Dyadic Reports 2006 Third Quarter Financial Results.

JUPITER, Fla. -- Dyadic International, Inc. (AMEX:DIL), a biotechnology company, today announced financial results for the third quarter ended September 30, 2006, highlighted by a notable increase in sales of the Company's proprietary enzymes to customers in the pulp and paper industry, effective cost management resulting in a strong closing cash balance, and improved gross margin as compared to the third quarter of 2005.

Third Quarter 2006:

Total net sales for the quarter ended September 30, 2006 increased slightly to approximately $4.2 million, as compared to approximately $4.1 million for the quarter ended September 30, 2005.

Third quarter 2006 net sales to the pulp & paper industry increased by 72% versus prior year to approximately $0.9 million, which represented 21% of net sales as compared to 13% of net sales for the third quarter of 2005. Textile industry net sales were approximately $2.4 million for the third quarter of 2006 versus approximately $2.8 million in the third quarter of 2005. As previously reported, the market for enzymes for applications in the textile industry continues to be affected by global pressure on pricing and margins. Sales of enzymes to the animal feed and other markets increased to approximately $0.9 million for this year's third quarter from approximately $0.8 million for the same period of 2005.

Gross margin for the third quarter of 2006 increased to 31% of revenue as compared to 20% for the third quarter of 2005, reflecting the shift in sales from the textile industry to the pulp and paper, animal feed and other higher margin industries.

Net loss for the quarter ended September 30, 2006 decreased to approximately $2.3 million, or $0.10 per share (basic and diluted), as compared to a net loss of approximately $2.5 million, or $0.11 per share (basic and diluted), for the quarter ended September 30, 2005.

At September 30, 2006, cash and cash equivalents were approximately $9.4 million, prior to the closing on November 8, 2006 of the $10 million R&D and stock purchase transaction with Abengoa Bioenergy. Inventories at the end of this year's third quarter were approximately $6.3 million. Working capital at September 30, 2006 amounted to approximately $16.5 million, and shareholders' equity was approximately $17.9 million.

Nine Months 2006:

Net sales for the nine months ended September 30, 2006 were approximately $12 million as compared to approximately $11.9 million for the comparable period last year. Net sales to the pulp & paper industry increased by 63% for the nine months ended September 30, 2006 over those in the same period last year, and totaled approximately $2.1 million. Textile industry net sales were approximately $7.8 million for the first nine months of 2006 versus approximately $8.6 million for the same period last year. Sales of enzymes to the animal feed and other markets increased to approximately $2.1 million for the first nine months of 2006 from approximately $1.9 million for the same period of 2005.

Gross margin for the nine months ended September 30, 2006 increased to 27% of revenue as compared to 20% for the first nine months of 2005. This increase was primarily the result of a 32% increase in net sales of higher-margin products to industries such as pulp & paper, animal feed and others to a total of approximately $4.2 million for this year's first nine months, as compared to approximately $3.2 million for the comparable period last year.

Net loss for the nine months ended September 30, 2006, was approximately $7.7 million, or $0.33 per share (basic and diluted), as compared to net loss of approximately $7.9 million, or $0.36 per share (basic and diluted), for the nine months ended September 30, 2005.

"We made important strides in the development of our core C1 and other enabling technologies for our enzyme, biorefinery and bioscience initiatives, while effectively managing our cash position," said President and CEO Mark Emalfarb. Cash at September 30, 2006, was approximately $9.4 million, prior to the closing on November 8, 2006 of the $10 million R&D and stock purchase transaction with Abengoa Bioenergy Company, a major global ethanol producer and a leader in the production of ethanol from both corn and cellulose feedstocks.

"In addition to significantly enhancing our cash position, we believe our partnership with Abengoa will help us accelerate the development of our proprietary C1 biofactory and other technologies for large-scale production of fermentable sugars which may be used for the production of ethanol, other biofuels, polymers and other chemicals from renewable biomass, thereby transitioning our petroleum-based economy to one based on agricultural residues and energy crops," Emalfarb said.

C1 Host Technology Development Progress Update

Dr. Glenn Nedwin, Dyadic's Chief Science Officer and President of the Biosciences Business, commented, "Dyadic recently was granted an important U.S. patent which we believe protects our novel technology for robotic screening in filamentous fungi using our C1 platform, further strengthening the Company's intellectual property position. With broad claims covering C1 (Chrysosporium lucknowense) and a number of other industrially relevant fungi, including Trichoderma and Aspergillus, we believe the patent also validates Dyadic's 'one stop shop' model where gene discovery and improvement, gene expression, and product manufacturing can all be performed in the same host organism. This provides Dyadic with a unique capability to improve the odds of identifying potentially useful proteins and to screen for gene variants for improving functional properties of target proteins, thereby shortening R&D development timelines, reducing development costs, and increasing the probability of successfully bringing products to the market."

Dr. Nedwin continued, "We have also had success in further developing our C1 fungal biofactory for the production of human antibodies and other high-value therapeutic proteins. We have successfully expressed a fully functional, bioactive, stable monoclonal antibody in our low protease C1 strain. Due to its expected low cost of manufacturing as compared to mammalian cells and its ability to produce human proteins, we believe our C1 host may become a significant alternative production host for the pharmaceutical industry.

"Other recent C1 technology developments include the identification of a number of novel enzymes which may be important for low-cost production of fermentable sugars, initially targeted towards cellulosic ethanol production, and the ability to over-express multiple genes in C1. We also are moving forward in our collaboration with The Scripps Research Institute to further annotate the C1 genome, which will yield a comprehensive genetic and biochemical blueprint. We believe that these tools may allow us to identify additional commercial enzyme product leads, including improved cellulases and hemicellulases for use in textile, pulp and paper, food and animal feed applications, the production of ethanol from biomass, and the identification and production of high-value therapeutic proteins. We expect that these improvements in our core C1 and related technologies will enable C1 to produce a wider variety of proteins at higher yields and at lower cost."

About Dyadic

Dyadic International, Inc., based in Jupiter, Florida, with operations in the United States of America, Hong Kong and mainland China, Poland and The Netherlands, is engaged in the development, manufacture and sale of biological products using a number of proprietary fungal strains to produce enzymes and other biomaterials, principally focused on a system for protein production based on the patented Chrysosporium lucknowense fungus, known as C1. Dyadic is applying its technologies to produce enzymes for use in converting various agricultural products (e.g. corn) and waste products (e.g. switch grass, wheat straw, sugar cane bagasse, etc.) into fermentable sugars, which can then be used in the production of traditional and cellulosic ethanol as well as other products currently derived from petroleum. Dyadic's C1 technology also is being developed to facilitate the discovery, development and large-scale production of human antibodies and other high-value therapeutic proteins. Dyadic currently sells more than 45 liquid and dry enzyme products to more than 200 industrial customers in approximately 50 countries for the textile, pulp & paper, animal feed, alcohol, starch, and food and beverage industries.

Cautionary Statement for Forward-Looking Statements

Certain statements contained in this press release are "forward-looking statements." These forward-looking statements involve risks and uncertainties that could cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. For a discussion of these risks and uncertainties, please see our filings from time to time with the Securities and Exchange Commission, which are available free of charge on the SEC's web site at http://www.sec.gov, including our Annual Report on Form 10-KSB for the year ended December 31, 2005, and our subsequent filings with the SEC. Except as required by law, we expressly disclaim any intent or obligation to update any forward-looking statements.

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