Standard BioTools(LAB) - 2019 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION This part presents unaudited financial statements, notes, and management's discussion of financial condition and operations Item 1. Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations, comprehensive loss, stockholders' equity, and cash flows, along with detailed notes explaining significant accounting policies, revenue recognition, asset details, debt, leases, fair value measurements, equity, stock-based compensation, income taxes, geographic information, and commitments and contingencies Condensed Consolidated Balance Sheets This statement provides a snapshot of the company's assets, liabilities, and equity at specific dates | Item | June 30, 2019 (in thousands) | December 31, 2018 (in thousands) | | :------------------------------------------------------------------------------------------------ | :--------------------------- | :------------------------------- | | ASSETS | | | | Cash and cash equivalents | $24,046 | $95,401 | | Short-term investments | $44,815 | — | | Accounts receivable, net | $19,262 | $16,651 | | Inventories | $14,269 | $13,003 | | Prepaid expenses and other current assets | $4,387 | $2,051 | | Total current assets | $106,779 | $127,106 | | Property and equipment, net | $8,298 | $8,825 | | Operating lease right-of-use asset, net | $6,506 | — | | Other non-current assets | $6,302 | $6,208 | | Developed technology, net | $51,800 | $57,400 | | Goodwill | $104,108 | $104,108 | | Total assets | $283,793 | $303,647 | | LIABILITIES AND STOCKHOLDERS' EQUITY | | | | Accounts payable | $8,075 | $4,027 | | Accrued compensation and related benefits | $8,281 | $14,470 | | Operating lease liabilities, current | $3,350 | — | | Other accrued liabilities | $5,642 | $7,621 | | Deferred revenue, current | $11,972 | $11,464 | | Total current liabilities | $37,320 | $37,582 | | Convertible notes, net | $49,833 | $172,058 | | Deferred tax liability, net | $12,295 | $13,714 | | Operating lease liabilities, non-current | $4,812 | — | | Deferred revenue, non-current | $6,318 | $6,327 | | Other non-current liabilities | $575 | $1,850 | | Total liabilities | $111,153 | $231,531 | | Total stockholders' equity | $172,640 | $72,116 | | Total liabilities and stockholders' equity | $283,793 | $303,647 | Condensed Consolidated Statements of Operations This statement details the company's revenues, expenses, and net loss over specific reporting periods | Item | Three Months Ended June 30, 2019 (in thousands) | Three Months Ended June 30, 2018 (in thousands) | Six Months Ended June 30, 2019 (in thousands) | Six Months Ended June 30, 2018 (in thousands) | | :--------------------------------------- | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Product revenue | $23,235 | $21,777 | $48,062 | $42,254 | | Service revenue | $4,961 | $4,651 | $10,245 | $9,422 | | Total revenue | $28,196 | $26,428 | $58,307 | $51,676 | | Cost of product revenue | $11,100 | $11,160 | $22,489 | $21,382 | | Cost of service revenue | $1,733 | $1,680 | $3,465 | $3,278 | | Total cost of revenue | $12,833 | $12,840 | $25,954 | $24,660 | | Gross profit | $15,363 | $13,588 | $32,353 | $27,016 | | Research and development | $7,865 | $7,386 | $16,237 | $14,642 | | Selling, general and administrative | $22,134 | $18,987 | $44,958 | $37,792 | | Total operating expenses | $29,999 | $26,373 | $61,195 | $52,434 | | Loss from operations | $(14,636) | $(12,785) | $(28,842) | $(25,418) | | Interest expense | $(491) | $(3,916) | $(3,192) | $(5,805) | | Loss on extinguishment of debt | — | — | $(9,000) | — | | Other income, net | $231 | $256 | $715 | $348 | | Loss before income taxes | $(14,896) | $(16,445) | $(40,319) | $(30,875) | | Income tax benefit | $1,143 | $204 | $1,101 | $1,387 | | Net loss | $(13,753) | $(16,241) | $(39,218) | $(29,488) | | Net loss per share, basic and diluted | $(0.20) | $(0.42) | $(0.61) | $(0.76) | | Shares used in computing net loss per share, basic and diluted | 69,158 | 39,003 | 63,923 | 38,930 | Condensed Consolidated Statements of Comprehensive Loss This statement presents net loss and other comprehensive income/loss, reflecting all non-owner equity changes | Item | Three Months Ended June 30, 2019 (in thousands) | Three Months Ended June 30, 2018 (in thousands) | Six Months Ended June 30, 2019 (in thousands) | Six Months Ended June 30, 2018 (in thousands) | | :-------------------------------------- | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net loss | $(13,753) | $(16,241) | $(39,218) | $(29,488) | | Other comprehensive income (loss), net of tax: | | | | | | Foreign currency translation adjustment | $(9) | $26 | $(1) | $69 | | Net change in unrealized gain on investments | $63 | $2 | $65 | $1 | | Other comprehensive income, net of tax | $54 | $28 | $64 | $70 | | Comprehensive loss | $(13,699) | $(16,213) | $(39,154) | $(29,418) | Condensed Consolidated Statements of Stockholders' Equity This statement outlines changes in equity accounts, including common stock, paid-in capital, and accumulated deficit | Item | Common Stock Shares (in thousands) | Common Stock Amount (in thousands) | Additional Paid-in Capital (in thousands) | Accumulated Other Comprehensive (Loss)/Income (in thousands) | Accumulated Deficit (in thousands) | Total Stockholders' Equity (in thousands) | | :--------------------------------------- | :--------------------------------- | :--------------------------------- | :---------------------------------------- | :----------------------------------------------------------- | :--------------------------------- | :---------------------------------------- | | 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 | 140 | $1 | $(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 | 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 | Condensed Consolidated Statements of Cash Flows This statement categorizes cash flows from operating, investing, and financing activities over specific periods | Item | Six Months Ended June 30, 2019 (in thousands) | Six Months Ended June 30, 2018 (in thousands) | | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Net cash used in operating activities | $(25,143) | $(20,499) | | Net cash provided by (used in) investing activities | $(45,299) | $3,936 | | Net cash provided by (used in) financing activities | $1,187 | $(2,152) | | Effect of foreign exchange rate fluctuations on cash and cash equivalents | $(25) | $83 | | Net decrease in cash, cash equivalents and restricted cash | $(69,280) | $(18,632) | | Cash, cash equivalents and restricted cash at beginning of period | $95,401 | $58,056 | | Cash, cash equivalents and restricted cash at end of period | $26,121 | $39,424 | Notes to Condensed Consolidated Financial Statements This section provides detailed disclosures on the company's accounting policies, financial instruments, and operational activities, including revenue recognition, asset valuation, debt management, lease accounting, equity changes, stock-based compensation, income taxes, geographic information, and commitments and contingencies Note 1. Description of Business This note describes Fluidigm's business, microfluidic technology, life science tools, and research focus - Fluidigm Corporation, reincorporated in Delaware in 2007, commercializes microfluidic technology and creates, manufactures, and markets innovative technologies and life science tools, including instruments for Mass Cytometry, PCR, Library Prep, Single Cell Genomics, and related consumables. The company focuses on translational and clinical research, particularly in cancer, immunology, and immunotherapy[22][23] Note 2. Summary of Significant Accounting Policies This note outlines key accounting principles, methods, and recent standard adoptions - The company adopted Topic 842, Leases, on January 1, 2019, recognizing $9.2 million in lease liabilities and $7.4 million in ROU assets, with no impact on retained earnings[45][47] - Potentially dilutive common shares, including stock options, RSUs, performance awards, and convertible notes, were excluded from diluted net loss per share calculations for being anti-dilutive[26][27] - Revenue is recognized from product sales (instruments, consumables) at the point of control transfer and service sales (contracts, repairs, training) over time or at completion[29][31][34] Note 3. Revenue This note details revenue by geographic market, product, service, and deferred revenue information | Geographic Markets | Three Months Ended June 30, 2019 (in thousands) | Three Months Ended June 30, 2018 (in thousands) | Six Months Ended June 30, 2019 (in thousands) | Six Months Ended June 30, 2018 (in thousands) | | :----------------- | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Americas | $11,120 | $12,520 | $24,091 | $23,354 | | Europe | $11,217 | $9,109 | $19,373 | $17,582 | | Asia Pacific | $5,859 | $4,799 | $14,843 | $10,740 | | Total revenue | $28,196 | $26,428 | $58,307 | $51,676 | | Product and Service | Three Months Ended June 30, 2019 (in thousands) | Three Months Ended June 30, 2018 (in thousands) | Six Months Ended June 30, 2019 (in thousands) | Six Months Ended June 30, 2018 (in thousands) | | :------------------ | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Instruments | $12,201 | $10,421 | $25,041 | $17,941 | | Consumables | $11,034 | $11,356 | $23,021 | $24,313 | | Product revenue | $23,235 | $21,777 | $48,062 | $42,254 | | Service | $4,961 | $4,651 | $10,245 | $9,422 | | Total revenue | $28,196 | $26,428 | $58,307 | $51,676 | - Deferred revenue at June 30, 2019, was $18.3 million, with $6.8 million of the opening balance recognized as revenue during the six months ended June 30, 2019[53] Note 4. Goodwill and Intangible Assets, net This note details goodwill and intangible assets, including amortization and acquisition origins - Goodwill of $104.1 million was recognized from the DVS acquisition in February 2014[59] | Asset Type | June 30, 2019 Net (in thousands) | December 31, 2018 Net (in thousands) | Weighted Average Amortization Period | | :------------------- | :------------------------------- | :----------------------------------- | :----------------------------------- | | Developed technology | $51,800 | $57,400 | 10.0 years | | Patents and licenses | $3,896 | $4,413 | 7.8 years | - Amortization of intangibles was $3.1 million for each of the three months ended June 30, 2019 and 2018, and $6.2 million for each of the six months ended June 30, 2019 and 2018[59] Note 5. Balance Sheet Details This note provides further breakdown of cash, inventories, and warranty liabilities | Item | June 30, 2019 (in thousands) | December 31, 2018 (in thousands) | | :------------------------------------ | :--------------------------- | :------------------------------- | | Cash and cash equivalents | $24,046 | $95,401 | | Restricted cash | $2,075 | — | | Cash, cash equivalents and restricted cash | $26,121 | $95,401 | | Item | June 30, 2019 (in thousands) | December 31, 2018 (in thousands) | | :---------------- | :--------------------------- | :------------------------------- | | Raw materials | $7,023 | $5,996 | | Work-in-process | $553 | $650 | | Finished goods | $6,693 | $6,357 | | Total inventories, net | $14,269 | $13,003 | | Item | Three Months Ended June 30, 2019 (in thousands) | Three Months Ended June 30, 2018 (in thousands) | Six Months Ended June 30, 2019 (in thousands) | Six Months Ended June 30, 2018 (in thousands) | | :-------------------- | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Beginning balance | $930 | $591 | $863 | $699 | | Accrual for warranties | $371 | $401 | $657 | $738 | | Warranty costs incurred | $(210) | $(383) | $(429) | $(828) | | Ending balance | $1,091 | $609 | $1,091 | $609 | Note 6. Convertible Notes and Credit Facility This note details convertible notes, conversions, outstanding amounts, and the revolving credit facility - In Q1 2019, $150.0 million of 2018 Notes were converted into 19.5 million shares of common stock, resulting in a $9.0 million loss on extinguishment of debt and a net impact of $133.3 million on equity[78] - As of June 30, 2019, $51.25 million principal amount of 2014 Notes remained outstanding, maturing on February 1, 2034, with holder repurchase options in 2021, 2024, and 2029[79][66][69] - The company has a $15.0 million revolving credit facility with Silicon Valley Bank, maturing August 2, 2020, with $12.5 million available as of June 30, 2019, and no outstanding borrowings[80] Note 7. Leases This note outlines lease accounting under ASC 842, including liabilities, ROU assets, and future commitments - The company adopted ASC 842 on January 1, 2019, recognizing $9.2 million in lease liabilities and $7.4 million in ROU assets[47] - A new operating lease for the corporate headquarters, commencing late 2019/early 2020 with a 10.25-year term, is expected to result in approximately $46.7 million in ROU assets and lease liabilities[87] | Item | Six Months Ended June 30, 2019 (in thousands) | | :----------------------------------------------------------------------------------------------------- | :-------------------------------------------- | | Operating lease cost (including variable costs) | $3,056 | | Variable costs including non-lease component | $1,303 | | Cash paid for amounts included in the measurement of operating lease liabilities (included in net cash used in operating activities) | $2,061 | Note 8. Fair Value of Financial Instruments This note provides fair value measurements for financial instruments like cash, investments, and convertible notes | Item | Carrying Amount (in thousands) | Fair Value (in thousands) | | :-------------------- | :----------------------------- | :------------------------ | | Total cash | $18,003 | $18,003 | | Available-for-sale | $52,868 | $52,933 | | Total | $70,871 | $70,936 | | Notes | June 30, 2019 Par Value (in thousands) | June 30, 2019 Carrying Value (in thousands) | June 30, 2019 Fair Value (in thousands) | December 31, 