View:
Download DOC
Download PDF
Download XLS
Download XBRL
Document
FALSEMarch 31, 20182018Q1FLDMAccelerated Filer000116219412-31—3910.0010.00110,00010,000————0.0010.001200,000200,00038,90838,78738,90838,7875/11/19992007-0751.259113060P1Ythree yearsP1Ythree years2.752.75P6MP4YP4YP3Yno00011621942018-01-012018-03-31xbrli:shares00011621942018-04-30iso4217:USD00011621942018-03-3100011621942017-12-31iso4217:USDxbrli:shares00011621942017-01-012017-03-3100011621942016-12-3100011621942017-03-310001162194us-gaap:StockCompensationPlanMember2018-01-012018-03-310001162194us-gaap:StockCompensationPlanMember2017-01-012017-03-310001162194us-gaap:ConvertibleDebtSecuritiesMemberfldm:ExchangeConvertibleSeniorNotesDue2034Member2018-01-012018-03-310001162194us-gaap:ConvertibleDebtSecuritiesMemberfldm:ExchangeConvertibleSeniorNotesDue2034Member2017-01-012017-03-310001162194fldm:ConvertibleNotesPotentialMakeWholeSharesMemberus-gaap:ConvertibleDebtSecuritiesMember2018-01-012018-03-310001162194fldm:ConvertibleNotesPotentialMakeWholeSharesMemberus-gaap:ConvertibleDebtSecuritiesMember2017-01-012017-03-310001162194fldm:SeniorConvertibleNotesdue2034Memberus-gaap:ConvertibleDebtSecuritiesMember2018-01-012018-03-310001162194fldm:SeniorConvertibleNotesdue2034Memberus-gaap:ConvertibleDebtSecuritiesMember2017-01-012017-03-310001162194us-gaap:AccumulatedTranslationAdjustmentMember2017-12-310001162194us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2017-12-310001162194us-gaap:AccumulatedOtherComprehensiveIncomeMember2017-12-310001162194us-gaap:AccumulatedTranslationAdjustmentMember2018-01-012018-03-310001162194us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2018-01-012018-03-310001162194us-gaap:AccumulatedOtherComprehensiveIncomeMember2018-01-012018-03-310001162194us-gaap:AccumulatedTranslationAdjustmentMember2018-03-310001162194us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2018-03-310001162194us-gaap:AccumulatedOtherComprehensiveIncomeMember2018-03-310001162194fldm:SeniorConvertibleNotesdue2034Memberus-gaap:ConvertibleDebtMember2014-02-28xbrli:pure0001162194us-gaap:ConvertibleDebtMemberfldm:ExchangeConvertibleSeniorNotesDue2034Member2018-03-310001162194us-gaap:DifferenceBetweenRevenueGuidanceInEffectBeforeAndAfterTopic606Memberus-gaap:AccountingStandardsUpdate201409Member2018-01-010001162194us-gaap:CalculatedUnderRevenueGuidanceInEffectBeforeTopic606Member2017-12-3100011621942018-01-010001162194us-gaap:CalculatedUnderRevenueGuidanceInEffectBeforeTopic606Member2018-01-012018-03-310001162194us-gaap:DifferenceBetweenRevenueGuidanceInEffectBeforeAndAfterTopic606Memberus-gaap:AccountingStandardsUpdate201409Member2018-01-012018-03-310001162194us-gaap:CalculatedUnderRevenueGuidanceInEffectBeforeTopic606Member2018-03-310001162194us-gaap:DifferenceBetweenRevenueGuidanceInEffectBeforeAndAfterTopic606Memberus-gaap:AccountingStandardsUpdate201409Member2018-03-310001162194fldm:SeniorConvertibleNotesdue2034Memberus-gaap:ConvertibleDebtMember2018-03-3100011621942018-04-012018-03-3100011621942019-01-012018-03-3100011621942020-01-012018-03-3100011621942021-01-012018-03-3100011621942018-03-310001162194fldm:CommissionCostsMember2018-03-310001162194fldm:CommissionCostsMember2018-01-010001162194country:US2018-01-012018-03-310001162194country:US2017-01-012017-03-310001162194us-gaap:EuropeMember2018-01-012018-03-310001162194us-gaap:EuropeMember2017-01-012017-03-310001162194us-gaap:AsiaPacificMember2018-01-012018-03-310001162194us-gaap:AsiaPacificMember2017-01-012017-03-310001162194fldm:OtherGeographicalCountriesMember2018-01-012018-03-310001162194fldm:OtherGeographicalCountriesMember2017-01-012017-03-310001162194fldm:InstrumentsMember2018-01-012018-03-310001162194fldm:InstrumentsMember2017-01-012017-03-310001162194fldm:ConsumablesMember2018-01-012018-03-310001162194fldm:ConsumablesMember2017-01-012017-03-310001162194fldm:TotalProductsMember2018-01-012018-03-310001162194fldm:TotalProductsMember2017-01-012017-03-310001162194fldm:ServicesMember2018-01-012018-03-310001162194fldm:ServicesMember2017-01-012017-03-310001162194fldm:LicenseMember2018-01-012018-03-310001162194fldm:LicenseMember2017-01-012017-03-3100011621942018-04-012018-01-012018-03-3100011621942019-01-012018-01-012018-03-3100011621942020-01-012018-01-012018-03-3100011621942018-01-012018-03-310001162194us-gaap:MinimumMember2018-01-012018-03-310001162194us-gaap:MaximumMember2018-01-012018-03-310001162194fldm:CommissionCostsMemberus-gaap:MinimumMember2018-01-012018-03-310001162194us-gaap:MaximumMemberfldm:CommissionCostsMember2018-01-012018-03-310001162194fldm:SeniorConvertibleNotesdue2034Memberus-gaap:ConvertibleDebtMember2014-02-0400011621942014-02-040001162194fldm:SeniorConvertibleNotesdue2034Memberus-gaap:DebtInstrumentRedemptionPeriodOneMemberus-gaap:ConvertibleDebtMember2014-02-042014-02-040001162194fldm:SeniorConvertibleNotesdue2034Memberus-gaap:DebtInstrumentRedemptionPeriodTwoMemberus-gaap:ConvertibleDebtMember2014-02-042014-02-040001162194fldm:SeniorConvertibleNotesdue2034Memberus-gaap:ConvertibleDebtMemberus-gaap:DebtInstrumentRedemptionPeriodThreeMember2014-02-042014-02-040001162194fldm:SeniorConvertibleNotesdue2034Memberus-gaap:ConvertibleDebtMember2014-02-042014-02-040001162194fldm:SeniorConvertibleNotesdue2034Memberus-gaap:ConvertibleDebtMember2014-02-012014-02-280001162194us-gaap:ConvertibleDebtMemberfldm:ExchangeConvertibleSeniorNotesDue2034Member2018-01-012018-03-310001162194us-gaap:ConvertibleDebtMemberfldm:ExchangeConvertibleSeniorNotesDue2034Member2018-03-012018-03-310001162194fldm:SeniorConvertibleNotesdue2034Memberus-gaap:ConvertibleDebtMember2017-12-310001162194us-gaap:ConvertibleDebtMemberfldm:ExchangeConvertibleSeniorNotesDue2034Member2017-12-310001162194us-gaap:ConvertibleDebtMember2018-03-310001162194us-gaap:CashMember2018-03-310001162194us-gaap:MoneyMarketFundsMemberus-gaap:FairValueInputsLevel1Member2018-03-310001162194us-gaap:USTreasurySecuritiesMemberus-gaap:FairValueInputsLevel1Member2018-03-310001162194us-gaap:FairValueInputsLevel1Member2018-03-310001162194us-gaap:FairValueInputsLevel2Memberus-gaap:USTreasuryAndGovernmentMember2018-03-310001162194us-gaap:CashMember2017-12-310001162194us-gaap:MoneyMarketFundsMemberus-gaap:FairValueInputsLevel1Member2017-12-310001162194us-gaap:USTreasurySecuritiesMemberus-gaap:FairValueInputsLevel1Member2017-12-310001162194us-gaap:FairValueInputsLevel1Member2017-12-310001162194us-gaap:FairValueInputsLevel2Memberus-gaap:USTreasuryAndGovernmentMember2017-12-310001162194us-gaap:FairValueInputsLevel2Memberus-gaap:ConvertibleDebtMember2018-03-310001162194us-gaap:FairValueInputsLevel2Memberus-gaap:ConvertibleDebtMember2017-12-310001162194us-gaap:ConvertibleDebtMember2017-12-310001162194us-gaap:DevelopedTechnologyRightsMember2018-03-310001162194us-gaap:DevelopedTechnologyRightsMember2018-01-012018-03-310001162194fldm:PatentsandLicenseAgreementsMember2018-03-310001162194fldm:PatentsandLicenseAgreementsMember2018-01-012018-03-310001162194us-gaap:DevelopedTechnologyRightsMember2017-12-310001162194us-gaap:DevelopedTechnologyRightsMember2017-01-012017-12-310001162194fldm:PatentsandLicenseAgreementsMember2017-12-310001162194fldm:PatentsandLicenseAgreementsMember2017-01-012017-12-310001162194us-gaap:DevelopedTechnologyRightsMemberfldm:DVSSciencesInc.Member2014-02-012014-02-280001162194us-gaap:DevelopedTechnologyRightsMemberfldm:DVSSciencesInc.Member2018-01-012018-03-310001162194us-gaap:DevelopedTechnologyRightsMemberfldm:DVSSciencesInc.Member2017-01-012017-03-310001162194fldm:ComputerEquipmentAndSoftwareMember2018-03-310001162194fldm:ComputerEquipmentAndSoftwareMember2017-12-310001162194fldm:LaboratoryAndProductionEquipmentMember2018-03-310001162194fldm:LaboratoryAndProductionEquipmentMember2017-12-310001162194us-gaap:LeaseholdImprovementsMember2018-03-310001162194us-gaap:LeaseholdImprovementsMember2017-12-310001162194us-gaap:OfficeEquipmentMember2018-03-310001162194us-gaap:OfficeEquipmentMember2017-12-310001162194fldm:ThermoMember2017-07-012017-07-310001162194fldm:ThermoMember2017-08-012017-08-310001162194us-gaap:EmployeeStockOptionMember2018-03-310001162194us-gaap:RestrictedStockUnitsRSUMember2018-03-310001162194us-gaap:PerformanceSharesMember2018-03-310001162194us-gaap:EmployeeStockOptionMember2018-01-012018-03-310001162194us-gaap:RestrictedStockUnitsRSUMember2018-01-012018-03-310001162194us-gaap:PerformanceSharesMember2018-01-012018-03-310001162194us-gaap:RestrictedStockUnitsRSUMemberus-gaap:MinimumMember2018-01-012018-03-310001162194us-gaap:MaximumMemberus-gaap:RestrictedStockUnitsRSUMember2018-01-012018-03-310001162194us-gaap:PerformanceSharesMemberus-gaap:ExecutiveOfficerMember2018-01-012018-03-310001162194us-gaap:MinimumMemberus-gaap:PerformanceSharesMemberus-gaap:ExecutiveOfficerMember2018-01-012018-03-310001162194us-gaap:MaximumMemberus-gaap:PerformanceSharesMemberus-gaap:ExecutiveOfficerMember2018-01-012018-03-310001162194us-gaap:MinimumMember2017-08-2300011621942017-09-20fldm:employee0001162194fldm:StockOptionExchangeProgramMember2017-08-232017-09-200001162194fldm:StockOptionExchangeProgramMemberus-gaap:EmployeeStockOptionMember2017-09-202017-09-200001162194us-gaap:RestrictedStockUnitsRSUMemberfldm:StockOptionExchangeProgramMember2017-09-202017-09-200001162194fldm:StockOptionExchangeProgramMember2017-09-202017-09-200001162194fldm:TwoThousandSeventeenEmployeeStockPurchasePlanMemberus-gaap:EmployeeStockMember2017-08-012017-08-310001162194fldm:TwoThousandSeventeenEmployeeStockPurchasePlanMemberus-gaap:EmployeeStockMember2017-08-010001162194us-gaap:PerformanceSharesMemberus-gaap:ExecutiveOfficerMember2016-01-012016-12-310001162194fldm:NonExecutiveEmployeesMemberfldm:PerformancebasedRSUsMember2016-01-012016-12-31fldm:segment0001162194country:CNus-gaap:RevenueFromContractWithCustomerMember2018-01-012018-03-310001162194country:CNus-gaap:RevenueFromContractWithCustomerMember2017-01-012017-03-3100011621942017-08-310001162194fldm:AtthemarketEquityOfferingProgramMemberus-gaap:CommonStockMember2017-08-012017-08-310001162194fldm:AtthemarketEquityOfferingProgramMember2017-08-310001162194fldm:AtthemarketEquityOfferingProgramMember2017-08-012017-08-31

 UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 
FORM 10-Q
 
(Mark One)
ýQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
For the quarterly period ended March 31, 2018
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
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 Number)
7000 Shoreline Court, Suite 100
South San Francisco, California 94080
(Address of principal executive offices) (Zip Code)
(650) 266-6000
(Registrant’s telephone number, including area code)
 
  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  ý    No ¨
        Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ý    No ¨
        Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 
ý
Non-accelerated filer ¨(Do not check if a smaller reporting company) 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. o   
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ¨  No ý
As of April 30, 2018, there were 38,916,219 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
FLUIDIGM CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
 (Unaudited)
March 31, 2018December 31, 2017
(Note 2) 
ASSETS 
Current assets: 
Cash and cash equivalents $41,972 $58,056 
Short-term investments 5,282 5,080 
Accounts receivable (net of allowances of $0 at March 31, 2018 and $391 at December 31, 2017) 16,267 15,049 
Inventories 15,253 15,088 
Prepaid expenses and other current assets 2,227 1,528 
Total current assets 81,001 94,801 
Property and equipment, net 11,433 12,301 
Other non-current assets 7,360 7,541 
Developed technology, net 65,800 68,600 
Goodwill 104,108 104,108 
Total assets $269,702 $287,351 
LIABILITIES AND STOCKHOLDERS’ EQUITY 
Current liabilities: 
Accounts payable $5,206 $4,211 
Accrued compensation and related benefits 10,045 10,535 
Other accrued liabilities 7,808 8,490 
Deferred revenue, current 10,645 10,238 
Total current liabilities 33,704 33,474 
Convertible notes, net 164,156 195,238 
Deferred tax liability, net 15,574 16,919 
Deferred revenue, non-current 5,313 4,960 
Other non-current liabilities 2,381 5,825 
Total liabilities 221,128 256,416 
Commitments and contingencies (see Note 8) 
Stockholders’ equity: 
Preferred stock, $0.001 par value, 10,000 shares authorized, no shares issued and outstanding at March 31, 2018 and December 31, 2017 — — 
Common stock, $0.001 par value, 200,000 shares authorized at March 31, 2018 and December 31, 2017; 38,908 and 38,787 shares issued and outstanding as of March 31, 2018 and December 31, 2017, respectively 39 39 
Additional paid-in capital 562,151 531,666 
Accumulated other comprehensive loss (532)(574)
Accumulated deficit (513,084)(500,196)
Total stockholders’ equity 48,574 30,935 
Total liabilities and stockholders’ equity $269,702 $287,351 
See accompanying notes.
1

FLUIDIGM CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
 
Three Months Ended March 31,
20182017
Revenue: 
Product revenue $20,477 $21,307 
Service revenue 4,771 4,167 
License revenue — 59 
Total revenue 25,248 25,533 
Costs and expenses: 
Cost of product revenue 10,222 10,851 
Cost of service revenue 1,598 1,118 
Research and development 7,256 8,524 
Selling, general and administrative 18,805 22,576 
Total costs and expenses 37,881 43,069 
Loss from operations (12,633)(17,536)
Interest expense (1,889)(1,455)
Other income, net 92 9 
Loss before income taxes (14,430)(18,982)
Income tax benefit 1,183 1,780 
Net loss $(13,247)$(17,202)
Net loss per share, basic and diluted $(0.34)$(0.59)
Shares used in computing net loss per share, basic and diluted 38,856 29,239 

See accompanying notes.
2

FLUIDIGM CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
(Unaudited)
 
Three Months Ended March 31,
20182017
Net loss $(13,247)$(17,202)
Other comprehensive income, net of tax: 
Foreign currency translation adjustment 43 34 
Net change in unrealized (loss) / gain on investments (1)1 
Other comprehensive income, net of tax 42 35 
Comprehensive loss $(13,205)$(17,167)
See accompanying notes.
3

