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TABLE OF CONTENTS
Singulex, Inc. Index to Consolidated Financial Statements

Table of Contents

As filed with the Securities and Exchange Commission on October 23, 2012

Registration No. 333-184199

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



Amendment No. 3
To
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933



Singulex, Inc.
(Exact name of Registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)
  8071
(Primary Standard Industrial
Classification Code Number)
  13-4213664
(I.R.S. Employer
Identification Number)

1650 Harbor Bay Parkway, Suite 200
Alameda, CA 94502
(888) 995-6123
(Address, including zip code, and telephone number, including area code, of Registrant's principal executive offices)



Philippe J. Goix, Ph.D.
President and Chief Executive Officer
Singulex, Inc.
1650 Harbor Bay Parkway, Suite 200
Alameda, CA 94502
(888) 995-6123
(Name, address, including zip code, and telephone number, including area code, of agent for service)



Copies to:

Alan C. Mendelson, Esq.
Latham & Watkins LLP
140 Scott Drive
Menlo Park, CA 94025
Telephone: (650) 328-4600
Facsimile: (650) 463-2600

 

Glenn R. Pollner, Esq.
Gibson, Dunn & Crutcher LLP
200 Park Avenue
New York, NY 10166
Telephone: (212) 351-4000
Facsimile: (212) 351-4035



Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.

           If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box:    o

           If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

           If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

           If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

           Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer o   Accelerated filer o   Non-accelerated filer ý
(Do not check if a
smaller reporting company)
  Smaller reporting company o



CALCULATION OF REGISTRATION FEE

       
 
Title of Securities
to be Registered

  Proposed Maximum
Aggregate Offering
Price(1)(2)

  Amount of
Registration Fee

 

Common Stock, $0.001 par value per share

  $85,531,250.00   (3)

 

(1)
Estimated solely for the purpose of calculating the amount of the registration fee in accordance with Rule 457(o) under the Securities Act of 1933, as amended.

(2)
Includes offering price of shares that the underwriters have the option to purchase to cover over-allotments, if any.

(3)
Previously paid.

           The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

   


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The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED OCTOBER 23, 2012

PRELIMINARY PROSPECTUS

LOGO

4,375,000 Shares

Singulex, Inc.

Common Stock

$16.00 per share



        This is the initial public offering of our common stock. We are selling 4,375,000 shares of our common stock. We currently expect the initial public offering price to be between $15.00 and $17.00 per share of common stock.

        We have granted the underwriters an option to purchase up to 656,250 additional shares of common stock to cover over-allotments.

        We have applied to have our common stock listed on the New York Stock Exchange under the symbol "SGLX."

        We are an emerging growth company as that term is used in the Jumpstart Our Business Startups Act of 2012 and, as such, have elected to comply with certain reduced public company reporting requirements for future filings.



        Investing in our common stock involves risks. See "Risk Factors" beginning on page 10.



 
  Per Share   Total

Public Offering Price

  $   $

Underwriting Discount

  $   $

Proceeds to Singulex, Inc. (before expenses)

  $   $

        The underwriters expect to deliver the shares of common stock to investors on or about                        , 2012.

        Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.



Joint Book-Running Managers

UBS Investment Bank   Piper Jaffray



Co-Managers

William Blair       Leerink Swann

   

                    , 2012


GRAPHIC


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TABLE OF CONTENTS

 
  Page  

PROSPECTUS SUMMARY

    1  

RISK FACTORS

    10  

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

    42  

MARKET, INDUSTRY AND OTHER DATA

    44  

USE OF PROCEEDS

    45  

DIVIDEND POLICY

    47  

CAPITALIZATION

    48  

DILUTION

    50  

SELECTED FINANCIAL DATA

    52  

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

    54  

BUSINESS

    82  

MANAGEMENT

    105  

EXECUTIVE COMPENSATION

    116  

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

    127  

PRINCIPAL STOCKHOLDERS

    130  

DESCRIPTION OF CAPITAL STOCK

    132  

SHARES ELIGIBLE FOR FUTURE SALE

    137  

MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES TO NON-U.S. HOLDERS

    140  

UNDERWRITING

    144  

LEGAL MATTERS

    150  

EXPERTS

    150  

WHERE YOU CAN FIND MORE INFORMATION

    150  

INDEX TO FINANCIAL STATEMENTS

    F-1  

        Neither we nor the underwriters have authorized anyone to provide you with information that is different from that contained in this prospectus or in any free writing prospectus we may authorize to be delivered or made available to you. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. We and the underwriters are offering to sell shares of common stock and seeking offers to buy shares of common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date on the front of this prospectus, regardless of the time of delivery of this prospectus or any sale of shares of our common stock.

        Until                    , 2012 (the 25th day after the date of this prospectus), all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

        Singulex® and our logo are some of our trademarks used in this prospectus. This prospectus also includes trademarks, tradenames, and service marks that are the property of other organizations. Solely for convenience, our trademarks and tradenames referred to in this prospectus appear without the ® and ™ symbols, but those references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights, or the right of the applicable licensor to these trademarks and tradenames.

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Prospectus Summary

        The items in the following summary are described in more detail later in this prospectus. This summary provides an overview of selected information and does not contain all of the information you should consider before buying our common stock. Therefore, you should read the entire prospectus carefully, especially the "Risk Factors" section beginning on page 10 and our financial statements and the related notes appearing at the end of this prospectus, before deciding to invest in our common stock. In this prospectus, unless the context otherwise requires, references to "we," "us," "our" or "Singulex" refer to Singulex, Inc.

Overview

        We are an innovative diagnostics company committed to improving patient care and enabling the reduction of healthcare costs by providing high-value, advanced tests for the diagnosis and monitoring of chronic diseases. We have initially focused on cardiovascular disease, or CVD, the leading cause of death globally. Our high precision digital immunoassay platform and advanced CVD test menu, which includes our proprietary digital heart function and inflammatory tests, provide clinically important diagnostic information that facilitates personalized disease management by physicians. Our innovative technology platform enables a significant improvement in measurement sensitivity over other commercially available technologies and measures biomarker concentrations at previously undetectable levels, providing physicians with information that can allow them to earlier diagnose, better monitor and more effectively manage chronic disease progression prior to the onset of acute clinical symptoms.

        According to the Centers for Disease Control and Prevention, or CDC, CVD is the leading cause of death in the United States. According to CDC statistics, nearly one in every three deaths is from heart disease or cerebrovascular diseases, such as stroke, an average of over 1,900 deaths per day. The American Heart Association, or AHA, estimates that approximately 40% of the U.S. population will have some form of CVD by 2030. In 2010 in the United States, CVD-related healthcare costs were estimated at $444 billion by the CDC. However, the World Health Organization, or WHO, estimates that approximately 80% of premature CVD deaths are potentially preventable through early diagnosis and management of CVD risk factors.

        In July 2010, we launched our Advanced CVD Monitoring services through which we offer our CVD test menu utilizing our CLIA certified laboratory in Alameda, CA. We currently market our tests in 28 U.S. states and, through June 30, 2012, we have received over 190,000 patient samples and performed approximately 1,350,000 tests. Our advanced CVD test menu covers four categories of tests: heart function, inflammatory, lipid and metabolic tests. Our menu features our proprietary Sgx HD cTnI test for cardiac troponin-I, a key component of our heart function panel, as well as our proprietary inflammatory test panel (Sgx HD IL-6, Sgx HD IL-17A, Sgx HD TNF-a). Cardiac troponin-I, or cTnI, is a clinically validated biomarker that has been used primarily in the acute setting for the diagnosis of myocardial infarctions, or heart attacks. Our proprietary inflammatory test panel measures levels of selected cytokines, which, when present in elevated levels in the blood, may be positively correlated to coronary heart disease, or CHD, risk, a leading cause of heart attacks. The high precision of our digital technology platform enables these proprietary tests, together with our other CVD tests, to be used by physicians as a monitoring tool in routine care to manage patients across the continuum of CVD progression.

        We believe our proprietary tests and patient reports enable physicians to effectively manage chronic disease progression by providing cost-effective tools for earlier diagnosis, evaluation of treatment efficacy, and monitoring of disease progression. As a result, physicians can formulate and deliver personalized treatment and monitoring plans to patients to mitigate the risk of an acute cardiac event. Our goal is to enable the reduction in overall healthcare costs and improve patient compliance with treatment protocols.

 

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        In order to expand into the global in vitro diagnostic, or IVD, market, we are developing a second generation digital immunoassay monitoring platform, which is currently in the design and development stage, with expected prototype development commencing in the first half of 2013. We expect this system to be a higher-throughput, fully-automated platform focused on high precision immunoassays for advanced management of CVD and other chronic diseases. We expect to focus our initial test menu for this system on high-value, high precision proprietary tests for chronic CVD detection and monitoring. We currently expect to begin utilizing our second generation platform in our CLIA laboratory in 2014. We intend to seek applicable regulatory clearances in selected markets in order to allow us to make our technology platform and test menu more widely available through clinical and reference laboratories and hospital laboratories with a goal of making the second generation system commercially available by 2016.

        For the year ended December 31, 2011 and the six months ended June 30, 2012, our revenues were $24.8 million and $20.5 million, respectively, and our net loss was $12.5 million and $10.3 million, respectively.

Existing CVD Testing

        The current market for CVD monitoring in the chronic setting is primarily comprised of standard lipid panel testing and testing for certain inflammatory biomarkers, and, in the acute setting, measurement of the cardiac troponin biomarker. Each of these testing methods provides a snapshot of cardiovascular health but only a partial picture of a patient's overall risk for CVD.

        Lipid panel testing is generally a well-accepted approach to determine a patient's need for LDL-lowering or HDL-targeted statin therapy and for monitoring treatment response. While traditional lipid profiles can be potentially predictive of atherosclerosis, a leading cause of CHD, lipid profiles cannot be used for prognosis of subclinical cardiac distress, a condition where chronic CVD is below the level of clinical diagnosis. In "Efficacy and Safety of Cholesterol-Lowering Treatment," a study published in 2005 in The Lancet, a peer-reviewed medical journal, an analysis of the data from 14 different lipid lowering statin trials involving approximately 90,000 patients showed an overall reduction in major cardiovascular events of only 21%.

        While advanced non-cholesterol-based indicators, such as cTnI and other cardiac biomarkers and certain inflammatory biomarkers, have been identified in multiple studies as having the potential to predict adverse cardiac events, their utility has been limited given the lack of clinical utility data or in some cases the lack of commercially available technology to detect these biomarkers at lower concentrations. For example, at commercially available detection levels, cardiac troponin and certain inflammatory biomarkers have either been limited to the diagnosis of a cardiac event in an acute setting or have not been commercially utilized as CVD indicators.

        Cardiac Troponin Testing.    In the acute setting, the measurement of cardiac troponin biomarkers is the current standard of care for the diagnosis of a heart attack and has long assisted physicians in improving diagnostic strategies for the effective management of patients with severe chest pain. However, the current cardiac troponin testing market is largely limited to the acute care setting, as most commercially available technologies can only accurately measure cardiac troponin at levels elevated above 30 - 50 pg/mL, which is generally not sensitive enough for use in non-acute settings. Yet, multiple studies have suggested that cardiac troponin is present in circulation at significantly lower levels in advance of an adverse cardiac event. A seminal study by Apple et. al. published in 2012 in Clinical Chemistry, a journal of clinical laboratory science, for which we tested samples without remuneration, indicated that people who have currently not been diagnosed with CVD but who have cardiac troponin levels above 10 pg/mL are at an 850% increased risk of dying due to a cardiac event over the next eight to 15 years.

 

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        Inflammatory Biomarkers.    Recent advances in atherosclerosis research have indicated that chronic inflammation of the blood vessels plays a significant role in the initiation and subsequent progression of atherosclerosis. The accumulation of inflammatory white blood cells and other lipids, such as cholesterol, in the artery form diseased lesions or plaques within the vessel wall which build up over time. These lesions include cells that release cytokines into the bloodstream. These cytokines, if measured in blood samples, can be used as early indicators of inflammatory disease. Publications of multiple independent studies have shown that increased levels of certain inflammatory biomarkers in the blood may correlate with increased heart disease risk. We believe detection and measurement of certain inflammatory biomarkers, such as IL-6, IL-17A, TNF-a and hs-CRP, may be effective in aiding physicians in further stratifying the risk of their patients for a variety of cardiovascular diseases including heart failure and CHD.

Our Solution

        Cardiac diseases are progressive in nature. As a result, there is a significant unmet need for prognostic biomarkers in the chronic setting that will help doctors to better identify and stratify patients with CVD risk in advance of an acute episode.

        Our proprietary digital immunoassay platform technology enables the early detection and monitoring of biomarkers with significantly greater sensitivity than other commercially available platforms, allowing for the measurement and monitoring of biomarkers at previously undetectable levels. We have initially focused our clinical test offerings on CVD through our Advanced CVD Monitoring services. We believe our technology has enabled cTnI and the inflammatory biomarkers included in our test panel to become clinically relevant in the chronic care setting.

        Our digital cTnI assay has been validated in numerous studies of adults with acute coronary syndromes and has shown the potential for predicting cardiovascular events. By monitoring changes in the amount of cTnI in the blood at levels undetectable by other commercially available technologies, we offer insight into disease progression and a risk assessment tool for physicians to assess whether the patient may require immediate or sustained, medium- or long-term treatment or intervention.

        CHD progression includes plaque formation (early stage), plaque build-up and plaque rupture (final stage of the disease). The high precision of our technology enables our proprietary tests, together with our other CVD tests, to be used as a monitoring tool by physicians in routine care to manage patients across the continuum of CVD progression, including CHD, heart attacks, heart failure and stroke. To help physicians assess the patient's level of chronic inflammation, our CVD menu includes a panel of known inflammatory biomarkers (IL-6, IL-17A, TNF-a and hs-CRP) associated with atherosclerosis to determine the potential for early stage inflammation in the artery, while our lipid tests provide information on the disease progression. If elevated levels of inflammatory biomarkers are detected in conjunction with an abnormal lipid panel result, the risk of progression may be compounded.

        We provide our test results to physicians using easy-to-interpret reports that record the concentrations of biomarkers from the four CVD categories covered by our Advanced CVD Monitoring services. Our test reports include both current test results and historical patient test-related data. Physicians can use this data to monitor the patient's CVD risk, therapeutic response and disease progression over time. Using our tests, physicians can make better informed recommendations for subsequent therapeutic/lifestyle interventions and develop a customized treatment plan.

 

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Strengths

        We believe that our competitive strengths include the following:

    Proprietary digital technology platform:  Our immunoassay diagnostic technology is capable of measuring single molecule changes in previously undetectable biomarker concentrations. While we have initially utilized our technology for the detection and monitoring of CVD, our digital technology platform can be used to detect and monitor biomarkers that may be predictive of other chronic diseases, including Alzheimer's disease, Parkinson's disease, rheumatoid arthritis, Crohn's disease, certain cancers and inflammatory- and autoimmune-based disease.

    Use of well-known biomarkers:  Our focus on utilizing well-known biomarkers with our digital technology platform allows us to leverage biomarkers known or validated in the acute setting and establish their prognostic value in the chronic monitoring setting. We believe this will reduce barriers to market adoption, lower clinical acceptance costs and alleviate reimbursement coverage decision challenges.

    Focus on large and growing CVD market:  According to the AHA, CVD is the number one cause of death in the United States and is projected to grow substantially. In particular, the AHA estimates that approximately 40% of the U.S. population will have some form of CVD by 2030. Approximately 80% of premature CVD deaths are potentially preventable through early identification and management of CVD risk factors according to the WHO. We believe our strategy to provide prognostic value in this growing market will result in physicians using our Advanced CVD Monitoring services to test their patients on a regular basis to detect chronic CVD early and effectively monitor disease progression.

    Differentiated chronic CVD testing solution:  Our Advanced CVD Monitoring services combine our CVD menu with integrated comprehensive reports providing physicians with tools to enable the development of a personalized treatment plan for, and improved monitoring of, patients across the continuum of CVD progression. As physicians continue to integrate our CVD testing solution in their patient treatment and monitoring plans, we believe we will be able to leverage these relationships to offer new testing solutions in chronic diseases beyond CVD.

    Relationships with established Life Sciences customers:  We also market and sell our digital technology platform and immunoassay development services to customers in the life sciences industry to facilitate their research and drug development efforts. These customers, which we refer to as our Life Sciences customers, serve as an important validation of our high precision technology platform. We believe that the immunoassay development we undertake for our Life Sciences customers has served and will continue to serve as a pipeline for our diagnostic services by generating additional assays that we may make commercially available in our menu.

Business Strategy

        Our current focus is the detection and monitoring of CVD, and we intend to become a leader in chronic disease detection and monitoring through our proprietary technology and test menu, by providing physicians the ability to measure disease progression, potentially limit acute events and enable possible reductions in the health care costs associated with chronic disease. The key elements of our strategy are the following:

    Achieve broad-based adoption of our advanced CVD menu;

    Increase market awareness and educate physicians about the clinical utility of our advanced CVD menu;

    Expand our advanced CVD menu;

 

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    Develop and commercialize our second generation platform; and

    Leverage our Life Sciences customer base.

Risks Related to Our Business

        Our ability to implement our business strategy is subject to numerous risks, as more fully described in the section entitled "Risk Factors" immediately following this prospectus summary. These risks include, among others:

    We are an early, commercial-stage company and have a limited operating history.

    Our success depends on the achievement of greater market acceptance of our Advanced CVD Monitoring services, especially our proprietary tests.

    We must expand our sales and marketing capabilities in order to increase demand for our Advanced CVD Monitoring services.

    We are substantially dependent on the efforts of BlueWave Healthcare Consultants, our third party contracted sales force.

    Health insurers and third party payors may decide not to cover, or may reduce or discontinue reimbursing for our tests.

    We face significant competition from large, well-capitalized companies.

    Our patent and other intellectual property rights may not adequately protect our technologies and tests.

    In order to develop and successfully commercialize our second generation system, we may require substantial additional capital.

    We may not successfully develop, or obtain regulatory approval for, and commercialize our second generation system.

    We are subject to significant government regulation.

Corporate Information

        We were originally formed as a limited liability company in the State of Delaware in November 1997 under the name BioProfile, L.L.C. In August 2002, we converted from a limited liability company to a corporation in Delaware under the name BioProfile Corporation. We commenced operations in August 2002, and, in July 2003, we changed our name to Singulex, Inc. Our principal executive offices are located at 1650 Harbor Bay Parkway, Suite 200, Alameda, California 94502, and our telephone number is (888) 995-6123. Our website address is http://www.singulex.com. The information contained in, or that can be accessed through, our website is not part of this prospectus.

        We are an "emerging growth company," as defined in the Jumpstart Our Business Startups Act of 2012. We will remain an emerging growth company until the earlier of (i) the last day of the fiscal year (a) following the fifth anniversary of the completion of this offering, (b) in which we have total annual gross revenue of at least $1.0 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeds $700 million as of the prior June 30, and (ii) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period. We refer to the Jumpstart Our Business Startup Act of 2012 as the "JOBS Act," and references to "emerging growth company" shall have the meaning associated with it in the JOBS Act.

 

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The Offering

Issuer

  Singulex, Inc.

Common stock we are offering

 

4,375,000 shares

Common stock to be outstanding after the offering

 

15,344,370 shares

Over-allotment option

 

656,250 shares

Use of proceeds

 

We estimate that the net proceeds from this offering will be approximately $62.3 million, or approximately $72.1 million if the underwriters exercise their over-allotment option in full, at an assumed initial public offering price of $16.00 per share, the midpoint of the range set forth on the cover page of this prospectus, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us. We intend to use the net proceeds from this offering to fund the development of our second generation system, expand our sales and marketing activities, repay indebtedness under our existing credit facility and for working capital and general corporate purposes, including research and development. See "Use of Proceeds" on page 45 for a description of the intended use of proceeds from this offering.

Risk factors

 

See "Risk Factors" beginning on page 10 and other information included in this prospectus for a discussion of factors that you should consider carefully before deciding to invest in our common stock.

Proposed symbol on the New York Stock Exchange

 

"SGLX"

        The number of shares of common stock to be outstanding after this offering is based on 10,969,370 shares of common stock outstanding as of June 30, 2012, and excludes the following:

    1,422,916 shares of common stock issuable upon the exercise of outstanding stock options as of June 30, 2012 having a weighted-average exercise price of $0.74 per share;

    425,735 shares of common stock issuable upon the exercise of outstanding warrants as of June 30, 2012 having a weighted-average exercise price of $6.88 per share;

    117,224 shares of common stock reserved for issuance pursuant to future awards under our 2002 Stock Option Plan, as amended, as of June 30, 2012, which will become available for issuance under our 2012 Equity Incentive Award Plan after consummation of this offering; and

    258,049 shares of common stock reserved for issuance pursuant to future awards under our 2012 Equity Incentive Award Plan, as well as any automatic increases in the number of shares of our common stock reserved for future issuance under this plan, which will become effective immediately prior to the consummation of this offering.

        Except as otherwise indicated, the number of shares of our common stock described above assumes no exercise of the underwriters' over-allotment option and gives effect to:

    the conversion of all 9,153,646 shares of our convertible preferred stock into an aggregate of 10,379,263 shares of common stock immediately prior to the consummation of this offering;

 

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    the conversion of all of our warrants exercisable for convertible preferred stock into warrants exercisable for 425,735 shares of common stock immediately prior to the consummation of this offering;

    the adoption of our amended and restated certificate of incorporation and amended and restated bylaws immediately prior to the consummation of this offering; and

    a 1-for-6.0647352 reverse stock split of our common stock and preferred stock to be completed prior to the consummation of this offering.

        We refer to our Series A, Series B, Series C, Series D, Series E and Series F convertible preferred stock collectively as "convertible preferred stock" for financial reporting purposes and in the financial tables included in this prospectus, as more fully explained in Note 8 to the notes to our audited consolidated financial statements. In other parts of this prospectus, we refer to our Series A, Series B, Series C, Series D, Series E and Series F convertible preferred stock collectively as "preferred stock."

 

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Summary Financial Data

        The following tables set forth a summary of our consolidated historical financial data as of, and for the period ended on, the dates indicated. The consolidated statement of operations data for the years ended December 31, 2009, 2010 and 2011 are derived from our audited consolidated financial statements included elsewhere in this prospectus. The consolidated statement of operations data for the six months ended June 30, 2011 and 2012 and consolidated balance sheet data as of June 30, 2012 have been derived from our unaudited consolidated financial statements appearing elsewhere in this prospectus. The unaudited financial data includes, in the opinion of our management, all adjustments, consisting only of normal recurring adjustments, that are necessary for a fair presentation of our financial position and results of operations for these periods. You should read this data together with our audited consolidated financial statements and related notes appearing elsewhere in this prospectus and the information under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations." Our historical results are not necessarily indicative of our future results, and results for the six months ended June 30, 2012 are not necessarily indicative of results to be expected for the full year ending December 31, 2012.

 
  Year Ended December 31,   Six Months Ended
June 30,
 
 
  2009   2010   2011   2011   2012
Restated(1)
 
 
   
   
   
  (unaudited)
 
 
  (in thousands, except share and per share data)
 

Consolidated Statement of Operations Data:

                               

Revenues:

                               

Advanced CVD Monitoring services

  $   $ 1,323   $ 19,114   $ 4,804   $ 18,125  

Life Sciences products

    1,866     1,967     3,469     1,714     1,591  

Life Sciences services

    1,350     1,617     2,185     1,241     831  
                       

    3,216     4,907     24,768     7,759     20,547  
                       

Cost of revenues:

                               

Advanced CVD Monitoring services

        2,882     9,211     3,303     7,002  

Life Sciences products

    384     1,112     1,117     561     634  

Life Sciences services

    1,574     1,428     814     369     529  
                       

    1,958     5,422     11,142     4,233     8,165  
                       

Gross profit (loss)

    1,258     (515 )   13,626     3,526     12,382  

Total operating expenses

    12,296     10,798     22,931     8,733     18,652  
                       

Loss from operations

    (11,038 )   (11,313 )   (9,305 )   (5,207 )   (6,270 )

Total other income (expense), net

    151     24     (3,149 )   (2,031 )   (4,047 )
                       

Net loss

    (10,887 )   (11,289 )   (12,454 )   (7,238 )   (10,317 )

Adjustment to net loss resulting from convertible preferred stock accretion and extinguishment

    (3,436 )   (3,719 )   (1,773 )   (1,864 )   (22 )
                       

Net loss attributable to common stockholders

  $ (14,323 ) $ (15,008 ) $ (14,227 ) $ (9,102 ) $ (10,339 )
                       

Net loss per share attributable to common stockholders, basic and diluted

  $ (62.43 ) $ (57.07 ) $ (35.89 ) $ (32.45 ) $ (18.00 )
                       

Weighted average shares of common stock used in computing net loss per share attributable to common stockholders, basic and diluted

    229,430     262,996     396,363     280,517     574,475  
                       

Pro forma net loss per share:

                               

Pro forma net loss per share of common stock, basic and diluted (unaudited)(2)

              $ (1.07 )       $ (0.90 )
                             

Weighted-average number of shares used in computing pro forma net loss per share of common stock, basic and diluted(unaudited)(2)

                9,722,543           11,437,922  
                             

(1)
Refer to Note 2 to our consolidated financial statements for a description of restated amounts.

