What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2021-02-25 compared with 2020-02-27 · 471 added, 329 removed, 723 unchanged (53% of the section changed)

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and

Stockholders of Fluidigm Corporation

To the Board of Directors and Stockholders of Fluidigm Corporation

Opinions on the Financial Statements and Internal Control over Financial Reporting

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A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

A company’s internal control over financial reporting

includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

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The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

2018 Senior Convertible Notes - Estimation of Fair Value of Debt Upon Retirement

As described in Notes 2 and 6 to the consolidated financial statements, in the first quarter of 2019 the Company converted $150 million of the 2018 Senior Convertible Notes into 19.5 million shares of its common stock, which resulted in the recording of a $9 million loss, representing the difference between the fair value of the notes retired and their carrying cost.

Management determined the fair value of the convertible notes using valuation techniques that require management to make assumptions related to the implied discount rate.

The principal considerations for our determination that performing procedures relating to the 2018 Senior Convertible Notes - estimation of fair value of debt upon retirement is a critical audit matter are there was significant auditor effort in performing procedures and evaluating the implied discount rate assumption used by management in determining the fair value of the convertible notes.

In addition, the audit effort involved the use of professionals with specialized skill and knowledge to assist in performing these procedures and in evaluating the audit evidence obtained from these procedures.

National Institutes of Health (NIH) Contract Accounting

As described in Notes 2 and 4 to the consolidated financial statements, in September 2020, the Company executed a definitive contract with the National Institutes of Health (NIH) for a project under the NIH Rapid Acceleration of Diagnostics (RADx) program, which has a total value of up to $34.0 million upon the achievement of certain conditional milestones.

As there is no authoritative guidance under U.S.

GAAP on accounting for government assistance to for-profit business entities, management applied International Accounting Standards (IAS) 20, Accounting for Government Grants and Disclosure of Government Assistance by analogy when accounting for the NIH contract payments to the Company.

Management has elected to record the grants received as deferred income with grant proceeds recognized when there is reasonable assurance the conditions of the grant will be met and the grant will be received.

With the NIH contract, this occurs when either each milestone has been accepted by NIH or management concludes the conditions of the grant have been substantially met.

As of December 31, 2020, a total $23.9 million has been recorded as deferred gran t income.

The principal considerations for our determination that performing procedures relating to the NIH contract accounting is a critical audit matter are (i) the significant judgment by management when determining the applicable accounting model and determining which milestones are reasonably assured, including consideration of conditional contract provisions and NIH termination rights;

and (ii) a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating audit evidence relating to the accounting policy selection and assumptions associated with conclusions of which milestones are reasonably assured.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to management’s valuation of the convertible notes, including controls over the development of the assumptions related to the implied discount rate.

These procedures also included, among others, the involvement of professionals with specialized skill and knowledge to assist in developing an independent estimate of the implied discount rate, and comparison of this independent estimate to management’s assumption.

These procedures included testing the effectiveness of controls relating to the NIH contract, including controls over the determination of the appropriate accounting model, and which grant milestones met the reasonable assurance criteria for recognition.

These procedures also included, among others (i) reading the executed agreement and correspondence with NIH, (ii) evaluating compliance with the contract requirements, including conditional provisions and NIH termination rights, (iii) evaluating management’s accounting analysis, and (iv) evaluating the assumptions associated with recognition of deferred income for milestones determined to be reasonably assured by management.

/s/ PricewaterhouseCoopers LLP

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Accounts receivable (net of allowances of $ 356 and $ 6 , at December 31, 2020 and 2019, respectively)

25,423 18,981

Inventories, net 19,689 13,884

Prepaid expenses and other current assets 4,031 4,592

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Developed technology, net 40,206 46,200

Goodwill 106,563 104,108

Total assets $ 324,757 $ 264,812

LIABILITIES AND STOCKHOLDERS’ EQUITY

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Deferred revenue, non-current 7,990 8,168

Deferred grant income, non-current 21,036 —

Other non-current liabilities 1,333 573

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Year Ended December 31,

2020 2019 2018

Product revenue $ 99,944 $ 95,416 $ 93,650

Service revenue 22,579 21,277 19,314

Grant revenue

License revenue

Development revenue 8,865 — —

Other revenue 6,756 550 —

Total revenue 138,144 117,243 112,964

Cost of sales:

Costs and expenses:

Cost of product revenue 47,527 45,461 44,861

Cost of service revenue 7,291 7,503 6,454

Total cost of sales

Operating expenses:

Research and development 36,461 31,640 30,030

Selling, general and administrative 97,901 84,478 79,783

Total operating expenses

Total costs and expenses 189,180 169,082 161,128

Loss from operations ( 51,036 ) ( 51,839 ) ( 48,164 )

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Income tax benefit 1,081 1,915 2,407

Net loss $ ( 53,020 ) $ ( 64,790 ) $ ( 59,013 )

Net loss per share, basic and diluted $ ( 0.74 ) $ ( 0.97 ) $ ( 1.49 )

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Year Ended December 31,

2020 2019 2018

Net loss $ ( 53,020 ) $ ( 64,790 ) $ ( 59,013 )

Other comprehensive income (loss), net of tax

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(in thousands)

Common Stock Additional

Capital Accumulated

Comprehensive

Income (Loss)

Income (Loss) Accumulated

Deficit Total

Stockholders’

Balance at December 31, 2016

At-the-market offering

Issuance of restricted stock, net of shares withheld for taxes, and other

Issuance of common stock from option exercises

Issuance of common stock under ESPP

Cumulative-effect of new accounting standard for Topic 718 Stock Compensation

Stock-based compensation expense

Other comprehensive income (loss), net of taxes

Shares Amount

Balance at December 31, 2017 38,787 $ 39 $ 531,666 $ ( 574 ) $ ( 500,196 ) $ 30,935

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Stock-based compensation expense 11,023 — 11,023

Net loss — — — — ( 59,013 ) ( 59,013 )

Other comprehensive income (loss), net of taxes — — — ( 113 ) — ( 113 )

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Stock-based compensation expense — 11,349 — — 11,349

Net loss — — — — ( 64,790 ) ( 64,790 )

Other comprehensive income (loss), net of taxes — — — 105 — 105

Balance at December 31, 2019 69,956 70 777,765 ( 582 ) ( 623,641 ) 153,612

Issuance of common stock from at-the-market offering, net of commissions 2,480 2 20,224 — — 20,226

Issuance of restricted stock, net of shares withheld for taxes, and other 1,050 1 ( 460 ) — — ( 459 )

Issuance of common stock under ESPP 476 1 1,322 — — 1,323

Issuance of common stock from stock option exercises 96 — 451 — — 451

Equity issuance costs — — ( 176 ) — — ( 176 )

Cumulative effect of new accounting standard for Topic 326 Credit Losses — — — — ( 100 ) ( 100 )

Stock-based compensation expense — — 14,450 — — 14,450

Acquisition of InstruNor AS 485 1 2,048 — — 2,049

Net loss — — — — ( 53,020 ) ( 53,020 )

Other comprehensive income (loss), net of taxes — — — 694 — 694

Balance as of December 31, 2020 74,543 $ 75 $ 815,624 $ 112 $ ( 676,761 ) $ 139,050

See accompanying notes

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Year Ended December 31,

2020 2019 2018

Operating activities

Net loss $ ( 53,020 ) $ ( 64,790 ) $ ( 59,013 )

Adjustments to reconcile net loss to net cash used in operating activities:

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Amortization of developed technology 11,910 11,200 11,200

Lease amortization 2,017 ( 516 ) —

Amortization of debt discounts, premiums and issuance costs 545 1,936 8,379

Impairment of intangible

Loss on extinguishment of debt

Impairment of intangible asset — 443 —

Loss from extinguishment of debt — 12,020 —

Loss on disposal of property and equipment 212 89 141

Increase in inventory reserves, net

Provision for excess and obsolete inventory 1,614 1,807 1,090

Other non-cash items 426 200 175

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Accounts receivable, net ( 7,628 ) ( 2,075 ) ( 1,788 )

Inventories, net ( 8,636 ) ( 3,047 ) 398

Prepaid expenses and other assets ( 877 ) ( 1,400 ) 178

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Investing activities

Proceeds from NIH Contract 21,036 — —

Acquisition, net of cash acquired ( 5,154 ) — —

Purchases of investments — ( 62,370 ) ( 1,450 )

Proceeds from sale of investments 5,010 — —

Proceeds from maturities of investments 31,800 25,600 6,541

Purchases of intangible assets

Purchases of property and equipment ( 12,717 ) ( 2,531 ) ( 372 )

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Financing activities

Proceeds from issuance of common stock

Proceeds from issuance of common stock, net of commissions 20,226 — 59,469

Proceeds from debt issuance — 55,000 —

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Cash paid for income taxes, net of refunds $ 521 $ 205 $ 321

Non-cash right-of-use assets and lease liabilities $ 36,225 $ 10,402 $ 0

Unpaid debt and equity issuance costs $ — $ 534 $ 375

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Description of Business

Fluidigm Corporation (the Company, we, our or us) creates, manufactures, and markets technologies and tools for life sciences research, including preparatory and analytical instruments for Mass Cytometry, PCR, Library Prep, Single Cell Genomics, and consumables, including integrated fluidic circuits (IFC), assays, and reagents.

Our focus is on the most pressing needs in translational and clinical research, including cancer, immunology and immunotherapy.

We sell our instruments, consumables and services to academic institutions, clinical research laboratories, and contract research organizations, as well as biopharmaceutical, biotechnology, and agricultural biotechnology companies.

Fluidigm Corporation (the Company, Fluidigm, we, our or us) improves life by driving meaningful insights in health and disease.

Our innovative technologies explore the biological complexities of disease to advance human health through research, diagnostics and clinical applications.

We create, manufacture, and market a range of products and services, including instruments, consumables, reagents and software that are used by researchers and clinical labs worldwide.

Our customers are leading academic and government laboratories, as well as pharmaceutical, biotechnology, plant and animal research organizations, and clinical laboratories worldwide.

The Company was formerly known as Mycometrix Corporation and changed its name to Fluidigm Corporation in April 2001.

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GAAP) and include the accounts of our wholly owned subsidiaries.

As of December 31, 2019 , we had wholly-owned subsidiaries in Singapore, Canada, the Netherlands, Japan, France, the United Kingdom, China, and Germany.

As of December 31, 2020, we had wholly owned subsidiaries in Singapore, Canada, the Netherlands, Japan, France, the United Kingdom, China, Germany and Norway.

All subsidiaries, except for Singapore, use their local currency as their functional currency.

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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.

Certain prior period amounts in the consolidated balance sheet and statements of cash flows were reclassified to conform with the current period presentation.

