical
studies are submitted to the FDA as part of an NDA for approval of the marketing
and commercial shipment of the product. The FDA may deny approval of an NDA if
applicable regulatory criteria are not satisfied, or may require additional
data. Even if such data is submitted, the FDA may ultimately decide that the NDA
does not satisfy its criteria for approval. Once issued, a product approval may
be withdrawn if compliance with regulatory standards is not maintained or if
problems occur after the product reaches the market. In addition, the FDA may
require testing and surveillance programs to monitor the effect of approved
products which have been commercialized, and it has the power to prevent or
limit further marketing of a product based upon the results of these
post-marketing programs.

         Satisfaction of these FDA requirements, or similar requirements by
foreign regulatory agencies, typically takes several years, and the time needed
to satisfy them may vary substantially, based upon the type, complexity and
novelty of the drug product. The effect of government regulation may be to delay
or to prevent marketing of potential products for a considerable period of time
and to impose costly procedures upon our or our partner's activities. There can
be no assurance that the FDA or any other regulatory agency will grant approval
for any products being developed by us or our partner on a timely basis, or at
all. Success in preclinical or early stage clinical trials does not assure
success in later stage clinical trials. Data obtained from preclinical and
clinical activities are susceptible to varying interpretations which could
delay, limit or prevent regulatory approval. If regulatory approval of a product
is granted, such approval may impose limitations on the indicated uses for which
a product may be marketed. Further, even if regulatory approval is obtained,
later discovery of previously unknown problems with a product may result in
restrictions on the product, including withdrawal of the product from the
market. Delay in obtaining or failure to obtain regulatory approvals would have
a material adverse affect on our business.

         Before our or our collaboration partners' human therapeutic protein
products, if any, can be marketed outside of the United States, they are subject
to regulatory approval similar to that required in the United States, although
the requirements governing the conduct of clinical trials, product licensing,
pricing and reimbursement vary widely from country to country. No action can be
taken to market any product in a country until an appropriate application has
been approved by the regulatory authorities in that country. The current
approval process varies from country to country, and the time spent in gaining
approval varies from that required for FDA approval. In certain countries, the
sales price of a product must also be approved. The pricing review period often
begins after market approval is granted. No assurance can be given that, even if
a product is approved by a regulatory authority, satisfactory prices will be
approved for our or our collaboration partners' products.

         There is no assurance that the FDA will successfully review our or our
collaboration partners' INDs or NDAs when filed, or that foreign regulatory
authorities will approve any similar applications that we submit to them.
Further, the FDA and foreign authorities may at any time take legal or
regulatory action against a product or us if it concludes that a product has not
complied with applicable laws and regulations or that earlier evaluations of a
product's safety or effectiveness may not have been adequate or appropriate.
Such action may include, but is not limited to, restrictions on manufacture and
shipment of products, seizure of products, injunctions and civil and criminal
penalties. The FDA's policies may change and additional government regulations
may be promulgated which could prevent or delay regulatory approval of our or
our collaboration partners' potential products. Moreover, increased attention to


                                       54
<PAGE>

the containment of health care costs in the United States and in foreign markets
could result in new government regulations which could have a material adverse
effect on our business or our joint ventures or its customers. We cannot predict
the likelihood of adverse governmental regulation which might arise from future
legislative or administrative action, either in the United States or abroad.

SCIENTIFIC ADVISORY BOARD

         We have, since 1999, maintained a scientific advisory board, or SAB,
which meets periodically to discuss R&D results and consult with us on plans for
future R&D activities and our strategies. Because we have diverse areas of
technology, including gene expression, industrial enzymology, biopharmaceutical
production and others, our SAB generally meets several times per year in
subgroups focused on specific disciplines. Currently, our SAB is comprised of
the following persons:

<TABLE>
<CAPTION>
         Name                         Current Position
         ----                         ----------------
<S>                                   <C>
         Richard Lerner, M.D.         President, The Scripps Research Institute, California
         Gerry Fink, Ph.D.            Member/Former Director of Whitehead Institute, MIT
         Michael Kozlowski, Ph.D.     CEO, Kreido Laboratories, California
         Edward McGuire, Ph.D.        Former Vice President, R&D, Neose Technologies, Pennsylvania
         Peter Punt, Ph.D.            Senior Scientist, TNO Food & Nutrition Institute, The Netherlands
         Cees van den Hondel, Ph.D.   Head of fungal research, TNO Food & Nutrition Institute, The
                                      Netherlands
         Arkady Sinitsyn, Ph.D.       Head of Laboratory, Department of Enzymology, Moscow State
                                      University, Russia
</TABLE>

         Richard A. Lerner, M.D., Chairman, Dyadic Scientific Advisory Board.
Dr. Lerner is Professor of Immunochemistry, Chair in Chemistry, and President of
The Scripps Research Institute, one of the largest private, non-profit
scientific research organizations in the world. The Scripps Research Institute
has recently announced plans to establish a major science center in Palm Beach
County, Florida, focusing on biomedical research, technology development, and
drug design. Dr. Lerner is an expert in the field of catalytic antibodies, a
field that takes as its principal goal an understanding of how the binding
energy of proteins can be utilized to facilitate chemical transformations. He
graduated from Northwestern University and Stanford Medical School and received
his postdoctoral training at Scripps Clinic and Research Foundation in
experimental pathology. Dr. Lerner has received numerous honors, including
election to the National Academy of Sciences and the Royal Swedish Academy of
Sciences, and receipt of the Wolf Prize in Chemistry.

         Gerald R. Fink, Ph.D. Dr. Fink is a founding Member of the Whitehead
Institute and American Cancer Society Professor of Genetics at the Massachusetts
Institute of Technology. The Whitehead Institute is a non-profit, independent
research and teaching institution recognized for programs in genomics, cell
biology, cancer research, structural biology and infectious disease. Dr. Fink
served as Director of the Whitehead Institute from 1990 to 2001. He received his
Ph.D. in genetics from Yale University, conducted postdoctoral research at the
National Institutes of Health and served for 15 years on the faculty of Cornell
University. Dr. Fink is an expert in the field of molecular genetics and cell
biology of brewers' yeast and Candida. He leads research into common baker's
yeast to explore critical pathways in cell growth and metabolism. The
applications of this research include cancer research and the development of new
anti-fungal drugs.

         Michael R. Kozlowski, Ph.D. Dr. Kozlowski is Chairman and CEO of Kreido
Laboratories, a newly established California based biotechnology company. Dr.
Kozlowski has nearly 20 years of combined large pharmaceutical company (Pfizer,
Bristol-Myers Squibb) and biotechnology (Geron, Telik, Axiom) experience in
positions of increasing responsibility from Research Scientist (Pfizer) to Chief
Operating Officer (Axiom). Dr. Kozlowski has shown himself to be an effective
translator of promising technologies into tangible results, and has also
demonstrated his business leadership as a member of the executive teams that
advanced Geron and Telik from small, private companies into public companies,
and that successfully folded Axiom into Sequenom through its sale. Dr. Kozlowski
earned a B.S. in Biology from Caltech, and a Ph.D. in Psychobiology from UC
Irvine.


                                       55
<PAGE>

         Edward J. McGuire, Ph.D. Dr. McGuire is a former Vice President of
Research and Development at Neose Technologies, a Pennsylvania based
biopharmaceutical company. He worked at Neose since its inception at the
University of Pennsylvania in 1990 and headed R&D from 1993 to 2002. Dr.
McGuire's scientific expertise is largely in the areas of glycobiology and
cell:cell adhesion. He is an expert on the glycosylation of proteins in various
industrial and pharmaceutical protein expression systems. Dr. McGuire received
his Ph.D. from the University of Illinois Medical School in 1960 and did his
post-doctoral studies at the University of Michigan and Johns Hopkins
University.

         Peter J. Punt, Ph.D. Dr. Punt is an expert on fungal genetics and has
served as senior staff scientist in molecular genetics at TNO Nutrition and Food
Research Institute in the Netherlands since 1983. He has led a variety of high
profile projects in the Department of Applied Microbiology and Gene Technology
at TNO. Dr. Punt received his M.Sc. in Biology from Leiden University and his
Ph.D. in Molecular Genetics from Amsterdam University.

         Cees van den Hondel, Ph.D. Dr. van den Hondel is an expert on fungal
genetics and serves as Professor of gene technology of filamentous fungi at
Leiden University. Dr. van den Hondel is also the Head of Fungal Research in the
Department of Molecular Genetics at TNO Nutrition and Food Research Institute in
the Netherlands. He has coordinated a number of large multinational projects
involving fungal research within the European Community programs. Dr. van den
Hondel obtained his M.Sc. in Biochemistry from Utrecht University and his Ph.D.
in Biochemistry from Nijmegen University.

         Arkady P. Sinitsyn, Ph.D. Dr. Sinitsyn is an expert on enzymology and
has worked with Moscow State University since 1974, first as a researcher, and
since 1989 as the Head of its Laboratory of Physical Chemistry of Enzymatic
Transformation of Polymers. He also serves as Chair of Chemical Enzymology. Dr.
Sinitsyn is a member of the Russian National Research Program on Enzyme
Engineering Council, and received his Ph.D. in Enzymology and Dr. of Sciences in
Enzymology and Biochemistry from Moscow State University.

LEGAL PROCEEDINGS

         We are not a party to any material legal proceedings.


                                       56
<PAGE>

                             DESCRIPTION OF PROPERTY

         Our corporate headquarters are located at 140 Intracoastal Pointe
Drive, Suite 404, Jupiter, Florida, in approximately 5,700 square feet of space
occupied under a lease with a monthly rental rate of $8,000 that expires on
December 31, 2005.

         On July 31, 2004, Dyadic-Florida entered into a contract with a land
developer under which Dyadic-Florida agreed to purchase an undeveloped 1.13 acre
parcel of land with a purchase price of $1.0 million by issuing $1.0 million in
shares of Dyadic-Florida common stock, representing 300,300 shares valued at
$3.33 per share. Incident to the consummation of the merger, we assumed
Dyadic-Florida's obligations to issue shares of our common stock to the
developer in the place of shares of Dyadic-Florida common stock. We view the
parcel, which is in a master planned community known as "Abacoa" located in
Jupiter, Florida, as a desirable location for the eventual construction of a
40,000 square foot facility to serve as both our headquarters and as a R&D
facility, for a number of reasons, including its proximity to the temporary
research facility of The Scripps Research Institute, its good highway access and
other factors. Closing of the sale is subject to a number of contingencies,
including required third party and governmental consents, and is expected to
occur on or before February 21, 2005. Dyadic-Florida has inspection rights which
entitle it to terminate the purchase contract in its absolute discretion. The
contract obligates Dyadic-Florida to commence development of the site within two
years following the closing date, and entitles the developer to repurchase the
site from Dyadic-Florida if Dyadic-Florida has not done so. In that event, the
repurchase price will be the greater of $1.0 million or the then fair market
value of the shares acquired by the developer, except that to the extent the
shares are worth less than $1.0 million, the balance must be paid in cash by the
developer. During this two year period, Dyadic-Florida is prohibited from
re-transferring the site to any other person other than in connection with our
sale or a sale of Dyadic-Florida, or other than to an affiliate or, with the
approval of a majority of our independent directors, to Mr. Emalfarb, the
Francisco Trust or an affiliate of either.


                                       57
<PAGE>

                                   MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

         Our board of directors currently consists of two persons. The following
table sets forth information about all of our directors, executive officers and
key employees:


<TABLE>
<CAPTION>
NAME                        AGE   POSITION                                       YEAR FIRST ELECTED*
----                        ---   --------                                       -------------------
<S>                         <C>   <C>                                                   <C>
Mark A. Emalfarb            49    Director; Chairman, President, Chief Executive        1979
                                  Officer, Secretary and Treasurer
Ratnesh (Ray) Chandra       56    Vice President, Marketing - BioSciences               2000
Kent M. Sproat              58    Vice President, Manufacturing                         1997
Richard Burlingame, Ph.D.   51    Executive Director, Research & Development            2001
Alexander (Sasha) Bondar    32    Executive Director, Business Development              2003
Rufus Gardner               50    Controller                                            2001
Stephen J. Warner**         64    Director                                              2004
Richard Berman **           62    Director                                              2005
</TABLE>


---------


*    Year first elected to position with  Dyadic-Florida.  Messrs.  Emalfarb and
     Warner were elected as  directors,  and all named  officers were elected as
     officers,  of Dyadic on October 29, 2004, upon  consummation of the merger.
     Mr. Berman was appointed as a director on January 11, 2005.

**   Members  of  Audit   Committee,   Compensation   Committee  and  Nominating
     Committee.


DIRECTORS

         The following biographies describe the business experience of our
directors:

         Mark A. Emalfarb. Since founding Dyadic-Florida in 1979, Mr. Emalfarb
has successfully led and managed the evolution of Dyadic-Florida -- from its
origins as a pioneer and leader in providing ingredients used in stone-washing
of blue jeans -- to the discovery, development, manufacturing and
commercialization of specialty enzymes used in various industrial applications
and the development of the C1 Expression System. Mr. Emalfarb is an inventor of
over 25 U.S. and foreign biotechnology patents and patent applications resulting
from discoveries related to Dyadic-Florida's proprietary C1 microorganism, and
has been the architect behind its formation of several strategic R&D,
manufacturing and marketing relationships with U.S. and international partners.
Mr. Emalfarb earned a B.A. degree from the University of Iowa.

         Stephen J. Warner. Mr. Warner has served as a director of
Dyadic-Florida since August 15, 2004. He currently serves as Managing Partner of
Bioform LLC, a newly established Florida-based venture capital fund focused on
investments in biotechnology companies. Mr. Warner has over 25 years of venture
capital experience. In 1981, Mr. Warner founded Merrill Lynch Venture Capital
Inc., a wholly owned subsidiary of Merrill Lynch & Co. Inc. in New York and
served as its President and Chief Executive Officer from 1981 to 1990. Under his
leadership, Merrill Lynch Venture Capital managed over $250 million and made
over 50 venture capital investments. In 1999, Warner co-founded and became
Chairman/CEO, of Crossbow Ventures Inc., a private equity fund that invests in
early and expansion stage technology companies primarily located in Florida and
the Southeast, with over 20 venture capital investments in Florida. Mr. Warner
earned a B.S. degree from the Massachusetts Institute of Technology and an MBA
from the Wharton School of Business, University of Pennsylvania.


         Richard Berman. Mr. Berman was appointed as a director of Dyadic on
January 11, 2005. During the past five years, Mr. Berman has served as Chairman
and CEO of Internet Commerce Corporation. Over the course of his career, he has
worked with several investment banking firms and has extensive experience in
venture capital, management and mergers and acquisitions. He has also served as
a director in the past for numerous companies. His last investment banking firm
position was with Bankers Trust Company from 1975 to 1982, where he served as
Senior Vice President and head of the Merger and Acquisition Department and
Equity Investment Department. Since 1980, he has been a private investor in real
estate developments, and currently owns seven commercial or office properties
located in New York City. Currently, he is a director of five other public
companies - International Microcomputer Software, Inc., Internet Commerce
Corporation, MediaBay, Inc., NexMed, Inc. and GVI Security Solutions Inc. He
also serves as Chairman of two private companies, a financial services company
and a human resources services company that delivers its services over the
internet. He is a past director of the Stern School of Business of New York
University, from which he received B.S. and M.B.A. degrees. He also has U.S. and
foreign law degrees from Boston College and The Hague Academy of International
Law.



                                       58
<PAGE>

EXECUTIVE OFFICERS

         The following biographies describe the business experience of our
officers and key employees. Information concerning the business experience of
Mark A. Emalfarb is set forth above under "Directors."

         Ratnesh (Ray) Chandra. Mr. Chandra joined Dyadic-Florida from Genencor
International in 2000. He had served at Genencor as the Director, New Business
Development since 1993. From 1987 to 1993, he was with Merck & Co. holding the
positions of Director, Business/Market Intelligence and Director, Business
Systems in their Human Health Marketing Division. From 1976 to 1987, he was with
Schering-Plough Corp. in the positions of Director Economic Analysis, Manager
Capital Planning and Senior Operations Analyst. Mr. Chandra has an M.B.A. from
New York University and an M.S. in engineering from Columbia University.

         Kent M. Sproat. Mr. Sproat joined Dyadic-Florida in 1997 from Genencor
International, where since 1996 he served as its Elkhart Site Manager. From 1990
to 1996, Mr. Sproat was Vice President, Manufacturing, of Solvay Enzymes, Inc.
From 1989 to 1990, he was Director of International Manufacturing of the Enzyme
Division of Miles, Inc. Between 1981 and 1990, he served as Plant Manager of
Miles' Elkhart, Indiana and Clifton, New Jersey-based enzyme plants. Between
1973 and 1981, Mr. Sproat was a Production Superintendent at Miles' Citric Acid
Division; Start Up Manager of Miles' citric acid facility in Brazil; and
Production Supervisor and Project Engineer. Mr. Sproat is the recipient of a
patent for his design in the purification process of amylases. Mr. Sproat is a
chemical engineer with a B.S. degree from Purdue University.

         Richard P. Burlingame, PhD. Dr. Burlingame joined Dyadic-Florida in
October 2001 and is focused on leading the Dyadic R&D team in its development of
the C1 Expression System and C1 HTS systems. Prior to that, Dr. Burlingame was a
research manager at BioTechnical Resources, Inc., or BTR, from 1989 to 2001,
leading a number of programs in the areas of metabolic engineering,
biocatalysis, gene expression, and strain and process development for the
production of fungal enzymes. He was the primary liaison and chief scientific
officer for BTR's collaborations with Dyadic. Between 1986 and 1989, Dr.
Burlingame was a researcher at Bio-Technical International, Inc. where he was
primarily involved with generating recombinant strains for the production of
amino acids and development of genetic engineering tools. His postdoctoral work
was at the University of Wisconsin-Madison in the area of bacteriophage genetics
and molecular biology. Dr. Burlingame received his Ph.D. degree in biochemistry
from the University of Minnesota, where he studied microbial biochemistry,
physiology, and genetics and his B.S. degree, also in biochemistry, from the
University of Illinois.

         Alexander (Sasha) Bondar. Mr. Bondar joined Dyadic-Florida in May 2003
from The Aurora Funds, a venture capital firm based in Research Triangle Park,
North Carolina, where he was focused on investing in early stage life sciences
companies. Prior to that, from 1996 to 2001, Mr. Bondar served in a variety of
management roles at Incyte Genomics, now Incyte Corporation, in Palo Alto,
California, and from 1999 to 2001 as Associate Director, Corporate Business
Development. From 1997 to 1999, he served as Manager, Pharmacogenomics Business
Development, and was a major contributor to the successful launch of Incyte's
pharmacogenomics program. From 1996 to 1997, he served as Technical Advisor to
the intellectual property group at Incyte, contributing to the creation of the
largest portfolio of gene patents in the world. Mr. Bondar holds a B.S. degree
in Biotechnology Management from Menlo College and an M.B.A. in Corporate
Finance and Health Sector Management from Duke University's Fuqua School of
Business.

         Rufus K. Gardner, Jr. Mr. Gardner joined Dyadic-Florida in July 2001.
Since 1975, he has held internal audit, cost and management accounting positions
with manufacturers and distributors. He has served as controller of
Dyadic-Florida for the past 3 years. He served with Binnings Pan American
located in Miami, Florida, which is engaged in the manufacturing and
distribution of aluminum fenestration and extrusion products, for six years
prior to joining Dyadic-Florida. Mr. Gardner earned a B.S. degree in Accounting
from the University of Southern Mississippi.


                                       59
<PAGE>

         Our officers are elected annually by our board of directors at a
meeting held following each annual meeting of stockholders, or as necessary and
convenient in order to fill vacancies or newly created offices. Each officer
serves at the discretion of our board of directors. Any officer elected or
appointed by our board of directors may be removed by our board of directors
whenever in its judgment our best interests will be served, but a removal is
without prejudice to the contractual rights, if any, of the person so removed.
See "Employment Agreements."

         We are not aware of any family relationship among any of our directors
or officers.

Board of Directors


         Our board of directors currently consists of three voting members. All
voting members of our board of directors serve in this capacity until their
terms expire or until their successors have been duly elected and qualified. Our
board of directors is divided into three classes that serve staggered three-year
terms. Mr. Berman is a Class I director whose term expires at the annual meeting
of stockholders to be held in 2005. Mr. Warner is a Class II director whose term
expires at the annual meeting of stockholders to be held in 2006. Mr. Emalfarb
is a Class III director whose term expires at the annual meeting of stockholders
to be held in 2007. Newly elected directors and any additional directorships
resulting from an increase in the number of directors will be distributed among
the three classes so that, as nearly as possible, each class will consist of
one-third of the directors.

         Mr. Berman has been designated as our Lead Director. In that capacity,
he is responsible for meeting regularly with our Chairman of the Board and Chief
Executive Officer to review monthly financials, agenda and minutes of committee
meetings and pertinent board issues, presiding, if requested by the board of
directors, as chairman of any of the committees of the board and presiding at
any meetings of the independent and nonemployee directors. He has been appointed
chairman of each of the existing three committees of the board.

         We intend to recruit not less than two and up to four additional
persons to serve on our board of directors. A majority of the members of the
board and all of the members of its committees consist of persons who are
"independent" within the meaning of applicable federal securities laws and the
listing requirements of the Nasdaq Stock Market.

Board Committees

         Our board of directors in January 2005 established three committees:
the Audit Committee, the Nominating Committee and the Compensation Committee.
These committees were constituted to assist our board of directors in carrying
out its duties. In particular, committees of the board of directors will work on
key issues in greater detail than would be practical at a full meeting of the
board of directors. Each committee reviews the results of its meetings with the
full board of directors. Messrs. Warner and Berman are the sole members of each
of the three committees.

         Audit Committee. The Audit Committee will oversee our accounting and
financial reporting processes and the audits of our financial statements. The
Audit Committee will select our independent auditors, review our filings with
the SEC, review the results and scope of audit and other services provided by
our independent auditors, including auditor fees, review and evaluate our audit
and control functions and investigate other areas of concern that may be
manifested in our financial reports or underlying accounting controls and
systems. The Audit Committee is governed by a charter.

         Compensation Committee. The Compensation Committee will be responsible
for the review and approval of objectives for our senior executive officers,
evaluating their performance in light of these objectives and, together with the
other independent members of the board of directors, determining and approving
the compensation of our chief executive officer. The Compensation Committee also
will determine and approve the compensation of our other senior executive
officers based on the recommendations of and after consultation with our chief
executive officer. The Compensation Committee will also make recommendations to
our board of directors on the adoption and amendment of compensation plans and
equity-based plans. The Compensation Committee is governed by a charter.


                                       60
<PAGE>

         Nominating Committee. The Nominating Committee will be responsible for
identifying individuals qualified to become members of the board of directors,
recommending for selection by the board of directors the director nominees for
the next annual meeting of stockholders or to fill any vacancies on the board of
directors, and overseeing the selection and composition of committees of the
board of directors. The Nominating Committee is governed by a charter. The
charter also provides policies and procedures regarding consideration of any
candidates for director recommended by any of our securityholders.

         Recommendations of director candidates by our security holders should
be forwarded to the chairman of the Nominating Committee in care of our
principal business address. Our Bylaws require that stockholders give advance
notice and furnish certain information to us in order for them to nominate a
person for election as a director at a meeting of stockholders.


Director Compensation


         In January 2005, our board of directors adopted a director compensation
policy. Directors who are also employees or officers will not receive any
separate compensation as a director. Other directors who are not our officers or
employees will receive $2,000 per month cash retainer and options to purchase
shares of our common stock under the Dyadic International, Inc. 2001 Equity
Compensation Plan. Upon commencement of a qualified director's service, the
director will receive an option to purchase 30,000 shares of our common stock,
except that the Lead Director will receive options to purchase 50,000 shares.
These options are vested 25% upon grant. The unvested portion of the options
will vest over a four-year period, at a rate of 25% per year, conditioned upon
the director's continued service on the board. The options will generally expire
five years from the date of grant and have an exercise price at least equal to
the fair market value of our common stock on the date of grant as determined in
accordance with the Equity Compensation Plan. At the end of each year, the
qualified directors who served on the board during that year will receive an
additional option to purchase 25,000 shares of our common stock, or a pro rata
portion based on the number of months that the director served on the board
during that year, subject to the same vesting provisions as described above. The
chairman of the Audit Committee will receive an additional $800 per month cash
retainer. All qualified directors will also be reimbursed for their reasonable
travel costs related to attendance at board meetings and meetings of board
committees.

         In accordance with the director compensation policy, in January 2005,
we granted to Mr. Berman an option to purchase 50,000 shares of our common stock
and to Mr. Warner an option to purchase 30,000 shares of our common stock. Both
options are exercisable at $5.93 per share, are 25% vested and have a four-year
vesting schedule as to 75% of the options. Each of the options expires on
December 31, 2009.


                                       61
<PAGE>


Executive Compensation

         The following Summary Compensation Table sets forth, for the years
indicated, all compensation for services, including salary and bonus amounts,
rendered for Dyadic or Dyadic-Florida paid to or earned by its Chief Executive
Officer and its four other most highly compensated executive officers who
received salary and bonus in excess of $100,000 during 2004.


                           SUMMARY COMPENSATION TABLE


<TABLE>
<CAPTION>
                                                                                                      LONG TERM
                                                      ANNUAL COMPENSATION                        COMPENSATION AWARDS
                                                     --------------------                       --------------------
                                                                                                        SECURITIES
                                                                         OTHER ANNUAL     RESTRICTED    UNDERLYING
NAME AND POSITION                   YEAR    SALARY ($)   BONUS ($)(6)  COMPENSATION ($)  STOCK AWARDS     OPTIONS
-----------------                  -----   -----------  ----------     ----------------- -------------  -----------
<S>                                 <C>      <C>          <C>              <C>               <C>          <C>
Mark A. Emalfarb(1)                   2004   300,000          --               --               --            --
     President, Chief Executive       2003   300,000      35,970               --               --            --
     Officer and Director             2002   300,000      32,700               --               --            --

Ratnesh (Ray) Chandra (2)             2004   149,856          --               --               --        10,000
      Vice President, Marketing       2003   144,004      23,250               --            3,716        15,000
      BioSciences                     2002   140,333      13,900               --               --            --

Kent M. Sproat (3)                    2004   145,206          --               --               --        10,000
     Vice President,                  2003   139,505      23,250               --            3,716        10,000
     Manufacturing                    2002   131,667      12,000               --               --            --

Thomas Bailey (4)                     2004   126,880          --               --               --        10,000
     Vice President, Marketing        2003   115,670      25,700               --               --        20,000
     Enzymes                          2002   106,250       6,300               --            4,054            --

Richard Burlingame (5)                2004   133,756          --               --               --        10,000
     Director Research &              2003   129,672      15,500               --            2,477        15,000
     Development                      2002   125,751          --           33,176               --            --


</TABLE>


----------

(1)      Bonuses listed for Mr. Emalfarb for 2002 and 2003 have been accrued,
         but have not yet been paid. We expect to pay these accrued bonuses in
         January 2005.

(2)      Other compensation disclosed was a moving expense reimbursement. Mr.
         Chandra has received the following awards under the Dyadic
         International, Inc. 2001 Equity Compensation Plan ("Dyadic 2001 Equity
         Compensation Plan"): (a) in July 2004, options to purchase 10,000
         shares of common stock at an exercise price of $3.33 for services
         rendered in 2003 and 2004, which are 20% vested and vest as to the
         balance at the rate of 20% for each 12 month period of employment
         thereafter; (b) in July 2004, 3,716 shares of common stock, valued at
         $3.33 per share on the date of issuance for services rendered in 2003,
         which are fully vested; and (c) in July 2003, options to purchase
         15,000 shares of common stock at an exercise price of $4.50 for
         services rendered in 2003 and 2002, which are fully vested.

(3)      Mr. Sproat has received the following awards under the Dyadic 2001
         Equity Compensation Plan: (a) in July 2004, options to purchase 10,000
         shares of common stock at an exercise price of $3.33 for services
         rendered in 2003 and 2004, which are 20% vested and vest as to the
         balance at the rate of 20% for each 12 month period of employment
         thereafter; (b) in July 2004, 3,716 shares of common stock, valued at
         $3.33 per share on the date of issuance for services rendered in 2003,
         which are fully vested; and (c) in July 2003, options to purchase
         10,000 shares of common stock at an exercise price of $4.50 for
         services rendered in 2003 and 2002, which are fully vested.

(4)      Mr. Bailey resigned as an employee and officer effective January 14,
         2005. Prior to his resignation, he had received the following awards
         under the Dyadic 2001 Equity Compensation Plan: (a) in July 2004,
         options to purchase 10,000 shares of common stock at an exercise price
         of $3.33 for services rendered in 2003 and 2004, which are 20% vested
         and vest as to the balance at the rate of 20% for each 12 month period
         of employment thereafter; (b) in July 2004, 4,054 shares of common
         stock, valued at $3.33 per share on the date of issuance for services
         rendered in 2003, which are fully vested; and (c) in July 2003, options
         to purchase 20,000 shares of common stock at an exercise price of $4.50
         for services rendered in 2003 and 2002, which are fully vested.


                                       62
<PAGE>

(5)      Other compensation disclosed was a moving expense reimbursement. Mr.
         Burlingame has received the following awards under the Dyadic 2001
         Equity Compensation Plan: (a) in July 2004, options to purchase 10,000
         shares of common stock at an exercise price of $3.33 for services
         rendered in 2003 and 2004, which are 20% vested and vest as to the
         balance at the rate of 20% for each 12 month period of employment
         thereafter; (b) in July 2004, 2,477 shares of common stock for services
         rendered in 2003, valued at $3.33 per share on the date of issuance.
         which are fully vested; and (c) in July 2003, options to purchase
         15,000 shares of common stock at an exercise price of $4.50 for
         services rendered in 2003 and 2002, which are fully vested.

(6)      Bonus amounts for 2004 have not been determined as of the date of this
         prospectus.


Stock Option Grants


The following table provides information related to options Dyadic-Florida
granted to the named executive officers during 2004. These options were assumed
by us incident to the merger.


                        Option Grants In Last Fiscal Year

                          Number of     Percent of
                          Securities   Total Options
                          Underlying      Granted      Exercise or
                           Options     to Employees     Base Price    Expiration
Name                     Granted (#)  in Fiscal Year      ($/SH)         Date
----                     -----------  --------------   ------------   ----------


Mark A. Emalfarb (1)           --            --                --            --
Ratnesh (Ray) Chandra      10,000           2.9%         $   3.33      07/28/09
Kent M. Sproat             10,000           2.9%         $   3.33      07/28/09
Thomas Bailey              10,000           2.9%         $   3.33      07/28/09
Richard Burlingame         10,000           2.9%         $   3.33      07/28/09


----------


(1) Excludes Bridge Loan Warrants granted to Mr. Emalfarb. See "Certain
Relationships and Related Transactions."

     The following table sets forth information concerning unexercised options
held by the named executive officers as of September 30, 2004. No options were
exercised by the named executive officers during 2003. Except for the exercise
in November 2004 by two of our executives of options granted to them in 2001 by
one of our principal stockholders with respect to previously issued and
outstanding shares, no options were exercised by the named executive officers
during 2004.


                                       63
<PAGE>


            Aggregate Options and Option Values at December 31, 2004




                     Number of Securities Underlying     Value of Unexercised
                          Unexercised Options at        In-The-Money Options at
                          December 31, 2004 (#)       December 31, 2004 ($) (5)
                          ----------------------      --------------------------

Name                   Exercisable    Unexercisable   Exercisable  Unexercisable
----                   -----------    -------------   -----------  -------------

Mark A. Emalfarb (6)         --              --             --            --

Ratnesh (Ray) Chandra    17,000(1)        8,000(1)      39,740        26,960

Kent M. Sproat           12,000(2)        8,000(2)      28,740        26,960

Thomas Bailey            31,000(3)       14,000(3)      70,540        40,160

Richard Burlingame       26,000(4)       14,000(4)      59,540        40,160

----------

(1)  15,000 of the exercisable options have an exercise price of $4.50 per share
     and 2,000 have an exercise price of $3.33, and all of the unexercisable
     options have an exercise price of $3.33.

(2)  10,000 of the exercisable options have an exercise price of $4.50 per share
     and 2,000 have an exercise price of $3.33, and all of the unexercisable
     options have an exercise price of $3.33.

(3)  29,000 of the exercisable options have an exercise price of $4.50 per share
     and 2,000 have an exercise price of $3.33, and 6,000 of the unexercisable
     options have an exercise price of $4.50 and 8,000 have an exercise price of
     $3.33.

(4)  24,000 of the exercisable options have an exercise price of $4.50 per share
     and 2,000 have an exercise price of $3.33, and 6,000 of the unexercisable
     options have an exercise price of $4.50 and 8,000 have an exercise price of
     $3.33.

(5)  Based on the closing bid price for our common stock of $6.70 per share as
     of December 31, 2004.


(6)  Excludes Bridge Loan Warrants owned by Mr. Emalfarb. See "Certain
     Relationships and Related Transactions."


     Mr. Chandra was granted an option to purchase 25,000 shares of common stock
in 2001 from one of our stockholders, the Francisco Trust, for services rendered
in 2001 and 2000. The option was exercisable at a price of $4.50 per share. On
November 3, 2004, Mr. Chandra exercised in its entirety this option to purchase
shares from the Francisco Trust by executing and delivering to the Francisco
Trust an exercise agreement under which he agreed to pay the entire exercise
price, together with interest at a rate of 2.37% per annum, on the first to
occur of October 31, 2005 or 60 days following the date of Mr. Chandra's
termination of employment with us.

     Mr. Sproat was granted an option to purchase 50,000 shares of common stock
in 2001 from one of our stockholders, the Francisco Trust, for services rendered
in 2001 and 2000. The option was exercisable at a price of $2.00 per share. On
November 3, 2004, Mr. Sproat exercised in its entirety this option to purchase
shares from the Francisco Trust by executing and delivering to the Francisco
Trust an exercise agreement under which he agreed to pay the entire exercise
price, together with interest at a rate of 2.37% per annum, on the first to
occur of October 31, 2005 or 60 days following the date of Mr. Sproat's
termination of employment with us.