 

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(2)
The pro forma net loss per share of common stock, basic and diluted, for the year ended December 31, 2011 and the six months ended June 30, 2012 (unaudited) reflects the conversion of all outstanding shares of our convertible preferred stock into shares of common stock immediately prior to the consummation of this offering. The pro forma net loss per share of common stock, basic and diluted, does not give effect to the issuance of shares from the proposed initial public offering nor do they give effect to potential dilutive securities where the impact would be anti-dilutive. See Note 1 to our audited consolidated financial statements included elsewhere in this prospectus.

        The table below presents our consolidated balance sheet data as of June 30, 2012:

    on an actual basis;

    on a pro forma basis to give effect to:

    the conversion of all outstanding shares of our convertible preferred stock into an aggregate of 10,379,263 shares of common stock immediately prior to the consummation of this offering;

    the conversion of all of our warrants exercisable for convertible preferred stock into warrants exercisable for 425,735 shares of common stock immediately prior to the consummation of this offering and the related reclassification of the convertible preferred stock warrant liability to additional paid-in capital; and

    the filing and effectiveness of our amended and restated certificate of incorporation and our amended and restated bylaws, which will occur immediately prior to the consummation of this offering; and

    on a pro forma as adjusted basis to give further effect to the sale of 4,375,000 shares of common stock in this offering at an assumed initial public offering price of $16.00 per share, the midpoint of the price range set forth on the cover page of this prospectus, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us.

 
  As of June 30, 2012  
 
  Actual
Restated
  Pro Forma   Pro Forma
As Adjusted(1)
 
 
  (unaudited, in thousands)
 

Consolidated Balance Sheet Data:

                   

Cash and cash equivalents

  $ 7,913   $ 7,913     70,213  

Working capital (deficit)

    (1,463 )   2,597     64,897  

Total assets

    15,381     15,381     77,681  

Accumulated deficit

    (81,301 )   (81,301 )   (81,301 )

Total stockholders' equity (deficit)

    (80,826 )   778     63,078  

(1)
A $1.00 increase (decrease) in the assumed initial public offering price of $16.00 per share, the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) each of pro forma as adjusted cash and cash equivalents, working capital, total assets and stockholders' equity by approximately $4.1 million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same. We may also increase or decrease the number of shares we are offering. An increase (decrease) of 1,000,000 in the number of shares we are offering would increase (decrease) each of pro forma as adjusted cash and cash equivalents, working capital, total assets and stockholders' equity by approximately $14.9 million, assuming the assumed initial public offering price per share, as set forth on the cover page of this prospectus, remains the same. The pro forma as adjusted information is illustrative only, and we will adjust this information based on the actual initial public offering price and other terms of this offering determined at pricing.

 

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Risk Factors

        Investing in our common stock involves a high degree of risk. Before deciding to invest in our common stock, you should carefully consider each of the following risk factors and all other information set forth in this prospectus and any related free writing prospectus. The following risks and the risks described elsewhere in this prospectus, including in the section titled "Management's Discussion and Analysis of Financial Condition and Results of Operations," could materially harm our business, financial condition, operating results, cash flow and prospects. If that occurs, the trading price of our common stock could decline, and you may lose all or part of your investment.

Risks Related to Our Business and Strategy

We are an early, commercial-stage company and have a limited operating history, which may make it difficult to evaluate our current business and predict our future performance.

        We are an early, commercial-stage company and have a limited commercial history. While we generated revenues prior to 2010, the significant majority of our revenues are derived from our Advanced CVD Monitoring services, which we launched in July 2010. Our limited commercial history may make it difficult to evaluate our current business and makes predictions about our future success or viability subject to significant uncertainty. We will continue to encounter risks and difficulties frequently experienced by early, commercial-stage companies, including scaling up our infrastructure and headcount. If we do not address these risks successfully, our business will suffer.

We have a history of incurring losses, and we expect to incur losses in the current fiscal year and for at least the next several fiscal years as we increase expenses in our efforts to increase market share for our Advanced CVD Monitoring services and to develop our second generation system.

        We have incurred net losses since our inception. As of December 31, 2011 and June 30, 2012, we had an accumulated deficit of $71.0 million and $81.3 million, respectively. We anticipate experiencing losses over the next several fiscal years as we increase expenses in pursuit of our growth strategy and seek to increase market share for our Advanced CVD Monitoring services and develop our second generation system.

        Historically, our losses have resulted principally from research and development programs, our sales and marketing efforts and our general and administrative expenses. We expect to continue to incur significant operating expenses and anticipate that our expenses and losses will increase due to costs relating to, among other things:

    expansion of our sales force and an increase in our marketing capabilities to promote market awareness and acceptance of our Advanced CVD Monitoring services, including our proprietary tests;

    development of and, as necessary, pursuit of regulatory clearances for, new diagnostic assays;

    development and commercialization of our second generation system, including conducting any clinical trials that may be required in order to achieve regulatory clearances that we may attempt to obtain;

    expansion of our operating and manufacturing capabilities, including capacity expansion of our current CLIA laboratory in Alameda, CA;

    maintenance, expansion and protection of our intellectual property portfolio and trade secrets;

    employment of additional quality control, scientific and management personnel; and

    employment of operational, financial, accounting and information systems personnel, consistent with expanding our operations and our status as a newly public company.

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        To become and remain profitable, we must succeed in increasing sales of our Advanced CVD Monitoring services, including our proprietary tests, and develop and commercialize new assays with significant market potential. We may not succeed in these activities and may never generate revenues that are sufficient to achieve profitability. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain consistently profitable would likely depress the market price of our common stock and could significantly impair our ability to raise capital, expand our business or continue to pursue our growth strategy.

Our ability to successfully execute our strategy is dependent on our achieving greater market acceptance in the United States of our Advanced CVD Monitoring services, especially our proprietary tests.

        Our ability to generate revenues depends substantially on our successful marketing and sales of our Advanced CVD Monitoring services and, in particular, our proprietary tests, and to a lesser extent sales of our digital technology instruments and immunoassay services to our Life Sciences customers. Our Advanced CVD Monitoring services accounted for 27% of our revenues for the year ended December 31, 2010, 77% of our revenues for the year ended December 31, 2011 and 88% of our revenues for the six months ended June 30, 2012. We expect that our revenues and profitability will depend on sales of Advanced CVD Monitoring services for the foreseeable future.

        In order to achieve greater market acceptance of our Advanced CVD Monitoring services and, in particular, our advanced CVD test menu, we must continue to demonstrate to physicians, other healthcare professionals, healthcare thought leaders and third party payors that the tests offered through our CVD menu are clinically meaningful and cost-effective diagnostic and disease management tools for CVD risk, providing for improved detection and monitoring beginning in earlier stages than conventional testing. In order to demonstrate these results, physicians and other health care professionals may require additional or more robust clinical data to further validate the clinical utility of our tests. For example, certain payors may opt not to provide coverage for our tests based on their perspective that our tests are experimental. In addition, in order for us to be successful in implementing our strategy for growth, physicians and other healthcare professionals must realize the benefits of our chronic CVD solution and utilize our tests on a repeat basis for chronic CVD monitoring. Our failure to achieve greater market acceptance of our Advanced CVD Monitoring services and proprietary tests would materially and adversely impact our ability to grow our revenues and achieve profitability.

In order to develop and successfully commercialize our second generation system, we may require substantial additional financing to achieve our goals, and a failure to obtain this necessary capital when needed on acceptable terms, or at all, could force us to delay, limit, reduce or terminate our development of our second generation system, other operations or commercialization efforts.

        We cannot assure you that the proceeds of this offering will be sufficient to adequately fund our business and growth strategy, particularly the development and commercialization of our second generation system. We may need to raise additional funds through public or private equity or debt financing to continue to fund our strategic efforts or expand our operations.

        Our actual liquidity and capital funding requirements will depend on numerous factors, including:

    the extent to which our Advanced CVD Monitoring services, including our proprietary tests, achieve market acceptance and remain competitive;

    the percentage of our sales that are reimbursed by third party payors;

    our ability to collect our accounts receivable;

    whether we are successful at developing our second generation system;

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    the expense required to develop and gain regulatory clearance of our second generation system, including the costs of any clinical trials that we may have to conduct;

    the costs and timing of further expansion of our sales and marketing efforts and research and development activities;

    our ability to control costs;

    whether we have sufficient testing capacity to meet the demand for our services;

    the costs of filing, prosecuting, defending and enforcing any patent or other intellectual property rights; and

    the acquisition of complementary business or technologies that we may undertake.

        Additional capital, if needed, may not be available on satisfactory terms, or at all. Furthermore, any additional capital raised through the sale of equity will dilute your ownership interest in us and may have an adverse effect on the price of our common stock. In addition, the terms of the financing may adversely affect your holdings or rights. Debt financing, if available, may include restrictive covenants which could limit the flexibility of our operations, including our ability to incur additional indebtedness.

        If we are not able to obtain adequate funding when needed, we may have to delay development or commercialization of our diagnostic tests or license to third parties the rights to commercialize products or technologies that we would otherwise seek to commercialize ourselves. We also may have to delay or limit the development of our second generation system, and reduce research and development, sales and marketing, customer support or other expenses. Any of these outcomes could harm our business.

We will need to expand our sales and marketing capabilities in order to increase demand for our Advanced CVD Monitoring services, to expand domestically and to successfully commercialize any other tests we may develop.

        We believe our current sales and marketing operations are not sufficient to achieve the level of market awareness and sales required for us to attain significant commercial success for our Advanced CVD Monitoring services, to expand our presence in the United States and to successfully commercialize any additional tests we may develop. In order to increase sales of our proprietary tests and the other tests featured on our CVD menu, we will need, among other things, to:

    expand our sales force in the United States by recruiting additional sales representatives in selected markets;

    educate physicians, other healthcare professionals, healthcare thought leaders and third party payors regarding the clinical benefits and cost-effectiveness of our proprietary tests and the other tests on our CVD menu;

    establish and manage reimbursement arrangements with third parties, such as insurance companies; and

    establish, expand and manage sales arrangements with third parties, such as clinical diagnostic laboratories.

        We intend to hire additional sales and marketing personnel in the United States with experience in the diagnostic, medical device or pharmaceutical industries. In seeking to attract and retain qualified sales and marketing employees, we may face competition from other companies in these industries, some of which are much larger than us and can pay significantly greater compensation and provide better benefits than we can. In addition, we have a limited history of operating our Advanced CVD Monitoring services and, as such, we do not have significant experience in scaling up or managing a

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direct sales force, which may be necessary to successfully grow our business. If we are unable to hire, retain and manage qualified sales and marketing personnel, our ability to grow our business may suffer.

We have agreed with BlueWave Healthcare Consultants, Inc. to utilize their contracted sales force in the majority of states in which we currently market our tests and have appointed them as our exclusive sales agent for our CVD tests in those states. The failure of BlueWave's sales force to perform adequately or the termination of our agreement with BlueWave may negatively and adversely affect our business.

        In June 2010, we entered into a seven-year agreement with BlueWave Healthcare Consultants, Inc., or BlueWave, to provide our contract sales support. We have appointed BlueWave as the exclusive sales agent for our proprietary tests in 18 states, and it sells our tests on a non-exclusive basis in one additional state. For the year ended December 31, 2011 and six months ended June 30, 2012, 94% and 90%, respectively, of the patient samples for our Advanced CVD Monitoring services were derived from sales by BlueWave. BlueWave currently is the exclusive sales agent for our proprietary tests in 18 of the 28 states in which we operate. In addition, BlueWave has a right of first negotiation to serve as our exclusive sales agent in any states in which we plan to expand our business, subject to certain exceptions, including offering all of our proprietary tests that we intend to offer in any such new state. BlueWave has agreed not to offer for sale any third party testing services similar to our tests in their exclusive states during the term of our sales agreement with them; however, BlueWave, as a contracted sales force, will not offer our other tests in states where they serve as a contract sales force for other diagnostic companies. As a result, BlueWave does not offer our full CVD test menu in the states where we have appointed them as our exclusive sales representative. After June 2017, our agreement with BlueWave will automatically renew for one-year periods unless we or BlueWave decide otherwise. We have the right to terminate the agreement prior to such expiration if BlueWave fails to attain certain predefined sales goals.

        We are currently dependent on the successful sales efforts of BlueWave for our Advanced CVD Monitoring services. The failure of BlueWave's sales force to perform adequately and any non-compliance with or the termination of our agreement with BlueWave will negatively and adversely affect the revenues we derive from our Advanced CVD Monitoring services.

We may never recognize revenue, or we may recognize less revenue than we have estimated, for a portion of the tests that we have performed and where results have been delivered but for which we have not yet collected payment.

        As of December 31, 2011 and June 30, 2012, the amount of our estimated future revenue for tests where services have been performed and results have been delivered but for which no revenue has been recognized because payment had not yet been received, the test fee was not fixed or determinable, and/or collectability was not reasonably assured was $7.1 million and $7.6 million, respectively. These figures represent our estimates of future revenue as of such dates generated by our billing system based on an estimated fee adjustment for the specific tests performed and the historic average reimbursement received from the patient's insurance provider for each specific test performed. Because we do not have contractual arrangements in place with any commercial third party payors nor do we have sufficient historical data due to the short commercial history of our Advanced CVD Monitoring service, we cannot estimate the amount of reimbursement we may receive from commercial third party payors with sufficient accuracy to recognize revenue when payment for such tests has not been received.

        The actual amount of revenue, if any, that we recognize will vary from these estimates based on a number of factors, including, but not limited to, whether our tests will be covered for reimbursement by a particular third party payor, variability in reimbursement levels by payor, variability in reimbursement levels per state and the length of time various payors require to process claims for coverage of such tests. In addition, we have limited experience making such estimates and a limited commercial history

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and collection experience. For these reasons, you should not rely on these estimated future revenues as a proxy for market acceptance of our Advanced CVD Monitoring services or as an indicator of our future revenues for tests that we have performed and where results have been delivered but for which we have not yet collected payment.

If we do not successfully develop and introduce new assays or other applications of our technology, we may not generate new sources of revenue and may not be able to successfully implement our growth strategy.

        Our business strategy includes the development of new assays for our advanced CVD menu and, in the future, assays for the detection and monitoring of other chronic diseases. All of our assays under development will require significant additional research and development, a commitment of significant additional resources and possibly costly and time-consuming clinical testing prior to their commercialization. Our technology is complex, and we cannot be sure that any assays under development will be developed successfully, be proven to be effective, offer diagnostic or other improvements over currently available tests, meet applicable regulatory standards, be produced in commercial quantities at acceptable costs or be successfully marketed. If we do not successfully develop new assays for our advanced CVD menu or to be used to detect and monitor other chronic diseases, we could lose revenue opportunities with existing or future customers.

We currently perform our Advanced CVD Monitoring services exclusively in one laboratory facility. If this or any future facility or our equipment were damaged or destroyed, or if we experience a significant disruption in our operations for any reason, our ability to continue to operate our business could be materially harmed.

        We currently perform our Advanced CVD Monitoring services exclusively in a single laboratory facility in Alameda, CA. If we were to lose a material portion of the capacity in this facility or the facility is shut down, even temporarily, we would not be able to perform our proprietary tests and our ability to generate revenue would be materially and adversely effected. In particular, Alameda is situated on or near major earthquake faults. If our facility there or any future facility were to be damaged, destroyed or otherwise became unable or less able to operate, whether due to fire, floods, storms, tornadoes, other natural disasters, employee malfeasance, terrorist acts, power outages, or otherwise, or if performance of our instruments is disrupted for any other reason, we may not be able to perform our proprietary tests or generate test reports as promptly as we do now, as promptly as our customers expect or possibly at all. If we are unable to perform our tests or generate test reports within a timeframe that meets our customers' expectations, our business, financial results and reputation could be materially harmed.

        Currently, we maintain insurance coverage totaling $2.8 million against damage to our property and equipment and an additional $3.0 million to cover business interruption and research and development restoration expenses, subject to deductibles and other limitations. If we have underestimated our insurance needs with respect to an interruption, or if an interruption is not subject to coverage under our insurance policies, we may not be able to cover our losses and our business may be materially and adversely affected.

We rely on courier delivery services to transport samples to our facility for analysis. If these delivery services are disrupted, our business and customer satisfaction could be negatively impacted.

        Physicians ship samples to us by air and ground express courier delivery service for analysis in our Alameda, CA facility. Samples are shipped to us in insulated containers, which include a frozen ice pack to maintain sample integrity during the normal shipping period. Disruptions in delivery service, whether due to bad weather, natural disasters, terrorist acts or threats, or for other reasons, can extend the shipping period beyond the ability of the container to maintain sample integrity. Blood collection centers may hold samples until normal shipping times are restored, but it is often difficult or impossible

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to predict such shipping delays, any of which may adversely affect the delivery of specimens, specimen quality and our ability to provide our services on a timely basis to customers.

We face substantial competition and our competitors may discover, develop or commercialize new technologies, products and services faster or more successfully than we do.

        The diagnostic testing industry is highly competitive, and we face significant competition from companies in the chronic disease testing market, including CLIA certified laboratories focused on advancing CVD risk assessment. Established companies competing in this market include Berkeley HeartLab, Inc., now part of Quest Diagnostics, Atherotech, Inc., LipoScience, Inc., SpectraCell Laboratories, Inc. and Health Diagnostic Laboratory, Inc. We also face competition with companies who develop high-sensitivity immunoassays that are not limited in application to CVD. Additional competitors, including Roche Diagnostics, Abbott Diagnostics, the Ortho Clinical Diagnostics division of Johnson & Johnson, Siemens Medical Solutions Diagnostics and Beckman Coulter, provide testing systems based on enzyme-linked immunosorbent assays. Many of these companies also offer an in vitro diagnostic platform and competitive immunoassay menus that would directly compete with our second generation system, such as Roche's Elecsys Systems, Abbott's ARCHITECT i System, Ortho Clinical Diagnostics' VITROS Immunodiagnostics Systems, Siemens' ADVIA Centaur Immunoassay Systems and Beckman Coulter's Access 2 Immunoassay System.

        It is possible that our competitors will develop and market new products and services that are less expensive and more effective than our products and services or that will render our products and services obsolete. We also anticipate that we will face increased competition in the future as new companies enter into our target markets and scientific developments surrounding the CVD testing field continue to develop. See "Business—Competition."

        Many of our competitors have materially greater name recognition and financial, manufacturing, marketing, research and development resources than we do. Large pharmaceutical companies in particular have extensive expertise in diagnostic testing and in obtaining regulatory approvals for their products. In addition, academic institutions, government agencies, and other public and private organizations conducting research may seek patent protection with respect to potentially competitive products or technologies. These organizations may also establish exclusive collaborative or licensing relationships with our competitors.

We may not be successful in developing our second generation system.

        An important element of our growth strategy is to develop our second generation system, which is our next-generation high-precision digital immunoassay monitoring platform for the IVD market. Our second generation system is currently in the design and development stage and we expect to commence prototype development in the first half of 2013. There are numerous factors that may prevent or delay the development of this system, including, but not limited to, a lack of financial resources, our inability to successfully develop a commercially viable prototype, the regulatory clearance process among others. If we are not successful in developing our second generation system, we may be forced to change our business strategy and expand our current CLIA operations. Our ability to expand sales of our Advanced CVD Monitoring services and expand into the IVD market is substantially dependent on our ability to develop and commercialize our second generation system, a failure of which would materially and adversely affect our ability to grow our business.

If we do not receive regulatory clearance in the United States or in other jurisdictions, if we experience delays in receiving such clearance, our growth strategy may not be successful.

        We expect to deploy our second generation system in our CLIA laboratory in 2014 and then submit for certain regulatory clearances. We may not receive regulatory clearances for the commercial

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use of the second generation system and test menu on a timely basis, or at all. If we are unable to receive the necessary regulatory clearances in all or any of the jurisdictions where we seek regulatory approval, our ability to grow our business by deploying the second generation system will be compromised and our commercialization plans for geographic expansion and overall growth strategy may not be successful.

Even if our second generation system and test menu do obtain regulatory clearance, this technology may never achieve market acceptance or commercial success.

        Even if we obtain FDA or other regulatory clearances, and are able to launch our second generation system commercially, our technology may not achieve market acceptance among physicians, other healthcare professionals, third party payors and commercial laboratories and, ultimately, may not be commercially successful. Market acceptance of our second generation system depends on a number of factors, including, among other things, the competitive landscape, the breadth of our test menu, the effectiveness of our sales and marketing efforts, the price of our tests relative to our competitors and the clinical utility of our system. Any failure of our second generation system and test menu to achieve market acceptance or commercial success may adversely affect our ability to grow our business.

We have identified a material weakness in internal control over financial reporting that is unremediated as of June 30, 2012. Our failure to establish and maintain effective internal control over financial reporting could result in our failure to meet our reporting obligations and cause investors to lose confidence in our reported financial information, which in turn could cause the trading price of our common stock to decline.

        We have restated our previously reported June 30, 2012 financial statements to correct an error relating to the accounting for preferred stock warrants that were issued prior to our current Chief Financial Officer and Corporate Controller assuming their respective positions. In connection with this restatement, our management identified a material weakness in our internal control over financial reporting. A material weakness is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

        The material weakness pertains to ineffective controls in the financial statement close process. Specifically, we did not have a sufficient number of accounting personnel with relevant technical accounting and financial reporting expertise to effectively design and operate controls over various non-routine and estimation classes of transactions including the evaluation of the completeness and accuracy of the accounting for preferred stock warrants issued in connection with debt arrangements. As a result of this material weakness, errors were identified in the previously issued unaudited interim June 30, 2012 consolidated financial statements related to the accounting for preferred stock warrants, which were corrected in the unaudited interim consolidated financial statements as of June 30, 2012 and for the six-month period then ended.

        We are working to remediate the material weakness. We have begun taking steps and plan to take additional measures to remediate the underlying causes of the material weakness, primarily through the continued development and implementation of formal policies, improved processes and documented procedures, as well as the continued hiring of additional finance personnel. The actions that we are taking are subject to ongoing senior management review, as well as audit committee oversight. Although we plan to complete this remediation process as quickly as possible, we cannot at this time estimate how long it will take, and our initiatives may not prove to be successful in remediating the material weakness. If our remedial measures are insufficient to address the material weakness, or if significant deficiencies or material weaknesses in our internal control over financial reporting are discovered or occur in the future, it may adversely affect the results of our management evaluations and, when required, annual auditor attestation reports regarding the effectiveness of our internal control over financial reporting required by Section 404 of the Sarbanes-Oxley Act of 2002. In addition, if we are unable to successfully remediate the material

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weakness and if we are unable to produce accurate and timely financial statements or we are required to restate our financial results, our stock price may be adversely affected and we may be unable to maintain compliance with the New York Stock Exchange listing requirements.

        For more information, please see "Management's Discussion and Analysis of Financial Condition and Results of Operations—Internal Controls" in this report.

If we are not able to retain and recruit qualified management, sales and marketing, regulatory, scientific and laboratory personnel, we may be unable to successfully execute our business strategy.