FLUIDIGM CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

Three Months Ended March 31,
20182017
Operating activities 
Net loss $(13,247)$(17,202)
Adjustments to reconcile net loss to net cash used in operating activities: 
Depreciation and amortization 1,983 1,951 
Stock-based compensation expense 1,747 2,446 
Amortization of developed technology 2,800 2,800 
Other non-cash items (58)(126)
Changes in assets and liabilities: 
Accounts receivable, net (1,278)231 
Inventories (539)436 
Prepaid expenses and other current assets (552)789 
Other non-current assets 83 (996)
Accounts payable 970 162 
Deferred revenue 720 792 
Other current liabilities (4,017)1,272 
Other non-current liabilities (4,788)(1,043)
Net cash used in operating activities (16,176)(8,488)
Investing activities
Purchases of investments (186)(1,183)
Proceeds from sales and maturities of investments — 19,375 
Purchases of property and equipment (77)(692)
Net cash (used in) / provided by investing activities (263)17,500 
Financing activities 
Payment of debt issuance costs (82)— 
Proceeds from exercise of stock options 24 3 
Net cash (used in) / provided by financing activities (58)3 
Effect of foreign exchange rate fluctuations on cash and cash equivalents 413 37 
Net (decrease) / increase in cash and cash equivalents (16,084)9,052 
Cash and cash equivalents at beginning of period 58,056 35,045 
Cash and cash equivalents at end of period $41,972 $44,097 
See accompanying notes.






4

FLUIDIGM CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 
1. Description of Business 

Fluidigm Corporation (we, our, or us) was incorporated in the State of California in May 1999, to commercialize microfluidic technology initially developed at the California Institute of Technology. In July 2007, we were reincorporated in Delaware. Our headquarters are located in South San Francisco, California.

We create, manufacture, and market innovative technologies and tools for life sciences research. We sell instruments and consumables, including integrated fluidic circuits, or IFCs, assays and reagents to academic institutions, clinical research laboratories, and biopharmaceutical, biotechnology, and agricultural biotechnology, or Ag-Bio, companies and contract research organizations, or CROs. Our technologies and tools are directed at the analysis of deoxyribonucleic acid, or DNA, ribonucleic acid, or RNA, and proteins in a variety of different sample types, from individual cells to bulk tissue.


2. Summary of Significant Accounting Policies 

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP), and following the requirements of the Securities and Exchange Commission (SEC) for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by U.S. GAAP have been condensed or omitted, and accordingly the balance sheet as of  December 31, 2017, has been derived from audited consolidated financial statements at that date but does not include all disclosures required by U.S. GAAP for complete financial statements. These financial statements have been prepared on the same basis as our annual financial statements and, in the opinion of management, reflect all adjustments (consisting only of normal recurring adjustments) that are necessary for a fair statement of our financial information. The results of operations for the three months ended March 31, 2018 are not necessarily indicative of the results to be expected for the year ending December 31, 2018, or for any other interim period or for any other future year. All intercompany transactions and balances have been eliminated in consolidation. 

The preparation of these condensed consolidated financial statements requires management to make estimates and assumptions that affect the amounts reported in the condensed 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. Actual results could differ materially from these estimates and could have a material adverse effect on our condensed consolidated financial statements.

The accompanying condensed consolidated financial statements and related financial information should be read in conjunction with the audited consolidated financial statements and the accompanying notes in Item 8 of Part II, "Financial Statements and Supplementary Data," for the year ended December 31, 2017, included in our Annual Report on Form 10-K.

Certain prior period amounts in the condensed consolidated statements of cash flows have been reclassified to conform to 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.

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, options to purchase common stock, and shares associated with the potential conversion of our convertible notes 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.









5
Table of Contents
FLUIDIGM CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)

The following potentially dilutive common shares were excluded from the computation of diluted net loss per share for the  three months ended March 31, 2018, and 2017 because including them would have been anti-dilutive (in thousands):
Three Months Ended March 31,
20182017
Stock options, restricted stock units and performance awards 3,254 5,085 
2018 Convertible Notes 19,036 — 
2018 Convertible Notes potential make-whole shares, March 31, 2018 1,204 — 
2014 Convertible Notes 1,364 3,598 
Total 24,858 8,683 

Accumulated Other Comprehensive Loss

The components of accumulated other comprehensive loss, net of tax, for the three months ended March 31, 2018, are as follows (in thousands):
Foreign Currency Translation AdjustmentNet Unrealized Gain on Securities Accumulated Other Comprehensive Loss
Balance at December 31, 2017 $(575)$1 $(574)
Other comprehensive income (loss) 43 (1)42 
Balance at March 31, 2018 $(532)$— $(532)

Immaterial amounts of unrealized gains and losses have been reclassified into the condensed consolidated statement of operations for the three months ended March 31, 2018.

Goodwill, Intangible Assets, and Other Long-lived Assets

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. 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 then conduct a two-step test for impairment of goodwill. In the first step, 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 the second step of the impairment test must be performed in order to determine the implied fair value of the goodwill. If the carrying value of the goodwill exceeds its implied fair value, then an impairment loss equal to the difference would be recorded.

We evaluate our finite-lived intangible assets and other long-lived assets for indicators of possible impairment when events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If any indicator of impairment exists, we assess the recoverability of the affected asset 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.

Convertible Notes

In February 2014, we closed an underwritten public offering $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 approximately $150.0 million in aggregate principal amount of the 2014 Notes for our new 2.75% Exchange Convertible Senior Notes due 2034 ("2018 Notes").

Following the exchange, approximately $51.3 million aggregate principal amount of the 2014 Notes remain outstanding in addition to $150.0 million in aggregate principal amount of the 2018 Notes.

6
Table of Contents
FLUIDIGM CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)

See Footnote 4. Convertible Notes for the accounting treatment of the transaction and additional information about the exchange.

Recent Accounting Changes and Accounting Pronouncements

Adoption of New Accounting Guidance

In May 2014, the FASB issued ASU 2014-09 Revenue from Contracts with Customers ("Topic 606"). Topic 606 and its related amendments supersede Revenue Recognition (Topic 605), issued in June 2010, and provide principles for recognizing revenue for goods and services in a manner consistent with the transfer of control of those goods and services to the customer.

