Dyadic (AMEX:DIL)
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Dyadic International, Inc. (AMEX:DIL) today provided an update on the
progress of its independent investigation into the potentially material
operational and financial improprieties at its Hong Kong and mainland
China operations announced on April 24, 2007.
Following the recent death of the managing director of the Company's
Asian subsidiaries, the Company received anonymous "whistleblower"
communications alleging a number of improprieties perpetrated against
the subsidiaries by the subsidiaries' management. The Company's
investigation, which is being conducted under the direction of
independent legal counsel engaged by the Audit Committee, thus far has
revealed that the Asian subsidiaries' largest customer was secretly
controlled by the Asian subsidiaries' management, including the deceased
managing director. This customer, which represented approximately 25% of
the Asian subsidiaries' reported net sales for 2006 of approximately
$6.1 million and approximately 33% of their net accounts receivable of
approximately $1.7 million as of December 31, 2006, purchased products
from the Asian subsidiaries which it subsequently re-sold on a cash
basis to businesses in mainland China, apparently allowing these
businesses to avoid Chinese reporting and sales tax requirements.
The Company's Board of Directors has authorized the Company to abandon
its Asian operations. To that end, the Company is currently working with
its independent registered public accounting firm, Ernst & Young LLP, to
determine the proper accounting treatment to record the effect of
abandoning these operations. As of December 31, 2006, the assets of its
Asian subsidiaries were approximately $4.7 million, consisting of
approximately $1.8 million of goodwill and approximately $2.9 million of
receivables and other assets, and liabilities were approximately $1.0
million. The Asian subsidiaries reported a net loss for 2006 of
approximately $43,000.
Mark A. Emalfarb, the Company's Chief Executive Officer and Chairman of
its Board of Directors, remains on a leave of absence from all of his
positions and offices with the Company pending completion of the
independent investigation.
The Company expects to complete the independent investigation and
finalize the accounting treatment for abandoning the operations of its
Asian subsidiaries by September 1, 2007, although there can be no
assurances in this regard. The Company intends to provide further
updates as the investigation progresses.
As previously announced, the Company's financial statements, including
those contained in its Annual Reports on Form 10-KSB and Quarterly
Reports on Form 10-QSB, as previously filed with the SEC, should no
longer be relied upon. The Company has suspended indefinitely the use of
its previously filed registration statement on Form S-3 covering the
resale of shares of its common stock by investors who participated in
the Company's private placement completed on December 1, 2006. During
this suspension period, the Company is obligated to pay liquidated
damages of approximately $130,000 per month beginning on May 23, 2007,
up to a maximum of $1.3 million.
On May 17, 2007, the Company received notice from the American Stock
Exchange that the Company is currently in violation of the Exchange's
continuing listing standards specified in Sections 134 and 1101 of the
Exchange's Company Guide because the Company has yet to file with the
SEC its quarterly report on Form 10-QSB for the quarter ended March 31,
2007. The notice further indicates that the Company must submit a plan
to the Exchange by June 18, 2007, advising the Exchange of action it has
taken, or will take, that will enable the Company to regain compliance
with these continued listing standards by no later than November 16,
2007.
The Company intends to submit such a plan to the Exchange in a timely
manner and take such actions necessary to regain compliance with these
continued listing standards. The Exchange will evaluate such plan and
determine whether or not the Company has made a reasonable demonstration
of an ability to regain compliance with these continued listing
standards. If the plan is accepted by the Exchange, the Company will
remain listed during the plan period, during which time the Company will
be subject to the Exchange's periodic review to determine whether it is
making progress consistent with the plan. If the Company does not submit
a plan or submits a plan that is not accepted by the Exchange, or if it
does not regain compliance with the continued listing standards or make
progress consistent with the plan, the Company will become subject to
delisting proceedings.
The halt on trading in the Company’s shares
that went into effect, at the request of the Registrant, on April 23,
2007, has been and, at the direction of the Exchange, will continue to
be in effect until such time as the Company has filed with the SEC its
quarterly report on Form 10-QSB for the quarter ended March 31, 2007.
About Dyadic
Dyadic International, Inc. is a biotechnology company that uses its
patented and proprietary technologies to conduct research and
development activities for the discovery, development, and manufacture
of products and enabling solutions to the bioenergy, industrial enzyme
and pharmaceutical 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, 2006, 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.