        Our future success depends to a significant extent on the skills, experience and efforts of our senior management team, including Philippe J. Goix, Ph.D., our President and Chief Executive Officer, and our key scientific and operational personnel. The loss of Dr. Goix or key scientific or operational personnel, could harm our business and might significantly delay or prevent the achievement of our business objectives. We may not be able to retain key members of our senior management team over the long term.

        Recruiting and retaining qualified sales and marketing, regulatory, scientific and laboratory personnel will also be critical to our success. We may not be able to attract and retain these personnel on acceptable terms, given the competition among numerous diagnostic, medical device, pharmaceutical and biotechnology companies for similarly skilled personnel.

If we do not establish relationships with additional pharmaceutical companies, academic institutions and contract research organizations, or CROs, or build upon our relationships with our existing customers, we may not be able to leverage our Life Sciences customer base to identify and develop biomarkers and our results of operations may be materially and adversely affected.

        An element of our strategy is to leverage and grow our relationships with our Life Sciences customers to identify and develop biomarkers for chronic diseases beyond CVD, such as Alzheimer's, rheumatoid arthritis and Crohn's disease. If we are unable to continue our existing relationships, or establish new relationships, with pharmaceutical companies, academic institutions and CROs who use our digital immunoassay platform technology in their therapeutic research and development efforts, our ability to leverage our Life Sciences customers to identify and develop biomarkers may be negatively affected. In addition, if we cannot maintain and build upon our existing relationships with our pharmaceutical company, academic institution and CRO customers, the revenues we derive from our Life Sciences customers may be negatively affected.

Failure in our information technology or storage systems could significantly disrupt our operations and our research and development efforts, which could adversely impact our revenues, as well as our research, development and commercialization efforts.

        Our ability to execute our business strategy depends, in part, on the continued and uninterrupted performance of our information technology, or IT, systems, which support our operations and our research and development efforts, as well as our storage systems and our analyzers. Due to the sophisticated nature of the technology we use in our testing, we are substantially dependent on our IT systems. IT systems are vulnerable to damage from a variety of sources, including telecommunications or network failures, malicious human acts and natural disasters. Moreover, despite network security and back-up measures, some of our servers are potentially vulnerable to physical or electronic break-ins, computer viruses and similar disruptive problems. Despite the precautionary measures we have taken to prevent unanticipated problems that could affect our IT systems, sustained or repeated system failures that interrupt our ability to generate and maintain data, and in particular to operate our digital immunoassay platform, could adversely affect our ability to operate our business. Any interruption in due to IT system failures, part failures or potential disruptions in the event we are required to relocate

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our instruments within our facility or to another facility, could have an adverse effect on our operations.

If we are unable to successfully manage our growth, our business will be harmed.

        During the past several years, we have significantly expanded our operations. We expect this expansion to continue to an even greater degree following completion of this offering as we seek to expand our domestic sales force and explore potential expansion into international markets. Our growth has placed and will continue to place a significant strain on our management, operating and financial systems and our sales, marketing and administrative resources. As a result of our growth, our operating costs may escalate even faster than planned, and some of our internal systems may need to be enhanced or replaced. If we cannot effectively manage our expanding operations and our costs, we may not be able to continue to grow or we may grow at a slower pace, and our business could be adversely affected.

If we expand sales of our instruments and diagnostic tests outside of the United States, our business will be susceptible to costs and risks associated with international operations.

        All of our Advanced CVD Monitoring services revenues and a majority of our revenues from Life Sciences customers are derived from sales in the United States. As part of our longer-term growth strategy, we may target select international markets to further grow our presence outside of the United States. Conducting international operations would subject us to new risks that, generally, we have not faced in the United States, including:

    fluctuations in currency exchange rates;

    longer accounts receivable payment cycles and difficulties in collecting accounts receivable;

    competition from companies located in the countries in which we offer our products, which may be a competitive disadvantage;

    difficulties in managing and staffing international operations and assuring compliance with foreign corrupt practices laws;

    the possibility of management distraction;

    potentially adverse tax consequences, including the complexities of foreign value added tax systems, tax inefficiencies related to our corporate structure and restrictions on the repatriation of earnings;

    increased financial accounting and reporting burdens and complexities;

    political, social and economic instability abroad, terrorist attacks and security concerns in general; and

    reduced or varied protection for intellectual property rights in some countries.

        The occurrence of any one of these risks could harm our business or results of operations. Additionally, operating internationally requires significant management attention and financial resources. We cannot be certain that the investment and additional resources required in establishing operations in other countries will produce desired levels of revenues or profitability.

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We may be adversely affected by the current economic environment and future adverse economic environments.

        Our ability to attract and retain customers, invest in and grow our business and meet our financial obligations depends on our operating and financial performance, which, in turn, is subject to numerous factors, including the prevailing economic conditions and financial, business and other factors beyond our control, such as the rate of unemployment, the number of uninsured persons in the United States and inflationary pressures. We cannot anticipate all the ways in which the current economic climate and financial market conditions, and those in the future, could adversely impact our business.

        We are exposed to risks associated with reduced profitability and the potential financial instability of our customers, many of which may be adversely affected by volatile conditions in the financial markets. For example, unemployment and underemployment, and the resultant loss of insurance, may decrease the demand for healthcare services and diagnostic testing. If fewer patients are seeking medical care because they do not have insurance coverage, we may experience reductions in revenues, profitability and/or cash flow. In addition, if economic challenges in the United States result in widespread and prolonged unemployment, either regionally or on a national basis, a substantial number of people may become uninsured or underinsured. To the extent such economic challenges result in less demand for our proprietary tests, our business, results of operations, financial condition and cash flows could be adversely affected.

The diagnostic clinical laboratory industry is subject to changing technologies which could make our current tests and the tests we are developing obsolete unless we continue to develop new and improved tests and pursue new market opportunities.

        Our industry is characterized by technological changes, new product introductions and enhancements and evolving industry standards. Our future success will depend on our ability to keep pace with the evolving needs of our customers on a timely and cost-effective basis and to pursue new market opportunities that develop as a result of technological and scientific advances. These new market opportunities may be outside the scope of our expertise or in areas which have unproven market demand, and the utility and value of new tests that we develop may not be accepted in the market. Our inability to gain market acceptance of new tests could harm our future operating results. Further, if new research, clinical evidence or economic comparative evidence arises that supports the use of a different marker for the diagnosis and management of CVD risk, demand for our test could decline.

Our ability to meet increased demand for our proprietary tests, especially our Sgx HD cTnI test, will be harmed if we are unable to expand our testing capacity.

        We have recently experienced rapid growth in orders of our proprietary tests, especially our Sgx HD cTnI test. We perform all of our proprietary tests in our CLIA laboratory in Alameda, CA. If demand for our tests grows to the point at which it exceeds our existing capacity, we will be required to add capacity or outsource additional testing in order to meet this demand. If we are unable to expand our facilities and equipment or outsource additional testing, we may be unable to maintain our current turnaround time between receipt of a sample and completion of all ordered tests for that sample. Increased turnaround time caused by our inability to meet demand would negatively and adversely affect our business and results of operations.

We depend upon a single source supplier for the fluorescent dye used during the single molecule counting process in our digital technology instruments. The loss of this supplier or its failure to supply us with an adequate supply of fluorescent dye on a timely basis, could adversely affect our business.

        We currently have a single supplier, Invitrogen Corporation (a subsidiary of Life Technologies Corporation), for the fluorescent dye that is used during the single molecule counting process in our

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digital technology instruments. In addition, we have optimized our platform technology for the characteristics of the dye we source from Invitrogen. If we were unable to acquire the fluorescent dye from Invitrogen, we could experience a delay in analyzing patient samples and ultimately generating revenues. In particular, we may be required to adjust our technology platform for a different type of dye and/or qualify a new supplier of a similar type of dye, and we may experience delays in meeting demand in the event we must switch to a new supplier.

We rely on a single contract manufacturer to assemble our digital technology instruments. If our relationship with this manufacturer is terminated, our ability to supply our instruments would be negatively and adversely affected.

        We currently rely on a single contract manufacturer, Invetech Pty. Ltd, an ISO-certified diagnostic product manufacturer located in Australia, to assemble our digital technology instruments. In February 2010, we entered into a three year manufacturing services agreement with Invetech, which automatically renews for successive one-year terms unless terminated, pursuant to which Invetech provides engineering services to us on an exclusive basis for the product specifications and work orders that we provide. Either party may terminate the agreement on six months written notice or upon an uncured material breach. We are aware of other instrument manufacturers that are capable of assembling our current digital technology instruments, but we currently do not have an agreement or relationship with any of those other manufacturers. In the event it becomes necessary or desirable to utilize a different contract manufacturer, we may experience additional costs, delays and difficulties in doing so and our business may suffer.

We will incur significant costs as a result of operating as a public company, and our management will devote substantial time to new compliance initiatives. We may fail to comply with the rules that apply to public companies, including Section 404 of the Sarbanes-Oxley Act of 2002, which could result in sanctions or other penalties that would harm our business.

        We will incur significant legal, accounting and other expenses as a public company, including costs resulting from public company reporting obligations under the Securities Exchange Act of 1934, as amended, and regulations regarding corporate governance practices. The listing requirements of the New York Stock Exchange require that we satisfy certain corporate governance requirements relating to director independence, distributing annual and interim reports, stockholder meetings, approvals and voting, soliciting proxies, conflicts of interest and a code of conduct. Moreover, the reporting requirements, rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. Any changes we make to comply with these obligations may not be sufficient to allow us to satisfy our obligations as a public company on a timely basis, or at all. In addition, as a public company we will be required to file accurate and timely quarterly and annual reports with the SEC under the Securities Exchange Act of 1934, as amended. Compliance with the various reporting and other requirements applicable to public companies will also require considerable time and attention of management. Any failure to report our financial results on an accurate and timely basis could result in sanctions, lawsuits, delisting of our shares from the New York Stock Exchange or other adverse consequences that would materially harm our business. These reporting requirements, rules and regulations, coupled with the increase in potential litigation exposure associated with being a public company, could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors or board committees or to serve as executive officers, or to obtain certain types of insurance, including directors' and officers' insurance, on acceptable terms.

        After this offering, we will be subject to Section 404 of The Sarbanes-Oxley Act of 2002, or Section 404, and the related rules of the Securities and Exchange Commission, or SEC, which generally require our management and independent registered public accounting firm to report on the

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effectiveness of our internal control over financial reporting. Beginning with the second annual report that we will be required to file with the SEC, Section 404 requires an annual management assessment of the effectiveness of our internal control over financial reporting. This assessment will need to include disclosure of any material weaknesses in our internal control over financial reporting identified by our management. We have previously identified a material weakness in our internal control over financial reporting as of June 30, 2012. However, for so long as we remain an emerging growth company as defined in the JOBS Act, we intend to take advantage of certain exemptions from various reporting requirements that are applicable to public companies that are not emerging growth companies, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404. Once we are no longer an emerging growth company or, if prior to such date, we opt to no longer take advantage of the applicable exemption, we will be required to include an opinion from our independent registered public accounting firm on the effectiveness of our internal controls over financial reporting. If we are unable to assert that our internal control over financial reporting is effective, or if our auditors are unable to express an opinion on the effectiveness of our internal control over financial reporting when required, we could lose investor confidence in the accuracy and completeness of our financial reports, which could have a material adverse effect on the price of our common stock. We will remain an emerging growth company until the earlier of (i) the last day of the fiscal year (a) following the fifth anniversary of the completion of this offering, (b) in which we have total annual gross revenue of at least $1.0 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeds $700 million as of the prior June 30th, and (ii) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.

If product liability lawsuits are successfully brought against us, we may incur substantial liabilities that could have a significant negative effect on our financial condition or reputation.

        Diagnostic testing entails the risk of product liability, and we may be exposed to liability claims arising from the use of our tests. We maintain product liability insurance, which is subject to deductibles and coverage limitations in an amount that we believe to be reasonable. We cannot be certain, however, that our product liability insurance will be sufficient to protect us against all losses due to liability. As a result, we may be required to pay all or a portion of any successfully asserted product liability claim out of our cash reserves. Furthermore, we cannot be certain that product liability insurance will continue to be available to us on commercially reasonable terms or in sufficient amounts. We can provide no assurance that we will be able to avoid significant product liability claims, which could hurt our reputation and our financial condition.

We may engage in strategic transactions that could impact our liquidity, increase our expenses and present significant distractions to our management.

        From time to time, we may consider strategic transactions, such as acquisitions of companies, asset purchases and out-licensing or in-licensing of products, product candidates or technologies. Additional potential transactions that we may consider include a variety of different business arrangements, including spin-offs, strategic partnerships, joint ventures, restructurings, divestitures, business combinations and investments. Any such transaction may require us to incur non-recurring or other charges, may increase our near- and long-term expenditures and may pose significant integration challenges or disrupt our management or business, which could adversely affect our operations and financial results. For example, these transactions may entail numerous operational and financial risks, including:

    exposure to unknown liabilities;

    disruption of our business and diversion of our management's time and attention in order to develop acquired products, product candidates or technologies;

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    incurrence of substantial debt or dilutive issuances of equity securities to pay for acquisitions;

    higher than expected acquisition and integration costs;

    write-downs of assets or goodwill or impairment charges;

    increased amortization expenses;

    difficulty and cost in combining the operations and personnel of any acquired businesses with our operations and personnel;

    impairment of relationships with key suppliers or customers of any acquired businesses due to changes in management and ownership; and

    inability to retain key employees of any acquired businesses.

        Accordingly, although there can be no assurance that we will undertake or successfully complete any transactions of the nature described above, any transactions that we do complete may be subject to the foregoing or other risks, could have a material adverse effect on our business, results of operations, financial condition and prospects.

We may use third party collaborators to help us develop, validate or commercialize any new diagnostic tests, and our ability to commercialize such tests could be impaired or delayed if these collaborations are unsuccessful.

        We may in the future selectively pursue strategic collaborations for the development, validation and commercialization of any new diagnostic tests we may develop. In any future third party collaboration, we would be dependent upon the success of the collaborators in performing their responsibilities and their continued cooperation. Our collaborators may not cooperate with us or perform their obligations under our agreements with them. We cannot control the amount and timing of our collaborators' resources that will be devoted to performing their responsibilities under our agreements with them. Our collaborators may choose to pursue alternative technologies in preference to those being developed in collaboration with us. The development, validation and commercialization of our potential tests will be delayed if collaborators fail to fulfill their responsibilities in a timely manner or in accordance with applicable regulatory requirements or if they breach or terminate their collaboration agreements with us. Disputes with our collaborators could also impair our reputation or result in development delays, decreased revenues and litigation expenses.

Our employees may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements.

        We are exposed to the risk of employee fraud or other misconduct, and, in certain circumstances, we may also be subject to claims based on the conduct of BlueWave representatives working on our behalf. Misconduct by employees (including BlueWave representatives working on our behalf) could include failures to comply with applicable regulations, provide accurate information to regulatory bodies, comply with federal and state healthcare fraud and abuse laws and regulations, report financial information or data accurately or disclose unauthorized activities to us. In particular, sales, marketing, business arrangements and reimbursement in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Employee misconduct could also involve the improper use of information obtained in the course of any clinical trials, which could result in regulatory sanctions and serious harm to our reputation. It is not always possible to identify and deter employee misconduct, both by our own employees and by BlueWave representatives working on our behalf, and the precautions we take to detect and prevent this activity may not be

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effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant fines or other sanctions, such as exclusion from participation in U.S. federal or state healthcare programs. Moreover, even if we were to successfully defend against such actions, the costs to defend those actions could be significant. See "Risks Related to Billing, Coverage and Reimbursement For Our Tests," "Risks Related to Government Regulation of Our Tests" and "Business—Government Regulation."

Our credit facilities contain restrictions that limit our flexibility in operating our business.

        Our credit facilities contain various covenants that limit our ability to engage in specified types of transactions. These covenants limit our ability to, among other things:

    sell, transfer, lease or dispose of our assets;

    create, incur or assume additional indebtedness;

    encumber or permit liens on certain of our assets;

    make restricted payments, including paying dividends on, repurchasing or making distributions with respect to our common stock;

    make specified investments (including loans and advances);

    consolidate, merge, sell or otherwise dispose of all or substantially all of our assets; and

    enter into certain transactions with our affiliates.

        In addition, our credit facility with Bridge Bank, N.A. contains numerous financial covenants, including an asset coverage ratio, securing an equity financing with gross proceeds of at least $8.0 million by December 31, 2012 or consummating this offering by January 31, 2013, and achieving pre-specified revenue and net loss thresholds based on projections provided by management. A breach of any of these covenants, a material adverse change to our business or a default under our Horizon credit facility could result in a default under our Bridge Bank credit facility. The covenants in our credit facilities may limit our ability to take certain actions and, in the event that we breach one or more covenants, our lenders may choose to declare an event of default and require that we immediately repay all amounts outstanding, terminate their commitments to extend further credit and foreclose on the collateral granted to them to secure such indebtedness. We currently expect to use a portion of the proceeds from this offering to repay our existing indebtedness under our term loan with Bridge Bank; however, if we are required to repay all outstanding amounts prior to such extinguishment, we may have to delay other planned expenditures in order to repay such amounts. Such repayment could have a material adverse effect on our business, operating results and financial condition.

We have in the past breached our financial covenants with Bridge Bank.

        We have in the past breached our financial covenant with Bridge Bank relating to our net income/loss projections, and we currently operate under a waiver of such breach. While our credit facility with Horizon does not contain financial covenants, it does contain a cross-default covenant. Upon the occurrence of an event of default under either of our credit facilities, either or both of our lenders may elect to declare all amounts outstanding to be immediately due and payable and terminate all commitments to extend further credit. While we currently expect to use a portion of the proceeds from this offering to repay our existing indebtedness under our term loan with Bridge Bank, if we were required to repay the outstanding loan balances amounts due to an event of default, either of our

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lenders could foreclose on the collateral granted to them to secure such indebtedness. We have pledged substantially all of our assets, other than our intellectual property, as collateral under these credit facilities. A default and any accompanying repayment could have a material adverse effect on our business, operating results and financial condition.

Our operations involve the use of hazardous materials, and we must comply with environmental, health and safety laws, which can be expensive and may adversely affect our business, operating results and financial condition.

        Our research and development and manufacturing activities involve the use of hazardous materials, including chemicals and biological materials, and some of our products include hazardous materials. Accordingly, we are subject to federal, state, local and foreign laws, regulations and permits relating to environmental, health and safety matters, including, among others, those governing the use, storage, handling, exposure to and disposal of hazardous materials and wastes, the health and safety of our employees, and the shipment, labeling, collection, recycling, treatment and disposal of products containing hazardous materials. Liability under environmental laws and regulations can be joint and several and without regard to fault or negligence. For example, under certain circumstances and under certain environmental laws, we could be held liable for costs relating to contamination at our or our predecessors' past or present facilities and at third party waste disposal sites. We could also be held liable for damages arising out of human exposure to hazardous materials. There can be no assurance that violations of environmental, health and safety laws will not occur as a result of human error, accident, equipment failure or other causes. The failure to comply with past, present or future laws could result in the imposition of substantial fines and penalties, remediation costs, property damage and personal injury claims, investigations, the suspension of production or product sales, loss of permits or a cessation of operations. Any of these events could harm our business, operating results and financial condition. We also expect that our operations will be affected by new environmental, health and safety laws and regulations on an ongoing basis, or more stringent enforcement of existing laws and regulations. Although we cannot predict the ultimate impact of any such new laws and regulations, or such more stringent enforcement, they will likely result in additional costs and may increase penalties associated with violations or require us to change the content of our products or how we manufacture them, which could have a material adverse effect on our business, operating results and financial condition.

Our ability to utilize our net operating loss carryforwards and certain other tax attributes may be limited.

        We have incurred net losses since inception and expect to continue to incur net losses over the next several years. To the extent that we continue to generate taxable losses, unused losses would generally carry forward to offset future taxable income, if any, until such unused losses expire. We may be unable to use these losses to offset income before such unused losses expire. In addition, under Section 382 of the Internal Revenue Code of 1986, as amended, if a corporation undergoes an "ownership change" (generally defined as a greater than 50% change (by value) in its equity ownership over a three-year period), the corporation's ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes may be limited. We have experienced ownership changes in the past and may experience ownership changes in connection with this offering or as a result of future changes in our stock ownership.

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Risks Related to Billing, Coverage and Reimbursement for Our Tests

Health insurers and other third party payors may decide not to cover, or may reduce or discontinue reimbursing for, our tests or any other diagnostic tests we may develop in the future, or may provide inadequate reimbursement, which could jeopardize our ability to expand our business and achieve profitability.

        Our business is impacted by the level of reimbursement for our tests from Medicare, Medicaid, other governmental payors and commercial third party payors. In the United States, the regulatory process allows diagnostic tests to be marketed regardless of any coverage determinations made by payors. For new diagnostic tests, each third party payor makes its own decision about which tests it will cover, how much it will pay and whether it will continue reimbursing the test. Clinicians may order diagnostic tests that are not reimbursed by third party payors if the patient is willing to pay for the test without reimbursement, but coverage determinations and reimbursement levels and conditions are critical to the commercial success of a diagnostic product.

        The Centers for Medicare and Medicaid Services, or CMS, under the U.S. Department of Health and Human Services, or HHS, establishes reimbursement payment levels and coverage rules for Medicare and Medicaid. CMS currently covers all of our tests. State Medicaid plans and commercial third party payors establish rates and coverage rules independently. As a result, the coverage determination process is often a time-consuming and costly process that requires us to provide scientific and clinical support for the use of our tests to each payor separately, with no assurance that coverage or adequate reimbursement will be obtained. While our tests are reimbursed by a number of governmental and commercial payors, there are significant large commercial payors who do not currently cover all of our tests. If Medicare, Medicaid or other third party payors decide not to cover our tests, place significant restrictions on the use of our tests, or offer inadequate payment amounts, our ability to generate revenue from our Advanced CVD Monitoring services tests could be limited.

        Even if one or more third party payors decides to reimburse for our tests, that payor may reduce utilization or stop or lower payment at any time, which could reduce our revenues. For example, payment for diagnostic tests furnished to Medicare fee-for-services beneficiaries is made based on a fee schedule established from time to time by CMS. In recent years, payments under these fee schedules have decreased and may decrease more. Some commercial third party payors are guided by Medicare clinical laboratory fee schedules in establishing their reimbursement rates. We cannot predict whether or when third party payors will cover our tests or offer adequate reimbursement to make them commercially attractive. Moreover, we do not currently have contracts or agreements with commercial third party payors, and, as a result, reimbursements from these payors is uncertain. If we enter into contracts with commercial third party payors, we may be reimbursed at an amount lower than the contracted test price. Clinicians may decide not to order our tests if third party payments are inadequate, especially if ordering the test could result in financial liability for the patient.

Billing complexities associated with obtaining payment or reimbursement for our tests may negatively affect our revenues, cash flow and profitability.

        Billing for laboratory testing services is complex. We perform tests in advance of payment and without certainty as to the outcome of the billing process. In cases in which we receive a fixed fee per test, we may still have disputes over pricing and billing. We receive payment from a variety of payors, such as commercial insurance carriers, including managed care organizations, and governmental programs, primarily Medicare and Medicaid. Each payor typically has different billing requirements, and the billing requirements of many payors have become increasingly stringent. In addition, healthcare cost containment activities and healthcare reform is focused on reimbursement and/or payment for healthcare services, including laboratory tests, among other areas. This focus includes ongoing assessment of reimbursement regulations, including balance billing, collection of copays and deductibles

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and other reimbursement matters, particularly in the setting of high deductible insurance plans, managed care and other healthcare reform initiatives.

        Among the factors complicating our billing of third party payors are:

    disparity in coverage among various payors;

    disparity in information and billing requirements among payors;

    changing reimbursement laws, regulations and payor policies; and

    incorrect or missing billing information, which is required to be provided by the prescribing physician.

        These billing complexities, and the related uncertainty in obtaining payment for our tests, could negatively affect our revenues, cash flow and profitability.

Healthcare reform measures could hinder or prevent commercial success of our CVD menu, including our proprietary tests.