We adopted Topic 606 on January 1, 2018, using the modified retrospective method applied to those contracts with unrecognized revenue on the adoption date. We recognized the effect of applying the new revenue standard by recording a cumulative catch-up adjustment that reduced the accumulated deficit component of stockholders’ equity by $0.4 million, and increased current assets by  $0.2 million and non-current assets by $0.2 million. The adjustment capitalized certain sales commission costs that were incurred to obtain instrument service contracts. Under Topic 605, we accounted for these incremental contract acquisition costs by recognizing them as expense at the point the contract was awarded. Under Topic 606, the costs are capitalized and amortized to expense over the life of the contract, which is generally one to three years. The comparative information for periods prior to January 1, 2018, has not been restated and continues to be reported in accordance with Topic 605.

The following table summarizes the cumulative effect of adopting Topic 606 on amounts previously reported in our consolidated balance sheet at December 31, 2017 (in thousands):

Balance at December 31, 2017Topic 606 Transition AdjustmentsBalance at January 1, 2018
Prepaid expenses and other current assets $1,528 $153 $1,681 
Total current assets $94,801 $153 $94,954 
Other non-current assets $7,541 $205 $7,746 
Total assets $287,351 $358 $287,709 
Accumulated deficit $(500,196)$358 $(499,838)
Total stockholders' equity $30,935 $358 $31,293 
Total liabilities and stockholders' equity $287,351 $358 $287,709 

The following table summarizes the impacts on our condensed consolidated statements of operations of adopting Topic 606 compared to Topic 605 for the three months ended March 31, 2018 (in thousands):

As Reported Balance Without Adoption of Topic 606 Effect of Change 
Three Months Ended March 31, 2018 
Selling, general and administrative $18,805 $18,838 $(33)
Total costs and expenses $37,881 $37,914 $(33)
Loss from operations $(12,633)$(12,666)$33 
Loss before income taxes $(14,430)$(14,463)$33 
Net loss $(13,247)$(13,280)$33 


7
Table of Contents
FLUIDIGM CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)

The following table summarizes the impacts on our condensed consolidated balance sheets of adopting Topic 606 compared to Topic 605 at March 31, 2018 (in thousands):

As Reported Balance Without Adoption of Topic 606 Effect of Change 
March 31, 2018
Prepaid expenses and other current assets $2,227 $2,058 $169 
Total current assets $81,001 $80,832 $169 
Other non-current assets $7,360 $7,138 $222 
Total assets $269,702 $269,311 $391 
Stockholders' equity $48,574 $48,183 $391 
Total liabilities and stockholders' equity $269,702 $269,311 $391 

In August 2016, the FASB issued ASU 2016-15 Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. The ASU addresses eight specific cash flow issues and their presentation within the statement of cash flows. We adopted this ASU in the first quarter of 2018. The adoption of this ASU did not have a material impact on our condensed consolidated financial statements.

In November 2016, the FASB issued ASU 2016-18 Statement of Cash Flows (Topic 230): Restricted Cash, a consensus of the FASB’s Emerging Issues Task Force, amending the presentation of restricted cash within the statement of cash flows. The new guidance requires that restricted cash be included within cash and cash equivalents on the statement of cash flows. We adopted this ASU in the first quarter of 2018. The adoption of this ASU did not have a material impact on our condensed consolidated financial statements.

Recent Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02 Leases (Topic 842). This ASU requires lessees to recognize a right-of-use asset and a lease liability on the balance sheet for all leases with the exception of short-term leases. For lessees, leases will continue to be classified as either operating or finance leases in the income statement. Lessor accounting under this ASU is similar to the current model but updated to align with certain changes to the lessee model. Lessors will continue to classify leases as operating, direct financing or sales-type leases. ASU 2016-02 will be effective for our fiscal year beginning January 1, 2019, and early adoption is permitted. We are currently evaluating the effect that the updated standard will have on our consolidated financial statements.

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 will be effective for annual and interim goodwill impairment testing performed for our fiscal year beginning January 1, 2020, with early adoption permitted. We are currently evaluating the effect that the updated standard will have on our consolidated financial statements.

In February 2018, the FASB issued ASU 2018-02 Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. This ASU amends the reporting of comprehensive income to allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act (the "Tax Act"). The Tax Act was enacted in December 2017 and reduced the U.S federal corporate income tax rate and made other changes to U.S. federal tax law. ASU 2018-02 will be effective for our fiscal year beginning January 1, 2019, and early adoption is permitted. We are currently evaluating the accounting, transition, and disclosure requirements of the standard. We are currently evaluating the effect that the updated standard will have on our consolidated financial statements.

8
Table of Contents
FLUIDIGM CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)

3. Revenue

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.

Revenue is reported net of any sales, use and value-added taxes we collect from customers as required by government authorities.

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. Instruments are sold with an assurance-type warranty and the estimated cost of the warranty is recognized as expense at the point when revenue is recognized. Invoices are generally issued at shipment and 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, 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 ratably 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 consolidated balance sheet as deferred revenue.
 
Performance Obligations

At December 31, 2017, and March 31, 2018, we reported $15.2 million and $16.0 million, respectively, of deferred revenue  on our condensed consolidated balance sheet. During the three months ended March 31, 2018, $3.1 million of the opening balance was recognized as revenue and $3.9 million of net additional advance payments were received from customers, primarily associated with our mass cytometry instruments.



9
Table of Contents
FLUIDIGM CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)

The following table summarizes the expected timing of revenue recognition for unfulfilled performance obligations associated with instrument service contracts that were partially completed at March 31, 2018 (in thousands):
Fiscal Year 
Expected Revenue (1)
2018 (remainder of the year) $7,583 
2019 5,603 
2020 2,612 
Thereafter 1,774 
Total $17,572 
_______
(1) Expected revenue includes both billed amounts included in deferred revenue and unbilled amounts that not reflected in our 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 cancelled in advance without penalty.

