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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________________
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2020
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to
_____________________________________________
Commission file number: 001-34180

FLDM-20200630_G1.JPG
FLUIDIGM CORPORATION
(Exact name of registrant as specified in its charter)
Delaware   77-0513190
State or other jurisdiction of incorporation or organization   I.R.S. Employer Identification No.
2 Tower Place, Ste 2000
South San Francisco,
CA
94080
Address of principal executive offices Zip Code
Registrant’s telephone number, including area code: (650) 266-6000
_____________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, $0.001 par value per share FLDM The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes      No  
As of July 31, 2020, there were 71,316,370 shares of the registrant’s common stock, $0.001 par value per share, outstanding.



FLUIDIGM CORPORATION
TABLE OF CONTENTS
    Page
PART I.
FINANCIAL INFORMATION
Item 1.
Financial Statements (Unaudited)
1
1
2
3
4
5
Notes to Condensed Consolidated Financial Statements
6
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
Item 4.
Controls and Procedures
PART II.
OTHER INFORMATION
Item 1.
Legal Proceedings
Item 1A.
Risk Factors
Item 5.
Other Information
Item 6.
Exhibits
SIGNATURES
EXHIBIT LIST


i


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

FLUIDIGM CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands) 
(Unaudited)
June 30, December 31,
2020 2019
ASSETS
Current assets:
Cash and cash equivalents $ 42,965    $ 21,661   
Short-term investments 2,431    36,978   
Accounts receivable (net of allowances of $101 and $6, at June 30, 2020 and December 31, 2019, respectively)
9,983    18,981   
Inventories 18,900    13,884   
Prepaid expenses and other current assets 4,171    4,592   
Total current assets 78,450    96,096   
Property and equipment, net 7,865    8,056   
Operating lease right-of-use asset, net 39,027    4,860   
Other non-current assets 5,034    5,492   
Developed technology, net 45,644    46,200   
Goodwill 106,328    104,108   
Total assets $ 282,348    $ 264,812   
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 9,384    $ 6,510   
Accrued compensation and related benefits 6,757    5,160   
Operating lease liabilities, current 2,170    1,833   
Other accrued liabilities 5,758    7,515   
Deferred revenue, current 14,279    11,803   
Total current liabilities 38,348    32,821   
Convertible notes, net 54,013    53,821   
Deferred tax liability 9,655    11,494   
Operating lease liabilities, non-current 39,139    4,323   
Deferred revenue, non-current 7,936    8,168   
Other non-current liabilities 538    573   
Total liabilities 149,629    111,200   
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.001 par value, 10,000 shares authorized, no shares issued and outstanding at either June 30, 2020 or December 31, 2019
—    —   
Common stock: $0.001 par value, 200,000 shares authorized at June 30, 2020 and December 31, 2019; 71,283 and 69,956 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively
71    70   
Additional paid-in capital 786,193    777,765   
Accumulated other comprehensive loss (809)   (582)  
Accumulated deficit (652,736)   (623,641)  
Total stockholders’ equity 132,719    153,612   
Total liabilities and stockholders’ equity $ 282,348    $ 264,812   
See accompanying notes
1



FLUIDIGM CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)

 
  Three Months Ended June 30, Six Months Ended June 30,
  2020 2019 2020 2019
Revenue:
Product revenue $ 17,405    $ 23,235    $ 36,386    $ 48,062   
Service revenue 5,140    4,961    10,326    10,245   
        Development revenue 3,000    —    3,000    —   
 Other revenue 513    —    3,963    —   
Total revenue 26,058    28,196    53,675    58,307   
Costs and expenses:
Cost of product revenue 9,483    11,100    19,123    22,489   
Cost of service revenue 1,237    1,733    2,762    3,465   
Research and development 8,448    7,865    17,147    16,237   
Selling, general and administrative 20,616    22,134    43,311    44,958   
Total costs and expenses 39,784    42,832    82,343    87,149   
Loss from operations (13,726)   (14,636)   (28,668)   (28,842)  
Interest expense (897)   (491)   (1,797)   (3,192)  
Loss from extinguishment of debt —    —    —    (9,000)  
Other income (expense), net 463    231    (355)   715   
Loss before income taxes (14,160)   (14,896)   (30,820)   (40,319)  
Income tax benefit 1,145    1,143    1,825    1,101   
Net loss $ (13,015)   $ (13,753)   $ (28,995)   $ (39,218)  
Net loss per share, basic and diluted $ (0.18)   $ (0.20)   $ (0.41)   $ (0.61)  
Shares used in computing net loss per share, basic and diluted 70,916    69,158    70,691    63,923   


See accompanying notes
2


FLUIDIGM CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
(Unaudited)

 
  Three Months Ended June 30, Six Months Ended June 30,
  2020 2019 2020 2019
Net loss $ (13,015)   $ (13,753)   $ (28,995)   $ (39,218)  
Other comprehensive income (loss), net of tax
Foreign currency translation adjustment 109    (9)   (194)   (1)  
Net change in unrealized gain (loss) on investments (33)   63    (33)   65   
Other comprehensive income (loss), net of tax 76    54    (227)   64   
Comprehensive loss $ (12,939)   $ (13,699)   $ (29,222)   $ (39,154)  


See accompanying notes
3


FLUIDIGM CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands)
(Unaudited)