        In March 2010, President Obama signed into law a legislative overhaul of the U.S. healthcare system, known as the Patient Protection and Affordable Care Act of 2010, as amended by the Healthcare and Education Affordability Reconciliation Act of 2010, or the PPACA, which may have far-reaching consequences for most healthcare companies, including diagnostic companies like us. As a result of this new legislation, substantial changes could be made to the current system for paying for healthcare in the United States, including changes made in order to extend medical benefits to those who currently lack insurance coverage. The mandatory purchase of insurance is strenuously opposed by a number of state governors, resulting in lawsuits challenging the constitutionality of these provisions. On June 28, 2012, the United States Supreme Court upheld the constitutionality of these provisions of the PPACA. Congress has also proposed a number of legislative initiatives, including possible repeal of the PPACA. At this time, it remains unclear whether there will be any changes made to the PPACA, whether in part or in its entirety.

        Extending coverage to a large population could substantially change the structure of the health insurance system and the methodology for reimbursing medical services, laboratory tests, drugs and devices. These structural changes could entail modifications to the existing system of private payors and government programs, such as Medicare and Medicaid, the creation of a government-sponsored healthcare insurance source, or some combination of both, as well as other changes.

        Restructuring the coverage of medical care in the United States could impact the reimbursement for diagnostic tests like ours. If reimbursement for our diagnostic tests is substantially less than we expect, our business could be materially and adversely impacted.

        Regardless of the impact of the PPACA on us, the U.S. government, other governments and commercial payors have shown significant interest in pursuing healthcare reform and reducing healthcare costs. Any government-adopted reform measures could cause significant pressure on the pricing of healthcare products and services, including our proprietary tests, in the United States and internationally, as well as the amount of reimbursement available from governmental agencies or other third party payors. The continuing efforts of the U.S. and foreign governments, insurance companies, managed care organizations and other payors to contain or reduce healthcare costs may compromise our ability to set prices at commercially attractive levels for our proprietary tests and other diagnostic tests that we may develop. Changes in healthcare policy, such as the creation of broad limits for diagnostic products, could substantially diminish the sale of or inhibit the utilization of diagnostic tests, increase costs, divert management's attention and adversely affect our ability to generate revenues and achieve consistent profitability.

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        New laws, regulations and judicial decisions, or new interpretations of existing laws, regulations and decisions, relating to healthcare availability, reimbursement methods of delivery or payment for diagnostic products and services, or sales, marketing or pricing, may also limit our potential revenues, and we may need to revise our Advanced CVD Monitoring services, research and development or commercialization programs. The pricing and reimbursement environment may change in the future and become more challenging for a number of reasons, including policies advanced by the U.S. government, state governments, new healthcare legislation or fiscal challenges faced by government health administration authorities. Specifically, in both the United States and some foreign jurisdictions, there have been a number of legislative and regulatory proposals and initiatives to change the healthcare system in ways that could affect our ability to sell our diagnostic tests profitably. Some of these proposed and implemented reforms could result in reduced utilization or reimbursement rates for our diagnostic products.

If we are subject to an enforcement action involving false claims, kickbacks, physician self-referral or other federal or state fraud and abuse laws, we could incur significant civil and criminal sanctions and loss of reimbursement, which would hurt our business.

        The government has made enforcement of the false claims, anti-kickback, physician self-referral and various other fraud and abuse laws a major priority. In many instances, private whistleblowers also are authorized to enforce these laws even if government authorities choose not to do so. Several clinical diagnostic laboratories and members of their management have been the subject of this enforcement scrutiny, which has resulted in very significant civil and criminal settlement payments. In most of these cases, private whistleblowers brought the allegations to the attention of federal enforcement agencies. These laws include:

    the federal Anti-Kickback Statute, which constrains our marketing practices, educational programs, pricing policies and relationships with healthcare providers or other entities by prohibiting, among other things, soliciting, receiving, offering or paying remuneration, directly or indirectly, to induce or in return for, the purchase or recommendation of an item or service reimbursable under a federal healthcare program, such as the Medicare and Medicaid programs;

    federal civil and criminal false claims laws and civil monetary penalty laws, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid, or other third party payors that are false or fraudulent;

    federal physician self-referral laws, such as the Stark law, which prohibit a physician from making a referral to a provider of certain health services with which the physician or the physician's family member has a financial interest, and prohibit submission of a claim for reimbursement pursuant to a prohibited referral; and

    state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws, which may apply to items or services reimbursed by any third party payor, including commercial insurers, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts.

        The risk of our being found in violation of these laws and regulations is heightened by the lack of full interpretive guidance from applicable regulatory authorities or the courts. For example, we enter into written agreements with physicians, laboratories and other healthcare providers under which we provide reimbursement for the specimen collection, processing and handling services of such providers on our behalf. While we believe that this reimbursement is based on a reasonable fair market value for the services performed and that these agreements are in compliance with all applicable legal requirements, we cannot assure you that, if challenged, we would ultimately prevail or would not be required to change our business practices. If we or our operations, possibly including the operations of

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BlueWave, are found to be in violation of any of these laws and regulations, we may be subject to penalties, including civil and criminal penalties, damages, fines, exclusion from participation in U.S. federal or state healthcare programs, such as Medicare and Medicaid, and the curtailment or restructuring of our operations. We are in the process of systematizing our compliance program regarding compliance with federal and state fraud and abuse laws, including with regard to collection of patient deductibles and coinsurance and physician-related payments, such as customer advisory board fees, draw fees and other similar fees. Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses, divert our management's attention from the operation of our business and hurt our reputation. If we were excluded from participation in U.S. federal healthcare programs, we would not be able to receive, or to sell our tests to other parties who receive, reimbursement from Medicare, Medicaid and other federal programs.

Risks Related to Our Intellectual Property

Our patent and other intellectual property rights may not adequately protect our technologies and tests. If our intellectual property rights are unable to protect our technologies and tests, it may materially and adversely affect our business.

        Our commercial success will depend on our ability to obtain additional patents and adequately protect the intellectual property rights covering our technologies and tests in the United States and other countries. As of June 30, 2012, our patent estate included five issued U.S. and foreign patents and 61 patent applications pending in the United States and various foreign jurisdictions throughout the world. There is no guarantee that any of our patent applications will result in issued patents, or that any issued patents will include claims that are sufficiently broad to cover our technologies or tests or to provide meaningful protection from our competitors. We will be able to protect our existing and future technologies and tests only to the extent that they are covered by valid and enforceable patents or utilize technologies or know-how that are effectively maintained as trade secrets. If third parties disclose or misappropriate our trade secrets, it may materially and adversely impact our business.

        We apply for patents covering our technologies and tests, as we deem appropriate. However, we may fail to apply for patents on important technologies or tests in a timely fashion, or at all. Our existing patents and any future patents we obtain may not be sufficiently broad to prevent others from using our technologies or from developing and commercializing competing products and technologies. Moreover, the patent positions of numerous biotechnology and pharmaceutical companies are highly uncertain and involve complex legal and factual questions for which important legal principles remain unresolved. As a result, the validity and enforceability of our patents cannot be predicted with certainty. In addition, we cannot guarantee you that:

    we were the first to make the inventions covered by each of our issued patents and pending patent applications;

    we were the first to file patent applications for these inventions;

    others will not independently develop similar or alternative technologies or duplicate any of our technologies by inventing around the claims of our patents;

    a third party will not challenge our patents, and if challenged that a court will hold that our patents are valid and enforceable;

    any patents issued to us or our collaboration partners will cover our product as ultimately developed, or provide us with any competitive advantages or will not be challenged by third parties;

    we will develop additional proprietary technologies that are patentable; or

    the patents of others will not have an adverse effect on our business.

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        In addition, there are numerous recent changes to the patent laws and proposed changes to the rules of the United States Patent and Trademark Office, or USPTO, which may have a significant impact on our ability to protect our technology and enforce our intellectual property rights. For example, on September 16, 2011, President Obama signed the America Invents Act which codifies several significant changes to the U.S. patent laws, including, among other things, changing from a "first to invent" to a "first inventor to file" system, limiting where a patentee may file a patent suit, requiring the apportionment of patent damages, replacing interference proceedings with derivation actions, and creating a post-grant opposition process to challenge patents after they have issued. The effects of these changes are currently uncertain as the USPTO must still implement various regulations, and the courts have yet to address any of these provisions in the context of a dispute. Further, we have not assessed the applicability of the act and new regulations on the specific patents discussed herein. As another example, the U.S. Supreme Court issued a decision on March 20, 2012 in Mayo Collaborative Services, DBA Mayo Medical Laboratories, et al. v. Prometheus Laboratories, Inc., holding that several claims drawn to measuring drug metabolite levels from patient samples were not patentable subject matter. The decision appears to impact diagnostics patents that merely apply a law of nature via a series of routine steps, but the full impact of the decision is not yet known. No assurances can be granted that claims of our diagnostic patents could not be found to include subject matter that is not patentable based on the Supreme Court's ruling.

If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.

        In addition to seeking patents for some of our technologies and tests, we also rely on trade secrets, including unpatented know-how, technology and other proprietary information, to maintain our competitive position. We seek to protect these trade secrets, in part, by entering into non-disclosure and confidentiality agreements with parties who have access to them, such as our employees, corporate collaborators, outside scientific collaborators, contract manufacturers, consultants, advisors and other third parties. We also enter into confidentiality and invention or patent assignment agreements with our employees and consultants that obligate them to assign to us any inventions developed in the course of their work for us. Despite these efforts, any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, some courts inside and outside the United States, including in foreign jurisdictions, may be less willing or unwilling to protect trade secrets. If any of the technology or information that we protect as trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent them from using that technology or information to compete with us. If any of our trade secrets were to be disclosed to or independently developed by a competitor, our competitive position would be harmed.

If we infringe or are alleged to infringe intellectual property rights of third parties, our business could be harmed.

        Our research, development and commercialization activities, including our current proprietary tests and our digital immunoassay platform technology, as well as any other diagnostic test resulting from these activities, may infringe or be claimed to infringe patents owned by other parties. There may also be patent applications that are relevant to our technologies or tests and that have been filed but not published. If a patent issues on any of these patent applications, that patent could be asserted against us. These third parties could bring claims against us that would cause us to incur substantial expenses and, if the claims against us are successful, could cause us to pay substantial damages. Further, if a patent infringement suit were brought against us, we could be forced to stop or delay research,

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development, manufacturing or sales of the diagnostic product or product candidate that is the subject of the suit.

        As a result of patent infringement claims, or in order to avoid potential claims, we may choose or be compelled to seek patent licenses from third parties. These licenses may not be available on acceptable terms, or at all. Even if we are able to obtain a license, the license would likely obligate us to pay license fees or royalties or both, and the rights granted to us likely would be nonexclusive, which would mean that our competitors also could obtain licenses to the same patents. Ultimately, we could be prevented from commercializing a product, or be forced to cease some aspect of our business operations, if, as a result of actual or threatened patent infringement claims, we are unable to enter into licenses of the relevant patents on acceptable terms.

        There has been substantial litigation and other proceedings regarding patent and other intellectual property rights in the medical diagnostics industry. In addition to the possibility of litigation relating to infringement claims asserted against us, we may become a party to other patent litigation and other proceedings, including interference proceedings declared by the USPTO and similar proceedings in foreign countries, regarding intellectual property rights with respect to our current or future technologies or tests. The cost to us of any patent litigation or other proceeding, even if resolved in our favor, could be substantial. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their substantially greater financial resources. Patent litigation and other proceedings may also absorb significant management time. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could impair our ability to compete in the marketplace.

We may become involved in lawsuits to protect or enforce our patents or other intellectual property, which could be expensive and time-consuming.

        Competitors may infringe our intellectual property, including our patents. As a result, we may be required to file infringement claims in an effort to stop third party infringement or unauthorized use. This can be expensive, particularly for a company of our size, and time-consuming. In addition, in an infringement proceeding, a court may decide that a patent of ours is not valid or is unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that our patent claims do not cover its technology. An adverse determination in any litigation or defense proceedings could put one or more of our patents at risk of being invalidated or interpreted narrowly and could put our patent applications at risk of not issuing.

        Interference proceedings brought by the USPTO may be necessary to determine the priority of inventions with respect to our patent applications. Litigation or interference proceedings may fail and, even if successful, may result in substantial costs and distraction to our management. We may not be able to prevent misappropriation of our proprietary rights, particularly in countries where the laws may not protect such rights as fully as in the United States.

        Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. In addition, during the course of this type of litigation, there could be public announcements of the results of hearings, motions or other interim proceedings or developments. If investors perceive these results to be negative, the market price for our common stock could be significantly harmed.

We may not be able to protect our intellectual property rights throughout the world.

        Filing, prosecuting and defending patents on all of our technologies and tests throughout the world would be prohibitively expensive. Competitors may use our technologies or tests in jurisdictions where we have not obtained patent protection to develop their own products and, further, may export otherwise infringing products to territories where we have patent protection but where enforcement is

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not as strong as that in the United States. These products may compete with our future products in jurisdictions where we do not have any issued patents and our patent claims or other intellectual property rights may not be effective or sufficient to prevent them from so competing.

        Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents and other intellectual property protection, particularly those relating to biopharmaceuticals, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our proprietary rights generally. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial cost and divert our efforts and attention from other aspects of our business.

Our business is dependent on the license from the Regents of the University of California.

        Our business is dependent on our exclusive license with the Regents of the University of California under U.S. 7,838,250, and its related patent family, which covers methods for determining the cardiovascular health of an individual, determining cardiac damage in an individual and determining cardiac damage progression in an individual using high-sensitivity detection of cTnI. If this license is terminated, the Regents could license this patent family to a competitor, although we would continue to have the right to use this patent family as a co-owner. We are obligated under this license to, among other things, pay certain royalties and to diligently proceed with the development, manufacture and sale of licensed products and services and diligently market licensed products and services in quantities sufficient to meet market demand for the licensed products and services. We are also obligated to submit an application for marketing approval for products covered by the license agreement to the U.S. Food and Drug Administration, or FDA, by November 2013, with up to two one-year extensions available. We are obligated to pay the Regents $10,000 for each one-year extension under the license agreement with regard to a submission of an application for marketing approval to the FDA, and we currently anticipate utilizing at least one of the one-year extensions. This license lasts until the expiration or abandonment of the patent rights licenses; however, the Regents may terminate our license if we fail to perform our obligations under the license agreement and do not cure our failure within 60-days after receipt of a notice of default. Termination of this license could negatively impact our market position.

If our trademarks and trade names are not adequately protected, we may not be able to build name recognition in our markets of interest, and our business may be adversely affected.

        Our registered or unregistered trademarks or trade names may be challenged, infringed, circumvented or declared generic or determined to be infringing on other marks. We may not be able to protect our rights to these trademarks and trade names, which we need to build name recognition by potential partners or customers in our markets of interest. Over the long term, if we are unable to establish name recognition based on our trademarks and trade names, then we may not be able to compete effectively and our business may be adversely affected.

Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.

        The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other provisions during the patent process. There are situations in which noncompliance can result in abandonment or lapse of a patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. In such an event, competitors might be able to enter the market earlier than would otherwise have been the case.

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Risks Related to Government Regulation of Our Tests

If we are unable to comply with the requirements of the Clinical Laboratories Improvement Amendments of 1988 and state laws governing clinical laboratories or if we are required to expend significant additional resources to comply with these requirements, the success of our business could be threatened.

        HHS has classified our proprietary tests as high-complexity tests under the Clinical Laboratories Improvement Amendments of 1988, commonly referred to as CLIA. Under CLIA, personnel requirements for laboratories conducting high-complexity tests are more stringent than those applicable to laboratories performing less complex tests. These personnel requirements require us to employ more experienced or more highly educated personnel and additional categories of employees, which increases our operating costs. If we fail to meet CLIA requirements, HHS or state agencies could require us to cease our proprietary testing or other testing subject to CLIA that we may develop in the future. Even if it were possible for us to bring our laboratory back into compliance, we could incur significant expenses and potentially lose revenues in doing so. Moreover, new interpretations of current regulations or future changes in regulations under CLIA may make it difficult or impossible for us to comply with our CLIA classification, which would significantly harm our business.

        Many states in which our physician and Life Sciences customers are located have laws and regulations governing clinical laboratories that are more stringent than federal law and may apply to us even if we are not located, and do not perform our proprietary test, in that state. We may also be subject to additional licensing requirements as we expand our sales and operations into new geographic areas, which could impair our ability to pursue our growth strategy.

Portions of our proprietary tests are subject to the FDA's exercise of enforcement discretion and any changes to the FDA's policies with respect to this exercise of enforcement discretion could hurt our business.

        Clinical laboratory tests that are developed and validated by a laboratory for its own use are called laboratory-developed tests, or LDTs. The laws and regulations governing the marketing of diagnostic products for use as LDTs are extremely complex and in many instances there are no significant regulatory or judicial interpretations of these laws. For instance, while the FDA maintains that LDTs are subject to the FDA's authority as diagnostic medical devices under the Federal Food, Drug and Cosmetic Act, or FDCA, the FDA has generally exercised enforcement discretion and not enforced applicable regulations with respect to most tests performed by CLIA-certified laboratories.

        All of the measurements that we report as part of our proprietary tests are LDTs. We have not yet applied for, or obtained, FDA clearance for any of these measurements; they are all LDTs and we include them in our report on this basis. We may seek FDA clearance for some LDTs in the future. In the event we were to not receive clearance for these tests, we would plan to continue to offer them as LDTs.

        The regulation of diagnostic tests classified as LDTs may become more stringent in the future. The FDA held a meeting in July 2010 during which it indicated that it intends to reconsider its current policy of enforcement discretion and to begin drafting an oversight framework for LDTs. We cannot predict the extent of the FDA's future regulation and policies with respect to LDTs and there can be no assurance that the FDA will not require us to obtain premarket clearance or approval for some or all portions of our proprietary tests. If the FDA imposes significant changes to the regulation of LDTs, or if Congress were to pass legislation that more actively regulates LDTs and in vitro diagnostic tests, it could restrict our ability to provide our test or potentially delay the launch of future tests.

        While we believe that we are currently in material compliance with applicable laws and regulations relating to LDTs, we cannot assure you that the FDA or other regulatory agencies would agree with our determination, and a determination that we have violated these laws, or a public announcement that we are being investigated for possible violation of these laws, could hurt our business and our reputation. A significant change in any of these laws, or the FDA's interpretation of the scope of its

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enforcement discretion, may also require us to change our business model in order to maintain compliance with these laws.

Our business is subject to other complex and sometimes unpredictable government regulations. If we fail to comply with these regulations, we could incur significant fines and penalties.

        As a provider of diagnostic testing products and services, we are subject to extensive and frequently changing federal, state and local laws and regulations governing various aspects of our business. In particular, the clinical laboratory industry is subject to significant governmental certification and licensing regulations, as well as federal and state laws regarding:

    test ordering and billing practices;

    marketing, sales and pricing practices;

    health information privacy and security, including the Health Insurance Portability and Accountability Act of 1996, or HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, or HITECH, and comparable state laws;

    insurance;

    anti-markup legislation; and

    consumer protection.

        In the future, we are also required to comply with FDA regulation of our manufacturing practices and adverse event reporting activities, and regulation by the FDA of our labeling and promotion activities. In addition, advertising of our tests may become subject to FDA regulation and also regulation by the Federal Trade Commission, or FTC, under the Federal Trade Commission Act, or FTC Act. Violation of any FDA requirement could result in enforcement actions, such as seizures, injunctions, civil penalties, criminal prosecutions and exclusions, and violation of the FTC Act could result in injunctions and other associated remedies, of which could have a material adverse effect on our business. Most states also have similar post-market regulatory and enforcement authorities for devices. Additionally, most foreign countries have authorities comparable to the FDA and processes for obtaining marketing approvals. Obtaining and maintaining these approvals, and complying with all laws and regulations, may subject us to similar risks and delays as those we could experience under FDA and FTC regulation. We incur various costs in complying and overseeing compliance with these laws and regulations.

        We are unable to predict what additional federal or state legislation or regulatory initiatives may be enacted in the future regarding our business or the healthcare industry in general, or what effect such legislation or regulations may have on us. Federal or state governments may impose additional restrictions or adopt interpretations of existing laws that could have a material adverse effect on us. If we fail to comply with any existing or future regulations, restrictions or interpretations, we could incur significant fines and penalties. See "Business—Government Regulation."

Failure to maintain the security of patient-related information or compliance with security requirements could damage our reputation and subject us to additional costs and potential litigation.

        We receive certain personal and financial information about patients from our Advanced CVD Monitoring services and our Life Science customers. In addition, we depend upon the secure transmission of confidential information over public networks. A compromise in our security systems that results in patient personal or financial information being obtained by unauthorized persons or our failure to comply with applicable privacy and security laws could adversely affect our reputation, lead us to incur significant additional costs and subject us to potential litigation.

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The regulatory clearance process is expensive, time consuming and uncertain and may prevent us from obtaining approvals for the commercialization of our second generation system and test menu.

        The development, research, testing, manufacturing, labeling, approval, selling, import, export, marketing and distribution of diagnostic testing products are subject to extensive and evolving regulation by federal, state and local governmental authorities in the United States, principally by the FDA, and foreign regulatory authorities, which regulations differ from country to country. We are not permitted to market our second generation system in the United States until we receive regulatory approval from the FDA. We have not submitted an application for or received marketing approval for our second generation system. Obtaining approval can be a lengthy, expensive and uncertain process.

        Prior to receiving clearance to commercialize our second generation system in the United States or abroad, we must demonstrate with substantial evidence from well controlled clinical trials, and to the satisfaction of the FDA and other regulatory authorities abroad, that such system is safe and effective for its intended uses. Preclinical testing and clinical trials are long, expensive and uncertain processes. Negative or inconclusive results or adverse medical events during a clinical trial could also cause the FDA or us to terminate a clinical trial or require that we repeat it or conduct additional clinical trials. Additionally, data obtained from preclinical studies and clinical trials can be interpreted in different ways and the FDA or other regulatory authorities may interpret the results of our studies and trials less favorably than we do. Even if we believe the preclinical or clinical data for our second generation system are promising, such data may not be sufficient to support clearance by the FDA and other regulatory authorities.

        Regulatory clearance of our second generation system is not guaranteed, and the clearance process is expensive and may take years. The FDA and foreign regulatory entities also have substantial discretion in the clearance process. Despite the time and expense exerted, failure can occur at any stage, and we could encounter problems that cause us to abandon or repeat clinical trials or perform additional preclinical studies and clinical trials. The FDA can delay, limit or deny clearance of our second generation system for many reasons, including, but not limited to, the following:

    the system may not be deemed safe or effective;

    FDA officials may not find the data from preclinical studies and clinical trials sufficient;

    the FDA might not approve our or our third party manufacturer's processes or facilities; or

    the FDA may change its approval policies or adopt new regulations.

        If our second generation system and test menu does not gain regulatory clearance, our growth strategy would be compromised and our business and results of operations could be materially and adversely harmed. See "Business—Government Regulation."

Failure to obtain regulatory approval in international jurisdictions would prevent us from marketing products abroad, including our second generation system and any new diagnostic tests we may develop.

        We may in the future seek to market our second generation system and any new diagnostic assays we may develop outside the United States. In order to market these products in the European Union and many other jurisdictions, we must submit clinical data and comparative effectiveness data concerning our products and obtain separate regulatory approvals and comply with numerous and varying regulatory requirements. The approval procedure varies among countries and can involve additional clinical testing. The time required to obtain approval from foreign regulators may be longer than the time required to obtain FDA approval. The regulatory approval process outside the United States may include all of the risks associated with obtaining FDA approval.

        In addition, in many countries outside the United States, it is required that our tests be approved for reimbursement before they can be approved for sale in that country. In some cases this may include approval of the price we intend to charge for our products, if approved. We may not obtain approvals

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from regulatory authorities outside the United States on a timely basis, or at all. Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by one regulatory authority outside the United States does not ensure approval by regulatory authorities in other countries or jurisdictions or by the FDA, but a failure to obtain, or a delay in obtaining, regulatory approval in one country may negatively affect the regulatory process in other countries. We may not be able to file for regulatory approvals and may not receive necessary approvals to commercialize any tests in any market and therefore may not be able to pursue these revenue opportunities.

Any test for which we obtain regulatory clearance will be subject to extensive ongoing regulatory requirements, and we may be subject to penalties if we fail to comply with regulatory requirements or if we experience unanticipated problems with our products.

