The following discussion and analysis of financial condition and results of operations should be read in conjunction with the financial statements and the notes to those statements appearing in this Quarterly Report. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks, assumptions and uncertainties. Important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis include, but not limited to those set forth in "Item 1A. Risk Factors" in this Quarterly Report. All forward-looking statements included in this Quarterly Report are based on information available to us as of the time we file this Quarterly Report and, except as required by law, we undertake no obligation to update publicly or revise any forward-looking statements.
Overview
Description of BusinessDyadic International, Inc. ("Dyadic", "we", "us", "our", or the "Company") is a global biotechnology platform company based inJupiter, Florida with operations inthe United States , a satellite office inthe Netherlands and predominantly two research organizations performing services under contract to Dyadic inFinland andSpain . Over the past two decades, the Company has developed a gene expression platform for producing commercial quantities of industrial enzymes and other proteins, and has previously licensed this technology to third parties, such asAbengoa Bioenergy , BASF, Codexis and others, for use in industrial (non-pharmaceutical) applications. This technology is based on the Thermothelomyces heterothallica (formerly Myceliophthora thermophila) fungus, which the Company named C1. The C1 technology is a robust and versatile fungal expression system for the development and production of enzymes and other proteins. OnDecember 31, 2015 , the Company sold its industrial technology business toDanisco USA ("Danisco"), the industrial biosciences business of DuPont (NYSE: DD) for$75 million (the "DuPont Transaction"). As part of the DuPont Transaction, Dyadic retained co-exclusive rights to the C1 technology for use in all human and animal pharmaceutical applications, and currently has the exclusive ability to enter into sub-license agreements (subject to the terms of the license and to certain exceptions). Danisco retained certain rights to utilize the C1 technology in pharmaceutical applications, including the development and production of pharmaceutical products, for which it will be required to make royalty payments to Dyadic upon commercialization. In certain circumstances, Dyadic may owe a royalty to either Danisco or certain licensors of Danisco, depending upon whether Dyadic elects to utilize certain patents either owned by Danisco or licensed in by Danisco. After the DuPont Transaction, the Company has been focused on the biopharmaceutical industry, specifically in further improving and applying the proprietary C1 technology into a safe and efficient gene expression platform to help speed up the development, lower production costs and improve the performance of biologic vaccines and drugs at flexible commercial scales. We believe that the C1 technology could be beneficial in the development and manufacturing of human and animal vaccines and drugs, such as virus-like particles (VLPs), protein antigens, monoclonal antibodies (mAbs), Bi-Specific antibodies, Fab antibody fragments, Fc-Fusion proteins, as well as other therapeutic enzymes and proteins. The Company is involved in multiple funded research collaborations with animal and human pharmaceutical companies designed to leverage its C1 technology to help develop products such as innovative vaccines and drugs, biosimilars and/or biobetters.
Recent Developments
23 -------------------------------------------------------------------------------- In the first half of fiscal 2020, the Company continued to develop relationships with business and research partners in the biopharmaceutical industry and achieved the following: •Data presented at the 15thEuropean Conference on Fungal Genetics ("ECFG15") demonstrated that C1 strain has been glyco-engineered to achieve a core human-like G2 glycan level over 76%. Data also showed excellent progress we made in reducing the extracellular protease background by 50 times in C1. The elimination of protease activity makes the C1 cell line more efficient at producing stable proteins, leading to even higher expression levels and lower cost. •Dyadic entered into two additional funded collaborations with two top four animal health companies to engage in a feasibility study regarding the production of their target proteins using our C1 platform. The Company has now entered into fully funded collaborations with each of the top four animal health companies to evaluate C1. The first two projects with one of these top four have been expanded with additional funding and have entered the second phase of development.
•Dyadic entered into a nonexclusive research license with WuXi Biologics, one of
the leading global
•Dyadic entered into a new feasibility study with the
•In July, Dyadic entered into a new, fully-funded collaboration with another top five global pharmaceutical company.