These reclassifications were immaterial and did not affect prior period total assets, total liabilities, stockholders' equity, total revenue, total costs and expenses, loss from operations or net loss.

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We base our estimates on historical experience and on various other assumptions believed to be reasonable, which together form the basis for making judgments about the carrying values of assets and liabilities.

The full extent to which the COVID-19 pandemic impacts our business, results of operations and financial condition will depend on numerous evolving factors including, but not limited to, the magnitude and duration of the pandemic, the extent to which it will impact worldwide macroeconomic conditions, including the speed of recovery, and governmental and business reactions to the pandemic.

We assessed certain accounting matters that generally require consideration of forecasted financial information, including the unknown impact of COVID-19 as of December 31, 2020.

These accounting matters included, but were not limited to, our allowance for doubtful accounts and credit losses, inventory and related reserves and the carrying value of goodwill and other long-lived assets.

Actual results could differ materially from these estimates and could have a material adverse effect on our consolidated financial statements.

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Revenue Recognition

We adopted ASC 606 Revenue from Contracts with Customers on January 1, 2018 and all the related amendments using the modified retrospective method.

The Company recognized the cumulative effect of initially applying the new revenue standard as an adjustment to the opening balance of accumulated deficit as of January 1, 2018.

The comparative information for 2017 has not been recast and continues to be reported under the accounting standards in effect for that period.

We generate revenue primarily from the sale of our products and services.

Product revenue is derived from the sale of instruments and consumables, including IFCs, assays and reagents.

Service revenue is derived from the sale of instrument service contracts, repairs, installation, training and other specialized product support services.

We receive grants from various entities to perform research and development activities over contractually defined periods.

Revenue is generally recognized provided that the conditions under which the grants were provided have been met and any remaining performance obligations are perfunctory.

Service revenue is primarily derived from the sale of instrument service contracts, repairs, installation, training and other specialized product support services.

We also generate revenue from development agreements, license and royalty agreements and grants.

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

Research and development cost includes costs associated with development and grant revenue.

We adopted ASU 2014-09 Revenue from Contracts with Customers (Topic 606) on January 1, 2018, using the modified retrospective method applied to those contracts with unrecognized revenue on the adoption date.

We recognize revenue based on the amount of consideration we expect to receive in exchange for the goods and services we transfer to the customer.

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Payments made in advance of service are reported on our consolidated balance sheet as deferred revenue.

Contract Costs

Incremental sales commission costs incurred to obtain instrument service contracts are capitalized and amortized to selling, general and administrative expense over the life of the contract, which is generally one to three years .

As a practical expedient, we expense sales commissions associated with product support services that are delivered in less than one year as they are incurred.

Sales commissions associated with the sale of products are expensed as they are incurred.

To date, capitalized contract costs have been immaterial.

Development Revenue

The Company has entered and may continue to enter into development agreements with third parties that provide for up-front and periodic milestone payments.

Our development agreements may include more than one performance obligation.

At the inception of the contract, we assess whether each obligation represents a separate performance obligation or whether such obligations should be combined as a single performance obligation.

The transaction price for each development agreement is determined based on the amount of consideration we expect to be entitled to for satisfying all performance obligations within the agreement.

We assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue.

In arrangements where we satisfy performance obligation(s) over time, we recognize development revenue typically using an input method based on our costs incurred relative to the total expected cost which determines the extent of our progress toward completion.

As part of the accounting for these arrangements, we must develop estimates and assumptions that require judgment to determine the transaction price and progress towards completion.

We review our estimate of the transaction price and progress toward completion based on the best information available to recognize the cumulative progress toward completion as of the end of each reporting period, and make revisions to such estimates as necessary.

We also generate revenue from development or collaboration agreements that do not include upfront or milestone-based payments and generally recognize revenue on these types of agreements based on the timing of development activities.

Other Revenue

Other revenue consists of license and royalty revenue and grant revenue.

We recognize revenue from license agreements when the license is transferred to the customer and the customer is able to use and benefit from the license.

For contracts that include sales-based royalties, we recognize revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied.

In March 2020, we entered into an agreement to settle intellectual property infringement claims, in which we received a $ 3.5 million payment in exchange for a perpetual license under certain Fluidigm intellectual property.

The settlement is considered a multiple-element arrangement with each element accounted for individually.

Accordingly, $ 3.1 million of the proceeds was recognized as license revenue and $ 0.4 million was offset against legal costs.

We receive grants from various entities to perform research and development activities over contractually defined periods.

Grant revenue is not accounted for under ASC 606 Revenue from Contracts with Customers, as the grant agreement is not with a customer.

As there is no authoritative U.S.

GAAP guidance for grants awarded to for-profit entities, we have applied the guidance in ASC 958 Not-for-Profit Entities by analogy.

Revenue is generally recognized provided that the conditions under which the grants were provided have been met and any remaining performance obligations are perfunctory.

Product Warranties

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Applying the revenue recognition practices discussed above often requires significant judgment.

Judgment is required when identifying performance obligations, estimating SSP and allocating purchasing consideration in multi-element

arrangements and estimating the future amount of our warranty obligations.

Judgment is required when identifying performance obligations, estimating SSP and allocating purchasing consideration in multi-element arrangements and estimating the future amount of our warranty obligations.

Moreover, significant judgment is required when interpreting commercial terms and determining when control of goods and services passes to the customer.

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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, net

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.

We regularly review inventory for excess and obsolete products and components.

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.

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Depreciation expense for the years ended December 31, 2020, 2019, and 2018 was $ 3.1 million, $ 3.6 million, and $ 4.2 million, respectively.

Goodwill, Intangible Assets and Other Long-Lived Assets

We adopted Accounting Standards Update (ASU) 2016-02, Leases (Topic 842) on January 1, 2019 using the modified retrospective method.

In accordance with Topic 842, we determine if an arrangement is a lease, or contains a lease, at inception.

Operating leases are included in operating lease right-of-use (ROU) assets, net and current and non-current operating lease liabilities in our consolidated balance sheets.

ROU assets represent our right-to-use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.

Operating lease ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term.

As most of our leases do not provide an implicit rate, we generally use our incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date.

Significant judgment is required in determining the incremental collateralized borrowing rate.

Lease expense for lease payments is recognized on a straight-line basis over the lease term.

We elected the short-term lease recognition exemption for all leases that qualify.

For those leases that qualify, we will not recognize ROU assets or lease liabilities for leases with an initial lease term of one year or less.

We also elected not to separate lease and nonlease components for our building leases.

The nonlease components are generally variable in nature and are expected to represent most of our variable lease costs.

Variable costs are expensed as incurred.

We have taken a portfolio approach for our vehicle leases by country.

Business Combinations, Goodwill, Intangible Assets and Other Long-Lived Assets

We have completed acquisitions of businesses in the past and may acquire additional businesses or technologies in the future.

The results of businesses acquired in a business combination are included in our consolidated financial statements from the date of acquisition.

We allocate the purchase price, which is the sum of the consideration provided in a business combination, to the identifiable assets and liabilities of the acquired business at their acquisition date fair values.

The excess of the purchase price over the amount allocated to the identifiable assets and liabilities, if any, is recorded as goodwill.

Determining the fair value of assets acquired and liabilities assumed requires management to use significant judgment and estimates, including the selection of valuation methodologies and estimates of future revenue.

Goodwill, which has an indefinite useful life, represents the excess of cost over fair value of net assets acquired.

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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.

Events or changes in circumstances that could affect the likelihood that we will be required to recognize an impairment charge include, but are not limited to, declines in our stock price or market capitalization, declines in our market share or revenues, and an increase in our losses, rapid changes in technology, failure to achieve the benefits of capacity increases and utilization, significant litigation arising out of an acquisition, or other matters.

Events or changes in circumstances that could affect the likelihood that we will be required to recognize an impairment charge include, but are not limited to, declines in our stock price or market capitalization, economic downturns and other macroeconomic events, including the current COVID-19 pandemic, declines in our market share or revenues, and an increase in our losses, rapid changes in technology, failure to achieve the benefits of capacity increases and utilization, significant litigation arising out of an acquisition, or other matters.

Any impairment charges could have a material adverse effect on our operating results and net asset value in the quarter in which we recognize the impairment charge.

In evaluating our goodwill and intangible assets with indefinite lives for indications of impairment, we first conduct an assessment of qualitative factors to determine whether it is more likely than not that the fair value of our reporting unit is less than its carrying amount.

If we determine that it is more likely than not that the fair value of our reporting unit is less than its carrying amount, we 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 we determine that it is more likely than not that the fair value of our reporting unit is less than its carrying amount, we compare the fair value of our reporting unit to its carrying value.

If the fair value of our reporting unit exceeds its carrying value, goodwill is not considered impaired and no further analysis is required.

If the carrying value of the reporting unit 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 did not recognize any impairment of goodwill for any of the periods presented herein.

If the carrying value of the reporting unit exceeds its fair value, then an impairment loss equal to the difference would be recorded to goodwill.

There were no indicators of impairment in 2020.

We did no t recognize any impairment of goodwill for any of the periods presented herein.

We evaluate our long-lived assets, including finite-lived intangibles, for indicators of possible impairment when events or changes in circumstances indicate the carrying amount of an asset may not be recoverable.

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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.

In the fourth quarter of 2019, we recognized an impairment charge of $ 0.4 million on patents and licenses that are not used in current products and are not expected to be used in future product offerings.

In the fourth quarter of 2019, we recognized an impairment charge of $ 0.4 million on patents and licenses that were not used in then current products and were not expected to be used in future product offerings.

Deferred Grant Income

In September 2020, we executed a definitive contract with the National Institutes of Health (NIH) for a project under the NIH Rapid Acceleration of Diagnostics (RADx) program.

The definitive contract, which amended the letter contract we entered into with the NIH in July 2020 (collectively, the NIH Contract), has a total value of up to $ 34.0 million upon the achievement of certain milestones.

Proceeds from the NIH Contract will be used primarily to expand production capacity.

Accounting for the NIH Contract does not fall under ASC 606, Revenue from Contracts with Customers, as the NIH will not benefit directly from our expansion or product development.

As there is no authoritative guidance under U.S.

GAAP on accounting for government assistance to for-profit business entities, we applied International Accounting Standards (IAS) 20, Accounting for Government Grants and Disclosure of Government Assistance, by analogy when accounting for the NIH Contract payments to Fluidigm.

The NIH Contract proceeds used for production capacity expansion meet the definition of grants related to assets as the primary purpose for the payments is to fund the purchase and construction of capital assets to scale up production capacity.

Under IAS 20, government grants related to assets are presented in the statement of financial position either by setting up the grant as deferred income or by deducting the grant in arriving at the carrying amount of the asset.