        Any test or medical device for which we obtain regulatory clearance, including our second generation system, along with the manufacturing processes, labeling, advertising and promotional activities for such test or device, will be subject to continual requirements of, and review by, the FDA and comparable regulatory authorities. These requirements include submissions of safety and other post-marketing information and reports, registration and listing requirements, requirements relating to quality control, quality assurance and corresponding maintenance of records and documents, requirements relating to product labeling, advertising and promotion and recordkeeping. Even if regulatory clearance of a test or device is granted, the clearance may be subject to limitations on the indicated uses for which the product may be marketed or to other conditions of approval. In addition, approval may contain requirements for costly post-marketing testing and surveillance to monitor the safety or efficacy of the test or device. After clearance, discovery of previously unknown problems with our tests, manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may result in actions such as:

    restrictions on manufacturing processes;

    restrictions on marketing of a test;

    restrictions on distribution;

    warning letters;

    withdrawal of the test from the market;

    refusal to approve pending applications or supplements to approved applications that we submit;

    recall of tests;

    fines, restitution or disgorgement of profits or revenue;

    suspension or withdrawal of regulatory clearances;

    exclusion from participation in U.S. federal or state healthcare programs, such as Medicare and Medicaid;

    refusal to permit the import or export of our products;

    product seizure;

    injunctions; or

    imposition of civil or criminal penalties.

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Risks Related to this Offering and Our Common Stock

An active trading market for our common stock may not develop.

        Prior to this offering, there has been no public market for our common stock. The initial public offering price for our common stock will be determined through negotiations with the underwriters and may bear no relationship to the price at which the common stock will trade upon completion of this offering. Although we intend to apply to have our common stock listed on the New York Stock Exchange, an active trading market for our shares may never develop or be sustained following this offering. If an active market for our common stock does not develop, it may be difficult for you to sell the shares you purchase in this offering without depressing the market price for the common stock or to sell your shares at all.

The trading price of our common stock is likely to be volatile, and purchasers of our common stock could incur substantial losses.

        Our stock price is likely to be volatile. The stock market in general and the market for diagnostic companies in particular have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility, investors may not be able to sell their common stock at or above the initial public offering price. The market price for our common stock may be influenced by many factors, including:

    our quarterly and annual results of operations;

    regulatory or legal developments in the United States and foreign countries;

    variations in our financial results or those of companies that are perceived to be similar to us;

    changes in reimbursement laws or policies, or the structure of healthcare payment systems;

    announcements by us of significant acquisitions, licenses, strategic partnerships, joint ventures or capital commitments;

    market conditions in the diagnostic sector and issuance of securities analysts' reports or recommendations;

    allegations of violations of regulatory, reimbursement or other laws applying to our business;

    sales of substantial amounts of our stock by insiders and large stockholders, or the expectation that such sales might occur;

    failure to remediate our material weakness or if additional material weaknesses or significant deficiences in our internal control over financial reporting are discovered or occur in the future;

    general economic, industry and market conditions;

    additions or departures of key personnel;

    intellectual property, product liability or other litigation against us;

    expiration or termination of our potential relationships with customers and strategic partners; and

    the other factors described in this "Risk Factors" section.

        In addition, in the past, when the market price of a stock has been volatile, holders of that stock have sometimes instituted securities class action litigation against the issuer. If any of our stockholders were to bring such a lawsuit against us, we could incur substantial costs defending the lawsuit and the attention of our management would be diverted from the operation of our business.

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If securities or industry analysts do not publish research or publish unfavorable research about our business, our stock price and trading volume could decline.

        Equity research analysts do not currently provide research coverage of our common stock, and we cannot assure you that any equity research analysts will provide research coverage of our common stock after the completion of this offering. In particular, as a smaller company, it may be difficult for us to attract the interest of equity research analysts. A lack of research coverage may adversely affect the liquidity of and market price of our common stock. To the extent we obtain equity research analyst coverage, we will not have any control of the analysts or the content and opinions included in their reports. The price of our stock could decline if one or more equity research analysts downgrade our stock or issue other unfavorable commentary or research. If one or more equity research analysts ceases coverage of our company or fails to publish reports on us regularly, demand for our stock could decrease, which in turn could cause our stock price or trading volume to decline.

If you purchase shares of our common stock in this offering, you will suffer immediate and substantial dilution of your investment.

        We expect the initial public offering price of our common stock to be substantially higher than the pro forma net tangible book value per share of our common stock after this offering. Based on an assumed initial public offering price of $16.00 per share, which is the midpoint of the price range set forth on the cover page of this prospectus, you will experience immediate dilution of $11.89 per share, representing the difference between our pro forma as adjusted net tangible book value per share after giving effect to this offering and the assumed initial public offering price. Based upon an assumed initial public offering price of $16.00 per share, the midpoint of the range on the cover page of this prospectus, purchasers of common stock in this offering will have contributed approximately 52.1% of the aggregate purchase price paid by all purchasers of our stock but will own only approximately 28.5% of our common stock outstanding after this offering.

        In addition, as of June 30, 2012, we had outstanding stock options to purchase an aggregate of 1,422,916 shares of common stock at a weighted-average exercise price of $0.74 per share and outstanding warrants to purchase an aggregate of 425,735 shares of our common stock, after giving effect to the conversion of preferred stock issuable upon the exercise of the warrants to common stock upon completion of this offering, at a weighted average exercise price of $6.88 per share. To the extent these outstanding options and warrants are exercised, there will be further dilution to investors in this offering.

Future sales of our common stock or securities convertible or exchangeable for our common stock may depress our stock price.

        If our existing stockholders or holders of our options or warrants sell, or indicate an intention to sell, substantial amounts of our common stock in the public market after the lock-up and legal restrictions on resale discussed in this prospectus lapse, the trading price of our common stock could decline. The perception in the market that these sales may occur could also cause the trading price of our common stock to decline. Based on 10,969,370 shares of common stock outstanding as of June 30, 2012, upon the completion of this offering at an assumed initial public offering price of $16.00 per share, the midpoint of the range set forth on the cover page of this prospectus, we will have outstanding a total of 15,344,370 shares of common stock, assuming no exercise of the underwriters' overallotment option. Of these shares, only the shares of common stock sold by us in this offering, plus any shares sold upon exercise of the underwriters' overallotment option will be freely tradable, without restriction, in the public market immediately following this offering. The underwriters may, however, in their sole discretion, permit our officers, directors and other stockholders and the holders of our outstanding options and warrants who are subject to these lock-up agreements to sell shares prior to the expiration of the lock-up agreements.

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        We expect that the lock-up agreements pertaining to this offering will expire 180 days from the date of this prospectus (subject to extension upon the occurrence of specified events). After the lock-up agreements expire, up to 10,969,370 additional shares of common stock will be eligible for sale in the public market, subject to volume limitations under Rule 144 under the Securities Act of 1933, as amended, or the Securities Act, with respect to shares held by directors, executive officers and other affiliates. In addition, shares of common stock that are either subject to outstanding options or reserved for future issuance under our employee benefit plans will become eligible for sale in the public market to the extent permitted by the provisions of various vesting schedules, the lock-up agreements and Rule 144 and Rule 701 under the Securities Act and, in any event, we plan to file a registration statement permitting shares of common stock issued on exercise of options to be freely sold in the public market. If these additional shares of common stock are sold, or if it is perceived that they will be sold, in the public market, the trading price of our common stock could decline.

        Certain holders of shares of our common stock, warrants to purchase our capital stock and the shares of common stock issuable upon exercise of those warrants will be entitled to rights with respect to the registration of their shares under the Securities Act, subject to the lock-up agreements described above. See "Description of Capital Stock—Registration Rights." Registration of these shares under the Securities Act would result in the shares becoming freely tradable without restriction under the Securities Act, except for shares purchased by affiliates. In addition, after the lock-up agreements described above expire, our directors and our executive officers may establish programmed selling plans under Rule 10b5-1 of the Exchange Act, for the purpose of effecting sales of our common stock. Any sales of securities by these stockholders, or the perception that those sales may occur, including the entry into such programmed selling plans, could have a material adverse effect on the trading price of our common stock.

Our quarterly operating results may fluctuate significantly or may fall below the expectations of investors or securities analysts, each of which may cause our stock price to fluctuate or decline.

        We expect our operating results to be subject to quarterly fluctuations. Our net loss and other operating results will be affected by numerous factors, including:

    our ability to successfully market and sell our Advanced CVD Monitoring services;

    changes in expectation as to our future financial performance, including financial estimates or publications or research reports by securities analysts;

    the timing of cash collections from third party payors;

    the extent to which our tests our eligible for reimbursement from third party payors;

    changes in reimbursement or in reimbursement-related laws directly affecting our business;

    the percentage of our revenues derived from sales by BlueWave;

    announcements by our competitors of new or competitive products;

    any intellectual property infringement lawsuit or opposition, interference, or cancellation proceeding in which we may become involved; and

    regulatory developments affecting our tests or those of our competitors.

        If our quarterly operating results fall below the expectations of investors or securities analysts, the price of our common stock could decline substantially. Furthermore, any quarterly fluctuations in our operating results may, in turn, cause the price of our stock to fluctuate substantially. We believe that quarterly comparisons of our financial results are not necessarily meaningful and should not be relied upon as an indication of our future performance.

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Provisions of our charter documents or Delaware law could delay or prevent an acquisition of our company, even if the acquisition would be beneficial to our stockholders, and could make it more difficult for you to change our management.

        Provisions in our amended and restated certificate of incorporation and our amended and restated bylaws that will become effective upon the closing of this offering may discourage, delay or prevent a merger, acquisition or other change in control that stockholders may consider favorable, including transactions in which stockholders might otherwise receive a premium for their shares. In addition, these provisions may frustrate or prevent any attempt by our stockholders to replace or remove our current management by making it more difficult to replace or remove our board of directors. These provisions include:

    a classified board of directors with three-year staggered terms so that not all directors are elected at one time, which may delay the ability of stockholders to change the membership of a majority of our board of directors;

    no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates;

    the exclusive right of our board of directors to elect a director to fill a vacancy created by the expansion of the board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors;

    the ability of our board of directors to alter our bylaws without obtaining stockholder approval;

    a prohibition on stockholder action through written consent;

    a requirement that special meetings of stockholders be called only by the chairman of the board of directors, the chief executive officer, the president or by the board of directors;

    limitation of our stockholders entitled to call special meetings of stockholders;

    an advance notice requirement for stockholder proposals and nominations;

    the authority of our board of directors to issue preferred stock with such terms as our board of directors may determine; and

    a requirement of approval of not less than 662/3% of all outstanding shares of our capital stock entitled to vote to amend any bylaws by stockholder action, or to amend specific provisions of our certificate of incorporation.

        In addition, Delaware law prohibits a publicly held Delaware corporation from engaging in a business combination with an interested stockholder, generally a person who, together with its affiliates, owns or within the last three years has owned 15% of our voting stock, for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner. Accordingly, Delaware law may discourage, delay or prevent a change in control of our company, even if the acquisition would be beneficial to our stockholders.

        These provisions in our charter and other provisions of Delaware law could limit the price that investors are willing to pay in the future for shares of our common stock.

Concentration of ownership of our common stock among our existing executive officers, directors and principal stockholders may prevent new investors from influencing significant corporate decisions.

        Upon completion of this offering, our executive officers, directors and current beneficial owners of 5% or more of our common stock and their respective affiliates will, in aggregate, beneficially own approximately 69.16% of our outstanding common stock (based on our outstanding capital stock as of

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September 30, 2012 and assuming no exercise of the underwriters' over-allotment option). These persons, acting together, would be able to significantly influence all matters requiring stockholder approval, including the election and removal of directors and any merger or other significant corporate transactions. The interests of this group of stockholders may not coincide with the interests of other stockholders. The significant concentration of stock ownership may adversely affect the trading price of our common stock due to investors' perception that conflicts of interest may exist or arise.

The occurrence of certain contingencies may cause us to change the actual amount of proceeds from this offering that we currently expect to allocate to certain uses.

        We currently expect to use the net proceeds of this offering to fund the development of our second generation system and assay menu, expand our sales and marketing activities, repay indebtedness under our existing credit facility and for working capital and general corporate purposes. The amount of proceeds from this offering that we intend to use to fund the development of our second generation system and assay menu, as well as to fund sales and marketing activities, represents our best estimates as of the date of this prospectus. However, there are certain contingencies, each of which is discussed in detail in "Use of Proceeds," the occurrence of which may cause us to change the actual amount of the net proceeds that we allocate to these uses, including working capital. In addition, the following factors may also contribute to a change in the amount of proceeds from this offering that are allocated to these uses: (i) if the amount of revenue we generate from our existing Advanced CVD Monitoring services is lower than we anticipate, we may need to allocate more funds to working capital and less funds to sales and marketing, and we may also slow the spend on the development of the second generation system, or, if our revenue is greater than we anticipate, we may allocate less funds to working capital and more to sales and marketing activities; and (ii) if we are unable to draw funds from our existing credit facilities we may allocate less funds to sales and marketing activities and more funds to working capital. Our failure to apply the net proceeds of this offering effectively could impair our ability to pursue our growth strategy or could require us to raise additional capital. Until the net proceeds are used, they may be placed in investments that do not produce significant investment returns or that may lose value.

Future issuances of equity securities could result in additional dilution to our stockholders and could place restrictions on our operations and assets.

        Pursuant to our equity incentive plans, we are authorized to grant equity-based incentive awards to our employees, directors and consultants. The number of shares of our common stock available for future grant under our 2012 Equity Incentive Award Plan, or the 2012 Plan, which will become effective immediately prior to the completion of this offering, is 258,049 plus the number of shares of our common stock reserved for issuance under our 2002 Stock Option Plan, or the 2002 Plan, as of the effective date of the 2012 Plan. As of June 30, 2012, there were 117,224 shares of our common stock reserved for future issuance under our 2012 Plan. Thereafter, the number of shares of our common stock reserved for issuance under our 2012 Plan will be increased (i) from time to time by the number of shares of our common stock forfeited upon the expiration, cancellation, forfeiture, cash settlement or other termination of awards under our 2002 Plan following the effective date of the 2012 Plan, and (ii) on July 1 of each year at the discretion of our board of directors by up to the lesser of (x) a number of additional shares of our common stock representing 5.0% of our then-outstanding shares of common stock on June 30 of such year and (y) 824,438 shares of our common stock. Future option grants and issuances of common stock under our 2012 Plan may have an adverse effect on the market price of our common stock.

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We do not anticipate paying any cash dividends on our capital stock in the foreseeable future; therefore, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future.

        We have never declared or paid cash dividends on our capital stock. We do not anticipate paying any cash dividends on our capital stock in the foreseeable future. We currently intend to retain all available funds and any future earnings to fund the development and growth of our business. In addition, the terms of our current debt financing arrangements, and any future debt financing arrangements, contain terms prohibiting or limiting the amount of dividends that may be declared or paid on our common stock. As a result, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future.

We are an "emerging growth company," and if we decide to comply only with reduced disclosure requirements applicable to emerging growth companies, our common stock could be less attractive to investors.

        We are an "emerging growth company," as defined in the Jumpstart Our Business Startups Act, or JOBS Act, enacted in April 2012, and, for as long as we continue to be an "emerging growth company," we may choose to take advantage of exemptions from various reporting requirements applicable to other public companies but not to "emerging growth companies," including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We could be an "emerging growth company" for up to five years, although a variety of circumstances could cause us to lose that status earlier. We cannot predict if investors will find our common stock less attractive if we choose to rely on these exemptions. If some investors find our common stock less attractive as a result of any choices to reduce future disclosure, there may be a less active trading market for our common stock and our stock price may be more volatile.

        In addition, Section 107 of the JOBS Act also provides that an "emerging growth company" can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. An "emerging growth company" can therefore delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. However, we are choosing to "opt out" of such extended transition period and, as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. Section 107 of the JOBS Act provides that our decision to opt out of the extended transition period for complying with new or revised accounting standards is irrevocable.

Changes in, or interpretations of, accounting rules and regulations could result in unfavorable accounting charges or require us to change our compensation policies.

        Accounting methods and policies for diagnostic companies, including policies governing revenue recognition, research and development and related expenses and accounting for stock-based compensation, are subject to further review, interpretation and guidance from relevant accounting authorities, including the SEC. Changes to, or interpretations of, accounting methods or policies may require us to reclassify, restate or otherwise change or revise our financial statements, including those contained in this filing.

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Special Note Regarding Forward-Looking Statements

        This prospectus contains forward-looking statements concerning our business, operations and financial performance and condition, as well as our plans, objectives and expectations for our business operations and financial performance and condition. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as "aim," "anticipate," "assume," "believe," "contemplate," "continue," "could," "due," "estimate," "expect," "goal," "intend," "may," "objective," "plan," "predict," "potential," "positioned," "seek," "should," "target," will," "would," and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms or other comparable terminology. These forward-looking statements include, but are not limited to, statements about:

    the size of the market for our Advanced CVD Monitoring services;

    the percentage of the population in the United States that is expected to have some form of CVD;

    our expectation that the revenues we derive from our Advanced CVD Monitoring services will increase and continue to increase as a percentage of our overall revenues;

    our expectations with regard to reimbursement from third party payors;

    the size of the market for chronic disease detection and monitoring;

    our plans to leverage our digital technology platform for application in the detection and monitoring of other chronic diseases;

    our expectations regarding the current competitive marketplace for CVD testing;

    our plans regarding pursuing contractual relationships with commercial third party payors;

    our plans for the development of future immunoassays;

    our expectations, including timing, regarding the development and commercialization of our second generation system;

    the potential impact resulting from any regulation of our Advanced CVD Monitoring services;

    our plans and intentions for seeking regulatory approval of our second generation system;

    our plans regarding seeking future protection for our intellectual property rights;

    our anticipated use of the net proceeds of this offering;

    our plans for executive and director compensation for the future;

    our anticipated cash needs and our estimates regarding our capital requirements and our need for additional financing; and

    anticipated trends and challenges in our business and the markets in which we operate.

        These forward-looking statements are based on management's current expectations, estimates, forecasts, and projections about our business and the industry in which we operate and management's beliefs and assumptions and are not guarantees of future performance or development and involve known and unknown risks, uncertainties, and other factors that are in some cases beyond our control. As a result, any or all of our forward-looking statements in this prospectus may turn out to be inaccurate. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under "Risk Factors" and elsewhere in this prospectus. Potential investors are urged to consider these factors carefully in evaluating the forward-looking statements.

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These forward-looking statements speak only as of the date of this prospectus. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future. You should, however, review the factors and risks we describe in the reports we will file from time to time with the SEC after the date of this prospectus. See "Where You Can Find More Information."

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Market, Industry and Other Data

        This prospectus also contains estimates, projections and other information concerning our industry, our business, and the markets for the chronic disease diagnostics and CVD diagnostics, including data regarding the estimated size of those markets, their projected growth rates, the perceptions and preferences of patients and physicians regarding certain therapies and other prescription, prescriber and patient data, as well as data regarding market research, estimates and forecasts prepared by our management. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances that are assumed in this information. Unless otherwise expressly stated, we obtained this industry, business, market and other data from reports, research surveys, studies and similar data prepared by market research firms and other third parties, industry, medical and general publications, government data and similar sources. In some cases, we do not expressly refer to the sources from which this data is derived. In that regard, when we refer to one or more sources of this type of data in any paragraph, you should assume that other data of this type appearing in the same paragraph is derived from the same sources, unless otherwise expressly stated or the context otherwise requires.

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Use of Proceeds

        We estimate that the net proceeds from the sale of 4,375,000 shares of common stock in this offering will be approximately $62.3 million at an assumed initial public offering price of $16.00 per share, the midpoint of the range set forth on the cover page of this prospectus, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us. If the underwriters exercise their over-allotment option in full, we estimate that net proceeds will be approximately $72.1 million after deducting the underwriting discounts and commissions and estimated offering expenses payable by us. Each $1.00 increase (decrease) in the assumed initial public offering price of $16.00 per share (the midpoint of the price range set forth on the cover page of this prospectus) would increase (decrease) the net proceeds to us from this offering, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us, by approximately $4.1 million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same. We may also increase or decrease the number of shares we are offering. An increase (decrease) of 1,000,000 in the number of shares we are offering would increase (decrease) the net proceeds to us from this offering, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us, by approximately $14.9 million, assuming the assumed initial public offering price stays the same. We do not expect that a change in the offering price or the number of shares by these amounts would have a material effect on our intended uses of the net proceeds from this offering, although it may impact the amount of time prior to which we may need to seek additional capital.

        We currently expect to use the net proceeds of this offering as follows:

    approximately $40.0 million to fund the development of our second generation system and assay menu, including seeking applicable regulatory clearances;

    approximately $10.0 million to fund sales and marketing activities, including the expansion of our sales force to support the launch and commercialization of our second generation platform and assay menu;

    $4.8 million for the repayment of our outstanding loan balance under our Bridge Bank Growth Capital Term Loan (the outstanding principal balance as of the date of this prospectus), which currently carries an interest rate of 4.75% per annum and matures in April 2015; and

    the remainder for working capital and other general corporate purposes, including research and development activities.

        The amount of proceeds from this offering that we intend to use to fund the development of our second generation system and assay menu, as well as to fund sales and marketing activities, represents our best estimates as of the date of this prospectus. However, there are certain contingencies, each of which is discussed below, the occurrence of which may cause us to change the actual amount of the net proceeds that we allocate to the above uses, including working capital. If one or more of the following contingencies occur, we may increase the amount of our expenditures on the development of the second generation system and assay menu and accordingly reduce amounts allocated to sales and marketing activities or working capital: (i) if the successful completion of the design, test and validation of the design, and manufacture of a prototype of the second generation system, is delayed or takes longer than we currently estimate; (ii) if the costs associated with the regulatory approval process are greater than we anticipate, including if we are required to undertake additional clinical studies in order to satisfy applicable regulatory authorities of the clinical utility of our tests; (iii) if we decide to pursue more validation studies than we currently anticipate are necessary for our assay menu; and (iv) if, during the course of the development process of our second generation system, we determine that we need to license or acquire rights to certain technologies, or if the process of securing intellectual property rights for our technology is more costly than we currently anticipate. We may also decide to

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decrease the amount we allocate to sales and marketing activities and increase the allocation of proceeds to working capital if we decide to engage a third party sales force to exclusively market and sell the second generation system because our initial cash outlay will be less than if we decide to recruit, hire and train an internal sales force. Similarly, if we decide to market the second generation system in more territories than we currently expect, we may have to allocate additional funds to sales and marketing and less to working capital. The following factors may also contribute to a change in the amount of proceeds from this offering that are allocated to the above uses: (i) if the amount of revenue we generate from our existing Advanced CVD Monitoring services is lower than we anticipate, we may need to allocate more funds to working capital and less funds to sales and marketing, and we may also slow the spend on the development of the second generation system, or, if our revenue is greater than we anticipate, we may allocate less funds to working capital and more to sales and marketing activities; and (ii) if we are unable to draw funds from our existing credit facilities we may allocate less funds to sales and marketing activities and more funds to working capital. Please see "Management Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Operating and Capital Expenditure Requirements" for more information regarding our expected operating and capital requirements.

        Pending the use of the proceeds from this offering, we intend to invest the net proceeds in short-term, interest-bearing, investment-grade securities, certificates of deposit or government securities.

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Dividend Policy

        We have never declared or paid cash dividends on our capital stock. We intend to retain all available funds and any future earnings, if any, to fund the development and expansion of our business and we do not anticipate paying any cash dividends in the foreseeable future. In addition, unless waived, the terms of our existing credit facilities with Compass Horizon Funding Company LLC/Horizon Credit I LLC, or Horizon, and Bridge Bank, N.A., or Bridge Bank, prohibit us from paying any cash dividends. Any future determination related to dividend policy will be made at the discretion of our board of directors.

