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Healthcare - Biotechnology - NASDAQ - US
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$ 33.4 M
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EARNINGS CALL TRANSCRIPT
EARNINGS CALL TRANSCRIPT 2015 - Q2
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Executives

Tom Dubinski - Chief Financial Officer, Vice President Mark Emalfarb - President, Chief Executive Officer, Director Danai Brooks - Chief Operating Officer.

Analysts

Luke Smith - Chapin Davis Stuart Tillman - Richard Deutsch - Ladenburg Thalmann Robert Hoffman - Princeton Opportunity Partners.

Operator

Good afternoon, ladies and gentlemen. Thank you for holding. Welcome to the Dyadic International's Second Quarter 2015 Results Earnings Conference Call. At this time, all participants are in a listen-only mode. My name is Danny, and I will be your conference coordinator today. As a reminder, please note that this call is being recorded.

At this time, I would like to introduce your host for today's call, Tom Dubinski, from Dyadic, Vice President and Chief Financial Officer..

Tom Dubinski

Thank you, Danny. Good afternoon and thank you for joining today's conference call to discuss Dyadic's financial and operating results for the second quarter of 2015, which were reported in a press release issued on Friday August 14.

The press release and Dyadic's quarterly financial statements have been posted to both, the Dyadic and the OTC Markets' websites. On today's call, Mark and Danai will cover operating highlights, business development and corporate strategy, and I will review our financial results in more detail. We will then give you an opportunity to ask questions.

Each caller will be allowed one question and one follow-up question in order to provide all callers an opportunity to participate. If time permits, the operator will allow additional questions from those who have already spoken.

Before we begin, we would like to remind you that certain statements made in this conference call maybe forward-looking statements, which involve risks and uncertainties that could cause Dyadic's actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements.

Dyadic expressly disclaims any intent or obligation to update any forward-looking statements except as required by law. I will now turn the call over to our President and CEO, Mark Emalfarb..

Mark Emalfarb Founder, Chief Executive Officer, President & Director

Thank you, Tom. I am pleased to report our cash position at the end of the quarter was approximately $5 million. We are continuing to work towards strengthening of our balance sheet.

I would like to add that subsequent to the second quarter, the company reached a favorable settlement with one of the defendants in connection with our ongoing professional liability. On August 12, 2015, the company received full payment of a low seven figure confidential settlement payment, which is net of fees and expenses.

The confidential settlement amount will be reported in the company's consolidated statement of operations and other income for the quarter ending September 30, 2015.

We had another successful quarter as our gross profit for the second quarter increased 48% versus the same period a year ago and through the first six months of the year gross profit is up 50% year-over-year. General and administrative expenses for the second quarter declined to 32% versus the same period a year ago.

Through the first six months of the year, our G&A expenses were down 29% year-over-year. Our investment and expansion of our Dutch research and development center over the past year-and-a-half continues to pay off.

As our C1 Technologies has become more productive and versatile has further validated by the receipt of $800,000 in milestones payments from BASF in the first half of this year. Our C1 White Strain 2.0 is now two times more productive than it was when we first licensed the technology to BASF two years ago.

Our CMAX bio fuel strains are 40% more productive than previous generations. Very high levels of protein expression of 100 grams per liter have been achieved, which have been verified by third parties, using both, our C1 High Cellulase and C1 Low Cellulase White Strain 2.0 strains.

What is even more remarkable is that the C1 White Strain 2.0 is shown to be able to produce an enzyme from a heterologous gene with approximately 80% purity or 80 grams per liter.

Our C1 Technology platform is being recognized by the biotechnology industry as a lending expression system, which is being used by ourselves, our licensees and our collaborators to turn genes into products to help feed, fuel and heal humankind.

The C1 Technology is starting to gain greater recognition and awareness resulting in a growing interest across academic and industry and gaining access to the C1 Expression System.