Either of these two methods of presentation of grants related to assets in financial statements are regarded as acceptable alternatives under IAS 20.

We have elected to record the grants received as deferred income using the first method.

Under IAS 20, grant proceeds are recognized when there is reasonable assurance the conditions of the grant will be met and the grant will be received.

With the NIH Contract, this occurs when either each milestone has been accepted by NIH or management concludes the conditions of the grant have been substantially met.

Deferred income related to production capacity expansion will be amortized over the period of depreciation for the related assets as a reduction of depreciation expense.

Deferred income related to reimbursement of operating expenses is recorded as a reduction of those expenses incurred to date.

Convertible Notes

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The embedded conversion option value was calculated as the difference between (i) the total fair value of the 2018 Notes and (ii) the fair value of a similar debt instrument excluding the embedded conversion option.

We determined an embedded conversion option value of $ 29.3 million , which was recorded in additional paid-in-capital and reduced the carrying value of the 2018 Notes.

The resulting discount on the 2018 Notes was amortized over the expected term of the 2018 N

otes, using the effective interest method through the first note holder put date, of February 6, 2023.

We determined an embedded conversion option value of $ 29.3 million for the 2018 Notes, which was recorded in additional paid-in-capital and which reduced the carrying value of the 2018 Notes.

The resulting discount on the 2018 Notes was amortized over the expected term of the 2018 Notes, using the effective interest method through the first note holder put date of February 6, 2023.

In the first quarter of 2019, the 2018 Notes were converted into 19.5 million shares of our common stock and the 2018 Notes were retired.

We recorded a loss of $ 9.0 million on the retirement of the 2018 Notes.

We have determined the fair value of the 2018 Notes using valuation techniques that require us to make assumptions related to the implied discount rate.

We recorded a loss of $ 9.0 million on the retirement of the 2018 Notes at conversion in the first quarter of 2019.

We determined the fair value of the 2018 Notes using valuation techniques that required us to make assumptions related to the implied discount rate.

In November 2019, we closed a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of $ 55.0 million aggregate principal amount of our 5.25 % Senior Convertible Notes due 2024 (2019 Notes).

The majority of the issuance proceeds were used to retire approximately $ 50.2 million of aggregate principal amount of our 2014 Notes, leaving approximately $ 1.1 million of aggregate principal amount of our 2014 Notes outstanding.

We recorded a loss of $ 3.0 million on the extinguishment of the 2014 Notes.

This amount represents the difference between the fair value of the 2019 Notes used to extinguish the debt and the carrying value of the 2014 Notes, including unamortized debt issuance costs.

As the 2019 Notes do not provide for a cash conversion feature, the 2019 Notes are recorded for as debt in their entirety in accordance with ASC 470.

We recorded a loss of $ 3.0 million on the extinguishment of the 2014 Notes in the fourth quarter of 2019.

This amount represented the difference between the fair value of the 2019 Notes used to extinguish the debt and the carrying value of the 2014 Notes, including unamortized debt issuance costs.

As the 2019 Notes do not provide a cash conversion feature, the 2019 Notes are recorded as debt in their entirety in accordance with ASC 470.

For the 2014, 2018 and 2019 Notes, offering-related costs, including underwriting costs, were capitalized as debt issuance costs, recorded as an offset to the carrying value of the related Notes, and are amortized over the expected term of the related Notes using the effective interest method.

See Note 6 for a detailed discussion of the accounting treatment of the transactions and additional information.

See Note 9 fo r a detailed discussion of the accounting treatment of the transactions and additional information.

Fair Value of Financial Instruments

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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.

Our cash equivalents, which include money market funds and investments in treasury securities are classified as Level I because they are valued using quoted market prices.

Our convertible notes are not regularly traded and it is difficult to estimate a reliable and accurate market price for these securities.

The estimated fair values for these securities

represent Level III valuations because a fair value for these securities cannot be determined by using readily observable inputs or measures, such as market prices.

Fair values were estimated using pricing models and risk-adjusted value ranges.

Research and Development

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We incurred advertising costs of $ 1.6 million, $ 3.4 million and $ 2.2 million during 2020, 2019, and 2018, respectively.

Stock-Based Compensation

We account for stock options, restricted stock units (RSU) and performance stock units (PSU) granted to employees and directors and stock purchases under ESPP based on the fair value of the awards at the date of grant.

We recognize stock-based compensation expense on a straight-line basis over the requisite service periods for non-performance-based awards.

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.

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.

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.

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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 non-performance-based awards.

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

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The components of accumulated other comprehensive loss, net of tax, for the years ended December 31, 2020, 2019, and 2018 are as follows (in thousands):

Foreign Currency Translation Adjustment

Unrealized Gain (Loss) on Investments

Accumulated Other Comprehensive Income (Loss)

Foreign Currency Translation Adjustment Unrealized Gain (Loss) on Investments Accumulated Other Comprehensive Income (Loss)

Ending balance at December 31, 2018 $ ( 687 ) $ — $ ( 687 )

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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):

Stock options, restricted stock units and performance awards

2020 2019 2018

Stock options, restricted stock units and performance stock units 7,507 5,189 4,354

2019 Convertible Notes 18,966 18,966 —

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2014 Convertible Notes 19 19 916

Total 27,329 27,356 25,062

Recent Accounting Changes and Accounting Pronouncements

Adoption of New Accounting Guidance

In February 2016, the FASB established Topic 842, Leases, by issuing Accounting Standards Update (ASU) No.

2016-02, which requires lessees to recognize operating leases on the balance sheet and disclose key information about leasing arrangements.

Topic 842 was subsequently amended by ASU No.

2018-01, Land Easement Practical Expedient for Transition to Topic 842;

2018-10, Codification Improvements to Topic 842, Leases;

2018-11, Targeted Improvements.

The new standard establishes a right-of-use (ROU) model that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with a term longer than 12 months.

Leases are classified as finance or operating;

the classification will impact the expense recognition in the income statement.

Modified Retrospective Transition approach is required, applying the new standard to all leases existing at the date of initial application.

An entity may choose to use either (1) its effective date or (2) the beginning of the earliest comparative period presented in the financial statements as its date of initial application.

We adopted the new standard on January 1, 2019 and used the effective date of the standard as our date of initial application.

Consequently, previously presented financial information has not been updated, and the disclosures required under the new standard have not been provided for dates and periods before January 1, 2019.

For dates and periods prior to January 1, 2019, the original disclosures under ASC 840 are disclosed.

The new standard provides several optional practical expedients in transition.

We elected the ‘package of practical expedients,’ which permits us to not reassess under the new standard our prior conclusions about lease identification, lease classification and initial direct costs.

We did not elect the use-of-hindsight or the practical expedient pertaining to land easements;

the latter not being applicable to us.

On adoption, we recognized $ 9.2 million of lease liabilities, based on the present value of the current minimum lease payments, discounted using our collateralized incremental borrowing rate, with corresponding ROU assets of $ 7.4 million .

The difference between the initial lease liability and ROU asset is attributable to deferred rent.

There was no impact to accumulated deficit from the adoption of ASC 842.

The new standard also provides certain accounting elections for an entity’s ongoing accounting.

We elected the short-term lease recognition exemption for all leases that qualify.

This means that, for those leases that qualify, we will not recognize ROU assets or lease liabilities for leases with an initial lease term of one year or less.

We also elected to not separate lease and nonlease components for our building leases.

The nonlease components are generally variable in nature and are expected to represent most of our variable lease costs.

Variable costs are expensed as incurred.

We have taken a portfolio approach for our vehicle leases by country.

We determine whether an arrangement is a lease, or contains a lease, at inception.

Recent Accounting Pronouncements

In November 2019, the FASB issued ASU 2019-12-Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes.

The amendments in this update improve consistent application of and simplifies GAAP for Topic 740 by clarifying and amending existing guidance including intra-period allocation, reporting tax law changes and losses in interim periods, state and

local taxes not fully based on income and recognition of deferred tax liability related to certain transactions.

There is also new guidance related to consolidated group reporting and tax impacts resulting from business combinations.

The new guidance is effective for fiscal years beginning after December 15, 2020.

We are currently evaluating the impact of adoption on our consolidated financial statements.

In August 2018, the FASB issued ASU 2018-15-Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40) which establishes new guidance on the accounting for costs incurred to implement a cloud computing arrangement that is considered a service arrangement.

In August 2018, the U.S.-based Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2018-15-Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40), which establishes new guidance on the accounting for costs incurred to implement a cloud computing arrangement that is considered a service arrangement.

The new guidance requires the capitalization of such costs, aligning it with the accounting for costs associated with developing or obtaining internal-use software.

The new guidance is effective for fiscal years beginning after December 15, 2019.

The adoption of the new guidance is not expected to have a significant impact on our financial results.

The new guidance became effective for fiscal years beginning after December 15, 2019.

The adoption of the new guidance did not have a significant impact on our financial results.

In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350):

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Instead, an entity performs its annual, or interim, goodwill impairment testing by comparing the fair value of a reporting unit with its carrying amount and recording an impairment charge for the amount by which the carrying amount exceeds the fair value.

The ASU will be effective for annual and interim goodwill impairment testing performed for our fiscal year beginning January 1, 2020, with early adoption permitted.

The adoption of the new guidance is not expected to have a significant impact on our financial results.

The ASU became effective for annual and interim goodwill impairment testing performed for our fiscal year beginning January 1, 2020.

The adoption of the new guidance did not have a significant impact on our financial results.

The FASB issued two ASUs related to financial instruments – credit losses.

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ASU 2016-13 is intended to improve financial reporting by requiring more timely recording of credit losses on loans and other financial instruments held by financial institutions and other organizations.

ASU 2018-19 clarifies that receivables arising from operating leases are not within the scope of the credit losses standard, but rather, should be accounted for in accordance with the leasing standard.

These ASUs are effective for fiscal years beginning after December 15, 2019, and interim periods within those years, with early adoption permitted.

ASU 2018-19 clarifies that receivables arising from operating leases are not within the scope of the credit losses standard, but rather, should be accounted for in accordance with the lease standard.

These ASUs were effective for fiscal years beginning after December 15, 2019, and interim periods within those years, with early adoption permitted.

The modified retrospective method is required upon adoption.

The adoption of the new guidance resulted in an adjustment of approximately $ 0.1 million to reduce the accumulated deficit component of stockholders’ equity and decrease current assets by the same amount in our consolidated balance sheet.

Recent Accounting Pronouncements

In August 2020, the FASB issued ASU 2020-06 Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.

The amendment to this ASU reduces the number of accounting models for convertible instruments and allows more contracts to qualify for equity classification, which is expected to result in more convertible instruments being accounted for as a single unit, rather than being bifurcated between debt and equity.