We apply the practical expedient that permits us to not disclose information about unsatisfied performance obligations that are expected to be delivered within one year.

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.

We reported $0.4 million of capitalized commission costs from instrument service contracts as of January 1, 2018, and March 31, 2018, respectively. Additional costs capitalized during the three months ended March 31, 2018, net of amortization, was not material.

Significant Judgments

Applying the revenue recognition practices discussed above often requires significant judgment. Assessing collectability requires us to determine if the customer has the ability and intent to make payments. This requires a comprehensive review of all relevant facts, including the customer’s historical practices and current financial condition. Estimating the amount of our future warranty obligations requires judgment. If warranty claims or the cost of servicing our products under warranty exceed our estimates, our cost of revenues could be adversely affected in future periods. Judgment is required when identifying performance obligations, estimating SSP and allocating purchasing consideration in multi-element arrangements. 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.


10
Table of Contents
FLUIDIGM CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)

Disaggregation of Revenues

The following table disaggregates our revenue for the three months ended March 31, 2018, and 2017, respectively, by geographic area and by products and services (in thousands):
March 31 Year Over Year Change 
2018 2017 
Geographic Markets: 
United States $10,116 $11,831 $(1,715)
Europe 8,473 7,636 837 
Asia Pacific 5,941 4,987 954 
Other 718 1,079 (361)
Total revenue $25,248 $25,533 $(285)
Products and Services: 
Instruments $7,520 $10,737 $(3,217)
Consumables 12,957 10,570 2,387 
Product revenue 20,477 21,307 (830)
Services 4,771 4,167 604 
License — 59 (59)
Total revenue $25,248 $25,533 $(285)

4. Convertible Notes

2014 Senior Convertible Notes (2014 Notes) 

On February 4, 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), pursuant to an underwriting agreement, dated January 29, 2014. The 2014 Notes accrue interest at a rate of 2.75% per year, payable semi-annually in arrears on February 1 and August 1 of each year. Interest on the 2014 Notes will accrue from February 4, 2014. The 2014 Notes will mature on February 1, 2034, unless earlier converted, redeemed, or repurchased in accordance with the terms of the 2014 Notes. The initial conversion rate of the 2014 Notes is 17.8750 shares of our common stock, par value $0.001 per share, per $1,000 principal amount of 2014 Notes (which is equivalent to an initial conversion price of approximately $55.94 per share). The conversion rate will be subject to adjustment upon the occurrence of certain specified events, including upon a conversion in connection with a fundamental change, as defined in the indenture governing the 2014 Notes or, subject to certain conditions, redemption of the 2014 Notes by the Company. Holders may surrender their 2014 Notes for conversion at any time prior to the stated maturity date. On or after February 6, 2018 and prior to February 6, 2021, we may redeem any or all of the 2014 Notes in cash if the closing price of our common stock exceeds 130% of the conversion price for a specified number of days, and on or after February 6, 2021, we may redeem any or all of the 2014 Notes in cash without any such condition. The redemption price of the 2014 Notes will equal 100% of the principal amount of the 2014 Notes plus accrued and unpaid interest. Holders may require us to repurchase all or a portion of their 2014 Notes on each of February 6, 2021, February 6, 2024, and February 6, 2029 at a repurchase price in cash equal to 100% of the principal amount of the 2014 Notes plus accrued and unpaid interest. If we undergo a fundamental change, as defined in the indenture governing the 2014 Notes, holders may require us to repurchase the 2014 Notes in whole or in part for cash at a repurchase price equal to 100% of the principal amount of the 2014 Notes plus accrued and unpaid interest.

In February 2014, 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. 


2018 Senior Convertible Notes (2018 Notes)

In March 2018, we entered into separate privately negotiated transactions with certain holders of our 2014 Notes to
11
Table of Contents
FLUIDIGM CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)

exchange approximately $150.0 million in aggregate principal amount of the 2014 Notes for new convertible notes (the "2018 Notes"). 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 will be 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.

We accounted for the exchange transaction as an extinguishment of debt due to the significance of the change in value of the embedded conversion option, resulting in a $0.1 million gain. The gain on extinguishment of debt was calculated as the difference between the reacquisition price (i.e., the fair value of the principal amount of 2018 Notes) and the net carrying value of the 2014 Notes exchanged net of unamortized debt discount and debt issuance cost write-offs.

The 2018 Notes accrue interest at a rate of 2.75%, payable semi-annually in arrears on February 1 and August 1 of each year. Interest on the 2018 Notes will accrue from February 1, 2018. The 2018 Notes will 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 is 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 will be subject to adjustment upon the occurrence of certain specified events. Any time prior to the maturity of the 2018 Notes, we may 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 equals or exceeds 110% of the conversion price then in effect for a specified number of days ("Issuer’s Conversion Option"). On or after February 6, 2022, we may elect to redeem all or any portion of the 2018 Notes at a redemption price equal to 100% of the accreted principal amount of the 2018 Notes on the redemption date of the 2018 Notes, plus accrued and unpaid interest.

Holders of the 2018 Notes have the right, at their option, to require us to purchase all or a portion of the 2018 Notes (i) on February 6, 2023, February 6, 2026 and February 6, 2029 or (ii) in the event of a fundamental change, as defined in the indenture governing the 2018 Notes, in each case, at a repurchase price equal to 100% of the accreted principal amount (i.e., up to 120% of the outstanding principal amount) of the 2018 Notes on the fundamental change repurchase date, plus accrued and unpaid interest. Holders who convert their 2018 Notes voluntarily prior to our exercise of the Issuer's Conversion Option or in connection with a make-whole fundamental change prior to February 6, 2023 are entitled, 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.