                                       64
<PAGE>

Dyadic International, Inc. 2001 Equity Compensation Plan

     Incident to the consummation of the merger, we assumed the Dyadic
International, Inc. 2001 Equity Compensation Plan adopted by Dyadic-Florida in
2001. The Equity Compensation Plan provides for the grant of options intended to
qualify as incentive stock options or nonstatutory stock options that are not
intended to so qualify, and awards of shares and stock appreciation rights.
Options or awards may be granted to our employees, officers, directors,
consultants and advisors and those of our subsidiaries. In addition to 832,500
shares of common stock we have reserved for issuance for outstanding options
granted under the Equity Compensation Plan, we presently have an additional
4,301,323 shares reserved for future options and awards under the Equity
Compensation Plan, subject to adjustment in the event of a stock split, stock
dividend, recapitalization or similar capital change. The Equity Compensation
Plan is administrated by a plan administrator, presently the Compensation
Committee of our board of directors, which:

     o    selects the eligible persons to whom awards and options are granted;

     o    determines the number of shares subject to each award or option, the
          exercise price or purchase price for options, vesting or
          exercisability schedules, and such other terms and conditions as the
          administrator deems necessary or appropriate;

     o    interprets the provisions of the Equity Compensation Plan; and

     o    may,  subject to certain  limitations,  amend the Equity  Compensation
          Plan.

Each award or option granted under the Equity Compensation Plan is required to
be evidenced by a written agreement between us and the recipient of the award or
option.

         The exercise period, vesting schedule and the exercise price for all
options granted under the Equity Compensation Plan is determined by the plan
administrator. The exercise price for incentive stock options may not be less
than the fair market value of our common stock on the date the option is
granted, except for incentive stock options granted to 10% stockholders, which
must have an exercise price of not less than 110% of the fair market value of
our common stock on the date the option is granted. The exercise price for all
nonstatutory stock options must be equal to or greater than the fair market
value of our common stock. Incentive stock options have a maximum term of ten
years, except for 10% stockholders who are subject to a maximum term of five
years. Options are not transferable other than by will and the laws of descent
and distribution. Options generally expire not later than 90 days following a
termination of employment, 12 months following the optionee's disability, or not
later than 12 months following the optionee's death. If any option expires,
terminates or is canceled for any reason, or if shares of stock issued subject
to a right of repurchase are repurchased by us, the shares allocable to the
unexercised option or the repurchased shares will become available for
additional option grants under the Equity Compensation Plan. The Equity
Compensation Plan also confers discretion upon the plan administrator to
accelerate the vesting schedules applicable to all awards and options upon the
occurrence of a change of control. The term "change in control" is defined under
the Equity Compensation Plan to mean:

     o    a sale of all or substantially all of our assets, or our liquidation
          or dissolution, or a merger or consolidation in which our stockholders
          immediately prior to the transaction own less than a majority of the
          voting securities of the surviving corporation;

     o    the commencement of a tender offer for 30% or more of the voting power
          of our outstanding shares of common stock;
     o    any person coming to own more than 50% of the voting power of our
          outstanding shares of common stock; or

     o    a change in the composition of our board of directors, in which less
          than two-thirds of its members have been members for two consecutive
          years.



                                       65
<PAGE>

Employment Agreements

         We have employment agreements with two of our named executive officers.
In April 2001, Dyadic-Florida and Mark A. Emalfarb, our chief executive officer
and the founder of Dyadic-Florida, entered into an Employment Agreement pursuant
to which he has been employed by Dyadic-Florida as its President and Chief
Executive Officer which we assumed incident to the consummation of the merger
with Dyadic-Florida. The initial term was for three years with automatic
two-year renewals unless either party furnishes the other a notice of
non-renewal not less than 60 days prior to the expiration of the then term.
Because no notice of termination has been furnished by either party, the current
expiration of the employment agreement is April 2006. Mr. Emalfarb's base annual
compensation was initially fixed at $300,000. He is eligible to earn a bonus
annually based upon goals and objectives mutually agreed upon by him and our
board of directors. Mr. Emalfarb has received no salary increases since the
employment agreement was executed. The employment agreement is terminable only
on account of Mr. Emalfarb's death or disability, by us only "for Cause," and by
Mr. Emalfarb only "for Good Reason." The phrase "for Cause" is defined to
include failure to substantially perform assigned duties for a period of 20 days
following a written demand for his substantial performance that identifies the
manner in which he has failed to substantially perform, a material breach of the
employment agreement, a material breach of his proprietary rights agreement with
us, his illegal or gross misconduct which is willful and causes damages to us,
the conviction of a felony or plea of no contest, substance abuse or violation
of our policies against racial or sexual discrimination. The phrase "for Good
Reason" is defined to mean the assignment of duties to Mr. Emalfarb inconsistent
with his position, our failure to honor our compensation commitments to Mr.
Emalfarb fixed by his employment agreement, our failure to cause Mr. Emalfarb to
be elected to our Board of Directors and our demotion of Mr. Emalfarb. If Mr.
Emalfarb's employment is terminated by us other than "for Cause" or by Mr.
Emalfarb "for Good Reason," he is entitled to receive a one year severance
benefit plus an amount equal to a portion of his annual bonus for the preceding
year, prorated for the portion of the current year worked. For its benefit,
Dyadic-Florida also maintains a term life insurance policy insuring Mr.
Emalfarb's life in the face amount of $5,000,000.

         In May 2000, Dyadic-Florida and Ratnesh (Ray) Chandra entered into an
employment agreement pursuant to which Mr. Chandra is employed by Dyadic-Florida
as its Vice President, Marketing - BioSciences . We assumed this agreement
incident to the consummation of the merger with Dyadic-Florida. The initial term
was two years with automatic one-year renewals unless either party furnishes the
other a notice of non-renewal not less than 60 days prior to the expiration of
the then term. Because no notice of termination has been furnished by either
party, the current expiration of the employment agreement is May 2005. Mr.
Chandra `s base annual compensation was initially fixed at $135,000, and has
been increased to $151,300, and he is eligible to earn a bonus annually based
upon goals and objectives mutually agreed upon by Dyadic-Florida's board and
him. The employment agreement is terminable on account of Mr. Chandra's death or
disability, by us without cause or "for Cause" and by him "for Good Reason." The
phrase "for Cause" is defined to include failure to substantially perform
assigned duties for a period of 20 days following a written demand for his
substantial performance that identifies the manner in which he has failed to
substantially perform, a material breach of the employment agreement, a material
breach of his proprietary rights agreement with us, his illegal or gross
misconduct which is willful and causes damages to us, the conviction of a felony
or plea of no contest, substance abuse or violation of our policies against
racial or sexual discrimination. The phrase "for Good Reason" is defined to mean
the assignment of duties to Mr. Chandra inconsistent with his position, our
failure to honor our compensation commitments to Mr. Chandra fixed by his
employment agreement, our geographic relocation of Mr. Chandra, a reduction in
Mr. Chandra's salary or reduction in his pension or other employee benefits or a
"Change of Control." The phrase "Change of Control" is defined to mean the
acquisition of majority voting control of our board of directors within one year
following the occurrence of a merger or combination, a material change in our
business that causes us to either cease to function in the biotechnology field,
including by reason of our bankruptcy, or to be engaged in the conduct of that
business in the State of Florida, a merger or consolidation in which we are not
the survivor, the sale of all or substantially all of our assets or our
liquidation. If Mr. Chandra's employment is terminated by us other than "for
Cause" he is entitled to receive either 90 days advance notice or, in lieu of
that advance notice, payment of his salary for that period of time. Mr. Chandra
is required to furnish us with 90 days prior written notice of his resignation
other than for Good Reason, in which case he is required to furnish us with only
30 days prior written notice.


         Incident to the consummation of the merger with Dyadic-Florida, we have
also assumed the rights and obligations of Dyadic-Florida under confidential
information, inventions assignment and non-compete agreements between
Dyadic-Florida and each of Mr. Emalfarb, Mr. Chandra, Mr. Kent Sproat, our Vice
President, Manufacturing, Mr. Richard Burlingame, Ph.D., our Executive Director
- Research & Development, Mr. Alexander (Sasha) Bondar, our Executive Director -
Business Development, and another individual who was our Vice President,
Marketing-Enzymes at the date of the merger. Under the terms of these
agreements, each executive confers upon us customary proprietary rights in
respect of our confidential information and intellectual work product
contributed to by them, as well as his covenant not to compete with our business
while employed by us and for three years after the termination of his
employment.


                                       66
<PAGE>

                                 STOCK OWNERSHIP


         The following table sets forth information regarding the number of
shares of our common stock beneficially owned on January 19, 2005, by:


     o    any person or "group," as that term is used in Section 13(d)(3) of the
          Securities Exchange Act of 1934, known to us to own beneficially more
          than five percent of the outstanding shares of our common stock,

     o    each of our directors,


     o    each of our past or present executive officers named in the Summary
          Compensation Table, and


     o    all of our directors and executive officers as a group.

         Except as indicated below, the persons named in the table have sole
voting and investment power with respect to all shares shown as beneficially
owned by them, subject to community property laws, where applicable. Unless
otherwise indicated, the address for each more than 5% stockholder is c/o Dyadic
International, Inc., 140 Intracoastal Pointe Drive, Suite 404, Jupiter, Florida
33477. Beneficial ownership is determined in accordance with the rules of the
SEC and generally includes voting or investment power with respect to
securities. Percentage of beneficial ownership is based on 22,231,105 shares
outstanding as of January 19, 2005.


<TABLE>
<CAPTION>
                                                                Shares Issuable Pursuant to
                                               Number               Options, Warrants &              Percentage
                                              of Shares            Convertible Securities            of Shares
                                            Beneficially                Exercisable                 Beneficially
          Beneficial Owner                      Owned                 Within 60 Days                 Owned (1)
          ----------------                      -----                 ---------------                ---------
<S>                                            <C>                        <C>                           <C>
Mark A. Emalfarb (2)                           5,570,827                  1,527,732                     29.9%

The Francisco Trust (3)                        4,422,041                    222,537                     20.7%
   c\o Robert S. Levin, Esq.
   Levin & Ginsburg, Ltd.
   180 N. LaSalle, Suite 3200
   Chicago, Illinois 60601

Thomas Bailey                                      4,056                     31,000                         *

Richard Berman                                         -                     12,500                         *

Ratnesh (Ray) Chandra                             28,716                     17,000                         *

Kent Sproat                                       53,716                     12,000                         *

Richard Burlingame                                 2,477                     26,000                         *

Stephen Warner (4)                               300,000                    157,500                      2.0%
   400 N. Flagler Drive, Suite 1601
    West Palm Beach, FL 33401

All executive officers and directors           5,959,792                  1,783,732                     32.0%
as a group (5)
</TABLE>


----------

*     Denotes less than one percent (1.0%).


                                       67
<PAGE>

(1)   The percentages of beneficial ownership as to each person, entity or group
      assume the exercise or conversion of all options, warrants and convertible
      securities held by such person, entity or group which are exercisable or
      convertible within 60 days, but not the exercise or conversion of options,
      warrants and convertible securities held by others shown in the table.

(2)   Held of record by the Mark A. Emalfarb Trust U/A/D October 1, 1987, for
      which Mr. Emalfarb serves as sole trustee, and represents the rights to
      purchase 1,092,500 shares under Bridge Loan Warrants, and 251,298 shares
      pursuant to the terms of a convertible note originally in the principal
      amount of $750,766, but increased to $836,824 on October 29, 2004, to
      reflect accrued interest of $86,058 through that date, at $3.33 per share.

(3)   Includes the right to purchase 222,537 shares pursuant to the terms of a
      convertible note originally in the principal amount of $664,838, but
      increased to $741,047 on October 29, 2004, to reflect accrued interest of
      $76,209 through that date, at $3.33 per share. The Francisco Trust has as
      its beneficiaries the spouse and descendants of Mark A. Emalfarb, and as
      its trustee an unrelated third party, Robert S. Levin, Esq.


(4)   All securities held of record by Bioform, LLC, of which Mr. Warner is the
      managing member, except for warrants to purchase 7,500 shares at $5.93 per
      share that are held of record by Mr. Warner.


(5)   Includes beneficial ownership of all persons listed other than the
      Francisco Trust.


                                       68
<PAGE>

                 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         Our President and Chief Executive Officer, Mark A. Emalfarb, is the
trustee and beneficiary of the Mark A. Emalfarb Trust, which is our largest
stockholder. the Mark A. Emalfarb Trust and our second largest stockholder, the
Francisco Trust, whose sole beneficiaries are the spouse and descendants of Mr.
Emalfarb, have made loans to Dyadic-Florida, which we assumed in connection with
the merger. The trustee for the Francisco Trust is not related to or affiliated
with Mr. Emalfarb or the Mark A. Emalfarb Trust. The aggregate amount of our
indebtedness to the Mark A. Emalfarb Trust and the Francisco Trust is
approximately $4.0 million, as of October 31, 2004, which is owed to them
pursuant to the terms of three separate debt instruments:

     o    $836,824 pursuant to a subordinated promissory note made payable to
          the Mark A. Emalfarb Trust dated May 30, 2001, bearing interest at the
          rate of 6% per annum and originally convertible into shares of Dyadic
          common stock, which we refer to as the Emalfarb Convertible Note;

     o    $741,048 pursuant to a subordinated promissory note made payable to
          the Francisco Trust dated May 30, 2001, bearing interest at the rate
          of 6% per annum and originally convertible into shares, which we refer
          to as the Francisco Convertible Note; and

     o    $2,424,941 pursuant to a revolving note made payable to the Mark A.
          Emalfarb Trust dated May 29, 2003 and bearing interest at the rate of
          8% per annum, which we refer to as the Bridge Loan Note. In connection
          with the Bridge Loan Note, warrants, which we refer to as the Bridge
          Loan Warrants, were issued to purchase 1,500,000 shares of
          Dyadic-Florida common stock for the lesser of $4.50 or the conversion
          price of the Series A convertible preferred stock of Dyadic-Florida
          then outstanding.

         In August 2004, the Mark A. Emalfarb Trust and Dyadic-Florida entered
into an agreement to facilitate the consummation of the merger. In accordance
with this agreement, subject to consummation of the merger:

     o    The Mark A. Emalfarb Trust agreed to exchange indebtedness of
          Dyadic-Florida to the trust in the amount of $1,225,000 for 367,868
          shares of our common stock and warrants to purchase 183,934 shares of
          our common stock;

     o    Each of the Emalfarb Convertible Note, the Francisco Convertible Note
          and the Bridge Loan Note were amended to extend their due date from
          January 1, 2005 to January 1, 2007 and to permit their prepayment in
          whole or part by Dyadic-Florida without premium or penalty;

     o    The conversion prices under the Emalfarb Convertible Note and
          Francisco Convertible Note were amended to fix the conversion price at
          $3.33 per share in lieu of the then current fair market value of
          shares of Dyadic-Florida common stock; and

     o    The Bridge Loan Warrants were amended to fix their exercise price at
          $3.33 per share.

The amendments to the convertible notes and warrants will cause us to recognize
additional borrowing costs of approximately $350,000 on October 29, 2004, which
will be amortized over the period from October 30, 2004 through January 1, 2007,
and to recognize a beneficial conversion feature of $554,000 in October 2004.
All accrued and unpaid interest due under the Emalfarb Convertible Note, the
Francisco Convertible Note and the Bridge Loan Note on the date of the
completion of the merger were added to the principal amount due under those
notes. Interest under the notes accruing after October 29, 2004, is payable on a
quarterly basis until the principal sum is paid in full.

                                       69
<PAGE>


         Mr. Emalfarb, Stephen J. Warner and Richard Berman, our three board
members, are each parties to indemnification agreements pursuant to which we
agreed to indemnify them against any liability arising out of their performance
of their duties to us in their capacities as directors. The agreements with
Messrs. Emalfarb and Warner were entered into by Dyadic-Florida on August 19,
2004 and assumed by us incident to the merger. Incident to the consummation of
the merger, they were amended to substitute applicable Delaware law for any
references contained in those agreements to Florida law. The agreement with Mr.
Berman was entered into directly with us in January 2005 when he became a
director. All of these indemnification agreements indemnify our directors in
addition to the indemnification provided by our restated certificate of
incorporation and amended and restated bylaws. Among other things, these
agreements indemnify our directors for certain expenses, including attorneys'
fees, judgments, fines and settlement amounts incurred by them in any action or
proceeding, including any action by or in the right of Dyadic arising out of
such person's services to us or to any of our subsidiaries or any other company
or enterprise to which such person provides services at our request. Further, we
agree to advance expenses they spend as a result of any proceeding against them
as to which they could be indemnified. At present, there is no pending
litigation or proceeding involving any of our directors where indemnification
will be required or permitted, and we are not aware of any threatened litigation
or proceeding that may result in a claim for such indemnification.
restated certificate of incorporation and amended and restated bylaws. Among
other things, these agreements indemnify our directors for certain expenses,
including attorneys' fees, judgments, fines and settlement amounts incurred by
them in any action or proceeding, including any action by or in the right of
Dyadic arising out of such person's services to us or to any of our subsidiaries
or any other company or enterprise to which such person provides services at our
request. Further, we agree to advance expenses they spend as a result of any
proceeding against them as to which they could be indemnified. At present, there
is no pending litigation or proceeding involving any of our directors where
indemnification will be required or permitted, and we are not aware of any
threatened litigation or proceeding that may result in a claim for such
indemnification.



                                       70
<PAGE>

                              SELLING STOCKHOLDERS

GENERAL

         This prospectus relates to the offer and sale from time to time:

     o    by stockholders of the Company of up to 20,577,967 outstanding shares
          of common stock,

     o    by the holders of outstanding warrants of a maximum of 6,952,776
          shares of common stock that may be issued upon the exercise of the
          warrants owned by them,

     o    by the holders of outstanding options of a maximum of 65,000 shares of
          common stock that may be issued upon the exercise of the options owned
          by them,

     o    by the holders of outstanding convertible notes of a maximum of
          473,835 shares of common stock that may be issued upon conversion of
          the notes owned by them, and

     o    by F&C Holdings, LLC of up to 300,300 shares of common stock that may
          be issued to that company upon the consummation of a real estate
          purchase contract.

TRANSFER RESTRICTIONS

         Our officers and key employees beneficially owning a total of 5,661,976
shares of common stock and options or warrants to acquire an additional
1,665,520 shares of common stock have signed lock-up agreements under which
these officers and key employees have agreed not to offer, sell or otherwise
dispose of their shares of common stock for a period of at least the earlier of
one year following the date of this prospectus or April 29, 2006.

         Non-management holders of 2,323,520 outstanding shares of common stock
have also signed lock-up agreements under which these holders have agreed not to
offer, sell or otherwise dispose of these shares of common stock for a period of
at least the earlier of six months after the date of this prospectus or October
29, 2005. In addition, 50% of these shares will remain subject to these lock-up
restrictions until the earlier of one year following the date of this prospectus
or April 29, 2006.

         Upon the expiration of all lock-up agreements, these shares will become
eligible for sale in the public market, assuming the shares continue to be
registered for sale by the selling stockholders or, if not registered, subject
to the provisions of Rule 144. We may, with the consent of the placement agents
for our private placement offering consummated in early November 2004, elect to
waive the lock-up restrictions as to any resale of these restricted shares. None
of the other holders of our outstanding shares of common stock were required to
execute any lock-up agreement by the placement agents. Neither the Company nor,
to the Company's knowledge, the placement agents have any current plans or
understandings to waive, shorten or modify the foregoing lock-up arrangements.

IDENTITY AND OWNERSHIP OF SELLING STOCKHOLDERS

         The following table sets forth:

     o    the name of each selling stockholder,


     o    the number of shares of common stock owned by each selling stockholder
          as of January 19, 2005,

     o    the number of shares of common stock that may be issued to each
          selling stockholder under outstanding options, warrants or convertible
          notes as of January 19, 2005,


     o    the maximum number of shares of common stock that may be offered for
          the account of each selling stockholder under this prospectus, and


                                       71
<PAGE>

     o    the number of shares and percentage of common stock that would be
          owned by each selling stockholder after completion of the offering,
          assuming the sale of all of the common stock that may be offered by
          this prospectus.

Except as otherwise noted below and elsewhere in this prospectus, the selling
stockholders have not, within the past three years, had any position, office or
other material relationship with the Company.

<TABLE>
<CAPTION>
                                                           SHARES
                                                       ISSUABLE UNDER             MAXIMUM
                                     SHARES               OPTIONS,               NUMBER OF        OWNERSHIP AFTER
                                      OWNED              WARRANTS OR         SHARES TO BE SOLD    THE OFFERING (3)
                                BEFORE OFFERING         CONVERTIBLE          IN THE OFFERING     ------------------
       NAME                            (1)                  NOTES                   (2)          SHARES   PERCENT(4)
------------------------------  ----------------       -----------------    ------------------   ------   ----------
<S>                                 <C>                    <C>                     <C>              <C>      <C>
Marc Abrams                           3,003  (9)             1,502  (10)             4,505            0       *
Elise Abrams-Kraut                   15,000  (6)             7,500  (5)             22,500            0       *
Elise Abrams-Kraut                   15,015  (9)             7,508  (10)            22,523            0       *
Betty Alperstein                      5,556  (6)                                     5,556            0       *
Morley Alperstein (21)               11,111  (6)                                    11,111            0       *
Alpha Capital A.G.                   75,075  (9)            37,538  (10)           112,613            0       *
Francis A. Anania                    16,667  (6)                                    16,667            0       *
Scott Andrews                        25,000  (9)            12,500  (10)            37,500            0       *
Anno, L.P.                            7,500  (9)             3,750  (10)            11,250            0       *
Apogee Fund, L.P.                   150,150  (9)            75,075  (10)           225,225            0       *
Thomas and Barbara Asarch             7,508  (9)             3,754  (10)            11,262            0       *
Asset Managers                       75,075  (9)            37,538  (10)           112,613            0       *
    International Ltd.
Atlantis Software P/S                10,000  (9)             5,000  (10)            15,000            0       *
Avia Eilon Trust dated               30,000  (9)            15,000  (10)            45,000            0       *
    May 14, 1999
Sally White Ayres                     7,500  (6)             3,750  (5)             11,250            0       *
Thomas Bailey (7)                     4,054  (6)                                     4,054            0       *
George Ball                           7,507  (9)             3,753  (10)            11,260            0       *
Bargia Investments LLC                7,500  (6)             3,750  (5)             11,250            0       *
Jana Bartholomew                      7,508  (9)             3,753  (10)            11,261            0       *
Bascom Baynes                        30,000  (9)            15,000  (10)            45,000            0       *
Allan M. Benton                       6,000  (6)             3,000  (5)              9,000            0       *
Allen Berger                          7,508  (9)             3,753  (10)            11,261            0       *
BSF US Special                      225,225  (9)           112,613  (10)           337,838            0       *
    Opportunities Trust
    PLC
BH Capital Investments LP            30,000  (9)            15,000  (10)            45,000            0       *
Richard G. Binetti                   26,111  (6)             7,500  (5)             33,611            0       *
Richard G. Binetti                                          25,000  (12)            25,000            0       *
Bioform LLC                         300,000  (6)           150,000  (5)            450,000            0       *
Bio-Technical Resources             300,300  (6)                                   300,300            0       *
    Division of Arkion
    Life Services LLC (20)
Jeffrey Bogatin                      50,000  (9)            25,000  (10)            75,000            0       *
Alexander V. Bondar (7)               3,716  (6)                                     3,716            0       *
Daniel Brams                          5,556  (6)                                     5,556            0       *
Brean Murray & Co.,                  16,102  (6)           371,595  (8)            387,697            0       *
    INC. (8)                                 (8)
Bristol Investment Fund             150,150  (9)            75,075  (10)           225,225            0       *
    Ltd.
Richard A. Bruno                     22,222  (6)            50,000  (12)            72,222            0       *
</TABLE>

                                       72
<PAGE>

<TABLE>
<CAPTION>
                                                           SHARES
                                                       ISSUABLE UNDER             MAXIMUM
                                     SHARES               OPTIONS,               NUMBER OF        OWNERSHIP AFTER
                                      OWNED              WARRANTS OR         SHARES TO BE SOLD    THE OFFERING (3)
                                BEFORE OFFERING         CONVERTIBLE          IN THE OFFERING     ------------------
       NAME                            (1)                  NOTES                   (2)          SHARES   PERCENT(4)
------------------------------  ----------------       -----------------    ------------------   ------   ----------
<S>                                 <C>                    <C>                     <C>              <C>      <C>
Robert D. and Jennifer B.            44,444  (6)                                    44,444            0       *
    Burke
Richard Burlingame (7)                2,477  (6)                                     2,477            0       *
Lawrence Burstein                    15,015  (9)             7,508  (10)            22,523            0       *
Albert E. Bush, Trustee               7,507  (9)             3,753  (10)            11,260            0       *
Bernard C. Byrd, Jr.,                30,000  (9)            15,000  (10)            45,000            0       *
    Trustee
Anthony Robert Campbell              26,111  (6)             7,500  (5)             33,611            0       *
Capital Growth                       60,060  (9)            30,030  (10)            90,090            0       *
    Investments Trust
Martin Cass                           7,500  (6)             3,750  (5)             11,250            0       *
Ratnesh Chandra (7)                  25,000  (23)                                   25,000            0       *
Ratnesh Chandra (7)                   3,716  (6)                                     3,716            0       *
Arnold and Renee Cinmar               9,009  (9)             4,504  (10)            13,513            0       *
Cluny Road Rentals, L.P.            150,000  (6)            75,000  (5)            225,000            0       *
Cobraco Manufacturing,               12,111  (6)                                    12,111            0       *
    Inc.
Richard B. Comiter                    5,556  (6)            12,500  (12)            18,056            0       *
Richard B. Comiter and                7,500  (6)             3,750  (5)             11,250            0       *
    Marilyn Comiter,
    Tenants by the
    Entireties
Commonfund Hedged Equity             32,000  (9)            16,000  (10)            48,000            0       *
The Cordillera Fund, L.P.           100,000  (9)            50,000  (10)           150,000            0       *
Cranshire Capital, L.P.              60,060  (9)            30,030  (10)            90,090            0       *
Crescent International              100,000  (9)            50,000  (10)           150,000            0       *
    Ltd.
Crestview Capital Master            600,600  (9)           300,300  (10)           900,900            0       *
    LLC
Mark N. Davis                        22,522  (9)            11,261  (10)            33,783            0       *
DCOFI Master LDC                     30,030  (9)            15,015  (10)            45,045            0       *
Erick S. Klefos (19)                 10,000  (9)             5,000  (10)            15,000            0       *
Steven J. Denholtz                   15,000  (6)             7,500  (5)             22,500            0       *
Stewart F. Denholtz                   7,500  (6)             3,750  (5)             11,250            0       *
Conrad DeSantis and                  30,000  (6)            15,000  (5)             45,000            0       *
    Patricia DeSantis,
    JTWROS
Robert Dressler                      11,111  (6)                                    11,111            0       *
Dreyfoos 2004 Charitable              3,000  (6)             1,500  (5)              4,500            0       *
    Remainder Unitrust
End of the Rainbow LLLP              11,111  (6)                                    11,111            0       *
Steven R. Elliott                     7,507  (9)             3,753  (10)            11,260            0       *
Mark A. Emalfarb (7) (15)         5,570,827  (13)        1,527,732  (14)         7,098,559            0       *
Charles & Anna Essman                15,015  (9)             7,508  (10)            22,523            0       *
    Irrevocable Trust
    dated 12/22/95
Excalibur Limited                   180,000  (9)            90,000  (10)           270,000            0       *
    Partnership
Martin Farber                        15,000  (6)             7,500  (5)             22,500            0       *
Edward Feigeles                                             16,666  (11)            16,666            0       *
Edward Feigeles and                  11,111  (6)                                    11,111            0       *
    Kathryn Green
</TABLE>

                                       73
<PAGE>

<TABLE>
<CAPTION>
                                                           SHARES
                                                       ISSUABLE UNDER             MAXIMUM
                                     SHARES               OPTIONS,               NUMBER OF        OWNERSHIP AFTER
                                      OWNED              WARRANTS OR         SHARES TO BE SOLD    THE OFFERING (3)
                                BEFORE OFFERING         CONVERTIBLE          IN THE OFFERING     ------------------
       NAME                            (1)                  NOTES                   (2)          SHARES   PERCENT(4)
------------------------------  ----------------       -----------------    ------------------   ------   ----------
<S>                                 <C>                    <C>                     <C>              <C>      <C>
FEQ GAS, LLC                         30,030  (9)            15,015  (10)            45,045            0       *
F & C Holdings LLC                                         300,300  (18)           300,300            0       *
William and Bettina Foody             7,508  (9)             3,753  (10)            11,261            0       *
Forest Hill Select                    5,750  (9)             2,875  (10)             8,625            0       *
    Offshore, Ltd.
Forest Hill Select Fund,            244,250  (9)           122,125  (10)           366,375            0       *
    Ltd.
Forich Group Limited                 30,030  (9)            15,015  (10)            45,045            0       *
Four JR Investments, Ltd.                                  100,000  (12)           100,000            0       *
Four JR Investments, Ltd.           120,000  (6)            60,000  (5)            180,000            0       *
Francisco Trust U/A/D             4,422,041  (6)           222,537  (16)         4,644,578            0       *
    February 28, 1996 (17)
Edwin Freedman                       30,000  (9)            15,000  (10)            45,000            0       *
Corie Fromkin                         5,556  (6)                                     5,556            0       *
Samuel Fromkin                                             100,000  (12)           100,000            0       *
Samuel and Ivee Fromkin              11,111  (6)                                    11,111            0       *
Rufus Gardner (7)                       945  (6)                                       945            0       *
Robert A. Garvy Revocable            22,222  (6)                                    22,222            0       *
    Trust U/A/D June 21,
    1994
Andrew Golding                        7,505  (9)             3,753  (10)            11,258            0       *
Good Steward Trading                 10,100  (9)             5,050  (10)            15,150            0       *
    Company SPC
Pamler E. Gozzo                       9,999  (6)             5,000  (5)             14,999            0       *
Robert and Jennifer Grandi           15,015  (9)             7,508  (10)            22,523            0       *
Robert D. Grandi and                  7,500  (6)             3,750  (5)             11,250            0       *
    Jennifer A. Grandi,
    JTWROS
Michael B. Gray                       7,500  (9)             3,750  (10)            11,250            0       *
Bill and Johnnie Haak                 7,500  (9)             3,750  (10)            11,250            0       *
Neil Herbst                           4,500  (6)             2,250  (5)              6,750            0       *
Seth J. Herbst                                              15,000  (11)            15,000            0       *
Seth J. Herbst                                              12,500  (12)            12,500            0       *
Highgate House Funds, Ltd.          150,150  (9)            75,075  (10)           225,225            0       *
David J. Hooper                     200,000  (6)                                   200,000            0       *
Romuald Ikauniks                     11,111  (6)                                    11,111            0       *
Incline Capital, L.P.                50,000  (9)            25,000  (10)            75,000            0       *
Intellectual Property                75,000  (9)            37,500  (10)           112,500            0       *
    Investment Partners,
    LLC
David Jay                            30,000  (6)            15,000  (5)             45,000            0       *
David and Barbara Jay                30,000  (9)            15,000  (10)            45,000            0       *
J&S Denholtz Family                   7,500  (6)             3,750  (5)             11,250            0       *
    Limited Partnership
Matthew Johnson                      15,015  (9)             7,508  (10)            22,523            0       *
Nathan Johnson                        7,508  (9)             3,753  (10)            11,261            0       *
Charles Johnston                     11,111  (6)            16,667  (11)            27,778            0       *
Douglas Kaplan                       11,111  (6)                                    11,111            0       *
Douglas Kaplan, Trustee              26,111  (6)             7,500  (5)             33,611            0       *
    f/b/o Barbara Kaplan
Douglas Kaplan, Trustee              26,111  (6)             7,500  (5)             33,611            0       *
    f/b/o Leslie Kaplan
</TABLE>