Impact of COVID-19 The outbreak of the novel coronavirus COVID-19, which was declared a pandemic by theWorld Health Organization onMarch 11, 2020 , has led to adverse impacts on theU.S. and global economies and created uncertainty regarding potential impacts to the Company's employees, operations, and research projects. To date, as a direct result of COVID-19, most of our employees are working remotely. The extent to which the COVID-19 pandemic will directly or indirectly impact our business will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19 and the actions taken to contain it or treat COVID-19, the economic impact on local, regional, national and international business partners and markets, delays or disruptions in our on-going research projects, and unavailability of the employees of the Company or third-party contract research organizations with whom we conduct business, due to illness or quarantines, all of which are highly uncertain and cannot be predicted at this time. Management is actively monitoring this situation and the possible effects on its financial condition, liquidity, operations, vendors, industry, and workforce. Even after the COVID-19 pandemic has subsided, the Company may continue to experience adverse impacts to its business as a result of any economic recession or depression that has occurred or may occur in the future. Given the daily evolution of the COVID-19 outbreak and the response to curb its spread, currently we are not able to accurately estimate the effects of the COVID-19 outbreak to our results of operations, financial condition, or liquidity. The Company is currently working on several COVID-19 related vaccine and antibody opportunities, including but not limited to the following: •The Company was selected by theFrederick National Laboratory to engineer Dyadic's patented and proprietary C1 cell lines to produce a number of COVID-19 vaccine candidates which will be utilized by theVaccine Research Center (VRC) of theNational Institute of Allergy and Infectious Diseases (NIAID), at theNational Institutes of Health . •Israel Institute for Biologic Research ("IIBR") is exploring the potential of Dyadic's industrially proven C1 gene expression platform to express a recombinant SARS-CoV-2 vaccine candidate based on the receptor binding domain (RBD) of the SARS-CoV-2 spike protein. The interim results of the mice trials using the C1 SARS-CoV-2 RBD vaccine candidate. as reported to Dyadic by IIBR, generated high neutralizing antibody titers. Accordingly, we anticipate that the IIBR will start hamster studies earlier than originally forecasted. 24 -------------------------------------------------------------------------------- •Collaboration with three scientistswho are a part of the EU ZAPI initiative:Dr. Bosch atUtrecht University (UU),Dr. Haagmans atErasmus Medical Center (EMC), andProf. Osterhaus atUniversity of Veterinary Medicine Hannover , DE (TiHo), and Mr. Es-Sbai at CR20 a clinical contract research organization to pre-clinically and clinically evaluate SARS-CoV-2 Receptor Binding Domain vaccine candidates to respond to the COVID-19 pandemic. •Collaboration with Ufovax, a spin-off vaccine company ofScripps Research . •In the second quarter of 2020, the Company entered into another fully funded SARS-CoV-2 vaccine research collaboration. We rely on our existing cash and cash equivalents, investments in debt securities, and operating cash flow to provide the working capital needs for our operations. We believe that we have sufficient cash, cash equivalents and investments to fund our operations for at least the next twelve months. However, in the event our financing needs for the foreseeable future are not able to be met by our existing cash, cash equivalents and investments, we would seek to raise funds through public or private equity offerings, and through other means to meet our financing requirements. The company may decide to fund all or part of a Phase I clinical trial in order to demonstrate the safety of the C1 expression platform in humans. There is no assurance that funding would be available at acceptable terms, if at all. Critical Accounting Policies, Estimates, and Judgments The preparation of these consolidated financial statements in accordance with GAAP requires management to make estimates and judgments that affect the reported amount of assets and liabilities and related disclosure of contingent assets and liabilities at the date of our consolidated financial statements and the reported amounts of revenues and expenses during the applicable period. Actual results may differ from these estimates under different assumptions or conditions. Such differences could be material to the consolidated financial statements. We define critical accounting policies as those that are reflective of significant judgments and uncertainties and which may potentially result in materially different results under different assumptions and conditions. In applying these critical accounting policies, our management uses its judgment to determine the appropriate assumptions to be used in making certain estimates. These estimates are subject to an inherent degree of uncertainty. Our critical accounting policies include the following: Revenue Recognition The Company has no pharmaceutical products approved for sale at this point, and all of our revenue to date has been research revenue from third party collaborations and government grants. The Company is expected to generate future revenue from license agreements and collaborative arrangements, which may include upfront payments for licenses or options to obtain a license, payment for research and development services and milestone payments, in the form of cash or non-cash considerations (e.g., minority