LOAN AND SECURITY AGREEMENT

Dated as of November 14, 2008

This Loan and Security Agreement (as modified from time to time, the '''Agreement'') has been executed by DYADIC INTERNATIONAL (USA), INC. (formerly known as Dyadic International, Inc.), a Florida corporation (“Dyadic Florida”), and DYADIC INTERNATIONAL, INC., a Delaware corporation (“Dyadic Delaware” and together with Dyadic Florida, the "Debtor"), as debtor, in favor of the MARK A.  EMALFARB TRUST, under agreement dated October 1, 1987, as amended (the “MAE Trust”), Francisco Trust, under agreement dated February 29, 1996, as amended, and Mark A. Emalfarb, individually (“MAE”), collectively, as secured party (together with any successor, assign or subsequent holder, individually and collectively referred to as the "Secured Party"), with its main office c/o the MAE Trust at 193 Spyglass Court, Jupiter, Florida 33477.  If more than one person or entity executes this Agreement, the term "Debtor" refers to each of them individually and some or all of them collectively, and their obligations hereunder shall be joint and several.

Each Debtor is jointly and severally indebted to MAE Trust pursuant to the terms of that certain Revolving Note dated as of May 29, 2003, as amended, in the original principal amount of Three Million Dollars ($3,000,000) (the “Prior Note”).  The Prior Note is secured by, among other things, a certain Security Agreement dated as of May 7, 2000, as amended, and a Security Agreement dated as of May 29, 2003, as amended (collectively, “Prior Security Agreement”), pursuant to which Dyadic Florida granted a security interest in and to certain personal property owned by Debtor as more particularly described in the Prior Security Agreement.

Debtor acknowledges and agrees that (i) certain defaults exist under the Prior Note and Prior Security Agreement, (ii) Debtor has received proper notice and opportunities to cure such defaults under the terms of the Prior Note and Prior Security Agreement, and (iii) Debtor has failed to cure such defaults as of the date hereof.

As of the date hereof, the outstanding principal balance of the Prior Note is Two Million Four Hundred Twenty-Four Thousand Two Hundred Ninety-Four and No/100 Dollars ($2,424,294.00), plus accrued and unpaid interest (such principal and accrued and unpaid interest being hereinafter referred to as the “Loan”).

Notwithstanding the existence of such uncured defaults, until the first to occur of the maturity date specified in the Amended Note (as hereinafter defined) or the date upon which a Default (as hereinafter defined) shall occur, Secured Party has agreed to forbear on the exercise of its rights under the Prior Note and Prior Security Agreement in exchange for Debtor’s agreement to (i) execute and deliver that certain Amended and Restated Note dated as of even date herewith (the “Amended Note”) in the original principal amount of Two Million Four Hundred Twenty Four Thousand Two Hundred Ninety Four and No/100 Dollars ($2,424,294), and (ii) otherwise observe and comply with the terms and conditions set forth herein.

NOW THEREFORE, in consideration of the foregoing recitals and other valuable consideration, the receipt and adequacy of which are hereby acknowledged, Debtor agrees as follows:

1.           DEFIN1TIONS.  As used in this Agreement:

(a)           “ Account ”, “ Account Debtor ”, “ Chattel Paper ”, “ Commercial Tort Claims ”, “ Deposit Accounts ”, “ Documents ”, “ Equipment ”, “ Fixtures ”, “ General Intangibles ”, “ Goods ”, “ Instruments ”, “ Inventory ”, “ Investment Property ”, “ Letter of Credit Rights ”, “ Proceeds ” and “ Tangible Chattel Paper ” shall have the respective meanings assigned to such terms, as of the date of this Agreement, in the Uniform Commercial Code.

(b)             Capitalized terms not expressly defined herein shall have the meaning ascribed to such terms in the Amended Note.

(c)           “Collateral” shall mean the property of Debtor described in Section 2 hereof, together with all other personal property of Debtor now or hereafter pledged to Secured Party to secure, either directly or indirectly, repayment of the Secured Obligations.

(d)           “License Agreement” shall have the meaning set forth in Section 8 hereof.

(e)           “Loan Documents” shall mean all documents evidencing and securing Loan, including, without limitation, the documents described in Section 6 .

(f)           “Secured Obligations” shall mean and include without limitation any and all of Debtor’s indebtedness, liabilities and other obligations to any Secured Party of every kind, nature and description, direct or indirect, joint or several, absolute or contingent, due or to become due, now existing or hereafter arising including, without limitation, the indebtedness and liabilities under the Amended Note, this Agreement and the other Loan Documents including, without limitation: (i) all obligations to perform acts or refrain from taking any action, (ii) each and all of the obligations of any Debtor owing to any Secured Party, whether now existing or hereafter arising, (iii) all indemnification and other obligations arising pursuant to any contract,  agreement, or any bylaw of any Debtor or under applicable law, (iv) the damages due MAE by reason of claims asserted by him in that certain arbitration proceeding between Mark A. Emalfarb, claimant, and Dyadic, Inc., respondent (American Arbitration Association # 32 460 00765 07), (iv) claims of MAE Trust and Francisco Trust relating to their conversion of indebtedness into shares of capital of Dyadic Florida or Dyadic Delaware, and (v) any other claim against any of Debtor.

