LAB 10-K Fiscal year ended Dec. 31, 2017

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Genotyping involves the analysis of DNA variations across individual genomes. There are multiple forms of variants, including single nucleotide polymorphism, or SNPs, insertion-deletions and copy number variation. A common application of genotyping focuses on analyzing SNPs to determine whether a SNP or group of SNPs are associated with a particular genetic trait, such as propensity for a disease.

•	Gene expression analysis involves measuring the levels of particular ribonucleic acid sequences known as messenger RNAs, or mRNAs, which have been transcribed from genes. Determining these levels is important because mRNAs are often translated by the cell into proteins, and may affect the activity of the cell or the larger organism.

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DNA sequencing is a process by which researchers are able to determine the particular order of nucleotide bases that comprise all or a portion of a particular gene or genome, and typically improves with target enrichment, such as complex sample preparation and tagging processes. Researchers are increasingly using next-generation DNA sequencers to rapidly and cost-effectively sequence portions of genomes, which is important for the identification of genetic variations that correlate with particular phenotypes.

•	Mass spectrometry is an analytical chemistry technique that measures the mass-to-charge ratio in molecules using external electric and magnetic fields. Mass spectrometry techniques are limited to bulk samples and provide an understanding of global protein dynamics on a tissue or organism level, but does not alone enable researchers to analyze data at a single cell level.

•	Traditional flow cytometry utilizes a suspension of cells in a stream of fluid and passes them through an electronic detection apparatus to allow simultaneous multi-parameter analysis of the physical and chemical characteristics of up to thousands of cells per second. Although traditional flow cytometry technologies are high-throughput with

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Immunohistochemistry is a method by which cells in a tissue section are stained with antibodies and then imaged with a conventional or fluorescent microscope. Antibodies selected to bind to proteins of interest can be conjugated with either chromogenic or fluorescent labels, allowing cellular proteins to be visualized in spatial context. Immunohistochemistry is used broadly throughout the life sciences industry, and in clinical diagnostics, to diagnose and better understand the characteristics and relationship of cancerous versus normal cells in biopsy tissue. In general, the number of simultaneously imageable proteins is less than five, with researchers only able to achieve a higher-parameter resolution using serial sections (several adjacent sections of the same tissue) or other highly laborious, more serial staining methods.

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Suspension mass cytometry is similar to traditional flow cytometry but is based primarily on antibodies using heavy metal isotope labels rather than fluorescent labels for detection of proteins, enabling the significant expansion of the number of parameters analyzed per individual cell versus conventional flow cytometry technologies. With high-throughput, single-cell analysis capabilities and the ability to analyze more protein markers per individual cell, researchers have more granular information, which allows them to identify and characterize even finer subpopulations of cells.

•	Imaging mass cytometry is similar to immunohistochemistry, but is also based primarily on antibodies using heavy metal isotope labels rather than fluorescent or chromogenic labels for detection of proteins. This method enables a significant expansion of the number of parameters simultaneously analyzed per tissue section rather than in adjacent sections or via serial staining protocols.

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•	Offer innovative, differentiated products to researchers based on our microfluidic and mass cytometry technologies.

•	Expand addressable markets through attention to assay content, workflow efficiency, software improvements, and desirable strategic partnerships .

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We exclusively license from Caltech relevant patent filings relating to developed technologies that enable the production of specialized valves and pumps capable of controlling fluid flow at nanoliter volumes. The license agreement will terminate as to each country and licensed product upon expiration of the last-to-expire patent covering licensed products in each country. The U.S. issued patents we have licensed from Caltech expire between 2017 and 2030.

•	We have entered into a co-exclusive license agreement with Harvard University for the license of relevant patent filings relating to microfluidic technology. The license agreement will terminate with the last-to-expire of the licensed patents. The U.S. issued patents we have licensed from Harvard University expire between 2019 and 2027.

•	In May 2011, we entered into a license agreement with Caliper to license Caliper’s existing patent portfolio in certain fields. The license agreement will terminate with the last-to-expire of the licensed patents. As later amended, the license agreement provides for certain royalty payments until mid-2018 for our existing products at the time of amendment and their future equivalents.

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•	a failure to achieve market acceptance or expansion of our product sales;

•	loss of customer orders and delay in order fulfillment;

•	damage to our brand reputation;

•	increased cost of our warranty program due to product repair or replacement;

•	product recalls or replacements;

•	inability to attract new customers;

•	diversion of resources from our manufacturing and research and development departments into our service department; and

•	legal claims against us, including product liability claims, which could be costly and time consuming to defend and result in substantial damages.

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•	changes in economic conditions;

•	natural disasters;

•	changes in government programs that provide funding to research institutions and companies;

•	changes in the regulatory environment affecting life science and Ag-Bio companies engaged in research and commercial activities;

•	differences in budget cycles across various geographies and industries;

•	market-driven pressures on companies to consolidate operations and reduce costs;

•	mergers and acquisitions in the life science and Ag-Bio industries; and

•	other factors affecting research and development spending.

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•	required compliance with existing and changing foreign regulatory requirements and laws that are or may be applicable to our business in the future, such as the RoHS and WEEE directives, which regulate the use of certain hazardous substances in, and require the collection, reuse, and recycling of waste from, products we manufacture;

•	required compliance with anti-bribery laws, such as the U.S. Foreign Corrupt Practices Act and U.K. Bribery Act, data privacy requirements, labor laws, and anti-competition regulations;

•	export or import restrictions;

•	laws and business practices favoring local companies;

•	longer payment cycles and difficulties in enforcing agreements and collecting receivables through certain foreign legal systems;

•	unstable economic, political, and regulatory conditions;

•	potentially adverse tax consequences, tariffs, customs charges, bureaucratic requirements, and other trade barriers;

•	difficulties and costs of staffing and managing foreign operations; and

•	difficulties protecting or procuring intellectual property rights.

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•	The IFCs used in our microfluidic systems are fabricated using a specialized polymer, and other specialized materials, that are available from a limited number of sources. In the past, we have encountered quality issues that have reduced our manufacturing yield or required the use of additional manufacturing processes.

•	Specialized pneumatic and electronic components for our C1, Callisto, Juno, and Polaris systems are available from a limited number of sources.

•	The electron multiplier detector included in the Hyperion/Helios systems and certain metal isotopes used with the Hyperion/Helios systems are purchased from sole source suppliers.

•	The movement stage included in the Hyperion imaging mass cytometer system is purchased from a sole source supplier.

•	The nickel sampler cone used with the Hyperion/Helios systems is purchased from single source suppliers and is available from a limited number of sources.

•	The raw materials for our Delta Gene and SNP Type assays and Access Array target-specific primers are available from a limited number of sources.

•	we may be subject to increased component or assembly costs;

•	we may not be able to obtain adequate supply or services in a timely manner or on commercially reasonable terms;

•	our suppliers or service providers may make errors in manufacturing or assembly of components that could negatively affect the efficacy of our products or cause delays in shipment of our products; and

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•	our suppliers or service providers may encounter capacity constraints or financial hardships unrelated to our demand for components or services, which could inhibit their ability to fulfill our orders and meet our requirements.

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•	expanding the commercialization of our products;

•	funding our operations;

•	furthering our research and development; and

•	acquiring other businesses or assets and licensing technologies.

•	market acceptance of our products;

•	the cost of our research and development activities;

•	the cost of filing and prosecuting patent applications;

•	the cost of defending any litigation including intellectual property, employment, contractual or other litigation;

•	the cost and timing of regulatory clearances or approvals, if any;

•	the cost and timing of establishing additional sales, marketing, and distribution capabilities;

•	the cost and timing of establishing additional technical support capabilities;

•	the effectiveness of our recent efficiency and cost-savings initiatives;

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•	the effect of competing technological and market developments; and

•	the extent to which we acquire or invest in businesses, products, and technologies, although we currently have no commitments or agreements relating to any of these types of transactions.