equity interest). Revenue related to research collaborations and agreements: The Company typically performs research and development services as specified in each respective agreement on a best efforts basis, and recognizes revenue from research funding under collaboration agreements in accordance with the 5-step process outlined in Topic 606: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. We recognize revenue when we satisfy a performance obligation by transferring control of the service to a customer in an amount that reflects the consideration that we expect to receive. Since the performance obligation under our collaboration agreements is generally satisfied over time, we elected to use the input method under Topic 606 to measure the progress toward complete satisfaction of a performance obligation. Under the input methods, revenue will be recognized on the basis of the entity's efforts or inputs to the satisfaction of a performance obligation (e.g., resources consumed, labor hours expended, costs incurred, or time elapsed) relative to the total expected inputs to the satisfaction of that performance obligation. The Company believes that the cost-based input method is the best measure of progress to reflect how the Company transfers its performance obligation to a customer. In applying the cost-based input method of revenue recognition, the Company uses actual costs incurred relative to budgeted costs to fulfill the performance obligation. These costs consist primarily of full-time equivalent effort and third-party contract costs. Revenue will 25 -------------------------------------------------------------------------------- be recognized based on actual costs incurred as a percentage of total budgeted costs as the Company completes its performance obligations. A cost-based input method of revenue recognition requires management to make estimates of costs to complete the Company's performance obligations. In making such estimates, significant judgment is required to evaluate assumptions related to cost estimates. The cumulative effect of revisions to estimated costs to complete the Company's performance obligations will be recorded in the period in which changes are identified and amounts can be reasonably estimated. A significant change in these assumptions and estimates could have a material impact on the timing and amount of revenue recognized in future periods. Revenue related to grants and fundings:The Company may receive grants and fundings from governments, agencies, and other private and not-for-profit organizations.These grants and fundings are intended to be used to partially or fully fund the Company's research collaborations, including opportunities arising in connection with COVID-19 that the Company is pursuing with certain collaborators. However, most, if not all, of such potential grant revenues, if received, is expected to be earmarked for third parties to advance the research required, including preclinical and clinical trials for SARS-CoV-2 vaccines and/or antibodies candidates. Revenue related to sublicensing agreements: If the sublicense to the Company's intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenue allocated to the license when technology is transferred to the customer and the customer is able to use and benefit from the license. Milestone payments: At the inception of each arrangement that includes development, commercialization, and regulatory milestone payments, the Company evaluates whether the achievement of the milestones is considered probable and estimates the amount to be included in the transaction price. If the milestone payment is in exchange for a sublicense and is based on the sublicensee's subsequent sale of product, the Company recognizes milestone payment by applying the accounting guidance for royalties. To date, the Company has not recognized any milestone payment revenue resulting from any of its sublicensing arrangements. Royalties: With respect to licenses deemed to be the predominant item to which sales-based royalties relate, including milestone payments based on the level of sales, and the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (i) when the related sales occur or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). To date, the Company has not recognized any royalty revenue resulting from any of its sublicensing arrangements. We invoice customers based on our contractual arrangements with each customer, which may not be consistent with the period that revenues are recognized. When there is a timing difference between when we invoice customers and when revenues are recognized, we record either a contract asset (unbilled accounts receivable) or a contract liability (deferred research and development obligations), as appropriate. We are not required to disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed.
The Company adopted a practical expedient to expense sales commissions when incurred because the amortization period would be one year or less.
Provision for Contract Losses The Company assesses the profitability of our collaboration agreements to provide research services to our contracted business partners and identifies those contracts where current operating results or forecasts indicate probable future losses. If the anticipated contract cost exceeds the anticipated contract revenue, a provision for the entire estimated loss on the contract is recorded and then accreted into the statement of operations over the remaining term of the contract. The provision for contract losses is based on judgment and estimates, including revenues and costs, where applicable, the consideration of our business partners' reimbursement, and when such loss is deemed probable to occur and is reasonable to estimate.