As the 2018 Notes are 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 accounted for in equity. The embedded conversion option value was calculated as the difference between (i) the total fair value of the 2018 Notes and (ii) the fair value of a similar debt instrument excluding the embedded conversion option. We determined an embedded conversion option value of $29.3 million, which was recorded in additional paid-in-capital and reduced the carrying value of the 2018 Notes. The resulting discount on the 2018 Notes will be 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.

Offering-related costs for the 2018 Notes were approximately $2.8 million, and are expected to be paid in the second quarter of 2018. 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 will be 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. Offering-related costs of $0.6 million were accounted for as equity issuance costs, recorded as an offset to additional paid-in capital, and are 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.


12
Table of Contents
FLUIDIGM CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)

The carrying values of the components of the 2014 Notes and the 2018 Notes are as follows (in thousands):

March 31, 2018December 31, 2017
2.75% 2014 Notes due 2034 
Principal amount $51,250 $201,250 
Unamortized debt discount (1,270)(5,087)
Unamortized debt issuance cost (313)(925)
49,667 195,238 
2.75% 2018 Notes due 2034 
Principal amount $150,000 — 
Premium accretion of 2018 Notes 221 — 
Unamortized debt discount (33,540)— 
Unamortized debt issuance cost (2,192)— 
114,489 — 
$164,156 $195,238 

5. Fair Value Measurements

Financial Instruments

The following tables summarize our cash and available-for-sale securities by significant category within the fair value hierarchy (in thousands):
March 31, 2018
Carrying Amount 
Gross
Unrealized
Gain
Gross
Unrealized
Loss
Fair Value Cash and Cash Equivalents Short-Term Marketable Securities 
Assets: 
Cash $13,100 $— $— $13,100 $13,100 $— 
Available-for-sale: 
Level I: 
Money market funds 7,190 — — 7,190 7,190 — 
U.S. treasury securities 499 — — 499 — 499 
Subtotal 7,689 — — 7,689 7,190 499 
Level II: 
U.S. government and agency securities 26,465 1 (1)26,465 21,682 4,783 
Total $47,254 $1 $(1)$47,254 $41,972 $5,282 

13
Table of Contents
FLUIDIGM CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)

December 31, 2017
Carrying Amount 
Gross
Unrealized
Gain
Gross
Unrealized
Loss
Fair Value Cash and Cash Equivalents Short-Term Marketable Securities 
Assets: 
Cash $20,129 $— $— $20,129 $20,129 $— 
Available-for-sale: 
Level I: 
Money market funds 16,142 — — 16,142 16,142 — 
U.S. treasury securities 497 497 497 
Subtotal 16,639 — — 16,639 16,142 497 
Level II: 
U.S. government and agency securities 26,369 — (1)26,368 21,785 4,583 
Total $63,137 $— $(1)$63,136 $58,056 $5,080 

There were no transfers between Level I and Level II measurements during the three months ended March 31, 2018, and 2017, and there were no changes in the valuation techniques used.

The contractual maturity periods of $5.3 million of our marketable debt securities are within one year from March 31, 2018.

Convertible Notes

The estimated fair value of the 2014 Notes is based on a market approach. The estimated fair value was approximately $43.1 million  and  $166.2 million (par value $51.3 million and $201.3 million) as of March 31, 2018, and December 31, 2017, respectively, and represents a Level II valuation.

The estimated fair value of the 2018 Notes is based on a market approach. The estimated fair value was approximately  $136.6 million (par value $150.0 million) as of March 31, 2018.


When determining the estimated fair value of our long-term debt, we used a commonly accepted valuation methodology and market-based risk measurements that are indirectly observable, such as credit risk.

6. Intangible Assets, net

Intangible assets include developed technology related to the DVS acquisition and other intangible assets included in Other non-current assets. Intangible assets, net were as follows (in thousands):
March 31, 2018
Gross Amount Accumulated Amortization Net Weighted-Average Amortization Period 
Developed technology $112,000 $(46,200)$65,800 10.0 years
Patents and licenses 11,274 (6,023)5,251 7.8 years
Total intangible assets, net $123,274 $(52,223)$71,051 

14
Table of Contents
FLUIDIGM CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)

December 31, 2017
Gross Amount Accumulated Amortization Net Weighted-Average Amortization Period 
Developed technology $112,000 $(43,400)$68,600 10.0 years
Patents and licenses 11,274 (5,721)5,553 7.8 years
Total intangible assets, net $123,274 $(49,121)$74,153 

In connection with the acquisition of DVS in February 2014, we acquired developed technology with a gross fair value of $112.0 million. These acquired intangible assets are being amortized to cost of product revenue over their useful life of ten years. Related amortization for the three months ended March 31, 2018, and 2017 was $2.8 million for both periods.

Based on the carrying value of intangible assets, net as of March 31, 2018, the annual amortization expense for intangible assets is expected to be as follows (in thousands):
Fiscal Year Amortization Expense 
2018 (remainder of the year)$9,234 
201912,242 
202012,241 
202112,087 
202212,004 
Thereafter 13,243 
$71,051 

7. Balance Sheet Details

Inventories

Inventories consisted of the following (in thousands):
March 31, 2018December 31, 2017
Raw materials $7,541 $7,566 
Work-in-process 847 929 
Finished goods 6,865 6,593 
Total inventories, net $15,253 $15,088 

Property and Equipment, net 

Property and equipment, net consisted of the following (in thousands):
March 31, 2018December 31, 2017
Computer equipment and software $4,133 $4,179 
Laboratory and manufacturing equipment 20,002 20,069 
Leasehold improvements 7,749 7,799 
Office furniture and fixtures 1,873 1,892 
Property and equipment, gross 33,757 33,939 
Less accumulated depreciation and amortization (22,373)(21,646)
Construction-in-progress 49 8 
Property and equipment, net $11,433 $12,301 