The new guidance is effective for fiscal years beginning after December 15, 2021.

We are currently evaluating the impact of adoption on our consolidated financial statements.

In November 2019, the FASB issued ASU 2019-12-Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes.

The amendments in this update improve consistent application of and simplify U.S.

GAAP for Topic 740 by clarifying and amending existing guidance for, among other items, intra-period allocation, reporting tax law changes and losses in interim periods, state and local taxes not fully based on income and recognition of deferred tax liability related to certain transactions.

There is also new guidance related to consolidated group reporting and tax impacts resulting from business combinations.

The new guidance is effective for fiscal years beginning after December 15, 2020.

The adoption of the new guidance is not expected to have a significant impact on our financial results.

Business Combination

On January 17, 2020, we completed the acquisition of all of the outstanding shares of InstruNor AS, a privately held Norwegian company (InstruNor).

InstruNor is a provider of the only fully integrated sample preparation system for flow and mass cytometry.

The acquisition of InstruNor supports our entry into the sample preparation market for cytometry analysis and expands our capabilities to include fully automated sample preparation for flow and mass cytometry.

The purchase price of $ 7.2 million included approximately $ 5.2 million in cash and 485,451 shares of our common stock valued at the closing price on the effective date of $ 4.22 .

The acquisition was accounted for in accordance with ASC 805, Business Combinations.

The assets acquired and liabilities assumed were recorded at their estimated fair values at the InstruNor acquisition date.

Developed technology was valued using a discounted cash flow model for which the most sensitive assumption was revenue growth rate.

There have been no measurement period adjustments recognized since the acquisition date.

Non-tax deductible goodwill of $ 2.2 million was calculated as the purchase price less the fair value of the net assets acquired as follows (in thousands):

Purchase price:

Cash consideration paid on closing to former equity holders $ 5,165

Non-cash consideration common shares 2,049

Total purchase price $ 7,214

Assets acquired:

Cash and cash equivalents $ 11

Accounts receivable 32

Other receivables 13

Inventories, net 153

Developed technology 5,380

Liabilities assumed:

Accounts payable 14

Other current liabilities 15

Deferred tax liability, net 566

Fair value of identifiable net assets acquired $ 4,994

Goodwill acquired on acquisition $ 2,220

In September 2020, we executed a contract with the NIH (the NIH Contract) for a project under the RADx program.

The RADx program provides grants to support a range of new lab-based and point-of-care tests that could significantly increase the number, type and availability of COVID-19 tests.

The NIH Contract has a total value of up to $ 34.0 million upon the achievement of certain milestones.

Proceeds from the NIH Contract will be used primarily to expand production capacity and, to a lesser extent, to offset applicable operating expenses.

We expect to complete the contract in 2021.

The NIH has the right to terminate the contract for convenience.

In the event of termination for convenience, Fluidigm will be paid a percentage of the contract price reflecting the percentage of the work performed prior to the notice of termination, plus reasonable charges.

In the event of termination for cause due to our default, NIH is not liable for supplies or services not accepted.

If we fail to deliver within the time specified in the contract and the delay is due to Fluidigm’s fault or negligence, we are required to pay liquidated damages in the amount of 33 % of the amount(s) already disbursed to date under the contract within six months from the date of termination.

We do not currently expect to pay any liquidated damages and are in compliance with the terms of the contract.

We are working with the NIH continuously to ensure we are in compliance with the contract requirements and milestones.

The following table summarizes the activity under the NIH Contract through December 31, 2020 (in thousands):

Total grant proceeds reasonably assured $ 25,436

Amounts applied against research and development expenses 1,488

Total deferred grant income $ 23,948

Short-term deferred grant income $ 2,912

Long-term deferred grant income 21,036

Total deferred grant income $ 23,948

Funding received $ 25,436

Short-term deferred grant income represents future research and development costs expected to be funded by the NIH Contract over the next year, and it is included in other accrued liabilities on the balance sheet at December 31, 2020.

The long-term deferred grant income represents the portion of the funding received in 2020 attributable to manufacturing capacity expansion, of which we have incurred $ 10.2 million of capital expenditures through December 31, 2020.

The majority of this amount is included in construction-in-progress, which is included in property and equipment, net in the consolidated balance sheet as of December 31, 2020 (see Note 8).

Development Agreement

Effective March 31, 2020, we signed an OEM Supply and Development Agreement (Development Agreement) with a customer.

Under the Development Agreement, Fluidigm will develop products based on our microfluidics technology.

The Development Agreement provides up-front and periodic milestone payments of up to $ 11.7 million during the development stage.

The development stage is expected to last approximately one year from the date of the agreement.

We recognized $ 8.8 million of development revenue from this agreement for the year ended December 31, 2020.

Disaggregation of Revenue

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Year Ended December 31,

2020 2019 2018

Geographic Markets:

Americas $ 74,586 $ 47,016 $ 51,172

EMEA 37,776 40,024 36,617

Asia-Pacific 25,782 30,203 25,175

Total $ 138,144 $ 117,243 $ 112,964

Year Ended December 31,

2020 2019 2018

Instruments $ 45,536 $ 50,004 $ 45,491

Consumables 54,408 45,412 48,159

Product revenue 99,944 95,416 93,650

Performance Obligations

Service revenue 22,579 21,277 19,314

Development revenue 8,865 — —

Other revenue:

License and royalty revenue 3,163 — —

Grant revenue 3,593 550 —

Total other revenue 6,756 550 —

Total $ 138,144 $ 117,243 $ 112,964

Unfulfilled Performance Obligations

We reported $ 20.0 million of deferred revenue on our December 31, 2019 consolidated balance sheet.

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The following table summarizes the expected timing of revenue recognition for unfulfilled performance obligations associated with instrument service contracts that were partially completed at December 31, 2020 (in thousands):

Expected Revenue (1)

Fiscal Year Expected Revenue (1)

2021 $ 12,492

Thereafter 1,634

Total $ 24,145

_ _______________________ ______

(1) Expected revenue includes both billed amounts included in deferred revenue and unbilled amounts that are not reflected in our consolidated financial statements and are subject to change if our customers decide to cancel or modify their contracts.

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Goodwill and Intangible Assets, net

In connection with our acquisition of DVS in February 2014, we recognized goodwill of $ 104.1 million .

Intangible assets include developed technology related to the DVS acquisition and other intangible assets are included in other non-current assets.

In connection with our acquisition of DVS in February 2014, we recognized goodwill of $ 104.1 million and $ 117.7 million of developed technology.

In the first quarter of 2020, we recognized $ 2.2 million (Euro 2.0 million) of goodwill from the InstruNor acquisition and $ 5.4 million (Euro 4.9 million) of developed technology (see Note 3).

As the goodwill and developed technology from the InstruNor acquisition are recorded in the functional currency of our European operations, which is the Euro, these balances are revalued each period and the U.S.

dollar value of these assets will fluctuate as foreign exchange rates change.

We are amortizing InstruNor developed technology over 8.0 years.

Qualitative assessment includes assessing significant events and circumstances such as our current results, assumptions regarding future performance, strategic initiatives and overall economic factors, including the ongoing global COVID-19 pandemic and macroeconomic developments to determine the existence of potential indicators of impairment and assess if it is more likely than not that the fair value of our reporting unit or intangible assets is less than their carrying value.

If indicators of impairment are identified, a quantitative impairment test is performed.

During the first quarter of fiscal 2020, the Company assessed whether the current and potential future impact of the COVID-19 pandemic represented an event which necessitated an impairment review.

No impairment was recorded as a result of the quantitative assessment performed.

In addition, the Company performed its annual impairment assessment and there were no indicators of impairment identified.

Intangible assets also include other patents and licenses, which are included in other non-current assets.

Intangible assets, net, were as follows (in thousands):

December 31, 2020

Accumulated Amortization

Weighted-Average Amortization Period

Developed technology

Patents and licenses

Gross Amount Accumulated Amortization and Translation Net Weighted-Average Amortization Period

Developed technology $ 117,658 $ ( 77,452 ) $ 40,206 9.9 years

Patents and licenses $ 11,256 $ ( 9,238 ) $ 2,018 7.5 years

December 31, 2019

Accumulated Amortization

Weighted-Average Amortization Period

Developed technology

Patents and licenses

In the fourth quarter of 2019, we concluded that one of our patents and licenses was impaired and reduced its carrying value to zero , recognizing a charge of $ 0.4 million , which is reflected in accumulated amortization.

Gross Amount Accumulated Amortization and Translation Net Weighted-Average Amortization Period

Developed technology $ 112,000 $ ( 65,800 ) $ 46,200 10.0 years

Patents and licenses $ 11,274 $ ( 8,342 ) $ 2,932 7.8 years

Total amortization expense for the years ended December 31, 2020, December 31, 2019, and December 31, 2018 was $ 12.8 million, $ 12.2 million and $ 12.3 million, respectively.

Based on the carrying value of intangible assets, net, as of December 31, 2020, the annual amortization expense is expected to be as follows (in thousands):

Developed Technology Amortization Expense

Patents and Licenses Amortization Expense

Fiscal Year Developed Technology Amortization Expense Patents and Licenses Amortization Expense Total

2021 $ 11,944 $ 761 $ 12,705

2022 11,944 678 12,622

2023 11,944 572 12,516

2024 2,144 7 2,151

2025 744 — 744

Thereafter 1,486 — 1,486

Total $ 40,206 $ 2,018 $ 42,224

Balance Sheet Details

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Total cash, cash equivalents, and restricted cash $ 69,536 $ 23,736

Short-term restricted cash of approximately $ 1.1 million is included in prepaid expenses and other current assets, and $ 1.0 million of non-current restricted cash is included in other non-current assets in the consolidated balance sheet.

Inventories consisted of the following as of December 31, 2019 and 2018 (in thousands):

Short-term restricted cash of approximately $ 16 th ousand is included in prepaid expenses and other current assets, and $ 1.0 million of non-current restricted cash is included in other non-current assets in the consolidated balance sheet as of December 31, 2020.