(g)           “Uniform Commercial Code” shall mean the Uniform Commercial Code as adopted in the State of Florida, including all of its revisions, amendments and modifications that may occur during the term of this Agreement.

2.           SECURITY INTEREST.  As security for the payment or other satisfaction of all Secured Obligations, Debtor hereby assigns to Secured Party and grants to Secured Party a continuing security interest in all of Debtor’s personal property, including, without limitation, the

following property of Debtor, whether now or hereafter owned (in whole or in part), existing, acquired or arising and wherever now or hereafter located:  (a) all Accounts and all Goods whose sale, lease or other disposition by Debtor has given rise to Accounts and have been returned to, or repossessed or stopped in transit by, Debtor; (b) all Chattel Paper, Instruments, Documents and General Intangibles (including, without limitation, all patents, patent applications, trademarks, trademark applications, tradenames, trade secrets, goodwill, copyrights, copyright applications, registrations, licenses, software, franchises, customer lists, tax refund claims, claims against carriers and shippers, guarantee claims, contract rights including, without limitation, leases and grants, payment intangibles, security interests, security deposits, rights to indemnification, strains and micro-organisms and related mutants and derivatives thereof now existing or hereafter produced, fermentation processes and protocols, proprietary and confidential information and materials, sequenced genome, annotated genome, genes, genetic material, research and development projects, research tools and materials, research equipment and supplies and know-how); (c) all Inventory including, without limitation, raw materials; (d) all Goods (other than Inventory) including, without limitation, Equipment, vehicles and Fixtures; (e) all Investment Property; (f) all Deposit Accounts, bank accounts, prepaid expenses and all deposits and cash; (g) all Letter of Credit Rights; (h) all Commercial Tort Claims, and all other claims and causes of action, whether in contract, tort or otherwise; (i) any property of Debtor now or hereafter in the possession, custody or control of Secured Party or any agent or any parent, affiliate or subsidiary of any of Secured Party or any participant with MAE Trust in the Loan, if any, for any purpose (whether for safekeeping, deposit, collection, custody, pledge, transmission or otherwise); (j) all other personal property described in the Prior Security Agreements; and (k) all additions and accessions to, substitutions for, and replacements, products and Proceeds of the foregoing property, including, without limitation, proceeds of all insurance policies insuring the foregoing property, and all of Debtor’s books and records relating to any of the foregoing and to Debtor’s business.

3.           SECURED OBLIGATIONS.  The Collateral shall secure the payment and performance of each and all of the Secured Obligations.  This Agreement shall continue and remain in effect notwithstanding that at any particular time there may be no Secured Obligations outstanding.  Notwithstanding the foregoing, this Agreement shall terminate when Secured Party gives the Debtor written notice that the Secured Obligations and all amounts payable thereunder have been fully paid, and that all commitments and obligations of Secured Party with respect to the Secured Obligations have terminated.

4.           REPRESENTATIONS.  Debtor hereby represents and warrants to Secured Party that:

(a)           Each Debtor is existing and in good standing under the laws of their state or other jurisdiction of formation, are duly qualified, in good standing and authorized to do business in each jurisdiction where failure to do so might have a material adverse impact on the consolidated assets, condition or prospects of Debtor; the execution, delivery and performance of this Agreement and all related documents and instruments are within Debtor's powers and have been authorized by all necessary corporate, action.

(b)           The execution, delivery and performance of this Agreement and all related documents and instruments have received any and all necessary governmental approval, and do

not and will not contravene or conflict with any provision of law, charter or by-laws of any Debtor or any agreement affecting such Debtor or its property.

(c)           There has been no material adverse change in the business, condition, properties, assets, operations or prospects of Debtor since the date of the latest financial statements, if any, provided on behalf of Debtor to Secured Party.

(d)           No financing statement, mortgage, notice of judgment, or any similar instrument (other than those security interests in existence at the execution of the Loan Documents which have been disclosed to and approved by Secured Party) covering any of the Collateral is on file in any public office.

(e)           Debtor is the lawful owner of all Collateral, free and clear of all liens, pledges, charges, mortgages, and claims other than any in favor of Secured Party, except liens for current taxes not delinquent and those liens previously disclosed to Secured Party.

(f)           All Accounts and Inventory of Debtor are genuine, are in all respects what they purport to be, are not evidenced by a judgment, and represent undisputed, bona fide transactions completed or to be completed in accordance with the terms and conditions of any document related thereto; none of the Collateral has been sold or pledged to any other person or entity, except as previously disclosed to Secured Party; and each Debtor has no knowledge of any fact or circumstance which would impair the validity or collectability of any of the Collateral.

(g)           Debtor has filed or caused to be filed all federal, state, and local tax returns that are required to be filed, and has paid or has caused to be paid all of its taxes, including without limitation any taxes shown on such returns or on any assessment received by it, to the extent that such taxes have become due.