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Capitalization

        The following table sets forth our capitalization as of June 30, 2012:

    on an actual basis;

    on a pro forma basis to give effect to:

    the conversion of all outstanding shares of our convertible preferred stock into an aggregate of 10,379,263 shares of common stock immediately prior to the consummation of this offering;

    the conversion of all of our warrants exercisable for convertible preferred stock into warrants exercisable for 425,735 shares of common stock immediately prior to the consummation of this offering and the related the reclassification of convertible preferred stock warrant liability to additional paid-in capital; and

    the filing and effectiveness of our amended and restated certificate of incorporation, which will occur immediately prior to the consummation of this offering; and

    on a pro forma as adjusted basis to give further effect to the issuance and sale by us of 4,375,000 shares of our common stock in this offering at an assumed initial public offering price of $16.00 per share (the midpoint of the range set forth on the cover page of this prospectus), after deducting the underwriting discounts and commissions and estimated offering expenses payable by us.

        You should read this information together with our audited consolidated financial statements and related notes appearing elsewhere in this prospectus and the information set forth under the headings "Selected Financial Data" and "Management's Discussion and Analysis of Financial Condition and Results of Operations."

 
  As of June 30, 2012  
 
  Actual
Restated
  Pro Forma   Pro Forma
As Adjusted
 
 
  (unaudited)
 
 
  (in thousands, except share and
per share data)

 

Convertible preferred stock warrant liability

  $ 4,060   $   $  

Convertible preferred stock, $0.001 par value per share, 60,771,203 shares authorized, 9,153,646 shares issued and outstanding, actual; no shares authorized, no shares issued and outstanding, pro forma and pro forma as adjusted

    77,544          

Stockholders' equity (deficit):

                   

Preferred stock, $0.001 par value per share; no shares authorized, issued and outstanding, actual; 5,000,000 shares authorized, no shares issued and outstanding, pro forma and pro forma as adjusted

             

Common stock, $0.001 par value per share; 93,408,572 shares authorized, 590,107 shares outstanding, actual; 300,000,000 shares authorized, 10,969,370 shares issued and outstanding, pro forma; 300,000,000 shares authorized, 15,344,370 shares issued and outstanding, pro forma as adjusted

    1     11     15  

Additional paid-in capital

    474     82,068     144,364  

Accumulated deficit

    (81,301 )   (81,301 )   (81,301 )
               

Total stockholders' equity (deficit)

    (80,826 )   778     63,078  
               

Total capitalization

  $ 778   $ 778   $ 63,078  
               

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        Each $1.00 increase (decrease) in the assumed initial public offering price of $16.00 per share, the midpoint of the range set forth on the cover page of this prospectus, would increase (decrease) each of pro forma as adjusted additional paid-in capital, stockholders' equity and total capitalization by approximately $4.1 million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same. We may also increase or decrease the number of shares we are offering. An increase (decrease) of 1,000,000 in the number of shares we are offering would increase (decrease) each of pro forma as adjusted additional paid-in capital, stockholders' equity and total capitalization by approximately $14.9 million, assuming the assumed initial public offering price per share, as set forth on the cover page of this prospectus, remains the same. The pro forma as adjusted information is illustrative only, and we will adjust this information based on the actual initial public offering price and other terms of this offering determined at pricing.

        The outstanding share information in the table above excludes the following as of June 30, 2012:

    1,422,916 shares of common stock issuable upon the exercise of outstanding stock options having a weighted-average exercise price of $0.74 per share;

    425,735 shares of common stock issuable upon the exercise of outstanding warrants having a weighted-average exercise price of $6.88 per share;

    117,224 shares of common stock reserved for issuance pursuant to future awards under our 2002 Stock Option Plan, as amended; and

    258,049 shares of common stock reserved for issuance pursuant to future awards under our 2012 Equity Incentive Award Plan.

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Dilution

        If you invest in our common stock, your interest will be diluted to the extent of the difference between the initial public offering price per share of our common stock in this offering and the net tangible book value per share of our common stock after this offering. As of June 30, 2012, we had a historical net tangible book value (deficit) of $(80.8) million, or $(136.99) per share of common stock. Our net tangible book value (deficit) represents total tangible assets less total liabilities and convertible preferred stock, all divided by the number of shares of common stock outstanding on June 30, 2012. Our pro forma net tangible book value (deficit) at June 30, 2012, before giving effect to this offering, was $0.8 million, or $0.07 per share of our common stock. Pro forma net tangible book value, before the issuance and sale of shares in this offering, gives effect to:

    the conversion of all outstanding shares of our convertible preferred stock into an aggregate of 10,379,263 shares of common stock immediately prior to the consummation of this offering;

    the conversion of all of our warrants exercisable for convertible preferred stock into warrants exercisable for 425,735 shares of common stock immediately prior to the consummation of this offering and the related reclassification of the convertible preferred stock warrant liability to additional paid-in capital; and

    the filing and effectiveness of our amended and restated certificate of incorporation, which will occur immediately prior to the consummation of this offering.

        After giving effect to the sale of shares of common stock in this offering at an assumed initial public offering price of $16.00 per share (the midpoint of the price range set forth on the cover page of this prospectus) and after deducting the underwriting discounts and commissions and estimated offering expenses, our pro forma as adjusted net tangible book value at June 30, 2012 would have been approximately $63.1 million, or $4.11 per share. This represents an immediate increase in pro forma as adjusted net tangible book value of $4.04 per share to existing stockholders and an immediate dilution of $11.89 per share to new investors. The following table illustrates this per share dilution:

Assumed initial public offering price per share

        $ 16.00  

Historical net tangible book value (deficit) per share as of June 30, 2012

  $ (136.99 )      

Pro forma increase in net tangible book value per share

    137.06        
             

Pro forma net tangible book value per share as of June 30, 2012

  $ 0.07        

Increase in pro forma net tangible book value per share attributable to new investors

    4.04        
             

Pro forma as adjusted net tangible book value per share after this offering

          4.11  
             

Dilution per share to new investors participating in this offering

        $ 11.89  
             

        A $1.00 increase (decrease) in the assumed initial public offering price of $16.00 per share, the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) our pro forma as adjusted net tangible book value as of June 30, 2012 after this offering by approximately $4.1 million, or approximately $0.27 per share, and would decrease (increase) dilution to investors in this offering by approximately $0.73 per share, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us. We may also increase or decrease the number of shares we are offering. An increase (decrease) of 1,000,000 in the number of shares we are offering would increase (decrease) our pro forma as adjusted net tangible book value as of June 30, 2012 after this offering by approximately $14.9 million, or approximately

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$0.66 per share, and the pro forma dilution per share to investors in this offering would be approximately $11.23 per share, assuming the assumed initial public offering price per share remains the same, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us. The pro forma as adjusted information is illustrative only, and we will adjust this information based on the actual initial public offering price and other terms of this offering determined at pricing.

        If the underwriters fully exercise their over-allotment option, pro forma as adjusted net tangible book value after this offering would increase to approximately $4.55 per share, and there would be an immediate dilution of approximately $11.45 per share to new investors.

        To the extent that outstanding options or warrants with an exercise price per share that is less than the pro forma as adjusted net tangible book value per share, before giving effect to the issuance and sale of shares in this offering, are exercised, new investors will experience further dilution. If all of our outstanding options and warrants described above were exercised, our pro forma net tangible book value as of June 30, 2012, before giving effect to the issuance and sale of shares in this offering, would have been approximately $4.8 million, or approximately $0.37 per share, and our pro forma as adjusted net tangible book value as of June 30, 2012 after this offering would have been approximately $67.1 million, or approximately $3.90 per share, causing dilution to new investors of approximately $12.10 per share.

        In addition, we may choose to raise additional capital due to market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the issuance of these securities could result in further dilution to our stockholders.

        The following table shows, as of June 30, 2012, on a pro forma as adjusted basis, after giving effect to the pro forma adjustments described above, the number of shares of common stock purchased from us, the total consideration paid to us and the average price paid per share by existing stockholders and by new investors purchasing common stock in this offering at an assumed initial public offering price of $16.00 per share, before deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

 
   
   
  Total
Consideration
   
 
 
  Shares Purchased    
 
 
  Average
Price Per
Share
 
 
  Number   Percent   Amount   Percent  

Existing stockholders

    10,969,370     71.5 % $ 64,391,820     47.9 % $ 5.87  

Investors participating in this offering

    4,375,000     28.5     70,000,000     52.1     16.00  
                         

Total

    15,344,370     100.0 % $ 134,391,820     100.0 %      
                         

        The number of shares of common stock to be outstanding after this offering is based on the number of shares outstanding as of June 30, 2012 and excludes the following:

    1,422,916 shares of common stock issuable upon the exercise of outstanding stock options having a weighted-average exercise price of $0.74 per share;

    425,735 shares of common stock issuable upon the exercise of outstanding warrants having a weighted-average exercise price of $6.88 per share;

    117,224 shares of common stock reserved for issuance pursuant to future awards under our 2002 Stock Option Plan, as amended; and

    258,049 shares of common stock reserved for issuance pursuant to future awards under our 2012 Equity Incentive Award Plan.

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Selected Financial Data

        You should read the following selected financial data together with our audited consolidated financial statements, the related notes appearing at the end of this prospectus and the information under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations." The selected financial data included in this section are not intended to replace the consolidated financial statements and the related notes included elsewhere in this prospectus.

        We derived the selected consolidated statement of operations data for the years ended December 31, 2009, 2010 and 2011 and the consolidated balance sheet data as of December 31, 2010 and 2011 from our audited consolidated financial statements appearing elsewhere in this prospectus. The consolidated statement of operations data for the six months ended June 30, 2011 and 2012 and consolidated balance sheet data as of June 30, 2012 have been derived from our unaudited consolidated financial statements appearing elsewhere in this prospectus. The unaudited financial data include, in the opinion of our management, all adjustments, consisting only of normal recurring adjustments, that are necessary for a fair presentation of our financial position and results of operations for these periods. Our historical results are not necessarily indicative of the results that may be expected in the future, and results for the six months ended June 30, 2012 are not necessarily indicative of results to be expected for the full year ending December 31, 2012.

 
  Year Ended December 31,   Six Months Ended
June 30,
 
 
  2009   2010   2011   2011   2012
Restated(1)
 
 
   
   
   
  (unaudited)
 
 
  (in thousands, except share and per share data)
 

Consolidated Statement of Operations Data:

                               

Revenues:

                               

Advanced CVD Monitoring services

  $   $ 1,323   $ 19,114   $ 4,804   $ 18,125  

Life Sciences products

    1,866     1,967     3,469     1,714     1,591  

Life Sciences services

    1,350     1,617     2,185     1,241     831  
                       

    3,216     4,907     24,768     7,759     20,547  
                       

Cost of revenues:

                               

Advanced CVD Monitoring services

        2,882     9,211     3,303     7,002  

Life Sciences products

    384     1,112     1,117     561     634  

Life Sciences services

    1,574     1,428     814     369     529  
                       

    1,958     5,422     11,142     4,233     8,165  
                       

Gross profit (loss)

    1,258     (515 )   13,626     3,526     12,382  

Operating expenses:

                               

Research and development

    4,360     3,745     6,090     2,698     4,622  

Sales and marketing

    3,348     1,855     9,622     3,111     8,609  

General and administrative

    4,588     5,198     7,219     2,924     5,421  
                       

Total operating expenses

    12,296     10,798     22,931     8,733     18,652  
                       

Loss from operations

    (11,038 )   (11,313 )   (9,305 )   (5,207 )   (6,270 )

Other income (expense):

                               

Interest expense

    (23 )   (109 )   (3,174 )   (2,039 )   (453 )

Interest income

    255     114     8     8      

Other income (expense)

    (81 )   19     17         (3,594 )
                       

Total other income (expense), net

    151     24     (3,149 )   (2,031 )   (4,047 )
                       

Net loss

    (10,887 )   (11,289 )   (12,454 )   (7,238 )   (10,317 )

Adjustment to net loss resulting from convertible preferred stock accretion and extinguishment

    (3,436 )   (3,719 )   (1,773 )   (1,864 )   (22 )
                       

Net loss attributable to common stockholders

  $ (14,323 ) $ (15,008 ) $ (14,227 ) $ (9,102 ) $ (10,339 )
                       

Net loss per share attributable to common stockholders, basic and diluted

  $ (62.43 ) $ (57.07 ) $ (35.89 ) $ (32.45 ) $ (18.00 )
                       

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  Year Ended December 31,   Six Months Ended
June 30,
 
 
  2009   2010   2011   2011   2012
Restated(1)
 
 
   
   
   
  (unaudited)
 
 
  (in thousands, except share and per share data)
 

Weighted average shares of common stock used in computing net loss per share attributable to common stockholders, basic and diluted

    229,430     262,996     396,363     280,517     574,475  
                       

Pro forma net loss per share:

                               

Pro forma net loss per share of common stock, basic and diluted (unaudited)(2)

              $ (1.07 )       $ (0.90 )
                             

Weighted-average number of shares used in computing pro forma net loss per share of common stock, basic and diluted(unaudited)(2)

                9,722,543           11,437,922  
                             

(1)
Refer to Note 2 to the notes to our consolidated financial statements for a description of restated amounts.

(2)
The pro forma net loss per share of common stock, basic and diluted, for the year ended December 31, 2011 and the six months ended June 30, 2012 (unaudited) reflects the conversion of all outstanding shares of our convertible preferred stock into shares of common stock immediately prior to the consummation of this offering. The pro forma net loss per share of common stock, basic and diluted, does not give effect to the issuance of shares from the proposed initial public offering nor do they give effect to potential dilutive securities where the impact would be anti-dilutive. See Note 1 to the notes to our audited consolidated financial statements included elsewhere in this prospectus.


 
  As of December 31,   As of June 30,  
 
  2010   2011   2012
Restated
 
 
   
   
  (unaudited)
 
 
   
  (in thousands)
   
 

Consolidated Balance Sheet Data:

                   

Cash and cash equivalents

  $ 4,608   $ 5,842   $ 7,913  

Working capital (deficit)

    3,866     (9,681 )   (1,463 )

Total assets

    11,105     12,482     15,381  

Accumulated deficit

    (58,530 )   (70,984 )   (81,301 )

Total stockholders' deficit

    (58,529 )   (70,752 )   (80,826 )

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Management's Discussion and Analysis of
Financial Condition and Results of Operations

        You should read the following discussion and analysis of financial condition and results of operations together with the section titled "Selected Financial Data" and our consolidated financial statements and related notes included elsewhere in this prospectus. This discussion and other parts of this prospectus contain forward-looking statements that involve risk and uncertainties, such as statements of our plans, objectives, expectations and intentions. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the "Risk Factors" section.

Overview

        We are an innovative diagnostics company committed to improving patient care and enabling the reduction of healthcare costs by providing high-value, advanced tests for the diagnosis and monitoring of chronic diseases. We have initially focused on cardiovascular disease, or CVD, the leading cause of death globally. Our high precision digital immunoassay platform and advanced CVD test menu, which includes our proprietary digital heart function and inflammatory tests, provide clinically important diagnostic information that facilitates personalized disease management by physicians. Our innovative technology platform enables a significant improvement in measurement sensitivity over other commercially available technologies and measures biomarker concentrations at previously undetectable levels, providing physicians with information that can allow them to earlier diagnose, better monitor and more effectively manage chronic disease progression prior to the onset of acute clinical symptoms.

        In July 2010, we launched our Advanced CVD Monitoring services through which we offer our CVD test menu utilizing our CLIA certified laboratory in Alameda, CA. Today, we sell our tests in 28 states and, since the launch of our Advanced CVD Monitoring services through June 30, 2012, we have received over 190,000 patient samples and performed approximately 1,350,000 tests. We have significantly grown our revenues from our Advanced CVD Monitoring services from $1.3 million in 2010 to $19.1 million in 2011, and to $18.1 million for the six months ended June 30, 2012.

        Our Advanced CVD Monitoring services revenues are driven by the volume of patient samples we receive, the number of tests performed per sample, and the reimbursement we receive for each test.

        Patient samples.    For the year ended December 31, 2011, we received 98,513 patient samples as compared to 17,890 patients samples in the year ended December 31, 2010. In the six months ended June 30, 2012, we received 78,180 patient samples compared to 36,552 in the six months ended June 30, 2011. We expect the volume of patient samples tested to increase as we increase the number of physicians ordering our tests in the states in which our sales forces currently operate and as we expand our offering to other states. We currently sell our tests to physicians through a combination of a third party contracted sales force, BlueWave, which was initiated in 16 states in 2010, and a direct sales force which was initiated in two states in late 2010. In 2012, we extended our agreement with BlueWave to include an additional three states and have expanded our direct sales force into an additional eight states, such that today we sell our tests in 28 states (one state is shared between BlueWave and our direct sales force).

        Average tests per sample.    The number of tests ordered per sample varies between samples generated by our third party contracted sales force and those generated by our direct sales force. Both sales forces promote all our proprietary tests, but only our direct sales force promotes our full test menu. For the years ended December 31, 2010, and December 31, 2011, and the six months ended June 30, 2012, the average number of tests per patient sample was approximately 4.2, 7.0 and 7.9, respectively. If we expand our test menu with additional clinically relevant tests, or expand our direct sales presence as compared to our third party contracted sales force, we expect that the average number of tests per sample will increase.

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        Reimbursement.    We obtain reimbursement from Medicare, Medicaid and commercial third party payors for our tests under existing specific and non-specific CPT codes. As of June 30, 2012, major commercial third party payors, such as Aetna, United Healthcare, Cigna, Blue Cross Blue Shield, and Humana, have reimbursed us for our tests as a non-participating provider. We do not currently have contracts in place with any commercial third party payors. The reimbursement we receive for each test performed depends upon the level of reimbursement from Medicare, Medicaid and commercial third party payors. Medicare reimbursement rates are established by the Centers for Medicare and Medicaid Services each year. Changes in Medicare and Medicaid reimbursement rates are dependent on a number of factors, including statutory and regulatory changes, retroactive rate adjustments, administrative rulings, competitive bidding initiatives, and other policy changes, that we cannot predict. Any future reductions in reimbursement rates for our tests would reduce our overall revenues per test.

        Revenues from our Advanced CVD Monitoring services are recorded when cash is collected, unless a contract or arrangement is in place with the payor or we have sufficient history to estimate the reimbursement of the payor, in which case revenue is recognized when the test is billed. As a result of our short commercial history and the absence of contracts in place with third party commercial payors, for the years ended December 31, 2010 and 2011, and six months ended June 30, 2012, approximately 64%, 79% and 79%, respectively, of our Advanced CVD Monitoring services revenues were recognized upon cash collection. We expect to continue to recognize a substantial proportion of our Advanced CVD Monitoring services revenues upon collection of cash for the foreseeable future. If we enter into contracts with commercial third party payors, the contracted test price may be lower than the amount we are currently reimbursed.

        Our Advanced CVD Monitoring services are performed at our CLIA certified laboratory in Alameda, CA. Our laboratory occupies 4,770 of usable square feet and currently processes approximately 25,000 tests per week. In August 2012, we entered into a ten year lease for a new facility in Alameda, CA, which will replace our existing head office and CLIA laboratory facility in early 2013. The new facility will provide 6,941 square feet of usable laboratory space and, with the additional laboratory staffing and equipment, will allow us to expand our capacity to 62,500 tests per week.

        In order to enable us to expand our Advanced CVD Monitoring tests to new markets in both the US and internationally, we intend to develop and commercialize a second generation high sensitivity immunoassay platform, or second generation system, for the global in vitro diagnostic market. Our second generation system is currently in the design and development stage and we expect to commence prototype development in the first half of 2013.

        We also sell our immunoassay products and services to leading pharmaceutical companies, academic institutions and CROs, which we refer to as our Life Sciences customers, throughout the US and Europe. These customers primarily utilize our technology and immunoassays for studying therapeutic efficacy, pharmacodynamics, pharmacokinetics and safety. In addition, academic institutions and pharmaceutical companies are incorporating our digital technology into their early stage biomarker discovery efforts to validate biomarker candidates for disease management and therapeutic development. Life Sciences revenues were $5.7 million in the year ended December 31, 2011, and $2.4 million for the six months ended June 30, 2012. Revenues from our Life Sciences products are derived from sales of our digital technology platform instrument and reagents. Revenues from our Life Sciences services are derived from the development of customer-specific immunoassays, sample testing and research services. Revenues for Life Sciences products and services can fluctuate from quarter to quarter due to the project dependent nature of the services component and the timing of instrument installations.

        As of June 30, 2012, we had cash and cash equivalents of $7.9 million. To date, we have financed our operations principally through private placements of our convertible preferred stock and convertible debt, borrowings from credit facilities and revenues from our commercial operations.

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Through June 30, 2012, we have raised approximately $64.3 million gross proceeds through private placements of our convertible preferred stock and convertible debt. We also have access to additional funds through our revolving credit line with Bridge Bank.

        We have incurred significant losses since our inception. We have incurred net losses of approximately $10.9 million, $11.3 million and $12.5 million for the years ended December 31, 2009, 2010 and 2011, respectively, and $7.2 million and $10.3 million for the six months ended June 30, 2011 and 2012, respectively. As of June 30, 2012, our accumulated deficit was $81.3 million. We expect to continue to incur net losses as we continue to expand our direct sales force and increase our marketing efforts to drive adoption of our proprietary tests, develop and commercially launch our second generation system, and develop additional immunoassays. We anticipate that a substantial portion of our capital resources and efforts will be focused on research and development of our second generation system and scale-up of our commercial organization. We will need substantial additional funding to support our operating activities. Adequate funding may not be available to us on acceptable terms, or at all. Our failure to obtain sufficient funds on acceptable terms when needed could have a material adverse effect on our business, results of operations, and financial condition.

Financial Operations Overview

    Revenues

        We operate in one operating segment and our revenues are derived from sales of our Advanced CVD Monitoring services and sales of our immunoassay products and services to our Life Sciences customers. Our Advanced CVD Monitoring services were launched in July 2010 and, for the years ended December 31, 2010 and 2011, represented approximately 27% and 77%, respectively, of our revenues, and 88% of our revenues for the six months ended June 30, 2012. We expect that the proportion of our revenues derived from our Advanced CVD Monitoring services will continue to increase as a percentage of our overall revenues.

        The following table presents our revenues for the periods indicated:

 
  Year Ended December 31,   Six Months
Ended June 30,
 
 
  2009   2010   2011   2011   2012  
 
   
   
   
  (unaudited)
 
 
  (in thousands)
 

Advanced CVD Monitoring services

  $   $ 1,323   $ 19,114   $ 4,804   $ 18,125  

Life Sciences products

    1,866     1,967     3,469     1,714     1,591  

Life Sciences services

    1,350     1,617     2,185     1,241     831  
                       

Revenues

  $ 3,216   $ 4,907   $ 24,768   $ 7,759   $ 20,547  
                       

        Our Advanced CVD Monitoring services revenues are driven by the volume of patient samples we receive, the number of tests performed per sample and the reimbursement we receive for each test. We currently sell our tests to physicians and healthcare specialists through a combination of a third party contracted sales force, BlueWave, which was initiated in 16 states in 2010, and a direct sales force which was initiated in two states in late 2010. In 2012, we extended our agreement with BlueWave to include an additional three states and have expanded our direct sales force into an additional eight states, such that today we sell our tests in 28 states (one state is shared between BlueWave and our direct sales force).

        For the year ended December 31, 2011, we received 98,513 patient samples as compared to 17,890 patients samples in the year ended December 31, 2010. In the six months ended June 30, 2012, we received 78,180 patient samples compared to 36,552 in the six months ended June 30, 2011. We expect the volume of patient samples tested to increase as we increase the number of physicians and

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healthcare specialists ordering our tests in the states in which our sales forces currently operate and as we expand our offering to other states.

        The number of tests ordered per sample varies between samples generated by our third party contracted sales force and those generated by our direct sales force. Both sales forces promote all our proprietary tests, but only our direct sales force promotes our full test menu. For the year ended December 31, 2011 and the six months ended June 30, 2012, the average number of tests per patient sample was approximately 7.0 and 7.9, respectively. If we expand our test menu with additional clinically relevant tests or direct sales presence, as compared to our third party contracted sales force, we expect that the average number of tests per sample will increase.

        The reimbursement we receive for each test performed depends upon the level of reimbursement from Medicare, Medicaid and commercial third party payors. Medicare reimbursement rates are established by the Centers for Medicare and Medicaid Services each year. Changes in Medicare and Medicaid reimbursement rates are dependent on a number of factors, including statutory and regulatory changes, retroactive rate adjustments, administrative rulings, competitive bidding initiatives, and other policy changes, that we cannot predict. Any future reductions in reimbursement rates for our tests would reduce our overall revenues per test. We do not currently have contracts in place with commercial third party payors.