Inventories, net

Inventories, net consisted of the following as of December 31, 2020 and 2019 (in thousands):

Raw materials $ 8,292 $ 6,133

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Finished goods 10,183 7,092

Total inventories

Total inventories, net $ 19,689 $ 13,884

Property and Equipment, net

Property and equipment consisted of the following as of December 31, 2019 and 2018 (in thousands):

Property and equipment, net consisted of the following as of December 31, 2020 and 2019 (in thousands):

Computer equipment and software $ 4,240 $ 3,997

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Property and equipment, net $ 17,531 $ 8,056

Activity for our warranty accrual for the years ended December 31, 2019 and 2018 , which are included in other accrued liabilities, is summarized below (in thousands):

Accrued Compensation and Related Benefits

Accrued compensation and related benefits consisted of the following as of December 31, 2020 and 2019 (in thousands):

Year Ended December 31,

Accrued incentive compensation $ 7,842 $ 1,589

Accrued vacation 3,367 2,249

Accrued payroll taxes and other 2,578 1,322

Accrued compensation and related benefits $ 13,787 $ 5,160

Activity for our warranty accrual for the years ended December 31, 2020 and 2019, which is included in other accrued liabilities, is summarized below (in thousands):

Year Ended December 31,

Beginning balance $ 1,390 $ 863

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2014 Senior Convertible Notes (2014 Notes)

On February 4, 2014, we closed an underwritten public offering of $ 201.3 million aggregate principal amount of our 2.75 % Senior Convertible Notes due 2034 (2014 Notes) pursuant to an underwriting agreement, dated January 29, 2014.

In February 2014, we closed an underwritten public offering of $ 201.3 million aggregate principal amount of our 2014 Notes.

We received $ 195.2 million, net of underwriting discounts, from the issuance of the 2014 Notes and incurred approximately $ 1.1 million in offering-related expenses.

The underwriting discount and offering-related expenses are being amortized to interest expense using the effective-interest rate method.

The effective interest rate on the 2014 Notes, reflecting the impact of debt discounts and issuance costs, is approximately 3.0 %.

The 2014 Notes will mature on February 1, 2034, unless earlier converted, redeemed, or repurchased in accordance with the terms of the 2014 Notes.

The initial conversion rate of the 2014 Notes is 17.8750 shares of our common stock, par value $ 0.001 per share, per $1,000 principal amount of 2014 Notes (which is equivalent to an initial conversion price of approximately $ 55.94 per share).

Holders may surrender their 2014 Notes for conversion at any time prior to the stated maturity date.

On or after February 6, 2018, and prior to February 6, 2021, we may redeem any or all of the 2014 Notes in cash if the closing price of our common stock exceeds 130 % of the conversion price for a specified number of days, and on or after February 6, 2021, we may redeem any or all of the 2014 Notes in cash without any such condition.

The redemption price of the 2014 Notes will equal 100 % of the principal amount of the 2014 Notes plus accrued and unpaid interest.

Holders may require us to repurchase all or a portion of their 2014 Notes on each of February 6, 2021, February 6, 2024, and February 6, 2029, at a repurchase price in cash equal to 100 % of the principal amount of the 2014 Notes plus accrued and unpaid interest.

If we undergo a fundamental change, as defined in the terms of the 2014 Notes, holders may require us to repurchase the 2014 Notes in whole or in part for cash at a repurchase price equal to 100 % of the principal amount of the 2014 Notes plus accrued and unpaid interest.

In February 2014, we received $ 195.2 million , net of underwriting discounts, from the issuance of the 2014 Notes and incurred approximately $ 1.1 million in offering-related expenses.

The underwriting discount of $ 6.0 million and the debt issuance costs of $ 1.1 million were recorded as offsets to the proceeds.

The underwriting discount and offering-related expenses are being amortized to interest expense using the effective-interest rate method.

The effective interest rate on the 2014 Notes, reflecting the impact of debt discounts and issuance costs, is 3.0 % .

We have retired the majority of the 2014 Notes through the issuance of the 2018 Notes and 2019 Notes, below discussed.

As of December 31, 2019 , there is $ 1.1 million aggregate principal of the 2014 Notes outstanding.

We have retired the majority of the 2014 Notes through the issuance of the 2018 Notes and 2019 Notes, as discussed below.

As of December 31, 2020, there was $ 1.1 million aggregate principal of the 2014 Notes outstanding.

2018 Senior Convertible Notes (2018 Notes)

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As of the closing of the 2018 Notes on March 12, 2018, the estimated fair value was $ 145.5 million.

The difference between the $ 150.0 million aggregate principal amount of the 2018 Notes and its fair value was being amortized over the expected term of the 2018 Notes using the effective interest method through the first note holder put date of February 6, 2023.

We accounted for the exchange transaction as an extinguishment of debt due to the significance of the change in value of the embedded conversion option, resulting in a $ 0.1 million gain.

The gain on extinguishment of debt was calculated as the

difference between the reacquisition price (i.e., the fair value of the principal amount of 2018 Notes) and the net carrying value of the 2014 Notes exchanged, net of unamortized debt discount and debt issuance cost write-offs.

The difference between the $ 150.0 million aggregate principal amount of the 2018 Notes and its fair value

was being amortized over the expected term of the 2018 Notes using the effective interest method through the first note holder put date of February 6, 2023.

The 2018 Notes accrued interest at a rate of 2.75 %, payable semi-annually in arrears on February 1 and August 1 of each year.

The 2018 Notes matured on February 1, 2034, unless earlier converted, redeemed, or repurchased in accordance with the terms of the indenture governing the 2018 Notes.

The 2018 Notes were to mature on February 1, 2034, unless earlier converted, redeemed, or repurchased in accordance with the terms of the indenture governing the 2018 Notes.

The initial conversion rate of the 2018 Notes was 126.9438 shares of our common stock, par value $ 0.001 per share, per $1,000 principal amount of the 2018 Notes (which is equivalent to an initial conversion price of approximately $ 7.88 per share).

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Those certain specified events included holders who convert their 2018 Notes voluntarily prior to our exercise of the issuer's conversion option described below or in connection with a make-whole fundamental change prior to February 6, 2023, entitling the holders, under certain circumstances, to a make-whole premium in the form of an increase in the conversion rate determined by reference to a make-whole table set forth in the indenture governing the 2018 Notes.

Any time prior to the maturity of the 2018 Notes, we could convert the 2018 Notes, in whole but not in part, into cash, shares of our common stock, or combination thereof, if the closing price of our common stock equaled or exceeded 110 % of the conversion price then in effect for a specified number of days.

On or after February 6, 2022, we could elect to redeem all or any portion of the 2018 Notes at a redemption price equal to 100 % of the accreted principal amount of the 2018 Notes on the redemption date of the 2018 Notes, plus accrued and unpaid interest.

Holders of the 2018 Notes had the right, at their option, to require us to purchase all or a portion of the 2018 Notes (i) on February 6, 2023, February 6, 2026, and February 6, 2029, or (ii) in the event of a fundamental change, as defined in the indenture governing the 2018 Notes, in each case, at a repurchase price equal to 100 % of the accreted principal amount (i.e., up to 120 % of the outstanding principal amount) of the 2018 Notes on the fundamental change repurchase date, plus accrued and unpaid interest.

Offering-related costs for the 2018 Notes were approximately $ 2.8 million.

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Net proceeds of the 2019 Notes issuance were $ 52.7 million, after deductions for commissions and other debt issuance costs.

Offering related costs were capitalized as debt issuance costs, recorded as an offset to the carrying value of the 2019 Notes and are being amortized over the expected term of the 2019 Notes using the effective interest method.

The effective interest rate on the 2019 Notes is 6.2 % .

$ 51.8 million of the proceeds of the 2019 Notes was used to retire $ 50.2 million aggregate principal amount of our 2014 Notes.

$ 51.8 million of the proceeds of the 2019 Notes were used to retire $ 50.2 million aggregate principal amount of our 2014 Notes, leaving $ 1.1 million of the 2014 Notes outstanding.

We accounted for the transaction as an extinguishment of debt due to the significance of the change in value of the embedded conversion option, resulting in a $ 3.0 million loss.

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The 2019 Notes will be convertible at the option of the holder at any point prior to the close of business on the second scheduled trading day preceding the maturity date.

The initial conversion rate of the Notes is 344.8276 shares of the C

ompany’s common stock per $1,000 principal amount of 2019 Notes (which is equivalent to an initial conversion price of approximately $ 2.90 per share).

The initial conversion rate of the Notes is 344.8276 shares of the Company’s common stock per $1,000 principal amount of 2019 Notes (which is equivalent to an initial conversion price of approximately $ 2.90 per share).

The conversion rate is subject to adjustment upon the occurrence of certain specified events.

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On or after December 1, 2022, if the price of the Company’s common stock has equaled or exceeded 130 % of the Conversion Price then in effect for a specified number of days, we may, at our option, elect to convert the 2019 Notes in whole but not in part into shares of the Company, determined in accordance with the terms of the indenture.

Offering-related costs for the 2019 Notes were approximately $ 2.3 million and were capitalized as debt issuance costs, recorded as an offset to the carrying value of the 2019 Notes, and are being be amortized over the expected term of the 2019 Notes using the effective interest method through the maturity date of December 1, 2024.

The carrying values of the components of the 2014 Notes, 2018 Notes and 2019 Notes are as follows (in thousands):

2.75% 2014 Notes due 2034

Principal amount

Unamortized debt discount

Unamortized debt issuance cost

Offering-related costs for the 2019 Notes were capitalized as debt issuance costs and are recorded as an offset to the carrying value of the 2019 Notes.

The debt issuance costs are amortized over the expected term of the 2019 Notes using the effective interest method through the maturity date of December 1, 2024.

The effective rate on the 2019 Notes is 6.2 %.

The carrying values of the components of the 2014 Notes and 2019 Notes are as follows (in thousands):

2.75 % 2014 Notes due 2034

Principal amount $ 1,079 $ 1,079

Premium accretion

Unamortized debt discount ( 16 ) ( 18 )

Unamortized debt issuance cost ( 4 ) ( 4 )

$ 1,059 $ 1,057

5.25 % 2019 Notes due 2024

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Unamortized debt issuance cost ( 1,835 ) ( 2,236 )

$ 53,165 $ 52,764

Net carrying value of all Notes $ 54,224 $ 53,821

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There were no borrowings outstanding under the Revolving Credit Facility at December 31, 2020.

The Revolving Credit Facility matures on August 2, 2020, and is collateralized by substantially all our property, other than intellectual property.

Outstanding loans under the Revolving Credit Facility will bear interest, at the greater of (i) prime rate plus 0.50 % or (ii) 5.50 % .

The Revolving Credit Facility is collateralized by substantially all our property, other than intellectual property.

Until an amendment in April 2020, the Revolving Credit Facility was set to mature on August 2, 2020.

The interest rate on outstanding loans under the Revolving Credit Facility was the greater of (i) prime rate plus 0.50 % or (ii) 5.50 %.

Interest on any outstanding loans is due and payable monthly and the principal balance is due at maturity though loans can be prepaid at any time without penalty.

Effective April 21, 2020, the Revolving Credit Facility was amended to extend the maturity date to August 2, 2022.

In addition, we pay a quarterly unused revolving line facility fee of 0.75 % per annum on the average unused facility.