                                       74
<PAGE>

<TABLE>
<CAPTION>
                                                           SHARES
                                                       ISSUABLE UNDER             MAXIMUM
                                     SHARES               OPTIONS,               NUMBER OF        OWNERSHIP AFTER
                                      OWNED              WARRANTS OR         SHARES TO BE SOLD    THE OFFERING (3)
                                BEFORE OFFERING         CONVERTIBLE          IN THE OFFERING     ------------------
       NAME                            (1)                  NOTES                   (2)          SHARES   PERCENT(4)
------------------------------  ----------------       -----------------    ------------------   ------   ----------
<S>                                 <C>                    <C>                     <C>              <C>      <C>
Emily Kaplan                         11,111  (6)                                    11,111            0       *
Eileen Katz                           7,443  (9)             3,722  (10)            11,165            0       *
Michael D. Kennedy                    4,500  (6)             2,250  (5)              6,750            0       *
Michael Kent                          2,000  (9)             1,000  (10)             3,000            0       *
Kingsbridge Capital                  45,045  (9)            22,523  (10)            67,568            0       *
Knott Partners L.P.                 253,000  (9)           126,500  (10)           379,500            0       *
Eugene M. Kornhaber                  15,000  (9)             7,500  (10)            22,500            0       *
Brian Kuhn                           45,000  (9)            22,500  (10)            67,500            0       *
Alan Lebow and Patricia               7,500  (6)             3,750  (5)             11,250            0       *
    Lebow, Tenancy by
    Entireties
Mark Leszczynski                     15,015  (9)             7,508  (10)            22,523            0       *
Robert S. Levin Trust                13,056  (6)             3,750  (5)             16,806            0       *
    u/a/d October 22, 1971
Barbara S. Lewin                      3,000  (6)             1,500  (5)              4,500            0       *
Barbara S. Lewin                      3,003  (9)             1,502  (10)             4,505            0       *
Alyssa B. List                        1,502  (9)               751  (10)             2,253            0       *
Alyssa B. List                        1,500  (6)               750  (5)              2,250            0       *
Jaimie Luciani                        3,778  (6)                                     3,778            0       *
Jodi Luciani                          3,667  (6)                                     3,667            0       *
Marni Luciani                         3,667  (6)                                     3,667            0       *
Richard Luciani                       7,508  (9)             3,753  (10)            11,261            0       *
Richard and Ruth Luciani             11,111  (6)                                    11,111            0       *
Ruth Luciani                                                37,500  (12)            37,500            0       *
M&M Capital, LLC                     15,015  (9)             7,508  (10)            22,523            0       *
Meyer Magid                           7,500  (6)             3,750  (5)             11,250            0       *
Meyer Magid                           7,508  (9)             3,753  (10)            11,261            0       *
Andrew J. Malik                      11,111  (6)            16,667  (11)            27,778            0       *
David E. Mann                        10,000  (9)             5,000  (10)            15,000            0       *
Matterhorn Offshore Fund            205,000  (9)           102,500  (10)           307,500            0       *
    Ltd.
Kevin and Henriette May              22,222  (6)                                    22,222            0       *
Marnee Fromkin Mccaren                5,556  (6)                                     5,556            0       *
Stacy Smith McNamara                  7,508  (9)             3,753  (10)            11,261            0       *
Rune & Elisa Medhus                  25,000  (9)            12,500  (10)            37,500            0       *
Edmund H. Melhado                    25,000  (9)            12,500  (10)            37,500            0       *
Mercantile Capital                  600,600  (9)           300,300  (10)           900,900            0       *
    Partners I, L.P.
MFN LLC                              75,075  (9)            37,538  (10)           112,613            0       *
Marie K. Mildren                      7,507  (9)             3,753  (10)            11,260            0       *
Joel Leslie Millman                   7,508  (9)             3,753  (10)            11,261            0       *
Mintz Levin Investments,             33,333  (6)                                    33,333                    *
    LLC
Charles Moche                        10,000  (9)             5,000  (10)            15,000            0       *
Nautica Holdings, Inc.              150,150  (9)            75,075  (10)           225,225            0       *
Rush Neill Family                   111,111  (6)                                   111,111            0       *
    Investment Partnership
Nite Capital LP                      45,045  (9)            22,523  (10)            67,568            0       *
Dean S. Oakey                        30,000  (9)            15,000  (10)            45,000            0       *
</TABLE>

                                       75
<PAGE>

<TABLE>
<CAPTION>
                                                           SHARES
                                                       ISSUABLE UNDER             MAXIMUM
                                     SHARES               OPTIONS,               NUMBER OF        OWNERSHIP AFTER
                                      OWNED              WARRANTS OR         SHARES TO BE SOLD    THE OFFERING (3)
                                BEFORE OFFERING         CONVERTIBLE          IN THE OFFERING     ------------------
       NAME                            (1)                  NOTES                   (2)          SHARES   PERCENT(4)
------------------------------  ----------------       -----------------    ------------------   ------   ----------
<S>                                 <C>                    <C>                     <C>              <C>      <C>
Dermot O'Brien                        6,000  (6)             3,000  (5)              9,000            0       *
Odin Partners LP                     30,030  (9)            15,015  (10)            45,045            0       *
T. Scott O'Keefe                      7,507  (9)             3,753  (10)            11,260            0       *
Robert Pedlow                        15,000  (9)             7,500  (10)            22,500            0       *
Peking Singer Biotech               140,000  (6)                                   140,000            0       *
    Partners
The Pinnacle Fund, L.P.             111,111  (6)                                   111,111            0       *
The Pinnacle Fund, L.P.           1,000,000  (9)           500,000  (10)         1,500,000            0       *
W. Randolph Piper, III                7,507  (9)             3,753  (10)            11,260            0       *
    and Sara Creed Piper
Carl Pipes                            7,508  (9)             3,753  (10)            11,261            0       *
Carter D. Pope                       30,000  (9)            15,000  (10)            45,000            0       *
Gerald W. Pope Revocable              7,507  (9)             3,753  (10)            11,260            0       *
    Trust
Louis E. Price, Trustee               7,500  (6)             3,750  (5)             11,250            0       *
    of Louis E. Price
    Living Trust dated
    May 22, 1990
Ptarmigan & Eden Asset               15,015  (9)             7,508  (10)            22,523            0       *
    Management, Ltd.
Suresh Rajamanickam, M.D.             9,000  (6)             4,500  (5)             13,500            0       *
    & Nisha Bhardwaj,
    M.D., JTWROS
Chuck Ramsay, Jr.                    15,015  (9)             7,508  (10)            22,523            0       *
Jan Rask                             15,015  (9)             7,508  (10)            22,523            0       *
Harold S. Reed & Kate M.             30,000  (6)            15,000  (5)             45,000            0       *
    Reed, JTWROS
Renaissance US Growth               225,225  (9)           112,613  (10)           337,838            0       *
    Investment Trust PLC
Erick Richardson                     15,015  (9)             7,508  (10)            22,523            0       *
Ridgewood Limited                    15,015  (9)             7,508  (10)            22,523            0       *
Gene Salkind, M.D.                   30,000  (9)            15,000  (10)            45,000            0       *
Sanders 1998 Children's              15,015  (9)             7,508  (10)            22,523            0       *
    Trust
Don A. Sanders                       22,523  (9)            11,261  (10)            33,784            0       *
Katherine U. Sanders                 15,015  (9)             7,508  (10)            22,523            0       *
Sanders Morris Harris                16,102  (6)           371,595  (8)            387,697            0       *
    Inc. (8)                                 (8)
Sanders Opportunity Fund             17,925  (9)             8,961  (10)            26,886            0       *
    LP
Sanders Opportunity Fund             57,150  (9)            28,575  (10)            85,725            0       *
    (INST) LP
Richard and Cheri Sarner             22,222  (6)                                    22,222            0       *
Scott M. & Peggy Schecter            15,015  (9)             7,508  (10)            22,523            0       *
Robert I. Schwimmer                 105,556  (6)                                   105,556            0       *
Blake Selig                           7,507  (9)             3,753  (10)            11,260            0       *
David L. Shadid                      15,015  (9)             7,508  (10)            22,523            0       *
Mel A. Shaftel                       30,000  (9)            15,000  (10)            45,000            0       *
Shoshone Partners, L.P.              93,000  (9)            46,500  (10)           139,500            0       *
Norman F. Siegel                     30,000  (6)            15,000  (5)             45,000            0       *
</TABLE>

                                       76
<PAGE>

<TABLE>
<CAPTION>
                                                           SHARES
                                                       ISSUABLE UNDER             MAXIMUM
                                     SHARES               OPTIONS,               NUMBER OF        OWNERSHIP AFTER
                                      OWNED              WARRANTS OR         SHARES TO BE SOLD    THE OFFERING (3)
                                BEFORE OFFERING         CONVERTIBLE          IN THE OFFERING     ------------------
       NAME                            (1)                  NOTES                   (2)          SHARES   PERCENT(4)
------------------------------  ----------------       -----------------    ------------------   ------   ----------
<S>                                 <C>                    <C>                     <C>              <C>      <C>
Ita Friedman and Philip               1,502  (9)               751  (10)             2,253            0       *
    Sieradski
Richard Singer                       22,523  (9)            11,261  (10)            33,784            0       *
Robert Albert Smeaton                10,000  (9)             5,000  (10)            15,000            0       *
Robert Albert Smeaton                                       50,000  (12)            50,000            0       *
Robert Albert Smeaton                15,000  (6)             7,500  (5)             22,500            0       *
Denis and Barbara Smith              11,111  (6)                                    11,111            0       *
William A. Solemene                 100,000  (9)            50,000  (10)           150,000            0       *
Kent Sproat (7)                      50,000  (23)                                   50,000            0       *
Kent Sproat                           3,716  (6)                                     3,716            0       *
Stonestreet Limited                 135,135  (9)            67,568  (10)           202,703            0       *
    Partnership
Sunrise Equity Partners,            150,150  (9)            75,075  (10)           225,225            0       *
    L.P.
Larry T. Tabloff and                  2,100  (6)             1,050  (5)              3,150            0       *
    Karen A. Tabloff,
    Tenants-in-Common
Henri I. Talerman                    60,060  (9)            30,030  (10)            90,090            0       *
Richard Taney                         9,000  (9)             4,500  (10)            13,500            0       *
Mary C. Tanner                       30,030  (9)            15,015  (10)            45,045            0       *
Thornaby Limited                     30,030  (9)            15,015  (10)            45,045            0       *
Tiberius Investment &               150,150  (9)            75,075  (10)           225,225            0       *
    Capital
M. Paul Tompkins                     15,000  (9)             7,500  (10)            22,500            0       *
Univest Management Inc.,             11,111  (6)                                    11,111            0       *
    E.P.S.P.
James E. Vanek                       15,000  (6)             7,500  (5)             22,500            0       *
Joseph Vassallo and                  15,000  (6)             7,500  (5)             22,500            0       *
    Patricia Vassallo,
    JTWROS
Vincent Vazquez                      15,015  (9)             7,508  (10)            22,523            0       *
Vision Capital Advisors              22,523  (9)            11,261  (10)            33,784            0       *
Robert A. Vitale, Jr.                                       20,000  (12)            20,000            0       *
Robert A. Vitale, Jr.                10,056  (6)             2,250  (5)             12,306            0       *
Vitel Ventures                      225,000  (6)           112,500  (5)            337,500            0       *
VLC Properties, LP                   22,522  (9)            11,261  (10)            33,783            0       *
Joseph H. Wein                        3,000  (6)             1,500  (5)              4,500            0       *
Edwin L. Weprinsky (22)               5,556  (6)                                     5,556            0       *
Westpark Capital, L.P.              200,000  (9)           100,000  (10)           300,000            0       *
Whalehaven Capital Fund              60,060  (9)            30,030  (10)            90,090            0       *
    Limited
Robert Wilensky                       7,507  (9)             3,754  (10)            11,261            0       *
Winton Capital Holdings             200,000  (9)           100,000  (10)           300,000            0       *
    Ltd.
William N. and Kimberly              10,000  (9)             5,000  (10)            15,000            0       *
    C. Woodworth
Ken Wormser                          30,000  (6)            15,000  (5)             45,000            0       *
Donald D. Wren                      150,000  (6)            75,000  (5)            225,000            0       *
Donald D. Wren                       75,075  (9)            37,538  (10)           112,613            0       *
Winston D. Wren                      30,000  (6)            15,000  (5)             45,000            0       *
Winston D. Wren                      45,045  (9)            22,523  (10)            67,568            0       *
Telly Zachariades                     7,500  (6)             3,750  (5)             11,500            0       *
</TABLE>

                                       77
<PAGE>

<TABLE>
<CAPTION>
                                                           SHARES
                                                       ISSUABLE UNDER             MAXIMUM
                                     SHARES               OPTIONS,               NUMBER OF        OWNERSHIP AFTER
                                      OWNED              WARRANTS OR         SHARES TO BE SOLD    THE OFFERING (3)
                                BEFORE OFFERING         CONVERTIBLE          IN THE OFFERING     ------------------
       NAME                            (1)                  NOTES                   (2)          SHARES   PERCENT(4)
------------------------------  ----------------       -----------------    ------------------   ------   ----------
<S>                                 <C>                    <C>                     <C>              <C>      <C>
Telly Zachariades                     7,508(9)               3,754(10)              11,262            0       *
Louis Zehil                           3,003(9)               1,502(10)               4,505            0       *
                                 ----------              ---------              ----------        -----     ----
         TOTAL:                  20,577,967              7,791,911              28,369,878            0
                                 ==========              =========              ==========        =====
</TABLE>

----------
*    Represents less than 1%.


(1)  Ownership as of January 19, 2005, for all selling stockholders is based
     upon information provided by the selling stockholders or known to us.


(2)  The number of shares in this column includes 20,577,967 presently
     outstanding shares of our common stock, a maximum of 7,791,911 shares of
     our common stock issuable upon the exercise of presently outstanding
     options or warrants to purchase our common stock and upon the conversion of
     presently outstanding promissory notes that are convertible into our common
     stock.

(3)  Assumes the sale of all shares of common stock registered pursuant to this
     prospectus, although the selling stockholders are under no obligation known
     to us to sell any shares of common stock at this time.


(4)  Based upon 22,231,105 shares of common stock outstanding on January 19,
     2005. The shares issuable under instruments to purchase our common stock
     that are currently exercisable within 60 days of that date, are treated as
     outstanding for purposes of computing the percentage ownership of the
     person holding these instruments, but are not treated as outstanding for
     purposes of computing the percentage ownership of any other person.


(5)  Represents shares purchasable under Investor Warrants expiring in October
     2009 and exercisable at $5.50 per share of common stock. These Investor
     Warrants were issued to former Dyadic-Florida shareholders who were
     investors in the private placement offering by Dyadic-Florida completed in
     July 2004.

(6)  Represents shares of common stock issued to former Dyadic-Florida
     shareholders as a result of the merger consummated on October 29, 2004.

(7)  Executive officer or key employee of the Company. See "Management."

(8)  Placement agent for our private placement offering completed in November
     2004. 16,102 shares of common stock were issued by Dyadic-Florida as an
     initial engagement fee. Upon completion of the offering, we issued to the
     placement agent Investor Warrants to purchase 123,865 shares of common
     stock expiring in October 2009 and exercisable at $5.50 per share, and
     another class of warrants to purchase 247,730 shares of common stock
     expiring in October 2009 and exercisable at $3.33 per share. The placement
     agent may transfer these warrants or shares to its employees, officers or
     directors prior to their sale under this prospectus, subject to compliance
     with applicable securities laws.

(9)  Represents shares of our common stock issued in our private placement
     offering completed in early November 2004.

(10) Represents shares purchasable under Investor Warrants expiring in October
     2009 and exercisable at $5.50 per share of common stock. These Investor
     Warrants were issued to investors in our private placement offering
     completed in early November 2004.

(11) Represents shares purchasable under options expiring May 24, 2006 and
     exercisable at $4.50 per share. These options were not issued under the
     Dyadic International, Inc. 2001 Equity Incentive Plan.


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<PAGE>

(12) Represents shares purchasable under Bridge Loan Warrants expiring in May
     2013 and exercisable at $3.33 per share.

(13) Represents 5,202,959 shares of common stock issued to the Mark A. Emalfarb
     Trust for its Dyadic-Florida shares as a result the merger and 367,868
     shares of common stock issued to the Mark A. Emalfarb Trust in exchange for
     cancellation of $1,225,000 of debt owed to the trust.

(14) Represents 1,092,500 shares purchasable under Bridge Loan Warrants
     exercisable at $3.33 per share, 251,298 shares purchasable upon the
     conversion of a convertible note in the amount of $836,824 at $3.33 per
     share, and 183,934 shares purchasable under Investor Warrants exercisable
     at $5.50 per share.

(15) All securities are held of record by the Mark A. Emalfarb Trust U/A/D
     October 1, 1987 for which Mr. Emalfarb serves as the sole trustee.

(16) Represents shares of common stock purchasable upon the conversion of a
     convertible note in the amount of $741,047, at $3.33 per share.

(17) The Francisco Trust has as its beneficiaries the spouse and descendants of
     Mark A. Emalfarb, and as its trustee an unrelated third party, Robert S.
     Levin, Esq.

(18) Represents shares of common stock that may be issued upon the closing of
     our purchase of certain real estate. See "Description of Property."

(19) Represents securities held of record in an Individual Retirement Account by
     Delaware Charter.

(20) Represents shares held of record by Mark J. Gunderson, Esq., as escrow
     agent under Development Agreement dated as of July 20, 2004 between the
     selling stockholder and Dyadic-Florida. The shares will be released from
     escrow and transferred to the selling stockholder as payment for R&D
     services being rendered by the selling stockholder to us.

(21) Represents shares of common stock held of record in an Individual
     Retirement Account by Mesirow Financial Inc., as custodian.

(22) Represents shares of common stock held of record in an Individual
     Retirement Account by Neuberger Berman Trust Company.

(23) Represents shares purchased on November 3, 2004 upon exercise of options to
     purchase shares from the Francisco Trust.

DESCRIPTION OF TRANSACTIONS

         Merger. On October 29, 2004, we completed the merger of our newly
created, wholly owned subsidiary with and into Dyadic International (USA), Inc.,
or Dyadic-Florida, a Florida corporation formerly known as Dyadic International,
Inc. At the time of the merger, Dyadic-Florida had 92 shareholders.
Dyadic-Florida survived the merger and, as a result, became our wholly owned
subsidiary. To consummate the merger, we issued 12,580,895 shares of our common
stock to former shareholders of Dyadic-Florida in exchange for the cancellation
of all of the outstanding shares of common stock of Dyadic-Florida.

         Incident to the merger, we assumed, on a one-share for one-share basis,
the obligations of Dyadic-Florida to issue:

     o    1,500,000 shares of common stock in respect of the Bridge Loan
          Warrants, at an exercise price of $3.33 per share, which expire on May
          29, 2013;


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<PAGE>

     o    shares upon the conversion of two convertible notes in the adjusted
          aggregate face principal amounts of $1,577,871, at the price of $3.33
          per share, which are convertible at the option of their holders into
          473,835 shares of common stock, and which mature on January 1, 2007;

     o    752,500 shares of common stock purchasable under outstanding options
          previously issued by Dyadic-Florida in accordance with the Dyadic
          International, Inc. 2001 Compensatory Equity Plan assumed by the
          Registrant;

     o    711,050 shares of common stock that may be purchased, at the price of
          $5.50 per share, under warrants expiring in October 2009, which
          warrants were issuable to certain former shareholders of
          Dyadic-Florida who invested in a private placement completed by
          Dyadic-Florida in July 2004 and are identical to the warrants issued
          to investors in the private placement offering described below;

     o    65,000 shares of common stock that may be purchased pursuant to
          outstanding options, at an exercise price of $4.50, which expire May
          24, 2006; and

     o    300,300 shares to be issued to a real estate developer as described in
          the prospectus under "Description of Properties," which is
          incorporated herein by this reference.


With respect to the 752,500 then outstanding options described in the
immediately preceding paragraph:


     o    options to purchase 270,500 shares are exercisable at the price of
          $3.33 per share, options to purchase 457,000 shares are exercisable at
          the price of $4.50 per share, and options to purchase 25,000 shares
          are exercisable at the price of $4.66 per share,

     o    the term of each option is five years from the date of grant, and

     o    in general, the options become exercisable in increments over periods
          of time ranging from two to five years from the date of grant.

         Offering. In early November 2004, in connection with the merger, we
completed a private placement offering in which we sold 7,629,204 investment
units, at a purchase price of $3.33 per unit, consisting of an aggregate of
7,629,204 shares of common stock and warrants to purchase 3,814,602 shares of
common stock, or Investor Warrants, having an exercise price of $5.50 per share,
to approximately 75 investors. The terms of the Investor Warrants are described
under "Description of Securities - Investor Warrants." These securities were
offered and sold by us in reliance on exemption from registration provided by
Rule 506 of Regulation D under the Securities Act.

         In connection with the foregoing private placement offering, we issued
to the placement agents for the offering, Brean Murray & Co., Inc. and Sanders
Morris Harris Inc., aggregate warrants to purchase a total of 247,730 shares of
common stock, at an exercise price of $5.50 per share, having terms similar to
the Investor Warrants, and another class of warrants to purchase an aggregate of
495,460 shares of common stock, at an exercise price of $3.33 per share. These
warrants were issued to the placement agents as partial compensation for their
services in connection with the offering. Prior to the merger, as an initial
engagement fee, Dyadic-Florida issued 16,102 shares of Dyadic-Florida common
stock to each of the placement agents. These shares have been exchanged in the
merger for shares of our common stock.

         Emalfarb Co-Investment. In connection with the consummation of the
foregoing merger and private placement offering, the founder of Dyadic-Florida
and now our Chief Executive Officer and Chairman of our board of directors, Mark
A. Emalfarb, purchased 367,868 investment units, at a purchase price of $3.33
per unit, consisting of 367,868 shares of common stock and Investor Warrants to
purchase 183,934 shares of common stock, in exchange for his cancellation of
$1,225,000 of indebtedness of Dyadic-Florida owed to him.

         Dyadic-Florida Offering. Between April and July 2004, Dyadic-Florida
conducted a private placement offering of its shares. As a result of this
offering and related transactions, Dyadic-Florida issued an aggregate of
1,422,099 shares of its common stock for an effective average per share price of
$3.33 per share. These shares have been exchanged in the merger for shares of
our common stock. The securities were offered and sold by Dyadic-Florida in
reliance on the exemption from registration provided by Rule 506 of Regulation D
under the Securities Act.


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<PAGE>

         In connection with this offering, Dyadic-Florida also committed to
issue to investors warrants to purchase 711,050 shares of common stock identical
to the Investor Warrants issued in our subsequent private placement offering at
a rate of a warrant to purchase one share of common stock for each two shares of
common stock previously purchased by the investors. This obligation was assumed
incident to the merger by us, and we have, since the merger, issued warrants to
purchase 711,050 shares of common stock to these investors.

         Bridge Loan Warrants. The Bridge Loan Warrants were issued as part of
the consideration by Dyadic-Florida for a $3,000,000 revolving bridge loan that
it received in May 2003. This bridge loan was made to Dyadic-Florida by its
syndicate of shareholders led by Mark A. Emalfarb, who himself loaned
$2,185,000, and a group of other Dyadic-Florida shareholders who loaned
$815,000. This loan bears interest at a rate of 8% per annum. The original
exercise price of the Bridge Loan Warrants was the lesser of $4.50 or the
conversion price of the Series A convertible preferred stock of Dyadic-Florida
then outstanding and this price was subject to adjustment under customary
anti-dilution provisions. To facilitate the closing of the November 2004 private
offering and the consummation of the merger, Dyadic-Florida and Mr. Emalfarb
amended the terms of the Bridge Loan Warrants to fix the exercise price at $3.33
per share. For more details regarding these transactions, see "Certain
Relationships and Related Transactions."

         Convertible Notes. In May 2001, Dyadic-Florida borrowed money from Mr.
Emalfarb and the Francisco Trust, which is the beneficial owner of 19.9% of our
outstanding shares of common stock. Dyadic-Florida issued convertible promissory
notes in the face amount of $750,766 payable to Mr. Emalfarb, and $664,838
payable to the Francisco Trust. Each note bears interest at the rate of 6% per
annum. These notes were originally convertible at the then current fair market
value of Dyadic-Florida common stock. To facilitate the consummation of the
merger and the related private placement offering, Dyadic-Florida and Mr.
Emalfarb agreed to fix the conversion price of the notes at $3.33 per share. In
addition, the notes were amended to provide that all accrued and unpaid interest
due under the notes as of the date of closing of the merger would be added to
the principal amount due and to require payment of interest on a quarterly basis
until the principal sum is paid in full. Maturity dates on the notes were also
extended from January 1, 2005, to January 1, 2007, and to permit their
prepayment in whole or in part by Dyadic-Florida without premium or penalty.
These notes were assumed by us in connection with the consummation of the
merger.

         Real Estate Purchase. On July 31, 2004, Dyadic-Florida entered into a
contract with F&C Holdings LLC, a land developer, under which Dyadic-Florida
agreed to purchase an undeveloped 1.13 acre parcel of land at a purchase price
of $1.0 million by issuing 300,300 shares of Dyadic-Florida common stock, valued
at $3.33 per share. Incident to the consummation of the merger, we assumed
Dyadic-Florida's obligations to issue shares of our common stock to the
development to replace of shares of Dyadic-Florida common stock. Closing of the
sale is subject to a number of contingencies, including required third party and
governmental consents, and is expected to occur on or before February 21, 2005.
For more details regarding this transaction, see "Description of Property."

         Shares Issuable for R&D Services. In July 2004, Dyadic-Florida entered
into a development agreement with Bio-Technical Resources, a division of Arkion
Life Sciences LLC, or BTR, under which Dyadic-Florida agreed to pay for 80% of
the $1.25 million worth of R&D services it was contracting to purchase over a
two-year period from BTR, by issuing 300,300 shares of Dyadic-Florida common
stock, valued at $3.33 per share. The Dyadic-Florida shares were issued and held
in an escrow. Incident to the consummation of the merger, we assumed
Dyadic-Florida's obligations with respect to the shares of common stock
deliverable to BTR under the development agreement, and our shares were
exchanged for the Dyadic-Florida shares in escrow. BTR's rights to the shares of
our common stock vest and may be withdrawn from the escrow pro rata to the
dollar value of BTR's actual performance of R&D services, as such services are
billed by BTR on a regular monthly basis over a period expected to be
approximately two years.


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<PAGE>

         Assumption of Non-Plan Options. In May 2001, Dyadic-Florida issued to
four individuals options to purchase an aggregate of 65,000 shares of
Dyadic-Florida common stock. Incident to the merger, we assumed the obligations
of Dyadic-Florida with respect to these options. These options expire on May 24,
2006 and are exercisable at a price of $4.50 per share. These options were not
issued under the Dyadic International, Inc. 2001 Equity Compensation Plan.


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                              PLAN OF DISTRIBUTION

DISTRIBUTION BY SELLING STOCKHOLDERS

         We are registering the shares of our common stock covered by this
prospectus for the selling stockholders. As used in this prospectus, "selling
stockholder" includes the donees, transferees or others who may later hold the
selling stockholder's interests. The selling stockholders will act independently
of us in making decisions with respect to the timing, manner and size of each
sale. The selling stockholders may, from time to time, sell all or a portion of
their shares of common stock on the OTC Bulletin Board or on any national
securities exchange or automated interdealer quotation system on which our
common stock may then be listed or traded, in negotiated transactions or
otherwise, at prices then prevailing or related to the current market price or
at negotiated prices. One or more underwriters, on a firm commitment or best
efforts basis, may sell the shares of common stock directly or through brokers
or dealers or in a distribution. The methods by which the shares of common stock
may be sold include:

     o    a block trade, which may involve crosses, in which the broker or
          dealer engaged will attempt to sell the shares of common stock as
          agent, but may position and resell a portion of the block ,as
          principal, to facilitate the transaction;

     o    purchases by a broker or dealer, as principal, and resales by such
          broker or dealer for its account pursuant to this prospectus;

     o    ordinary brokerage transactions and transactions in which the broker
          solicits purchasers or through marketmakers;

     o    transactions in put or call options or other rights, whether
          exchange-listed or otherwise, established after the effectiveness of
          the registration statement of which this prospectus is a part, and

     o    privately negotiated transactions.

In addition, any of the shares of common stock that qualify for sale pursuant to
Rule 144 promulgated under the Securities Act of 1933, as amended, or Securities
Act, may be sold in transactions complying with that Rule, rather than pursuant
to this prospectus.

         For sales to or through broker-dealers, these broker-dealers may
receive compensation in the form of discounts, concessions or commissions from
the selling stockholder or the purchaser of the shares, or both. We have advised
the selling stockholders that the anti-manipulative provisions of Regulation M
under the Securities Exchange Act of 1934 may apply to their sales in the market
and have informed them that they must deliver copies of this prospectus. We are
not aware, as of the date of this prospectus, of any agreements between any of
the selling stockholders and any broker-dealers with respect to the sale of the
shares of common stock covered by this prospectus.

         The selling stockholders and any broker-dealers or agents participating
in the distribution of our securities may be deemed to be "underwriters" within
the meaning of the Securities Act, and any commissions received by any
broker-dealer or agent and profit on any resale of shares of common stock may be
deemed to be underwriting commissions under the Securities Act. The commissions
received by a broker-dealer or agent may be in excess of customary compensation.
If a selling stockholder is deemed to be an "underwriter," the selling
stockholder may have liability for the accuracy of the contents of this
prospectus under the Securities Act.

         At a time a particular offer of shares is made by a selling
stockholder, a prospectus supplement, if required, will be distributed that will
set forth the names of any underwriters, dealers or agents and any discounts,
commissions and other terms constituting compensation from the selling
stockholders and any other required information.


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<PAGE>

         In connection with distributions of the selling stockholders' shares or
otherwise, the selling stockholders may enter into hedging transactions with
broker-dealers or others prior to or after the effective time of the
arrangement. These broker-dealers may engage in short sales of shares or other
transactions in the course of hedging the positions assumed by them or
otherwise. The selling stockholders may also:

     o    sell shares short and redeliver shares to close out short positions;

     o    enter into option or other transactions with broker-dealers or others
          that may involve the delivery to those persons of the shares, and
          broker-dealers may resell those shares pursuant to this prospectus;
          and

     o    pledge the shares to a broker-dealer or others and, upon a default,
          these persons may effect sales of the shares pursuant to this
          prospectus.

         We have advised the selling stockholders who purchased shares in our
private placement offering completed in early November 2004, that open positions
in shares of common stock covered by this prospectus prior to the registration
statement, of which this prospectus is a part, being declared effective by the
Securities and Exchange Commission may constitute a violation of Section 5 of
the Securities Act. Each of such selling stockholders agreed with us that they
would not have an open position in shares of our common stock prior to the
registration statement being declared effective.

         In order to comply with securities laws of certain states, if
applicable, the shares of our common stock may be sold only through registered
or licensed brokers-dealers.

         The selling stockholders will be subject to applicable provisions of
the Securities Exchange Act of 1934, as amended, and its rules and regulations,
including Rule 102 under Regulation M. These provisions may limit the timing of
purchases and sales of shares of our common stock by the selling stockholders.
Rule 102 under Regulation M provides, with certain exceptions, that it is
unlawful for a selling stockholder or its affiliated purchaser to, directly or
indirectly, bid for or purchase, or attempt to induce any person to bid for or
purchase, for an account in which the selling stockholder or affiliated
purchaser has a beneficial interest in any securities that are the subject of
the distribution during the applicable restricted period under Regulation M. All
of the foregoing may affect the marketability of our common stock.

         The selling stockholders may offer all of the shares of common stock
for sale. Further, because it is possible that a significant number of shares
could be sold at the same time under this prospectus, those sales, or that
possibility, may have a depressive effect on the market price of our common
stock.

         We will receive none of the proceeds from the sale of the shares of
common stock by the selling stockholders. However, some of the shares being
resold under this prospectus by selling stockholders are shares to be issued by
us upon the exercise of warrants or options owned by the selling stockholders.
We will receive the proceeds of the exercise price of these options or warrants,
if and when they are exercised. However, we will receive no proceeds from the
exercise of warrants to purchase 495,460 shares of common stock issued to the
placement agents for our private placement offering completed in early November
2004 if these warrants are exercised on a cashless basis by their holders, as
permitted by the terms of these warrants.

         We will pay all costs and expenses incurred in connection with the
registration under the Securities Act of the shares of common stock offered by
the selling stockholders, including all registration and filing fees, listing
fees, printing expenses, and our legal and accounting fees. Each selling
stockholder will pay all of his, her or its own brokerage fees and commissions,
if any, incurred in connection with the sale of his, her or its shares of common
stock. In addition, in certain cases, we have agreed to indemnify some of the
selling stockholders against certain liabilities, including liabilities under
the Securities Act.

         We cannot assure you that any of the selling stockholders will sell any
or all of the shares of common stock they may offer.


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<PAGE>

                            DESCRIPTION OF SECURITIES


     Our authorized capital stock consists of 100,000,000 shares of common
stock, par value $0.001 per share, and 5,000,000 shares of preferred stock, par
value $0.0001 per share. As of January 19, 2005, there were issued and
outstanding:


     o    22,231,105 shares of common stock;


     o    options to purchase 886,000 shares of common stock at an average
          weighted per share exercise price of $4.29;


     o    warrants to purchase 1,995,460 shares of common stock at an exercise
          price of $3.33 per share;

     o    warrants to purchase 4,957,316 shares of common stock at an exercise
          price of $5.50 per share;

     o    promissory notes convertible, as of October 29, 2004, into 473,835
          shares of common stock at $3.33 per share; and

     o    a contractual obligation to issue 300,300 shares in connection with
          the purchase of certain real estate, which ascribes a $3.33 per share
          value to these shares.

         The following summary of the material provisions of our common stock,
options, warrants, convertible notes, amended certificate of incorporation and
bylaws is qualified by reference to the provisions of applicable law and to our
amended certificate of incorporation and bylaws and the forms of warrants
included as exhibits to the registration statement of which this prospectus is a
part.

COMMON STOCK

         Holders of our Common Stock are entitled to receive ratably, from funds
legally available for the payment thereof, dividends when and as declared by
resolution of the board of directors, subject to any preferential dividend
rights which may be granted to holders of any preferred stock authorized and
issued by the board of directors. Holders of our common stock do not have
cumulative voting rights and are entitled to one vote per share on all matters
to be voted upon by stockholders. Our common stock is not entitled to preemptive
rights and is not subject to redemption, including sinking fund provisions, or
conversion. Upon our liquidation, dissolution or winding up, the assets, if any,
legally available for distribution to stockholders are distributable ratably
among the holders of our common stock after payment of all classes or series of
our preferred stock. All outstanding shares of our common stock are validly
issued, fully-paid and nonassessable. The rights, preferences and privileges of
holders of our common stock are subject to the preferential rights of all
classes or series of preferred stock that we may issue in the future.

PREFERRED STOCK

         Our board of directors has the authority, without further action by our
stockholders, to issue from time to time the preferred stock in one or more
series and to fix the number of shares, designations, preferences, powers, and
relative, participating, optional or other special rights and the qualifications
or restrictions thereof. The preferences, powers, rights and restrictions of
different series of preferred stock may differ with respect to dividend rates,
amounts payable on liquidation, voting rights, conversion rights, redemption
provisions, sinking fund provisions and other matters. The issuance of preferred
stock could decrease the amount of earnings and assets available for
distribution to holders of our common stock or affect adversely the rights and
powers, including voting rights, of the holders of common stock. Additionally,
as discussed below, the issuance of preferred stock with voting and/or
conversion rights may adversely affect the voting power of the holders of our
common stock, including the loss of voting control to others.