  Common Stock Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Income (Loss)
Accumulated
Deficit
Total
Stockholders’
Equity
  Shares Amount
Balance as of December 31, 2019 69,956    $ 70    $ 777,765    $ (582)   $ (623,641)   $ 153,612   
Issuance of restricted stock, net of shares withheld for taxes, and other 255    —    (146)   —    —    (146)  
Cumulative-effect of new accounting standard for Topic 326 Credit Losses
—    —    —    —    (100)   (100)  
Stock-based compensation expense —    —    2,364    —    —    2,364   
Acquisition of InstruNor AS 485      2,048    —    —    2,049   
Net loss —    —    —    —    (15,980)   (15,980)  
Other comprehensive loss, net of tax —    —    —    (303)   —    (303)  
Balance as of March 31, 2020 70,696    $ 71    $ 782,031    $ (885)   $ (639,721)   $ 141,496   
Issuance of restricted stock, net of shares withheld for taxes, and other 286    —    (116)   —    —    (116)  
Issuance of common stock under ESPP 301    —    645    —    —    645   
Stock-based compensation expense —    —    3,633    —    —    3,633   
Net loss —    —    —    —    (13,015)   (13,015)  
Other comprehensive income, net of tax —    —    —    76    —    76   
Balance as of June 30, 2020 71,283    $ 71    $ 786,193    $ (809)   $ (652,736)   $ 132,719   
  Common Stock Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Income (Loss)
Accumulated
Deficit
Total
Stockholders’
Equity
  Shares Amount
Balance as of December 31, 2018 49,338    $ 49    $ 631,605    $ (687)   $ (558,851)   $ 72,116   
Issuance of common stock on bond conversion 19,460    19    133,279    —    —    133,298   
Issuance of restricted stock, net of shares withheld for taxes, and other 140      (177)   —    —    (176)  
Issuance of common stock from option exercises 53    —    255    —    —    255   
Stock-based compensation expense —    —    2,207    —    —    2,207   
Net loss —    —    —    —    (25,465)   (25,465)  
Other comprehensive income, net of tax —    —    —    10    —    10   
Balance as of March 31, 2019 68,991    $ 69    $ 767,169    $ (677)   $ (584,316)   $ 182,245   
Issuance of restricted stock, net of shares withheld for taxes, and other 183    —    (325)   —    —    (325)  
Issuance of common stock from option exercises 130    —    793    —    —    793   
Issuance of common stock under ESPP 96    —    641    —    —    641   
Stock-based compensation expense —    —    2,985    —    —    2,985   
Net loss —    —    —    —    (13,753)   (13,753)  
Other comprehensive income, net of tax —    —    —    54    —    54   
Balance as of June 30, 2019 69,400    $ 69    $ 771,263    $ (623)   $ (598,069)   $ 172,640   
See accompanying notes
4


FLUIDIGM CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended June 30,
  2020 2019
Operating activities
Net loss $ (28,995)   $ (39,218)  
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 2,016    2,351   
Stock-based compensation expense 6,000    5,263   
Amortization of developed technology 5,936    5,600   
Amortization of debt discounts, premiums and issuance costs 275    2,037   
Lease amortization 1,331    (250)  
Loss on extinguishment of debt —    9,000   
Provision for excess and obsolete inventory 306    555   
Loss on disposal of property and equipment 148    29   
Other non-cash items 136    162   
Changes in assets and liabilities:
Accounts receivable, net 9,055    (2,420)  
Inventories (4,892)   (2,041)  
Prepaid expenses and other assets (706)   (965)  
Accounts payable 3,136    3,439   
Deferred revenue 1,965    476   
Other liabilities (2,796)   (9,161)  
Net cash used in operating activities (7,085)   (25,143)  
Investing activities
Acquisition, net of cash acquired (5,154)   —   
Purchases of investments —    (44,614)  
Proceeds from sale of investments 5,011    —   
Proceeds from maturities of investments 29,400    —   
Purchases of property and equipment (1,671)   (685)  
Net cash provided by (used in) investing activities 27,586    (45,299)  
Financing activities
Payment of debt issuance cost (375)   (15)  
Proceeds from exercise of stock options —    1,048   
Proceeds from stock issuance from ESPP 645    641   
Payments for taxes related to net share settlement of equity awards and other (262)   (487)  
Net cash provided by financing activities   1,187   
Effect of foreign exchange rate fluctuations on cash and cash equivalents (205)   (25)  
Net increase (decrease) in cash, cash equivalents and restricted cash 20,304    (69,280)  
Cash, cash equivalents and restricted cash at beginning of period 23,736    95,401   
Cash, cash equivalents and restricted cash at end of period $ 44,040    $ 26,121   
Supplemental disclosures of cash flow information
Cash paid for interest $ 1,531    $ 2,600   
Cash paid for income taxes, net of refunds $ 194    $ 139   
Asset retirement obligations $ 316    $ 319   

See accompanying notes
5


FLUIDIGM CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2020

1. Description of Business
Fluidigm Corporation (the Company, Fluidigm, we, our or us) creates, manufactures, and markets technologies and tools for life sciences research, including preparatory and analytical instruments for Mass Cytometry, PCR, Library Prep, Single Cell Genomics, and consumables, including integrated fluidic circuits (IFC), assays, and reagents. Our focus is on the most pressing needs in translational and clinical research, including infectious disease, cancer, immunology and immunotherapy. We sell our instruments, consumables and services to academic institutions, clinical laboratories, and contract research organizations, as well as biopharmaceutical, biotechnology, and agricultural biotechnology companies. The Company was formerly known as Mycometrix Corporation and changed its name to Fluidigm Corporation in April 2001. Fluidigm Corporation was founded in 1999 and is headquartered in South San Francisco, California.
2. Summary of Significant Accounting Policies
Basis of Presentation and Consolidation
The accompanying consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (U.S. GAAP) and include the accounts of our wholly owned subsidiaries. As of June 30, 2020, we had wholly owned subsidiaries in Singapore, Canada, the Netherlands, Japan, France, the United Kingdom, China, Germany and Norway. All subsidiaries, except for Singapore, use their local currency as their functional currency. The Singapore subsidiary uses the U.S. dollar as its functional currency. All intercompany transactions and balances have been eliminated in consolidation.
Certain prior period amounts in the condensed consolidated statements of income and condensed consolidated statements of cash flows were reclassified to conform with the current period presentation. These reclassifications were immaterial and did not affect prior period total assets, total liabilities, stockholders’ equity, total revenue, total costs and expenses, loss from operations or net loss.
Use of Estimates
The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. We base our estimates on historical experience and on various other assumptions believed to be reasonable, which together form the basis for making judgments about the carrying values of assets and liabilities. The full extent to which the COVID-19 pandemic impacts our business, results of operations and financial condition will depend on numerous evolving factors including, but not limited to, the magnitude and duration of the pandemic, the extent to which it will impact worldwide macroeconomic conditions, including the speed of recovery, and governmental and business reactions to the pandemic. We assessed certain accounting matters that generally require consideration of forecasted financial information in the context of information available to us and the unknown impact of COVID-19 as of June 30, 2020. These accounting matters included, but were not limited to, our allowance for doubtful accounts and credit losses, inventory and related reserves and the carrying value of goodwill and other long lived assets. Actual results could differ materially from these estimates and could have a material adverse effect on our consolidated financial statements.
Foreign Currency
Assets and liabilities of non-U.S. subsidiaries that use the local currency as their functional currency are translated into U.S. dollars at exchange rates in effect on the balance sheet date. The adjustments resulting from the foreign currency translations are recorded in accumulated other comprehensive loss, a separate component of stockholders’ equity. Income and expense accounts are translated at monthly average exchange rates during the year.
Revenue Recognition
We generate revenue primarily from the sale of our products and services. Product revenue is derived from the sale of instruments and consumables, including IFCs, assays and reagents. Service revenue is derived from the sale of instrument service contracts, repairs, installation, training and other specialized product support services. We also generate revenue from
6