In order to properly record services that have been rendered but not yet billed to the Company, we review open contracts and purchase orders, communicate with our personnel and we estimate the level of service performed and the 26 -------------------------------------------------------------------------------- associated cost incurred for the service when we have not yet been invoiced or otherwise notified of the actual cost. The majority of our service providers invoice us monthly or quarterly in arrears for services performed or when contractual milestones are met. We make estimates of our accrued expenses as of each balance sheet date in our consolidated financial statements based on facts and circumstances known to us at that time. We periodically confirm the accuracy of our estimates with the service providers and make adjustments if necessary. Examples of accrued research and development expenses include amounts owed to contract research organizations, to service providers in connection with commercialization and development activities. Stock-Based Compensation We have granted stock options and restricted stock to employees, directors and consultants. The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model. The Black-Scholes model considers volatility in the price of our stock, the risk-free interest rate, the estimated life of the option, the closing market price of our stock and the exercise price. For purposes of the calculation, we assumed that no dividends would be paid during the life of the options and restricted stock and applied a discount to reflect the lack of marketability due to the holding period restriction of its shares under Rule 144 prior to the CompanyApril 2019 uplisting to NASDAQ. We also used the weighted-average vesting period and contractual term of the option as the best estimate of the expected life of a new option except in the case of our CEO, 5 or 10 years , and in the case of contractors, 2 or 3 years). The Company performs a review of assumptions used in the Black-Scholes option-pricing model on an annual basis. During the Company's annual review of its volatility assumption in 2018, the Company determined that it would be appropriate to use the Company's historical volatility since 2016, as the DuPont Transaction resulted in significant changes in the Company's business and capital structure. The change in assumption was effectiveJanuary 1, 2018 and only impacts new options granted in 2018 and thereafter. The estimates utilized in the Black-Scholes calculation involve inherent uncertainties and the application of management judgment. These estimates are neither predictive nor indicative of the future performance of our stock. As a result, if other assumptions had been used, our recorded share-based compensation expense could have been materially different from that reported. In addition, because some of the options and restricted stock issued to employees, consultants and other third-parties vest upon the achievement of certain milestones, the total ultimate expense of share-based compensation is uncertain. In connection with board member and employee terminations, the Company may modify certain terms to outstanding share-based awards. We have recorded charges related to these modifications based on the estimated fair value of the share-based options immediately prior to and immediately after the modification occurs, with any incremental value being charged to expense. We have used the Black-Scholes pricing model in this valuation process, and this requires management to use various assumptions and estimates. Future modifications to share-based compensation transactions may result in significant expenses being recorded in our consolidated financial statements. Accounting for Income Taxes The Company accounts for income taxes under the asset and liability method in accordance with ASC Topic 740 ("Topic 740"), "Income Taxes". Under this method, income tax expense/(benefit) is recognized for: (i) taxes payable or refundable for the current year and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity's financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of the available positive and negative evidence, it is more likely than not some portion or all the deferred tax assets will not be realized. In determining taxable income for the Company's consolidated financial statements, we are required to estimate our income taxes in each of the jurisdictions in which we operate. This process requires the Company to make certain estimates of our actual current tax exposure and assessment of temporary differences between the tax and financial statement recognition of revenue and expense. In evaluating the Company's ability to recover its deferred tax assets, the Company must consider all available positive and negative evidence including its past operating results, the existence of cumulative losses in the most recent years and its forecast of future taxable income. Significant management judgment is required in determining our provision for income taxes, deferred tax assets and liabilities and any valuation allowance recorded against our net deferred tax assets. The Company is required to evaluate the provisions of Topic 740 related to the accounting for uncertainty in income taxes recognized in a company's financial statements. Topic 740 prescribes a comprehensive model for how a company should 27 -------------------------------------------------------------------------------- recognize, present, and disclose uncertain positions that the company has taken or expects to take in its tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. Differences between tax positions taken