5.           COVENANTS OF DEBTOR.  Debtor agrees that so long as this Agreement remains in effect, it will:

(a)           NOTIFY SECURED PARTY IN WRITING AT LEAST THIRTY (30) DAYS IN ADVANCE OF ANY CHANGE WHATSOEVER IN THE NAME OF DEBTOR OR THE NAME(S) UNDER WHICH DEBTOR CONDUCTS BUSINESS, ANY NEW NAMES UNDER WHICH DEBTOR INTENDS TO DO BUSINESS, AND ANY NEW ADDRESSES AT OR FROM WHICH DEBTOR INTENDS TO DO BUSINESS OR TO KEEP COLLATERAL OF ANY KIND;

(b)           provide and maintain insurance with respect to the Collateral, the operation of Debtor's business, and certain employees or officers of Debtor as required by Secured Party from time to time; all such insurance shall be in such amounts and against such risks as shall be satisfactory in all respects to Secured Party, with Secured Party named as additional insured and loss payee;

(c)           defend the Collateral against the claims and demands of all persons other than Secured Party and promptly pay all taxes, assessments, and charges upon the Collateral; and not

sign (or permit to be signed), without the prior consent of Secured Party, any financing statements or other documents creating or perfecting a lien upon or security interest in any of the Collateral except in favor of Secured Party, or otherwise create, suffer, or permit to exist any liens or security interests upon any Collateral other than in favor of Secured Party, except tax liens, provided that such liens are removed before related taxes become delinquent;

(d)           execute such financing statements and other documents (and pay the cost of filing and recording the same in all public offices deemed necessary by Secured Party) and do such other acts as Secured Party may request to establish and maintain a valid and perfected security interest in the Collateral free and clear of all other liens and claims, except tax liens, provided that such liens are removed before related taxes become delinquent;

(e)           deliver to Secured Party any certificates or other documents of title representing or issued with respect to any of the Collateral, with Secured Party's security interest and lien endorsed thereon, and record such certificates or documents with all appropriate regulatory agencies;

(f)           furnish to Secured Party, immediately upon the request of Secured Party, any evidence of ownership of the Collateral, including without limitation bills of sale, paid invoices, certificates of title, or applications for title;

(g)           keep at its address for notices set forth under or opposite its signature hereto its records concerning the Collateral, which records shall be of such character as will enable Secured Party to determine at any time the status of the Collateral; furnish to Secured Party such information concerning Debtor, the Collateral, and the account debtors as Secured Party may from time to time reasonably request; and permit Secured Party from time to time, at reasonable times, to inspect the Collateral and to inspect, audit, and make copies of, and extracts from, all records and all other papers in the possession of Debtor pertaining to the Collateral and the account debtors; Secured Party shall have the right at any reasonable time or times to make direct verification with the account debtors of any and all of the accounts

(h)           keep and maintain the Collateral in good operating condition and repair, and make all necessary replacements and renewals to the Collateral so that the value and operating efficiency thereof shall at all times be maintained and preserved;

(i)           make appropriate entries upon its financial statements and its books and records disclosing Secured Party's security interest in the Collateral;

(j)           provide to Secured Party from time to time such financial statements of and other information concerning Debtor as Secured Party shall reasonably request;

(k)           if at any time any of the Collateral shall be or become evidenced by any instrument, note, or other document, immediately deliver such instrument, note, or document to Secured Party, endorsed as requested by Secured Party;

(l)           immediately notify Secured Party of any material loss or depreciation in the value of the Collateral;

(m)           not open any new deposit accounts without the prior written approval of Security Party;

(n)           not amend the License Agreement (as hereinafter defined) without the prior written approval of Secured Party; and

(o)           except if and to the extent specifically permitted by this Agreement, not sell, transfer, or otherwise dispose of any Collateral (other than a sale or disposition of any Inventory no longer useful in connection with the operation of Debtor's business, provided that prior to the sale or other disposition thereof such Inventory has been replaced by other Inventory of at least equal value and utility which is subject to the lien of this Agreement with the same priority as the Inventory so sold or disposed of, except for Dyadic Florida’s liquidation of Inventory without purchasing replacement Inventory from and after June 21, 2008 to the date of a Default under this Agreement) without Secured Party's prior written consent.

6.   DOCUMENTATION:  Debtor agrees to deliver to Secured Party contemporaneously with the execution of this Agreement except as otherwise indicated, the following documents in form and substance acceptable to Secured Party:

(a)   Amended and Restated Note;

(b)   Collateral Assignment of Inventions and Patents and Patent Applications (“Collateral Patent Assignment”);

(c)   One or more blank assignments under the terms of the Collateral Patent Assignment;

(d)   Collateral Assignment of Trademarks (“Collateral Trademark Assignment”);

(e)   One or more blank assignments under the terms of the Collateral Trademark Assignment;

(f)   UCC Financing Statement regarding patents to be filed with the United States Patent and Trademark Office;

(g)   UCC Financing Statements for Debtor to be filed with the respective Secretaries of State of the states of formation of each Debtor;

(h)   all documentation required