Subject to certain exceptions, we must pay a prepayment fee equal to (i) 2.00 % of the Maximum Amount if it prepays all advances and terminates the Loan Agreement prior to August 2, 2019, or (ii) 1.00 % of the Maximum Amount if it prepays all advances and terminates the Loan Agreement on or after August 2, 2019, and prior to the maturity date.

We incurred approximately $ 335,000 of debt issuance costs in connection with the facility, including $ 225,000 in commitment fees.

Half of the commitment fee was paid at the inception of the facility and the remainder was paid on August 2, 2019.

Debt issuance costs were capitalized and are being amortized to interest expense over the life of the Revolving Credit Facility.

The quarterly unused line fee, which was previously based on the Maximum Amount, will now be based on the Borrowing Base.

The annual commitment fee of $ 112,500 is unchanged.

The Revolving Credit Facility contains customary affirmative and negative covenants which, unless waived by the bank, limit our ability to, among other things, incur additional indebtedness, grant liens, make investments, repurchase stock, pay dividends, transfer assets, enter into affiliate transactions, undergo a change of control, or engage in merger and acquisition activity, including merging or consolidating with a third party.

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During the existence of an event of default, interest on the obligations under the Revolving Credit Facility could be increased to 5.0 % above the otherwise applicable rate of interest.

We were in compliance with all the terms and conditions of the Revolving Credit Facility at December 31, 2019 .

We were in compliance with all the terms and conditions of the Revolving Credit Facility as of December 31, 2020.

We have operating leases for buildings, equipment and vehicles.

Existing leases have remaining terms of less than one year to eight years .

Existing leases have remaining terms of less than one year to ten years .

Some leases contain options to extend the lease, usually for up to five years , and termination options.

Operating lease right-of-use assets, net, consisted of the following (in thousands):

December 31, 2019

Accumulated Amortization

December 31, 2020 December 31, 2019

Operating lease right-of-use buildings $ 41,132 $ 6,234

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Operating lease right-of-use vehicles 679 355

In the first half of 2019, we entered into a new operating lease for our corporate headquarters in South San Francisco, California, which is expected to commence in March 2020.

The lease term is approximately 10 years .

Future minimum lease payments over the life of the lease are expected to be approximately $ 61.1 million .

The components of lease expense were:

(in thousands)

Twelve months ended December 31, 2019

Total operating lease right-of-use assets, gross 41,900 6,658

Accumulated amortization ( 3,786 ) ( 1,798 )

Total operating lease right-of-use assets, net $ 38,114 $ 4,860

Operating lease liabilities, current $ 2,973 $ 1,833

Operating lease liabilities, non-current 38,178 4,323

Total operating lease liabilities $ 41,151 $ 6,156

Weighted average remaining lease term (in years) 8.6 years 4.7 years

Weighted average discount rate 11.9 % 5.0 %

A new operating lease for our corporate headquarters in South San Francisco, California commenced in March 2020.

We recorded a ROU asset of $ 35.7 million at the inception of the lease and an operating lease liability of $ 35.3 million.

The lease term is approximately ten years .

Future minimum lease payments over the life of the lease were discounted at a rate of 12.6 %, which was our estimated incremental collateralized borrowing rate for the term of the lease at the inception of the lease.

The following table presents the components of lease expense for the year-ended December 31, 2020 and 2019, respectively (in thousands):

(in thousands) Twelve months ended December 31, 2020 Twelve months ended December 31, 2019

Operating lease cost (including variable costs) $ 9,682 $ 6,093

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Operating cash flows from operating leases $ 5,265 $ 4,008

December 31, 2019

Weighted average remaining lease term (in years)

Weighted average discount rate

Future minimum lease payments and minimum sublease income under commenced non-cancelable operating leases, which are as of December 31, 2019 as follows (in thousands):

Minimum Lease Payments for Operating Leases

Minimum Sublease Income

Total future minimum payments (income)

Future minimum lease payments under commenced non-cancelable operating leases are as of December 31, 2020 as follows (in thousands):

Fiscal Year Minimum Lease Payments for Operating Leases

Thereafter 31,908

Total future minimum payments $ 68,272

imputed interest ( 27,121 )

December 31, 2019

Operating lease liabilities, current

Operating lease liabilities, non-current

Disclosures related to periods prior to adoption of ASC 842

Operating lease rent expense, net of amortization of lease incentives and sublease income was $ 5.0 million and $ 4.7 million for the twelve months ended December 31, 2018 and 2017 , respectively, for the comparative prior years before the adoption of ASC 842.

As of December 31, 2018, future minimum lease payment obligations and minimum sublease income, net of expenses, under noncancelable operating leases before the adoption of ASC 842 were disclosed as follows (in thousands):

Minimum Lease Payments for Operating Leases

Minimum Sublease Income

Total future minimum payments (income)

Total $ 41,151

Fair Value of Financial Instruments

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December 31, 2020

Amortized Cost

Gross Unrealized Gain

Gross Unrealized Loss

Cash and Cash Equivalents

Short-Term Marketable Securities

Cash- Restricted

Amortized Cost Gross Unrealized Gain Gross Unrealized Loss Fair Value Cash and Cash Equivalents Short-Term Marketable Securities Restricted Cash

Cash $ 47,818 $ — $ — $ 47,818 $ 47,818 $ — $ —

Cash-restricted 1,016 — — 1,016 — — 1,016

Total cash and restricted cash $ 48,834 $ — $ — $ 48,834 $ 47,818 $ — $ 1,016

Available-for-sale:

Money market funds $ 20,702 $ — $ — $ 20,702 $ 20,702 $ — $ —

treasury securities

Subtotal $ 20,702 $ — $ — $ 20,702 $ 20,702 $ — $ —

Total $ 69,536 $ — $ — $ 69,536 $ 68,520 $ — $ 1,016

December, 31, 2019

Amortized Cost

Gross Unrealized Gain

Gross Unrealized Loss

Cash and Cash Equivalents

Short-Term Marketable Securities

Amortized Cost Gross Unrealized Gain Gross Unrealized Loss Fair Value Cash and Cash Equivalents Short-Term Marketable Securities Restricted Cash

Cash $ 16,614 $ — $ — $ 16,614 $ 16,614 $ — $ —

Cash-restricted 2,075 — — 2,075 — — 2,075

Total cash and restricted cash $ 18,689 $ — $ — $ 18,689 $ 16,614 $ — $ 2,075

Available-for-sale:

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treasury securities 36,942 36 — 36,978 — 36,978 —

Subtotal $ 41,989 $ 36 $ — $ 42,025 $ 5,047 $ 36,978 $ —

Total $ 60,678 $ 36 $ — $ 60,714 $ 21,661 $ 36,978 $ 2,075

There were no transfers between Level I and Level II measurements, and no changes in the valuation techniques used during the years ended December 31, 2020, and 2019.

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, 2020, 2019, and 2018.

None of our investments have been in a

continuous loss position for more than 12 months.

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.

Convertible Notes

For 2018, the estimated fair value of the 2014 and 2018 Notes was based on a market approach and represents a Level II valuation.

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

In 2019, we significantly reduced the amount of our debt outstanding.

As a result, these securities are not traded frequently, so it is difficult to estimate a reliable and accurate market price and represent Level III valuations.

A fair value for these assets cannot be determined by using readily observable inputs or measures, such as market prices or models.

The estimated fair values for these securities represent Level III valuations since a fair value for these securities cannot be determined by using readily observable inputs or measures, such as market prices.

Fair values were estimated using pricing models and risk-adjusted value ranges.

The following table summarizes the par value, carrying value and the estimated fair value of the 2014 and 2019 Notes at December 31, 2020 and 2019, respectively (in thousands):

December 31, 2019

December 31, 2018

Carrying Value

December 31, 2020 December 31, 2019

Par Value Carrying Value Fair Value Par Value Carrying Value Fair Value

2014 Notes $ 1,079 $ 1,059 $ 1,122 $ 1,079 $ 1,057 $ 1,122

2019 Notes 55,000 53,165 117,899 55,000 52,764 73,975

Total $ 56,079 $ 54,224 $ 119,021 $ 56,079 $ 53,821 $ 75,097

Shareholders’ Equity

2020 At-the-Market Offering

In March 2020, we entered into an Open Market Sale Agreement (Sale Agreement) with Jefferies LLC (Jefferies) to sell shares of our common stock having aggregate sales proceeds of up to $ 50 million, from time to time, through an “at-the-market” equity offering program under which Jefferies acts as sales agent.

During the third quarter of 2020, we sold 2.5 million shares of our common stock pursuant to the Sale Agreement, for aggregate gross proceeds of $ 20.9 million.

Our net proceeds from the sale of such shares of common stock were approximately $ 20.1 million, after deducting related expenses, including commissions of approximately $ 0.6 million and issuance costs of approximately $ 0.2 million.

InstruNor Acquisition

In January 2020, we completed the acquisition of all of the outstanding shares of InstruNor (see Note 3).

The purchase price was approximately $ 7.2 million, consisting of $ 5.2 million in cash and 485,451 shares of our common stock.

Conversion of 2018 Notes

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As a result of this issuance of our common stock, we recorded a total of $ 133.3 million of equity, which is equivalent to the fair value of the bonds retired.

2018 Market Offering

On December 14, 2018, we closed on an underwritten public offering of 9,372,500 shares our common stock, $ 0.001 par value.

The common stock was sold at a price to the public of $ 6.75 per share, for aggregate gross proceeds of approximately $ 63.3 million , from our existing shelf registration statement.

Net proceeds from the offering were approximately $ 59.1 million after deducting underwriting discounts and commissions of $ 3.8 million and the $ 0.4 million of estimated expenses of the offering.

We intend to use the net proceeds of the offering for general corporate purposes, including working capital, capital expenditures and continued research and development with respect to products and technologies, and to fund possible investments in or acquisitions of complementary businesses, products, or technologies.

2017 At-the-Market Offering

On August 10, 2017, we sold 9,090,909 shares of our common stock, $ 0.001 par value per share, pursuant to an earlier Sales Agreement, for aggregate gross proceeds of $ 30.0 million .

Our aggregate net proceeds were approximately $ 28.8 million , after deducting related expenses, including commissions of approximately $ 0.7 million and issuance costs of approximately $ 0.5 million .

These sales fully exhausted the shares that were available for sale under the Sales Agreement.

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 December 31, 2020, we had reserved shares of common stock for future issuance under equity compensation plans as follows:

Securities To Be Issued Upon Exercise Of Options

Securities To Be Issued Upon Release Of Restricted Stock and Performance Share Units

Number Of Remaining Securities Available For Future Issuance

(in 000s) Securities To Be Issued Upon Exercise Of Options Securities To Be Issued Upon Release Of Restricted Stock and Performance Share Units Number Of Remaining Securities Available For Future Issuance

2009 Equity Incentive Plan 19 — —

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2017 Employee Stock Purchase Plan — — 2,925

1,635 5,872 6,198

Stock-Based Plans

Our board of directors sets the terms, conditions, and restrictions related to our ESPP and the grant of stock options, RSUs and performance-based awards under our various stock-based plans.