As stated in our quarterly report for the second fiscal quarter, we are exploring several transactions, including but not limited to licensing of our C1 Technology to new collaborators, expanding or modifying the rights of existing licensees, other strategic alternatives and monetizing our assets, including potentially selling certain parts of the business and technology and extending the maturity dates of its subordinated convertible debts and notes payable to the stockholders as we have done in the past.

For a brief update on our vaccine projects with Sanofi Pasteur, we understand the preclinical mice testing was completed at the end of July, and we anticipate hearing the results in September.

The feedback we have received so far has been positive, but we caution that the result are not yet in hand and we are unsure what Sanofi's plans are going forward. With all these advances, we believe, we are better positioned than ever to leverage our C1 White Strain 2.0 into biopharmaceutical industry.

Our Dutch subsidiary, Dyadic Netherlands recently receive funding as part of the €22 million consortia called ZAPI, a goal of ZAPI project is the development of the fast track for the production of animal vaccines.

It is anticipated that these new methodologies and processes developed within ZAPI will provide benefits both, to animal health and human health. As ZAPI consortia includes Merial, a Sanofi affiliate, AstraZeneca, Boehringer Ingelheim, as well as a variety of other companies and leading European research institutes.

Furthermore from a research and management standpoint, we have two new board members both, of whom have pharmaceutical industry experience and provide insights and guidance as how we approach or are going to approach the biologics market.

As for an update on ongoing professional liability litigation, we continue to vigorously pursue our claims against the two remaining defendants, Greenberg Traurig and Bilzin Sumberg. As stated in our previous earnings calls, the company is seeking over $200 million in damages in this litigation.

If we are able to reach a favorable settlement with one or both of them this would provide the company with additional capital. However, if we do not prevail, court may determine that the company is responsible for some or all of the cost in addition to the cost incurred by the company what maybe a protracted and long trial.

As with all litigation, this outcome is uncertain. I will now turn it over to Danai Brooks, our Chief Operating Officer to discuss business developments, research and operations..

Danai Brooks

Thank you, Mark. We have now accomplished six quarters of consecutive year-over-year growth in gross profit starting in Q1 of 2014. This success has been driven by operational and production improvement, focus on higher margin customers and markets and managing research and development costs.

First half product revenues were up 27% year-over-year with growth in excess of 20% in all the regions we operate and positive growth with each of our 10 top customers. Sales continued to be driven by growth in our core animal feed markets and several product opportunities may materialize in the back half of this year.

Progress was also observed with key customers in food, starch, dietary supplements, textiles, and with our entering the biogas market. Our gross margins are holding from strong 2014 levels.

The initial biogas product launch of our FiberZyme G4 enzyme into Europe, promising growth area for us, we believe our product has the potential to decrease viscosity, which is expected to increase biogas yields at customer facilities.

In the first half of the year, we gained some initial customer traction and have begun to generate additional interest by field testing potential new customers. We hope that these trials will provide additional data to further support the initial test results that showed viscosity reduction from third-party where it performed in December 2014.

We believe our C1-based products such as FiberZyme G4 are differentiated due to their inherent ability to be active across conditions where many biogas plants operate. According to the European Biogas Association, in 2014, there were over 40,500 plants in Europe, with over 9,000 biogas plants in Germany alone.

While we expect the market adoption to be gradual, our initial success continues to be encouraging. I would like to next briefly touch on a few of our commercial collaborations and research programs. One of the new projects mentioned in our last earnings call was one of our partners in the food and [ph] bev space has met with initial research success.

Although this product is likely a few years away from launch, we believe that by using our C1 White Strain 2.0 technology, we will be able to reach commercially viable production levels of this product for our partner. We are continuing to work on the expression levels of this gene to push the yield further.

We are also making progress on our next-generation advanced bio fuel strains, where our last generation CMAX is 40% more productive than last year. We have begun a small early-stage research project with a third potential partner or licensee to add to Abengoa and CIMV, work in collaboration with the EU funded 2G BIOPIC program has also begun.