        Revenues from our Advanced CVD Monitoring services are recorded when cash is collected, unless a contract or arrangement is in place with the payor or we have sufficient history to estimate the reimbursement of the payor, in which case revenue is recognized when the test is billed. As a result of our short commercial history and as we do not have contracts in place with third party commercial payors, for the years ended December 31, 2010 and 2011, and six months ended June 30, 2012, approximately 64%, 79% and 79%, respectively, of our Advanced CVD Monitoring services revenues were recognized upon cash collection. We expect to continue to recognize a substantial proportion of our Advanced CVD Monitoring services revenues upon collection of cash while we do not have contracts in place with commercial third party payors. If we enter into contracts with commercial third party payors, the contracted test price may be lower than the amount we are currently reimbursed.

        Revenues from our Life Sciences products are derived from sales of our digital technology platform instrument and reagents. Revenues from our Life Sciences services are derived from the development of customer-specific immunoassays, sample testing and research services. These products and services are sold to leading pharmaceutical companies, academic institutions, and CROs throughout the United States and selected European countries. These revenues are recorded when delivery and acceptance of the products or services is completed. Revenues for Life Sciences products and services can fluctuate from quarter to quarter due to the project dependent nature of the services component and the timing of instrument installations.

    Cost of Revenues and Operating Expenses

        We allocate certain overhead expenses, including rent, utilities and depreciation of general office assets to cost of revenues and operating expense categories based on facility usage. As a result, an overhead expense allocation is reflected in cost of revenues and each operating expense category.

    Cost of Revenues

        Cost of Advanced CVD Monitoring service revenues consists of the cost of materials, direct labor, equipment and facility expenses associated with sample processing, processing and handling fees, related royalties and shipping charges to transport samples. Costs associated with performing our Advanced CVD Monitoring services are recorded as they are incurred.

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        Cost of Life Sciences service revenues includes the cost of materials, direct labor, equipment and facility expenses, and related royalties associated with assay development and sample testing. Cost of Life Sciences product revenues includes the externally procured cost of our digital technology, installation and training costs where applicable, and the cost of materials, direct labor, equipment and facility expenses associated with manufacturing of the reagents. Costs related to our Life Sciences products and services are recorded at the time the revenues are recognized or in accordance with other contractual obligations.

        We expect our overall cost of revenues to increase in absolute dollars as we increase the volume of advanced CVD tests performed.

    Research and Development Expenses

        Our research and development expenses include personnel-related expenses, including salary expense and stock-based compensation, as well as fees for contractual and consulting services, laboratory supplies, depreciation of laboratory equipment, travel costs and certain allocated overhead expenses. We expense all research and development as costs are incurred.

        We expect that our overall research and development expenses will continue to increase in absolute dollars as we perform studies related to our Advanced CVD Monitoring services, and as we develop, test and validate our second generation system and related assays, including any costs that may be associated with the regulatory clearance process.

    Sales and Marketing Expenses

        Our sales and marketing expenses include sales commissions paid to our contracted and direct sales forces, which is calculated as a percentage of cash collected, as well as other costs associated our direct sales force, sales management, marketing, clinical health education and customer support functions. These costs consist principally of salaries, bonuses, stock-based compensation expense, employee benefits and travel costs, as well as costs related to marketing and clinical health education activities and certain allocated overhead expenses. We expense all sales and marketing as costs are incurred.

        We expect our sales and marketing costs to increase in absolute dollars as we increase our sales and pay commissions for those sales, expand our direct sales force and increase our sales, marketing and clinical health education expenses.

    General and Administrative Expenses

        Our general and administrative expenses include costs for our executive, accounting and finance, billing, information technology, legal, and human resources functions. These expenses consist principally of salaries and stock-based compensation expense for the personnel included in these functions, and professional services fees, such as consulting, audit, tax and legal fees, general corporate costs, bad debt expense and certain allocated overhead expenses. We expense all general and administrative expenses as costs are incurred.

        We expect that our general and administrative expenses will increase after this offering, primarily due to the costs associated with operating as a public company, including additional legal and accounting expenses related to compliance with Securities and Exchange Commission and exchange listing requirements, directors' and officers' insurance premiums and investor relations expenses.

    Other Income and Expense, Net

        Other income consists of interest income earned on our cash and cash equivalents. During the years ended December 31, 2009, 2010 and 2011 and the six months ended June 30, 2012, interest

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income has not been material. Other expenses consist of interest expense primarily related to our loan balances and the impact from the remeasurement of warrants exercisable for our convertible preferred stock. Other income and expense, net for the year ended December 31, 2011 includes interest expense resulting from a beneficial conversion feature related to convertible promissory notes we issued in May and June 2011 and the related interest expense arising from the amortization of debt discount.

Results of Operations

Comparison of Six Months Ended June 30, 2011 and 2012 (unaudited)

 
  Six Months
Ended June 30,
  Change  
 
  2011   2012
Restated
  Amount   Percentage  
 
  (unaudited, in thousands, except for percentages)
 

Revenues:

                         

Advanced CVD Monitoring services

  $ 4,804   $ 18,125   $ 13,321     277 %

Life Sciences products

    1,714     1,591     (123 )   (7 )%

Life Sciences services

    1,241     831     (410 )   (33 )%
                     

    7,759     20,547     12,788     165 %
                     

Cost of revenues:

                         

Advanced CVD Monitoring services

    3,303     7,002     3,699     112 %

Life Sciences products

    561     634     73     13 %

Life Sciences services

    369     529     160     43 %
                     

    4,233     8,165     3,932     93 %
                     

Gross profit

    3,526     12,382     8,856     251 %

Operating expenses:

                         

Research and development

    2,698     4,622     1,924     71 %

Sales and marketing

    3,111     8,609     5,498     177 %

General and administrative

    2,924     5,421     2,497     85 %
                     

Total operating expenses

    8,733     18,652     9,919     114 %
                     

Loss from operations

    (5,207 )   (6,270 )   (1,063 )   20 %

Total other income (expense), net

    (2,031 )   (4,047 )   (2,016 )   99 %
                     

Net loss

  $ (7,238 ) $ (10,317 ) $ (3,079 )   43 %
                     

        Revenues.    For the six months ended June 30, 2012, revenues were $20.5 million as compared to $7.8 million for the six months ended June 30, 2011.

        This increase was driven primarily by revenues from our Advanced CVD Monitoring services, which increased from $4.8 million to $18.1 million period over period. For the six months ended June 30, 2012, we received 78,180 patient samples compared to 36,552 in the corresponding period in 2011. This growth reflects the increase in the number of our sales representatives, through both our contracted and direct sales forces, greater geographic coverage of our sales forces, and increased market acceptance of our CVD tests. The average number of tests performed on each patient sample increased from 6.1 to 7.9 period over period due to an increase in the average number of tests per patient sample generated by our BlueWave sales force and an increase from 5% to 10% in the proportion of patient samples generated by our direct sales force.

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        Revenues from our Life Sciences products remained stable at $1.7 million and $1.6 million for the six months ended June 30, 2011 and 2012, respectively. Revenues from our Life Sciences services decreased from $1.2 million in the six months ended June 30, 2011, to $0.8 million in the corresponding period in 2012 primarily due to lower sample testing volumes.

        Cost of Revenues and Gross Profit.    For the six months ended June 30, 2012, cost of revenues was $8.2 million as compared to $4.2 million for the six months ended June 30, 2011. The increase resulted primarily from an increase of $3.7 million Advanced CVD Monitoring services costs due to the number of patient samples received in the six months ended June 30, 2012, of 78,180 compared to 36,552 in the corresponding period in 2011.

        Gross profit increased by $8.9 million period over period. Advanced CVD Monitoring services gross profit increased $9.6 million due to increased sales in 2012 and the automation of certain laboratory operations. Life Sciences services gross profit reduced by $0.6 million due to lower sample testing volumes and subsequent lower utilization of resources.

        Research and Development Expenses.    For the six months ended June 30, 2012, research and development expenses increased to $4.6 million from $2.7 million for the six months ended June 30, 2011, as a result of increased expense related to the development of the second generation system.

        Sales and Marketing Expenses.    For the six months ended June 30, 2012, sales and marketing expenses increased to $8.6 million from $3.1 million for the six months ended June 30, 2011. The primary reason for this increase was an additional $3.9 million in salaries, benefits, travel costs and sales commissions paid to our sales forces as a result of the growth in revenues from our Advanced CVD Monitoring services and the expansion of our direct sales organization. In addition, marketing expenses increased by $0.3 million and consulting expense increased by $0.4 million.

        General and Administrative Expenses.    For the six months ended June 30, 2012, general and administrative expenses increased to $5.4 million from $2.9 million for the six months ended June 30, 2011. This increase was primarily attributable to a $1.1 million increase in salaries and benefits due to an increase in the number of employees across general and administration functions, and additional expenditures of approximately $0.9 million for outside services, consisting of consulting, legal and patent services, recruiting, and information technology.

        Other Income and Expense, Net.    Other expense, net was $4.0 million and $2.0 million for the six months ended June 30, 2012 and 2011, respectively. The increase of $2.0 million is primarily due to a $3.6 million expense in the six months ended June 30, 2012 related to the increased fair value and related liability for Series C, D, E and F warrants arising from the remeasurement of the warrants as of June 30, 2012. This is partially offset by interest expense of $1.6 million resulting from a beneficial conversion feature for the convertible promissory notes we issued in May and June 2011 that was not incurred in the six months ended June 30, 2012.

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    Comparison of Years Ended December 31, 2010 and 2011

 
  Year Ended
December 31,
  Change  
 
  2010   2011   Amount   Percentage  
 
  (in thousands, except for percentages)
 

Revenues:

                         

Advanced CVD Monitoring services

  $ 1,323   $ 19,114   $ 17,791     1,345 %

Life Sciences products

    1,967     3,469     1,502     76 %

Life Sciences services

    1,617     2,185     568     35 %
                     

    4,907     24,768     19,861     405 %
                     

Cost of revenues:

                         

Advanced CVD Monitoring services

    2,882     9,211     6,329     220 %

Life Sciences products

    1,112     1,117     5     0.4 %

Life Sciences services

    1,428     814     (614 )   (43 )%
                     

    5,422     11,142     5,720     105 %
                     

Gross profit (loss)

    (515 )   13,626     14,141       *

Operating expenses:

                         

Research and development

    3,745     6,090     2,345     63 %

Sales and marketing

    1,855     9,622     7,767     419 %

General and administrative

    5,198     7,219     2,021     39 %
                     

Total operating expenses

    10,798     22,931     12,133     112 %
                     

Loss from operations

    (11,313 )   (9,305 )   2,008     (18 )%

Total other income (expense), net

    24     (3,149 )   (3,173 )     *
                     

Net loss

  $ (11,289 ) $ (12,454 ) $ (1,165 )   10 %
                     

*
Percentage not meaningful

        Revenues.    For the year ended December 31, 2011, revenues were $24.8 million as compared to $4.9 million for the year ended December 31, 2010.

        This increase was driven primarily by an increase in revenues from our Advanced CVD Monitoring services, which increased from $1.3 million to $19.1 million year over year, as well as an increase in revenues derived from our Life Sciences customers, which increased from $3.6 million to $5.7 million year over year. For the year ended December 31, 2011, we received 98,513 patient samples compared to 17,890 in the same period in 2010. This growth reflects the impact of a full year of Advanced CVD Monitoring commercial operations in 2011, as compared to six months in 2010, and the impact of an increase in the size of our sales forces, greater geographic coverage of our sales forces, and increased market acceptance of our advanced CVD tests. The average number of tests performed on each patient sample increased from 4.2 to 7.0 period over period due to an increase in the number of tests per patient sample generated by our BlueWave sales force and an increase in the proportion of patient samples generated by our direct sales force from 3% to 6%.

        For the year ended December 31, 2011, revenues derived from our Life Sciences customers increased to $5.7 million from $3.6 million in 2010. This was primarily due to increased product sales of $0.7 million and $0.6 million related to instruments and reagents, respectively.

        Cost of Revenues and Gross Profit.    For the year ended December 31, 2011, cost of revenues was $11.1 million as compared to $5.4 million for the year ended December 31, 2010. The increase resulted primarily from an increase of $6.3 million Advanced CVD Monitoring services costs due to the number

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of patient samples received in the year ended December 31, 2011, of 98,513 compared to 17,890 in the corresponding period in 2010.

        Gross profit increased to $13.6 million from a gross loss of $0.5 million year over year. Advanced CVD Monitoring services gross profit increased by $11.4 million due to increased sales volume in 2011 and upfront costs of set-up and operations in 2010 which were not incurred in 2011. Life Sciences products gross profit increased by $1.5 million due to increased sales of $1.5 million and a greater proportion of instruments sales in 2011 compared to 2010, which generate a higher gross profit than reagent sales. Life Sciences services gross profit increased by $1.2 million primarily due to increased sales of $0.6 million in 2011 and $0.6 million lower costs in 2011 due to a full year allocation of fixed laboratory costs to Advanced CVD Monitoring services in 2011 compared to six months allocation in 2010.

        Research and Development Expenses.    For the year ended December 31, 2011, research and development expenses increased to $6.1 million from $3.7 million for the year ended December 31, 2010. The increase was primarily the result of the number of personnel and outside services expenses related to the development of the second generation system, which commenced in 2011.

        Sales and Marketing Expenses.    For the year ended December 31, 2011, sales and marketing expenses increased to $9.6 million from $1.9 million for the year ended December 31, 2010. The primary reason for the increase was an additional $6.9 million in salaries, benefits, travel expenses and sales commissions paid to our sales forces as a result of the growth in revenues from our Advanced CVD Monitoring services, the expansion of our sales and marketing organization and the launch of our Advanced CVD Monitoring services direct sales force. Additionally, marketing expenses increased by $0.2 million and consulting expenses increased by $0.2 million.

        General and Administrative Expenses.    For the year ended December 31, 2011, general and administrative expenses increased to $7.2 million from $5.2 million for the year ended December 31, 2010. The increase was primarily attributable to a $1.6 million increase in salaries and benefits due to an increase of employees across general and administration functions. Additional increases in spending of approximately $0.4 million were due to higher legal, information technology and bad debt expenses.

        Other Income and Expense, Net.    For the year ended December 31, 2011, other income and expense changed to a net other expense of $3.1 million from net other income of $24,000 for the year ended December 31, 2010. Other expense, net for the year ended December 31, 2011 includes interest expense of $1.6 million resulting from a beneficial conversion feature related to the convertible promissory notes we issued in May and June 2011 of $1.6 million, the related interest expense arising from the amortization of debt discount of $0.3 million, $0.6 million relating to interest expense arising from the convertible promissory notes, and $0.7 million of interest expense related to outstanding notes payable with Horizon and Bridge Bank. Interest expense for the year ended December 31, 2010 was $0.1 million, which was related to outstanding notes payable.

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    Comparison of Years Ended December 31, 2009 and 2010

 
  Year Ended
December 31,
  Change  
 
  2009   2010   Amount   Percentage  
 
  (in thousands, except for percentages)
 

Revenues:

                         

Advanced CVD Monitoring services

  $   $ 1,323   $ 1,323     *  

Life Sciences products

    1,866     1,967     101     5 %

Life Sciences services

    1,350     1,617     267     20 %
                     

    3,216     4,907     1,691     53 %
                     

Cost of revenues:

                         

Advanced CVD Monitoring services

        2,882     2,882     *  

Life Sciences products

    384     1,112     728     190 %

Life Sciences services

    1,574     1,428     (146 )   (9 )%
                     

    1,958     5,422     3,464     177 %
                     

Gross profit (loss)

    1,258     (515 )   (1,773 )   (141 )%

Operating expenses:

                         

Research and development

    4,360     3,745     (615 )   (14 )%

Sales and marketing

    3,348     1,855     (1,493 )   (45 )%

General and administrative

    4,588     5,198     610     13 %
                     

Total operating expenses

    12,296     10,798     (1,498 )   (12 )%
                     

Loss from operations

    (11,038 )   (11,313 )   (275 )   2 %

Total other income (expense), net

    151     24     (127 )   (84 )%
                     

Net loss

  $ (10,887 ) $ (11,289 ) $ (402 )   4 %
                     

*
Percentage not meaningful

        Revenues.    For the year ended December 31, 2010, revenues were $4.9 million as compared to $3.2 million for the year ended December 31, 2009.

        The increase in revenues was primarily due to the launch of our Advanced CVD Monitoring services in July 2010, which generated revenues of $1.3 million for the year ended December 31, 2010. For the year ended December 31, 2010, we received 17,890 patient samples. The average number of tests performed on each patient sample was 4.2. There were no revenues from Advanced CVD Monitoring services for the year ended December 31, 2009.

        For the year ended December 31, 2010, revenue derived from our Life Sciences customers increased to $3.6 million from $3.2 million in 2009. This was primarily due to increased assay development sales.

        Cost of Revenues and Gross Profit.    For the year ended December 31, 2010, cost of revenues was $5.4 million as compared to $2.0 million for the year ended December 31, 2009. The increase resulted primarily from the launch of our Advanced CVD Monitoring services in July 2010. Costs of revenues for our Advanced CV Monitoring services for the year ended December 31, 2010 were $2.9 million compared to no costs for the year ended December 31, 2009.

        Gross profit decreased from $1.3 million for the year ended December 31, 2009, to a gross loss of $0.5 million for the year ended December 31, 2010. This was primarily due to a loss of $1.6 million in 2010 from the upfront set-up costs and initial operating costs of our Advanced CVD Monitoring services which were launched in July 2010.

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        Research and Development Expenses.    For the year ended December 31, 2010, research and development expenses decreased to $3.7 million from $4.4 million for the year ended December 31, 2009. The decrease resulted primarily from lower spending on outside services costs of $1.1 million. This was partially offset by an increase of $0.7 million in salaries and benefits due to increased headcount within our research and development department.

        Sales and Marketing Expenses.    For the year ended December 31, 2010, sales and marketing expenses decreased to $1.9 million from $3.3 million for the year ended December 31, 2009. The decrease resulted primarily from lower spending related to the pre-launch of our Advanced CVD Monitoring services of $1.8 million, which was $0.9 million for the year ended December 31, 2010 compared to $2.7 million for the year ended December 31, 2009. The decrease was partially offset by a $0.8 million increase in salaries and benefits due to increased headcount within our sales and marketing department and sales commissions paid to our sales forces.

        General and Administrative Expenses.    For the year ended December 31, 2010, general and administrative expenses increased to $5.2 million from $4.6 million for the year ended December 31, 2009. The increase was primarily due to an increase in salaries and benefits due to increased headcount within general and administrative functions.

        Other Income and Expense, Net.    For the year ended December 31, 2010, other income, net decreased from other income, net of $0.2 million for the year ended December 31, 2009 to other income, net of $24,000 for the year ended December 31, 2010, due to lower interest income received on cash and cash equivalents, net of interest expense of $0.1 million recognized on a $5.0 million loan from Horizon entered into in November 2010.

Quarterly Results of Operations

        The following table sets forth our Advanced CVD Monitoring patient samples and average tests per sample.

 
  Three Months Ended  
 
  March 31,
2011
  June 30,
2011
  September 30,
2011
  December 31,
2011
  March 31,
2012
  June 30,
2012
 
 
  (unaudited)
 

Advanced CVD Monitoring Services Data:

                                     

Patient samples received

    15,465     21,087     30,073     31,888     36,822     41,358  

Average tests per sample

    5.0     6.9     7.5     7.6     7.8     7.9  

        The following table sets forth our unaudited condensed consolidated statements of operations data for each of the six quarters ended June 30, 2012. The data have been prepared on the same basis as the audited consolidated financial statements and related notes included in this prospectus and you should read the following tables together with such financial statements. The quarterly results of operations include all necessary adjustments consisting only of normal recurring adjustments that we

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consider necessary for a fair presentation of this data. The results of historical periods are not necessarily indicative of future results.

 
  Three Months Ended  
 
  March 31,
2011
  June 30,
2011
  September 30,
2011
  December 31,
2011
  March 31,
2012
  June 30,
2012
 
 
  (unaudited)
 

Consolidated Statement of Operations Data:

                                     

Revenues:

                                     

Advanced CVD Monitoring services

  $ 1,577   $ 3,227   $ 6,300   $ 8,010   $ 8,267   $ 9,858  

Life Sciences products

    398     1,316     992     763     738     853  

Life Sciences services

    555     686     421     523     281     550  
                           

    2,530     5,229     7,713     9,296     9,286     11,261  
                           

Cost of revenues:

                                     

Advanced CVD Monitoring services

    1,415     1,888     2,816     3,092     3,168     3,834  

Life Sciences products

    246     315     284     272     375     259  

Life Sciences services

    44     325     212     233     205     324  
                           

    1,705     2,528     3,312     3,597     3,748     4,417  
                           

Gross profit

    825     2,701     4,401     5,699     5,538     6,844  

Total operating expenses

    3,668     5,065     6,683     7,515     8,596     10,056  
                           

Loss from operations

    (2,843 )   (2,364 )   (2,282 )   (1,816 )   (3,058 )   (3,212 )

Total other expense, net

    (168 )   (1,863 )   (545 )   (573 )   (268 )   (3,779 )
                           

Net loss

  $ (3,011 ) $ (4,227 ) $ (2,827 ) $ (2,389 ) $ (3,326 ) $ (6,991 )
                           

Liquidity and Capital Resources

    Sources of Liquidity

        Since our inception, we have incurred net losses and negative cash flows from operations. We incurred net losses of $12.5 million and $10.3 million, and used $6.0 million and $6.1 million of cash flows for our operating activities for the year ended December 31, 2011 and the six months ended June 30, 2012, respectively. As of June 30, 2012, we had an accumulated deficit of $81.3 million.

        As of June 30, 2012, we had cash and cash equivalents of $7.9 million. To date, we have financed our operations principally through private placements of our convertible preferred stock and convertible debt, borrowings from credit facilities and revenues from our commercial operations. Through June 30, 2012, we have raised approximately $64.3 million gross proceeds through private placements of our convertible preferred stock and convertible debt. We also have access to additional funds through our revolving credit line with Bridge Bank.

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    Cash and Cash Equivalents

        The following table summarizes our cash and cash equivalents and restricted cash as of each of the periods indicated and net changes in our cash and cash equivalents for each the periods indicated:

 
  Year Ended December 31,   Six Months
Ended June 30,
 
 
  2009   2010   2011   2011   2012  
 
   
   
   
  (unaudited)
 
 
   
   
  (in thousands)
   
   
 

Cash and cash equivalents

  $ 4,375   $ 4,608   $ 5,842   $ 9,029   $ 7,913  

Restricted cash

    211     211     101     101     47  

Consolidated statements of cash flows data:

                               

Operating activities

    (11,304 )   (10,187 )   (5,979 )   (4,137 )   (6,127 )

Investing activities

    (2,124 )   5,298     (1,522 )   (599 )   (504 )

Financing activities

    (1,548 )   5,122     8,735     9,157     8,702  
                       

Net increase (decrease) in cash and cash equivalents

  $ (14,976 ) $ 233   $ 1,234   $ 4,421   $ 2,071  
                       

        At June 30, 2012, our cash and cash equivalents were held for working capital purposes. We do not enter into investments for trading or speculative purposes. Our policy is to invest any cash in excess of our immediate requirements in investments designed to preserve the principal balance and provide liquidity. Accordingly, our cash and cash equivalents are invested primarily in money market funds that are currently providing only a minimal return. At June 30, 2012, we had restricted cash of $47,000, which consists of certificates of deposit.

    Cash Flows for the Six Months Ended June 30, 2011 and 2012

    Operating Activities

        Net cash used in operating activities was $6.1 million during the six months ended June 30, 2012, which included a net loss of $10.3 million and net non-cash items of $4.7 million which consisted primarily of depreciation of equipment of $0.7 million and $3.6 million arising from the revaluation of warrants exercisable for convertible preferred stock. We also had a net cash outflow from changes in operating assets and liabilities of $0.5 million.

