Company Quick10K Filing
Fluidigm
Price12.25 EPS-1
Shares70 P/E-16
MCap852 P/FCF-29
Net Debt-28 EBIT-51
TEV824 TEV/EBIT-16
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-06-30 Filed 2020-08-07
10-Q 2020-03-31 Filed 2020-05-11
10-K 2019-12-31 Filed 2020-02-27
10-Q 2019-09-30 Filed 2019-11-08
10-Q 2019-06-30 Filed 2019-08-07
10-Q 2019-03-31 Filed 2019-05-07
10-K 2018-12-31 Filed 2019-03-18
10-Q 2018-09-30 Filed 2018-11-06
10-Q 2018-06-30 Filed 2018-08-08
10-Q 2018-03-31 Filed 2018-05-08
10-K 2017-12-31 Filed 2018-03-08
10-Q 2017-09-30 Filed 2017-11-07
10-Q 2017-06-30 Filed 2017-08-08
10-Q 2017-03-31 Filed 2017-05-09
10-K 2016-12-31 Filed 2017-03-03
10-Q 2016-09-30 Filed 2016-11-09
10-Q 2016-06-30 Filed 2016-08-09
10-Q 2016-03-31 Filed 2016-05-09
10-K 2015-12-31 Filed 2016-02-29
10-Q 2015-09-30 Filed 2015-11-09
10-Q 2015-06-30 Filed 2015-08-10
10-Q 2015-03-31 Filed 2015-05-11
10-K 2014-12-31 Filed 2015-02-26
10-Q 2014-09-30 Filed 2014-11-06
10-Q 2014-06-30 Filed 2014-08-04
10-Q 2014-03-31 Filed 2014-05-12
10-K 2013-12-31 Filed 2014-03-12
10-Q 2013-09-30 Filed 2013-11-07
10-Q 2013-06-30 Filed 2013-08-07
10-Q 2013-03-31 Filed 2013-05-09
10-K 2012-12-31 Filed 2013-03-12
10-Q 2012-09-30 Filed 2012-11-09
10-Q 2012-06-30 Filed 2012-08-14
10-Q 2012-03-31 Filed 2012-05-15
10-K 2011-12-31 Filed 2012-03-26
10-Q 2011-09-30 Filed 2011-11-14
10-Q 2011-06-30 Filed 2011-08-09
10-Q 2011-03-31 Filed 2011-05-12
10-K 2010-12-31 Filed 2011-03-28
8-K 2020-09-08 Other Events
8-K 2020-08-06 Earnings, Exhibits
8-K 2020-06-23
8-K 2020-05-07
8-K 2020-05-05
8-K 2020-04-21
8-K 2020-04-14
8-K 2020-03-04
8-K 2020-02-10
8-K 2020-01-14
8-K 2019-11-20
8-K 2019-11-05
8-K 2019-08-01
8-K 2019-07-23
8-K 2019-06-03
8-K 2019-05-02
8-K 2019-04-18
8-K 2019-03-20
8-K 2019-02-27
8-K 2019-02-20
8-K 2019-02-13
8-K 2019-02-04
8-K 2018-12-11
8-K 2018-11-01
8-K 2018-10-30
8-K 2018-09-18
8-K 2018-08-02
8-K 2018-08-02
8-K 2018-07-30
8-K 2018-05-31
8-K 2018-05-03
8-K 2018-03-15
8-K 2018-03-12
8-K 2018-03-06
8-K 2018-03-02
8-K 2018-02-08
8-K 2018-02-06

FLDM 10Q Quarterly Report

Part I. Financial Information
Item 1. Financial Statements
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 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 5. Other Information
Item 6. Exhibits
EX-10.5 exhibit10510q2q2020.htm
EX-31.1 exhibit31110q2q2020ng.htm
EX-31.2 exhibit31210q2q2020ng.htm
EX-32.1 exhibit32110q2q2020ng.htm
EX-32.2 exhibit32210q2q2020ng.htm

Fluidigm Earnings 2020-06-30

Balance SheetIncome StatementCash Flow
0.50.40.30.20.10.02012201420172020
Assets, Equity
0.10.10.0-0.0-0.1-0.12012201420172020
Rev, G Profit, Net Income
0.20.10.0-0.0-0.1-0.22012201420172020
Ops, Inv, Fin