2018 Par Value (in thousands) | December 31, 2018 Carrying Value (in thousands) | December 31, 2018 Fair Value (in thousands) | | :--------- | :------------------------------------- | :------------------------------------------ | :-------------------------------------- | :----------------------------------------- | :---------------------------------------------- | :------------------------------------------ | | 2014 Notes | $51,250 | $49,833 | $49,559 | $51,250 | $49,794 | $43,665 | | 2018 Notes | — | — | — | $149,999 | $122,264 | $171,843 | | Total | $51,250 | $49,833 | $49,559 | $201,249 | $172,058 | $215,508 | Note 9. Shareholders' Equity This note details changes in shareholders' equity, including common stock issuances from bond conversions - In Q1 2019, the conversion of 2018 Notes resulted in the issuance of 19,460,260 common shares and a $133.3 million increase in equity[96] Note 10. Stock-Based Plans This note describes stock-based compensation plans, including amendments, terminations, and related expenses - The 2011 Equity Incentive Plan was amended in April 2019 to increase reserved shares by approximately 5.0 million and extend its term to April 2029[101] - The Inducement Plan was terminated in June 2019, with no further grants, while outstanding awards remain subject to its terms[103] | Item | Three Months Ended June 30, 2019 (in thousands) | Three Months Ended June 30, 2018 (in thousands) | Six Months Ended June 30, 2019 (in thousands) | Six Months Ended June 30, 2018 (in thousands) | | :------------------------------ | :---------------------------------------------- | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Options and Restricted Stock Units | $2,848 | $1,888 | $4,993 | $3,514 | | Employee Stock Purchase Plan | $144 | $119 | $270 | $240 | | Total Share-based Compensation | $2,992 | $2,007 | $5,263 | $3,754 | Note 11. Income Taxes This note explains the income tax benefit, its components, and factors affecting the effective tax rate - The company recorded a tax benefit of $1.1 million for both the three and six months ended June 30, 2019, primarily from the amortization of acquisition-related deferred tax liability, partially offset by foreign operations provision[114] - The tax benefit differs from the 21% U.S. Federal statutory rate due to a valuation allowance for deferred tax assets, mainly net operating loss carryforwards[115] Note 12. Information about Geographic Areas This note breaks down revenue by geographic region, highlighting sales contributions from key markets - Sales to customers in the United States represented 35% ($9.9 million) and 38% ($22.4 million) of total revenues for the three and six months ended June 30, 2019, respectively[120] - Sales to customers in China represented 14% ($4.0 million) and 13% ($7.5 million) of total revenues for the three and six months ended June 30, 2019, respectively, showing an increase from prior year[121] Note 13. Commitments and Contingencies This note discloses indemnification provisions and legal proceedings, assessing potential financial impact - The company enters into indemnification provisions in the ordinary course of business, typically with business partners, customers, and suppliers, for intellectual property infringement claims, with maximum potential payments often not limited[123] - The company is subject to various legal proceedings and claims, including intellectual property and employment matters, and accrues liabilities for probable and estimable losses[125] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial performance, including an overview of its business, critical accounting policies, recent accounting changes, and a detailed analysis of results of operations, liquidity, and capital resources. It highlights revenue growth, gross margin improvements, changes in operating expenses, and the impact of debt extinguishment Overview This section introduces Fluidigm's business, strategic focus, financial trends, and operational efficiency initiatives - Fluidigm is a global biotechnology tools provider focused on translational and clinical research, particularly cancer, immunology, and immunotherapy, utilizing proprietary CyTOF® and microfluidics technologies[131][132] - Total revenue for the six months ended June 30, 2019, increased to $58.3 million from $51.7 million in the prior year, but the company has an accumulated deficit of $598.1 million as of June 30, 2019[135] - The company has implemented operational efficiencies and cost-savings initiatives since 2017, leading to reduced net losses ($76.0 million in 2016 to $59.0 million in 2018) and a strengthened balance sheet through equity issuance