That the objective is to demonstrate advanced bio fuel technologies with building a demonstration scale facility that can process 24 tons of biomass per day. Our partners in the program represent France, Belgium, the Netherlands and Sweden and includes CIMV, Taurus Energy, Bio Base Europe, [ph] Critt Bio Industries.

We now have a total of 10 EU-funded programs, including 2G BIOPIC and ZAPI. The other two new programs for 2015, ROBOX and Butamax, which focus on oxididases and next generation bio butanol, respectively, both kicked off.

ROBOX, which is working to expand the industrial use of robust oxidative bio catalyst for the preservation and production of alcohol, the synthetic genes have arrived and cleaning work has begun. Our other projects which include Biomimetic, BakeZyme, OPTIBIOCAT, [ph], AlgaeParc and MIRACLES are all progressing on track.

Through these projects, we are gaining both, knowledge and product leads that can be applied for specific project industries and adjacent markets as well. The work is expected to increase the C1 library of commercially interesting enzymes and future potential applications. We are making further progress with our product development pipeline.

In any of these projects, we are confirming our positive lab test results with potential customers and leading third-party institutes.

However, in the area of growing, we are excited to announce that we believe one of our product candidates subject to safety studies and registration is ready for commercialization and could be brought to market as early as the second half of 2016.

In third-party application trials, this new product candidate has shown much better performance than commercial enzymes we have benchmarked. In the animal feed market, we selected a gene of interest and are seeking a development partner to further modify this gene in order to launch a thermostable feed enzyme.

In addition, we have several potential baking enzymes in various stages of the development. These enzymes have shown to prevent bread staling, increased bread loaf size and potentially make bread more nutritious. We anticipate that many of these application trials will have ongoing, animal feed, baking, brewing, biogas and other industries.

Along with the expected continued improvements in our science, these should help us realize business objectives in 2016 and beyond. On the business development front, we are continuing to progress in a variety of late-stage discussions and negotiations.

These discussions include a strategic review of partnerships, joint ventures and licenses and advanced bio fuels, animal nutrition, baking and brewing.

With worldwide reach and our business development efforts with the focus on Brazil, China, Japan, India, Western Europe and the United States, and as Mark mentioned, we are developing and beginning the execution of the business plan to develop biosimilars, vaccines and other biologics in the pharmaceutical space.

Now, let me turn it over to Tom Dubinski, our CFO to discuss the financial results..

Tom Dubinski

Thank you, Danai. I would like to highlight. Our cash position at June 30, 2015 cash and cash equivalents were $5 million compared to $2.5 million at December 31, 2014.

Net cash provided in operating activities for the six-month period ended June 30, 2015 was $0.5 million as compared to cash used in operating activities of $4.5 million for the same period a year ago.

In addition, as Mark discussed earlier, subsequent to the second quarter the company reached a settlement on July 31, 2015 with one of the remaining defendant law firms in its ongoing professional liability litigation. On August 12, 2015, the company received full payment of this low seven-figure settlement, which is net of fees and expenses.

The settlement amount will be recorded in the company's consolidated statement of operations and other income for the quarter ended September 30, 2015.

The Company's net loss for the second quarter ended June 30, 2015 was $400,000 or $0.01 per basic and diluted share compared to a net loss of $1.7 million or $0.05 per share basic and diluted for the same period a year ago.

Net loss for the six-month period ended June 30, 2015 was $800,000 or $0.02 per basic and diluted share compared to a net loss of $3.2 million or $0.10 per basic and diluted share for the same period a year ago. Total revenue for the second quarter ended June 30, increased 25% to $3.8 million compared to $3.1 million for the same period a year ago.

Net product related revenue for the second quarter of '15 increased 12% to $2.8 million compared to $2.5 million for the same period a year ago. The increase in revenue for the period was driven by growth in animal nutrition, initial sales into our biogas and food markets.

License fee revenue for the second quarter of '15 increased to $600,000 due to the company achieving a third research milestone with BASF. Research and development revenue for the second quarter of '15 decreased 21% to $0.5 million dollars compared to $600,000 for the same period a year ago.