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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 officesZip Code
Registrant’s telephone number, including area code: (650) 266-6000
_____________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.001 par value per shareFLDMThe 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 filerAccelerated 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)
Notes to Condensed Consolidated Financial Statements
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,
20202019
ASSETS
Current assets:
Cash and cash equivalents$42,965  $21,661  
Short-term investments2,431  36,978  
Accounts receivable (net of allowances of $101 and $6, at June 30, 2020 and December 31, 2019, respectively)
9,983  18,981  
Inventories18,900  13,884  
Prepaid expenses and other current assets4,171  4,592  
Total current assets78,450  96,096  
Property and equipment, net7,865  8,056  
Operating lease right-of-use asset, net39,027  4,860  
Other non-current assets5,034  5,492  
Developed technology, net45,644  46,200  
Goodwill106,328  104,108  
Total assets$282,348  $264,812  
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$9,384  $6,510  
Accrued compensation and related benefits6,757  5,160  
Operating lease liabilities, current2,170  1,833  
Other accrued liabilities5,758  7,515  
Deferred revenue, current14,279  11,803  
Total current liabilities38,348  32,821  
Convertible notes, net54,013  53,821  
Deferred tax liability9,655  11,494  
Operating lease liabilities, non-current39,139  4,323  
Deferred revenue, non-current7,936  8,168  
Other non-current liabilities538  573  
Total liabilities149,629  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 capital786,193  777,765  
Accumulated other comprehensive loss(809) (582) 
Accumulated deficit(652,736) (623,641) 
Total stockholders’ equity132,719  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,
 2020201920202019
Revenue:
Product revenue$17,405  $23,235  $36,386  $48,062  
Service revenue5,140  4,961  10,326  10,245  
        Development revenue3,000    3,000    
 Other revenue513    3,963    
Total revenue26,058  28,196  53,675  58,307  
Costs and expenses:
Cost of product revenue9,483  11,100  19,123  22,489  
Cost of service revenue1,237  1,733  2,762  3,465  
Research and development8,448  7,865  17,147  16,237  
Selling, general and administrative20,616  22,134  43,311  44,958  
Total costs and expenses39,784  42,832  82,343  87,149  
Loss from operations(13,726) (14,636) (28,668) (28,842) 
Interest expense(897) (491) (1,797) (3,192) 
Loss from extinguishment of debt      (9,000) 
Other income (expense), net463  231  (355) 715  
Loss before income taxes(14,160) (14,896) (30,820) (40,319) 
Income tax benefit1,145  1,143  1,825  1,101  
Net loss$(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 diluted70,916  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,
 2020201920202019
Net loss$(13,015) $(13,753) $(28,995) $(39,218) 
Other comprehensive income (loss), net of tax
Foreign currency translation adjustment109  (9) (194) (1) 
Net change in unrealized gain (loss) on investments(33) 63  (33) 65  
Other comprehensive income (loss), net of tax76  54  (227) 64  
Comprehensive loss$(12,939) $(13,699) $(29,222) $(39,154) 


See accompanying notes
3


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

 Common StockAdditional
Paid-in
Capital
Accumulated
Other
Comprehensive
Income (Loss)
Accumulated
Deficit
Total
Stockholders’
Equity
 SharesAmount
Balance as of December 31, 201969,956  $70  $777,765  $(582) $(623,641) $153,612  
Issuance of restricted stock, net of shares withheld for taxes, and other255  —  (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 AS485  1  2,048  —  —  2,049  
Net loss—  —  —  —  (15,980) (15,980) 
Other comprehensive loss, net of tax—  —  —  (303) —  (303) 
Balance as of March 31, 202070,696  $71  $782,031  $(885) $(639,721) $141,496  
Issuance of restricted stock, net of shares withheld for taxes, and other286  —  (116) —  —  (116) 
Issuance of common stock under ESPP301  —  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, 202071,283  $71  $786,193  $(809) $(652,736) $132,719  
 Common StockAdditional
Paid-in
Capital
Accumulated
Other
Comprehensive
Income (Loss)
Accumulated
Deficit
Total
Stockholders’
Equity
 SharesAmount
Balance as of December 31, 201849,338  $49  $631,605  $(687) $(558,851) $72,116  
Issuance of common stock on bond conversion19,460  19  133,279  —  —  133,298  
Issuance of restricted stock, net of shares withheld for taxes, and other140  1  (177) —  —  (176) 
Issuance of common stock from option exercises53  —  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, 201968,991  $69  $767,169  $(677) $(584,316) $182,245  
Issuance of restricted stock, net of shares withheld for taxes, and other183  —  (325) —  —  (325) 
Issuance of common stock from option exercises130  —  793  —  —  793  
Issuance of common stock under ESPP96  —  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, 201969,400  $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,
 20202019
Operating activities
Net loss$(28,995) $(39,218) 
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization2,016  2,351  
Stock-based compensation expense6,000  5,263  
Amortization of developed technology5,936  5,600  
Amortization of debt discounts, premiums and issuance costs 275  2,037  
Lease amortization1,331  (250) 
Loss on extinguishment of debt  9,000  
Provision for excess and obsolete inventory306  555  
Loss on disposal of property and equipment148  29  
Other non-cash items136  162  
Changes in assets and liabilities:
Accounts receivable, net9,055  (2,420) 
Inventories(4,892) (2,041) 
Prepaid expenses and other assets(706) (965) 
Accounts payable3,136  3,439  
Deferred revenue1,965  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 investments5,011    
Proceeds from maturities of investments29,400    
Purchases of property and equipment(1,671) (685) 
Net cash provided by (used in) investing activities27,586  (45,299) 
Financing activities
Payment of debt issuance cost(375) (15) 
Proceeds from exercise of stock options  1,048  
Proceeds from stock issuance from ESPP645  641  
Payments for taxes related to net share settlement of equity awards and other(262) (487) 
Net cash provided by financing activities8  1,187  
Effect of foreign exchange rate fluctuations on cash and cash equivalents(205) (25) 
Net increase (decrease) in cash, cash equivalents and restricted cash20,304  (69,280) 
Cash, cash equivalents and restricted cash at beginning of period23,736  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
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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
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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.
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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 milli