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•	difficulties in integrating and managing the operations, technologies, and products of the companies we acquire;

•	diversion of our management’s attention from normal daily operation of our business;

•	our inability to maintain the key business relationships and the reputations of the businesses we acquire;

•	our inability to retain key personnel of the acquired company;

•	uncertainty of entry into markets in which we have limited or no prior experience and in which competitors have stronger market positions;

•	our dependence on unfamiliar affiliates and customers of the companies we acquire;

•	insufficient revenue to offset our increased expenses associated with acquisitions;

•	our responsibility for the liabilities of the businesses we acquire, including those which we may not anticipate; and

•	our inability to maintain internal standards, controls, procedures, and policies.

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•	We might not have been the first to make the inventions covered by each of our pending patent applications;

•	We might not have been the first to file patent applications for these inventions;

•	The patents of others may have an adverse effect on our business; and

•	Others may independently develop similar or alternative products and technologies or duplicate any of our products and technologies.

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•	actual or anticipated quarterly variation in our results of operations or the results of our competitors;

•	announcements or communications by us or our competitors relating to, among other things, new commercial products, technological advances, significant contracts, commercial relationships, capital commitments, acquisitions or sales of businesses, and/or misperceptions in or speculation by the market regarding such announcements or communications;

•	issuance of new or changed securities analysts’ reports or recommendations for our stock;

•	developments or disputes concerning our intellectual property or other proprietary rights;

•	commencement of, or our involvement in, litigation;

•	market conditions in the life science, Ag-Bio, and CRO sectors;

•	failure to complete significant sales;

•	manufacturing disruptions that could occur if we were unable to successfully expand our production in our current or an alternative facility;

•	any future sales of our common stock or other securities in connection with raising additional capital or otherwise;

•	any major change to the composition of our board of directors or management; and

•	general economic conditions and slow or negative growth of our markets.

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•	authorize our board of directors to issue, without further action by the stockholders, up to 10,000,000 shares of undesignated preferred stock;

•	require that any action to be taken by our stockholders be effected at a duly called annual or special meeting and not by written consent;

•	specify that special meetings of our stockholders can be called only by our board of directors, the chairman of the board, the chief executive officer or the president;

•	establish an advance notice procedure for stockholder approvals to be brought before an annual meeting of our stockholders, including proposed nominations of persons for election to our board of directors;

•	establish that our board of directors is divided into three classes, Class I, Class II, and Class III, with each class serving staggered three year terms;

•	provide that our directors may be removed only for cause;

•	provide that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than a quorum;

•	specify that no stockholder is permitted to cumulate votes at any election of directors; and

•	require a super-majority of votes to amend certain of the above-mentioned provisions.

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•	senior in right of payment to any of our indebtedness that is expressly subordinated in right of payment to the Notes;

•	equal in right of payment to all of our liabilities that are not so subordinated;

•	effectively junior in right of payment to any of our secured indebtedness to the extent of the value of the assets securing such indebtedness; and

•	structurally junior to all indebtedness and other liabilities (including trade payables) of our subsidiaries.

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•	require us to maintain any financial ratios or specific levels of net worth, revenues, income, cash flows, or liquidity and, accordingly, does not protect holders of the Notes in the event that we experience adverse changes in our financial condition or results of operations;

•	limit our subsidiaries’ ability to guarantee or incur indebtedness that would rank structurally senior to the Notes;

•	limit our ability to incur additional indebtedness, including secured indebtedness;

•	restrict our subsidiaries’ ability to issue securities that would be senior to our equity interests in our subsidiaries and therefore would be structurally senior to the Notes;

•	restrict our ability to repurchase our securities;

•	restrict our ability to pledge our assets or those of our subsidiaries; or

•	restrict our ability to make investments or pay dividends or make other payments in respect of our common stock or our other indebtedness.

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The date on which we may be first required to repurchase the Exchange Notes has been extended to February 2023, compared to February 2021 under the Original Notes. In addition, while the applicable cash repurchase price for the Original Notes is 100% of the outstanding principal amount, the cash repurchase price for the Exchange Notes is based on a formula that would result in the Exchange Notes being redeemed for up to an amount equal to 120% of the outstanding principal amount, plus, in each case, accrued and unpaid interest.

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The initial conversion price under the Exchange Notes is approximately $7.8775, as compared to approximately $55.94 under the Original Notes. As a result, each of the outstanding Exchange Notes is initially convertible into 126.9438 shares of our common stock per $1,000 principal amount, while the Original Notes are initially convertible into 17.8750 shares of our common stock per $1,000 principal amount.

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Under the supplement indenture for the Exchange Notes, we may at any time cause the then-outstanding Exchange Notes to be converted into shares of our common stock at the then-applicable Exchange Note conversion price if the volume weighted average price of our common stock is at least 110% of the applicable Exchange Note conversion price on each applicable trading day over a period specified in the supplement indenture for the Exchange Notes.  Under the indenture for the Original Notes, we may only redeem the Original Notes for cash under certain circumstances during the period from February 6, 2018 through February 6, 2021.

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Under certain circumstances such as a “fundamental change” (as defined in the applicable indenture) that occurs prior to (i) February 6, 2021 in the case of the Original Notes and (ii) February 6, 2023 in the case of the Exchange Notes, holders of the Notes are entitled to a “make-whole” premium that will result in an increase in the applicable conversion rate. Under the terms of the Exchange Notes (but not the Original Notes), holders will be entitled to receive additional shares reflecting the economic equivalent of approximately two years of additional coupon payments, subject to certain limitations, in connection with a voluntary conversion by the noteholder prior to our exercise of our early conversion option.

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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.

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 December 31, 2017 , we had wholly-owned subsidiaries in Singapore, Canada, the Netherlands, Japan, France, the United Kingdom, China, and Germany. 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 consolidated statements of cash flows were reclassified to conform with the current period presentation. Payments for cash settled equity awards were reclassified from Proceeds from issuance of common stock under financing activities to Changes in other liabilities under operating activities in the consolidated statements of cash flows. Proceeds from exercise of stock options and Payments for taxes related to net share settlement of equity awards, which were previously included in the Proceeds from issuance of common stock are presented as separated line items under financing activities in the consolidated statements of cash flows. 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. 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.

Cash and Cash Equivalents

We consider all highly liquid financial instruments with maturities at the time of purchase of three months or less to be cash equivalents. Cash and cash equivalents may consist of cash on deposit with banks, money market funds, and notes from government-sponsored agencies.

Investments

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Short and long-term investments are comprised of notes from government-sponsored agencies. All investments are recorded at estimated fair value. Any unrealized gains and losses from investments are reported in accumulated other comprehensive loss, a separate component of stockholders’ equity. We evaluate our investments to assess whether investments with unrealized loss positions are other-than-temporarily impaired. An investment is considered to be other-than-temporarily impaired if the impairment is related to deterioration in credit risk or if it is likely that we will sell the securities before the recovery of their cost basis. No investment has been assessed as other than temporarily impaired, and realized gains and losses were immaterial during the years presented. The cost of securities sold or the amount reclassified out of accumulated other comprehensive income into earnings is based on the specific-identification method.