                                       85
<PAGE>

INVESTOR WARRANTS

         We have issued warrants to purchase shares of our common stock, which
we refer to as the Investor Warrants, in connection with a private placement
offering of shares of our common stock completed in early November 2004 and,
incident to the consummation of the merger, to certain Dyadic-Florida
shareholders who purchased shares of Dyadic-Florida common stock in a private
placement that Dyadic-Florida completed in July 2004. Each Investor Warrant
entitles the holder to purchase one share of our common stock for $5.50 at any
time prior to October 29, 2009, at which time the warrants will expire. The
Investor Warrants can be transferred, subject to compliance with applicable
securities laws, separately from the shares of common stock comprising part of
the investment units in which they were sold. The shares of our common stock
underlying the Investor Warrants, when issued upon exercise and payment of the
purchase price, will be fully paid and nonassessable.

         The Investor Warrants are callable in whole and not in part by us, upon
15 business days' prior notice, at a price of $0.001 per share purchasable under
the Investor Warrant, if the volume weighted average trading price of the common
stock has averaged at least 150% of the Investor Warrant exercise price for a
period of 10 consecutive business days ending within three trading days prior to
the day on which we mail the notice of call to the Investor Warrant holders. In
the event we give notice of our intention to call the Investor Warrants, a
holder would be forced to either exercise his Investor Warrants within 15
business days of the notice of call or accept the call price. We may not call
the Investor Warrants at any time that a current registration statement under
the Securities Act is not then in effect covering the resale of the shares
purchasable under the Investor Warrants and the shares are not listed or quoted
on a national stock exchange, Nasdaq or the OTC Bulletin Board.

         The number and kind of securities or other property for which the
Investor Warrants are exercisable and the Investor Warrant exercise price are
subject to adjustment upon the occurrence of certain events, including mergers,
reorganizations, stock dividends, stock splits, and recapitalizations. Holders
of Investor Warrants have no voting, dividend, or other rights as stockholders
with respect to the shares underlying the Investor Warrants, unless and until
the Investor Warrants are exercised.

         Our exercise of our call right would force a holder of Investor
Warrants either to exercise them and pay to us the exercise price at a time when
it may be disadvantageous for the holder to do so or to accept the nominal call
price. Holders who do not exercise their Investor Warrants prior to the
effectiveness of the call by us will forfeit their right to purchase the shares
of common stock underlying the Investor Warrants.

P/A WARRANTS

         As part consideration for the services provided by the placement agents
in our private placement offering completed in early November 2004, in addition
to Investor Warrants, these placement agents were also issued warrants to
purchase an aggregate of 495,460 shares of common stock, which we refer to as
the P/A Warrants. The terms of the P/A Warrants are identical to the terms of
the Investor Warrants, except that:

     o    the per share exercise price is $3.33 instead of $5.50,

     o    the P/A Warrants may be exercised on a cashless basis, and

     o    the placement agents may transfer their P/A Warrants to their
          directors, officers and employees, subject to compliance with
          applicable securities laws.

BRIDGE LOAN WARRANTS

         In connection with the bridge loan in the amount of $3,000,000 that
Dyadic-Florida obtained from a syndicate of its shareholders in May 2003,
Dyadic-Florida issued to these lending shareholders warrants to purchase
1,500,000 shares of Dyadic-Florida common stock, which we refer to as the Bridge
Loan Warrants. Incident to the consummation of the merger, we assumed
Dyadic-Florida's obligations under these Bridge Loan Warrants. The exercise
price of the Bridge Loan Warrants was originally the lesser of $4.50 or the
conversion price of a Series A convertible preferred stock of Dyadic-Florida
which was redeemed in the first half of 2004. The Bridge Loan Warrants were
amended in August 2004 to fix their exercise price at $3.33 as part


                                       86
<PAGE>

consideration for Mr. Emalfarb's commitment to purchase $1,225,000 in shares of
our common stock and Investor Warrants, at $3.33 per investment unit, upon
consummation of the merger, the extension of the due date of Mr. Emalfarb's
portion of the $3.0 million bridge loan and the surrender of certain
anti-dilution protective provisions formerly existing under the Bridge Loan
Warrants. The Bridge Loan Warrants expire in May 2013.

REGISTRATION RIGHTS

         Pursuant to the terms of the private placement offering completed in
early November 2004, we agreed to file a registration statement registering the
shares of our common stock sold in the offering, or purchasable under the
Investor Warrants sold in the offering, for resale under the Securities Act of
1933 within 60 days following the closing of the Offering. Additionally, we
agreed to use our reasonable best efforts to maintain the effectiveness of the
registration statement, at our expense, through the last to occur of 24 months
after the date of this prospectus or 12 months after the full exercise or
expiration of the Investor Warrants held by investors in that offering. All of
our shares subject to these agreements are included in this prospectus in
accordance with the terms of those agreements, except for those securities for
which the registered owner of the securities did not respond to our requests for
information.

         Incident to the merger, we also agreed to register for resale shares of
our common stock issued to former shareholders of Dyadic-Florida or issuable
upon the exercise of Dyadic-Florida warrants, stock options, other than those
granted under the Dyadic 2001 Equity Compensation Plan, convertible notes and
contractual commitments which we assumed incident to the consummation of the
merger. All of our shares subject to the agreement to register are included in
this prospectus in accordance with the terms of that agreement.

ANTI-TAKEOVER, LIMITED LIABILITY AND INDEMNIFICATION PROVISIONS

         Certificate of Incorporation and Bylaws. Certain provisions in our
restated certificate of incorporation and our bylaws could have the effect of
impeding or discouraging the acquisition of control of us by means of a merger,
tender offer, proxy contest or otherwise, including a transaction in which our
stockholders would receive a premium over the market price for their shares, and
thereby protects the continuity of our management. Specifically, our restated
certificate of incorporation or bylaws contain the following provisions:

     o    Our board of directors is composed of three classes of directors who
          serve staggered three-year terms so that only one-third of the
          directors are eligible for election at any annual meeting of
          stockholders, and cumulative voting in the election of directors is
          specifically denied.

     o    Any action permitted to be taken by our stockholders is required to be
          effected at a duly called annual or special meeting of stockholders
          and cannot be effected by a written consent.

     o    Our stockholders will not be permitted to call a special meeting of
          stockholders, and the only business matters permitted to be conducted
          at any annual or special meeting of stockholders will be business
          matters properly brought before that meeting in accordance with
          specified procedures.

     o    Specific procedures are established for stockholder nominations for
          directors and stockholder proposals of business to be considered at an
          annual or special meeting of stockholders.

     o    Our board of directors establishes the number of directors, and
          vacancies on our board of directors must be filled by a majority
          approval of the remaining directors, and directors may not be removed
          by stockholder action without cause.

     o    Our board of directors is empowered to adopt, amend or repeal our
          bylaws, while our stockholders may adopt, amend or repeal our bylaws
          only upon an affirmative vote of the holders of at least two-thirds of
          the voting power of all then outstanding shares of stock entitled to
          vote.

     o    Our board of directors has the power to designate and establish new
          classes of preferred stock having terms that the board of directors
          determines to be advisable.


                                       87
<PAGE>

     o    With respect to extraordinary matters that are brought to our
          stockholders for a vote, including the sale of all or substantially
          all of our assets, a merger, a consolidation, the conversion of us
          into another type of entity or the amendment of our restated
          certificate of incorporation, unless that matter is affirmatively
          recommended by our board of directors, its approval will require the
          affirmative vote of the holders of at least two-thirds of the voting
          power of all then outstanding shares of stock entitled to vote.

     o    The foregoing provisions of our restated certificate of incorporation
          and bylaws and other provisions pertaining to the limitation of
          liability and indemnification of directors may be amended or repealed
          only with the affirmative vote of the holders of at least two-thirds
          of the voting power of all then outstanding shares of stock entitled
          to vote.

In addition, if in the due exercise of its fiduciary obligations, the board of
directors were to determine that a takeover proposal was not in our best
interest, shares of common stock or preferred stock could be issued by the board
of directors without stockholder approval in one or more transactions that might
prevent or render more difficult or costly the completion of the takeover by:

     o    diluting the voting or other rights of the proposed acquirer or
          insurgent stockholder group;

     o    putting a substantial voting block in institutional or other hands
          that might undertake to support the incumbent board of directors; or

     o    effecting an acquisition that might complicate or preclude the
          takeover.

         The effect of all of the foregoing provisions may be to delay or
prevent a tender offer or takeover attempt that a stockholder may determine to
be in his or her best interest, including attempts that might result in a
premium over the market price for the shares held by the stockholders.

         Delaware Anti-Takeover Law. We are not currently subject to the
provisions of Section 203 of the Delaware General Corporation Law concerning
corporate takeovers. Nevertheless, if our shares of common stock become listed
on a national securities exchange, authorized for quotation on The Nasdaq Stock
Market or held of record by more than 2,000 stockholders, we will become subject
to the provisions of Section 203. Section 203 prevents certain Delaware
corporations from engaging in a business combination with any interested
stockholder, under certain circumstances. For these purposes, a business
combination includes a merger or sale of more than 10% of our assets, and an
interested stockholder includes a stockholder who owns 15% or more of our
outstanding voting stock, as well as affiliates and associates of these persons.
Under these provisions, this type of business combination is prohibited for
three years following the date that the stockholder became an interested
stockholder unless:

     o    the transaction in which the stockholder became an interested
          stockholder is approved by the board of directors prior to the date
          the interested stockholder attained such status;

     o    upon consummation of the transaction that resulted in the
          stockholder's becoming an interested stockholder, the interested
          stockholder owned at least 85% of the voting stock of the corporation
          outstanding at the time the transaction was commenced, excluding those
          shares owned by persons who are directors and also officers; or

     o    on or subsequent to that date, the business combination is approved by
          the board of directors and authorized at an annual or special meeting
          of stockholders by the affirmative vote of at least two-thirds of the
          outstanding voting stock that is not owned by the interested
          stockholder.

         This statute could prohibit or delay mergers or other takeover or
change-in-control attempts with respect to us and, accordingly, may discourage
attempts to acquire us.


                                       88
<PAGE>

         Limited Liability and Indemnification. Our certificate of incorporation
eliminates the personal liability of our directors for monetary damages arising
from a breach of their fiduciary duty as directors to the fullest extent
permitted by Delaware law. This limitation does not affect the availability of
equitable remedies, such as injunctive relief or rescission. Our certificate of
incorporation and bylaws require us to indemnify our directors and officers to
the fullest extent permitted by Delaware law, including in circumstances in
which indemnification is otherwise discretionary under Delaware law.

         Under Delaware law, we may indemnify our directors or officers or other
persons who were, are or are threatened to be made a party to an action, suit or
proceeding because the person is or was our director, officer, employee or
agent, against expenses, including attorneys' fees, judgments, fines and amounts
paid in settlement actually and reasonably incurred by them in connection with
the action, suit or proceeding if the person:

     o    acted in good faith and in a manner the person reasonably believed to
          be in or not opposed to the best interests of the corporation, and

     o    with respect to any criminal action or proceeding, had no reasonable
          cause to believe the person's conduct was unlawful.

         If the person is found liable to the corporation, no indemnification
shall be made unless the court in which the action was brought determines that
the person is fairly and reasonably entitled, under the circumstances and
despite the adjudication of liability, to indemnity for an amount of expenses
that the court deems proper.

         Insofar as indemnification for liabilities under the Securities Act may
be permitted to directors, officers or persons controlling us pursuant to the
foregoing provisions, we have been informed that, in the opinion of the SEC,
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable.

TRANSFER AGENT AND REGISTRAR

         The transfer agent and registrar for our common stock is Continental
Stock Transfer & Trust Company and its address is 17 Battery Place, New York,
New York 10004-1123.

                         SHARES ELIGIBLE FOR FUTURE SALE


         As of January 19, 2005, we had outstanding an aggregate of 22,231,105
shares of our common stock, assuming no exercises of outstanding options,
warrants and convertible securities. All shares sold in this offering will be
freely tradable without restriction or further registration under the Securities
Act, unless they are purchased by one of our "affiliates," as that term is
defined in Rule 144 promulgated under the Securities Act. A number of the
selling stockholders, however, are subject to lock-up agreements. These lock-up
agreements restrict these selling stockholders from selling all or a portion of
their shares for specified periods. See "Selling Stockholders - Restrictions on
Transfer."


RULE 144

         In general, under Rule 144, as currently in effect, a person who has
beneficially owned shares of our common stock for at least one year, including
the holding period of prior owners other than affiliates, is entitled to sell
within any three-month period a number of shares that does not exceed the
greater of:


     o    1% of the number of shares of our common stock then outstanding, which
          equals 222,311 shares as of January 19, 2005, or


     o    the average weekly trading volume of our common stock on the OTC
          Bulletin Board during the four calendar weeks preceding the filing of
          a notice on Form 144 with respect to that sale.

         Sales under Rule 144 are also subject to manner-of-sale provisions,
notice requirements and the availability of current public information about us.
In order to effect a Rule 144 sale of our common stock, our transfer agent will
require an opinion from legal counsel. We may charge a fee to persons requesting
sales under Rule 144 to obtain the necessary legal opinions.

                                       89
<PAGE>


         As of January 19, 2005, 1,653,138 shares of our common stock currently
outstanding are eligible for sale under Rule 144. After November 2005, an
additional 20,577,967 shares of our common stock currently outstanding will be
eligible for sale under Rule 144.


RULE 144(k)

         Under Rule 144(k), a person who is not deemed to have been one of our
affiliates at any time during the three months preceding a sale and who has
beneficially owned shares for at least two years, including the holding period
of certain prior owners other than affiliates, is entitled to sell those shares
without complying with the manner-of-sale, public information, volume limitation
or notice provisions of Rule 144. Our transfer agent will require an opinion
from legal counsel to effect a Rule 144(k) transaction. We may charge a fee to
persons requesting transactions under Rule 144(k) to obtain the necessary legal
opinions.


         As of January 19, 2005, 1,653,138 shares of our common stock currently
outstanding are eligible for sale pursuant to Rule 144(k).


STOCK PLANS


         As of January 19, 2005, options to purchase 821,000 shares of our
common stock were outstanding under the Dyadic International, Inc. 2001 Equity
Compensation Plan and an additional 4,312,823 shares of our common stock were
reserved for issuance under the plan for options and awards that had not yet
been granted. We intend to file a registration statement on Form S-8 under the
Securities Act covering shares of common stock reserved for issuance under the
plan but not the shares being offered to the holders of outstanding options.
Based on the number of options outstanding and shares reserved for issuance
under our stock option and incentive plans, the Form S-8 registration statement
would cover 5,133,823 shares. The Form S-8 registration statement will become
effective immediately upon filing. At that point, subject to the satisfaction of
applicable exercisability periods and Rule 144 volume limitations applicable to
affiliates, shares of our common stock to be issued upon exercise of outstanding
options subsequently granted pursuant to the plan will be available for
immediate resale in the public market.


                                  LEGAL MATTERS

         The validity of the shares of common stock offered in this prospectus
will be passed upon for us by Jenkens & Gilchrist, a Professional Corporation,
Dallas, Texas. Robert I. Schwimmer, a shareholder in that firm, owns 105,556
shares of our common stock.

                                     EXPERTS

         The financial statements as of December 31, 2003, and for each of the
two years in the period ended December 31, 2003, included in this prospectus
have been audited by Ernst & Young LLP, independent registered public accounting
firm, as stated in its report, appearing herein and have been so included in
reliance upon the report of such firm given upon their authority as experts in
accounting and auditing.

                             CHANGES IN ACCOUNTANTS

         The Company consummated, on October 29, 2004, its acquisition via a
reverse acquisition transaction of Dyadic-Florida.

         The independent registered public accounting firm for the Company was
Sherb & Co., LLP, and the independent auditors for Dyadic-Florida have been
Ernst & Young LLP. Because the reverse acquisition transaction will be treated
as a reverse acquisition for accounting purposes, future historical financial
reports filed by the Company will be those of Dyadic-Florida, the accounting
acquirer. Accordingly, the Company's Board of Directors determined to change its
independent registered public accounting firm from Sherb & Co., LLP to Ernst &
Young LLP. Sherb & Co., LLP was dismissed as the independent registered public
accounting firm of the Company on December 22, 2004, and Ernst & Young LLP was
engaged as the independent registered public accounting firm for the Company on
December 22, 2004. As a result of being the auditors of Dyadic-Florida, Ernst &
Young LLP did have consultations with Dyadic Florida regarding the reverse
acquisition transaction.


                                       90
<PAGE>

         The reports of Sherb & Co., LLP on the Company's financial statements
for the fiscal year ending December 31, 2003 did not contain an adverse opinion
or disclaimer of opinion and were not qualified or modified as to uncertainty,
audit scope or accounting principles, but did include an explanatory paragraph
relating to the Company's ability to continue as a going concern. In connection
with the audit of our financial statement for the fiscal year ended December 31,
2003 and through the date of the dismissal of Sherb & Co., LLP, there were no
disagreements with Sherb & Co., LLP on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure,
which, if not resolved to the satisfaction of Sherb & Co., LLP, would have
caused Sherb & Co., LLP to make reference to the matter in its reports. During
the fiscal year ended December 31, 2003 and through the date of dismissal of
Sherb & Co., LLP, no information is required to be reported under Item
304(a)(1)(iv)(B) of Regulation S-B.


                                       91
<PAGE>

                   INDEX TO CONSOLIDATED FINANCIAL INFORMATION

<TABLE>
<CAPTION>
                                                                                                        PAGE
                                                                                                        ----

<S>                                                                                                      <C>

Index to Consolidated Financial Statements:


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM..................................................F-1

CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2003 (RESTATED) AND SEPTEMBER 30, 2004 (UNAUDITED)........F-2

CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2003 (RESTATED) AND 2002
     AND THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003 (UNAUDITED)...................................F-3

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) FOR THE YEARS ENDED DECEMBER 31, 2003
     (RESTATED) AND 2002 AND THE NINE MONTHS ENDED SEPTEMBER 30, 2004 (UNAUDITED)........................F-4 to F-5

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2003 (RESTATED) AND 2002 AND
     THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003 (UNAUDITED).......................................F-6

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS...............................................................F-7

Index to Unaudited Pro Forma Consolidated Financial Statements:


Unaudited Pro Forma Consolidated Financial Statements (Introductory Note)................................P-1

Unaudited Pro Forma Consolidated Balance Sheet as of September 30, 2004..................................P-2

Unaudited Pro Forma Consolidated Statement of Operations for the Nine Months Ended
   September 30, 2004...................................... .............................................P-3

Unaudited Pro Forma Consolidated Statement of Operations for the Year Ended December 31, 2003............P-4

Notes to Unaudited Pro Forma Consolidated Financial Statements ..........................................P-5

</TABLE>


                                       92
<PAGE>

             Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders
Dyadic International, Inc.

We  have  audited  the  accompanying   consolidated   balance  sheet  of  Dyadic
International, Inc. (a Florida corporation) and subsidiaries (the Company) as of
December  31,  2003,  and the related  consolidated  statements  of  operations,
stockholders'  equity  (deficit) and cash flows for each of the two years in the
period  ended   December  31,  2003.   These   financial   statements   are  the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

Since  the date of  completion  of our  audit of the  accompanying  consolidated
financial  statements and initial issuance of our report thereon dated August 6,
2004,  which report contained an explanatory  paragraph  regarding the Company's
ability to continue as a going concern, the Company, as discussed in Note 1, has
completed a private placement of its common stock resulting in gross proceeds of
approximately  $25.4 million,  satisfied the principal balance of a note payable
to a  stockholder  with shares of common  stock,  and had the maturity  dates of
certain other loans from  stockholders  extended from January 1, 2005 to January
1, 2007.  Therefore,  the conditions that raised substantial doubt about whether
the Company will continue as a going concern no longer exist.

In our opinion,  the financial  statements  referred to above present fairly, in
all  material   respects,   the  consolidated   financial   position  of  Dyadic
International,  Inc. and subsidiaries at December 31, 2003, and the consolidated
results  of their  operations  and their cash flows for each of the two years in
the period ended December 31, 2003, in conformity with U.S.  generally  accepted
accounting principles.

                                            /s/ Ernst & Young LLP
                                            Certified Public Accountants

Fort Lauderdale, Florida

August 6, 2004, except for the section of Note 1 under Merger, Private Placement
   of Common Stock and Other Related  Transactions,  and the first  paragraph of
   Note 2, as to which the date is December 27, 2004.


                                      F-1
<PAGE>

                   Dyadic International, Inc. and Subsidiaries

                           Consolidated Balance Sheets

<TABLE>
<CAPTION>
                                                                            SEPTEMBER 30      DECEMBER 31
                                                                                2004              2003
                                                                            ------------      ------------
                                                                             (UNAUDITED)     (RESTATED - SEE
ASSETS                                                                                           NOTE 2)
<S>                                                                         <C>               <C>
Current assets:
   Cash and cash equivalents                                                $  1,753,199      $  1,649,562
   Accounts receivable, net of allowances of $225,718 at
     September 30, 2004 (unaudited) and $348,997 at December 31, 2003          3,794,929         3,688,366
   Inventory                                                                   5,985,242         4,551,210
   Prepaid expenses and other current assets                                     927,088           281,113
                                                                            ------------      ------------
Total current assets                                                          12,460,458        10,170,251

Fixed assets, net                                                                875,723         1,196,944
Intangible assets, net                                                           213,335           252,431
Goodwill                                                                         467,821           467,821
Other assets                                                                     561,089           261,106
                                                                            ------------      ------------
Total assets                                                                $ 14,578,426      $ 12,348,553
                                                                            ============      ============

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities:
   Accounts payable                                                         $  4,503,502      $  2,487,562
   Accrued expenses                                                            1,090,762         1,265,165
   Current portion of notes payable to stockholders, including
     accrued interest                                                            222,232           327,167
   Current portion of other notes payable                                             --             6,771
   Deferred revenue                                                                   --            45,756
   Income taxes payable                                                           91,967             9,046
                                                                            ------------      ------------
Total current liabilities                                                      5,908,463         4,141,467
                                                                            ------------      ------------

Long-term liabilities:
   Notes payable to stockholders, including accrued interest, net
     of current portion                                                        6,103,350         5,874,162
   Minority interest                                                             149,268            82,180
                                                                            ------------      ------------
Total long-term liabilities                                                    6,252,618         5,956,342
                                                                            ------------      ------------

Commitments and contingencies

Redeemable Series A convertible preferred stock                                       --        11,977,302

Stockholders' equity (deficit):
   Preferred stock, $0.0001 par value, 5,000,000 shares authorized, no
     shares issued and outstanding                                                    --                --
   Common stock, $0.001 par value, 100,000,000 shares authorized,
     13,933,733 and 12,460,806 shares issued and outstanding at
     September 30, 2004 (unaudited) and December 31, 2003, respectively           13,934            12,461
   Additional paid-in capital                                                 23,439,541         7,557,209
   Note receivable from exercise of stock options                               (250,000)         (250,000)
   Accumulated deficit                                                       (20,786,130)      (17,046,228)
                                                                            ------------      ------------
Total stockholders' equity (deficit)                                           2,417,345        (9,726,558)
                                                                            ------------      ------------
Total liabilities and stockholders' equity (deficit)                        $ 14,578,426      $ 12,348,553
                                                                            ============      ============
</TABLE>

See accompanying notes.


                                      F-2
<PAGE>

                   Dyadic International, Inc. and Subsidiaries

                      Consolidated Statements of Operations

<TABLE>
<CAPTION>
                                                         NINE MONTHS ENDED
                                                           SEPTEMBER 30                 YEAR ENDED DECEMBER 31
                                                  -------------------------------- ---------------------------------
                                                       2004            2003              2003            2002
                                                  -------------------------------- ---------------------------------
                                                            (UNAUDITED)            (RESTATED - SEE
                                                                                       NOTE 2)

<S>                                                <C>               <C>               <C>               <C>
 Net sales                                         $ 12,944,314      $ 11,399,713      $ 16,780,147      $ 10,026,736

Cost of goods sold                                    9,818,967         8,571,195        12,596,925         7,992,294
                                                   ------------      ------------      ------------      ------------
Gross profit                                          3,125,347         2,828,518         4,183,222         2,034,442
                                                   ------------      ------------      ------------      ------------

Expenses:
   Research and development                           2,533,531         2,609,296         3,571,242         3,144,462
   Sales and marketing                                1,373,728         1,248,592         1,749,023         1,141,344
   General and administrative                         2,055,803         1,864,419         2,307,540         2,420,234
                                                   ------------      ------------      ------------      ------------
Total expenses                                        5,963,062         5,722,307         7,627,805         6,706,040
                                                   ------------      ------------      ------------      ------------

Loss from operations                                 (2,837,715)       (2,893,789)       (3,444,583)       (4,671,598)
                                                   ------------      ------------      ------------      ------------

Other income (expense):
   Interest expense, including amortization
     of debt issuance costs on warrant of
     $1,996,875 for the nine months ended
     September 30, 2003 (unaudited) and
     $3,195,000 for the year ended
     December 31, 2003                                 (347,086)       (2,196,732)       (3,498,367)         (205,481)
   Interest income                                        2,576            10,158            12,593           188,648
   Share of income of unconsolidated affiliate               --                --                --            81,927
   Minority interest                                    (67,088)           (6,761)          (14,297)          (40,371)
   Foreign currency exchange losses, net                (55,752)         (131,854)         (236,200)          (93,400)
   Other, net                                            17,987             5,443            10,576           (35,807)
                                                   ------------      ------------      ------------      ------------
Total other income (expense)                           (449,363)       (2,319,746)       (3,725,695)         (104,484)
                                                   ------------      ------------      ------------      ------------

Loss before income taxes                             (3,287,078)       (5,213,535)       (7,170,278)       (4,776,082)

Provision for income taxes                               85,487            58,607            92,944            43,551
                                                   ------------      ------------      ------------      ------------
Net loss                                           $ (3,372,565)     $ (5,272,142)     $ (7,263,222)     $ (4,819,633)
                                                   ============      ============      ============      ============

Net income (loss) applicable to holders of
  common stock                                     $  7,104,737      $ (5,889,502)     $ (8,101,207)     $ (5,656,142)
                                                   ============      ============      ============      ============


Net income (loss) per common share:
   Basic                                           $       0.56      $      (0.47)     $      (0.65)     $      (0.45)
                                                   ============      ============      ============      ============

   Diluted                                         $      (0.23)     $      (0.47)     $      (0.65)     $      (0.45)
                                                   ============      ============      ============      ============

Weighted average shares and equivalent
  shares used in calculating net income
  (loss) per share:
   Basic                                             12,794,096        12,460,806        12,460,806        12,460,806
                                                   ============      ============      ============      ============

   Diluted                                           14,754,768        12,460,806        12,460,806        12,460,806
                                                   ============      ============      ============      ============
</TABLE>

See accompanying notes.


                                      F-3
<PAGE>

                   Dyadic International, Inc. and Subsidiaries

            Consolidated Statements of Stockholders' Equity (Deficit)

<TABLE>
<CAPTION>

                                                COMMON STOCK                             NOTE
                                         --------------------------   ADDITIONAL      RECEIVABLE
                                          NUMBER OF                     PAID-IN     FROM EXERCISE     ACCUMULATED
                                           SHARES         AMOUNT        CAPITAL    OF STOCK OPTIONS     DEFICIT         TOTAL
                                         -----------   ------------   ------------   ------------    ------------    ------------
<S>                                      <C>           <C>            <C>            <C>             <C>             <C>
Balance at December 31, 2001              12,460,806   $     12,461   $  4,183,031   $         --    $ (3,458,879)   $    736,613
   Dividends accrued on
     preferred stock                              --             --             --             --        (800,000)       (800,000)
   Accretion of preferred
     stock issuance costs                         --             --             --             --         (36,509)        (36,509)
   Amortization of deferred
     compensation on
     nonemployee stock options                    --             --         43,830             --              --          43,830
   Exercise of employee stock
     options granted
     by principal stockholder                     --             --         80,000       (350,000)        270,000              --
   Net loss                                       --             --             --             --      (4,819,633)     (4,819,633)
                                         -----------   ------------   ------------   ------------    ------------    ------------

Balance at December 31, 2002              12,460,806         12,461      4,306,861       (350,000)     (8,845,021)     (4,875,699)
   Dividends accrued on
     preferred stock                              --             --             --             --        (800,000)       (800,000)
   Accretion of preferred
     stock issuance costs                         --             --             --             --         (37,985)        (37,985)
   Amortization of deferred
     compensation on nonemployee
     stock options                                --             --         55,348             --              --          55,348
   Amortization of debt issuance
     costs on warrant                             --             --      3,195,000             --              --       3,195,000
   Payment of exercise price
     of employee stock
     options to principal stockholder             --             --             --        100,000        (100,000)             --
   Net loss - restated - see Note 2               --             --             --             --      (7,263,222)     (7,263,222)
                                         -----------   ------------   ------------   ------------    ------------    ------------

Balance at December 31, 2003
  - restated - see Note 2                 12,460,806         12,461      7,557,209       (250,000)    (17,046,228)     (9,726,558)
</TABLE>

Continued on next page.


                                      F-4
<PAGE>

                   Dyadic International, Inc. and Subsidiaries

      Consolidated Statements of Stockholders' Equity (Deficit) (continued)

<TABLE>
<CAPTION>
                                               COMMON STOCK                            NOTE
                                       --------------------------    ADDITIONAL     RECEIVABLE
                                        NUMBER OF                      PAID-IN     FROM EXERCISE    ACCUMULATED
                                         SHARES         AMOUNT         CAPITAL   OF STOCK OPTIONS     DEFICIT          TOTAL
                                       -----------   ------------   ------------   ------------    ------------    ------------
<S>                                    <C>           <C>            <C>            <C>             <C>             <C>
Unaudited:
   Dividends accrued on
     preferred stock                            --   $         --              $   $         --    $   (350,684)   $   (350,684)
   Accretion of preferred stock
     issuance costs                             --             --             --             --         (16,653)        (16,653)
   Amortization of deferred
     compensation on
     nonemployee stock options                  --             --        252,579             --              --         252,579
   Issuances of common stock in
     a private placement, net of
     expenses of $118,260                1,422,099          1,422      4,615,908             --              --       4,617,330
   Redemption of Series A Preferred             --             --     10,844,639             --              --      10,844,639
   Common stock issued for
     employee bonuses                       18,624             19         61,999             --              --          62,018
   Common stock issued to
     investment bankers                     32,204             32        107,207             --              --         107,239
   Net loss                                     --             --             --             --      (3,372,565)     (3,372,565)
                                       -----------   ------------   ------------   ------------    ------------    ------------

Balance at September
  30, 2004 (unaudited)                  13,933,733   $     13,934   $ 23,439,541   $   (250,000)   $(20,786,130)   $  2,417,345
                                       ===========   ============   ============   ============    ============    ============
</TABLE>

See accompanying notes.


                                      F-5
<PAGE>

                   Dyadic International, Inc. and Subsidiaries

                      Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
                                                                     NINE MONTHS ENDED
                                                                         SEPTEMBER 30                YEAR ENDED DECEMBER 31
                                                                ----------------------------      ----------------------------
                                                                   2004             2003             2003              2002
                                                                -----------      -----------      -----------      -----------
                                                                         (UNAUDITED)              (RESTATED -
                                                                                                  SEE NOTE 2)
<S>                                                             <C>              <C>              <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss                                                        $(3,372,565)     $(5,272,142)     $(7,263,222)     $(4,819,633)
Adjustments to reconcile net loss to net cash used in
  operating activities:
   Depreciation and amortization of fixed assets                    365,657          366,408          486,628           94,673
   Amortization of intangible and other assets                       67,599           67,599           90,132           90,112
   Amortization of debt issuance costs on warrant                        --        1,996,875        3,195,000               --
   Minority interest                                                 67,088            6,761           14,297           40,371
   Provision for doubtful accounts                                   23,000          182,229          184,809           35,340
   Share of loss of unconsolidated affiliate                             --               --               --          (81,927)
   Compensation expense on stock options                            252,579           41,511           55,348           75,296
   Changes in operating assets and liabilities:
     Accounts receivable                                           (129,563)        (350,633)        (726,849)        (624,696)
     Inventory                                                   (1,434,032)      (1,738,802)        (856,492)         224,562
     Prepaid expenses and other current assets                     (608,475)         (59,758)          31,511           38,348
     Other assets                                                  (221,247)        (103,020)         (85,359)         (11,350)
     Accounts payable                                             2,015,940          409,534          611,113          299,944
     Accrued expenses                                               116,803          167,785          204,062         (116,063)
     Deferred revenue                                               (45,756)              --           45,756               --
     Income taxes payable                                            82,921           61,400            4,300               --
     Investment in and advances to unconsolidated affiliate              --               --               --         (172,409)
                                                                -----------      -----------      -----------      -----------

Total adjustments                                                   552,514        1,047,889        3,254,256         (107,799)
                                                                -----------      -----------      -----------      -----------

Net cash used in operating activities                            (2,820,051)      (4,224,253)      (4,008,966)      (4,927,432)
                                                                -----------      -----------      -----------      -----------


CASH FLOWS FROM INVESTING ACTIVITIES

Purchases of fixed assets                                           (44,436)         (63,689)        (109,593)      (1,217,859)
Cash paid to acquire additional voting interest in
  unconsolidated affiliate                                               --               --          (30,000)         (70,000)
Net cash acquired from consolidation of affiliate                        --               --               --            9,675
                                                                -----------      -----------      -----------      -----------

Net cash used in investing activities                               (44,436)         (63,689)        (139,593)      (1,278,184)
                                                                -----------      -----------      -----------      -----------


CASH FLOWS FROM FINANCING ACTIVITIES

Repayment of note payable to bank                                        --         (245,222)        (245,222)        (336,679)
Repayment of other notes payable                                     (6,771)          (6,771)          (9,029)              --
Payment of deferred offering costs                                  (37,500)              --               --               --
Net proceeds from issuance of common stock                        4,617,330               --               --               --
Payment for redemption of Redeemable Series A
  convertible preferred stock                                    (1,500,000)              --               --               --
Proceeds from (repayment of) notes payable to stockholders         (104,935)       3,000,000        3,000,000               --
                                                                -----------      -----------      -----------      -----------

Net cash provided by (used in) financing activities               2,968,124        2,748,007        2,745,749         (336,679)
                                                                -----------      -----------      -----------      -----------

Net increase (decrease) in cash and cash equivalents                103,637       (1,539,935)      (1,402,810)      (6,542,295)

Cash and cash equivalents at beginning of period                  1,649,562        3,052,372        3,052,372        9,594,667
                                                                -----------      -----------      -----------      -----------

Cash and cash equivalents at end of period                      $ 1,753,199      $ 1,512,437      $ 1,649,562      $ 3,052,372
                                                                ===========      ===========      ===========      ===========

SUPPLEMENTAL DISCLOSURES

Cash paid for interest                                          $   137,790      $   110,006      $   115,292      $   170,977
                                                                ===========      ===========      ===========      ===========
Cash paid for income taxes                                      $    10,616      $        --      $   158,255      $        --
                                                                ===========      ===========      ===========      ===========

Fair value of warrant recorded as debt issuance costs           $        --      $ 1,996,875      $ 3,195,000      $        --
                                                                ===========      ===========      ===========      ===========

Common stock issued for deferred offering costs                 $   107,239      $        --      $        --      $        --
                                                                ===========      ===========      ===========      ===========
</TABLE>

See accompanying notes.