or expected to be taken in a tax return and the net benefit recognized and measured pursuant to the interpretation are referred to as "unrecognized benefits." A liability should be recognized (or amount of net operating loss carry forward or amount of tax refundable is reduced) for unrecognized tax benefit because it represents a company's potential future obligation to the taxing authority for a tax position that was not recognized because of applying the provision of Topic 740. The Tax Cuts and Jobs Act ("TCJA") was enacted onDecember 22, 2017 and became effectiveJanuary 1, 2018 . The legislation included, among other things, a reduction of theU.S. federal corporate income tax rate from 35% to 21%, and a repeal of the corporate alternative minimum tax (the "AMT"). The TCJA repealed the corporate AMT but permitted unused AMT credit carryforwards to be used to reduce the regular tax obligation in future years. Any AMT credit carryforwards that do not reduce regular taxes are eligible for a 50% refund in 2018 through 2020, and a 100% refund in 2021. Subsequently, the Coronavirus Aid, Relief and Economic Security Act ("CARES Act"), which was signed into law inMarch 2020 , accelerated the full refund of any unused AMT credits from 2021 (as provided for in the TCJA) to 2018 or 2019, at the taxpayer's election . Accordingly, we reclassified the balance of the AMT credit from the deferred tax asset to an income tax receivable in 2018. The corresponding balance in the valuation allowance has been reversed into income tax benefit in the amount of$1,001,233 . As ofJune 30, 2020 , we have received 50% or approximately a$0.5 million refund for tax year 2018. OnJuly 27, 2020 , we received the remaining$0.5 million AMT refund for the tax year 2019. Fair Value Measurements Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company utilized various methods, including income, cost and market approaches to determine the fair value of its investments in equity interest, which may fall into Level 3 of the fair value hierarchy because of the significant unobservable inputs utilized in these valuation approaches. These inputs can be readily observable, market corroborated, or generally unobservable inputs. The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Our key inputs included, but were not limited to, significant management judgments and estimates, including projections of the timing and amount of the project's cash flows, determination of a discount rate for the income approach, market multipliers, probability weighting of potential outcomes of legal and regulatory proceedings, and weighting of the valuations produced by the income, cost and market approaches. The Company bases its fair value estimates on assumptions it believes to be reasonable, but which are unpredictable and inherently uncertain. Actual future results may differ from those estimates. Off-Balance Sheet Arrangements We do not have any off-balance sheet arrangements. Recent Accounting Pronouncements See Note 1 to the Consolidated Financial Statements for information about recent accounting pronouncements. Results of Operations Three and Six Months EndedJune 30, 2020 Compared to the Same Periods in 2019 Revenue, Cost of Revenue, and Provision for Contract Losses The following table summarizes the Company's revenue, cost of research and development revenue and provision for contract losses for the three and six months endedJune 30, 2020 and 2019: 28 --------------------------------------------------------------------------------
Six Months Ended June Three Months Ended June 30, 30, 2020 2020 2019 2020 2019 Revenue$ 524,271 $ 390,874 $ 839,643 $ 793,401 Cost of research and development revenue 624,240 322,228 902,422 650,131 Provision for contract losses 74,955 - 74,955 - The increase in revenue and cost of research and development revenue for the three months endedJune 30, 2020 reflected nine on-going research collaborations compared to four collaborations for the same period a year ago. The increase in revenue and cost of research and development revenue for the six months endedJune 30, 2020 reflected ten on-going research collaborations compared to seven collaborations for the same period a year ago. The increase in provision for contract losses reflected the activities of one biopharmaceutical collaboration research project. Research and Development Expenses Research and development costs are expensed as incurred and primarily include salary and benefits of research personnel, third-party contract research organization services and supply costs. Research and development expenses for the three months endedJune 30, 2020 increased to approximately$1,116,000 compared to$818,000 for the same period a year ago. The increase primarily reflected the costs of additional internal research projects. Research and development expenses for the six months endedJune 30, 2020 increased to approximately$1,872,000 compared to$1,511,000 for the same period a year ago. The increase primarily reflected the costs of additional internal research projects. Research and development expenses - related party, for the three months endedJune 30, 2020 , was none compared to approximately$336,000 for the same period a year ago. The decrease was due to the completion of the Research Service Agreement with BDI inJune 2019 . Research and development expenses - related party, for the six months endedJune 30, 2020 , was none compared to approximately$726,000 for the same period a year ago. The decrease was due to the completion of the Research Service Agreement with BDI inJune 2019 . General and Administrative Expenses General and administrative expenses for the three months endedJune 30, 2020 , decreased 21.2% to approximately$1,475,000 compared to$1,871,000 for the same period a year ago. The decrease principally reflected reductions in noncash share-based compensation expenses of$165,000 , executive compensation costs and accrued incentives of$150,000 , legal and NASDAQ uplisting expenses of$102,000 , business development and investor relations costs, including travel expenses of$24,000 , offset by increases in insurance premium and outside service costs of$45,000 . General and administrative expenses for the six months endedJune 30, 2020 , decreased 5.2% to approximately$3,129,000 compared to$3,299,000 for the same period a year ago. The decrease principally reflected reductions in executive compensation costs and accrued incentives of$220,000 , legal and NASDAQ uplisting expenses of$125,000 , noncash share-based compensation expenses of$68,000 , offset by increases in insurance premium of$147,000 , business development and investor relations costs of$47,000 and other increases of$49,000 . Interest Income Interest income for the three months endedJune 30, 2020 was approximately$147,000 compared to$266,000 for the same period a year ago. The decrease was primarily due to the lower interest rate and yield on the Company's investment grade securities, which are classified as held-to-maturity. Interest income for the six months endedJune 30, 2020 was approximately$315,000 compared to$533,000 for the same period a year ago. The decrease was primarily due to the lower interest rate and yield on the Company's investment grade securities, which are classified as held-to-maturity. 29
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Net Loss Net loss for the three months endedJune 30, 2020 was approximately$2,651,000 compared to$2,696,000 for the same period a year ago. Net loss for the six months endedJune 30, 2020 was approximately$4,866,000 compared to$4,871,000 for the same period a year ago. Liquidity and Capital Resources Our primary source of cash has been the cash received from the DuPont Transaction inDecember 2015 , interest income received from investment grade securities, and funding from our research collaboration agreements. BetweenJanuary 2016 andAugust 2018 , the Company repurchased a total of 14,390,254 shares of its common stock from its existing cash on hand, for an aggregate purchase price of$21,814,530 at a weighted average price of$1.52 per share. As ofJune 30, 2020 , our investment balance includes$20.3 million of short-term investments with contractual maturities of twelve (12) months of less, including interest receivable. The Company's liquidity was further improved with the receipt of an approximately$0.5 million tax refund inJune 2019 and an approximately$0.5 million additional tax refund inJuly 2020 resulting from the elimination of corporate Alternative Minimum Tax (AMT) under the TCJA. Our ability to achieve profitability depends on a number of factors, including our scientific results and our ability to continue to obtain funded research and development collaborations from industry and government programs, as well as sub-license agreements. We may continue to incur substantial operating losses even if we begin to generate revenues from research and development and licensing. Our primary future cash needs are expected to be for general operating activities, including our business development and research expenses, as well as additional costs as anSEC reporting and NASDAQ listed company. We believe that our existing cash position and investments in short-term and long-term investment grade securities will be adequate to meet our operational, business, and other liquidity requirements for at least the next twelve (12) months. As ofJune 30, 2020 , cash and cash equivalents were approximately$11.8 million compared to$4.8 million as ofDecember 31, 2019 . The carrying value of short-term and long-term investment grade securities, including accrued interest as ofJune 30, 2020 was approximately$20.3 million compared to$31.2 million as ofDecember 31, 2019 . Net cash used in operating activities for the six months endedJune 30, 2020 of approximately$3.9 million was principally attributable to a net loss of approximately$4.9 million and changes in operating assets and liabilities of approximately$0.3 million , offset by share-based compensation expenses of approximately$0.9 million , amortization of held-to-maturity securities of approximately$0.2 million , and other items of approximately$0.2 million . Net cash used in operating activities for the six months endedJune 30, 2019 of approximately$2.8 million was principally attributable to a net loss of$4.9 million , partially offset by share-based compensation expense of approximately$0.9 million , changes in tax receivable of approximately$0.5 million , changes in other operating assets and liabilities of approximately$0.5 million , and amortization of held-to-maturity securities of approximately$0.1 million . Net cash provided by investing activities for the six months endedJune 30, 2020 was approximately$10.6 million compared to$5.1 million for the six months endedJune 30, 2019 . Cash flows from investing activities during the six months endedJune 30, 2020 and 2019 were primarily related to proceeds from maturities and purchases of investment grade debt securities. Net cash provided by financing activities for the six months endedJune 30, 2020 was approximately$0.2 million compared to$0.1 million for the six months endedJune 30, 2019 . Cash flows from financing activities during the six months endedJune 30, 2020 and 2019 were primarily related to proceeds from exercise of options.
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