Fair Value of Financial Instruments

Our financial instruments consist primarily of cash and cash equivalents, investments, accounts receivable, accounts payable, and convertible notes. Our cash equivalents, investments, accounts receivable, and accounts payable have short maturity or payment periods. Accordingly, their carrying values approximated their fair values at December 31, 2017 and 2016 . The convertible notes are presented at their carrying value, with fair value disclosures made in Note 4. As a basis for considering fair value, we follow a three-tier value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level I: observable inputs such as quoted prices in active markets;

Level II: inputs other than quoted prices in active markets that are observable either directly or indirectly; and

Level III: unobservable inputs for which there is little or no market data, which requires us to develop our own assumptions.

This hierarchy requires us to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. Our cash equivalents, which include money market funds, are classified as Level I because they are valued using quoted market prices. Our investments and convertible notes are generally classified as Level II because their value is based on valuations using significant inputs derived from or corroborated by observable market data. Depending on the security, the income and market approaches are used in the model driven valuations. Inputs of these models include recently executed transaction prices in securities of the issuer or comparable issuers and yield curves.

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. No single customer represented more than 10% of total revenue for 2017 , 2016 , or 2015 , and no single customer represented more than 10% of total accounts receivable at December 31, 2017 , 2016 , or 2015 .

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.

Inventories

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Inventories are stated at the lower of cost (on a first-in, first-out basis) or net realizable value. Inventory costs include direct materials, direct labor, and normal manufacturing overhead. Finished goods that are used for research and development are expensed as consumed or depreciated over their period of use. Provisions for slow-moving, excess, and obsolete inventories are recorded when required to reduce inventory values to their estimated net realizable values based on product life cycle, development plans, product expiration, and quality issues.

Property and Equipment and Long-Lived Assets

Property and equipment, including leasehold improvements, are stated at cost less accumulated depreciation. Accumulated depreciation is calculated using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized using the straight-line method over the estimated useful lives of the assets or the remaining term of the lease, whichever is shorter. The estimated useful lives of our property and equipment are generally as follows: computer equipment and software, three to four years; laboratory and manufacturing equipment, two to five years; and office furniture and fixtures, five years.

Depreciation expense for the years ended December 31, 2017 , 2016 and 2015 was $ 5.9 million , $ 5.1 million and $ 3.6 million , respectively.

We evaluate our long-lived assets 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 long-lived assets for any of the periods presented herein.

Investment, at Cost

In February 2013, Illumina, Inc. acquired Verinata Health, Inc. (Verinata), a privately-held company, for $ 350 million in cash and up to an additional $ 100 million in milestone payments through December 2015. In March 2013, we received cash proceeds of $ 3.1 million in exchange for our ownership interest in Verinata resulting in a gain of $ 1.8 million . During 2014, we received cash proceeds of $ 0.3 million from the escrow account related to the acquisition. We recorded these amounts as Gain from sale of investment in Verinata in the accompanying consolidated statements of operations for the years ended December 31, 2013 and 2014. The final milestones related to the sale of Verinata to Illumina were met in December 2015 and, accordingly, we recorded our share of these milestone payment obligations in the amount of $ 2.3 million in Other Assets and Gain from sale of investment in Verinata in the accompanying consolidated statement of operations for the year ended December 31, 2015. In January 2016, we received payment of $ 2.3 million and it was recorded in net cash provided by investing activities in the consolidated statement of cash flows.

Intangible Assets

Our intangible assets include developed technology, patents and licenses. We evaluate our intangible assets 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 intangible 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 on intangible assets for any of the periods presented herein.

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 consolidated statements of operations.

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Revenue Recognition

We generate revenue from sales of our products, services and license agreements. Our products consist of instruments and consumables, including IFCs, assays, and reagents. Our service revenue consists of post-warranty service contracts, preventive maintenance plans, instrument parts, installation, and training.

We recognize revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price to the customer is fixed or determinable, and collectability is reasonably assured. We assess collectability based on factors such as the customer’s creditworthiness and past collection history, if applicable. If collection is not reasonably assured, revenue recognition is deferred until receipt of payment. We also assess whether a price is fixed or determinable by, among other things, reviewing contractual terms and conditions related to payment. Delivery occurs when there is a transfer of title and risk of loss passes to the customer. Revenue excludes taxes collected from our customers.

Product and Service Revenue

Certain of our sales contracts involve the delivery of multiple products and services within contractually binding arrangements. Multiple-deliverable sales transactions typically consist of the sale and delivery of one or more instruments and consumables together with one or more of our installation, training and/or customer support services. Significant judgment is sometimes required to determine the appropriate accounting for such arrangements, including whether the deliverables specified in a multiple element arrangement should be treated as separate units of accounting for revenue recognition purposes and, if so, how the related sales price should be allocated among the elements, when to recognize revenue for each element, and the period over which revenue should be recognized.

For sales contracts that include multiple deliverables, we allocate the contract consideration at the inception of the contract to each unit of accounting based upon its relative selling price. We may use our best estimate of selling price for

individual deliverables when vendor specific objective evidence or third-party evidence is unavailable. A delivered item is considered to be a separate unit of accounting when it has value to the customer on a stand-alone basis.

Our products, other than service contracts, are typically delivered within a short time frame, generally within one to three months of the contract date. Service contracts are entered into for terms of one to three years, following the expiration of the warranty period.

Our products are generally sold without the right of return. Amounts received before revenue recognition criteria are met are classified in the consolidated balance sheets as deferred revenue or customer deposits, depending on the terms of the arrangement.

License Revenue

License and royalty revenue from license agreements is recognized when received, which is generally in the quarter following the quarter in which the corresponding sales occur.

Shipping and Handling Costs

Shipping and handling costs incurred for product shipments are included within cost of product revenue in the consolidated statements of operations.

Research and Development

We recognize research and development expenses in the period incurred. Research and development expenses consist of personnel costs, independent contractor costs, prototype and materials expenses, allocated facilities and information technology expenses, and related overhead expenses.

Advertising Costs

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We expense advertising costs as incurred. We incurred advertising costs of $ 1.8 million , $ 2.3 million and $ 2.9 million during 2017 , 2016 , and 2015 , respectively.

Income Taxes

We use the asset and liability method to account for income taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Valuation allowances are provided when the expected realization of deferred tax assets does not meet a “more likely than not” criterion. We make estimates and judgments about our future taxable income that are based on assumptions that are consistent with our plans and estimates. Should the actual amounts differ from our estimates, the amount of our valuation allowance could be materially impacted. Changes in these estimates may result in significant increases or decreases to our tax provision in a period in which such estimates are changed, which in turn would affect net income or loss.

We recognize the financial statement effects of a tax position when it is more likely than not, based on the technical merits, that the position will be sustained upon examination. Any interest and penalties related to uncertain tax positions are reflected in the income tax provision.

Stock-Based Compensation

We account for stock options and restricted stock units granted to employees and directors and stock purchases under ESPP based on the fair value of the awards. We recognize stock-based compensation expense on a straight-line basis over the requisite service periods. For performance-based stock awards, stock-based compensation expense is recognized over the requisite service period when the achievement of each individual performance goal becomes probable.

Comprehensive Loss

Comprehensive loss is comprised of net loss and other comprehensive income (loss). Other comprehensive income (loss) consists of unrealized gains and losses on our investments and foreign currency translation adjustments. Total comprehensive loss for all periods presented has been disclosed in the consolidated statements of comprehensive loss.

The components of accumulated other comprehensive loss, net of tax, for the years ended December 31, 2017 , 2016 , and 2015 are as follows (in thousands):

		Foreign Currency Translation Adjustment				Unrealized Gain (Loss) on Investments				Accumulated Other Comprehensive Income (Loss)
Ending balance at December 31, 2015		$	( 1,072	)		$	( 72	)		$	( 1,144	)
Change during the year		314				70				384
Ending balance at December 31, 2016		( 758		)		( 2		)		( 760		)
Change during the year		183				3				186
Ending balance at December 31, 2017		$	( 575	)		$	1			$	( 574	)

Immaterial amounts of unrealized gains and losses have been reclassified into the consolidated statement of operations for the years ended December 31, 2017 , 2016 and 2015 .