development agreements, license and royalty agreements and grants. Revenue is reported net of any sales, use and value-added taxes we collect from customers as required by government authorities. Research and development cost includes costs associated with development and grant revenue.
We recognize revenue based on the amount of consideration we expect to receive in exchange for the goods and services we transfer to the customer. Our commercial arrangements typically include multiple distinct products and services, and we allocate revenue to these performance obligations based on their relative standalone selling prices. Standalone selling prices (SSP) are generally determined using observable data from recent transactions. In cases where sufficient data is not available, we estimate a product’s SSP using a cost plus a margin approach or by applying a discount to the product’s list price.
Product Revenue
We recognize product revenue at the point in time when control of the goods passes to the customer and we have an enforceable right to payment. This generally occurs either when the product is shipped from one of our facilities or when it arrives at the customer’s facility, based on the contractual terms. Customers generally do not have a unilateral right to return products after delivery. Invoices are generally issued at shipment and generally become due in 30 to 60 days.
We sometimes perform shipping and handling activities after control of the product passes to the customer. We have made an accounting policy election to account for these activities as product fulfillment activities rather than as separate performance obligations.
Service Revenue
We recognize revenue from repairs, maintenance, installation, training and other specialized product support services at the point in time the work is completed. Installation and training services are generally billed in advance of service. Repairs and other services are generally billed at the point the work is completed.
Revenue associated with instrument service contracts is recognized on a straight-line basis over the life of the agreement, which is generally one to three years. We believe this time-elapsed approach is appropriate for service contracts because we provide services on demand throughout the term of the agreement. Invoices are generally issued in advance of service on a monthly, quarterly, annual or multi-year basis. Payments made in advance of service are reported on our condensed consolidated balance sheet as deferred revenue.
Development Revenue
The Company has entered and may continue to enter into development agreements with third parties that provide for up-front and periodic milestone payments. Our development agreements may include more than one performance obligation. At the inception of the contract, we assess whether each obligation represents a separate performance obligation or whether such obligations should be combined as a single performance obligation. The transaction price for each development agreement is determined based on the amount of consideration we expect to be entitled to for satisfying all performance obligations within the agreement.
We assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue. In arrangements where we satisfy performance obligation(s) over time, we recognize development revenue typically using an input method based on our costs incurred relative to the total expected cost which determines the extent of our progress toward completion. As part of the accounting for these arrangements, we must develop estimates and assumptions that require judgment to determine the transaction price and progress towards completion. We review our estimate of the transaction price and progress toward completion based on the best information available to recognize the cumulative progress toward completion as of the end of each reporting period, and make revisions to such estimates as necessary.
We may also generate revenue from development or collaboration agreements that do not include upfront or milestone-based payments and generally recognize revenue on these types of agreements based on the timing of development activities.
Other Revenue
Other revenue consists of license and royalty revenue, and grant revenue. We recognize revenue from license agreements when the license is transferred to the customer and the customer is able to use and benefit from the license. For
7


contracts that include sales-based royalties, we recognize 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.
In March 2020, we entered into an agreement to settle intellectual property infringement claims, in which we received a $3.5 million payment in exchange for a perpetual license under certain Fluidigm intellectual property. The settlement is considered a multiple-element arrangement with each element accounted for individually. Accordingly, $3.1 million of the proceeds was recognized as license revenue and $0.4 million was offset against legal costs.
We receive grants from various entities to perform research and development activities over contractually defined periods. Revenue is generally recognized provided that the conditions under which the grants were provided have been met and any remaining performance obligations are perfunctory.
Contract Costs
Incremental sales commission costs incurred to obtain instrument service contracts are capitalized and amortized to selling, general and administrative expense over the life of the contract, which is generally one to three years. As a practical expedient, we expense sales commissions associated with product support services that are delivered in less than one year as they are incurred. Sales commissions associated with the sale of products are expensed as they are incurred. To date, capitalized contract costs have been immaterial.
Product Warranties
We generally provide a one-year warranty on our instruments. We accrue for estimated warranty obligations at the time of product shipment. We periodically review our warranty liability and record adjustments based on the terms of warranties provided to customers, and historical and anticipated warranty claim experience. This expense is recorded as a component of cost of product revenue in the condensed consolidated statements of operations.
Significant Judgments
Applying the revenue recognition practices discussed above often requires significant judgment. Judgment is required when identifying performance obligations, estimating SSP and allocating purchasing consideration in multi-element arrangements, determining the transaction price and progress towards completion on development arrangements and estimating the future amount of our warranty obligations. Moreover, significant judgment is required when interpreting commercial terms and determining when control of goods and services passes to the customer. Any material changes created by errors in judgment could have a material effect on our operating results and overall financial condition.
Accounts Receivable
Trade accounts receivable are recorded at net invoice value. We review our exposure to accounts receivable and provide allowances of specific amounts if collectability is no longer reasonably assured based on historical experience and specific customer collection issues. We evaluate such allowances on a regular basis and adjust them as needed.
Concentrations of Business and Credit Risk
Financial instruments that potentially subject us to credit risk consist of cash, cash equivalents, investments, and accounts receivable. Our cash, cash equivalents, and investments may consist of deposits held with banks, money market funds, and other highly liquid investments that may at times exceed federally insured limits. Cash equivalents and investments are financial instruments that potentially subject us to concentrations of risk. Under our investment policy, we invest primarily in securities issued by the U.S. government. The goals of our investment policy, in order of priority, are as follows: preserve capital, meet liquidity needs, and optimize returns.
We generally do not require collateral to support credit sales. To reduce credit risk, we perform credit evaluations of our customers. One customer from whom we derived development revenue exceeded 10% of revenue for the three months ended June 30, 2020. No other customer represented more than 10% of total revenue for three and six months ended June 30, 2020 or 2019. Including the development revenue, revenues from our five largest customers were 32% and 30% of total revenue for the three months ended June 30, 2020 and 2019, respectively. Revenues from our five largest customers were 23% and 20% of total revenue for the six months ended June 30, 2020 and 2019, respectively. There was no single customer that represented more than 10% of total accounts receivable at June 30, 2020, or December 31, 2019.
8