and debt reduction[136] Critical Accounting Policies, Significant Judgments and Estimates This section discusses accounting policies requiring significant judgment and estimates, and their financial impact - The preparation of financial statements requires significant estimates and assumptions, which, if materially different from actual results, could affect financial condition and results of operations[137] - No material changes in critical accounting policies occurred during the six months ended June 30, 2019, except for the adoption of ASC 842[138] Recent Accounting Pronouncements This section details new accounting standard adoptions, specifically ASC 842 for leases, and its financial impact - The company adopted ASC 842 (Leases) on January 1, 2019, using a modified retrospective approach, recognizing $9.2 million in lease liabilities and $7.4 million in ROU assets, with no impact on retained earnings[139][140][142] - The company elected practical expedients under ASC 842, including not reassessing prior conclusions on lease identification/classification and not recognizing ROU assets/liabilities for short-term leases (one year or less)[141][143] Results of Operations The company experienced revenue growth driven by mass cytometry instruments, improved gross margins due to better capacity utilization, and increased operating expenses from higher headcount and product development. Interest expense significantly decreased following debt extinguishment, while a one-time loss was recognized from the conversion of convertible notes | Item | Three Months Ended June 30, 2019 (in thousands) | % | Three Months Ended June 30, 2018 (in thousands) | % | Six Months Ended June 30, 2019 (in thousands) | % | Six Months Ended June 30, 2018 (in thousands) | % | | :---------------------------------- | :---------------------------------------------- | :- | :---------------------------------------------- | :- | :-------------------------------------------- | :- | :---------------------------------------------- | :- | | Revenue | $28,196 | 100 | $26,428 | 100 | $58,307 | 100 | $51,676 | 100 | | Cost of revenue | $12,833 | 46 | $12,840 | 48 | $25,954 | 45 | $24,660 | 48 | | Gross profit | $15,363 | 54 | $13,588 | 52 | $32,353 | 55 | $27,016 | 52 | | Total operating expenses | $29,999 | 106 | $26,373 | 100 | $61,195 | 105 | $52,434 | 101 | | Loss from operations | $(14,636) | (52) | $(12,785) | (48) | $(28,842) | (50) | $(25,418) | (49) | | Interest expense | $(491) | (1) | $(3,916) | (15) | $(3,192) | (5) | $(5,805) | (12) | | Loss on extinguishment of debt | — | — | — | — | $(9,000) | (15) | — | — | | Other income, net | $231 | 1 | $256 | 1 | $715 | 1 | $348 | 1 | | Loss before income taxes | $(14,896) | (52) | $(16,445) | (62) | $(40,319) | (69) | $(30,875) | (60) | | Income tax benefit | $1,143 | 4 | $204 | 1 | $1,101 | 2 | $1,387 | 3 | | Net loss | $(13,753) | (48) | $(16,241) | (61) | $(39,218) | (67) | $(29,488) | (57) | Revenue This section analyzes revenue performance, highlighting growth drivers, regional contributions, and segment trends - Total revenue increased by 7% to $28.2 million for Q2 2019 and 13% to $58.3 million for H1 2019, driven by higher mass cytometry instrument sales, partially offset by lower microfluidics sales[149][151] - Americas revenue decreased 11% in Q2 2019 due to lower mass cytometry instruments and microfluidics sales, while Europe grew 23% and Asia-Pacific grew 22% due to increased instrument and consumables sales[150] - Product revenue increased 7% for Q2 2019 and 14% for H1 2019, primarily from higher mass cytometry instrument sales, while consumables revenue decreased 3% in Q2 2019 due to lower microfluidics consumables[152][153] Cost of Revenue, Gross Profit and Gross Margin This section analyzes cost of revenue, gross profit, and gross margin trends, attributing changes to utilization and pricing | Item | Three Months Ended June 30, 2019 (in thousands) | Three Months Ended June 30, 2018 (in thousands) | Year-Over-Year Change | Six Months Ended June 30, 2019 (in thousands) | Six Months Ended June 30, 2018 (in thousands) | Year-Over-Year Change | | :-------------------- | :---------------------------------------------- | :---------------------------------------------- | :-------------------- | :-------------------------------------------- | :---------------------------------------------- | :-------------------- | | Cost of product revenue | $11,100 | $11,160 | (1)% | $22,489 | $21,382 | 5% | | Cost of service revenue | $1,733 | $1,680 | 3% | $3,465 | $3,278 | 6% | | Total cost of revenue | $12,833 | $12,840 | —% | $25,954 | $24,660 | 5% | | Gross profit | $15,363 | $13,588 | 