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 identifiable intangible assets are typically comprised of acquired core technologies, licensed technologies, license agreements and patents. The cost of identifiable intangible assets with finite lives is generally amortized on a straight-line basis over the assets’ respective estimated useful lives.

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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 exceed 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 intangible 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.

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 and options to purchase our common stock are considered to be potentially dilutive common shares but have been excluded from the calculation of diluted net loss per share as their effect is anti-dilutive for all periods presented.

The following potentially dilutive common shares were excluded from the computations of diluted net loss per share for the periods presented because including them would have been anti-dilutive (in thousands):

		December 31,
		2017			2016			2015
Stock options, restricted stock units and performance awards		3,501			4,622			3,905
Convertible notes		3,598			3,598			3,598
Total		7,099			8,220			7,503

Recent Accounting Changes and Accounting Pronouncements

Adoption of New Accounting Guidance

In July 2015, the FASB issued ASU 2015-11 Inventory (Topic 330): Simplifying the Measurement of Inventory, which changes the measurement principle for inventory from the lower of cost or market to the lower of cost or net realizable value. ASU 2015-11 defines net realizable value as estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. We adopted this standard in the first quarter of 2017. The adoption of this ASU did not have a material impact on our consolidated financial statements.

In March 2016, the FASB issued ASU 2016-09 Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. This ASU simplified several aspects of the accounting for share-based payments, including changing the threshold to qualify for equity classification up to the employees’ maximum statutory tax rates, allowing an entity-wide accounting policy election to either estimate the number of awards that are expected to vest or account for forfeitures as they occur, and clarifying the classification on the statement of cash flows of employee taxes paid when an employer withholds shares for tax-withholding purposes. We adopted this standard in the first quarter of 2017 by recording the cumulative impact of applying this guidance to retained earnings. We also elected to account for forfeitures as they occur, as permitted by ASU 2016-09. The adoption of this ASU did not have a material impact on our consolidated financial statements. See Note 9 for the impact on deferred tax assets.

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Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) 2014-09 regarding ASC (Topic 606) Revenue from Contracts with Customers. ASU 2014-09 and subsequent amendments provide principles for recognizing revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This ASU permits two methods of adoption, the full retrospective method applying the standard to each prior reporting period presented, or the modified retrospective method with a cumulative effect of initially applying the new standard recognized at the date of initial application. This ASU also allows entities to apply certain practical expedients at their discretion. The new standard will be effective for our fiscal year beginning January 1, 2018.

We adopted ASU 2014-09 in the first quarter of 2018 using the modified retrospective method. The adoption is not expected to have a material impact on our consolidated financial statements. The new standard’s broader definition of variable consideration requires us to estimate and record certain payments from customers. This ASU requires that the transaction price received from customers be allocated to each separate and distinct performance obligation. We have determined that our service plans do not contain separate and distinct performance obligations. Therefore, the fees we receive for our service plans will be recognized as revenue ratably over the term of the service plan, which is our current practice. The requirement in the new standard is to capitalize incremental costs to obtain contracts with our customers and amortize those costs over the term of the contract. This is a change from our current practice of expensing sales commissions as incurred. We are utilizing the practical expedient provision permitting expensing of costs to obtain a contract when the expected amortization period is one year or less. Under the modified retrospective method, periods prior to the adoption of ASU 2014-09 are not restated and the cumulative effect of initially applying the new standard is reflected in the opening balance of retained earnings as of January 1, 2018. Additional disclosures are required for significant differences between the reported results under the new standard and those that would have been reported under the legacy standard. While we continue to evaluate the effect of the new standard on our ongoing financial reporting, we currently do not expect the cumulative effect of the new standard to be material. We continue to identify the appropriate changes to our business processes, systems, and controls to support revenue recognition and disclosure under the new standard.

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 accounting, transition, and disclosure requirements of the standard. We have not yet determined whether we will elect early adoption of the standard and cannot currently estimate the financial statement impact of adoption.

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. ASU 2016-18 will be effective for our fiscal year beginning January 1, 2018. We adopted this ASU in the first quarter of 2018. The adoption is not expected to have a material impact 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. This 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 adoption of this ASU and cannot estimate the financial statement impact of adoption.

Goodwill

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In connection with our acquisition of DVS in February 2014, we recognized goodwill of $ 104.2 million . The only change to goodwill after the Acquisition Date was an adjustment of $ 0.1 million to the deferred taxes liability resulting from the final tax analysis during the measurement period in 2014.

Goodwill is tested for impairment annually during the fourth quarter unless a triggering event requires an expedited analysis. During the fourth quarters of 2017 and 2016, we completed our annual impairment assessments and we concluded that goodwill was not impaired in any of these years.

Developed Technology

In connection with our 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 expense for each of the years ended December 31, 2017 , 2016 and 2015 was $ 11.2 million , respectively.

Patents

On June 28, 2013, we acquired certain patents, patent applications, and licenses from Helicos Biosciences Corporation (Helicos) relating to Helicos’ next-generation sequencing technology. The rights acquired by us are subject to certain licenses and sublicenses granted by Helicos prior to or contemporaneously with our acquisition. The assets were acquired for $ 1.0 million and we incurred transaction costs of approximately $ 0.3 million . The patents, patent applications, and licenses have an alternative future use and, as a result, the acquired assets and transaction costs are capitalized as intangible assets and are included in other non-current assets. The acquired assets from Helicos are being amortized to research and development expense over their useful life of ten years. Related amortization expense was $ 0.1 million for each of the years ended 2017 , 2016 and 2015 .

On November 4, 2015, we entered into a patent purchase agreement with PerkinElmer Health Sciences, Inc. (PerkinElmer) pursuant to which we purchased the Patents for a purchase price of $ 6.5 million and a patent assignment agreement pursuant to which PerkinElmer transferred and assigned to us all rights, title, privileges, and interest in and to the Patents and the Original License Agreement, between Fluidigm Canada Inc. and PerkinElmer. Accordingly, we have no further financial obligations to PerkinElmer under the Original License Agreement. The Patents are being amortized to cost of product revenue through their useful life. Related amortization expense for the years ended December 31, 2017 , 2016 and 2015 was $ 0.9 million , $ 0.9 million and $ 0.1 million , respectively.

Licenses

In May 2011, we entered into an agreement with Caliper Life Sciences, Inc., which subsequently became a PerkinElmer company (Caliper), to license Caliper’s existing patent portfolio in certain fields, including non-invasive prenatal diagnostics, and obtained an option to extend this license to cover additional fields. Additional payments are due if we exercise our option to extend the license. Under this agreement, we made an up-front payment of $ 0.6 million and our obligation to pay royalties to Caliper commenced in January 2012. In August 2011, we entered into an amendment to the agreement with Caliper and made an additional up-front payment of $ 0.5 million . Pursuant to the amendment, the rates for royalties payable to Caliper were substantially reduced and the period for which we are obligated to make royalty payments was shortened, with the last payment due in mid-2018 for our existing products at the time of amendment and their future equivalents. If any of our future products are determined to infringe Caliper’s patents, the same reduced royalty rates will apply until the respective patents expire. The aggregate $ 1.1 million of payments to Caliper are being amortized to cost of product revenue on a straight-line basis through July 2018, when our royalty payment obligations are expected to terminate based upon our current utilization of the patents. We recognized $ 0.2 million in cost of product revenue during each year of 2017 , 2016 , and 2015 , respectively. Our future royalty payments are not expected to be material.