Our board of directors sets the terms, conditions, and restrictions related to our 2017 Employee Stock Purchase Plan (ESPP) and the grant of stock options, RSUs and PSUs awards under our various stock-based plans.

Our board of directors determines the number of awards to grant and also sets vesting criteria.

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.

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.

Generally, 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, or ratably over 16 quarters, both subject to the employees’ continued employment.

In May 2020, we granted 1.8 million retention RSUs that vest over 3 years with 50 % of the RSUs vesting after one year and 25 % of the RSUs vesting each year thereafter.

Incentive stock options and non-statutory stock options granted under the 2011 Equity Incentive Plan (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 .1 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 1.1 of the fair market value of the underlying common stock on the date of grant.

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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.

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

In April 2019, our board of directors authorized, and in June 2019, our stockholders approved, the amendment and restatement of the 2011 Plan to make various changes, including increasing the number of shares reserved for issuance by approximately 5.0 million shares and extending the term of the 2011 Plan until April 2029.

2009 Equity Incentive Plan and 1999 Stock Option Plan

In May 2020, our board of directors authorized, and in June 2020, our stockholders approved, an increase in the number of shares reserved for issuance under the 2011 Plan of 1.4 million shares.

2009 Equity Incentive Plan

Our 2009 Equity Incentive Plan (the 2009 Plan) terminated on the date the 2011 Plan was adopted.

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The Inducement Plan provides for the grant of equity-based awards and its terms are substantially similar to the 2011 Plan.

accordance with Rule 5635(c)(4) of the Nasdaq Listing Rules, awards under the Inducement Plan may only be made to individuals not previously our employees or non-employee members of our board of directors (or following such individual's bona fide period of non-employment), as an inducement material to the individual's entry into employment with us or in connection with a merger or acquisition, to the extent permitted by Rule 5635(c)(3) of the Nasdaq Listing Rules.

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 our employees or non-employee members of our board of directors (or following such individual's bona fide period of non-employment), as an inducement material to the individual's entry into employment with us or in connection with a merger or acquisition, to the extent permitted by Rule 5635(c)(3) of the Nasdaq Listing Rules.

In June 2019, concurrently with the increase in shares available for grant under the 2011 Plan, the Inducement Plan was terminated such that no further grants could be made thereunder.

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Year Ended December 31,

2020 2019 2018

Stock options

Weighted average expected volatility 79.0 % 69.5 % 68.4 %

Weighted average expected term

Weighted average expected term 3.8 years 4.3 years 4.7 years

Weighted average risk-free interest rate 2.6 % 1.9 % 2.7 %

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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:

Activity under the various plans was as follows:

Restricted Stock Units :

Number of Units (in 000's)

Weighted-Average

Number of Units (in 000s) Weighted-Average

Grant Date Fair Value per Unit

Balance at December 31, 2017 1,168 $ 8.55

RSU granted 1,822 $ 5.98

RSU released ( 945 ) $ 9.63

RSU forfeited ( 233 ) $ 8.50

Balance at December 31, 2018 1,812 $ 7.09

RSU granted 1,808 $ 8.08

RSU released ( 730 ) $ 8.06

RSU forfeited ( 339 ) $ 7.80

Balance at December 31, 2019 2,551 $ 7.43

RSU granted 3,788 $ 4.06

RSU released ( 1,139 ) $ 7.04

RSU forfeited ( 338 ) $ 6.24

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On September 18, 2018, the compensation committee of our board of directors approved an exchange program for our executive officers and for employees resident in the United States and Canada who are retention bonus program participants.

In the exchange program, eligible participants could elect to surrender their right to receive a cash bonus in exchange for fully vested restricted stock units issued under our 2011 Equity Incentive Plan on the terms described below.

In the exchange program, eligible participants could elect to surrender some or all of their right to receive a cash bonus in exchange for fully vested restricted stock units issued under our 2011 Equity Incentive Plan on the terms described below.

Among other reasons, our compensation committee adopted the exchange program to encourage employee stock ownership and to effectively manage cash resources.

In connection with the bonus exchange program, each eligible employee could elect to exchange 25 % , 50 % , 75 % , or 100 % of the retention cash bonus otherwise payable under the terms of the program.

Each employee participating in the exchange would receive a number of fully vested restricted stock units equal to the quotient, rounded up to the next whole number, determined by dividing the cash amount of the retention cash bonus that such eligible employee elects to exchange by an amount equal to 85 % of the lower of the closing prices of one share of our common stock on the commencement date of the exchange offer or the closing date of the exchange offer.

The exchange offer closed on November 5, 2018.

The total value of the 379,593 shares of common stock issued under this program was $ 2.8 million and is included in the total intrinsic value of RSUs released in 2018.

Stock Options :

Options (000's)

Weighted-Average

Options (in 000s) Weighted-Average

Exercise Price

Average Remaining Contractual Life (in Years)

Value (1) in (000's)

per Option Weighted-

Average Remaining Contractual Life (in Years) Aggregate Intrinsic Value(1) in (000s)

Balance at December 31, 2017 2,164 $ 10.41 6.6

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Options exercised ( 197 ) $ 5.43 $ 1,198

Option forfeited

Options forfeited ( 211 ) $ 8.73

Balance at December 31, 2019 2,027 $ 7.78 6.8

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Unvested awards at December 31, 2020 277 $ 5.71 7.8 $ 190

_________________________

(1) Aggregate intrinsic value as of December 31, 2020 was calculated as the difference between the closing price per share of our common stock on the last trading day of 2020, which was $ 6.00 , and the exercise price of the options, multiplied by the number of in-the-money options.

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We expect to recognize those costs over a weighted average period of 1.4 years.

2017 Stock Option Exchange

Included in the 2017 option activity above is the impact of our 2017 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.

Employees elected to surrender Eligible Options to purchase a total of 1,204,198 shares of our common stock.

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 .

The Program did not result in a material incremental stock-based compensation expense because the fair value of the new awards was approximately equal to the fair value of the surrendered options immediately prior to the exchange date.

The original fair value of the surrendered options plus the incremental stock-based compensation expense is being recognized over the vesting periods of the New Awards.

Performance-based Awards

Performance Stock Units with Market Conditions.

During the twelve months ended December 31, 2019 and 2018, we granted performance stock units to certain executive officers and senior level employees.

Beginning in 2018, we granted performance stock units to certain executive officers and senior level employees.

The number of performance stock units ultimately earned under these awards is calculated based on the Total Shareholder Return (TSR) of our common stock as compared to the TSR of a defined group of peer companies during the applicable three-year performance period.

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We used a Monte Carlo simulation pricing model to incorporate the market condition effects at our grant date.

Activity under the performance stock units is as follows:

Number of Units (in 000's)

Weighted-Average

Number of Units (in 000s) Weighted-Average

Grant Date Fair Value per Unit

Balance as at December 31, 2017 — $ —

PSU granted 167 $ 10.09

PSU released — —

PSU forfeited ( 12 ) $ 10.09

Balance at December 31, 2018 155 $ 10.09

PSU granted 401 $ 16.90

PSU released — —

PSU forfeited ( 9 ) $ 10.09

Balance at December 31, 2019 547 $ 15.09

PSU granted 509 $ 4.82

PSU released — —

PSU forfeited ( 94 ) $ 14.26

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During 2019, we also granted performance stock units to a certain employee.

The number of performance stock units that ultimately vest under these awards is dependent on achieving certain discrete operational milestones between September 30, 2019 and December 31, 2020.

Activity under these performance stock units is as follows:

Number of Units (in 000s)

Weighted-Average

Grant Date Fair Value per Unit

Balance at December 31, 2018

PSU forfeited

Balance at December 31, 2019

The number of performance stock units that ultimately vest under these awards is dependent on achieving certain discrete operational milestones, the latest of which is December 31, 2021.

As of December 31, 2020, there were approximately 48 thousand units of these awards outstanding with a weighted-average grant date fair value of $ 6.46 per unit.

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.

On August 1, 2017, our stockholders approved our 2017 ESPP at the annual meeting of stockholders.

Our ESPP offers U.S.

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In the event the fair market value of the common stock at the beginning of the second purchase period is less than the fair market value on the beginning of the offering period, the purchase price for the second offering period is reset to 85 % of the lower of the fair value of the common stock at the beginning of the second purchase period and last day of the offering period.

The offering period of June 1, 2019 to May 31, 2020 has two purchase periods, with one ending November 30, 2019 and the other May 31, 2020.

The offering period of June 1, 2019 to May 31, 2020 had two purchase periods, with one ending November 30, 2019 and the other May 31, 2020.

As the fair market value of the common stock at November 30, 2019 was lower than the fair value of the common stock at the beginning of the offering period, the purchase price for the second purchase period was reset based on the lower of the November 30, 2019 price and May 31, 2019 price.

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Under ASC 718, the incremental fair value based on the difference between the fair value of the modified award and the fair value of the original award immediately before it was modified was approximately $ 0.3 million.

This amount is being amortized over the remaining offering period.

This amount was amortized over the remaining offering period.

In April 2020, our board of directors authorized, and in June 2020, our stockholders approved, an amendment and restatement of the ESPP that increased the number of shares reserved for issuance by an additional 3.0 million shares and made various other changes.

Effective June 2020, our ESPP program was amended to offer a six-month offering period, with a new offering and purchase period commencing on the first trading day on or after May 31 and November 30 of each year.

Employees are eligible under the amended program to participate through payroll deductions of up to 10 % of their compensation.

Employees may not purchase more than $ 25 thousand of stock for any calendar year.

The purchase price of the shares sold under the ESPP is 85 % of the lower of 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.