Our products include components that are currently procured from a single source or a limited number of sources. We believe that other vendors would be able to provide similar components; however, the qualification of such vendors may require start-up time. In order to mitigate any adverse impacts from a disruption of supply, we attempt to maintain an adequate supply of critical limited-source components.
Leases
We determine if an arrangement is a lease, or contains a lease, at inception. Operating leases are included in operating lease right-of-use (ROU) assets and current and non-current operating lease liabilities in our condensed consolidated balance sheets. ROU assets represent our right-to-use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As most of our leases do not provide an implicit rate, we generally use our incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date. Significant judgment is required in determining the incremental collateralized borrowing rate. Lease expense for lease payments is recognized on a straight-line basis over the lease term.
We elected the short-term lease recognition exemption for all leases that qualify. For those leases that qualify, we will not recognize ROU assets or lease liabilities for leases with an initial lease term of one year or less. We also elected not to separate lease and nonlease components for our building leases. The nonlease components are generally variable in nature and are expected to represent most of our variable lease costs. Variable costs are expensed as incurred. We have taken a portfolio approach for our vehicle leases by country.
Goodwill, Intangible Assets and Other Long-Lived Assets
Goodwill, which has an indefinite useful life, represents the excess of cost over fair value of net assets acquired. Our intangible assets include developed technology, patents and licenses. The cost of identifiable intangible assets with finite lives is generally amortized on a straight-line basis over the assets’ respective estimated useful lives.
Goodwill and intangible assets with indefinite lives are not subject to amortization but are tested for impairment on an annual basis during the fourth quarter or whenever events or changes in circumstances indicate the carrying amount of these assets may not be recoverable. Events or changes in circumstances that could affect the likelihood that we will be required to recognize an impairment charge include, but are not limited to, declines in our stock price or market capitalization, economic downturns and other macroeconomic events, including the current COVID-19 pandemic, declines in our market share or revenues, and an increase in our losses, rapid changes in technology, failure to achieve the benefits of capacity increases and utilization, significant litigation arising out of an acquisition, or other matters. Any impairment charges could have a material adverse effect on our operating results and net asset value in the quarter in which we recognize the impairment charge.
In evaluating our goodwill and intangible assets with indefinite lives for indications of impairment, we first conduct an assessment of qualitative factors to determine whether it is more likely than not that the fair value of our reporting unit is less than its carrying amount. If we determine that it is more likely than not that the fair value of our reporting unit is less than its carrying amount, we compare the fair value of our reporting unit to its carrying value. If the fair value of our reporting unit exceeds its carrying value, goodwill is not considered impaired and no further analysis is required. If the carrying value of the reporting unit exceeds its fair value, then an impairment loss equal to the difference would be recorded to goodwill. We did not recognize any impairment of goodwill for any of the periods presented herein.
We evaluate our long-lived assets, including finite-lived intangibles, for indicators of possible impairment when events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. If any indicator of impairment exists, we assess the recoverability of the affected long-lived assets by determining whether the carrying value of the asset can be recovered through undiscounted future operating cash flows. If impairment is indicated, we estimate the asset’s fair value using future discounted cash flows associated with the use of the asset and adjust the carrying value of the asset accordingly. We did not recognize any impairment of intangibles for any of the periods presented herein.
Convertible Notes
In February 2014, we closed an underwritten public offering of $201.3 million aggregate principal amount of our 2.75% Senior Convertible Notes due 2034 (2014 Notes). In March 2018, we entered into separate privately negotiated transactions with certain holders of our 2014 Notes to exchange $150.0 million in aggregate principal amount of the 2014 Notes for our 2.75% Exchange Convertible Senior Notes due 2034 (2018 Notes). As the 2018 Notes were convertible, at our election, into cash, shares of our common stock, or a combination of cash and shares of our common stock, we accounted for the 2018 Notes under the cash conversion guidance in ASC 470, whereby the embedded conversion option in the 2018 Notes was separated and
9