Intangible assets include developed technology as a result of the DVS acquisition and other intangible assets included in Other non-current assets. Intangible assets, net were as follows (in thousands):

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	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

		December 31, 2016
		Gross Amount				Accumulated Amortization				Net				Weighted-Average Amortization Period
Developed technology		$	112,000			$	( 32,200	)		$	79,800			10.0 years
Patents and licenses		11,224				( 4,533		)		6,691				7.9 years
Total intangible assets, net		$	123,224			$	( 36,733	)		$	86,491

Based on the carrying value of intangible assets, net as of December 31, 2017 , the annual amortization expense for intangible assets, net is expected to be as follows (in thousands):

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The following tables summarize our cash and available-for-sale securities that were measured at fair value by significant investment category within the fair value hierarchy (in thousands):

	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
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
	December 31, 2016
	Carrying Amount				Gross Unrealized Gain				Gross Unrealized Loss				Fair Value				Cash and Cash Equivalents				Short-Term Marketable Securities
Assets:
Cash	$	13,984			$	—			$	—			$	13,984			$	13,984			$	—
Available-for-sale:
Level I:
Money market funds	21,061				—				—				21,061				21,061				—
Level II:
U.S. government and agency securities	24,388				1				( 4		)		24,385				—				24,385
Total	$	59,433			$	1			$	( 4	)		$	59,430			$	35,045			$	24,385

The contractual maturity periods of $ 5.1 million of debt securities are within one year from December 31, 2017 .

There were no transfers between Level I and Level II measurements during the year ended December 31, 2017 , and there were no changes in the valuation techniques used.

Based on an evaluation of securities that were in a loss position, we did not recognize any other-than-temporary impairment charges for the years ended December 31, 2017 , 2016 , and 2015 . None of our investments have been in a continuous loss position for more than 12 months. We concluded that the declines in market value of our available-for-sale securities investment portfolio were temporary in nature and did not consider any of our investments to be other-than-temporarily impaired.

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Cash and Cash Equivalents

Cash and cash equivalents consisted of the following as of December 31, 2017 and 2016 (in thousands):

		December 31,
Cash and cash equivalents:		2017				2016
Cash		$	20,129			$	13,984
Money market funds		16,142				21,061
U.S. Government and agency securities		21,785				—
Total		$	58,056			$	35,045

Inventories

Inventories consisted of the following as of December 31, 2017 and 2016 (in thousands):

		December 31,
Inventories:		2017				2016
Raw materials		$	7,566			$	8,919
Work-in-process		929				1,742
Finished goods		6,593				9,453
Total inventories, net		$	15,088			$	20,114

Property and Equipment

Property and equipment consisted of the following as of December 31, 2017 and 2016 (in thousands):

		December 31,
Property and equipment:		2017				2016
Computer equipment and software		$	4,179			$	5,497
Laboratory and manufacturing equipment		20,069				23,670
Leasehold improvements		7,799				8,747
Office furniture and fixtures		1,892				2,084
Property and equipment, gross		33,939				39,998
Less accumulated depreciation and amortization		( 21,646		)		( 24,084		)
Construction-in-progress		8				611
Property and equipment, net		$	12,301			$	16,525

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Product Warranties

We accrue for estimated warranty obligations at the time of product shipment. Management periodically reviews the estimated fair value of its warranty liability and records adjustments based on the terms of warranties provided to customers, historical and anticipated warranty claim experience. Activity for our warranty accrual for the years ended December 31, 2017 and 2016 , which are included in other accrued liabilities, is summarized below (in thousands):

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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 (Original Notes) pursuant to an underwriting agreement, dated January 29, 2014. The Original 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. The Original Notes will mature on February 1, 2034, unless earlier converted, redeemed, or repurchased in accordance with the terms of the Original Notes. The initial conversion rate of the Original Notes is 17.8750 shares of our common stock, par value $ 0.001 per share, per $ 1,000 principal amount of Original 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. Holders may surrender their Original 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 Original 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 Original Notes in cash without any such condition. The redemption price of the Original Notes will equal 100 % of the principal amount of the Original Notes plus accrued and unpaid interest. Holders may require us to repurchase all or a portion of their Original 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 Original Notes plus accrued and unpaid interest. If we undergo a fundamental change, as defined in the terms of the Original Notes, holders may require us to repurchase the Original Notes in whole or in part for cash at a repurchase price equal to 100 % of the principal amount of the Original Notes plus accrued and unpaid interest.

In February 2014, we received $ 195.2 million , net of underwriting discounts, from the issuance of the Original 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.

In February 2014, we used $ 113.2 million of the net proceeds to fund the cash portion of the consideration payable by us in connection with our acquisition of DVS (now Fluidigm Sciences Inc.). Interest expense related to the Original Notes was approximately $ 5.8 million during each of the years ended December 31, 2017 , 2016 and 2015 , respectively. Accrued interest related to the Original Notes as of December 31, 2017 and 2016 were both $ 2.3 million , respectively, which were included in Other current liabilities. Approximately $ 5.5 million of interest under the Original Notes were paid for each year ended December 31, 2017 and 2016 , respectively.

The carrying values of the components of the convertible notes are as follows (in thousands):

		December 31,
		2017				2016
Principal amount of Original Notes		$	201,250			$	201,250
Unamortized debt discount		( 5,087		)		( 5,330		)
Unamortized debt issuance cost		( 925		)		( 969		)
Net carrying value of convertible notes		$	195,238			$	194,951

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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 years ended December 31, 2017 , 2016 and 2015 was $ 4.7 million , $ 6.3 million and $ 5.2 million , respectively.

Future minimum lease payments and minimum sublease income under non-cancelable operating leases as of December 31, 2017 are as follows (in thousands):

Fiscal Year		Minimum Lease Payments				Minimum Sublease Income				Net Operating Leases
2018		$	4,239			$	( 1,019	)		$	3,220
2019		4,140				( 1,070		)		3,070
2020		2,166				( 410		)		1,756
2021		1,273				—				1,273
2022		873				—				873
Thereafter		1,935				—				1,935
Total		$	14,626			$	( 2,499	)		$	12,127

Other Commitments

In the normal course of business, we enter into various contractual and legally binding purchase commitments. As of December 31, 2017 , these commitments were approximately $ 1.3 million .

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 legal 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 Fisher Scientific, Inc., (Thermo) filed a complaint in the Circuit Court 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 an insurance recovery payment of $ 1.0 million related to this matter.

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Contingencies

2011 Equity Incentive Plan

On January 28, 2011, our board of directors adopted the 2011 Equity Incentive Plan (the 2011 Plan) under which incentive stock options, non-statutory stock options, restricted stock units (RSUs), stock appreciation rights, performance units, and performance shares may be granted to our employees, directors, and consultants.

Incentive stock options and non-statutory stock options granted under the 2011 Plan have a term of no more than ten years from the date of grant and an exercise price of at least 100 % of the fair market value of the underlying common stock on the date of grant. If a participant owns stock representing more than 10 % of the voting power of all classes of our stock on the grant date, an incentive stock option awarded to the participant will have a term of no more than five years from the date of grant and an exercise price of at least 110 % of the fair market value of the underlying common stock on the date of grant. Generally, options vest at a rate of either 25 % on the first anniversary of the option grant date and ratably each month over the remaining period of 36 months , or ratably each month over 48 months . We may grant options with different vesting terms from time to time.

Our board of directors sets the terms, conditions, and restrictions related to our ESPP and the grant of stock options and RSUs, including the number of restricted stock units to grant. Our board of directors also sets vesting criteria and, depending on the extent to which the criteria are met, our board of directors will determine the number of restricted stock units to be paid out. In general, RSUs vest on a quarterly basis over a period of four years from the date of grant at a rate of 25% on the first anniversary of the grant date and ratably each quarter over the remaining 12 quarters, subject to the employees' continued employment.

