DYADIC INTERNATIONAL INC Stock Compensation Disclosure

Note 6: Share-Based Compensation

 

Description of Equity Plans

 

The 2021 Equity Incentive Award Plan (the “2021 Plan”) was adopted by the Company’s Board of Directors on April 9, 2021 and approved by the Company’s Annual Meeting of Shareholders (the “Annual Meeting”) on June 11, 2021. The 2021 Plan serves as a successor to the Company’s 2011 Equity Incentive Plan (the “2011 Plan”). Since the adoption of the 2021 Plan, all equity awards were made from the 2021 Plan and no additional awards will be granted under the 2011 Plan. The 2021 Plan provides for the issuance of a variety of share-based compensation awards, including stock options, restricted stock awards, restricted stock unit awards, performance awards, dividend equivalents awards, deferred stock awards, stock payment awards and stock appreciation rights. The 2021 Plan increased the number of shares available for grant by 3,000,000 in addition to the number of shares remaining available for the grant of new awards under the 2011 Plan.

 

As of December 31, 2025, the Company had 5,362.722 stock options outstanding and 64,656 unvested restricted stock units, in addition to 2,208,257 shares of common stock available for grant under the 2021 Plan. As of December 31, 2024, the Company had 5,788,597 stock options outstanding and 117,925 unvested restricted stock units, in addition to 2,056,629 shares of common stock available for grant under the 2021 Plan.

 

Stock Options

 

Options are granted to purchase common stock at prices that are equal to the fair value of the common stock on the date the option is granted. Vesting is determined by the Board of Directors at the time of grant. The term of any stock option awards under the Company’s 2011 Plan and 2021 Plan is ten years, except for certain options granted to the contractors, which are two2 to five years.

 

The grant-date fair value of each option grant is estimated using the Black-Scholes option pricing model and amortized on a straight-line basis over the requisite service period, which is generally the vesting period, for each separately vesting portion of the award as if the award was, in substance, multiple awards. Use of a valuation model requires management to make certain assumptions with respect to selected model inputs, including the following:

 

Risk-free interest rate. The risk-free interest rate is based on U.S. Treasury rates with securities approximating the expected lives of options at the date of grant.

 

Expected dividend yield. The expected dividend yield is zero, as the Company has never paid dividends to common shareholders and does not currently anticipate paying any in the foreseeable future.

 

Expected stock price volatility. The expected stock price volatility was calculated based on the Company’s own volatility. The Company reviews its volatility assumption on an annual basis.

 

Expected life of option. The expected life of option was based on the contractual term of the option and expected employee exercise and post-vesting employment termination behavior. The Company uses the weighted average vesting period and contractual term of the option as the best estimate of the expected life of a new option.

 

The assumptions used in the Black-Scholes option pricing model for stock options granted for the year ended December 31, 2025, are as follows:

Schedule of Stock Options 

			Years Ended December 31,
			2025				2024
Risk-free interest rate			4.1% - 4.4	%			3.6% - 4.6	%
Expected dividend yield			—	%			—	%
Expected stock price volatility			65.1-65.4	%			63.0-63.6	%
Expected life of options (in years)			0.8 - 6.3				2.6 - 6.3

 

 

The following table summarizes the combined stock option activity under the Company’s Equity Compensation Plans:

Schedule of Stock Option Activities 

										Weighted-
										Average
						Weighted-				Remaining				Aggregate
						Average				Contractual				Intrinsic
		Shares				Exercise Price				Term (Years)				Value
Outstanding at December 31, 2023			5,469,247			$	3.08				5.66			$	322,738
Granted			830,725				1.61
Exercised			(55,000	)			1.18
Expired			(383,063	)			2.16
Canceled			(73,312	)			1.73
Outstanding at December 31, 2024			5,788,597			$	2.97				5.34			$	655,578
Granted (1)			698,500				1.71
Exercised (2)			(55,000	)			1.17
Expired (3)			(891,875	)			2.99
Canceled (4)			(177,500	)			2.74
Outstanding at December 31, 2025			5,362,722			$	2.83				4.73			$	—
Exercisable at December 31, 2025			4,207,747			$	3.10				3.77			$	—

 

Notes:

 

(1)	Options granted:

 

	●	Annual share-based compensation awards on January 2, 2025, with an exercise price of $1.74, including: (a) 356,500 stock options granted to executives and key personnel, vesting upon one year anniversary, or annually in equal installments over four years, (b) 277,500 stock options granted to members of the Board of Directors, vesting upon one year anniversary, (c) 19,500 stock options granted to employees, vesting annually in equal installments over four years, and (d) 20,000 stock options granted to a consultant, vesting upon one year anniversary.
	●	One time share-based compensation award on May 30, 2025, with an exercise price of $1.04, of 25,000 stock options granted to an executive, vesting annually in equal installments over four years.
(2)	Options exercised:

 

(a) 25,000 stock options with an exercise price of $0.97 per share exercised by a board member (b) 30,000 stock options with an exercise price of $1.33 per share exercised by a board member.

 

(3)	Options expired:

 

(a)

27,500 stock options with an exercise price of $1.75 per share granted to a consultant, (b) 37,500 stock options with an exercise price of $2.23 per share granted to a consultant, (c) 265,000 stock options with a weighted average exercise price of $3.28 per share granted to a former board member, and (d) 561,875 stock options with an exercise price of $2.96 per share granted to a former board member.

 

(4)	Options canceled:

 

(a)

27,500 stock options with an exercise price of $1.75 per share granted to a consultant, (b) 75,000 stock options with an exercise price of $4.10 per share granted to key personnel, (c) 67,500 stock options with an exercise price of $1.74 per share granted to a consultant, and (d) 7,500 stock options with a weighted average exercise price of $1.71 per share granted to a former employee.

 

The weighted average grant-date fair market value of stock options granted for the years ended December 31, 2025 and 2024 was $1.05 and $0.95, respectively, based on the Black-Scholes option pricing model. The intrinsic value of options exercised for the years ended December 31, 2025 and 2024 was $28,350 and $33,300, respectively.

 

As of December 31, 2025 and 2024, total unrecognized compensation cost related to non-vested stock options granted under the Company’s equity compensation plans was $291,410 and $319,978, respectively, which is expected to be recognized over a weighted average period of 2.59 years and 2.40 years, respectively. The Company adjusts the unrecognized compensation cost for actual forfeitures as they occur.

 

 

Restricted Stock Units

 

Restricted stock units (the “RSUs”) are granted subject to certain restrictions. Vesting conditions are determined at the discretion of the Board of Directors. The fair market value of RSUs is generally determined based on the closing market price of the stock on the grant date.

 

The following table summarizes the restricted stock units activity during the year ended December 31, 2025:

 Schedule of Restricted Stock Unit Activity

						Weighted-Average
						Grant Date
		Shares				Fair Value
Outstanding at December 31, 2023			213,044			$	1.43
Granted			354,219				1.60
Vested			(437,546	)			1.52
Unvested shares forfeited			(11,792	)			1.59
Outstanding at December 31, 2024			117,925			$	1.59
Granted (1)			230,023				1.74
Vested (2)			(272,516	)			1.68
Unvested shares forfeited (3)			(10,776	)			1.74
Outstanding at December 31, 2025			64,656			$	1.74

 

Notes:

 

(1)	On January 2, 2025, the Company granted 96,984 RSUs, vesting upon one year anniversary, to the Board of Directors as a result of reduction in director cash compensation of 2025, and an aggregate of 133,039 RSUs, vested in full, to executives and key personnel in lieu of cash bonus earned for the year ended December 31, 2024.
(2)	Represents the vesting 133,039 RSUs granted to executives and key personnel, and 139,477 RSUs granted to the Board of Directors.
(3)	Represents the cancellation of unvested RSUs granted to a former member of the Board of Directors.

 

Compensation Expenses

 

We recognize all share-based payments to employees, consultants, and our Board of Directors, as non-cash compensation expenses, in research and development expenses or general and administrative expenses in the consolidated statement of operations, and these charges had no impact on the Company’s reported cash flows. Stock-based compensation expense is calculated on the grant date fair values of such awards, and recognized each period based on the value of the portion of share-based payment awards that is ultimately expected to vest during the period. Forfeitures are recorded as they occur. For the years ended December 31, 2025 and 2024, the Company recognized forfeitures of $54,458 and $30,218, respectively.

 

For performance-based awards, the Company recognizes related stock-based compensation expenses based upon its determination of the potential likelihood of achievement of the specified performance conditions at each reporting date. There was no performance-based award recognized during the years ended December 31, 2025 and 2024.

 

Total non-cash stock option compensation expense was allocated among the following expense categories:

Schedule of Non-cash Share-based Compensation Expense 

		2025				2024
		Year ended December 31,
		2025				2024
General and administrative		$	861,348			$	1,067,750
Research and development			68,835				58,529
Total		$	930,183			$	1,126,279

 

Warrants

 

On August 1, 2025, in connection with the services the Underwriter provided to the Company in the Offering, the Company issued a warrant to purchase up to 302,600 shares, representing 5.0% of the total shares sold in the Offering. The warrants are exercisable at a price of $1.0925 per share, at any time and from time to time, in whole or in part, from January 28, 2026 until August 1, 2030. As of December 31, 2025, there were 302,600 outstanding warrants to purchase common stock. See Note 7 Shareholder’s Equity.

 

The warrants were accounted for as equity-classified instruments under ASC 718. The fair value of the warrants, determined using the Black-Scholes option pricing model, was estimated to be $0.58 at the issuance date and was recorded as a component of additional paid-in capital, with a corresponding reduction to offering proceeds as an offering cost. The assumptions used in the Black-Scholes model included:

Schedule of Fair Value of Warrants Using Black-Scholes Model 

Risk-Free interest rate			3.67	%
Expected dividend yield			0	%
Expected stock price volatility			64.97	%
Expected life of warrant (in years)			5