The decrease in revenue for the period was due in part to mix in timing of R&D, project activities in commercial and government programs. As Danai discussed earlier, total revenue for the six-month period ended June 30th increased 30% to $7.9 million compared to $6 million for the same period a year ago.

Net product related revenue for the six-month period increased 27% to $6.2 million compared to $4.9 million for the same period a year ago. The increase in revenue for the period was driven by growth in animal nutrition, initial sales of enzymes into the biogas industry and food markets.

License fee revenue for the six-month period of '15 increased $0.8 million due to the company achieving second and third milestones with BASF. Research and development revenue for the six-month period of 2015 decreased 26% to $0.8 million compared to $1.1 million for the same period a year ago.

The decrease in revenue for the period was due in part to mix and timing of R&D project activity and commercial and government programs. Gross profit for the second quarter ended June 30, 2015 increased 48% to $1.5 million compared to $1 million for the same period a year ago.

The $0.5 million increase in gross profit is attributable to product margin growth of $100,000, cost savings and manufacturing and fermentation and downstream processing of $200,000, the receipts of the third BASF research milestone of $600 million, partially offset by lower research and development margins of $400,000.

Gross profit for the six-month period ended June 30, 2015 increased 50% to $3.2 million compared to $2.2 million in the same period a year ago. The $1 million increase in gross profit is attributable to product related margin growth of the $0.5 million.

Cost savings of manufacturing fermentation and downstream processing of $400,000, the receipt of the second and third BASF milestones of $800,000, partially offset by lower research and development margins of the $700,000.

General and administrative expenses for the second quarter ended June 30, 2015 declined 32% to $1.7 million compared to $2.6 million for the same period a year ago.

The decrease primarily reflects lower litigation cost of $400,000, lower research and development spending of $300,000 and lower professional service cost compensation and project related spending of $200,000.

General administrative expenses for the six-month period ended June 30, 2015 declined 29% to $3.6 million compared to $5.1 million for the same period a year ago.

The decrease primarily reflects lower litigation cost of $1 million, lower research and development spend a $0.5 million and lower professional service cost compensation and project related spend of $200,000, partially offset by a net foreign currency exchange loss of $200,000, reflecting the strengthening U.S. dollar to the Euro.

Now, I would like to turn the call back to our operator to take your questions.

Danny?.

Operator

Thank you. [Operator Instructions] We will take our first question from Luke Smith..

Luke Smith

Hi, Mark. I wanted you to describe the biogas enzyme opportunity and our advantages and any progress you can report..

Mark Emalfarb Founder, Chief Executive Officer, President & Director

As Danai indicated, it is a very large market in Europe with over 14,000 in plants in Europe, with 9,000 plants in Germany alone.

The advantage that we believe we have is that our enzymes operate as at a neutral to alkaline pH coming from the C1 enzymes versus enzymes that have been offered in the market that Trichoderma that do not operate in those ranges, so they have not been as effective in the biogas industry as they would have liked.

We have initially started sign our product to a distributor in Europe and at same initial sales that are pretty substantial as a startup. We have ongoing trials in other European plants and have generated a lot of interest and we are pursuing that aggressively going forward..

Luke Smith

Okay.

Is that an exclusive arrangement with your distributors or exclusive just in Europe or non-exclusive?.

Mark Emalfarb Founder, Chief Executive Officer, President & Director

Non-exclusive. Okay. Thank you..

Operator

We will take our next question from Stuart Tillman. Please go ahead..

Stuart Tillman

Yes. We have been hearing for the last almost six months that a deal was in the offering an important deal and that we could not learn anything about it because you are bound by confidentiality agreements and also from SEC rules. That is a long time to be your negotiating a deal.

Could you give us an update or explain why it is taking so long?.

Mark Emalfarb Founder, Chief Executive Officer, President & Director

The update is same statement we made in the past. We are in discussions with a variety of people and a variety of options and we are exploring which options will bring the best value to our shareholders and some of those deals are dependent on the other ones and the direction we want to move forward.