Our board of directors sets the performance objectives and other vesting provisions in determining the number of shares or value of performance units and performance shares that will be paid out. Such payout will be a function of the extent to which performance objectives or other vesting provisions have been achieved.

As of December 31, 2017 , the 2011 Plan had a total of 5.6 million shares authorized for future issuance, of which 2.3 million shares were available for future grants.

2009 Equity Incentive Plan and 1999 Stock Option Plan

Our 2009 Equity Incentive Plan (the 2009 Plan) terminated on the date the 2011 Plan was adopted, and the 1999 Stock Option Plan (the 1999 Plan) expired in 2009. Options granted or shares issued under the 2009 Plan and the 1999 Plan that were outstanding on the date the 2011 Plan became effective remained subject to the terms of their respective plans.

2017 Inducement Award Plan

On January 5, 2017, we adopted the Fluidigm Corporation 2017 Inducement Award Plan (the “Inducement Plan”) and reserved 2 million shares of the Company’s common stock for issuance pursuant to equity awards granted under the Inducement Plan. The Inducement Plan provides for the grant of equity-based awards and its terms are substantially similar to the 2011 Plan. In accordance with Rule 5635(c)(4) of the Nasdaq Listing Rules, awards under the Inducement Plan may only be made to individuals not previously employees or non-employee directors of the Company (or following such individuals’ bona

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fide period of non-employment with the Company), as an inducement material to the individuals’ entry into employment with the Company or in connection with a merger or acquisition, to the extent permitted by Rule 5635(c)(3) of the Nasdaq Listing Rules.

There were no material equity awards granted under the Inducement Plan in 2017. As of December 31, 2017 , the Inducement Plan had a total of 2.0 million shares authorized for future issuance, of which 2.0 million shares were available for future grants.

2017 Employee Stock Purchase Plan

On August 1, 2017, our stockholders approved our 2017 Employee Stock Purchase Plan (ESPP) at the annual meeting of stockholders. Our ESPP offers U.S. and some non-U.S. employees the right to purchase shares of our common stock. Our ESPP has a six -month offering period, with a new period commencing on the first trading day on or after May 31 and November 30 of each year. Employees are eligible to participate through payroll deductions of up to 10 % of their compensation and may not purchase more than $ 25,000 of stock in any calendar year. The purchase price at which shares are sold under the ESPP is 85 % of the lower of the fair market value of a share of our common stock on the first day of the offering period or the last day of the offering period. Our first ESPP offering period began on October 1, 2017 with a shorter offering period ending on November 30, 2017.

As of December 31, 2017 , 0.9 million shares were available for future issuance under the ESPP. Sales under the ESPP were 0.1 million shares of common stock at an average price of $ 5.20 per share for 2017.

Valuation and Expense Information

We use the Black-Scholes option-pricing model to estimate the fair value of stock options granted under our equity incentive plans and stock purchases under our ESPP. The weighted average assumptions used to estimate the fair value were as follows:

		Year Ended December 31,
		2017				2016				2015
Stock options:
Expected volatility		65.0		%		43.4		%		46.3		%
Expected term		4.2 years				6.0 years				5.9 years
Risk-free interest rate		1.7		%		1.4		%		1.8		%
Dividend yield		—				—				—
Weighted-average fair value per share		$	2.97			$	3.19			$	13.89
ESPP shares:
Expected volatility		74.4		%
Expected term		0.4 years
Risk-free interest rate		1.3		%
Dividend yield		—
Weighted-average fair value per share		$	1.93

We determine the expected volatility based on our historical stock price volatility generally commensurate with the estimated expected term of the stock awards. The expected term of an award is based on historical forfeiture experience, exercise activity, and the terms and conditions of the stock awards. The risk-free interest rate is based on the U.S. Treasury yield in effect at the time of grant for zero coupon U.S. Treasury notes with maturities approximately equal to each grant’s expected life. Each of these inputs is subjective and generally requires significant judgment by us. Also required to compute the fair value calculation of options and ESPP shares is the fair value of the underlying common stock. We account for forfeitures as they occur.

We grant stock options at exercise prices not less than the fair value of our common stock at the date of grant.

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The fair value of RSUs granted to employees was estimated on the date of grant by multiplying the number of shares granted by the fair market value of our common stock on the grant date.

Activity under the 2011 Plan, the 2009 Plan, the 1999 Plan and the Inducement Plan is as follows (in thousands, except per share amounts and terms):

Restricted Stock units:

		Number of Shares			Weighted-Average Grant Date Fair Value per Share
Balance at December 31, 2016		1,065			$	15.31
RSUs granted		916			$	5.73
RSUs vested		( 445	)		$	15.57
RSUs canceled		( 368	)		$	13.11
Balance at December 31, 2017		1,168			$	8.55
Expected to vest at December 31, 2017		1,127			$	8.59

The total intrinsic value of RSUs vested and released during the year ended December 31, 2017 , 2016 and 2015 were approximately $ 2.3 million , $ 2.4 million and $ 1.8 million , respectively. The intrinsic value of vested and released RSUs is calculated by multiplying the fair market value of our common stock on the vesting date by the number of shares vested. As of December 31, 2017 , the unrecognized compensation costs related to outstanding unvested RSUs under our equity incentive plans were $ 8.6 million . We expect to recognize those costs over a weighted average period of 2.4 years.

Stock options :

		Number of Shares			Weighted-Average Exercise Price per Share				Weighted- Average Remaining Contractual Life (in Years)		Aggregate Intrinsic Value (1)
Balance at December 31, 2016		3,560			$	16.62
Options granted		1,364			$	5.61
Options exercised		( 25	)		$	4.07
Options canceled/forfeited		( 2,735	)		$	16.33
Balance at December 31, 2017		2,164			$	10.41
Vested at December 31, 2017		990			$	15.15			4.9		$	315
Expected to vest at December 31, 2017		1,149			$	5.58			9.3		726

(1)	Aggregate intrinsic value was calculated as the difference between the closing price per share of our common stock on the last trading day of 2017 , which was $ 5.89 , and the exercise price of the options, multiplied by the number of in-the-money options.

The total intrinsic value of options exercised during 2017 , 2016 and 2015 was $ 0.1 million , $ 0.3 million and $ 13.7 million , respectively. As of December 31, 2017 , the unrecognized compensation costs related to outstanding unvested options under our equity incentive plans were $ 3.7 million . We expect to recognize those costs over a weighted average period of 2.9 years.

The total stock-based compensation recognized during 2017 , 2016 , and 2015 was $ 9.1 million , $ 13.9 million and $ 16.8 million , respectively. There were no stock-based compensation tax benefits recognized during 2017 , 2016 or 2015 . Capitalized stock-based compensation costs were insignificant at December 31, 2017 , 2016 and 2015 .

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In 2016, we granted 184,050 and 87,620 performance-based stock options and performance-based restricted stock units (each, a “performance award”), respectively, to executive officers and employees, which were accounted for as equity awards. The number of performance awards that ultimately vest depends on the achievement of certain performance criteria set by the Compensation Committee of the Company’s Board of Directors. The performance-based stock options have an exercise price per share of $ 7.10 . The Company recognizes stock-based compensation expense over the vesting period of the performance awards when achievement of the performance criteria becomes probable. We did not recognize any expense related to these performance awards in 2017 or 2016.