15
Table of Contents
FLUIDIGM CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)

Warranty 
We accrue for estimated warranty obligations once revenue is recognized. Management periodically reviews the estimated fair value of its warranty liability and records adjustments based on the terms of warranties provided to customers, as well as historical and anticipated warranty claim experience. Activity for our warranty accrual for the three months ended March 31, 2018, and 2017, which is included in other accrued liabilities, is summarized below (in thousands):  
Three Months Ended March 31,
20182017
Beginning balance $699 $1,023 
Accrual for current period warranties 337 168 
Warranty costs incurred (445)(327)
Ending balance $591 $864 

8. Commitments and Contingencies

Operating Leases

We have entered into various long-term non-cancelable operating lease agreements for equipment and facilities expiring at various times through March 2026. We lease office space under non-cancelable leases in the United States, Canada, Singapore, Japan, China, France and United Kingdom. Certain facility leases also contain rent escalation clauses. Our lease payments are expensed on a straight-line basis over the life of the leases. Rental expense under operating leases, net of amortization of lease incentives and sublease income for the three months ended March 31, 2018, and 2017 was $1.2 million and $1.6 million, respectively. 

Future minimum lease payments and minimum sublease income under non-cancelable operating leases as of March 31, 2018, are as follows (in thousands):
Fiscal Year Minimum Lease Payments Minimum Sublease Income Net Operating Leases 
2018 (remainder of the year)$3,194 $(899)$2,295 
20194,219 (1,233)2,986 
20202,197 (465)1,732 
20211,276 — 1,276 
2022867 — 867 
Thereafter 1,894 — 1,894 
Total $13,647 $(2,597)$11,050 

Indemnifications

From time to time, we have entered into indemnification provisions under certain of our agreements in the ordinary course of business, typically with business partners, customers, and suppliers. Pursuant to these agreements, we may indemnify, hold harmless, and agree to reimburse the indemnified parties on a case-by-case basis for losses suffered or incurred by the indemnified parties in connection with any patent or other intellectual property infringement claim by any third party with respect to our products. The term of these indemnification provisions is generally perpetual from the time of the execution of the agreement. The maximum potential amount of future payments we could be required to make under these indemnification provisions is typically not limited to a specific amount. In addition, we have entered into indemnification agreements with our officers, directors, and certain other employees. With certain exceptions, these agreements provide for indemnification for related expenses including, among others, attorneys' fees, judgments, fines and settlement amounts incurred by any of these individuals in any action or proceeding. 


We incurred indemnification expenses between October 2015 and the third quarter of 2017 to defend claims by Thermo Fisher Scientific, Inc., (Thermo) against one of our employees. In December, 2015, Thermo filed a complaint in the Circuit Court
16
Table of Contents
FLUIDIGM CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Unaudited)

for the County of Kalamazoo, Michigan against one of its former employees who had recently been hired by us alleging, among other claims, misappropriation of proprietary information and breach of contractual and fiduciary obligations to Thermo while such individual was still an employee of Thermo. In November, 2016, Thermo amended its complaint to add us as a party to the litigation, making various commercial and employment-related claims and seeking damages and injunctive relief. In July 2017, we entered into a settlement agreement with Thermo. Pursuant to the terms of the settlement agreement, we agreed to pay Thermo a one-time payment of $3.0 million in exchange for a release and dismissal of all claims with prejudice upon payment of the settlement. In August 2017, we paid the settlement of $3.0 million and received a related insurance recovery payment of $1.0 million.

Contingencies 

From time to time, we may be subject to various legal proceedings and claims arising in the ordinary course of business. These include disputes and lawsuits related to intellectual property, mergers and acquisitions, licensing, contract law, tax, regulatory, distribution arrangements, employee relations and other matters. Periodically, we review the status of each matter and assess its potential financial exposure. If the potential loss from any claim or legal proceeding is considered probable and a range of possible losses can be estimated, we accrue a liability for the estimated loss. Legal proceedings are subject to uncertainties, and the outcomes are difficult to predict. Because of such uncertainties, accruals are based only on the best information available at the time. As additional information becomes available, we continue to reassess the potential liability related to pending claims and litigation and we may revise estimates. 

9. Stock-Based Compensation

We recognized stock-based compensation expense of $1.7 million and $2.4 million during the three months ended March 31, 2018, and 2017 respectively. As of March 31, 2018, we had $4.2 million,  $7.3 million, and $1.7 million of unrecognized stock-based compensation expense related to stock options, restricted stock units, and performance stock units, respectively, which are expected to be recognized over a weighted average period of 3.0 years,  2.5 years, and  3.0 years, respectively.

Equity Incentive Plans (Excluding Stock Option Exchange Program)

During the three months ended March 31, 2018, we granted certain employees options to purchase 292,000 shares of common stock. The options granted during the three months ended March 31, 2018 had a weighted average exercise price of  $6.33  per share and a total grant date fair value of $1.1 million. 

During the three months ended March 31, 2018, we granted certain employees 84,288 restricted stock units. The restricted stock unit awards granted during the three months ended March 31, 2018 had fair market values ranging from $6.30 to $7.81 per unit and a total grant date fair value of $0.6 million. 

During the three months ended March 31, 2018, we granted certain executive officers  167,000 performance stock units. The performance stock unit awards granted during the three months ended March 31, 2018 had a grant date fair value of $10.09 per unit and a total grant date fair value of  $1.7 million.

The expenses relating to these options and restricted stock units will be recognized over their respective four-year vesting periods. The expenses relating to these performance stock units will be recognized over their three-year vesting periods.

2018 Performance Stock Units

During the three months ended March 31, 2018, we granted 167,000 performance stock units to certain executive officers and senior level employees. The number of performance stock units ultimately earned is calculated based on the Total Shareholder Return ("TSR") of our common stock as compared to the TSR of a defined group of peer companies during the performance period from January 1, 2018, to December 31, 2020. The percentage of performance stock units that vest will depend on our relative position at the end of the performance period and can range from