                                      F-6
<PAGE>

                   Dyadic International, Inc. and Subsidiaries

                   Notes to Consolidated Financial Statements

                                December 31, 2003
         (Information pertaining to the periods ended September 30, 2004
                             and 2003 is unaudited)


1.    ORGANIZATION AND OPERATIONS

GENERAL

Dyadic International,  Inc. (the Company or Dyadic), based in Jupiter,  Florida,
with  operations  in the United  States of  America,  Hong Kong,  Poland and The
Netherlands,  is a developer and  distributor  of specialty  enzymes and related
products  for sale to the  textile,  food and feed,  starch,  pulp and paper and
other  industries.  The Company  intends to become a global leader in functional
proteomics  through  the  discovery,  development  and  manufacturing  of  novel
products,  including  enzymes and  proteins,  derived  from the genes of complex
living organisms (including humans) found in the earth's biodiversity. Using its
proprietary platform technologies for gene discovery and gene expression, Dyadic
is  developing   additional  biological  products  (e.g.,   proteins,   enzymes,
polypeptides  and small  molecules)  for use by itself and for  applications  in
large  segments of the  agricultural,  industrial,  chemical and  pharmaceutical
industries.

The Company  expects to incur losses over the next several years as it continues
to develop its technologies and establish the commercial  laboratories and other
required infrastructure to exploit these technologies.  However, there can be no
assurance  that the  Company's  efforts  with  regard to these  matters  will be
successful.

MERGER, PRIVATE PLACEMENT OF COMMON STOCK AND
   OTHER RELATED TRANSACTIONS

In October and November  2004,  the Company  entered  into and executed  several
contemporaneous  and related  transactions  (collectively,  the Transactions) as
described below.

Merger

Effective  October 29, 2004, the Company entered into an Agreement of Merger and
Plan of Reorganization (the Merger) with CCP Worldwide, Inc., a public reporting
company, and its wholly-owned  subsidiary,  CCP Acquisition Corp. As a result of
the Merger, CCP Acquisition Corp. was merged with and into the Company, with the
Company being the  surviving  corporation,  and the Company  changed its name to
Dyadic International  (USA), Inc. In turn, CCP Worldwide,  Inc. changed its name
to Dyadic  International,  Inc., and  stockholders of the Company  received,  in
exchange for Company  shares,  shares of CCP  Worldwide,  Inc. on a  one-for-one
basis.


                                      F-7
<PAGE>

                   Dyadic International, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


1.    ORGANIZATION AND OPERATIONS (CONTINUED)

Concurrently,  the  Company's  officers  and  directors  became the officers and
directors of the merged,  reorganized  entity.  A total of 12,580,895  shares of
common stock were  exchanged in the Merger,  including the 300,300 shares placed
in escrow in accordance with the Development Agreement discussed in Note 11. The
Company's  pre  Merger  obligations  to  contingently  issue  common  shares  in
accordance  with a real estate  acquisition  agreement,  employee stock options,
nonemployee  stock options and warrants and convertible  debt  instruments  were
also assumed.

The  Company  has  recorded  the  Merger  as the  issuance  of stock for the net
monetary  assets of CCP  Worldwide,  Inc.  (which  were nil),  accompanied  by a
recapitalization.  This accounting is identical to that resulting from a reverse
acquisition,  except that no goodwill or other intangible assets are recorded. A
total of 1,653,138 shares of common stock,  representing the aggregate number of
shares held by  stockholders  of CCP Worldwide,  Inc.  immediately  prior to the
Merger,  have  been  retroactively  reflected  as  outstanding  for all  periods
presented in the accompanying  consolidated financial statements.  Additionally,
the accompanying  consolidated  financial statements  retroactively  reflect the
authorized capital stock of CCP Worldwide, Inc. and the resultant change from no
par to $0.001 par value on the Company's common stock.

As part of the Transactions, and immediately prior to the Merger, CCP Worldwide,
Inc. disposed of its only operating  subsidiary as part of a Split-off Agreement
between CCP  Worldwide,  Inc.,  its wholly owned  subsidiary,  the Company and a
former member of the board of directors of CCP Worldwide, Inc.

As a result  of the  Merger  and the  Split-off  Agreement,  the  only  business
operations  of  the  newly  formed  Dyadic  International,  Inc.,  formerly  CCP
Worldwide, Inc., are the operations of the Company.

The Company has incurred  approximately  $336,000 of costs through September 30,
2004  related to the Merger.  These costs are  included in prepaid  expenses and
other  current  assets  in the  accompanying  consolidated  balance  sheet as of
September  30, 2004  (unaudited).  The Company will expense all costs related to
the Merger in the fourth quarter of the year ending December 31, 2004.


                                      F-8
<PAGE>

                   Dyadic International, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


1.    ORGANIZATION AND OPERATIONS (CONTINUED)

Private Placement

In November  2004,  in accordance  with  Subscription  Agreements  and a Private
Offering  Memorandum (the October Offering) dated October 2004, the Company sold
7,629,204   Investment   Units,   realizing  gross  proceeds  of   approximately
$25,405,000.  An Investment  Unit consists of one share of the Company's  common
stock and one five-year  callable warrant to purchase one share of the Company's
common  stock at $5.50  per share for  every  two  Investment  Units  purchased.
Accordingly,  3,814,602  warrants to purchase  the  Company's  common stock were
issued to participants in the October Offering. Concurrently, the Company issued
711,050  warrants to purchase the  Company's  common stock at $5.50 per share to
participants  in the  Offering  completed  in July 2004 (see Note 8), as well as
247,730  warrants to purchase the Company's  common stock at $5.50 per share and
495,460 warrants to purchase the Company's common stock at $3.33 per share, both
to placement agents in the October Offering.

The Company has incurred  approximately  $311,000 of costs through September 30,
2004 related to the October Offering,  including the subsequent  registration of
the Company's shares issued in the Merger and the October Offering.  These costs
are included in other assets in the accompanying  consolidated  balance sheet as
of September 30, 2004 (unaudited).  The Company will record all costs related to
the October  Offering in the fourth quarter of the year ending December 31, 2004
as a reduction of additional paid-in capital.

Other Transactions

      CANCELLATION OF INDEBTEDNESS

Ancillary to the Merger and October  Offering,  in November  2004, an additional
367,868  Investment  Units  were sold to Mark A.  Emalfarb  through  the Mark A.
Emalfarb Trust in exchange for the cancellation of the Company's note payable to
the Mark A. Emalfarb Trust (see Note 6) with a balance of $1,225,000.


                                      F-9
<PAGE>

                   Dyadic International, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


1.    ORGANIZATION AND OPERATIONS (CONTINUED)

      MODIFICATION OF BRIDGE LOAN WARRANT

As part of the  Transactions,  the warrant to purchase 1.5 million shares of the
Company's  common  stock  issued  in  connection  with the May  2003 $3  million
revolving  note payable to the Mark A. Emalfarb  Trust (see Note 6) was modified
to reduce the exercise  price from $4.50 to $3.33 per share.  Additionally,  the
Bridge  Loan  maturity  date was  extended  to  January  1,  2007.  As a result,
approximately $350,000,  representing the incremental fair value of the modified
warrant as compared to the fair value of the original warrant immediately before
the modification (determined using the Black-Scholes option pricing model, using
the following  assumptions:  risk-free interest rate of 3.91%, dividend yield of
0%, expected  volatility of 50% and an expected remaining life of 8.6 years, the
remaining term of the warrant) will be amortized to interest expense through the
new maturity  date.  The estimated  fair value of the original  warrant had been
fully amortized to interest expense during the year ended December 31, 2003.

      MODIFICATION OF CONVERTIBLE NOTES

Also as part of the  Transactions,  the  conversion  prices with  respect to the
October 29, 2004 principal and accrued  interest  balances on the Emalfarb Trust
Note and the  Francisco  Trust  Note (see Note 6) were fixed at $3.33 per share,
and the due  dates  were  extended  to  January  1,  2007.  As a  result  of the
modification of the conversion price, a beneficial  conversion  feature totaling
approximately $554,000 will be recognized in October 2004.

      INCREASE IN SHARES RESERVED FOR EQUITY PLAN

In September  2004, by written  consent,  the  Company's  Board of Directors and
stockholders  approved an increase in the authorized  number of shares of common
stock under the Equity Plan (see Note 10) from 1,302,989 to 5,152,447.

ORGANIZATIONAL HISTORY

The Boards of Directors of three  companies under common control agreed to merge
in a transaction  that became  effective on May 31, 1999,  and at that time, the
surviving corporation changed its name to Dyadic International,  Inc. The merger
was   accounted   for  at   historical   cost   in  a   manner   similar   to  a
pooling-of-interest business combination as each entity was under common control
at the time of the merger.


                                      F-10
<PAGE>

                   Dyadic International, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


1.    ORGANIZATION AND OPERATIONS (CONTINUED)

In April 2001,  the Company  formed  Dyadic  International  Sp. z o.o., a Polish
corporation, for the purpose of managing and coordinating the Company's contract
manufacturing  of industrial  enzymes in Poland,  and to assist in the marketing
and distribution of those products.

In January  2003,  the  Company  formed  Dyadic  Nederland  B.V.  (BV),  a Dutch
corporation,  and  entered  into a  Cooperation  and License  Agreement  with an
unrelated third party to cooperate on an exclusive basis in the development, use
and marketing of High Throughput  Robotic  Screening  Systems  utilizing  fungal
organisms.

HISTORICAL RESULTS OF OPERATIONS

The Company has  incurred  losses  from  operations  during each of the last two
years, which, when combined with losses incurred through December 31, 2001, have
resulted  in an  accumulated  deficit  of  approximately  $17.0  million,  and a
stockholders' deficit of approximately $9.7 million as of December 31, 2003.

The Company has  attributed  these  operating  results,  among other things,  to
negative  trends  in the  textile  enzymes  sector,  utilization  of  funds  for
acquiring  and  developing  assets,  including  but not limited to  intellectual
property and proprietary technology, expansion of its operations,  establishment
of new affiliates,  and increased research and development spending. In order to
advance its science and to develop new  products,  the Company has  continued to
incur  discretionary  research and development  expenditures in 2004.  Unaudited
interim  financial  information  for the nine months ended  September  30, 2004,
indicates that the losses are continuing.  The Company has  historically  funded
these losses from operations with proceeds from gross profit  generated  through
the sale of its products, external borrowings, borrowings from its stockholders,
and sales of preferred and common equity securities.  As more fully described in
Note  11,  independent  foreign  and  domestic  manufacturers  conduct  contract
production of certain products for the Company.  The foreign  manufacturer  must
obtain funding to expand its production capacity,  and the domestic manufacturer
has informed the Company that it will not renew its contract, which is in effect
until May 14,  2005.  During the year  ended  December  31,  2003,  the  Company
received  a $3  million  loan  from one of its  stockholders,  and in 2004,  the
Company raised  approximately  $4.7 million in a private  offering of its equity
securities  ($1.5 million of which was used to redeem all outstanding  shares of
Series A Preferred  stock).  The Company  will require  additional  financing to
continue  to fund its  operations  (which  used net cash of  approximately  $4.0
million  and $4.9  million  in 2003 and  2002,  respectively)  and  satisfy  its
obligations as they come due in the normal course of business.


                                      F-11
<PAGE>

                   Dyadic International, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


1.    ORGANIZATION AND OPERATIONS (CONTINUED)

The Company believes that it will raise  sufficient  capital to continue to fund
its operations and satisfy its obligations as they come due in the normal course
of business.  The sources of this capital are expected to include  proceeds from
additional borrowings and sales of preferred and common equity securities.

See Merger, Private Placement of Common Stock and Other Related Transactions.

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

RESTATEMENT

The Company has restated the accompanying  consolidated  financial statements as
of and for the  year  ended  December  31,  2003,  to  correct  an  error in the
recording of certain revenue and expenditure transactions denominated in foreign
currencies.  This error also resulted in the incorrect  costing of the Company's
inventory as of December 31, 2003. The Company  corrected this error in order to
properly value inventory as of December 31, 2003, and to properly record certain
revenue and expenditure  transactions denominated in foreign currencies based on
the  published   exchange  rates  on  the  effective  dates  of  the  respective
transactions.

The impact of these  corrections on certain financial  statement  captions as of
and for the year ended December 31, 2003 follows:


                                                                INCREASE
                                                               (DECREASE)
                                                            ------------------
        Consolidated Balance Sheet Data:
           Inventory                                          $     126,311
           Stockholders' deficit                                   (126,311)

        Consolidated Statement of Operations Data:
           Net sales                                                183,745
           Cost of goods sold                                       242,448
                                                            ------------------
           Gross profit                                             (58,703)
           Expenses
             Research and development                               131,394
           Other income (expense)
             Interest expense                                         3,692
             Foreign currency exchange losses, net                 (320,100)
                                                            ------------------
           Net loss                                           $    (126,311)
                                                            ==================
           Net loss per common share, basic and diluted       $       (0.01)
                                                            ==================


                                      F-12
<PAGE>

                   Dyadic International, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

UNAUDITED INTERIM RESULTS

The accompanying  consolidated financial statements as of September 30, 2004 and
for the nine months ended September 30, 2004 and 2003 are unaudited; however, in
the opinion of  management  all  adjustments  (consisting  of normal,  recurring
adjustments)  necessary to a fair  presentation  of the  consolidated  financial
statements for these interim  periods have been made. The results of the interim
period are not  necessarily  indicative of the results to be expected for a full
fiscal year. The accounting  policies described  hereafter and disclosed as part
of the Company's annual consolidated financial statements have been consistently
applied to the Company's unaudited interim consolidated financial statements.

PRINCIPLES OF CONSOLIDATION

The accompanying  consolidated  financial statements include the accounts of the
Company  and its  majority  owned  subsidiaries.  All  significant  intercompany
transactions and balances have been eliminated in consolidation. As described in
Note 7, Dyadic has an 82.5% ownership  interest in the outstanding  shares of an
affiliate  that,  until June 30, 2002, was accounted for under the equity method
because the Company's  ownership  interest did not  constitute a majority of the
outstanding  voting shares of the affiliate.  In July 2002, the Company acquired
additional voting rights such that, as of that date, it also owned a majority of
the outstanding voting shares of the affiliate. Therefore, the investment in the
affiliate was accounted for under the equity method  through June 30, 2002,  and
as a consolidated  subsidiary  (with an allocation to minority  interest)  after
that date.

CASH AND CASH EQUIVALENTS

The Company  considers  as cash  equivalents  all  interest-bearing  deposits or
investments with original maturities of three months or less.

The Company has cash equivalents of approximately $725,000 in money market funds
as of December 31, 2003 bearing interest at 0.86% per annum.


                                      F-13
<PAGE>

                   Dyadic International, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

INVENTORY

Inventory primarily consists of finished goods including industrial enzymes used
in the industrial,  chemical and agricultural markets and is stated at the lower
of cost or market using the first-in,  first-out method.  Finished goods include
raw materials and manufacturing  costs,  substantially all of which are incurred
pursuant to agreements with independent  manufacturers.  Provision has been made
to reduce excess or obsolete inventory to net realizable value.

FIXED ASSETS

Fixed  assets are  recorded  at cost and  depreciated  and  amortized  using the
straight-line method over their estimated useful lives, which range from five to
ten years.  Leasehold improvements are amortized over the lesser of their useful
lives or the lease terms.

INTANGIBLE ASSETS

Intangible  assets  include patent and  technology  acquisition  costs which are
being amortized using the straight-line method over the twelve-year terms of the
patents. No additional costs related to the patents and technology were incurred
and capitalized in 2003 or 2002.  Accumulated  amortization of intangible assets
was $288,927 as of December 31, 2003, and  amortization  expense was $52,128 for
each of the years ended December 31, 2003 and 2002. Amortization expense will be
approximately  the same as in 2003  and  2002 for each of the next 4 years,  and
will be approximately  $44,000 in 2008, when these intangible assets will become
fully amortized.

GOODWILL

To apply the provisions of Statement of Financial  Accounting  Standards  (SFAS)
No.  142,  Goodwill  and Other  Intangible  Assets,  the  Company is required to
identify its reporting units.  Based on an analysis of economic  characteristics
and how the Company  operates  its  business,  the Company  has  designated  its
geographic  locations as its reporting  units: the United States (which includes
the Company's subsidiary in Poland), The Netherlands and Hong Kong. All goodwill
is  associated  with  the Hong  Kong  reporting  unit.  In  accordance  with the
provisions  of SFAS No. 142, the Company was  required to perform an  impairment
review of goodwill as of January 1, 2003 and 2004. This test involved the use of
estimates to determine the fair value of


                                      F-14
<PAGE>

                   Dyadic International, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

the Company's  Hong Kong  reporting unit and the comparison of fair value to the
carrying value of the reporting  unit.  The  impairment  review as of January 1,
2003 and 2004 was completed and resulted in no goodwill impairment charge.

LONG-LIVED ASSETS

In October 2001, the FASB issued SFAS No. 144,  Accounting for the Impairment or
Disposal of Long-Lived Assets. SFAS No. 144 addresses  financial  accounting and
reporting for the  impairment or disposal of long-lived  assets.  This statement
superseded SFAS No. 121,  Accounting for the Impairment of Long-Lived Assets and
for  Long-Lived  Assets to Be Disposed Of, and  establishes a single  accounting
model, based on the framework established in SFAS No. 121, for long-lived assets
to be disposed of by sale.

The Company reviews its long-lived assets,  including fixed assets that are held
and used in its  operations,  for  impairment  whenever  events  or  changes  in
circumstances  indicate  that  the  carrying  amount  of the  asset  may  not be
recoverable,  as  required  by SFAS  No.  144.  If such an event  or  change  in
circumstances is present, the Company will estimate the undiscounted future cash
flows, less the future outflows  necessary to obtain those inflows,  expected to
result from the use of the asset and its eventual disposition. If the sum of the
undiscounted  future cash flows is less than the carrying  amount of the related
assets, the Company will recognize an impairment loss to the extent the carrying
value exceeds the fair value.  The Company records  impairment  losses resulting
from  abandonment  in  loss  from  operations.  Assets  to be  disposed  of  are
reclassified  as assets held for sale at the lower of their  carrying  amount or
fair value less costs to sell.  Write-downs to fair value less costs to sell are
reported above the loss from operations line as other expense.

The  Company  does not  believe  that the there  were any  events or  changes in
circumstances  that indicate that the carrying amounts of its long-lived  assets
may not be recoverable as of December 31, 2003.

RESEARCH AND DEVELOPMENT

Research and  development  costs related to both present and future products are
charged  to  operations  when  incurred.   Revenue  received  for  research  and
development is recognized as the Company meets its obligations under the related
agreement.  The Company recognized  $150,000 in research and development revenue
for the year ended  December  31,  2003,  which is  included in net sales in the
accompanying consolidated statement of operations.


                                      F-15
<PAGE>

                   Dyadic International, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

INCOME TAXES

The Company  accounts for income taxes using the  liability  method.  Under this
method,  deferred  tax  assets  and  liabilities  are  determined  based  on the
difference  between  the  financial  statement  and  tax  bases  of  assets  and
liabilities,  using  enacted  tax  rates in  effect  for the  year in which  the
differences  are  expected to reverse.  A deferred  tax  valuation  allowance is
established if, in management's  opinion, it is more likely than not that all or
a portion of the Company's deferred tax assets will not be realized.

NET INCOME (LOSS) PER SHARE

Basic net income (loss) per share has been computed  using the  weighted-average
number of shares of common stock  outstanding  during the period. In arriving at
net income (loss)  applicable to common  stockholders,  accrued  preferred stock
dividends and accretion of preferred  stock issuance costs are deducted for each
period  presented in which such cumulative  preferred stock is outstanding.  For
the nine months ended  September 30, 2004,  the excess of the Series A Preferred
carrying  value at the time of  redemption,  over the  $1,500,000  cash paid for
redemption is added to net loss in computing net income applicable to holders of
common stock,  in accordance with EITF Topic D-42: The Effect on the Calculation
of Earnings  per Share for the  Redemption  or Induced  Conversion  of Preferred
Stock.  For the nine months ended  September 30, 2004,  the Company has used the
if-converted  method to calculate the dilutive  effect of common stock  issuable
pursuant to conversion features for purposes of diluted income per share.


                                      F-16
<PAGE>

                   Dyadic International, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

The following  table  reflects the  calculation  of basic and diluted net income
(loss) per share for the periods presented:


<TABLE>
<CAPTION>
                                                          NINE MONTHS ENDED                    YEAR ENDED
                                                             SEPTEMBER 30                      DECEMBER 31
                                                   --------------------------------- --------------------------------
                                                         2004            2003              2003           2002
                                                   --------------------------------- --------------------------------
                                                             (UNAUDITED)               (RESTATED -
                                                                                       SEE NOTE 2)
<S>                                                  <C>             <C>             <C>             <C>
Net loss                                             $ (3,372,565)   $ (5,272,142)   $ (7,263,222)   $ (4,819,633)
Plus: Excess carrying value of Series A Preferred
        stock over cash redemption amount              10,844,639              --              --              --
Less: Accrued dividends on preferred stock               (350,684)       (600,000)       (800,000)       (800,000)
      Accretion of preferred stock issuance costs         (16,653)        (27,360)        (37,985)        (36,509)
                                                     ------------    ------------    ------------    ------------
Net income (loss) applicable to holders of
   common stock for basic calculation                   7,104,737    $ (5,899,502)   $ (8,101,207)   $ (5,656,142)
                                                                     ============    ============    ============

Plus: Accrued dividends on preferred stock                350,684
      Accretion of issuance costs                          16,653
      Interest on subordinated convertible notes
        payable                                            47,601
Less: Excess carrying value of Series A Preferred
        over cash redemption amount                   (10,844,639)
                                                     ------------

Net loss applicable to holders of common stock for
   diluted calculation                               $ (3,324,964)
                                                     ============

Weighted average common shares used in computing
  net income (loss) per share:
     Basic                                             12,794,096      12,460,806      12,460,806      12,460,806
                                                                     ============    ============    ============
     Plus: Common shares obtainable upon
             conversion of Series A Preferred           1,611,637
           Common shares obtainable upon
             conversion of subordinated
             convertible notes payable                    349,035
                                                     ------------
     Diluted                                           14,754,768      12,460,806      12,460,806      12,460,806
                                                     ============    ============    ============    ============

Net income (loss) per common share:
     Basic                                           $       0.56    $      (0.47)   $      (0.65)   $      (0.45)
                                                     ============    ============    ============    ============
     Diluted                                         $      (0.23)   $      (0.47)   $      (0.65)   $      (0.45)
                                                     ============    ============    ============    ============
</TABLE>


                                      F-17
<PAGE>

                   Dyadic International, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

The  following   potentially  dilutive  securities  were  not  included  in  the
calculation  of diluted  net loss per share as they were  anti-dilutive  for the
respective periods presented:

<TABLE>
<CAPTION>
                                                                 NINE MONTHS ENDED                  YEAR ENDED
                                                                    SEPTEMBER 30                    DECEMBER 31
                                                             -------------------------       -------------------------
                                                               2004             2003            2003            2002
                                                             ---------       ---------       ---------       ---------
                                                                   (UNAUDITED)
<S>                                                          <C>             <C>             <C>             <C>
Instruments to purchase common stock:
  Stock options outstanding pursuant to the
     Equity Plan (see Note 10)                                 755,000         419,000         415,000         231,000
   Other stock options                                          65,000          65,000          65,000          65,000
   Warrants outstanding (a)                                  1,500,000       1,500,000       1,500,000              --

Common stock issuable pursuant to conversion features:
   Redeemable Series A convertible preferred stock                  --       2,815,333       2,682,000       2,504,222
   Subordinated convertible notes payable                           --         337,474         338,457         334,560
                                                             ---------       ---------       ---------       ---------

Total shares of common stock considered anti-dilutive        2,320,000       5,136,807       5,000,457       3,134,782
                                                             =========       =========       =========       =========
</TABLE>

(a)   Issued in connection with Bridge Loan discussed in Note 6.


A total of 300,300  contingently  issuable  shares under an agreement to conduct
research and  development  activities  on behalf of the Company  pursuant to the
arrangement discussed in Note 11 are also excluded.  Such shares of common stock
are unearned,  nonvested,  restricted shares that will be considered outstanding
once earned  under the  agreement.  Additionally,  the 300,300  shares of common
stock  potentially  issuable  under  the real  estate  purchase  contract,  also
discussed  in Note 11,  are not  included  in the above  amounts as they are not
issuable until the purchase contract is closed.

See Note 1 for a  description  of  equity  transactions  that took  place  after
September 30, 2004,  that are expected to have a significant  impact on weighted
average shares outstanding in the future.


                                      F-18
<PAGE>

                   Dyadic International, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

STOCK-BASED COMPENSATION

SFAS No. 123, Accounting for Stock-Based Compensation,  encourages, but does not
require companies to record  stock-based  compensation  using a fair value-based
method. The Company continues to account for stock-based  compensation using the
intrinsic  value-based  method  prescribed in Accounting  Principles Board (APB)
Opinion  No. 25,  Accounting  for Stock  Issued to  Employees,  and its  related
interpretations.  Accordingly,  compensation  cost for stock options  granted to
employees is measured as the excess,  if any, of the  estimated  market value of
the  Company's  stock at the date of the grant over the amount an employee  must
pay to acquire the stock.  Stock option grants to nonemployees are accounted for
under the fair value method prescribed by SFAS No. 123, and compensation cost is
recognized  based on the  measurement  principles  prescribed  by EITF Issue No.
96-18, Accounting for Equity Instruments that are Issued to Other than Employees
for Acquiring, or in Conjunction with Selling, Goods or Services.

The Company's pro forma net loss and pro forma net loss per share,  with related
assumptions, are disclosed in the following table. This information is presented
as if compensation  cost for the Company's  stock-based  compensation  plans had
been determined based on the estimated fair value of the employee options at the
grant dates, consistent with the method prescribed in SFAS No. 123.


                                      F-19
<PAGE>

                   Dyadic International, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

<TABLE>
<CAPTION>
                                                               NINE MONTHS ENDED                            YEAR ENDED
                                                                  SEPTEMBER 30                             DECEMBER 31
                                                        ---------------------------------       ---------------------------------
                                                            2004                 2003                2003                2002
                                                        -------------       -------------       -------------       -------------
                                                                   (UNAUDITED)
<S>                                                     <C>                 <C>                 <C>                 <C>
Net income (loss) applicable to holders of common
   stock, as reported                                   $   7,104,737       $  (5,889,502)      $  (8,101,207)      $  (5,656,142)
Add: Stock-based employee compensation expense
   included in reported net loss, determined under
   the intrinsic value method                                      --                  --                  --                  --
Deduct: Stock-based employee compensation expense
   determined under the fair value method                    (101,323)           (103,536)           (133,450)            (28,070)
                                                        -------------       -------------       -------------       -------------
Pro forma net income (loss) applicable to holders
   of common stock                                      $   7,003,414       $  (5,993,038)      $  (8,234,657)      $  (5,684,212)
                                                        =============       =============       =============       =============

Net income (loss) per share, as reported:
   Basic                                                $        0.56       $       (0.47)      $       (0.65)      $       (0.45)
                                                        =============       =============       =============       =============
   Diluted                                              $       (0.23)      $       (0.47)      $       (0.65)      $       (0.45)
                                                        =============       =============       =============       =============

Pro forma net income (loss) per share:
   Basic                                                $        0.55       $       (0.48)      $       (0.66)      $       (0.46)
                                                        =============       =============       =============       =============
   Diluted                                              $       (0.23)      $       (0.48)      $       (0.66)      $       (0.46)
                                                        =============       =============       =============       =============


Weighted average fair value of stock options
   granted during the period                            $        1.57       $        1.47       $        1.47       $         --(a)

Principal assumptions:
   Risk-free interest rates                                3.60%-5.09%         3.36%-5.09%         3.36%-5.09%         3.60%-5.09%
   Expected life in years                                           5                   5                   5                   5
   Expected volatility                                             50%                 50%                 50%                 50%
   Expected dividend yield                                          0%                  0%                  0%                  0%
</TABLE>

(a)   No stock options were granted to employees  during the year ended December
      31, 2002.


                                      F-20
<PAGE>

                   Dyadic International, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

REVENUE RECOGNITION

The Company  recognizes  revenues in accordance with Staff  Accounting  Bulletin
(SAB) No. 104,  Revenue  Recognition in Financial  Statements.  SAB No. 104 sets
forth four basic criteria that must be met before SEC  registrants can recognize
revenue.  These criteria are:  persuasive evidence of an arrangement must exist;
delivery  had to have taken place or  services  have had to been  rendered;  the
seller's price to the buyer should be fixed or determinable;  and collectibility
of the  receivable  should be reasonably  assured.  Sales not meeting any of the
aforementioned criteria are deferred. Sales are comprised of gross revenues less
provisions for expected customer returns, if any. Reserves for estimated returns
and inventory credits are established by the Company, if necessary, concurrently
with the recognition of revenue.  The amounts of reserves are established  based
upon  consideration  of a  variety  of  factors,  including  estimates  based on
historical returns.

FOREIGN CURRENCY TRANSLATION AND EXCHANGE

The  financial  statements  of the  Company's  foreign  subsidiaries  have  been
translated  into United States  dollars in accordance  with SFAS No. 52, Foreign
Currency   Translation.   Assets  and  liabilities  of  the  Company's   foreign
subsidiaries  are  translated  at year-end  exchange  rates,  and  revenues  and
expenses are translated at average rates prevailing  during the period.  Certain
accounts receivable from customers are collected and certain accounts payable to
vendors are payable in foreign  currencies.  These  amounts  are  translated  at
year-end exchange rates. Net translation adjustments and realized exchange gains
and losses are included as a component of foreign currency exchange losses, net,
in the accompanying consolidated statements of operations.

SHIPPING AND HANDLING

Shipping and handling  charges that are billed to and reimbursed by the customer
are  included in  revenues.  Shipping and  handling  costs  associated  with the
delivery of inventory to customers are included in cost of goods sold.


                                      F-21
<PAGE>

                   Dyadic International, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

ACCOUNTING ESTIMATES

The  preparation  of financial  statements  in  conformity  with U.S.  generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that  affect the  reported  amounts of assets and  liabilities  and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting periods. Actual results could differ from those estimates.

RECLASSIFICATIONS

Certain  amounts  in  the  2002  consolidated  financial  statements  have  been
reclassified to conform with the 2003 presentation.

REPORTING COMPREHENSIVE LOSS

Comprehensive  loss is defined as the change in equity of a business  enterprise
during a period from transactions and other events and circumstances, except for
those  resulting from  investments by owners and  distributions  to owners.  The
presentation  of  comprehensive   loss  required  by  SFAS  No.  130,  Reporting
Comprehensive Income, is not required in the accompanying consolidated financial
statements  as the Company  has no  material  components  of  accumulated  other
comprehensive loss.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company uses various  methods and  assumptions to estimate the fair value of
each  class  of  financial  instrument.  Due  to  their  short-term  nature  and
measurement,  the  carrying  value  of  cash  and  cash  equivalents,   accounts
receivable,  accounts payable and notes payable approximate fair value. The fair
value of the Company's  Redeemable Series A Convertible  Preferred Stock closely
approximates  liquidation  value (see Note 9).  The  Company's  other  financial
instruments are not significant.


                                      F-22
<PAGE>

                   Dyadic International, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

CREDIT RISK

Financial instruments which potentially subject the Company to concentrations of
credit risk include cash and cash equivalents and accounts  receivable (see Note
3). The Company invests its excess cash in money market funds.  The money market
funds  represent  an  interest  in low risk  U.S.  Government  obligations.  The
Company's investments are not insured or guaranteed by the U.S. Government,  the
Federal Deposit Insurance Corporation or any other government agency.

RECENT ACCOUNTING PRONOUNCEMENTS

In December  2002,  the FASB issued SFAS No.  148,  Accounting  for  Stock-Based
Compensation-Transition  and  Disclosure an amendment of FASB Statement No. 123.
This statement amends SFAS No. 123, Accounting for Stock-Based Compensation,  to
provide  alternative  methods of transition  for a voluntary  change to the fair
value based method of  accounting  for  stock-based  employee  compensation.  In
addition,  SFAS No. 148 amends the  disclosure  requirements  of SFAS No. 123 to
require prominent  disclosures in both annual and interim  financial  statements
about the method of accounting for  stock-based  employee  compensation  and the
effect of the method used on reported results. SFAS No. 148 also does not permit
the  prospective  method of  transition  for  changes to the fair value  method,
previously  allowed  in  SFAS  No.  123.  The  Company  adopted  the  disclosure
provisions  of  SFAS  No.  148  in  2002.  The  Company  currently  applies  the
intrinsic-value method for accounting for employee stock-based compensation.