Total stock-based compensation expense recognized was as follows (in thousands):

For the Year Ended December 31,

2020 2019 2018

2018 retention bonus program $ — $ — $ 2,809

Options, Performance Share Units, and Restricted Stock Units

Options, restricted stock units and performance share units 13,428 10,555 7,716

Employee stock purchase plan 1,023 838 498

Total Share-based Compensation

Total stock-based compensation $ 14,451 $ 11,393 $ 11,023

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

Year Ended December 31,

2020 2019 2018

Domestic $ ( 46,277 ) $ ( 59,900 ) $ ( 47,600 )

International ( 7,824 ) ( 6,805 ) ( 13,820 )

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Year Ended December 31,

2020 2019 2018

Federal $ — $ — $ ( 27 )

State ( 31 ) ( 31 ) ( 19 )

Foreign ( 2,314 ) ( 568 ) ( 32 )

Total current tax (expense) benefit ( 2,345 ) ( 599 ) ( 78 )

Foreign 3,426 2,514 2,485

Total deferred benefit 3,426 2,514 2,485

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Year Ended December 31,

2020 2019 2018

Tax benefit at federal statutory rate 21.0 % 21.0 % 21.0 %

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Unrecognized tax benefit ( 0.1 ) ( 0.1 ) ( 0.2 )

Impact of the 2017 Tax Cuts and Jobs Act

Non-deductible interest/premium ( 1.1 ) ( 7.9 ) —

Global Intangible Low-Tax Income (GILTI) ( 3.9 ) ( 5.6 ) —

Net operating loss expiration ( 3.3 ) — —

Other, net ( 1.1 ) — ( 0.4 )

Effective tax rate 2.0 % 2.9 % 3.9 %

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Stock-based compensation 3,168 2,501

Right-of-use lease liability 9,451 1,097

Total gross deferred tax assets 143,733 133,849

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Fixed assets and intangibles ( 12,272 ) ( 14,183 )

Right-of-use asset ( 8,694 ) ( 783 )

Total deferred tax liabilities ( 20,966 ) ( 14,966 )

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The net deferred tax assets have been partially offset by a valuation allowance because we have incurred losses since our inception.

The valuation allowance increased by $ 4.0 million and $ 6.9 million during 2019 and 2018 , respectively, and decreased by $ 27.1 million during 2017 .

The valuation allowance increased by $ 1.1 million and $ 4.0 million during 2020 and 2019, respectively, and increased by $ 6.9 million during 2018.

The changes in valuation allowance during 2020 and 2019 are mainly due to significant taxable losses and an increase in tax attributes.

The change in valuation allowance during 2019 also includes a release of the valuation allowance against our deferred tax assets in Japan due to achievement of recent profitability and the expectation of future profitability in the jurisdiction, which decreased the valuation allowance by $ 294 thousand .

The changes in valuation allowance during 2019 also includes a release of the valuation allowance against our deferred tax assets in Japan due to achievement of recent profitability and the expectation of future profitability in the jurisdiction, which decreased the valuation allowance by $ 294 thousand in 2019.

The valuation allowances of $ 131.2 million and $ 130.1 million as of December 31, 2020 and 2019, respectively, primarily relate to temporary tax differences, net operating losses and research and development credits generated in the current and prior years.

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federal income tax purposes of $ 461.6 million, which expire beginning in 2021, and U.S.

federal research and development tax credits of $ 9.0 million , which expire in

the years 2020 through 2040.

federal research and development tax credits of $ 9.6 million, which expire in beginning in 2021 through 2040.

As of December 31, 2020, we had net operating loss carryforwards for state income tax purposes of $ 176.5 million, which expire beginning in 2021 through 2040, and California research and development tax credits of $ 12.5 million, which do not expire.

As of December 31, 2019 , we had no foreign net operating loss carryforwards.

As of December 31, 2020, we had $ 3.8 million of foreign net operating loss carryforwards which do not expire.

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.

In 2020, we continued the Section 382 analysis as historically performed through December 31, 2020 and determined that an ownership change did not occur during the current year.

Uncertain Tax Positions

The aggregate changes in the balance of our gross unrecognized tax benefits during 2020, 2019, and 2018 were as follows (in thousands):

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December 31, 2018 7,344

Increases in balances related to tax positions during a prior period 155

Increases in balances related to tax positions taken during current period 354

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Accrued interest and penalties related to unrecognized tax benefits were included in the income tax provision and are immaterial as of December 31, 2020 and 2019.

As of December 31, 2019 , there are $ 0.7 million unrecognized tax benefits that, if recognized, would affect our effective tax rate.

The uncertain taxes payable are recorded as a long-term liability on the balance sheet.

As of December 31, 2020, there were $ 1.6 million of 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.

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (CARES) Act was signed into law.

The CARES Act includes provisions relating to refundable payroll tax credits, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations and technical corrections to the tax depreciation methods for qualified improvement property.

The CARES Act has an immaterial impact on our income taxes.

We file income tax returns in the United States, various states, and certain foreign jurisdictions.

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In 2019, the match was increased to up to $ 3,000 annually.

Employer matching contributions to the 401(k) plan for the years ended December 31, 2019 , 2018 , and 2017 were $ 0.6 million , $ 0.4 million , and $ 0.5 million , respectively.

Employer matching contributions to the 401(k) plan were $ 0.6 million for the years ended December 31, 2020 and 2019, and $ 0.4 million for the year ended December 31, 2018.

Information About Geographic Areas

We operate in one reporting segment that develops, manufacturers and commercializes tools for life sciences research.

We operate in one reporting segment that creates, manufactures, and markets a range of products and services, including instruments, consumables, reagents and software that are used by researchers and clinical labs worldwide.

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.

Our general and administrative expenses and our research and development expenses are not allocated to an y 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.

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Sales to customers in the United States represented $ 43.4 million, or 37 %, of total revenues for the year ended December 31, 2019 and $ 48.1 million, or 43 %, for the year ended December 31, 2018.

Sales to customers in China represented $ 15.4 million or 13 % , of total revenues for the year ended December 31, 2019 .

Sales to customers in China represented $ 14.0 million or 12 % for year ended December 31, 2018, and 11 % or $ 11.1 million , of total revenues for 2017 .

Sales to customers in China were less than 10 % of total revenues for the year ended December 31, 2020.

Sales to customers in China represented $ 15.4 million, or 13 %, of total revenues for year ended December 31, 2019, and $ 14.0 million, or 12 %, of total revenues for 2018.

Except for China, no other foreign country or jurisdiction had sales in excess of 10% of our total revenue during the years 2020, 2019 and 2018.

No individual customer represented more than 10% of our total revenues for the fiscal years ended December 31, 2019 , 2018 , and 2017 respectively.

Revenues from our five largest customers were 17 % for both the years ended December 31, 2019 and 2018 , and 14 % for the year ended December 31, 2017 .

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

No individual customer represented more than 10% of our t otal revenues for the fiscal years ended December 31, 2020, 2019, and 2018 respectively.

Revenues from our five largest customers were 23 % for the year ended December 31, 2020 and 17 % for both the years ended December 31, 2019 and 2018.

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

United States $ 35,188 $ 907

Singapore 12,195 3,618

Canada 6,456 7,474

Asia-Pacific 1,048 243

Total $ 55,645 $ 12,916

The increase in the long-lived assets for the United States as of December 31, 2020 compared to the prior year end is due to a new ten-year lease for our South San Francisco headquarters (see Note 10).

The increase in long-lived assets in Singapore is attributable to capital expenditures funded by the NIH Contract (see Note 4).

Commitments and Contingencies

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As of December 31, 2020, these commitments were approximately $ 12.9 million.

In December 2019, we also entered into a Sales and Purchase Agreement with the shareholders of InstruNor AS to purchase all of the outstanding shares of InstruNor AS.

The purchase price was approximately $ 5.2 million in cash and 485,451 shares of our stock.

The transaction closed in January 2020.

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.

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.

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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 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.

Contingencies

In early March 2019, we experienced a ransomware attack that infiltrated and encrypted certain of our information technology systems, including systems containing critical business data.

Immediately following the attack, actions were taken to recover the compromised systems and we believe we were able to restore their operation without significant loss of business data.

Based on the nature of the attack and its impact on our systems, we do not believe confidential data was lost or disclosed, but we are continuing to monitor the situation.

The costs associated with the intrusion to be approximately $ 0.1 million , net of insurance proceeds.

In September 2020, a putative class action complaint alleging violations of the federal securities laws was filed against the Company (also naming our Chief Executive Officer and Chief Financial Officer as defendants) in the U.S.

District Court for the Northern District of California (Reena Saintjermain, et al.

Fluidigm Corporation, et al).

The Court appointed a lead plaintiff and lead counsel in December 2020, and an amended complaint was filed on February 19, 2021.

The complaint, as amended, seeks unspecified damages on behalf of a purported class of persons and entities who acquired our common stock between

February 7, 2019 and November 5, 2019 and alleges securities laws violations based on statements and alleged omissions made by the Company during such period.

The Company intends to file a motion to dismiss the complaint, which motion is currently due to be filed in early April 2021.

We believe the claims alleged in the complaint lack merit and we intend to defend this action vigorously.

From time to time, we may be subject to various legal proceedings and claims arising in the ordinary course of business.

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If the potential loss from any claim or legal proceeding is considered probable and a range of possible losses can be estimated, we accrue a liability for the estimated loss.

We have not recorded any such liabilities.

Legal proceedings are subject to uncertainties, and the outcomes are difficult to predict.

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Selected quarterly results of operations for the years ended December 31, 2020 and 2019 are as follows (in thousands, except for per share amounts):

Quarter Second

Quarter Third

Quarter Fourth

Total revenue $ 27,617 $ 26,058 $ 39,861 $ 44,608

Product and service gross profit $ 13,002 $ 11,825 $ 20,799 $ 22,079

Net loss $ ( 15,980 ) $ ( 13,015 ) $ ( 5,999 ) $ ( 18,026 )

Net loss per share, basic and diluted $ ( 0.23 ) $ ( 0.18 ) $ ( 0.08 ) $ ( 0.24 )

Quarter Second

Quarter Third

Quarter Fourth

Total revenue $ 30,111 $ 28,196 $ 26,496 $ 32,440

Product and service gross profit $ 16,990 $ 15,363 $ 13,838 $ 17,538

Net loss $ ( 25,465 ) $ ( 13,753 ) $ ( 12,887 ) $ ( 12,685 )

Net loss per share, basic and diluted $ ( 0.44 ) $ ( 0.20 ) $ ( 0.19 ) $ ( 0.18 )

Subsequent Event

On December 17, 2019, we entered into a Sales and Purchase Agreement with the shareholders of InstruNor AS, a privately held Norwegian company (InstruNor), to purchase all of the outstanding shares of InstruNor.

The purchase price was approximately $ 5.2 million in cash and 485,451 shares of our stock.

The transaction closed on January 17, 2020 for a total purchase price of $ 7.2 million .

On February 19, 2021, we and the National Institutes of Health entered into a modification of the NIH Contract (see Note 4) (the Modification).

The Modification revised the milestones under the NIH Contract to include, in addition to the Advanta Dx SARS-CoV-2 RT-PCR Assay, the development and manufacture of a cartridge-based COVID-19 assay designed to provide a more integrated sample-to-answer workflow.

The Modification also extended the period of performance under the NIH Contract through September 30, 2021.

The Modification did not change the total NIH Contract value of up to approximately $ 34.0 million based upon our achievement of milestones.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data