Unfortunately, in some of these deals, these companies are quite large and they take time to get to the point that we are both happy with the arrangements that we potentially might move forward with and we are diligently working towards resolving one, two or three of these are moving in a different direction..

Stuart Tillman

When you say diligently is my follow-up question, what timeframe that we can expect some news. I mean, after all six months is a very long time to say that you are in negotiations and you cannot tell your stockholders anything about it..

Mark Emalfarb Founder, Chief Executive Officer, President & Director

Well, we can only tell you things when something is signed and definitive, so we would have expected quite frankly to actually have some news by now and be able to have a definitive agreement on one or more of these opportunities and I think we are getting much nearer to that point.

I mean, obviously, we are at the mercy of the other party in terms of what is timeline that they want to do, but we are going to move forward one way or another very quickly. Within the next month or two, with the latest, we expect to make a decision which direction we want to go in creating value for our shareholders..

Stuart Tillman

Is it fair to say that some of these prospective deals fell through?.

Mark Emalfarb Founder, Chief Executive Officer, President & Director

I think it is fair to say that maybe one of those deals fell through, but the other ones is still pending and there is more coming, but the one that we have been talking about and the infrastructure and the relationship we have is still ongoing and I think that it looks positive that both parties want to move forward together..

Stuart Tillman

Thank you..

Operator

[Operator Instructions] Our next question is from Richard Deutsch from Ladenburg Thalmann. Please go ahead..

Richard Deutsch

Yes. Thank you. Thank you for taking my call. During the first quarter of this year, you announced near record breaking industrial enzyme cells, which was extremely promising. During the second quarter which you have just announced, they fell dramatically all the way back down to quite pathetic levels.

Can you explain the business and the reason for the rise and the components and also the reason for the falloff and where do we stand with that business going forward? Thank you..

Mark Emalfarb Founder, Chief Executive Officer, President & Director

Okay. Well, I think Rick, falling off dramatically is an overstatement on your part. This business does not operate on a month-to-month basis and we might have had sales in December that has got pickup would have otherwise got picked up in January.

We had sales in February, March that might have got picked up in April, so you cannot go by exact quarter to quarter.

On the first six months of this year, we are up substantially and we continue to see that we are going to have increase sales, but we do not give projections and forward-looking statement as to what they will be and won't be, but I think that we have had dramatic performance and profits, which is the most important and in our eyes is cash and generating cash flow and selling products that we make nice margins on and we had good top-line revenue growth, so I would look at the six-month numbers and ignore the quarter-to-quarter variations, so I am not quite sure what you are looking at but that is what we are looking at..

Richard Deutsch

I will tell you what I am looking at. I am looking it at industrial enzyme business that has been out there for a decade and it is operating at exceedingly low levels over the long-term and to jump the bar from a year ago which was extremely low is pathetic. Let me move on since you did not answer that question..

Mark Emalfarb Founder, Chief Executive Officer, President & Director

Actually I did answer the question, Rick..

Richard Deutsch

Not my satisfaction..

Mark Emalfarb Founder, Chief Executive Officer, President & Director

Okay. That is a different story..

Richard Deutsch

What is happening with BASF? The fact is that it is rather stunning that you have completed the work for them extremely successfully according to what we hear and you are not speaking about any further operations with them.

Could you explain that relationship and where you think it is going?.

Mark Emalfarb Founder, Chief Executive Officer, President & Director

I think BASF is extremely pleased with the results that they got from the C1 research project. I think, they are extremely pleased and feel, in fact, that the technology has over performed their initial expectations.

We received $800,000 milestone of payment from them in the first half of the year and they are using that technology internally to try to develop and create new products as well as the product that came out of the research program that we developed for them, so I think it has been a huge success.

I think they would view it in the same manner and that is a 110,000 employees of which part of those people will be working on expressing genes for all kinds of things using C1, so I think it is a huge success.