Stock Option Exchange Program

On August 23, 2017, we launched a one-time stock option exchange program (the Program), which eligible employees were able to exchange certain outstanding stock options (Eligible Options), whether vested or unvested, with an exercise price greater than $ 4.37 per share and greater than the closing price of a share of our common stock on the NASDAQ Global Select Market on the expiration date of the exchange offer (the Offer), for restricted stock units or stock options (New Awards) covering a lesser number of shares than were subject to the Eligible Options exchanged immediately before being canceled in the Offer. Non-employee members of our Board of Directors were not eligible to participate in the Program. The Program expired on September 20, 2017, with a closing price of $ 5.13 per share.

115 employees elected to surrender Eligible Options to purchase a total of 1,204,198 shares of our common stock, representing approximately 50.02 % of the total shares of common stock underlying the Eligible Options. All surrendered options were canceled effective as of the expiration date, and immediately thereafter, in exchange for such surrendered options, we issued (i) new options to purchase an aggregate of 399,117 shares of our common stock with an exercise price of $ 5.13 ; and (ii) restricted stock units representing 54,944 shares of our common stock, each, pursuant to the terms of the Offer and our 2011 Equity Incentive Plan. The new awards granted under the Program generally vest over three years.

Our loss before income taxes consists of the following (in thousands):

		Year Ended December 31,
		2017				2016				2015
Domestic		$	( 56,885	)		$	( 65,211	)		$	( 46,757	)
International		( 6,914		)		( 14,966		)		( 8,033		)
Loss before income taxes		$	( 63,799	)		$	( 80,177	)		$	( 54,790	)

Significant components of our benefit for income taxes are as follows (in thousands):

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		Year Ended December 31,
		2017				2016				2015
Current:
Federal		$	—			$	—			$	( 30	)
State		( 17		)		( 14		)		( 14		)
Foreign		( 501		)		286				( 1,319		)
Total current tax (expense) benefit		( 518		)		272				( 1,363		)
Deferred:
State		—				—				—
Foreign		3,782				3,920				2,838
Total deferred benefit		3,782				3,920				2,838
Total benefit for income taxes		$	3,264			$	4,192			$	1,475

Reconciliation of income taxes at the statutory rate to the benefit from (provision for) income taxes recorded in the statements of operations is as follows:

		Year Ended December 31,
		2017			2016			2015
Tax benefit at federal statutory rate		34.0	%		34.0	%		34.0	%
State tax expense, net of federal benefit		5.5			2.2			1.4
Foreign tax benefit (expense)		0.4			( 0.7	)		( 1.9	)
Change in valuation allowance		39.2			( 31.2	)		( 28.6	)
Federal research and development credit		1.9			1.3			2.6
Unrecognized tax benefit		( 0.6	)		( 1.3	)		( 1.8	)
Return to provision reconciliation		—			1.5			( 1.2	)
Impact of the Tax Act		( 74.6	)		—			—
Other, net		( 0.7	)		( 0.6	)		( 1.9	)
Effective tax rate		5.1	%		5.2	%		2.6	%

The Tax Act was enacted in December 2017. The Tax Act introduced a broad range of tax reform measures that significantly change U.S. federal income tax laws. Among other provisions, the Tax Act reduces the federal tax rate from 34% to 21% and imposes a one-time transition tax on post-1986 foreign unremitted earnings. We have remeasured our deferred taxes as of December 31, 2017 using the reduced U.S. federal tax rate of 21%. Accordingly, our gross deferred tax assets, which primarily include our net operating loss carryforwards, decreased by $ 29.9 million with a corresponding decrease in our valuation allowance. There is no net impact on our income tax provision from the remeasurement of existing deferred taxes due to a full valuation allowance. In addition, the Tax Act requires companies to pay a one-time transition tax for accumulated foreign earnings not previously subject to U.S. income tax. We have reviewed the accumulated undistributed foreign earnings after previously taxed income and currently we do not anticipate a transition tax liability due to our estimated aggregate foreign deficit. We have made reasonable estimates to reflect the impact of the Tax Act and recorded provisional amounts, in accordance with SAB 118, for the remeasurement of deferred taxes and the one-time transition tax as of December 31, 2017 .

We continue to analyze additional information and new guidance issued by relevant authorities related to the Tax Act, which could impact the determination of the net deferred taxes subject to the remeasurement, the related impact to the assessment of our valuation allowance, and the one-time transition tax. The prospects of supplemental legislation or regulatory processes to address questions that arise because of the Tax Act, or evolving technical interpretations of the tax law, may cause the final impact from the Tax Act to differ materially from the recorded amounts. We will finalize and record any adjustments related to the Tax Act within the one-year measurement period provided under SAB 118.

As of December 31, 2017 , we changed our permanent reinvestment assertion and will not permanently reinvest our foreign earnings outside the United States. The cash generated from some of our foreign subsidiaries may be used domestically to fund operations. Any domestic, foreign and state taxes that may be due upon future repatriation of earnings is not expected to

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be significant. In addition, we currently do not anticipate any significant impact from the one-time transition tax liability under the Tax Act due to our estimated aggregate foreign deficit.

Our Development and Expansion Incentive, or DEI, in Singapore was terminated in 2017 and we did not benefit from the reduced tax rate of 5 % for qualifying income in Singapore because certain milestones were not met. In addition, the capital allowance provision under the Singapore Productivity and Innovation Credit Scheme ended in 2017. Due to the termination of our DEI and capital allowance deduction, we released the valuation allowance and are subject to the statutory tax rate for Singapore.

Significant components of our deferred tax assets and liabilities are as follows (in thousands):

		December 31,
		2017				2016
Deferred tax assets:
Net operating loss carryforwards		$	91,701			$	123,913
Reserves and accruals		3,927				4,281
Depreciation and amortization		5,591				712
Tax credit carryforwards		14,838				12,584
Stock-based compensation		5,994				7,057
Total gross deferred tax assets		122,051				148,547
Valuation allowance on deferred tax assets		( 119,228		)		( 146,285		)
Total deferred tax assets, net of valuation allowance		2,823				2,262
Deferred tax liabilities:
Fixed asset and intangibles		( 18,912		)		( 22,000		)
Total deferred tax liabilities		( 18,912		)		( 22,000		)
Net deferred tax liability		$	( 16,089	)		$	( 19,738	)

Upon adoption of ASU 2016-09 (see Note 2), we recorded to the opening balance of retained earnings $ 9.3 million in deferred tax assets for previously unrecognized excess tax benefits that existed as of January 1, 2017, and a corresponding increase of $ 9.3 million in valuation allowances against these deferred tax assets as substantially all of our U.S. deferred tax assets, net of deferred tax liabilities, were subject to a full valuation allowance. The net impact to retained earnings as a result of these adjustments was zero.

We evaluate a number of factors to determine the realizability of our deferred tax assets. Recognition of deferred tax assets is appropriate when realization of these assets is more likely than not. Assessing the realizability of deferred tax assets is dependent upon several factors including historical financial results. The deferred tax assets have been partially offset by a valuation allowance because we have incurred losses since our inception. The valuation allowance decreased by $ 27.1 million and increased by $ 22.1 million during 2017 and 2016 , respectively. The change in valuation allowance during 2017 is mainly due to the change in Federal statutory rate from 34% to 21%, offset by a significant increase in the taxable loss in 2017. The change in valuation allowance during 2016 is primarily due to a significant increase in the taxable loss in 2016 and an increase in research development credits.

The valuation allowances of $ 119.2 million and $ 146.3 million as of December 31, 2017 and 2016 , respectively, primarily relate to temporary tax differences, net operating losses and research and development credits generated in the current and prior years. We believe it is more likely than not that U.S. federal, California and Japan deferred tax assets relating to temporary differences, net operating losses and research and development credits are not realizable. As such, full valuation allowances have been applied against the deferred tax assets relating to jurisdictions of the federal U.S., the state of California and Japan.