accounted for in equity. In the first quarter of 2019, the 2018 Notes were converted into 19.5 million shares of our common stock and the 2018 Notes were retired. We recorded a loss of $9.0 million on the retirement of the 2018 Notes. We determined the fair value of the 2018 Notes using valuation techniques that required us to make assumptions related to the implied discount rate. 
In November 2019, we closed a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of $55.0 million aggregate principal amount of our 5.25% Senior Convertible Notes due 2024 (2019 Notes). Most of the issuance proceeds were used to retire approximately $50.2 million of aggregate principal amount of our 2014 Notes, leaving approximately $1.1 million of aggregate principal amount of our 2014 Notes outstanding.
As the 2019 Notes do not provide for a cash conversion feature, the 2019 Notes are recorded for as debt in their entirety in accordance with ASC 470. For the 2014, 2018 and 2019 Notes, offering-related costs, including underwriting costs, were capitalized as debt issuance costs, recorded as an offset to the carrying value of the related Notes, and are amortized over the expected term of the related Notes using the effective interest method.
See Note 7 for a detailed discussion of the accounting treatment of the transactions and additional information.
Comprehensive Loss
Comprehensive loss is comprised of net loss and other comprehensive income (loss). Other comprehensive income (loss) consists of unrealized gains and losses on our investments and foreign currency translation adjustments. Total comprehensive loss for all periods presented has been disclosed in the condensed consolidated statements of comprehensive loss.
The components of accumulated other comprehensive loss, net of tax, for the three and six months ended June 30, 2020 is as follows (in thousands):
Foreign Currency Translation Adjustment Unrealized Gain (Loss) on Investments Accumulated Other Comprehensive Income (Loss)
Ending balance at December 31, 2019 $ (618)   $ 36    $ (582)  
Other comprehensive income (loss) (303)   —    (303)  
Ending balance at March 31, 2020 (921)   36    (885)  
Other comprehensive income (loss) 109    (33)   76   
Ending balance at June 30, 2020 $ (812)   $   $ (809)  
Immaterial amounts of unrealized gains and losses have been reclassified into the condensed consolidated statement of operations for the three and six months ended June 30, 2020 and 2019.
Net Loss per Share
Our basic and diluted net loss per share is calculated by dividing net loss by the weighted-average number of shares of common stock outstanding for the period. Restricted stock units, performance share units, and stock options to purchase our common stock are considered to be potentially dilutive common shares but have been excluded from the calculation of diluted net loss per share as their effect is anti-dilutive for all periods presented.
The following potentially dilutive common shares were excluded from the computations of diluted net loss per share for the periods presented because including them would have been anti-dilutive (in thousands):
  Six Months Ended June 30,
  2020 2019
Stock options, restricted stock units and performance awards 8,237    4,541   
2019 Convertible Notes 18,966    —   
2019 Convertible Notes potential make-whole shares 2,412    —   
2014 Convertible Notes 19    916   
Total 29,634    5,457   
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Recent Accounting Changes and Accounting Pronouncements
Adoption of New Accounting Guidance
In August 2018, the U.S.-based Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2018-15-Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40), which establishes new guidance on the accounting for costs incurred to implement a cloud computing arrangement that is considered a service arrangement. The new guidance requires the capitalization of such costs, aligning it with the accounting for costs associated with developing or obtaining internal-use software. The new guidance is effective for fiscal years beginning after December 15, 2019. The adoption of the new guidance did not have a significant impact on our financial results.
In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The ASU eliminates the requirement for an entity to calculate the implied fair value of goodwill to measure a goodwill impairment charge. Instead, an entity performs its annual, or interim, goodwill impairment testing by comparing the fair value of a reporting unit with its carrying amount and recording an impairment charge for the amount by which the carrying amount exceeds the fair value. The ASU is effective for annual and interim goodwill impairment testing performed for our fiscal year beginning January 1, 2020. The adoption of the new guidance did not have a significant impact on our financial results.
The FASB issued two ASUs related to financial instruments – credit losses. The ASUs issued were: (1) in June 2016, ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, and (2) in November 2018, ASU 2018-19-Codification Improvements to Topic 326, Financial Instruments-Credit Losses. ASU 2016-13 is intended to improve financial reporting by requiring more timely recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. ASU 2018-19 clarifies that receivables arising from operating leases are not within the scope of the credit losses standard, but rather, should be accounted for in accordance with the leasing standard. These ASUs are effective for fiscal years beginning after December 15, 2019, and interim periods within those years, with early adoption permitted. The modified retrospective method is required upon adoption. The adoption of the new guidance resulted in an adjustment of approximately $0.1 million to reduce the accumulated deficit component of stockholders’ equity and decrease current assets by the same amount in our condensed consolidated balance sheet.
Recent Accounting Pronouncements
In November 2019, the FASB issued ASU 2019-12-Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The amendments in this update improve consistent application of and simplify U.S. GAAP for Topic 740 by clarifying and amending existing guidance for, among other items, intra-period allocation, reporting tax law changes and losses in interim periods, state and local taxes not fully based on income and recognition of deferred tax liability related to certain transactions. There is also new guidance related to consolidated group reporting and tax impacts resulting from business combinations. The new guidance is effective for fiscal years beginning after December 15, 2020. We are currently evaluating the impact of adoption on our condensed consolidated financial statements.
3. Business Combination
On January 17, 2020, we completed the acquisition of all of the outstanding shares of InstruNor AS, a privately held Norwegian company (InstruNor).
InstruNor is a provider of the only fully integrated sample preparation system for flow and mass cytometry. The acquisition of InstruNor supports our entry into the sample preparation market for cytometry analysis and expands our capabilities to include fully automated sample preparation for flow and mass cytometry. The value of this technology is reflected in the intangible asset for developed technology. The developed technology was valued using a discounted cash flow model for which the most sensitive assumption was revenue growth rate.
The purchase price of $7.2 million included approximately $5.2 million in cash and 485,451 shares of our common stock valued at the closing price on the effective date of $4.22.
A summary of the net cash flows is summarized below (in thousands):
January 17, 2020
Cash consideration paid to former equity holders $ 5,165   
Less: cash and cash equivalents acquired (11)  
Acquisition of InstruNor, net of cash acquired $ 5,154   
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The acquisition was accounted for in accordance with ASC 805, Business Combinations. The assets acquired and liabilities assumed were recorded at their estimated fair values at the InstruNor acquisition date. Goodwill of $2.2 million was calculated as the purchase price less the fair value of the net assets acquired as follows (in thousands):
January 17, 2020
Purchase price:
Cash consideration paid on closing to former equity holders $ 5,165   
Non-cash consideration common shares 2,049   
Total purchase price $ 7,214   
Assets acquired:
Cash and cash equivalents $ 11   
Accounts receivable 32   
Other receivables 13   
Inventories, net 153   
Developed technology 5,380   
Liabilities assumed:
Accounts payable 14   
Other current liabilities 15   
Deferred tax liability 566   
Fair value of identifiable net assets acquired $ 4,994   
Goodwill acquired on acquisition $ 2,220   

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4. Revenue
Disaggregation of Revenue
The following table presents our revenue for the three and six months ended June 30, 2020 and 2019, respectively, based on geographic area and by source (in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
Geographic Markets:
Americas $ 13,940    $ 11,120    $ 28,784    $ 24,091   
EMEA 6,557    11,217    14,653    19,373   
Asia-Pacific 5,561    5,859    10,238    14,843   
Total revenue $ 26,058    $ 28,196    $ 53,675    $ 58,307   
Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
Source:
Instruments $ 8,577    $ 12,201    $ 18,048    $ 25,041   
Consumables 8,828    11,034    18,338    23,021   
Product revenue 17,405    23,235    36,386    48,062   
Service revenue 5,140    4,961    10,326    10,245   
Development revenue 3,000    —    3,000    —   
Other revenue
  License and royalty revenue 63    —    3,163    —   
  Grant revenue 450    —    800    —   
  Total other revenue 513    —    3,963    —   
Total revenue $ 26,058    $ 28,196    $ 53,675    $ 58,307   
Performance Obligations
We reported $20.0 million of deferred revenue in our December 31, 2019 consolidated balance sheet. During the six months ended June 30, 2020, $6.2 million of the opening balance was recognized as revenue and $8.4 million of net additional advance payments were received from customers, primarily associated with instrument service contracts. At June 30, 2020, we reported $22.2 million of deferred revenue.
The following table summarizes the expected timing of revenue recognition for unfulfilled performance obligations associated with instrument service contracts that were partially completed at June 30, 2020 (in thousands):
Fiscal Year
Expected Revenue (1)
2020 (remainder of the year) $ 7,401   
2021 8,636   
2022 4,702   
Thereafter 3,164   
Total $ 23,903   
_______
(1) Expected revenue includes both billed amounts included in deferred revenue and unbilled amounts that are not reflected in our condensed consolidated financial statements and are subject to change if our customers decide to cancel or modify their contracts. Purchase orders for instrument service contracts can generally be canceled before the service period begins without penalty.