I think in fact that they have mentioned it and I do not know what else you want to tell you about that, but we do not have insight into exactly what they are doing with it, but I can tell you that they have told us that it had exceeded what they originally expected and we hit levels higher than what they thought was possible at this point in the faster timeframe and they are very happy with the license they took..

Richard Deutsch

Okay. I will get back in the queue..

Operator

Our next question is from Robert Hoffman with Princeton Opportunity Partners..

Robert Hoffman

Yes. First question, I will follow-up on the last one with regard to industrial enzymes.

Mark, you have talked about it being the first half rather than looking at quarters? Is it fair to say that the first half is a run rate that we can feel confident that going forward it will be similar over the next six months, whether it happens in August or whether it happens in November, it depends on the order flow from your customers, but can we look at the first half as being a pretty good run rate?.

Tom Dubinski

Robert, Tom Dubinski. We operate in a number of different markets with a number of different types of customers, some are distributors, and some are sell and product that they manufacture from, so that there is a order of patterns with our business. Typically the business is fairly ratable, but we did enjoy a very good first quarter of the year.

I believe there were some shortages in the overall market that I think, Danai, you can potentially expand on, but I believe July and August were recovering from the second quarter and I think the trends looked good..

Danai Brooks

I think, we feel good about the run rate for the first half of the year relative to what the year looks like. I also want to note that if you look back at this business two years ago, in 2012, this was $7 million business. This run rate is up to $12 million. It has been a growing business over the past few years..

Mark Emalfarb Founder, Chief Executive Officer, President & Director

Robert, I like to point out that you have to realize that we have been spending a lot of our resources on advancing a platform technology they can now accelerate a business for ourselves and our licensees as indicated to BASF, so when you have a limited amount of resources you have to spend them wisely and we chose to actually invest in a platform technology that puts us at the forefront of gene expression for a variety of industries and applications, so the enzyme business is growing, we have reduced some of our sales that we wanted to do in terms of like textile, which were lower margin.

I think we have had a good growth and we have a good product pipeline and we have great opportunities to license the technology, joint venture and collaborated with a variety of people, in animal feed, food, brewing, pulp and paper, bio fuels, pharmaceuticals.

It is really all about the fungus among us that we actually improved dramatically and continue to improve as I think Danai or I pointed out, it is over two times better than it was when we licensed it to BASF.

More remarkably, it has been able to prove high levels of protein of up to, maybe in some cases it is more than 100 grams per liter, with 80% purity those are remarkable numbers. Quite frankly, it is about the technology, not about an individual enzyme..

Robert Hoffman

I am just trying to get a sense of your financial stability from that part of the business, so I think that is what Mr. Deutsch was trying to do as well.

Moving on, can you just extrapolate a little bit on where we stand with Sanofi? If you said it, it through past me, because I frankly was not concentrating as closely as I should have in the beginning, so can you either repeat what you said or extrapolate on it?.

Mark Emalfarb Founder, Chief Executive Officer, President & Director

Yes. I will repeat what I said.

How is that?.

Robert Hoffman

Really good..

Mark Emalfarb Founder, Chief Executive Officer, President & Director

For a brief update on the vaccine project with Sanofi Pasteur, we understand the preclinical mice testing was completed at the end of July and we anticipate hearing results in September. The feedback we have received so far has been positive, but we caution that the results are not yet in hand and we are unsure what Sanofi’s plans are going forward.

With all of these advances, we believe, we are better positioned than ever to leverage our C1 White Strain 2.0 into the biopharmaceutical industry.

I further went on to talk about the ZAPI project, our Dutch subsidiary Dyadic Netherlands received recently funding as part of a €22 million consortia called ZAPI, a goal of the ZAPI project is the development of a fast-track for the production of animal vaccines.

It is anticipated new methodologies and processes developed within ZAPI, will provide benefits to both, animal health and human health.