In May 2003,  the FASB  issued SFAS No. 150,  Accounting  for Certain  Financial
Instruments with  Characteristics  of both Liabilities and Equity. The statement
establishes  standards  for  how  an  issuer  classifies  and  measures  certain
financial  instruments with  characteristics  of both liabilities and equity. It
requires that an issuer classify a financial instrument that is within its scope
as a liability  (or an asset in some cases),  whereas many of those  instruments
were  previously  classified as equity.  SFAS No. 150 is effective for financial
instruments  entered  into or  modified  after  May 31,  2003 and  otherwise  is
effective at the beginning of the first interim period  beginning after June 15,
2003.  The  adoption  of SFAS No. 150 had no impact on the  Company's  financial
position or results of operations as the Company's Redeemable Series A Preferred
Stock did not fall within the scope of SFAS No. 150.


                                      F-23
<PAGE>

                   Dyadic International, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

In  January  2003,  the FASB  issued  Interpretation  No. 46,  Consolidation  of
Variable Interest Entities (FIN No. 46) and a revised  interpretation of FIN No.
46 (FIN No.  46-R) in  December  2003,  to expand upon and  strengthen  existing
accounting  guidance  that  addresses  when  a  company  should  include  in its
financial  statements the assets,  liabilities and activities of another entity.
Prior to FIN No. 46, one company  generally has included  another  entity in its
consolidated  financial  statements  only if it  controlled  the entity  through
voting  interest.  FIN No. 46 changed  that by  requiring  a  variable  interest
entity,  as defined,  to be consolidated by a company if that company is subject
to a majority of the risk of loss from the variable interest entity's activities
or entitled to receive a majority of the entity's  residual returns or both. FIN
No. 46 also requires disclosures about variable interest entities that a company
is not  required  to  consolidate  but in  which it has a  significant  variable
interest.  The  consolidation  requirements of FIN No. 46-R apply immediately to
variable  interest  entities  created after  December 31, 2003,  and to existing
variable  interest  relationships  in the first reporting period that ends after
March 15, 2004.  Certain of the disclosure  requirements  apply to all financial
statements  issued  after  December 31,  2003,  regardless  of when the variable
interest  entity was  established.  The Company does not have any entities  that
require  disclosure or new  consolidation  under FIN No. 46-R. As a result,  the
adoption  of FIN No.  46-R did not impact the  Company's  financial  position or
results of operations.

3. CONCENTRATIONS

The  Company's  credit  risks  consist  primarily of  uncollateralized  accounts
receivable  from  customers  in the  textile and other  industries.  The Company
performs periodic credit evaluations of its customers'  financial  condition and
provides  allowances for doubtful  accounts as required.  The Company  purchases
credit  insurance to partially  mitigate losses on certain  accounts  receivable
from foreign customers.


                                      F-24
<PAGE>

                   Dyadic International, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


3.    CONCENTRATIONS (CONTINUED)

Sales to certain  customers  have accounted for 10% or more of the Company's net
sales for the years ended December 31, 2003 and 2002 as follows,  expressed as a
percentage of the corresponding consolidated totals:


<TABLE>
<CAPTION>
                                       NINE MONTHS ENDED                 YEAR ENDED
                                         SEPTEMBER 30                    DECEMBER 31
                                   ---------------------------- ------------------------------
                                      2004           2003            2003          2002
                                   ---------------------------- ------------------------------
                                          (UNAUDITED)           (RESTATED -
                                                                 SEE NOTE 2)
<S>                                 <C>            <C>             <C>            <C>
         Customer:
            Company A sales            10%            12%             14%           14%
            Company B sales             8%            20%             18%           19%

</TABLE>


Accounts receivable from Company A and Company B were 14% and 18%, respectively,
of total  accounts  receivable  as of December 31, 2003.  Customer A's sales and
accounts  receivable  are included in the Company's U.S.  operating  segment and
Customer B's sales and accounts  receivable  are included in the Company's  Hong
Kong operating segment.

The Company conducts operations in Hong Kong, Poland and The Netherlands through
its foreign subsidiaries.  The net assets (liabilities) of the Hong Kong, Polish
and  Netherlands  subsidiaries  as of December 31, 2003,  totaled  approximately
$470,000, $(5,500) and $(964,000), respectively.

The Company  generates a large portion of its revenues from  customers  that are
located outside the U.S. Revenues from external customers  attributed to foreign
countries,  defined as the location of the corporate  office of those customers,
totaled  $14,603,451  and  $7,405,310  for the years ended December 31, 2003 and
2002, respectively.


                                      F-25
<PAGE>

                   Dyadic International, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


4.    FIXED ASSETS

Fixed assets, net consist of the following as of December 31, 2003:

         Vehicles                                               $    124,274
         Lab and manufacturing equipment                           1,563,036
         Office furniture and equipment                              316,834
         Leasehold improvements                                      103,896
                                                                ---------------
                                                                   2,108,040
         Less accumulated depreciation and amortization             (911,096)
                                                                ---------------
                                                                $  1,196,944
                                                                ===============

Depreciation  and  amortization of fixed assets for the years ended December 31,
2003 and 2002, were $486,628 and $94,673, respectively.

5.    ACCRUED EXPENSES

Accrued expenses consist of the following at December 31, 2003:

         Payroll and related costs                              $    407,899
         Professional fees                                           395,498
         Research and development                                    261,564
         Other                                                       200,204
                                                                ---------------
                                                                $  1,265,165
                                                                ===============

Accrued  research and  development  consists of costs  related to  agreements to
conduct  research and  development  activities  on behalf of the Company and the
Company's  Cooperation  and License  Agreement,  as  discussed in Note 11. Other
accrued  expenses include  approximately  $28,000 of accrued interest due to the
Mark A. Emalfarb Trust (see Note 6).


                                      F-26
<PAGE>

                   Dyadic International, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


6.    LONG-TERM LIABILITIES

<TABLE>
<CAPTION>
<S>                                                                                       <C>
Long-term liabilities consist of the following at December 31, 2003:

         Notes payable to stockholders, including accrued interest:

            Loan payable with a rate of 8% as of December 31, 2003 to Mark A.
              Emalfarb Trust (Bridge Loan), secured by all assets of the Company,
              principal and accrued interest due January 2005. Maturity date
              extended to January 1, 2007 in connection with the transactions
              described in Note 1.                                                        $   3,126,104

            Note payable with an allowed original principal of $2,000,000 with a
              rate of 9% as of December 31, 2003, to Mark A. Emalfarb Trust, secured
              by all assets of the Company, maturity date extended to January 2005.
              Cancelled in November 2004 through the sale of Investment Units in the
              October 2004 Offering (see Note 1).                                             1,225,000

            Subordinated convertible note payable to Mark A. Emalfarb Trust
              (Emalfarb Trust Note), secured by all assets of the Company, in the
              original principal amount of $750,766, dated May 2001, interest at the
              Applicable Federal Funds Rate, adjusted each January 1 (0.98% at
              December 31, 2003), principal and accrued interest due March 2011, or
              earlier upon a Qualified Public Offering, Liquidation Event,
              repurchase by payor or Conversion of all Series A Preferred Stock into
              Common Stock. Maturity date modified to January 1, 2005 and interest
              rate adjusted to 6% in connection with the 2004 private offering (see
              Note 8). Maturity date extended to January 1, 2007 in connection with
              the transactions described in Note 1.                                             807,747

            Subordinated  convertible  note  payable to  Francisco  Trust  u/a/d
              February 28, 1996 (the Francisco  Trust)  (Francisco  Trust Note),
              secured by all assets of the Company,  in the  original  principal
              amount of  $664,838,  dated May 2001,  interest at the  Applicable
              Federal Funds Rate, adjusted each January 1 (0.98% at December 31,
              2003),  principal and accrued  interest due March 2011, or earlier
              upon a Qualified Public Offering, Liquidation Event, repurchase by
              payor or  Conversion  of all Series A Preferred  Stock into Common
              Stock. Maturity date modified to January 1, 2005 and interest rate
              adjusted to 6% in connection  with the 2004 private  offering (see
              Note 8). Maturity date extended to January 1, 2007  in  connection
              with the transactions described in Note 1.                                        715,311
                                                                                        -------------------
                                                                                           $  5,874,162
                                                                                        ===================

            Subordinated  notes  payable to the  Company's  President  and Chief
              Executive  Officer and the minority  stockholders of a subsidiary,
              interest at a weighted  average  rate of 5.6% as of  December  31,
              2003, no fixed repayment terms, classified as current.                      $     327,167
                                                                                        ===================

         Other notes payable                                                              $       6,771
         Less - current portion                                                                  (6,771)
                                                                                        -------------------
                                                                                          $           -
                                                                                        ===================
</TABLE>


                                      F-27
<PAGE>

                   Dyadic International, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


6.    LONG-TERM LIABILITIES (CONTINUED)

On May 29, 2003, the Company obtained a $3 million  revolving note from the Mark
A. Emalfarb Trust,  bearing interest at 8% per annum,  with all unpaid principal
and interest  originally due on January 2, 2004, and extended to January 1, 2005
on February 13, 2004. The loan is  collateralized  by a security interest in all
of the Company's  assets.  The Mark A. Emalfarb Trust was also granted a warrant
to purchase up to 1.5 million shares of the Company's common stock at the lesser
of $4.50 per share or the Series A  Preferred  conversion  price,  expiring  ten
years from the date of grant (the Bridge Loan Warrant). The Company recorded the
fair value of the Bridge Loan Warrant in 2003 as a cost of issuing the revolving
note,  and  amortized  this fair value,  which totaled  $3,195,000,  to interest
expense  in 2003.  The fair  value  of the  warrant  was  determined  using  the
Black-Scholes  option  pricing model with the following  assumptions:  risk-free
interest rate of 3.33%,  dividend yield of 0%, expected volatility of 50% and an
expected life of 10 years (the maximum  contractual  term).  Accrued interest on
the revolving  note payable is $126,104 and is included in the principal  amount
of the note as of December 31, 2003.

The  $1,225,000  note  payable  to  Mark A.  Emalfarb  Trust  carries  financial
covenants  and the maturity  date is January 1, 2005.  Interest  expense on this
note payable totaled approximately $110,000 for each of the years ended December
31, 2003 and 2002.  Accrued interest on this note payable totaled  approximately
$28,000 as of December  31,  2003,  and is  included in accrued  expenses in the
accompanying consolidated balance sheet.

Interest expense on the subordinated convertible notes payable was approximately
$18,000  and  $29,000  for  the  years  ended   December   31,  2003  and  2002,
respectively.  Accrued  interest on the subordinated  convertible  notes payable
totaled  approximately  $108,000 as of December  31, 2003 and is included in the
principal  amount  of  the  subordinated   convertible   notes  payable  in  the
accompanying consolidated balance sheet.

The notes payable and accrued interest due on the subordinated convertible notes
payable are  convertible  in whole or part into shares of the  Company's  common
stock at any time,  at a  conversion  price  equal to fair  market  value of the
Company's common stock.

Mark A. Emalfarb Trust and Francisco Trust are major stockholders of the Company
and are trusts benefiting the Company's  President and Chief Executive  Officer,
and his wife and children.


                                      F-28
<PAGE>

                   Dyadic International, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


6.    LONG-TERM LIABILITIES (CONTINUED)

The  subordinated  notes payable to the Company's  President and Chief Executive
Officer and the minority  stockholders of a subsidiary are collateralized by the
subsidiary's  accounts  receivable and  inventories.  Interest  expense on these
subordinated  notes payable was $11,425 and $16,230 for the years ended December
31, 2003 and 2002, respectively, and accrued interest of $123,724 is included in
the principal amount of the subordinated notes payable as of December 31, 2003.

7.    INVESTMENT IN AFFILIATE

In October 1998 (the  Completion  Date),  the Company  entered into an agreement
(the Agreement) with a foreign  textile,  chemical and enzyme business to form a
venture. The Company purchased,  directly from two investors (the Sellers),  who
at  that  time  owned  a 95%  interest,  70% of the  outstanding  shares  in the
affiliate for $536,882,  which included  transaction  costs. As described below,
the Company could only vote 25% of the outstanding shares of the affiliate.  The
amount by which the Company's  original  investment  exceeded its  proportionate
share of the  affiliate's  net  assets  was  initially  being  amortized  over a
twenty-four-year period using the straight-line method.

On January 18, 2000, the Company obtained an additional 12.5% of the outstanding
shares of the affiliate, thereby increasing its then existing voting rights from
25% to 37.5%,  and its ownership  interest from 70% to 82.5%.  These shares were
obtained by the Company  from one of the  Sellers for nominal  consideration  in
connection with the termination of a service agreement between the affiliate and
one of the Sellers.  In July 2002,  the Company and the Sellers  entered into an
agreement  that resulted in the Company  increasing its voting rights from 37.5%
to 62.5%. The additional voting rights were obtained from one of the Sellers for
consideration  of $100,000,  with $20,000 paid upon  execution of the agreement,
and the remainder  payable in equal  installments of $10,000 through March 2003.
The amount was paid in its entirety during 2003.

The Company can only vote 62.5% of the total outstanding shares of the affiliate
until it pays for  additional  voting  rights.  The  Company  has an  option  to
purchase  the  additional  voting  rights  on the  remaining  20%  of the  total
outstanding shares of the affiliate for a total of $400,000.  This option can be
exercised in $20,000  increments  for each 1% of the  additional  voting rights.
This option must be exercised once the affiliate  reaches $900,000 in cumulative
profit,  as  defined.   Through  December  31,  2003,  and  September  30,  2004
(unaudited), this cumulative profit target has not been attained.


                                      F-29
<PAGE>

                   Dyadic International, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


7.    INVESTMENT IN AFFILIATE (CONTINUED)

Each of the Sellers has agreed not to sell or  otherwise  transfer  ownership in
their  remaining  shares of the  affiliate  for a period  of 20 years  after the
Completion Date without prior written consent of the Company.

For a period of 20 years  after the  Completion  Date,  the  Company  has a call
option over any shares (presently 12.5% of the total outstanding  shares) of the
affiliate owned by the Sellers,  exercisable after the above described  $400,000
of remaining  consideration  has been paid, but not earlier than two years after
the  Completion  Date,  to  purchase  any shares of the  affiliate  owned by the
Sellers.  The  exercise  price is  based on the  results  of  operations  of the
affiliate for the 12 months preceding the exercise date.

Through  December 31, 2003,  neither the Company nor the Sellers have  exercised
any of the above described options.

As more fully described in Note 2, effective July 1, 2002, the Company accounted
for its investment in the affiliate as a consolidated  subsidiary.  As such, the
following  disclosures do not include information related to the affiliate as of
December 31, 2003 and 2002,  or for the period from July 1, 2002 to December 31,
2003.

The Company sells inventory and extends trade credit to the affiliate.  Sales to
the affiliate for the period from January 1, to June 30, 2002 were $213,537.

The following is a condensed summary of financial  information for the affiliate
for the period from January 1, to June 30, 2002:

         Statement of operations data:
            Revenues                                      $    2,524,379
            Net income                                            99,306


                                      F-30
<PAGE>

                   Dyadic International, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


8.    STOCKHOLDERS' EQUITY (DEFICIT)

DESCRIPTION

In December 2000, the Company amended its Articles of Incorporation to authorize
the issuance of 150,000,000  shares of capital stock,  consisting of 100,000,000
shares  of no par  value  common  stock  and  50,000,000  shares of no par value
preferred stock, and effected a recapitalization in the form of a 4,697.0408 for
one split of all then  outstanding  shares of common stock. A total of 3,111,110
shares of the Company's  common stock are reserved for issuance upon  conversion
of the Redeemable Series A Convertible Preferred Stock.

In March 2004, the Company amended its Articles of  Incorporation to designate a
total of 3,111,110 shares of the Company's Preferred Stock as Series A Preferred
Stock  and  2,222,222  shares  of the  Company's  Preferred  Stock  as  Series B
Preferred Stock.

ISSUANCES OF COMMON STOCK

In July 2004, the Company completed a private offering (pursuant to a Term Sheet
dated April 1, 2004) of its common and preferred equity  securities,  and raised
gross  proceeds  of $4.7  million.  The  equity  securities  were  offered as an
Investment Unit, with each unit consisting of two shares of common stock and one
share of Series B Preferred  Stock, at a price of $10 per unit. The Company used
$1.5 million of the proceeds from this offering to redeem all outstanding shares
of Series A Preferred (see Note 9). Holders of the Series B Preferred  Stock are
entitled to receive noncumulative dividends at the rate of 8% per annum when and
as declared by the Company's  Board of Directors,  have certain  preferences  in
liquidation,  and have voting  rights  identical  to those of the holders of the
Company's  common  stock.  All of the  outstanding  shares of Series B Preferred
Stock  automatically  converted  into an equal  number of shares of common stock
upon  closing of the private  offering.  After  giving  effect to the  automatic
conversion  of the Series B  Preferred  Stock,  a total of  1,422,099  shares of
common  stock were  issued in  connection  with this  offering.  If the  Company
completes an additional  private  offering of its common shares  pursuant to the
Confidential  Offering  Memorandum  described  below, the Company will grant the
purchasers  of these  Investment  Units  warrants  to acquire a total of 711,050
shares of the Company's common stock at $5.50 per share.

In July 2004,  the Company  issued  18,624 shares of its common stock to certain
employees for payment of a portion of accrued bonuses in the amount of $62,018.


                                      F-31
<PAGE>

                   Dyadic International, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


8.    STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)

On June 15, 2004,  the Company  entered into an  Engagement  Agreement  with two
investment  bankers to furnish corporate finance and investment banking services
to the Company, including, but not limited to assisting the Company in preparing
and  distributing  a  Confidential  Offering  Memorandum,  identifying  suitable
potential  investors and identifying and evaluating  potential  candidates for a
business combination  transaction.  The initial term of the Engagement Agreement
ends on November 5, 2004, but may be extended under certain  circumstances.  The
investment  bankers will receive a cash payment of $37,500,  reimbursement of up
to $60,000 of out-of-pocket  expenses, and if a transaction is completed, a cash
fee equal to 7% (10% in certain  circumstances) of gross proceeds raised, shares
of the  Company's  common stock and warrants to acquire  shares of the Company's
common stock. In July 2004, pursuant to this Engagement  Agreement,  the Company
awarded each of its two  investment  bankers  16,102  shares of its common stock
valued at $53,620.  Such amount is included in other assets in the  accompanying
unaudited September 30, 2004 consolidated balance sheet.

On June 23,  2004,  the Company  executed a Term Sheet with  another  investment
banker pursuant to which this investment  banker would assist in connection with
the  structuring  and concurrent  consummation  of a reverse  triangular  merger
between  the  Company  and a public  company,  and a  private  placement  of the
securities (common stock and warrants) of the merged entity (see Note 1).

9.    REDEEMABLE SERIES A CONVERTIBLE PREFERRED STOCK

On May 25, 2001,  pursuant to a Convertible  Preferred Stock Purchase Agreement,
the Company sold 2,222,222 shares of newly authorized and designated  Redeemable
Series A  Convertible  Preferred  Stock  (the  Series A  Preferred)  to  several
unrelated  investors  for  approximately  $10,000,000.  Holders of these  shares
maintain  certain  preferences in  liquidation  and have voting and other rights
with  respect  to the  composition  of the  Company's  Board  of  Directors.  An
additional  888,888  shares of Series A Preferred  are  reserved for issuance as
dividends.


                                      F-32
<PAGE>

                   Dyadic International, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


9.    REDEEMABLE SERIES A CONVERTIBLE PREFERRED STOCK (CONTINUED)

In  addition,  holders of Series A  Preferred  are  entitled  to receive  annual
dividends at the rate of $0.36 per share (8%).  No dividends  will be paid until
the earlier of (i) two years,  (ii) a Liquidation  Event, as defined,  (iii) the
consummation of an underwritten Public Offering, as defined, (iv) the conversion
into common stock of all of the Series A Preferred of the holder or (v) the date
on which the preferred shares are acquired by the Company. Upon the consummation
of a Qualified  Public  Offering,  as defined,  if prior to any of the events in
items (i) through (v), all dividends accrued will be extinguished.  Dividends on
the Series A Preferred may be paid in cash or with Series A Preferred shares, at
the Company's option.  In addition,  upon the consummation of a Qualified Public
Offering, Series A Preferred shares will automatically convert into common stock
on a one-for-one  basis,  subject to  adjustment  as defined in the  Convertible
Preferred Stock Purchase Agreement.  In certain circumstance,  holders also have
the option to require the Company to redeem for cash any  outstanding  shares of
Series A Preferred  beginning in May 2006.  Accordingly,  the Series A Preferred
and accrued  dividends are not reflected as a component of stockholders'  equity
(deficit).

Issuance  costs are being  accreted  up to the  Series A  Preferred  liquidation
value, which is equal to the Original Purchase Price plus all accrued and unpaid
dividends,  and are being charged to accumulated deficit over a 60-month period.
At that time,  if the Company has not completed a Qualified  Public  Offering or
merger,  as defined,  then each holder of Series A Preferred  can exercise a Put
Option,  requiring  the  Company  to  purchase  all  Series A  Preferred  shares
outstanding.

On October  24,  2003,  the  Company  and the  holders of the Series A Preferred
entered into a  Conditional  Consent and Waiver to Placement  of  Securities  of
Dyadic  International,  Inc.  (the  Consent and Waiver) to induce the Company to
continue its efforts to conclude a private  placement which raises at least $2.0
million for the Company,  and to induce prospective  investors in the Company to
engage in negotiations with the Company pertaining to a private  placement.  The
Consent and Waiver was subject to certain  conditions which included the receipt
by the Company of proceeds  from the sale of Series B Preferred of at least $2.0
million under terms  substantially  similar to the holders of Series B Preferred
as the rights,  privileges and preferences of the holders of Series A Preferred.
The Consent and Waiver would have  resulted in  acceptance by Series A investors
of common stock for dividends  accrued to date;  termination  of the  continuing
accrual of  dividends;  subordination  of Series A  Preferred  Stock to Series B
Preferred Stock (and any accrued but unpaid Series B Preferred Stock  dividends)
in the event of


                                      F-33
<PAGE>

                   Dyadic International, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


9.    REDEEMABLE SERIES A CONVERTIBLE PREFERRED STOCK (CONTINUED)

a liquidation,  dissolution or winding up of the Company;  elimination of one of
two  seats on the  Company's  Board  of  Directors;  and a  one-time  wavier  of
anti-dilution rights by Series A Preferred investors.

In February 2004, the holders of the Series A Preferred offered to sell at least
80% of the outstanding shares of Series A Preferred to the Company, and in March
2004,  the  Company and the  holders of the Series A  Preferred  entered  into a
Redemption  Agreement  that  resulted  in  the  Company  redeeming  all  of  the
outstanding shares of Series A Preferred, including accrued and unpaid dividends
thereon, for a cash payment of $1.5 million in June 2004.

Changes in the Series A  Preferred  for the years  ended  December  31, 2003 and
2002,  and for the nine  months  ended  September  30, 2004  (unaudited)  are as
follows:

<TABLE>
<CAPTION>
                                                                           SERIES A PREFERRED STOCK,
                                                                                 NO PAR VALUE
                                                                     --------------------------------------
                                                                      NUMBER OF SHARES       AMOUNT
                                                                     --------------------------------------
<S>                                                                  <C>                 <C>
         Balance at December 31, 2001                                      2,222,222     $     10,302,808
            Accretion of issuance costs                                           --               36,509
            Dividends                                                             --              800,000
                                                                     --------------------------------------
         Balance at December 31, 2002                                      2,222,222           11,139,317
            Accretion of issuance costs                                           --               37,985
            Dividends                                                             --              800,000
                                                                     --------------------------------------
         Balance at December 31, 2003                                      2,222,222           11,977,302
         Unaudited:
            Accretion of issuance costs                                           --               16,653
            Dividends                                                             --              350,684
            Redemption - June 2004:
              Reversal of unaccreted issuance costs                               --               75,039
              Reversal of accumulated dividends                                   --           (2,419,678)
              Share redemption                                            (2,222,222)         (10,000,000)
                                                                     --------------------------------------
         Balance, September 30, 2004 - unaudited                                  --     $             --
                                                                     ======================================
</TABLE>


                                      F-34
<PAGE>

                   Dyadic International, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


10.   STOCK OPTIONS

Effective  May 2001,  the Company  adopted the Dyadic  International,  Inc. 2001
Equity  Compensation  Plan (the Equity  Plan) under  which  1,302,989  shares of
common stock were reserved for issuance (see Note 1). All employees,  as well as
members of the Company's  Board of Directors and Key Advisors,  as defined,  are
eligible to participate  in the Equity Plan.  Under the Equity Plan, the Company
may issue  incentive  stock options and  nonqualified  stock options to purchase
shares of common stock,  or the Company may issue shares of common  stock.  Such
shares,  if issued,  may be subject to restrictions,  as disclosed in the Equity
Plan. In addition to stock options and stock grants,  the Equity Plan allows for
the  issuance  of  Performance  Units  to  an  employee  or  Key  Advisor.  Each
Performance  Unit  represents the right to receive an amount,  in cash or in the
Company's  common stock,  as determined by a committee of the Company's Board of
Directors  (the  Committee),  based on the  value of the  Performance  Unit,  if
established performance goals are met.

The Equity Plan limits the stock options, shares of common stock and Performance
Units to be granted under the Equity Plan to 100,000  options,  shares issued or
Performance  Units per  individual  per  calendar  year or  Performance  Period,
respectively,  as defined.  The Committee determines the term and exercisability
of options;  however,  the term is not to exceed 10 years. A summary of activity
relating to grants under the Equity Plan,  grants by the  Francisco  Trust,  and
grants of 65,000  options to  nonemployees  prior to the Equity Plan's  adoption
follows:

<TABLE>
<CAPTION>
                                                          2003                           2002
                                              ------------------------------ ------------------------------
                                                               WEIGHTED                       WEIGHTED
                                                                AVERAGE                        AVERAGE
                                                               EXERCISE                       EXERCISE
                                                  SHARES         PRICE           SHARES         PRICE
                                              ------------------------------ ------------------------------
<S>                                            <C>            <C>               <C>          <C>
         Outstanding at beginning of year          371,000      $  4.15           597,500      $  3.45
            Granted                                219,500         4.50                 -         -
            Exercised                                    -         -             (200,000)       (2.00)
            Canceled                               (35,500)        4.50           (26,500)       (4.50)
                                              ------------------------------ ------------------------------
         Outstanding at end of year                555,000      $  4.23           371,000      $  4.15
                                              ============================== ==============================

         Exercisable at end of year                327,967      $  4.12           190,100      $  3.84
                                              ============================== ==============================
</TABLE>


                                      F-35
<PAGE>

                   Dyadic International, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


10.   STOCK OPTIONS (CONTINUED)

Information about stock options outstanding at December 31, 2003, is as follows:

<TABLE>
<CAPTION>
                                      OPTIONS OUTSTANDING                      OPTIONS EXERCISABLE
                        -----------------------------------------------------------------------------------
                                             WEIGHTED
                              NUMBER          AVERAGE       WEIGHTED          NUMBER          WEIGHTED
                          OUTSTANDING AT     REMAINING       AVERAGE      EXERCISABLE AT       AVERAGE
            EXERCISE       DECEMBER 31,     CONTRACTUAL     EXERCISE       DECEMBER 31,       EXERCISE
              PRICE            2003        LIFE (YEARS)       PRICE            2003             PRICE
         --------------------------------------------------------------------------------------------------
<S>                      <C>              <C>              <C>           <C>                <C>
              $ 2.00            50,000           -            $  2.00           50,000          $ 2.00
              $ 4.50           505,000         3.36           $  4.50          277,967          $ 4.50
</TABLE>

On July 8, 2003, the Company granted 219,500 stock options to several employees,
consultants and scientific advisors, at an exercise price of $4.50 per share. As
of December  31,  2003, a total of 822,989  shares were  available  for issuance
under the Equity Plan (see Note 1).

During  2001,  concurrent  with the  issuance of  preferred  stock (see Note 9),
options  granted to employees prior to the Equity Plan's adoption were cancelled
and replaced by options to purchase  shares of the  Company's  common stock from
the Francisco Trust (see Note 6). Authoritative  accounting  literature requires
that such options be treated as though they were options granted by the Company.

Accordingly,  such options are reflected in the above tables and concurrent with
the  cancellation  and reissuance of such options by the Francisco  Trust, a new
measurement date has been established in which to compute  compensation  expense
relating only to those options replaced,  measured as the difference between the
fair market value of the options granted by the Francisco Trust and the exercise
price of those options. A summary of such transactions follows:

      o     Under a 1996  employment  agreement  with an officer of the Company,
            200,000  options to purchase  shares of the  Company's  Common Stock
            were granted.  In May 2001, such options were cancelled and replaced
            by  options  granted  by the  Francisco  Trust at the same  exercise
            price,  but below the then  current fair market  value.  The options
            were fully  vested  and the  transaction  resulted  in  $320,000  of
            compensation  expense,  which was  included in the December 31, 2001
            consolidated statement of operations.  In December 2002, the officer
            exercised  this stock option and paid the exercise price of $400,000
            to the  Francisco  Trust in the form of a $50,000 cash payment and a
            $350,000  non-recourse  note,  bearing  interest  at 6%  per  annum,
            calculated  and payable on December  31 of each year,  principal  of
            $100,000 payable before December 31, 2003, and principal of $250,000


                                      F-36
<PAGE>

                   Dyadic International, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


10.   STOCK OPTIONS (CONTINUED)

            payable  before  December  31,  2004,  pre-payable  as to all or any
            portion  of the  balance  at any  time  prior to the due  date.  The
            issuance of the note extended the original  option term.  During the
            year ended  December 31,  2003,  the  $100,000  scheduled  principal
            payment, including accrued interest, was made. The principal balance
            is secured  only by the shares of common  stock sold to the officer,
            and  accrued  interest  is  secured  by all the  officer's  personal
            assets.  The  remeasurement of compensation  cost at the time of the
            exercise of this stock option resulted in no additional compensation
            expense.

      o     During  1999,  the  Company  granted a stock  option to an  employee
            providing the employee  with an option to purchase  50,000 shares of
            the Company's  common stock,  with exercise prices between $2.00 and
            $3.00 per share,  dependent upon whether certain  production  levels
            were  attained.  Options to purchase  this stock were to vest on the
            later of December  31, 2002,  or on the date that a production  goal
            was met.  This  option  must be  exercised  within one year from the
            latter of this  vesting  date or the date the Company  completes  an
            underwritten  pubic offering.  Excess,  if any, of fair market value
            over the  exercise  price on the  vesting  date would be recorded as
            compensation   expense.  In  May  2001,  these  stock  options  were
            cancelled  and replaced by stock  options  granted by the  Francisco
            Trust.  The options  granted in 2001 carried the same  provisions as
            the options  granted in 1999. In 2001, the Company  determined  that
            the conditions  required for use of a $2.00 per share exercise price
            were met, and the Company recognized $80,000 of compensation expense
            at that time.

      o     In  May  2000,  the  Company  entered  into  a  two-year  employment
            agreement  with  its  Vice  President,  Marketing  -  Biotechnology,
            granting  options to purchase 25,000 shares of the Company's  common
            stock for 110% of the initial public  offering price in the event of
            an initial public  offering.  In May 2001,  these stock options were
            cancelled  and replaced by stock  options  granted by the  Francisco
            Trust at a fixed  exercise  price of $4.50 per share,  which was not
            below the estimated  fair market value of the options on the date of
            grant.  Accordingly,  no  compensation  expense  has  been  recorded
            relating to this grant.


                                      F-37
<PAGE>

                   Dyadic International, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


10.   STOCK OPTIONS (CONTINUED)

In 2003 and 2001,  and during the nine months  ended  September  30,  2004,  the
Company  issued  options  to other  nonemployee  consultants  and  advisors  for
services.  In  accordance  with SFAS No. 123,  such options are recorded at fair
value,  using  the  Black-Scholes   option  pricing  model  with  the  following
assumptions:  risk free interest rate of 3.33% in 2003,  5.45% in 2001 and 4.35%
to 5.09% for the nine months ended  September  30, 2004,  dividend  yield of 0%,
expected  volatility  of 50% and an  expected  life of five years  (the  maximum
contractual  term).  Compensation  cost related to these options is reflected in
the accompanying consolidated financial statements as follows:

<TABLE>
<CAPTION>
                                           NINE MONTHS ENDED                  YEAR ENDED
                                             SEPTEMBER 30                     DECEMBER 31
                                   -------------------------------- -------------------------------
                                         2004           2003             2003           2002
                                   ----------------------------------------------------------------
                                             (UNAUDITED)
<S>                                  <C>              <C>              <C>            <C>
Research and development             $     28,349     $   23,018       $   30,691     $   31,309
General and administrative                224,230         18,493           24,657         12,521
                                   -------------------------------- -------------------------------
                                     $    252,579     $   41,511       $   55,348     $   43,830
                                   ================================ ===============================
</TABLE>


11.   COMMITMENTS AND CONTINGENCIES

EMPLOYMENT AGREEMENT

In 2001, the Company entered into an Employment Agreement with Mark A. Emalfarb,
the Company's President and Chief Executive Officer.  The agreement commenced on
April 1, 2001,  and  terminates on March 30, 2004,  but renews for an additional
two years unless one party gives written notice 60 days prior to March 30, 2003.
Written  notice was not issued by either party.  The  agreement  provides for an
annual  base salary of $300,000  and the  payment of an annual  bonus  (based on
goals and  objectives to be agreed upon by the Board and Mr.  Emalfarb) for each
fiscal year or portion of a fiscal year,  including  but not limited to research
and other business  milestones,  sales,  profitability  or cash flow goals.  The
Company agrees to cause the Committee to grant Mr. Emalfarb  options to the same
extent as the Committee grants to other senior  executives of the Company and on
the same terms and conditions.