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We apply the practical expedient that permits us not to disclose information about unsatisfied performance obligations for service contracts with an expected term of one year or less.
5. Goodwill and Intangible Assets, net
In connection with our acquisition of DVS Sciences, Inc. in February 2014, we recognized goodwill of $104.1 million and $112.0 million of developed technology. In the first quarter of 2020, we recognized $2.2 million of goodwill from the InstruNor acquisition and $5.4 million of developed technology (see Note 3). We are amortizing InstruNor developed technology over 8.0 years.
Goodwill and intangible assets with indefinite lives are not subject to amortization but are tested for impairment on an annual basis during the fourth quarter or whenever events or changes in circumstances indicate the carrying amount of these assets may not be recoverable. Qualitative assessment includes assessing significant events and circumstances such as our current results, assumptions regarding future performance, strategic initiatives and overall economic factors, including the ongoing global COVID-19 pandemic and macroeconomic developments to determine the existence of potential indicators of impairment and assess if it is more likely than not that the fair value of our reporting unit or intangible assets is less than their carrying value. If indicators of impairment are identified, a quantitative impairment test is performed.
During the first quarter of fiscal 2020, the Company assessed whether the current and potential future impact of the COVID-19 pandemic represented an event which necessitated an impairment review. This assessment included an update of the qualitative and quantitative factors affecting our business. As a result of this assessment, we determined that a triggering event had occurred and a quantitative impairment test was performed. As a result of this quantitative analysis, we determined that the fair values of our goodwill and developed technology intangibles were not less than their carrying values and no impairment was recognized.
Intangible assets also include other patents and licenses, which are included in other non-current assets. Intangible assets, net, were as follows (in thousands):
June 30, 2020
Gross Amount Accumulated Amortization Net Weighted-Average Amortization Period
Developed technology $ 117,380    $ (71,736)   $ 45,644    9.9 years
Patents and licenses $ 11,274    $ (8,802)   $ 2,472    7.8 years
December 31, 2019
Gross Amount Accumulated Amortization Net Weighted-Average Amortization Period
Developed technology $ 112,000    $ (65,800)   $ 46,200    10.0 years
Patents and licenses $ 11,274    $ (8,342)   $ 2,932    7.8 years
Total amortization expense for the three months ended June 30, 2020 and 2019 was $3.2 million and $3.1 million, respectively. Amortization of intangibles was $6.4 million and $6.2 million for the six months ended June 30, 2020 and 2019, respectively.

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Based on the carrying value of intangible assets, net, as of June 30, 2020, the amortization expense is expected to be as follows (in thousands):
Fiscal Year Developed Technology Amortization Expense Patents and Licenses Amortization Expense Total
2020 (remainder of the year) $ 5,936    $ 457    $ 6,393   
2021 11,873    759    12,632   
2022 11,873    676    12,549   
2023 11,873    570    12,443   
2024 2,073    10    2,083   
Thereafter 2,016    —    2,016   
Total $ 45,644    $ 2,472    $ 48,116   

6. Balance Sheet Details
Cash, Cash Equivalents and Restricted Cash
Cash, cash equivalents and restricted cash consisted of the following as of June 30, 2020 and December 31, 2019 (in thousands):
June 30, 2020 December 31, 2019
Cash and cash equivalents $ 42,965    $ 21,661   
Restricted cash 1,075    2,075   
Total cash, cash equivalents and restricted cash $ 44,040    $ 23,736   
Short-term restricted cash of approximately $75 thousand is included in prepaid expenses and other current assets and $1.0 million of non-current restricted cash is included in other non-current assets in the condensed consolidated balance sheet as of June 30, 2020.
Inventories
Inventories consisted of the following as of June 30, 2020 and December 31, 2019 (in thousands):
June 30, 2020 December 31, 2019
Raw materials $ 9,665    $ 6,133   
Work-in-process 1,063    659   
Finished goods 8,172    7,092   
Total inventories $ 18,900    $ 13,884   
Property and Equipment, net
Property and equipment consisted of the following as of June 30, 2020 and December 31, 2019 (in thousands):
June 30, 2020 December 31, 2019
Computer equipment and software $ 4,376    $ 3,997   
Laboratory and manufacturing equipment 19,652    19,325   
Leasehold improvements 7,962    7,788   
Office furniture and fixtures 2,076    1,824   
Property and equipment, gross 34,066    32,934   
Less accumulated depreciation and amortization (26,309)   (24,954)  
Construction-in-progress 108    76   
Property and equipment, net $ 7,865    $ 8,056   
 
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Warranties
Activity for our warranty accrual for the six months ended June 30, 2020 and 2019, which are included in other accrued liabilities, is summarized below (in thousands):
Six Months Ended June 30,
2020 2019
Beginning balance $ 1,390    $ 863   
Accrual for current period warranties 419    657   
Warranty costs incurred (277)   (429)  
Ending balance $ 1,532    $ 1,091   