The ZAPI consortia includes Merial, a Sanofi affiliate, AstraZeneca, Boehringer Ingelheim, as well as a variety of other companies and leading European research institutes, so that kind of highlights that the technology platform is being applied now into biopharmaceuticals in the vaccine development and production, with the goal there to be able to develop a way to bring vaccines in the market quicker, in much larger volumes, and much lower cost so that if there is an epidemic we can actually treat the greater portion of the population versus technology that can only treat a small portion that takes too long and it is too expensive..

Robert Hoffman

Great. Thank you for repeating that, but back to Sanofi, so we are going to hear or are you going to hear hopefully what we will hear as well the results of this mice trial.

Is that one of a number of things that they are doing or is that sort of, if things work well there, they move on with you; if they do not, kind of the end of the story?.

Mark Emalfarb Founder, Chief Executive Officer, President & Director

I do not have a crystal ball on the Sanofi's thinking. I wish I did, but I believe that if the results are promising and continue to look as good as we think they looked in our laboratory, which was an in-vitro test. We saw the reaction that we would have expected.

Hopefully that they were seeing the same thing in mice, which is why we sort of heard some positive results back between the scientists, but do not have the final result and we do expect to get those in September. I do not know if those give us exact data, but they will share with us that.

If we move forward, I think that you cannot find the better partner than Sanofi, they are one of the largest biopharmaceutical companies in the world, one of the largest vaccine companies in world.

We have now entered into the ZAPI program, which they are part of in the animal health side and all that development work is working towards both as ZAPI project said making quicker faster, better, cheaper, vaccine for both, animal and human health. We hope that they will be extremely pleased with the mice studies, but we do not have the results.

They do or we will have shortly and that that would lead to a strengthening the relationship and eventually to creating a lot of value for all of us both, for Sanofi for Dyadic and of course for humankind..

Robert Hoffman

I appreciate that. I think you answered it in that. It is not like Sanofi is doing a myriad of different things in different areas. This is the focus of your relationship. If it works, they will continue on. It is not like there are three different tracks going on and this is just one of the three tracks. This is the single track..

Mark Emalfarb Founder, Chief Executive Officer, President & Director

Actually I must be retract and one thing, which is actually little better. They did ask us to clone and express some additional genes since they had seen some progress recently, so that would be maybe a second track, but I would say that is a secondary thing or tertiary versus the main event.

I do not believe and it is possible even if this result was not as perfect as they might like, which I have no idea, if it was or it was not that they might not continued it anyways. I do not know, if there is black and white as you might think..

Robert Hoffman

That is fine.

Just finally any update on the Abengoa plants, when did they go up and running I guess in the first quarter?.

Mark Emalfarb Founder, Chief Executive Officer, President & Director

Initially it started up in Q4 last year. They apparently have had some struggles not with the enzymes.

By the way, we will tell you that they have mentioned publicly and otherwise that the enzymes have met or exceeded expectations, but they apparently are having some issues at some part of the plan, which I am not at liberty to discuss, which I think they have mentioned that they hope to have solved shortly and to be running at a much higher level towards the end of the year, but we do not project high material amounts of money coming in from our royalties this year, which we would have expected, but I think stay tuned there, because again we do not have the inside track on that, but we do get updates as to what the royalties are for us and per quarter..

Robert Hoffman

The bottom-line is, they are not running anywhere close to capacity here if they are running it all, so any results from there are not showing up in Q2 numbers?.

Mark Emalfarb Founder, Chief Executive Officer, President & Director

Yes. That is true. There is virtually nothing showing up in Q2 numbers..

Robert Hoffman

Great. Okay. Thank you. I will get to the end of the queue..

Operator

I am showing no further questions at this time. I would like to turn the call back over to Mr. Emalfarb for closing remarks..

Mark Emalfarb Founder, Chief Executive Officer, President & Director

Okay. I would like to thank everybody for their support over the years. Thank you for being the shareholders of Dyadic and for participating in today's conference call. We look forward to updating you on our progress during our third quarter call sometime in mid-November 2015. Thank you very much..

Operator

Ladies and gentlemen, this concludes our program for today. You may now disconnect..

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