A reconciliation of the beginning and ending amount of the valuation allowance for the years ended December 31, 2017 , 2016 , or 2015 is as follows (in thousands):

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	Valuation Allowance
December 31, 2014	$	110,167
Charges to earnings	—
Charges to other accounts	13,970
December 31, 2015	124,137
Charges to earnings	—
Charges to other accounts	22,148
December 31, 2016	146,285
Charges to earnings	830
Charges to other accounts	( 27,887		)
December 31, 2017	$	119,228

As of December 31, 2017 , we had net operating loss carryforwards for U.S. federal income tax purposes of $ 402.7 million , which expire in the years 2021 through 2038, and U.S. federal research and development tax credits of $ 8.3 million , which expire in the years 2021 through 2038. As of December 31, 2017 , we had net operating loss carryforwards for state income tax purposes of $ 163.6 million , which expire beginning in 2018 through 2038, and California research and development tax credits of $ 10.4 million , which do not expire. As of December 31, 2017 , we had foreign net operating loss carryforwards of $ 1.6 million , which expire in the years 2018 through 2038.

Utilization of the net operating loss carryforwards and credits may be subject to a substantial annual limitation due to the ownership change limitations provided by Section 382 of the Internal Revenue Code of 1986, as amended, and similar state provisions. The annual limitation may result in the expiration of net operating losses and credits before utilization. In 2015, we completed a Section 382 analysis for the period from our inception in May 1999 through December 31, 2015, which excluded the net operating loss carryforwards for DVS prior to the acquisition, and determined that an ownership change as defined under Section 382 occurred in November 2001, which resulted in a reduction to our U.S. federal net operating losses by $ 1.2 million . In 2016 and 2017, we continued the Section 382 analysis through December 31, 2017 and determined that an ownership change did not occur during the periods.

Uncertain Tax Positions

The aggregate changes in the balance of our gross unrecognized tax benefits during 2017 , 2016 , and 2015 were as follows (in thousands):

December 31, 2014	$	7,672
Increases in balances related to tax positions taken during current period	1,049
Decreases in balances related to tax position taken during prior period	( 59		)
December 31, 2015	8,662
Increases in balances related to tax positions taken during a prior period	46
Increases in balances related to tax positions taken during current period	1,673
Decreases in balances related to tax positions taken during prior period	( 1,048		)
December 31, 2016	9,333
Increases in balances related to tax positions taken during a prior period	—
Increases in balances related to tax positions taken during current period	61
Decreases in balances related to tax positions taken during prior period	( 2,077		)
December 31, 2017	$	7,317

Accrued interest and penalties related to unrecognized tax benefits were included in the income tax provision and are immaterial as of December 31, 2017 and 2016 .

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As of December 31, 2017 , there are no unrecognized tax benefits that, if recognized, would affect our effective tax rate. We do not anticipate that our existing unrecognized tax benefits will significantly increase or decrease within the next 12 months .

We operate in one reporting segment that develops, manufacturers and commercializes tools for life sciences research. Our chief executive officer manages our operations and evaluates our financial performance on a consolidated basis. For purposes of allocating resources and evaluating regional financial performance, our chief executive officer reviews separate sales information for the different regions of the world. Our general and administrative expenses and our research and development expenses are not allocated to any specific region. Most of our principal operations, other than manufacturing, and our decision-making functions are located at our corporate headquarters in the United States.

The following table represents our total revenue by geographic area of our customers for each year presented (in thousands):

		Year Ended December 31,
		2017				2016				2015
United States		$	45,820			$	52,637			$	55,404
Europe		32,642				29,739				36,772
Asia-Pacific		20,005				18,478				16,967
Other		3,470				3,592				5,569
Total		$	101,937			$	104,446			$	114,712

Our license revenue is primarily generated in the United States.

We had long-lived assets consisting of property and equipment, net of accumulated depreciation, in the following geographic areas for each year presented (in thousands):

		December 31,
		2017				2016
United States		$	3,500			$	6,145
Singapore		5,167				6,830
Canada		3,481				3,503
Europe		125				43
Asia-Pacific		28				4
Total		$	12,301			$	16,525

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Tax Benefit Preservation Plan

On August 1, 2017, the Tax Benefit Preservation Plan (Tax Plan) dated as of November 21, 2016 expired and all of the preferred share purchase rights distributed to the holders of our common stock pursuant to the Tax Plan expired.

At-The-Market Offering

On August 3, 2017, we entered into a Sales Agreement with Cowen and Company, LLC (Cowen) to sell shares of our common stock having aggregate sales proceeds of up to $ 30 million , from time to time, through an “at-the-market” equity offering program under which Cowen would act as sales agent. Under the Sales Agreement, we set the parameters for the sale of shares, including the number of shares to be issued, the time period during which sales are requested to be made, limitation on the number of shares that may be sold in any one trading day and any minimum price below which sales may not be made.

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Selected quarterly results of operations for the years ended December 31, 2017 and 2016 are as follows (in thousands, except for per share amounts):

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On March 2, 2018, we entered into separate privately negotiated agreements with certain holders our Original Notes to exchange in a private placement (Exchange Transactions) approximately $ 125.0 million in aggregate principal amount of our Original Notes for approximately $ 125.0 million in aggregate principal amount of our Exchange Notes. Each $ 1,000 principal amount of Original Notes was exchanged for $ 1,000 principal amount of Exchange Notes. Approximately $ 76.3 million in aggregate principal amount of Original Notes will remain outstanding.

The issuance of the Exchange Notes in the Exchange Transactions closed on March 6, 2018 and in connection with the Exchange Transactions, we entered into a Second Supplemental Indenture (Supplemental Indenture) to the Indenture, dated February 4, 2014, with U.S. Bank National Association, as trustee (Base Indenture, and together with the Supplemental Indenture, the Indenture).

The Exchange Notes have an interest rate of 2.75 % per year per $ 1,000 , which accrue on the principal amount of Exchange Notes, payable in cash semi-annually in arrears on February 1 and August 1 of each year, beginning February 1, 2018, and will mature on February 1, 2034, unless earlier repurchased, redeemed or converted. The Exchange Notes have an initial conversion rate of 126.9438 shares of our common stock, par value $ 0.001 per share, per $ 1,000 principal amount (which is equivalent to an initial conversion price of approximately $ 7.88 per share), subject to adjustment, and are convertible into cash, shares of our common stock or a combination of cash and common stock, at our election. The Exchange Notes are convertible at the option of the holder at any time prior to the business day immediately preceding the maturity date for the Exchange Notes. The Exchange Notes are also convertible at our option upon certain conditions specified in the Indenture for the Exchange Notes (the issuer’s conversion option).

Holders of the Exchange Notes have the right, at their option, to require us to purchase their Exchange 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, 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 Exchange Notes on the fundamental change repurchase date, plus accrued and unpaid interest. Holders who convert their Exchange 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. On or after February 6, 2022, we may elect to redeem all or any portion of the Exchange Notes at a redemption price equal to 100 % of the accreted principal amount (i.e., up to 120 % of the outstanding principal amount) of the Exchange Notes on the redemption date of the Exchange Notes, plus accrued and unpaid interest.

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		In thousands
		Balance at Beginning of Period				Additions/ Charged to Expense				Deductions				Balance at End of Period
Year ended December 31, 2017
Accounts receivable allowance		$	502			$	24			$	( 135	)		$	391
Year ended December 31, 2016
Accounts receivable allowance		$	103			$	484			$	( 85	)		$	502
Year ended December 31, 2015
Accounts receivable allowance		$	120			$	23			$	( 40	)		$	103

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