7. Convertible Notes and Credit Facility
2014 Senior Convertible Notes (2014 Notes)
In February 2014, we closed an underwritten public offering of $201.3 million aggregate principal amount of our 2014 Notes. We received $195.2 million, net of underwriting discounts, from the issuance of the 2014 Notes and incurred approximately $1.1 million in offering-related expenses. The underwriting discount of $6.0 million and the debt issuance costs of $1.1 million were recorded as offsets to the proceeds. The underwriting discount and offering-related expenses are being amortized to interest expense using the effective-interest rate method. The effective interest rate on the 2014 Notes, reflecting the impact of debt discounts and issuance costs, is 3.0%. The 2014 Notes will mature on February 1, 2034, unless earlier converted, redeemed, or repurchased in accordance with the terms of the 2014 Notes. We have retired the majority of the 2014 Notes through the issuance of the 2018 Notes and 2019 Notes, as discussed below. As of June 30, 2020, there is $1.1 million aggregate principal of the 2014 Notes outstanding.
2018 Senior Convertible Notes (2018 Notes)
In March 2018, we entered into separate privately negotiated transactions with certain holders of our 2014 Notes to exchange $150.0 million in aggregate principal amount of the 2014 Notes for 2018 Notes, leaving $51.3 million of the aggregate principal amount of 2014 Notes outstanding. As of the closing of the 2018 Notes on March 12, 2018, the estimated fair value was $145.5 million. The difference between the $150.0 million aggregate principal amount of the 2018 Notes and its fair value was being amortized over the expected term of the 2018 Notes using the effective interest method through the first note holder put date of February 6, 2023.
The 2018 Notes accrued interest at a rate of 2.75% payable semi-annually in arrears on February 1 and August 1 of each year. The 2018 Notes were set to mature on February 1, 2034, unless earlier converted, redeemed, or repurchased in accordance with the terms of the indenture governing the 2018 Notes. The initial conversion rate of the 2018 Notes was 126.9438 shares of our common stock, par value $0.001 per share, per $1,000 principal amount of the 2018 Notes (which is equivalent to an initial conversion price of approximately $7.88 per share). The conversion rate was subject to adjustment upon the occurrence of certain specified events. Those certain specified events included holders who converted their 2018 Notes voluntarily prior to our exercise of the issuer’s conversion option described below or in connection with a make-whole fundamental change prior to February 6, 2023, entitling the holders, under certain circumstances, to a make-whole premium in the form of an increase in the conversion rate determined by reference to a make-whole table set forth in the indenture governing the 2018 Notes. Any time prior to the maturity of the 2018 Notes, we could convert the 2018 Notes, in whole but not in part, into cash, shares of our common stock, or combination thereof, if the closing price of our common stock equaled or exceeded 110% of the conversion price then in effect for a specified number of days.
Offering-related costs for the 2018 Notes were approximately $2.8 million. Offering-related costs of $2.2 million were capitalized as debt issuance costs, recorded as an offset to the carrying value of the 2018 Notes, and were being amortized over the expected term of the 2018 Notes using the effective interest method through the first note holder put date of February 6, 2023. The effective interest rate on the 2018 Notes was 12.3%. Offering-related costs of $0.6 million were accounted for as equity issuance costs, recorded as an offset to additional paid-in capital, and were not subject to amortization. Offering-related costs were allocated between debt and equity in the same proportion as the allocation of the 2018 Notes between debt and equity.
In the first quarter of 2019, we received notices from holders of the 2018 Notes electing to voluntarily convert approximately $138.1 million in aggregate principal amount of the 2018 Notes. In February 2019, we notified the trustee, U.S. Bank National Association, of our intention to exercise our issuer’s conversion option with respect to the remaining approximately $11.9 million in aggregate principal amount of 2018 Notes. In total, $150.0 million of the 2018 Notes were
16