                                      F-38
<PAGE>

                   Dyadic International, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


11.   COMMITMENTS AND CONTINGENCIES (CONTINUED)

The  agreement  also  provides  for  the  participation  in all  benefit  plans,
practices,  policies  and programs  provided by the Company such as  (including,
without  limitation,  reimbursement  of  business  related  expenses,  vacation,
medical,  prescription,  dental,  disability,  retirement,  salary  continuance,
employee life insurance,  group life insurance,  and accidental death and travel
accident  insurance  plans and  programs)  generally  available  to other senior
executives of the Company, and for other employee benefits.

If,  during  the  employment  period,  the  Company  terminates  Mr.  Emalfarb's
employment,  other than for cause or disability  or by reason of Mr.  Emalfarb's
death or by  reason  of the  failure  of the  Company  to renew  the  Employment
Agreement, or if Mr. Emalfarb terminates employment for good reason, the Company
shall provide Mr. Emalfarb with annual base salary and all benefits  received by
Mr.  Emalfarb  as of the date of  termination  for a period of one year from the
date of termination.

EMPLOYEE BENEFIT PLAN

The Company has a 401(k)  defined  contribution  plan in which all employees are
eligible  to  participate.  Participants  may  elect  to  defer  up  to  25%  of
compensation  up to a maximum amount  determined  annually  pursuant to Internal
Revenue  Service  regulations.  The Company  elected not to provide for matching
employer contributions for the years ended December 31, 2003 and 2002.

MANUFACTURING AGREEMENTS

The Company entered into an agreement (the  Manufacturing  Agreement) in October
1999,  under which the Company and a foreign  manufacturer  have established the
terms for the foreign  manufacturer  to conduct  contract  production of certain
products for the  Company.  The  production  process is conducted by the foreign
manufacturer at its facilities.  The Company  provides the foreign  manufacturer
with all technical  and  technology  information,  instructions  and  procedures
available to the Company and necessary for the  production,  packing and testing
of the product.


                                      F-39
<PAGE>

                   Dyadic International, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


11.   COMMITMENTS AND CONTINGENCIES (CONTINUED)

The  Manufacturing  Agreement  requires the payment of monthly  charges based on
capacity usage,  ultrafiltration  costs,  disposal costs, raw material costs and
reimbursement of plant  modification  costs. In July 2001, the Company agreed to
pay a total of approximately $1.6 million in plant modification costs in monthly
installments  of  $26,713,  plus  LIBOR  (2.1% at  December  31,  2003),  over a
seven-year period. Payments are denominated in Euros. Remaining minimum payments
under the Manufacturing  Agreement,  including interest at the December 31, 2003
LIBOR rate, are as follows:

     Year ending December 31,
           2004                                         $      353,317
           2005                                                344,864
           2006                                                336,410
           2007                                                327,957
           2008                                                101,440
                                                        -----------------
                                                        $    1,463,988
                                                        =================


The  Manufacturing  Agreement  is being  accounted  for as a service  agreement.
Accordingly,  annual payments are reflected as a component of cost of goods sold
in the annual period in which each payment is due.

The Company has made a request of its product  manufacturer to expand production
capacity in order to produce  higher  volumes of existing and new  products.  In
January  2004,  the Company  concluded an  agreement  with the  manufacturer  to
provide  an  additional  250 M3 (cubic  meters)  of  fermentation  capacity  and
associated recovery capacity with the capital necessary for this expansion to be
provided by the  manufacturer.  If the  manufacturer  cannot  obtain the funding
necessary to provide the needed  capital to honor its  obligation to the Company
under the Manufacturing Agreement (and the Company presently has concern on this
issue), this will negatively affect the Company's ability to meet its production
requirements and therefore impact its financial position,  results of operations
and cash flows.

The Company has entered into an agreement  whereby a domestic  manufacturer will
produce and store various  products for the Company.  The current contract is in
effect until May 14, 2005, and provides the Company with access to  fermentation
capacities and storage facilities.


                                      F-40
<PAGE>

                   Dyadic International, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


11.   COMMITMENTS AND CONTINGENCIES (CONTINUED)

The Company has been informed that the domestic  manufacturer will not renew the
contract,  and the Company is presently  seeking  other  manufacturing  capacity
alternatives  in addition to the request of the foreign  manufacturer  discussed
above.  Although  there are no  assurances,  certain  products at present can be
produced only by the domestic  manufacturer  but the Company  expects that those
products will be in production by the foreign manufacturer prior to the contract
expiration date.

AGREEMENTS TO CONDUCT RESEARCH AND DEVELOPMENT ACTIVITIES ON
   BEHALF OF THE COMPANY

The Company has entered into several  agreements with independent  third parties
to conduct research and development activities on behalf of the Company.  Except
as described  below,  none of these agreements are for minimum periods in excess
of one year,  and are generally  cancelable by the Company with advance  written
notice.

On July 30, 2004, the Company entered into a Development  Agreement with a third
party to assist the Company in various  research and  development  projects over
the 26-month period ending September 30, 2006. Under the Development  Agreement,
the Company is required to utilize, and the third party has committed to provide
research and development  assistance valued at approximately $1.25 million.  The
consideration  for these  services will include  300,300 shares of the Company's
common stock,  valued at $1 million,  and cash,  $250,000 of which was paid upon
execution of the Development  Agreement.  Pursuant to the Development Agreement,
the 300,300  shares of common  stock were placed in escrow and will be issued to
the third party as earned during the contractual period, at which time they will
be deemed to be outstanding.  The Development  Agreement  imposes cash penalties
upon the  third  party in the  event of  nonperformance  under  the  Development
Agreement, beyond the forfeiture of any shares of common stock placed in escrow.


                                      F-41
<PAGE>

                   Dyadic International, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


11.   COMMITMENTS AND CONTINGENCIES (CONTINUED)

COOPERATION AND LICENSE AGREEMENT

In January  2003,  the  Company  formed  Dyadic  Nederland  B.V.  (BV),  a Dutch
corporation,  and  entered  into a  Cooperation  and License  Agreement  with an
unrelated third party to cooperate on an exclusive basis in the development, use
and marketing of High Throughput  Robotic  Screening  Systems  utilizing  fungal
organisms.  Under the  Cooperation  and License  Agreement,  the Company and the
third  party have  granted BV  worldwide  license in and to certain  patents and
technologies,  and BV will make  royalty  and  revenue  sharing  payments to the
Company and the third party on revenue  generated  from the business.  The third
party was also granted an option to acquire shares of the Company's common stock
beginning  on the  two-year  anniversary  of the  formation of BV, or earlier in
certain  circumstances.  The  number  of shares of the  Company's  common  stock
available  to the  third  party  is  equal  to 15% of the sum of  BV's  Business
Shareholder's  Equity, as defined,  divided by $4.50. No shares of the Company's
common stock were available under this option as of December 31, 2003.

LITIGATION, CLAIMS AND ASSESSMENTS

In the opinion of management,  there are no known pending legal proceedings that
would have a material  effect on the Company's  financial  position,  results of
operations or cash flows.

LEASES

The Company is obligated under a noncancelable  operating lease for office space
that  expires  in  2005.  The  Company  also  leases  certain   equipment  under
noncancelable  agreements.  Annual minimum payments under these operating leases
as of December 31, 2003, are as follows:

     Year ending December 31:
           2004                                          $     131,692
           2005                                                116,593
           2006                                                 11,130
                                                         -----------------
                                                         $     259,415
                                                         =================


Rent expense totaled $180,564 and $120,381 for the years ended December 31, 2003
and 2002, respectively.


                                      F-42
<PAGE>

                   Dyadic International, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


11.   COMMITMENTS AND CONTINGENCIES (CONTINUED)

The  Company's  Hong  Kong  subsidiary  leases a  facility  in Hong  Kong from a
minority stockholder of the subsidiary.  Rent expense under this arrangement was
approximately $23,000 for each of the years ended December 31, 2003 and 2002.

PROTECTION OF PROPRIETARY TECHNOLOGIES

The Company's  success is dependent in part on its ability to obtain patents and
maintain adequate  protection of other  intellectual  property for the Company's
technologies  and  products  in the United  States and other  countries.  If the
Company does not adequately protect its intellectual  property,  competitors may
be able to practice its  technologies and erode its competitive  advantage.  The
laws of some  foreign  countries do not protect  proprietary  rights to the same
extent as the laws of the United States,  and many  companies  have  encountered
significant  problems in protecting  their  proprietary  rights in these foreign
countries.  These  problems can be caused by, for  example,  a lack of rules and
methods for defending intellectual property rights.

The Company holds 3 issued United States  patents,  including  claims that cover
the C1 Expression  Technology (a host organism that performs protein  expression
and related  services for laboratory  research,  clinical  trials and commercial
production)  and 3 PCT  Publications.  The  Company  has 57  United  States  and
international    patent    applications   filed.   The   patent   positions   of
biopharmaceutical  and biotechnology  companies,  including the Company's patent
position,  are  generally  uncertain  and  involve  complex  legal  and  factual
questions.  The  Company  will be able to protect  its  proprietary  rights from
unauthorized  use by third  parties  only to the  extent  that  its  proprietary
technologies  are covered by valid and  enforceable  patents or are  effectively
maintained as trade secrets.  The Company intends to apply for patents  covering
both its technologies and products as it deems  appropriate.  However,  existing
and future patent  applications  may be challenged  and may not result in issued
patents.  The Company's  existing  patents and any future patents it obtains may
not be  sufficiently  broad to prevent  others  from  practicing  the  Company's
technologies  or from developing  competing  products.  Furthermore,  others may
independently  develop similar or alternative  technologies or design around the
Company's patented technologies. In addition, others may challenge or invalidate
the Company's  patents,  or its patents may fail to provide the Company with any
competitive advantages.


                                      F-43
<PAGE>

                   Dyadic International, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


11.   COMMITMENTS AND CONTINGENCIES (CONTINUED)

The  Company  relies  upon trade  secret  protection  for its  confidential  and
proprietary information.  The Company has taken security measures to protect its
proprietary information.  These measures may not provide adequate protection for
the Company's trade secrets or other proprietary information.  The Company seeks
to  protect  its  proprietary   information  by  entering  into  confidentiality
agreements  with  employees,   collaborators   and  consultants.   Nevertheless,
employees,  collaborators  or  consultants  may  still  disclose  the  Company's
proprietary information, and the Company may not be able to meaningfully protect
its trade secrets. In addition,  others may independently  develop substantially
equivalent proprietary information or techniques or otherwise gain access to the
Company's trade secrets.

The inability of the Company to adequately protect its proprietary  technologies
could  have a  material  adverse  impact on the  Company's  business,  operating
results and financial condition.

LITIGATION, OTHER PROCEEDINGS OR THIRD PARTY CLAIMS OF
   INTELLECTUAL PROPERTY INFRINGEMENT

The  Company's  commercial  success is dependent  in part on neither  infringing
patents and proprietary rights of third parties, nor breaching any licenses that
the Company  has entered  into with  regard to its  technologies  and  products.
Others have  filed,  and in the future are likely to file,  patent  applications
covering  genes or gene  fragments that the Company may wish to utilize with the
Company's C1  Expression  Technology,  or products  that are similar to products
developed  with the use of the  Company's  C1  Expression  Technology.  If these
patent  applications  result in issued patents and the Company wishes to use the
claimed  technology,  the Company  would need to obtain a license from the third
party.

Third  parties  may assert  that the  Company  is  employing  their  proprietary
technology without authorization.  In addition, third parties may obtain patents
in the future and claim that use of the Company's  technologies  infringes these
patents.  The Company could incur  substantial costs and diversion of management
and  technical  personnel  in  defending  itself  against any of these claims or
enforcing its patents or other  intellectual  property  rights  against  others.
Furthermore,  parties  making  claims  against the Company may be able to obtain
injunctive or other equitable relief which could effectively block the Company's
ability to further develop, commercialize and sell products, and could result in
the award of substantial damages against the Company. If a claim of infringement
against  the Company is  successful,  the Company may be required to pay damages
and obtain one or more licenses from third parties.  The Company may not be able
to obtain these


                                      F-44
<PAGE>

                   Dyadic International, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


11.   COMMITMENTS AND CONTINGENCIES (CONTINUED)

licenses at a  reasonable  cost,  if at all. In that  event,  the Company  could
encounter  delays in  product  commercialization  while it  attempts  to develop
alternative methods or products. Defense of any lawsuit or failure to obtain any
of these  licenses  could  prevent the Company  from  commercializing  available
products.

Further,  the  taxonomic  classification  of the  Company's C1 host organism was
determined  using  classical   morphological   methods.  More  modern  taxonomic
classification  methods have  indicated that the Company's C1 host organism will
be reclassified as a different genus and species.  Some of the possible  species
that the C1 host could be  reclassified as could be the subject of patent rights
owned by others.  The Company believes,  based on its evaluation of the relevant
field of science and  discussions  with our consulting  professionals,  that any
such patent  rights  would be  invalid,  and were  litigation  over the issue to
ensue, the Company believes they should prevail. If the Company did not prevail,
to settle any such  litigation or  pre-litigation  claims,  the Company could be
required to enter into a cross-licensing arrangement, pay royalties or be forced
to stop commercialization of some of its activities.

The Company does not fully  monitor the public  disclosures  of other  companies
operating in its industry regarding their technological  development efforts. If
the Company did evaluate the public disclosures of these companies in connection
with their  technological  development efforts and determined that they violated
the  Company's   intellectual  property  or  other  rights,  the  Company  would
anticipate taking appropriate action,  which could include litigation.  However,
any action the Company takes could result in substantial  costs and diversion of
management and technical personnel. Furthermore, the outcome of any action taken
by the Company to protect its rights may not be resolved in the Company's  favor
or may not be resolved for a lengthy period of time.

REAL ESTATE PURCHASE CONTRACT

The Company  entered into a real estate  purchase  contract with F & C Holdings,
LLC  (Holdings)  dated July 31,  2004 (the  Commercial  Land  Purchase  And Sale
Agreement), pursuant to which Dyadic agreed to purchase an undeveloped 1.13 acre
parcel of land (the Site) for $1.0  million by issuing $1.0 million in shares of
the Company's common stock (300,300 shares valued at $3.33 per share).


                                      F-45
<PAGE>

                   Dyadic International, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


11.   COMMITMENTS AND CONTINGENCIES (CONTINUED)

The Site, which is in a planned  community known as "Abacoa" located in the Town
of Jupiter,  Florida (the Town), is viewed by Dyadic as a desirable location for
the eventual  construction  of a 40,000 square foot  commercial  office  biotech
research and  development  building.  Holdings  shall  endeavor in good faith to
transfer from the Town's Workplace District to the Site sufficient  research and
development  rights so that the  Company  may  construct  a 40,000  square  foot
commercial office biotech research and development  building, so long as (a) the
Town allows  Holdings to do so; and (b)  Holdings  obtains the consents of other
third party landowners in the Town Center District and Workplace District to the
extent  required to amend the respective  sub-district  plans.  The closing date
shall be within five (5) days following the Development Rights Transfer Date.

In the event Holdings is unable to transfer the development  rights as described
in the  Commercial  Land Purchase and Sale  Agreement on or before  February 21,
2005 (the  Development  Rights  Transfer  Date),  either party may,  upon giving
written  notice to the other party,  terminate this entire  transaction  and the
parties shall have no further  obligations  thereunder;  provided,  however,  if
either party fails to exercise such right of  termination,  the Company shall be
obligated to purchase the Site without  Holdings  being  obligated to assign any
development rights.

Dyadic  is  contemplating  locating  its  corporate  offices  and  research  and
development  facilities  at this site for a number  of  reasons,  including  its
proximity to the temporary research facility of The Scripps Research  Institute,
its good  highway  access  and  certain  other  factors.  Closing of the sale is
expected to occur within five days of the Development  Rights  Transfer,  though
Dyadic has  inspection  rights up to  December  22,  2004,  which  entitle it to
terminate  the  Commercial  Land  Purchase  and Sale  Agreement  in its absolute
discretion.

The  Commercial  Land Purchase and Sale Agreement  obligates  Dyadic to commence
development of the Site within two (2) years following the closing date.  During
this two-year period,  Dyadic is prohibited from re-transferring the Site to any
other  person  other than (i) in  connection  with a sale of Dyadic,  (ii) to an
affiliate or (iii) with the approval of Dyadic's  Board of Directors (a majority
of its  independent  directors),  to the Francisco  Trust,  the Mark A. Emalfarb
Trust and/or any entity that is controlled,  directly or indirectly,  by Mark A.
Emalfarb and/or his family members.


                                      F-46
<PAGE>

                   Dyadic International, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


11.   COMMITMENTS AND CONTINGENCIES (CONTINUED)

If closing  occurs and Dyadic has not commenced  development  of the Site,  then
Holdings shall,  in exchange for the  reconveyance  Deed, pay the  "Reconveyance
Purchase Price" equal to the greater of the following:  (i) $1.0 million or (ii)
the "Market  Value" of the shares of the  Company's  common  stock,  as defined,
determined  as of the  date  of  the  reconveyance  notice  from  Holdings.  The
Reconveyance Purchase Price can be paid in all cash, or return of all the shares
of the Company's  common stock to the Company so long as the Market Value of the
shares of the  Company's  common stock is greater than or equal to $1.0 million,
or by  combination  of  shares  of the  Company's  common  stock  and  cash,  as
determined in the sole and absolute discretion of Holdings.

12.   SEGMENT DATA INFORMATION

Operating  segments  are  defined as  components  of an  enterprise  engaging in
business activities about which separate financial information is available that
is  evaluated  regularly  by the  chief  operating  decision  maker  or group in
deciding how to allocate resources and in assessing performance. Utilizing these
criteria,  the Company  has  identified  its  reportable  segments  based on the
geographical  markets  they  serve,  which is  consistent  with how the  Company
operates and reports internally.

The Company has three reportable segments: U.S. operations, Hong Kong operations
and Netherlands operations. The U.S. reportable segment includes a subsidiary in
Poland that is  considered  auxiliary and integral to the U.S.  operations.  The
accounting  policies  for the  segments  are the same as those  described in the
summary  of  significant   accounting   policies.   The  Company   accounts  for
intersegment  sales as if the sales were to third  parties,  that is, at current
market prices.  The U. S.  operating  segment is a developer,  manufacturer  and
distributor  of enzyme  products,  proteins,  peptides  and other  bio-molecules
derived  from  genes,  and a  collaborative  licensor  of  enabling  proprietary
technology for the development and manufacturing of biological  products and use
in research and development.  The Hong Kong operating  segment is engaged in the
manufacturing  and  distribution  of chemical and enzyme products to the textile
and pulp and paper  industries.  The  Netherlands  operating  segment  is also a
developer of enzyme products, proteins, peptides and other bio-molecules derived
from  genes  and to  date  has  invested  solely  in  research  and  development
activities.


                                      F-47
<PAGE>

                   Dyadic International, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


12.   SEGMENT DATA INFORMATION (CONTINUED)

The  following  table   summarizes  the  Company's   segment  and   geographical
information:


<TABLE>
<CAPTION>
                                                               YEAR ENDED DECEMBER 31, 2003
                                                                  (RESTATED - SEE NOTE 2)
                                   ---------------------------------------------------------------------------------
                                         U.S.        HONG KONG     NETHERLANDS
                                      OPERATING      OPERATING      OPERATING
                                       SEGMENT        SEGMENT        SEGMENT       ELIMINATIONS        TOTALS
                                   ---------------------------------------------------------------------------------
<S>                                 <C>             <C>            <C>            <C>               <C>
Revenues:
   External customers               $  11,797,545   $  4,982,602   $         -    $          -      $   16,780,147
   Intersegment                           736,409              -             -        (736,409)                  -
                                   ---------------------------------------------------------------------------------
Total revenues                         12,533,954      4,982,602             -        (736,409)         16,780,147

Operating income (loss)                (2,810,526)       244,160      (864,062)        (14,155)         (3,444,583)
Interest income                            65,421             56            35         (52,919)             12,593
Interest expense (a) (b)                3,387,698         62,224       101,364         (52,919)          3,498,367
Depreciation and amortization             175,482         29,156       372,122               -             576,760
Capital expenditures                       29,729         79,864             -               -             109,593
Total assets                           11,000,959      2,924,840       759,462      (2,336,708)         12,348,553
</TABLE>

<TABLE>
<CAPTION>
                                                                YEAR ENDED DECEMBER 31, 2002
                                   ---------------------------------------------------------------------------------
                                         U.S.        HONG KONG     NETHERLANDS
                                      OPERATING      OPERATING      OPERATING
                                       SEGMENT      SEGMENT (c)      SEGMENT (d)    ELIMINATIONS        TOTALS
                                   ---------------------------------------------------------------------------------
<S>                                 <C>             <C>            <C>            <C>               <C>
Revenues:
   External customers               $   7,570,929   $  2,455,807   $         -    $          -      $   10,026,736
   Intersegment                           253,784              -             -        (253,784)                  -
                                   ---------------------------------------------------------------------------------
Total revenues                          7,824,713      2,455,807             -        (253,784)         10,026,736

Operating income (loss)                (4,981,039)       328,898             -         (19,457)         (4,671,598)
Interest income                           212,874             26             -         (24,252)            188,648
Interest expense                          197,687         32,046             -         (24,252)            205,481
Depreciation and amortization             169,080         15,705             -               -             184,785
Capital expenditures                    1,209,341          8,518             -               -           1,217,859
Total assets                           11,741,549      2,568,838             -      (1,544,237)         12,766,150
</TABLE>

(a)   U.S.  operating  segment  includes  amortization  of debt  issue  costs on
      warrant of $3,195,000.

(b)   Interest expense relating to the purchase by the U.S. operating segment of
      manufacturing equipment is allocated to the Netherlands operating segment.

(c)   As more fully  described in Notes 2 and 7, the  accompanying  consolidated
      statement of operations for the year ended December 31, 2002, includes the
      results of  operations  for this  segment for the period from July 1, 2002
      through December 31, 2002.

(d)   The Netherlands operating segment was formed in January 2003.


                                      F-48
<PAGE>

                   Dyadic International, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


12.   SEGMENT DATA INFORMATION (CONTINUED)

<TABLE>
<CAPTION>
                                                   NINE MONTHS ENDED SEPTEMBER 30, 2004 (UNAUDITED)
                                   ---------------------------------------------------------------------------------
                                        U.S.         HONG KONG     NETHERLANDS
                                      OPERATING      OPERATING      OPERATING
                                       SEGMENT        SEGMENT        SEGMENT       ELIMINATIONS        TOTALS
                                   ---------------------------------------------------------------------------------
<S>                                  <C>            <C>            <C>            <C>               <C>
Revenues:
   External customers                $  8,292,383   $  4,651,931   $         -    $          -      $  12,944,314
   Intersegment                           633,812              -             -        (633,812)                 -
                                   ---------------------------------------------------------------------------------
Total revenues                          8,926,195      4,651,931             -        (633,812)        12,944,314

Operating income (loss)                (2,645,812)       517,183      (699,820)         (9,266)        (2,837,715)
Total assets                           12,930,992      3,360,260       488,145      (2,200,971)        14,578,426
</TABLE>

<TABLE>
<CAPTION>
                                                   NINE MONTHS ENDED SEPTEMBER 30, 2003 (UNAUDITED)
                                   ---------------------------------------------------------------------------------
                                         U.S.        HONG KONG     NETHERLANDS
                                      OPERATING      OPERATING      OPERATING
                                       SEGMENT        SEGMENT        SEGMENT       ELIMINATIONS        TOTALS
                                   ---------------------------------------------------------------------------------
<S>                                  <C>            <C>            <C>            <C>               <C>
Revenues:
   External customers                $  7,867,421   $  3,532,292   $         -    $          -     $   11,399,713
   Intersegment                           452,876              -             -        (452,876)                 -
                                   ---------------------------------------------------------------------------------
Total revenues                          8,320,297      3,532,292             -        (452,876)        11,399,713

Operating income (loss)                (2,427,283)       160,001      (622,052)         (4,455)        (2,893,789)
Total assets                           11,328,585      2,916,019       857,067      (2,274,843)        12,826,828
</TABLE>


                                      F-49
<PAGE>

                   Dyadic International, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


13.   INCOME TAXES

No provision for United States  income taxes has been  recognized  for the years
ended December 31, 2003 and 2002, or for the nine month periods ended  September
30, 2004 and 2003 as the Company has incurred  operating  losses.  The Company's
operations in Poland,  Hong Kong and The Netherlands are subject to income taxes
in  these  jurisdictions.  The  provisions  for  income  taxes  consist  of  the
following:

                                                        YEAR ENDED
                                                        DECEMBER 31

                                                    2003          2002
                                               -----------------------------
         Current:
            U.S.                                 $        --   $        --
            Foreign                                   92,944        43,551

         Deferred:
            U.S.                                          --            --
            Foreign                                       --            --
                                               -----------------------------
                                                 $    92,944   $    43,551
                                               =============================


The  components  of  net  income  (loss)  before  income  taxes  consist  of the
following:

                                                        YEAR ENDED
                                                        DECEMBER 31

                                                    2003          2002
                                               -----------------------------
                                                  (RESTATED -
                                                  SEE NOTE 2)
          U.S.                                   $(6,430,527)  $(5,128,244)
          Hong Kong                                  212,149       282,409
          Other foreign                             (951,900)       69,753
                                               -----------------------------
                                                 $(7,170,278)  $(4,776,082)
                                               =============================


The primary  differences  between the Company's income tax benefit computed at
the U.S.  statutory  rate of 34% and the effective  foreign  income tax rates of
1.3% and .9% for the years  ended  December  31,  2003 and  2002,  respectively,
relate  to  state  income  taxes,  net of a  Federal  income  tax  benefit,  the
nondeductability  of 2003  interest  expense  relating to the  interest  expense
computed on the value of the Bridge Loan warrants,  and to a greater extent, the
change in the valuation  allowance in the  respective  periods that results from
the Company not  recording a deferred  income tax benefit for its net  operating
losses.


                                      F-50
<PAGE>

                   Dyadic International, Inc. and Subsidiaries

             Notes to Consolidated Financial Statements (continued)


13.   INCOME TAXES (CONTINUED)

Significant  components  of the  Company's  deferred tax assets and  liabilities
consist of the following at December 31, 2003:

         Current assets and liabilities:
           Deferred revenue                                    $        17,218
           Inventory                                                    89,813
           Accrued expenses                                            188,308
           Other items, net                                             17,196
                                                               -----------------
                                                                       312,535

         Non-current assets and liabilities:
           Net operating loss and tax credit carryforwards           3,805,508
           Depreciation and amortization                              (139,643)
                                                               -----------------
         Total noncurrent                                            3,665,865
                                                               -----------------
         Valuation allowance                                        (3,978,400)
                                                               -----------------
         Total deferred tax assets, net                        $             -
                                                               =================


The Company has net operating losses of  approximately  $10.1 million for United
States  Federal and State income tax purposes that expire between 2021 and 2023.
The amounts of and benefits from net  operating  losses  carried  forward may be
impaired or limited in certain circumstances. Events which may cause limitations
in the amount of net  operating  losses  that the Company may utilize in any one
year include, but are not limited to, a cumulative ownership change of more than
50% over a three-year period.

The  Company  has  provided a 100%  valuation  allowance  on the  United  States
deferred tax assets both at the time the Company converted from an S Corporation
to a C  Corporation  in March 2001,  at December 31, 2003 and at  September  30,
2004, in order to reduce such deferred tax assets to zero as it is  management's
belief that  realization  of such  amounts  does not meet the deferred tax asset
recognition criteria required by accounting principles generally accepted in the
United  States.  Management  will review the  valuation  allowance  requirements
periodically and make adjustments as warranted.


                                      F-51
<PAGE>

              Unaudited Pro Forma Consolidated Financial Statements
                               (Introductory Note)

The unaudited pro forma consolidated balance sheet as of September 30, 2004, and
the unaudited  pro forma  consolidated  statements  of  operations  for the nine
months ended  September  30, 2004 and for the year ended  December 31, 2003 give
effect to the following  transactions on the historical  financial statements of
Dyadic  International,  Inc.:  the  completion of the November 2004 offering and
sale of 7,629,204  Investments  Units at a purchase  price of $3.33 per unit and
the  purchase  of  367,868  Investment  Units at  $3.33  per unit by the Mark A.
Emalfarb  Trust and the  resultant  cancellation  of debt owed by the Company to
Mark A. Emalfarb Trust, as if those  transactions  (together,  the Transactions)
occurred on  September  30,  2004,  for  purposes of the pro forma  consolidated
balance sheet and on the first day of the respective  period for purposes of the
pro forma  consolidated  statements  of  operations.  Historical  results of the
continuing  operations  of CCP  Worldwide,  Inc.  are  not  significant  and are
therefore not included herein.

As part of the  Transactions  discussed  in the  notes to  unaudited  pro  forma
consolidated  financial  statements,  the  Company  completed  its merger with a
wholly-owned  subsidiary  of CCP  Worldwide,  Inc.  The  accompanying  pro forma
consolidated  statements of operations  also reflect the estimated  costs of the
merger, which will be expensed in accordance with SEC guidance.

The  unaudited pro forma  consolidated  financial  information  is presented for
illustrative  purposes only and does not purport to represent what the Company's
actual results of operations would have been had the Transactions  actually been
completed on or at the beginning of the indicated periods, and is not indicative
of  the  Company's  future  results  of  operations.  The  unaudited  pro  forma
consolidated  financial  information  should  be read in  conjunction  with  the
Company's audited consolidated financial statements and notes thereto.

The Company has restated its historical  consolidated financial statements as of
and for the year ended  December 31, 2003,  to correct an error in the recording
of  certain  revenue  and  expenditure   transactions   denominated  in  foreign
currencies.  This error also resulted in the incorrect  costing of the Company's
inventory as of December 31, 2003. The Company  corrected this error in order to
properly value inventory as of December 31, 2003, and to properly record certain
revenue and expenditure  transactions denominated in foreign currencies based on
the  published   exchange  rates  on  the  effective  dates  of  the  respective
transactions.

As  a  result  of  these  corrections,   inventory  increased  $126,311  with  a
corresponding  decrease  in net loss as of and for the year ended  December  31,
2003. See Note 2 to the Consolidated Financial Statements for a complete summary
and discussion of the restatement.


                                      P-1
<PAGE>

                           Dyadic International, Inc.

                 Unaudited Pro Forma Consolidated Balance Sheet

                               September 30, 2004


<TABLE>
<CAPTION>
                                                             HISTORICAL                                PRO FORMA
                                                           SEPTEMBER 30,        PRO FORMA            SEPTEMBER 30,
                                                                2004           ADJUSTMENTS                2004
                                                          ----------------- ------------------      -----------------
ASSETS                                                      (Unaudited)                               (Unaudited)
<S>                                                         <C>               <C>                    <C>
Current assets:
   Cash and cash equivalents                                $  1,753,199      $ 23,249,988     (a)   $  25,003,187
   Accounts receivable, net of allowance of $225,718           3,794,929                --               3,794,929
   Inventory                                                   5,985,242                --               5,985,242
   Prepaid expenses and other current assets                     927,088          (336,187)    (e)         590,901
                                                          ----------------- ------------------      -----------------
Total current assets                                          12,460,458        22,913,801              35,374,259

Fixed assets, net                                                875,723                --                 875,723
Intangible assets, net                                           213,335                --                 213,335
Goodwill                                                         467,821                --                 467,821
Other assets                                                     561,089          (311,423)    (a)         249,666
                                                          ----------------- ------------------      -----------------
Total assets                                                $ 14,578,426      $ 22,602,378           $  37,180,804
                                                          ================= ==================      =================

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Accounts payable                                         $  4,503,502      $   (166,684)    (a)   $   4,336,818
   Accrued expenses                                            1,090,762                --               1,090,762
   Current portion of notes payable to stockholders              222,232                --                 222,232
   Income taxes payable                                           91,967                --                  91,967
                                                          ----------------- ------------------      -----------------
Total current liabilities                                      5,908,463          (166,684)              5,741,779
                                                          ----------------- ------------------      -----------------

Long-term liabilities:
   Notes payable to stockholders, including accrued
     interest, net of current portion                          6,103,350        (1,225,000)    (b)       4,878,350
   Minority interest                                             149,268                --                 149,268
                                                          ----------------- ------------------      -----------------
Total long-term liabilities                                    6,252,618        (1,225,000)              5,027,618
                                                          ----------------- ------------------      -----------------

Commitments and contingencies

Stockholders' equity:
   Preferred stock, $0.0001 par value, 5,000,000 shares
     authorized, no shares issued and outstanding                     --                --                      --
   Common stock, $0.001 par value, 100,000,000 shares
     authorized, 13,933,733 shares issued and                                        7,629     (a)
     outstanding (pro forma 21,930,805)                           13,934               368     (b)          21,931
                                                                                23,097,620     (a)
   Additional paid-in capital                                 23,439,541         1,224,632     (b)      47,761,793
   Note receivable from exercise of stock options               (250,000)               --                (250,000)
   Accumulated deficit                                       (20,786,130)         (336,187)    (e)     (21,122,317)
                                                          ----------------- ------------------      -----------------

Total stockholders' equity                                     2,417,345        23,994,062              26,411,407
                                                          ----------------- ------------------      -----------------
Total liabilities and stockholders' equity                  $ 14,578,426      $ 22,602,378           $  37,180,804
                                                          ================= ==================      =================
</TABLE>


The accompanying notes to unaudited pro forma consolidated  financial statements
are an integral part of these statements.


                                      P-2
<PAGE>

                           Dyadic International, Inc.