13% | $32,353 | $27,016 | 20% | | Gross margin | 54.5% | 51.4% | 3.1 ppts | 55.5% | 52.3% | 3.2 ppts | - Gross margin increased by 3.1 percentage points for Q2 2019 and 3.2 percentage points for H1 2019, driven by higher instrument capacity utilization and spreading fixed costs over a larger revenue base, despite lower instrument pricing[157][158] Operating Expenses This section analyzes R&D and SG&A expense changes, detailing underlying cost drivers | Item | Three Months Ended June 30, 2019 (in thousands) | Three Months Ended June 30, 2018 (in thousands) | Year-Over-Year Change | Six Months Ended June 30, 2019 (in thousands) | Six Months Ended June 30, 2018 (in thousands) | Year-Over-Year Change | | :------------------------------ | :---------------------------------------------- | :---------------------------------------------- | :-------------------- | :-------------------------------------------- | :---------------------------------------------- | :-------------------- | | Research and development | $7,865 | $7,386 | 6% | $16,237 | $14,642 | 11% | | Selling, general and administrative | $22,134 | $18,987 | 17% | $44,958 | $37,792 | 19% | | Total | $29,999 | $26,373 | 14% | $61,195 | $52,434 | 17% | - R&D expense increased by 6% for Q2 2019 and 11% for H1 2019, primarily due to higher laboratory supplies, equipment, and headcount costs[161][162] - SG&A expense increased by 17% for Q2 2019 and 19% for H1 2019, driven by higher compensation-related costs (including stock-based compensation due to executive changes and increased headcount), business development, legal, advertising, and promotional expenses[164][165] Interest Expense, Loss on Extinguishment of Debt, and Other Income, Net This section analyzes non-operating income/expense, including debt extinguishment and interest rate impacts | Item | Three Months Ended June 30, 2019 (in thousands) | Three Months Ended June 30, 2018 (in thousands) | Year-Over-Year Change | Six Months Ended June 30, 2019 (in thousands) | Six Months Ended June 30, 2018 (in thousands) | Year-Over-Year Change | | :------------------------------ | :---------------------------------------------- | :---------------------------------------------- | :-------------------- | :-------------------------------------------- | :---------------------------------------------- | :-------------------- | | Interest expense | $491 | $3,916 | (87)% | $3,192 | $5,805 | (45)% | | Loss on extinguishment of debt | — | — | NA | $9,000 | — | NA | | Other income, net | $(231) | $(256) | (10)% | $(715) | $(348) | 105% | | Total | $260 | $3,660 | (93)% | $11,477 | $5,457 | 110% | - Interest expense significantly decreased for Q2 and H1 2019 due to the retirement of the 2018 Notes in Q1 2019[169] - A $9.0 million loss on extinguishment of debt was recognized in H1 2019 due to the conversion of $150.0 million of 2018 Notes into common stock[168] Income Tax Benefit This section discusses the income tax benefit, its sources, and factors influencing the effective tax rate - The company recorded a tax benefit of $1.1 million for both the three and six months ended June 30, 2019, primarily from the amortization of acquisition-related deferred tax liability, partially offset by foreign operations[172] - Future release of valuation allowances on deferred tax assets in foreign subsidiaries, contingent on achieving future profitability, could decrease the income tax provision[173] Liquidity and Capital Resources The company's liquidity is supported by cash, investments, and an available revolving credit facility. Operating activities continue to use cash, while investing activities reflect significant purchases of investments. Financing activities provided cash, primarily from stock option exercises and ESPP, following the conversion of convertible notes Sources of Liquidity This section identifies primary liquidity sources: cash, investments, and available credit facilities - As of June 30, 2019, principal liquidity sources included $24.0 million in cash and cash equivalents, $44.8 million in short-term investments, and $12.5 million available under the Revolving Credit Facility[174] Net Cash Used in Operating Activities This section analyzes cash flows from operating activities, detailing net loss and non-cash adjustments | Period | Net Cash Used in Operating Activities (in thousands) | | :---------------------- | :--------------------------------------------------- | | Six Months Ended June 30, 2019 | $(25,143) | | Six Months Ended June 30, 2018 | $(20,499) | - Net cash used in operating activities increased to $25.1 million for H1 2019 (from $20.5 million in H1 2018), driven by a net loss of $39.2 