converted into 19.5 million shares of our common stock and the bonds were retired. We recognized a loss of $9.0 million on the retirement of the 2018 Notes, which represented the difference between the fair value of the bonds retired and their carrying costs. The net impact on equity was $133.3 million and represented the fair value of the bonds retired.
2019 Senior Convertible Notes (2019 Notes)
In November 2019, we issued $55.0 million aggregate principal amount of 2019 Notes. Net proceeds of the offering of the 2019 Notes issuance were $52.7 million, after deductions for commissions and other debt issuance costs of approximately $2.3 million. $51.8 million of the proceeds of the 2019 Notes were used to retire $50.2 million aggregate principal amount of our 2014 Notes, leaving $1.1 million of aggregate principal value of 2014 Notes outstanding. We accounted for the transaction as an extinguishment of debt due to the significance of the change in value of the embedded conversion option, resulting in a $3.0 million loss in the fourth quarter of 2019. The loss on extinguishment of debt was calculated as the difference between the reacquisition price (i.e., the fair value of the principal amount of 2019 Notes) and the net carrying value of the 2014 Notes exchanged.
The 2019 Notes bear interest at 5.25% per annum, payable semiannually in arrears on June 1 and December 1 of each year, beginning on June 1, 2020. The Notes will mature on December 1, 2024, unless earlier repurchased or converted pursuant to their terms. The 2019 Notes will be convertible at the option of the holder at any point prior to the close of business on the second scheduled trading day preceding the maturity date. The initial conversion rate of the Notes is 344.8276 shares of the Company’s common stock per $1,000 principal amount of 2019 Notes (which is equivalent to an initial conversion price of approximately $2.90 per share). The conversion rate is subject to adjustment upon the occurrence of certain specified events. Those certain specified events include voluntary conversion of the 2019 Notes prior to our exercise of the Issuer’s Conversion Option or in connection with a make-whole fundamental change, entitling the holders, under certain circumstances, to a make-whole premium in the form of an increase in the conversion rate determined by reference to a make-whole table set forth in the indenture governing the 2019 Notes. The conversion rate will not be adjusted for any accrued and unpaid interest.
The 2019 Notes will also be convertible at our option upon certain conditions in accordance with the terms of the indenture governing the 2019 Notes. On or after December 1, 2021 to December 1, 2022, if the price of the Company’s common stock has equaled or exceeded 150% of the Conversion Price then in effect for a specified number of days (Issuer’s Conversion Option), we may, at our option, elect to convert the 2019 Notes in whole but not in part into shares of the Company, determined in accordance with the terms of the indenture. On or after December 1, 2022, if the price of the Company’s common stock has equaled or exceeded 130% of the Conversion Price then in effect for a specified number of days, we may, at our option, elect to convert the 2019 Notes in whole but not in part into shares of the Company, determined in accordance with the terms of the indenture.
Offering-related costs for the 2019 Notes were capitalized as debt issuance costs and are recorded as an offset to the carrying value of the 2019 Notes. The debt issuance costs are being amortized over the expected term of the 2019 Notes using the effective interest method through the maturity date of December 1, 2024. The effective interest rate on the 2019 Notes is 6.2%.
The carrying values of the components of the 2014 Notes and the 2019 Notes are as follows (in thousands):
June 30, 2020 December 31, 2019
   2.75% 2014 Notes due 2034
Principal amount $ 1,079    $ 1,079   
Unamortized debt discount (24)   (18)  
Unamortized debt issuance cost (4)   (4)  
$ 1,051    $ 1,057   
    5.25% 2019 Notes due 2024
Principal amount $ 55,000    $ 55,000   
Unamortized debt issuance cost (2,038)   (2,236)  
$ 52,962    $ 52,764   
    Net carrying value of all Notes $ 54,013    $ 53,821   
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2018 Revolving Credit Facility
In August 2018, we entered into a revolving credit facility with Silicon Valley Bank (as amended, the Revolving Credit Facility) in an aggregate principal amount of up to the lesser of (i) $15.0 million (Maximum Amount) or (ii) the sum of (a) 85% of our eligible receivables and (b) 50% of our eligible inventory, in each case, subject to certain limitations (Borrowing Base), provided that the amount of eligible inventory that may be counted towards the Borrowing Base shall be subject to a cap as set forth in the Revolving Credit Facility. Subject to the level of this Borrowing Base, we may make and repay borrowings from time to time until the maturity of the Revolving Credit Facility. The Borrowing Base as of June 30, 2020 under the Revolving Credit Facility was $7.3 million. There were no borrowings outstanding under the Revolving Credit Facility at June 30, 2020.
The Revolving Credit Facility is collateralized by substantially all our property, other than intellectual property. Until an amendment in April 2020, the Revolving Credit Facility was set to mature on August 2, 2020. The interest rate on outstanding loans under the Revolving Credit Facility was the greater of (i) prime rate plus 0.50% or (ii) 5.50%. Interest on any outstanding loans is due and payable monthly and the principal balance is due at maturity, though loans can be prepaid at any time without penalty. In addition, we pay a quarterly unused revolving line facility fee of 0.75% per annum on the average unused facility and an annual commitment fee of $112,500.
Effective April 21, 2020, the Revolving Credit Facility was amended to extend the maturity date to August 2, 2022. In addition, the interest rate on outstanding loans under the Revolving Credit Facility was reduced by 0.25%. The quarterly unused line fee, which was previously based on the Maximum Amount, will now be based on the Borrowing Base. The annual commitment fee of $112,500 is unchanged.
The Revolving Credit Facility contains customary affirmative and negative covenants that, unless waived by the bank, limit our ability to, among other things, incur additional indebtedness, grant liens, make investments, repurchase stock, pay dividends, transfer assets, enter into affiliate transactions, undergo a change of control, or engage in merger and acquisition activity, including merging or consolidating with a third party. The Revolving Credit Facility also contains customary events of default, subject to customary cure periods for certain defaults, that include, among other things, non-payment defaults, covenant defaults, material judgment defaults, bankruptcy and insolvency defaults, cross-defaults to certain other material indebtedness, and defaults due to inaccuracy of representation and warranties. Upon an event of default, the lender may declare all or a portion of the outstanding obligations payable by us to be immediately due and payable and exercise other rights and remedies provided for under the Revolving Credit Facility. During the existence of an event of default, interest on the obligations under the Revolving Credit Facility could be increased to 5.0% above the otherwise applicable rate of interest. We were in compliance with all the terms and conditions of the Revolving Credit Facility at June 30, 2020.
8. Leases
We have operating leases for buildings, equipment and vehicles. Existing leases have remaining terms of less than one year to ten years. Some leases contain options to extend the lease, usually for up to five years, and termination options.
Supplemental balance sheet information related to leases was as follows as of June 30, 2020 and December 31, 2019 (in thousands, except for discount rate and lease term):
June 30, 2020 December 31, 2019
Operating lease right-of-use buildings $ 40,618    $ 6,234   
Operating lease right-of-use equipment 33    69   
Operating lease right-of-use vehicles 452    355   
Total operating lease right-of-use assets, gross 41,103    6,658   
Accumulated amortization (2,076)   (1,798)  
Total operating lease right-of-use assets, net $ 39,027    $ 4,860   
Operating lease liabilities, current $ 2,170    $ 1,833   
Operating lease liabilities, non-current 39,139    4,323   
Total operating lease liabilities $ 41,309    $ 6,156   
Weighted average remaining lease term (in years) 9.1 4.7
Weighted average discount rate per annum 11.9  % 5.0  %
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A new operating lease for our corporate headquarters in South San Francisco, California commenced in March 2020. We recorded a ROU asset of $35.7 million at the inception of the lease and an operating lease liability of $35.3 million. The lease term is approximately ten years. Future minimum lease payments over the life of the lease were discounted at a rate of 12.55%, which was our estimated incremental collateralized borrowing rate for the term of the lease at the inception of the lease.
The following table presents the components of lease expense for the three and six months ended June 30, 2020 and 2019, respectively (in thousands):
Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
Operating lease cost (including variable costs) $ 2,312    $ 1,553    $ 4,511    $ 3,056   
Variable costs including non-lease component $ 548    $ 703    $ 1,169    $ 1,303   
Supplemental Cash Flow Information:
Cash paid for amounts included in the measurement of operating lease liabilities (included in net cash used in operating activities in thousands):
Six Months Ended June 30,
2020 2019
Operating cash flows from operating leases $ 1,987    $ 2,061   
Future minimum lease payments under commenced non-cancelable operating leases, which are as of June 30, 2020 as follows (in thousands):
Fiscal Year Minimum Lease Payments for Operating Leases
2020 (remainder of year) $ 3,214   
2021 7,282   
2022 6,985   
2023 6,907   
2024 7,120   
Thereafter 39,231   
Total future minimum payments $ 70,739   
Less: imputed interest (29,430)  
Total $ 41,309   

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9. Fair Value of Financial Instruments
The following tables summarize our cash and available-for-sale securities that were measured at fair value by significant investment category within the fair value hierarchy (in thousands):
June 30, 2020
Amortized Cost Gross Unrealized Gain Gross Unrealized Loss Fair Value Cash and Cash Equivalents Short-Term Marketable Securities Cash- Restricted
Assets:
Cash-unrestricted $ 20,196    $ —    $ —    $ 20,196    $ 20,196    $ —    $ —   
Cash-restricted 1,075    —    —    1,075    —    —    1,075   
  Total cash $ 21,271    $ —    $ —    $ 21,271    $ 20,196    $ —    $ 1,075   
Available-for-sale:
    Level I:
         Money market funds $ 22,769    $ —    $ —    $ 22,769    $ 22,769    $ —    $ —   
    US treasury securities 2,428      —    2,431    —    2,431    —   
           Subtotal $ 25,197    $   $ —    $ 25,200    $ 22,769    $ 2,431    $ —   
Total $ 46,468    $   $ —    $ 46,471    $ 42,965    $ 2,431    $ 1,075   
December 31, 2019
Amortized Cost Gross Unrealized Gain Gross Unrealized Loss Fair Value Cash and Cash Equivalents Short-Term Marketable Securities Cash- Restricted
Assets:
Cash-unrestricted $ 16,614    $ —    $ —    $ 16,614    $ 16,614    $ —    $ —   
Cash-restricted 2,075    —    —    2,075    —    —    2,075   
  Total cash $ 18,689    $ —    $ —    $ 18,689    $ 16,614    $ —    $ 2,075   
Available-for-sale:
    Level I:
         Money market funds $ 5,047    $ —    $ —    $ 5,047    $ 5,047    $ —    $ —   
         US treasury securities 36,942    36    —