            Unaudited Pro Forma Consolidated Statement of Operations

                      Nine Months Ended September 30, 2004


<TABLE>
<CAPTION>
                                                           HISTORICAL                                   PRO FORMA
                                                          NINE MONTHS                                  NINE MONTHS
                                                             ENDED                                        ENDED
                                                         SEPTEMBER 30,        PRO FORMA               SEPTEMBER 30,
                                                              2004           ADJUSTMENTS                   2004
                                                       ------------------- -----------------        -------------------
                                                          (Unaudited)      (Unaudited)
<S>                                                      <C>                <C>                       <C>
Net sales                                                $   12,944,314     $          --             $   12,944,314
Cost of goods sold                                            9,818,967                --                  9,818,967
                                                       ------------------- -----------------        -------------------
Gross profit                                                  3,125,347                --                  3,125,347

Expenses:
   Research and development                                   2,533,531                --                  2,533,531
   Sales and marketing                                        1,373,728                --                  1,373,728
   General and administrative                                 2,055,803                --                  2,055,803
                                                       ------------------- -----------------        -------------------
Total expenses                                                5,963,062                --                  5,963,062
                                                       ------------------- -----------------        -------------------

Loss from operations                                         (2,837,715)               --                 (2,837,715)

Other income (expense):
   Interest expense                                            (347,086)           82,688     (d)           (264,398)
   Interest income                                                2,576                --                      2,576
   Minority interest                                            (67,088)               --                    (67,088)
   Foreign currency exchange losses, net                        (55,752)               --                    (55,752)
   Other, net                                                    17,987          (336,187)    (e)           (318,200)
                                                       ------------------- -----------------        -------------------
Total other income (expense)                                   (449,363)         (253,499)                  (702,862)
                                                       ------------------- -----------------        -------------------

Loss before income taxes                                     (3,287,078)         (253,499)                (3,540,577)

Provision for income taxes                                       85,487                --                     85,487
                                                       ------------------- -----------------        -------------------
Net loss                                                $    (3,372,565)    $    (253,499)           $    (3,626,064)
                                                       =================== =================        ===================

Net income (loss) applicable to holders of common
   stock                                                $     7,104,737     $    (253,499)           $     6,851,238
                                                       =================== =================        ===================

Net income (loss) per common share:
     Basic                                              $         0.56                               $          0.33
                                                       ===================                          ===================
     Diluted                                            $        (0.23)                              $         (0.16)
                                                       ===================                          ===================

Weighted average shares and equivalent
  shares used to calculate net income
   (loss) per common share:
     Basic                                                   12,794,096         7,997,072     (f)         20,791,168
                                                       =================== =================        ===================
     Diluted                                                 14,754,768         7,997,072     (f)         22,751,840
                                                       =================== =================        ===================
</TABLE>


The accompanying notes to unaudited pro forma consolidated  financial statements
are an integral part of these statements.

                                      P-3
<PAGE>

                           Dyadic International, Inc.

            Unaudited Pro Forma Consolidated Statement of Operations

                          Year Ended December 31, 2003


<TABLE>
<CAPTION>
                                                           HISTORICAL
                                                           YEAR ENDED                                   PRO FORMA
                                                          DECEMBER 31,                                  YEAR ENDED
                                                              2003            PRO FORMA                DECEMBER 31,
                                                           (RESTATED)        ADJUSTMENTS                   2003
                                                       ------------------- -----------------        -------------------
                                                                                                        (Unaudited)
<S>                                                      <C>                 <C>                      <C>
Net sales                                                $   16,780,147      $         --             $   16,780,147
Cost of goods sold                                           12,596,925                --                 12,596,925
                                                       ------------------- -----------------        -------------------
Gross profit                                                  4,183,222                --                  4,183,222

Expenses:
   Research and development                                   3,571,242                --                  3,571,242
   Sales and marketing                                        1,749,023                --                  1,749,023
   General and administrative                                 2,307,540                --                  2,307,540
                                                       ------------------- -----------------        -------------------
Total expenses                                                7,627,805                --                  7,627,805
                                                       ------------------- -----------------        -------------------

Loss from operations                                         (3,444,583)               --                 (3,444,583)

Other income (expense):
   Interest expense                                          (3,498,367)          110,250     (c)         (3,388,117)
   Interest income                                               12,593                --                     12,593
   Minority interest                                            (14,297)               --                    (14,297)
   Foreign currency exchange losses, net                       (236,200)               --                   (236,200)
   Other, net                                                    10,576          (336,187)    (e)           (325,611)
                                                       ------------------- -----------------        -------------------
Total other income (expense)                                 (3,725,695)         (225,937)                (3,951,632)
                                                       ------------------- -----------------        -------------------

Loss before income taxes                                     (7,170,278)         (225,937)                (7,396,215)

Provision for income taxes                                       92,944                --                     92,944
                                                       ------------------- -----------------        -------------------
Net loss                                                 $   (7,263,222)     $   (225,937)             $  (7,489,159)
                                                       =================== =================        ===================

Net loss applicable to holders of common stock           $   (8,101,207)     $   (225,937)           $    (8,327,144)
                                                       =================== =================        ===================

Net loss per common share, basic and diluted             $       (0.65)                              $         (0.41)
                                                       ===================                          ===================

Shares used in calculating net loss per share, basic
   and diluted                                               12,460,806         7,997,072     (f)         20,457,878
                                                       =================== =================        ===================
</TABLE>


The accompanying notes to unaudited pro forma consolidated  financial statements
are an integral part of these statements.

                                      P-4
<PAGE>

                           Dyadic International, Inc.

         Notes to Unaudited Pro Forma Consolidated Financial Statements


1. GENERAL

MERGER, PRIVATE PLACEMENT OF COMMON STOCK AND
   OTHER RELATED TRANSACTIONS

In October and November  2004,  the Company  entered  into and executed  several
contemporaneous  and  related  transactions  (together,   the  Transactions)  as
described below.

Merger

Effective  October 29, 2004, the Company entered into an Agreement of Merger and
Plan of Reorganization (the Merger) with CCP Worldwide, Inc., a public reporting
company, and its wholly-owned  subsidiary,  CCP Acquisition Corp. As a result of
the Merger, CCP Acquisition Corp. was merged with and into the Company, with the
Company being the  surviving  corporation,  and the Company  changed its name to
Dyadic International  (USA), Inc. In turn, CCP Worldwide,  Inc. changed its name
to Dyadic  International,  Inc., and  stockholders of the Company  received,  in
exchange for Company  shares,  shares of CCP  Worldwide,  Inc. on a  one-for-one
basis.  Concurrently,  the Company's  officers and directors became the officers
and directors of the merged, reorganized entity. A total of 12,580,895 shares of
common stock were  exchanged in the merger,  including the 300,300 shares placed
in escrow in accordance with a Development  Agreement.  The Company's pre Merger
obligations to contingently issue common shares in accordance with a real estate
acquisition agreement,  employee stock options, nonemployee options and warrants
and convertible debt instruments were also assumed.

The  Company  has  recorded  the  Merger  as the  issuance  of stock for the net
monetary  assets of CCP  Worldwide,  Inc.  (which  were nil),  accompanied  by a
recapitalization.  This accounting is identical to that resulting from a reverse
acquisition,  except that no goodwill or other intangible assets are recorded. A
total of 1,653,138 shares of common stock,  representing the aggregate number of
shares held by  stockholders  of CCP Worldwide,  Inc.  immediately  prior to the
Merger,  have  been  retroactively  reflected  as  outstanding  for all  periods
presented in the  accompanying  historical  consolidated  financial  statements.
Additionally,  the accompanying  historical  consolidated  financial  statements
retroactively  reflect the authorized  capital stock of CCP Worldwide,  Inc. and
the  resultant  change from no par to $0.001 par value on the  Company's  common
stock.

                                      P-5
<PAGE>

                           Dyadic International, Inc.

         Notes to Unaudited Pro Forma Consolidated Financial Statements


1. GENERAL (CONTINUED)

As part of the Transactions, and immediately prior to the Merger, CCP Worldwide,
Inc. disposed of its only operating  subsidiary as part of a Split-off Agreement
between CCP Worldwide,  Inc., its operating subsidiary, the Company and a former
member of the board of directors of CCP Worldwide, Inc.

As a result  of the  Merger  and the  Split-off  Agreement,  the  only  business
operations  of  the  newly  formed  Dyadic  International,  Inc.,  formerly  CCP
Worldwide, Inc., are the operations of the Company.

Private Placement

In November  2004,  in accordance  with  Subscription  Agreements  and a Private
Offering  Memorandum (the October Offering) dated October 2004, the Company sold
7,629,204   Investment   Units,   realizing  gross  proceeds  of   approximately
$25,405,000.  An Investment  Unit consists of one share of the Company's  common
stock and one five-year  callable warrant to purchase one share of the Company's
common  stock at $5.50  per share for  every  two  Investment  Units  purchased.
Accordingly,  3,814,602  warrants to purchase  the  Company's  common stock were
issued to participants in the October Offering. Concurrently, the Company issued
711,050  warrants to purchase the  Company's  common stock at $5.50 per share to
participants in an Offering  completed in July 2004, as well as 247,730 warrants
to purchase the Company's  common stock at $5.50 per share and 495,460  warrants
to purchase the  Company's  common  stock at $3.33 per share,  both to placement
agents in the October Offering.

Cancellation of Indebtedness

Ancillary  to the  Merger  and  October  Offering,  in  November  2004,  367,868
Investment  Units were sold to Mark A.  Emalfarb  through  the Mark A.  Emalfarb
Trust in exchange for  cancellation of the Company's note payable to the Mark A.
Emalfarb Trust with a balance of $1,225,000.

                                      P-6
<PAGE>

                           Dyadic International, Inc.

         Notes to Unaudited Pro Forma Consolidated Financial Statements


1. GENERAL (CONTINUED)

The pro forma  adjustments  give effect to the Transactions and the cancellation
of indebtedness,  on the Company's  historical  September 30, 2004  consolidated
balance sheet and on the Company's  historical  statement of operations  for the
nine months ended  September 30, 2004 and for the year ended  December 31, 2003,
as if the  Transactions  had occurred on September 30, 2004, for purposes of the
pro forma  consolidated  balance  sheet  and on the first day of the  respective
period for  purposes of the pro forma  consolidated  statements  of  operations.
Historical results of the continuing operations of CCP Worldwide,  Inc., are not
included  in  the  accompanying   unaudited  pro  forma  consolidated  financial
statements as they were insignificant.

2. PRO FORMA ADJUSTMENTS

Adjustments  to the  accompanying  unaudited  pro forma  consolidated  financial
statements are as follows:

(a)        Reflects the proceeds from the sale of 7,629,204 Investment Units and
           issuances of common stock in the October  Offering,  net of estimated
           expenses  (placement  agent  commission,  legal and accounting  fees,
           etc.) of approximately $2.3 million. Of the total estimated expenses,
           approximately   $167,000  are   included  in  accounts   payable  and
           approximately  $311,000  are in  other  assets  in  the  accompanying
           historical September 30, 2004 consolidated balance sheet.

(b)        Reflects the reduction in debt, sale of 367,868  Investment Units and
           issuance of common stock resulting from the sale of Investment  Units
           to Mark A. Emalfarb and  cancellation  of indebtedness to the Mark A.
           Emalfarb Trust.

(c)        Reflects   reduction  of  2003  interest   expense  relating  to  the
           cancellation of Mark A. Emalfarb Trust indebtedness.

(d)        Reflects   reduction  of  2004  interest   expense  relating  to  the
           cancellation of Mark A. Emalfarb Trust indebtedness.

(e)        Represents  estimated  expenses  related  to the  Merger,  which  are
           included  in  prepaid  expenses  and  other  current  assets  in  the
           accompanying  historical  September  30,  2004  consolidated  balance
           sheet.

(f)        Represents  common  shares  issued in the  October  Offering  and the
           common shares  issued to Mark A.  Emalfarb  Trust as described in (a)
           and (b), respectively.


                                      P-7

<PAGE>

                                  [DYADIC LOGO]

                           DYADIC INTERNATIONAL, INC.
                          140 INTRACOASTAL POINTE DRIVE
                                    SUITE 404
                             JUPITER, FLORIDA 33477
                                 (561) 743-8333
<PAGE>

                                     PART II

                     INFORMATION NOT REQUIRED IN PROSPECTUS


         Part II Items not included in this Amendment No. 1 to Form SB-2
Registration Statement have not been amended by this Amendment No. 1.




ITEM 25.  OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

         The other expenses payable by the Registrant in connection with the
issuance and distribution of the securities being registered are estimated as
follows:


         Registration Fees................................. $  22,873
         Legal Fees and Expenses............................*  95,000
         Printing and Engraving Expenses....................*  10,000
         Blue Sky Fees......................................*  35,000
         Accounting Fees and Expenses.......................* 550,000
         EDGAR Preparation and Filing.......................*   5,000
         Miscellaneous......................................*  12,127
                                                            ---------
                Total...................................... $ 730,000
                                                            =========


     *estimated

ITEM 26.  RECENT SALES OF UNREGISTERED SECURITIES.

         On September 23, 2002, David Allison, the sole shareholder of Custom
Craft Packaging, Inc. , or Custom Craft, sold all of his Custom Craft shares to
the Registrant in exchange for 3,000,000 shares of common stock of the
Registrant. Because the sale was a private transaction, the Registrant relied on
the exemptions from registration provided by Section 4(2) and Rule 506 of
Regulation D of the Securities Act of 1933, as amended, or the Securities Act.
There was no general solicitation. These securities have restrictions on resale
and bear a legend disclosing this restriction. In connection with the merger
described below, these shares were repurchased by the Registrant in exchange for
a transfer to Mr. Allison of all of the Custom Craft shares.

         In September 2002, the Registrant issued 50,000 shares of its common
stock to KGL Investments, Ltd., the owner of which is now Jackson Steinem, Inc.
The beneficial owner of these shares is Adam S. Gottbetter of Gottbetter &
Partners, LLP, former legal counsel to the Registrant. The shares were issued in
exchange for $2,500 worth of non-legal services rendered to the Registrant,
which included corporate formation and corporate governance. The shares were
valued at $.05 per share. KGL Investments, Ltd. and Jackson Steinem, Inc. are
accredited investors. Because the sale was a private transaction, the Registrant
relied on the exemptions from registration provided by Section 4(2) and Rule 506
of Regulation D of the Securities Act. There was no general solicitation. These
securities have restrictions on resale and bear a legend disclosing this
restriction.

         From November 1, 2002 to December 19, 2002, the Registrant sold 265,000
shares of its common stock at $.10 per share for a total of $26,500. These
shares were sold to 26 accredited investors who had access to information
pertaining to the Registrant. These investors were personal business
acquaintances of the Registrant's officers and directors. Because these sales
were a private transaction, the Registrant relied on the exemptions from
registration provided by Section 4(2) and Rule 506 of Regulation D of the
Securities Act. The Registrant made the determination that each investor had
enough knowledge and experience in finance and business matters to evaluate the
risks and merits of the investment. There was no general solicitation or general
advertising used to market the securities. Also, these investors were given a
private placement memorandum containing the kind of information normally
provided in a prospectus. All purchasers represented in writing that they
acquired the securities for their own accounts. A legend was placed on the stock
certificates stating that the securities have not be registered under the
Securities Act and cannot be sold or otherwise transferred without an effective
registration or an exemption therefrom.


                                      II-1
<PAGE>

         Also, from November 1, 2002 to December 19, 2002, the Registrant sold
1,680,000 shares of its common stock at $.10 per share for a total of $168,000.
These shares were sold to 14 foreign investors who had access to information
pertaining to the Registrant. The Registrant relied on the exemptions provided
by Rule 903(b)(3) of Regulation S of the Securities Act of 1933, as amended. The
sales were not made to U.S. persons or for the benefit of U.S. persons. The
foreign investors certified, by reviewing and executing a subscription
agreement, that they were not U.S. persons and were not acquiring the securities
for the account or benefit of any U.S. person, and agreed to resell their shares
only in accordance with the provisions of Regulation S, pursuant to registration
under the Securities Act, or pursuant to an available exemption from
registration. Further, a legend was placed on the shares sold pursuant to
Regulation S that stated that transfer of the shares is prohibited except in
accordance with Regulation S, pursuant to registration under the Securities Act,
or pursuant to an available exemption from registration.

         On October 29, 2004, the Registrant completed the merger of CCP
Acquisition Corp., a Florida corporation and its newly created, wholly owned
subsidiary, with and into Dyadic International (USA), Inc., or Dyadic-Florida, a
Florida corporation formerly known as Dyadic International, Inc., with
Dyadic-Florida surviving as a wholly owned subsidiary of the Registrant. The
merger was consummated under Florida law and pursuant to an Agreement of Merger
and Plan of Reorganization, dated as of September 29, 2004, or the Merger
Agreement. As a result of the merger, the Registrant issued 12,580,895 shares of
its common stock to the former shareholders of Dyadic-Florida in exchange for
the cancellation of all of the outstanding shares of common stock of
Dyadic-Florida. The Registrant relied on the exemptions from registration
provided by Regulation D and Section 4(2) of the Securities Act, because the
transaction did not involve any public offering and was made in connection with
a privately negotiated merger transaction approved by the board of directors and
controlling stockholders of Dyadic-Florida. The former Dyadic-Florida
shareholders represented they were all accredited investors.

         Incident to the merger, we assumed, on a one-share for one-share basis,
the obligations of Dyadic-Florida to issue:

     o    1,500,000 shares of common stock in respect of the Bridge Loan
          Warrants, at an exercise price of $3.33 per share, which expire on May
          29, 2013;

     o    shares upon the conversion of two convertible notes in the adjusted
          aggregate face principal amounts of $1,577,871, at the price of $3.33
          per share, which are convertible at the option of their holders into
          473,835 shares of common stock, and which mature on January 1, 2007;

     o    752,500 shares of common stock purchasable under outstanding options
          previously issued by Dyadic-Florida in accordance with the Dyadic
          International, Inc. 2001 Compensatory Equity Plan assumed by the
          Registrant;

     o    711,050 shares of common stock that may be purchased, at the price of
          $5.50 per share, under warrants expiring in October 2009, which
          warrants were issuable to certain former shareholders of
          Dyadic-Florida who invested in a private placement completed by
          Dyadic-Florida in July 2004 and are identical to the warrants issued
          to investors in the private placement offering described below;

     o    65,000 shares of common stock that may be purchased pursuant to
          outstanding options, at an exercise price of $4.50, which expire May
          24, 2006; and

     o    300,300 shares to be issued to a real estate developer as described in
          the prospectus under "Description of Properties," which is
          incorporated herein by this reference.

         The assumption by the Registrant of Dyadic-Florida's obligations under
the foregoing securities previously issued by Dyadic-Florida was required by the
terms of the Merger Agreement and effective as of the effective date of the
merger, which was October 29, 2004. To the extent the assumption by the
Registrant of Dyadic-Florida's obligations with respect to such outstanding
securities of Dyadic-Florida constitutes an offer and sale of securities, such
securities were offered and sold in reliance on exemption from registration
provided by Section 4(2) of the Securities Act because they were part of a
privately negotiated transaction approved by the board of directors of
Dyadic-Florida and its controlling stockholders. With respect to the 752,500
options described in the immediately preceding paragraph: (a) 270,500 are
exercisable at the price of $3.33 per share, 457,000 are exercisable at the
price of $4.50 per share and 25,000 are exercisable at the price of $4.66 per
share; (b) the term of each option is five years; and (c) in general options
become exercisable in increments over periods of time ranging from two to five
years from the date of grant.


                                      II-2
<PAGE>

         In early November 2004, in connection with the merger, the Registrant
completed a private placement offering in which it sold investment units, at a
purchase price of $3.33 per unit, consisting of an aggregate of 7,629,204 shares
of common stock and warrants to purchase 3,814,602 shares of common stock, or
Investor Warrants, having an exercise price of $5.50 per share, to approximately
75 investors. The terms of these Investor Warrants are described in the
prospectus under "Description of Securities - Investor Warrants," which is
incorporated herein by reference. These securities were offered and sold by the
Registrant in reliance on the exemption from registration provided by Rule 506
of Regulation D under the Securities Act. The investors were all "accredited
investors" as that term is defined under Regulation D. The investors were all
provided a confidential private offering memorandum and executed individual
subscription agreements in which they made representations regarding their
sophistication and qualification as accredited investors.

         In connection with the foregoing private placement offering, the
Registrant issued to the placement agents for the offering aggregate warrants to
purchase a total of 247,730 shares of common stock at an exercise price of $5.50
per share, having terms similar to the Investor Warrants, and another class of
warrants to purchase an aggregate of 495,460 shares of common stock, at an
exercise price of $3.33 per share. The terms of this latter class of warrants
are described in the prospectus under "Description of Securities - P/A
Warrants," which is incorporated herein by reference. The foregoing warrants
were issued to the placement agents as compensation for their services in
connection with the offering and in reliance on the exemption from registration
provided by Section 4(2) of the Securities Act. The number, terms and exercise
price of the foregoing securities were privately negotiated between the
Registrant, Dyadic-Florida, the placement agents and their respective legal
counsel.

         The shares of the Registrant's common stock issued to stockholders of
Dyadic-Florida in connection with the merger and the shares of the Registrant's
common stock and warrants to purchase shares of the Registrant's common stock
that were issued in the private placement offering were not registered under the
Securities Act and, as a result, are "restricted securities" and may not be
offered or sold in the United States absent registration or an applicable
exemption from registration requirements. These securities were issued by the
Registrant in reliance upon an exemption from registration set forth in Section
4(2) and Rule 506 under the Securities Act. The issuance of the shares of the
Registrant's common stock to the former Dyadic-Florida shareholders and to the
investors in the private placement was undertaken without general solicitation
or advertising. The former Dyadic-Florida shareholders and the investors
represented to the Registrant that, among other items, they were acquiring these
securities for investment purposes only and not with a view toward public
distribution and that they were accredited investors within the meaning of Rule
506. Additionally, the former Dyadic-Florida stockholders and investors
acknowledged that the securities issued to them were "restricted securities."
Moreover, the Registrant filed with the Securities and Exchange Commission a
Form D pursuant to Rule 506 with respect to each of these transactions. A legend
was placed on the certificates representing these securities stating that the
securities have not been registered under the Securities Act and cannot be
resold or otherwise transferred without an effective registration or an
exemption therefrom.

         In connection with the consummation of the foregoing merger and private
placement offering, the founder of Dyadic-Florida and now the Registrant's Chief
Executive Officer and Chairman of its board of directors, Mark A. Emalfarb
purchased investment units, at a purchase price of $3.33 per unit, consisting of
367,868 shares of common stock and Investor Warrants to purchase 183,934 shares
of common stock, in exchange for his cancellation of $1,225,000 of indebtedness
of Dyadic-Florida owed to him. These securities were issued by the Registrant in
reliance upon the exemption from registration set forth in Section 4(2) under
the Securities Act. The issuance of the shares was undertaken without general
solicitation or advertising. A legend was placed on the certificates
representing these securities stating the securities have not been registered
under the Securities Act and cannot be resold or otherwise transferred without
an effective registration or exemption therefrom. Mr. Emalfarb, as a corporate
insider, had familiarity with the Registrant and its business and qualifies as
an "accredited investor," as that term is defined under Regulation D.


                                      II-3
<PAGE>


         In January 2005, the Registrant granted options to purchase 30,000
shares of common stock to Stephen Warner, an existing director of the
Registrant, and 50,000 shares of common stock to Richard Berman, a new director
of the Registrant. These options are exercisable at an exercise price of $5.93
per share and expire on December 31, 2009. These securities were issued by the
Registrant in reliance upon the exemption from registration set forth in Section
4(2) under the Securities Act. Messrs. Warner and Berman, as directors of the
Registrant, have familiarity with the Registrant and its business and qualify as
"accredited investors" as that term is defined under Regulation D. The issuance
of the options was undertaken without general solicitation or advertising.


ITEM 27.  EXHIBITS

EXHIBIT
NUMBER                           DESCRIPTION OF EXHIBIT
-------                          ----------------------

2.1         Agreement of Merger and Plan of Reorganization dated as of September
            28, 2004 by and among Dyadic International (USA), Inc. (f/k/a Dyadic
            International, Inc.), Dyadic International, Inc. (f/k/a CCP
            Worldwide, Inc.) and CCP Acquisition Corp. (incorporated by
            reference from Form 8-K Current Report filed September 30, 2004)

**2.2       Split-Off Agreement dated September 28, 2004, by and among Dyadic
            International (USA), Inc. (f/k/a Dyadic International, Inc.), Dyadic
            International, Inc. (f/k/a CCP Worldwide, Inc.) and Custom Craft
            Packaging, Inc.

**3.1       Restated Certificate of Incorporation

**3.2       Amended and Restated Bylaws

**4.1       Form of Common Stock Certificate

**4.2       Form of $5.50 Common Stock Purchase Warrant

**4.3       Form of $3.33 Common Stock Purchase Warrants issued to Placement
            Agents

**4.4       Form of Bridge Loan Warrants

**4.5       Form of Stock Option representing aggregate right to purchase 65,000
            shares of Common Stock


5.1*        Legal opinion of Jenkens & Gilchrist, a Professional Corporation
            (previously filed)


**10.1      Cooperation and License Agreement dated August 12, 2003 between
            Dyadic International (USA), Inc. (f/k/a Dyadic International, Inc.)
            and TNO Nutrition and Food Research Institute

**10.2      Development Agreement dated July 30, 2004 between Dyadic
            International (USA), Inc. (f/k/a Dyadic International, Inc.) and
            Bio-Technical Resources Division of Arkion Life Sciences LLC

**10.3      Commercial Land Purchase and Sale Agreement dated July 31, 2004
            between Dyadic International (USA), Inc. (f/k/a Dyadic
            International, Inc.) and F&C Holdings, LLC

**10.4      Investors' Rights Agreement dated March 24, 2004 among the Mark A.
            Emalfarb Trust, the Francisco Trust, Dyadic International (USA),
            Inc. (f/k/a Dyadic International, Inc.) and other shareholders, as
            amended and assumed by Registrant


                                      II-4
<PAGE>

EXHIBIT
NUMBER                           DESCRIPTION OF EXHIBIT
-------                          ----------------------

**10.5      Employment Agreement dated April 1, 2001 between Mark A. Emalfarb
            and Dyadic International (USA), Inc. (f/k/a Dyadic International,
            Inc.), as assumed by Registrant

**10.6      Employment Agreement dated May 26, 2000 between Ratnesh (Ray)
            Chandra and Dyadic International (USA), Inc. (f/k/a Dyadic
            International, Inc.), as assumed by Registrant

**10.7.1    Confidential Information, Inventions Assignment and Non-Compete
            Agreement dated May 21, 2001 between Mark Emalfarb and Dyadic
            International (USA), Inc. (f/k/a Dyadic International, Inc.), as
            assumed by Registrant

**10.7.2    Confidential Information, Inventions Assignment and Non-Compete
            Agreement dated May 21, 2001 between Ray Chandra and Dyadic
            International (USA), Inc. (f/k/a Dyadic International, Inc.), as
            assumed by Registrant

**10.7.3    Confidential Information, Inventions Assignment and Non-Compete
            Agreement dated May 21, 2001 between Kent Sproat and Dyadic
            International (USA), Inc. (f/k/a Dyadic International, Inc.), as
            assumed by Registrant

**10.7.4    Confidential Information, Inventions Assignment and Non-Compete
            Agreement dated September 4, 2001 between Richard Burlingame, Ph.D.
            and Dyadic International (USA), Inc. (f/k/a Dyadic International,
            Inc.), as assumed by Registrant

**10.7.5    Confidential Information, Inventions Assignment and Non-Compete
            Agreement dated March 27, 2003 between Thomas Bailey and Dyadic
            International (USA), Inc. (f/k/a Dyadic International, Inc.), as
            assumed by Registrant

**10.7.6    Confidential Information, Inventions Assignment and Non-Compete
            Agreement dated May 21, 2001 between Alexander (Sasha) Bondar and
            Dyadic International (USA), Inc. (f/k/a Dyadic International, Inc.),
            as assumed by Registrant

**10.8.1    Indemnification Agreement dated August 19, 2001 between Mark A.
            Emalfarb and Dyadic International (USA), Inc. (f/k/a Dyadic
            International, Inc.), as assumed by Registrant

**10.8.2    Indemnification Agreement dated August 19, 2001 between Stephen J.
            Warner and Dyadic International (USA), Inc. (f/k/a Dyadic
            International, Inc.), as assumed by Registrant


***10.8.3   Indemnification Agreement dated January 11, 2005 between Dyadic
            International, Inc. and Richard Berman


   **10.9   Dyadic International, Inc. 2001 Equity Compensation Plan, as amended
            and assumed by Registrant


***10.9.1   Standard form of Director Stock Option Grant Agreement under Dyadic
            International, Inc. 2001 Equity Compensation Plan

***10.9.2   Second Amendment to Dyadic International, Inc. 2001 Equity
            Compensation Plan dated as of January 12, 2005



                                      II-5
<PAGE>

EXHIBIT
NUMBER                           DESCRIPTION OF EXHIBIT
-------                          ----------------------

**10.10     Subordinated Promissory Note dated May 30, 2001 made by Dyadic
            International (USA), Inc. (f/k/a Dyadic International, Inc.), as
            amended, payable to the order of the Mark A. Emalfarb Trust in the
            original principal amount of $750,766, as assumed by Registrant

**10.11     Subordinated Promissory Note dated May 30, 2001 made by Dyadic
            International (USA), Inc. (f/k/a Dyadic International, Inc.), as
            amended, payable to the order of the Francisco Trust in the original
            principal amount of $664,838, as assumed by Registrant

**10.12     Revolving Note dated May 29, 2003 made by Dyadic International
            (USA), Inc. (f/k/a Dyadic International, Inc.), as amended, payable
            to the order of the Mark A. Emalfarb Trust in the original principal
            amount of $3,000,000, as assumed by Registrant

**10.13     Security Agreement dated May 29, 2003, between the Mark A. Emalfarb
            Trust and Dyadic International (USA), Inc. (f/k/a Dyadic
            International, Inc.), as amended

**10.14     Inducement and Amending Agreement dated August 19, 2004 among the
            Mark A. Emalfarb Trust, the Francisco Trust and Dyadic International
            (USA), Inc. (f/k/a Dyadic International, Inc.)

**10.15     Contract Manufacturing Agreement dated October 27, 1999 between
            Polfa Tarchomin, SA and Dyadic International (USA), Inc. (f/k/a
            Dyadic International, Inc.), as amended by Amendments dated May 8,
            2000 and February 10, 2004 and letters dated February 11, 2004

**10.16     Indemnification and Escrow Agreement dated September 28, 2004 among
            Vitel Ventures, Mark Tompkins, Registrant and Dyadic International
            (USA), Inc. (f/k/a Dyadic International, Inc.)

**10.17     Form of Subscription Agreement from investors in private placement
            offering completed in early November 2004

**10.18     Agreement dated October 21, 1998 among Geneva Investment Holdings
            Limited, a wholly owned subsidiary of Dyadic International (USA),
            Inc. (f/k/a Dyadic International, Inc.), Robert B. Smeaton and
            Raymond Chih Chung Kwong, as amended by Agreements dated January 17,
            2000 and July 8, 2002

**10.19     Lock-Up Agreements from each of the Mark A. Emalfarb Trust and Mark
            A. Emalfarb; the Francisco Trust; Mark Tompkins and IVC Group;
            Ratnash Chandra; Richard Burlingame; Rufus Gardner; Kent Sproat;
            Thomas Bailey; and Alexander Bondar

10.20       Indemnification Agreement dated as of September 28, 2004 among
            Dyadic International (USA), Inc. (f/k/a Dyadic International, Inc.),
            Dyadic International, Inc. (f/k/a CCP Worldwide, Inc.), Tom Shute,
            Roy Provencher and David R. Allison (incorporated by reference from
            Form 10-QSB Quarterly Report for the nine months ended September 30,
            2004)


***10.21    Dyadic International, Inc. Statement of Director Compensation Policy


23.1        Consent of Jenkens & Gilchrist, a Professional Corporation (included
            in Exhibit 5.1)


                                      II-6
<PAGE>

EXHIBIT
NUMBER                           DESCRIPTION OF EXHIBIT
-------                          ----------------------

23.2*       Consent of Ernst & Young LLP

24.1*       Power of Attorney (included on the signature page attached hereto).

---------
 *  Filed herewith.

**  Incorporated by reference from Form 8-K Current Report dated October 29,
    2004, as amended.


*** Incorporated by reference from Form 8-K Current Report dated January 10,
    2005.





                                      II-7
<PAGE>


                                   SIGNATURES


         In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Jupiter, State of Florida, on January 24, 2005.


                                            DYADIC INTERNATIONAL, INC.



                                            By: /s/ Mark A. Emalfarb
                                               -------------------------------
                                               Mark A. Emalfarb
                                               President, Secretary and Chief
                                               Executive Officer



                                POWER OF ATTORNEY

         Know all persons by these presents that each individual whose signature
appears below constitutes and appoints Mark A. Emalfarb and Rufus Gardner and
both of them, his true and lawful attorneys-in-fact and agents, with full power
of substitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this registration statement, and to sign any registration statement for the
same offering covered by this registration statement that is to be effective
upon filing pursuant to Rule 462 promulgated under the Securities Act, and all
post-effective amendments thereto, and to file the same, with all exhibits
thereto and all documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or his or
their substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.

         In accordance with the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates stated.



/s/ Mark A. Emalfarb    Director, Chief Executive Officer       January 24, 2005
---------------------   and President (Principal Executive
Mark A. Emalfarb        Officer)


/s/ Rufus Gardner       Controller (Principal Financial and     January 24, 2005
---------------------   Accounting Officer)
Rufus Gardner


/s/ Stephen J. Warner   Director                                January 24, 2005
---------------------
Stephen J. Warner


/s/ Richard Berman      Director                                January 24, 2005
---------------------
Richard Berman



                                      II-8

</TEXT>
</DOCUMENT>