million, partially offset by non-cash adjustments and changes in assets/liabilities[178][179] Net Cash Provided by (Used in) Investing Activities This section analyzes cash flows from investing activities, focusing on investments and capital expenditures | Period | Net Cash Provided by (Used in) Investing Activities (in thousands) | | :---------------------- | :----------------------------------------------------------------- | | Six Months Ended June 30, 2019 | $(45,299) | | Six Months Ended June 30, 2018 | $3,936 | - Net cash used in investing activities was $45.3 million for H1 2019, primarily due to $44.6 million in purchases of investments and $0.7 million in capital expenditures[181] Net Cash Provided by (Used in) Financing Activities This section analyzes cash flows from financing activities, including equity issuances and debt transactions | Period | Net Cash Provided by (Used in) Financing Activities (in thousands) | | :---------------------- | :----------------------------------------------------------------- | | Six Months Ended June 30, 2019 | $1,187 | | Six Months Ended June 30, 2018 | $(2,152) | - Net cash provided by financing activities was $1.2 million for H1 2019, mainly from stock option exercises ($1.0 million) and ESPP proceeds ($0.6 million), partially offset by tax payments for equity awards ($0.5 million)[182] Liquidity and Capital Resources (continued) This section assesses future liquidity, capital requirements, and potential funding strategies - The company believes existing cash, cash equivalents, and investments, along with the Revolving Credit Facility, will be sufficient for working capital and capital expenditures for at least the next 18 months (through December 31, 2020)[186] - Future funding requirements are uncertain and may necessitate additional capital raises through debt or equity financing, depending on market acceptance, R&D costs, litigation, regulatory approvals, and potential acquisitions[187] Off-Balance Sheet Arrangements This section confirms the absence of material off-balance sheet arrangements per SEC regulations - As of June 30, 2019, the company did not have any off-balance sheet arrangements as defined by SEC Regulation S-K[188] Contractual Obligations and Commitments This section outlines contractual obligations, primarily operating leases, and notes material changes - Operating lease obligations include current headquarters and foreign subsidiary leases, with a new headquarters lease expected to commence in late 2019 or early 2020[189] - No material changes occurred in contractual obligations during the six months ended June 30, 2019, compared to those disclosed in the 2018 annual report on Form 10-K, other than those related to leases[190] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section assesses the company's exposure to market risks, primarily from foreign currency exchange rates and interest rates. It notes that the company does not use derivative financial instruments for trading and believes its exposure to these risks is not material due to its investment strategy Foreign Currency Exchange Risk This section assesses exposure to foreign currency fluctuations and their potential financial impact - The company's operations and cash flows are subject to foreign currency exchange rate fluctuations, with most revenue in USD but expenses in local currencies (US, Singapore, Canada)[192] - For the six months ended June 30, 2019 and 2018, foreign exchange rate changes resulted in gains and losses of less than $0.1 million, and a 10% change in rates would not have a material impact[193] Interest Rate Sensitivity This section evaluates exposure to interest rate changes, particularly for cash and short-term investments - As of June 30, 2019, the company held $68.9 million in cash, cash equivalents, and short-term investments, primarily in short-term instruments like treasury bills and money market funds[194] - Due to the short-term nature of investments, the company believes it has no material exposure to changes in fair value from interest rate fluctuations, and a 10% decrease in rates would not materially affect interest income[194] Fair Value of Financial Instruments This section discusses market risk management for financial instruments and derivative usage policy - The company does not have material exposure to market risk from investments and does not use derivative financial instruments for speculative or trading purposes, though hedging strategies may be adopted in the future[195] Item 4. Controls and Procedures This section confirms the effectiveness of the company's disclosure controls and procedures as of June 30, 2019, and reports no material changes in internal control over financial reporting during the quarter. It also acknowledges the inherent limitations of control systems Evaluation of Disclosure Controls and Procedures This section reports on management's assessment of disclosure controls and procedures effectiveness - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2019[196] Changes in Internal Control Over Financial Reporting This section reports any material changes in internal control over financial reporting during the period - No material changes in internal control over financial reporting occurred during the three months ended June 30, 2019[197] Limitations on the Effectiveness of Controls This section acknowledges inherent limitations of control systems, noting that absolute assurance is not guaranteed - Control systems provide reasonable, not absolute, assurance, and inherent limitations mean misstatements due to error or fraud may occur and go undetected[198] PART II. OTHER INFORMATION This part includes legal proceedings, risk factors, other information, exhibits, and official signatures Item 1. Legal Proceedings This section states that the company is involved in various legal proceedings and claims in the ordinary course of business, but currently believes these matters will not have a material adverse effect on its financial condition or operations - The company is involved in various legal proceedings and claims in the ordinary course of business, but currently believes the final outcome of pending matters would not have a material adverse effect on its business, operating results, financial condition, or cash flows[200] Item 1A. Risk Factors This section outlines significant risks to Fluidigm's business, including financial volatility, ongoing losses, intense market competition, challenges in product development and market acceptance, supply chain dependencies, international business risks, and intellectual property protection issues. It also addresses risks related to regulatory compliance, IT security, and capital needs Risks Related to Fluidigm's Business and Strategy This section details risks from financial performance, market competition, product development, and operations - The company's financial results and revenue growth rates have varied significantly, and future variability could lead to stock price volatility, especially given its increasing dependence on the capital-intensive mass cytometry business[203] - Fluidigm has incurred significant net losses since inception, with an accumulated deficit of $598.1 million as of June 30, 2019, and expects to continue incurring losses due to ongoing R&D and sales/marketing investments[205][206] - The life science markets are highly competitive and subject to rapid technological change, with numerous established competitors having greater resources, which could lead to pricing pressures and reduced profit margins[207][208] Risks Related to Intellectual Property This section outlines risks protecting intellectual property, potential litigation, and reliance on licensed technologies - The company's ability to protect its intellectual property through patents, copyrights, trade secrets, and contractual restrictions is uncertain, and patents may be challenged or circumvented, affecting competitive advantage[285][286] - Litigation to protect or enforce intellectual property rights, or defend against infringement claims, can be costly, time-intensive, and may result in substantial legal fees, royalty payments, or delays in product introductions[290][291] - The company relies on licensed technologies, and any loss of rights due to non-compliance, termination, or inability to secure future licenses on favorable terms could prevent product sales and adversely affect the business[294][296] Item 5. Other Information This section indicates that there is no other material information to report beyond what is already disclosed in the filing - This section states "None," indicating no other material information to report[300] Item 6. Exhibits This section lists the exhibits accompanying the Form 10-Q, including amendments to the equity incentive plan and certifications - The report includes an exhibit list detailing documents incorporated by reference or filed herewith, such as amendments to the 2011 Equity Incentive Plan and certifications pursuant to the Sarbanes-Oxley Act[302][304] SIGNATURES This section contains the official signatures of the company's President and CEO and CFO, certifying the report - The report is signed by Stephen Christopher Linthwaite, President and Chief Executive Officer, and Vikram Jog, Chief Financial Officer, on August 7, 2019[307]