        Net cash used in operating activities was $4.1 million during the six months ended June 30, 2011, which included a net loss of $7.2 million and net non-cash items of $2.5 million which consisted of interest expense of $1.5 million resulting from a beneficial conversion feature related to the convertible promissory notes we issued in May and June 2011, $0.4 million amortization of debt discount and $0.5 million depreciation of equipment. We also had a net cash inflow from changes in operating assets and liabilities of $0.5 million.

    Investing Activities

        Net cash used in investing activities was $0.5 million and $0.6 million during the six months ended June 30, 2012 and 2011, respectively, which consisted of purchases of property and equipment.

    Financing Activities

        Net cash provided by financing activities was $8.7 million during the six months ended June 30, 2012. This consisted primarily of $5.1 million in net cash proceeds from the issuance of Series F preferred stock, $5.0 million in proceeds from our Bridge Bank loan and principal loan repayments to Bridge Bank and Horizon of $0.5 million and $0.9 million, respectively.

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        Net cash provided by financing activities was $9.2 million during the six months ended June 30, 2011. This consisted of net proceeds of $9.3 million from the issuance of convertible promissory notes to our current investors less principal loan repayments to Bridge Bank of $0.3 million.

    Cash Flows for the Years Ended December 31, 2009, 2010 and 2011

    Operating Activities

        Net cash used in operating activities was $6.0 million during the year ended December 31, 2011, which included a net loss of $12.5 million and net non-cash items of $3.4 million, which consisted primarily of depreciation of equipment of $1.1 million, and $1.9 million relating to interest expense from the beneficial conversion feature and amortization of debt discount associated with the Company's convertible promissory notes entered into in May and June 2011. We also had a net cash inflow from changes in operating assets and liabilities of $3.1 million during the year. The significant items in the changes in operating assets and liabilities included an increase of $0.6 million in accounts payable, and an increase of $2.7 million in accrued expenses. The increase in accounts payable was due primarily to increased consumables and freight charges for our Advanced CVD Monitoring services. The increase in accrued expenses was due to higher bonus accruals to employees, sales-based commissions payable to our contracted and direct sales forces, and accrued loan interest.

        Net cash used in operating activities was $10.2 million during the year ended December 31, 2010, which included a net loss of $11.3 million and net non-cash items of $0.8 million which consisted primarily of depreciation of equipment. We also had a net cash inflow from changes in operating assets and liabilities of $0.3 million during the year. The significant items in the changes in operating assets and liabilities included an increase of $1.3 million in accounts payable and a decrease of $0.1 million in accrued liabilities, partially offset by an increase of $0.4 million in prepaid expenses and other assets and an increase of $0.5 million in inventories. The increase in accounts payable, accrued liabilities and inventory are all related our Advanced CVD Monitoring services which was launched in July 2010. The prepaid expenses consist primarily of upfront commissions paid to our contracted sales force at the launch of our Advanced CVD Monitoring services.

        Net cash used in operating activities was $11.3 million during the year ended December 31, 2009, which included a net loss of $10.9 million and net non-cash items of $0.5 million which consisted primarily of depreciation of equipment. We also had a net cash outflow from changes in operating assets and liabilities of $0.9 million during the year. The significant item in the changes in operating assets and liabilities was an increase of $0.6 million in accounts receivable due to increased sales to our Life Sciences customers in 2009.

    Investing Activities

        Net cash used in investing activities was $1.5 million during the year ended December 31, 2011 relating to purchases of equipment.

        Net cash provided by investing activities was $5.3 million during the year ended December 31, 2010. This consisted of purchases of equipment relating to capacity expansion in our Alameda, CA laboratory totaling $2.2 million and net proceeds of $7.5 million from the sale and purchase of short-term investments, which were subsequently reinvested in short-term investments.

        Net cash used in investing activities was $2.1 million during the year ended December 31, 2009. This consisted of purchases of equipment totaling $0.9 million and net cash of $1.2 million used in the sale and purchase of short-term investments.

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    Financing Activities

        Net cash provided by financing activities was $8.7 million during the year ended December 31, 2011. This consisted of proceeds from completion of a $9.7 million bridge loan from certain current investors and loan repayments of $0.5 million to Bridge Bank and $0.5 million to Horizon.

        Net cash proceeds from financing activities was $5.1 million during the year ended December 31, 2010, consisting primarily of loan repayments of $0.5 million to Bridge Bank and net proceeds from a $5.5 million loan from Horizon.

        Net cash used in financing activities was $1.5 million during the year ended December 31, 2009. This consisted primarily of payments on a line of credit with UBS Financial of $2.4 million and proceeds from a $1.0 million loan with Bridge Bank.

    Operating and Capital Expenditure Requirements

        We have not achieved profitability on a quarterly or annual basis since our inception, and we expect to continue to incur net losses in the future. We also expect that our operating expenses will increase as we continue to expand our direct sales force and increase our marketing efforts to drive adoption of our proprietary tests, develop and commercially launch our second generation system, and develop additional immunoassays. Additionally, as a public company, we will incur significant audit, legal and other expenses that we did not incur as a private company. Our liquidity requirements have historically consisted, and we expect that they will continue to consist, of sales and marketing expenses, research and development expenses, working capital, debt service and general corporate expenses. We expect that we will use a portion of the net proceeds of this offering, in combination with our existing cash and cash equivalents, for these purposes and for the increased costs associated with being a public company. In addition, we expect to use at least $15.0 to $20.0 million of the net proceeds of this offering for capital expenditures related to the development of our second generation system during 2013 and $4.8 million for the repayment of our outstanding loan balance under our Bridge Bank Growth Capital Term Loan (the outstanding principal balance as of the date of this prospectus). Please see "Use of Proceeds" for a description of our anticipated uses of the net proceeds from this offering. We expect that our planned expenditures will be funded from our ongoing operations, as well as from the proceeds of this offering.

        We believe the net proceeds from this offering, together with the cash generated from operations, our current cash and cash equivalents, and interest income we earn on these balances will be sufficient to meet our anticipated cash requirements through at least the next 24 months. In the future, we expect our operating and capital expenditures to increase as we increase headcount, expand our sales and marketing activities and grow our customer base. As sales of our Advanced CVD Monitoring services increase, we expect our accounts receivable balance to increase. Any such increase in accounts receivable may not be completely offset by increases in accounts payable and accrued expenses, which could result in greater working capital requirements.

        Our estimates of the period of time through which our financial resources will be adequate to support our operations and the costs to support research and development and our sales and marketing activities are forward-looking statements and involve risks and uncertainties and actual results could vary materially and negatively as a result of a number of factors, including the factors discussed in the section "Risk Factors" of this prospectus. We have based our estimates on assumptions that may prove to be wrong and we could utilize our available capital resources sooner than we currently expect.

        Our future capital requirements will depend on many factors, including the following:

    the extent to which our Advanced CVD Monitoring services, including our proprietary tests, achieve market acceptance and remain competitive;

    the percentage of our sales that are reimbursed by payors;

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    our ability to collect our accounts receivable;

    whether we are successful at developing our second generation system;

    the expense required to develop and gain regulatory clearance of our second generation system, including the costs of any clinical trials that we may have to conduct;

    the costs and timing of further expansion of our sales and marketing efforts and research and development activities;

    our ability to control costs;

    whether we have sufficient testing capacity to meet the demand for our services;

    the costs of filing, prosecuting, defending and enforcing any patent or other intellectual property rights; and

    the acquisition of complementary business or technologies that we may undertake.

Credit Facilities

        Compass Horizon Funding Company LLC/Horizon Credit I LLC.    We currently have a $5.0 million term loan with Compass Horizon Funding Company LLC/Horizon Credit I LLC, or Horizon, which was entered into in November 2010 and subsequently amended in April and September 2012 in connection with amendments to our Bridge Bank credit facility. As of June 30, 2012, the loan had an outstanding balance of $3.6 million. The loan carries a fixed interest rate of 11%. Repayment of the principal and interest is paid in monthly installments and will continue through March 2014. The loan is secured by substantially all of our assets. The credit facility contains customary non-financial covenants and other provisions, including a cross-default covenant. Upon an event of default, outstanding amounts may be accelerated and become immediately due and payable upon sole election of Horizon. For any scheduled payment that was not paid when due, a late payment fee of 6% applies. We are operating under debt covenant waivers with respect to our credit facility with Bridge Bank (as described below) and therefore no cross default exists under the Horizon agreement. In addition, we have obtained a waiver from Horizon with respect to the requirement to provide audited financial statements within the allotted period following year end 2011. As of June 30, 2012 and December 31, 2011, we were in compliance with all other covenants in the loan agreement.

        Bridge Bank, N.A.    We currently have a credit facility with Bridge Bank, N.A., or Bridge Bank, which includes a term loan and a revolving line of credit. We originally entered into the credit facility in May 2007 and, in April 2012, we amended the credit facility and the outstanding loan balance was repaid and replaced with a $5.0 million Bridge Bank Growth Capital Term Loan, which carries a variable interest rate of Bridge Bank prime rate plus 1.50%, with a prime rate floor of 3.25%. As of June 30, 2012, the current interest rate was 4.75% and the loan matures in April 2015. Repayment of the principal and interest is paid monthly over 36 months with the initial six months being interest-only payments. The loan is secured by substantially all of our assets. In connection with the amendment to the credit facility in April 2012, we established a revolving line of credit with Bridge Bank. In September 2012, we amended the revolving line of credit to increase our borrowing capacity from $5.0 million to $10.0 million and extended the term of the credit line to September 2013. The amount available to us under the line of credit is dependent on the level of our accounts receivable. Borrowings under this line of credit carry a variable interest rate of Bridge Bank prime rate plus 1.0%, with a prime rate floor of 3.25%.

        On September 28, 2012, we drew $5.4 million on the revolving line of credit, which represented all funds available for draw based on our eligible accounts receivable as of the end of the third quarter of 2012. The credit facility includes a cross-default covenant and a number of financial and other covenants relating to, among other things, maintaining an asset coverage ratio, holding at least 75% of

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our total cash with Bridge Bank, securing an equity financing with gross proceeds of at least $8.0 million by December 31, 2012 or consummating this offering by January 31, 2013, and achieving pre-specified revenue and net loss thresholds based on projections provided by management. On an annual basis, our management provides Bridge Bank with quarterly and annual projections related to revenue and net loss. The financial covenants require that we achieve an agreed upon threshold level of such projections and failure to meet these thresholds on an annual or quarterly basis results in a failure to comply with the covenant as of such period.

        Upon an event of default, Bridge Bank has the right to terminate the agreement, and all outstanding amounts may be accelerated and become immediately due and payable upon sole election of Bridge Bank. As of December 31, 2010, we were not in compliance with the required asset coverage ratio, and quarterly revenue and net loss financial covenants, and as of December 31, 2011, March 31, 2012 and June 30, 2012, we were not in compliance with the quarterly net loss financial covenants. We have received a waiver for non-compliance from Bridge Bank for each of these periods. In particular, for the quarter ended December 31, 2011, our net loss exceeded 20% of our projected net loss for such period and for the quarters ended March 31, 2012 and June 30, 2012, our net loss exceeded 30% of our projected net loss for such periods. For the quarter ended December 31, 2010, our asset coverage was less than 1.75 to 1 (actual 1.25 to 1), our revenue was approximately $0.5 million less than our projected revenues of $3.5 million and our quarterly net loss exceeded $1.5 million. The waivers we have received from Bridge Bank waive in full our failure to comply with each of the covenants for which we failed to comply for the respective period and Bridge Bank's rights to assert an event of default under the terms of the credit facility for such failure to comply. Bridge Bank's waiver relates solely to failure to comply with such covenants and does not relieve of us of any other obligations under the credit facility.

        We currently anticipate using a portion of the net proceeds from this offering to repay the outstanding indebtedness under our term loan with Bridge Bank; however, if we were required to repay our outstanding loan balances prior to such extinguishment, we may have to delay other planned expenditures in order to repay the outstanding balances.

Contractual Commitments and Obligations

        The following is a summary of our contractual obligations and commitments as of December 31, 2011:

 
  Payments Due by Period  
 
  Total   Less than 1 year   1-3 Years   3-5 Years   More Than 5 Years  

Long-term debt obligations(1)

  $ 5,059   $ 2,388   $ 2,671   $   $  

Interest relating to long-term debt obligations

    616     416     200          

Operating lease obligations(2)

    940     833     83     12     12  
                       

Total contractual obligations

  $ 6,615   $ 3,637   $ 2,954   $ 12   $ 12  
                       

(1)
Principal portion of notes payable due to Bridge Bank and Horizon.

(2)
Non-cancelable facility operating leases.

Indemnification

        In the normal course of business, we enter into contracts and agreements that contain a variety of representations and warranties and provide for general indemnification. Our exposure under these agreements is unknown because it involves claims that may be made against us in the future, but that have not yet been made. To date, we have not paid any claims or been required to defend any action

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related to its indemnification obligations. However, we may record charges in the future as a result of these indemnification obligations.

        In accordance with our certificate of incorporation and bylaws, we have indemnification obligations to our officers and directors for certain events or occurrences, subject to certain limits, while they are serving at our request in such capacity. There have been no claims to date, and we have director and officer insurance that enables us to recover a portion of any amounts paid for future potential claims. In addition to the indemnification provided for in our certificate of incorporation and bylaws, we have also entered into separate indemnification agreements with each of our directors, which agreements provide such directors with broad indemnification rights under certain circumstances.

Off-Balance Sheet Arrangements

        As of June 30, 2012, we do not have any off-balance sheet arrangements (as defined by applicable Securities and Exchange Commission regulations) that are reasonably likely to have a current or future material effect on our financial condition, revenues and expenses results of operations, liquidity, capital expenditures or capital resources.

Critical Accounting Policies and Significant Judgments and Estimates

        We have prepared our consolidated financial statements in accordance with U.S. generally accepted accounting principles. Our preparation of these consolidated financial statements requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, expenses and related disclosures at the date of the consolidated financial statements, as well as revenues and expenses during the reporting periods. We evaluate our estimates and judgments on an ongoing basis. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results could therefore differ materially from these estimates under different assumptions or conditions.

        While our significant accounting policies are described in more detail in Note 1 to our consolidated financial statements included in this prospectus, we believe the following accounting policies to be critical to the judgments and estimates used in the preparation of our financial statements.

Revenue Recognition

        We derive revenues from the sale of our CLIA laboratory testing service, which is our Advanced CVD Monitoring services, and the sale of immunoassay products and services to pharmaceutical companies, academic and government institutions, and contract research organizations, which are our Life Sciences customers. We recognize revenues when the following revenue recognition criteria are met: (1) persuasive evidence that an arrangement exits; (2) delivery has occurred or services have been rendered; (3) the fee is fixed or determinable; and (4) collectability is reasonably assured.

    Advanced CVD Monitoring Services

        CLIA laboratory testing service revenues are derived primarily from performing tests on patient samples and the above revenue recognition criteria are assessed as follows: Criterion (1) is satisfied when an arrangement is in place with the payor addressing reimbursement for the patient test. In the absence of such arrangements, criterion (1) is satisfied when a payor pays us for the test performed. Criterion (2) is satisfied when a test is performed and a patient report is generated and delivered to the physician. Determination of satisfying criteria (3) and (4) are based on management's judgments regarding whether the fee charged for services delivered is fixed or determinable, and the collectability

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of those fees under any arrangement. When evaluating criteria (3) and (4), we consider whether we have a specific arrangement with a payor or sufficient history with a payor to reliably estimate the payor's individual payment patterns. In evaluating payment history, based upon at least several months of history, we review the amount received for each test and the payor's outstanding balance for unpaid tests to determine whether payments are being made consistently for a high percentage of tests billed. To the extent all criteria set forth above are not met when test results are delivered, laboratory testing service revenues are recognized when cash is received from the payor. For the years ended December 31, 2010 and 2011, and six months ended June 30, 2012, approximately 64%, 79% and 79%, respectively, of our Advanced CVD Monitoring services revenues were recognized on upon collection of cash. Where all criteria set forth above are met, revenue is recognized when the test result is delivered and is calculated by our billing system, which generates a contractual adjustment to the test fee based on the contractual agreement with the payor or, in the case of Medicare, the established level of reimbursement from Medicare.

        In circumstances where we do not have a contractual arrangement with a payor, our billing system generates an estimated fee adjustment in order to estimate the revenues per test performed. The primary factors that are considered in this estimated fee adjustment are: (a) the specific tests performed for the patient encounter and (b) the historic average reimbursement received from the patient's insurance provider for each specific test performed. The average reimbursement per test takes into account historical reimbursement data and includes instances where no reimbursement has been received. As of December 31, 2010 and 2011 and June 30, 2012, the amount of our estimated future revenue for tests where services have been performed and results have been delivered but for which no revenue has been recognized because payment had not yet been received, the test fee was not fixed or determinable, and/or collectability was not reasonably assured was $1.3 million, $7.1 million and $7.6 million, respectively. The foregoing estimates should not be relied upon by you as a representation of future revenue or cash that we may collect. In particular, the actual amount of revenue, if any, we may recognize and the timing of such recognition will vary based on a number of factors including, but not limited to, whether our tests will be covered for reimbursement by a particular third party payor, variability in reimbursement levels by payor, variability in reimbursement levels per state and the length of time various payors require to process claims for coverage of such tests. As of June 30, 2012, we have collected $0.9 million of the estimated future revenues at December 31, 2010 and $4.3 million of the estimated future revenues at December 31, 2011. We may never collect any or all of the remaining estimated future revenue for these periods, the amounts estimated as future revenues at June 30, 2012 or any amounts we estimate in future periods.

        The table below sets forth the payor mix classifications for the years ended December 31, 2010 and 2011 and the six months ended June 30, 2012 for our Advanced CVD Monitoring services.

Payor(1)
  2010   2011   Six Months
Ended
June 30, 2012
 

Medicare(2)

    36 %   21 %   21 %

Managed Care and others

    64 %   79 %   79 %

(1)
Medicaid and self-pay amounts are less than 0.5% for each of the periods presented.

(2)
For the years ended December 31, 2010 and 2011 and the six months ended June 30, 2012, Medicare represented 10%, 17% and 19%, respectively, of our total revenues.

        Currently, many governmental payors, such as Medicare, and private insurers do not impose a patient co-payment obligations for a number of clinical laboratory tests such as those we perform, particularly with respect to non-participating providers such as the Company. Our policy with respect to co-payments is to monitor the federal, state and private insurer requirements for the collection of co-payments.

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        The table below sets forth the aging of our accounts receivable for our Advanced CVD Monitoring services as of December 31, 2011 and June 30, 2012. As we currently recognize revenue only upon collection of cash for non-Medicare payors, the table below reflects the aging of receivables from Medicare.

Aging(1)
  As of
December 31, 2011
  As of
June 30, 2012
 

Less than 30 days

    52 %   70 %

31-60 days

    16 %   11 %

61-90 days

    6 %   6 %

91-180 days

    12 %   10 %

Greater than 181 days

    14 %   3 %

(1)
Our billing system did not have the capacity to provide an aging schedule of our receivables as of December 31, 2010.

        The number of days' sales outstanding as of December 31, 2011 and June 30, 2012, was 42 and 44, respectively.

    Life Sciences Products and Services

        With respect to our Life Sciences customers, we recognize immunoassay products and services revenue as follows:

    Immunoassay Products—immunoassay products consist of sales of instruments, including any related installation, training services, and the sale of reagents. We recognize revenues on sales of instruments, including installation, training services, upon installation of the instrument and completion of the related services. We periodically lease immunoassay instruments under operating and sales-type lease arrangements. Revenue for products sold under operating lease arrangements is recognized on an installment basis over the life of the lease where the cost of the leased equipment is carried on our balance sheet and amortized over its estimated useful life. For arrangements that qualify as sales-type leases, the discounted sales value of the product is recorded as revenue upon delivery to the customer. We recognize revenues on the sale of reagents upon delivery of the reagents to the customer.

    Immunoassay Services—immunoassay services consist of assay development and assay sample testing. Assay development services are provided based on contracts with specific milestones outlined in the arrangement. Assay sample testing services are provided based on fixed price arrangements. We recognize revenue related to assay development services as the services are completed and the specific milestones are achieved, while revenue related assay sample testing is recognized upon completion of the services and delivery of the test reports to the customer. We have also entered into research contracts with academic and government institutions and contract research organizations to perform research services under a cost or cost-plus pricing arrangement. We recognize revenues related to research contracts upon delivery of the services based the terms of the arrangements.

        Arrangements related to immunoassay products and services can include multiple elements, including delivery of our digital technology platform, reagents, assay development and assay sample testing. We evaluate products and services for multiple elements and allocate revenues to each element of the arrangement based on vendor specific objective evidence, or VSOE, or third party evidence, if available. When VSOE or third party evidence is not available, we use our best estimate of the selling price to separate deliverables and allocate arrangement consideration using the relative selling price method. Once the elements are identified and the revenues are allocated to the separate elements, we recognize revenues for immunoassay products and services as described above.

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Stock-Based Compensation Expense

        We account for all stock-based compensation payments issued to employees and directors using an option pricing model for estimating fair value. Accordingly, stock-based compensation expense is measured based on the estimated fair value of the awards on the date of grant, net of forfeitures. Compensation expense is recognized for the portion that is ultimately expected to vest over the period during which the recipient renders the required services to us using the straight-line single option method. In accordance with authoritative guidance, the fair value of non-employee stock-based awards is re-measured as the awards vest, and the resulting value, if any, is recognized as expense during the period the related services are rendered.

    Significant Factors, Assumptions and Methodologies Used in Determining Fair Value

        We estimate the fair value of our stock-based awards to employees and directors using the Black-Scholes option pricing model. The Black-Scholes model requires the input of subjective assumptions, including (a) the expected stock price volatility, (b) the calculation of the expected term of the award, (c) the risk free interest rate and (d) expected dividends. Due to our limited operating history and a lack of company specific historical and implied volatility data, we have based our estimate of expected volatility on the historical volatility of a group of similar companies, which are publicly-traded. When selecting these public companies on which we have based our expected stock price volatility, we selected companies with comparable characteristics to us, including enterprise value, risk profiles, position within the industry, and with historical share price information sufficient to meet the expected life of our stock-based awards. The historical volatility data was computed using the daily closing prices for the selected companies' shares during the equivalent period of the calculated expected term of our stock-based awards. We will continue to apply this process until a sufficient amount of historical information regarding the volatility of our own stock price becomes available. We have estimated the expected life of our employee stock options using the "simplified" method, whereby, the expected life equals the arithmetic average of the vesting term and the original contractual term of the option. The risk-free interest rates for periods within the expected life of the option are based on the U.S. Treasury yield curve in effect during the period the options were granted. We have never paid, and do not expect to pay, dividends in the foreseeable future.

        The weighted-average assumptions used to estimate the fair value of stock options using the Black-Scholes option pricing model were as follows:

 
  Year Ended December 31,   Six Months
Ended
June 30,
 
 
  2009   2010   2011   2012  

Weighted-average exercise price of options granted

  $ 0.67   $ 0.79   $ 0.79   $ 0.79  

Expected volatility

    50 %   49 %   61 %   63 %

Expected term (in years)

    7.8     7.3     5.9     5.7  

Risk free interest rate

    2.84-4.86 %   1.53-5.04 %   1.24-4.86 %   0.93-3.47 %

Expected dividends

                 

        We are also required to estimate forfeitures at the time of grant, and revise those estimates in subsequent periods if actual forfeitures differ from our estimates. We use historical data to estimate pre-vesting option forfeitures and record stock-based compensation expense only for those awards that are expected to vest. To the extent that actual forfeitures differ from our estimates, the difference is recorded as a cumulative adjustment in the period the estimates were revised.

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    Fair Value Estimate

        We are required to estimate the fair value of the common stock underlying our stock-based awards when performing the fair value calculations with the Black-Scholes option pricing model. The fair value of the common stock underlying our stock-based awards was determined on each grant date by our board of directors, with input from management. All options to purchase shares of our common stock are intended to be granted with an exercise price per share no less than the fair value per share of our common stock underlying those options on the date of grant, based on the information known to us on the date of grant. In the absence of a public trading market for our common stock, on each grant date, we develop an estimate of the fair value of our common stock in order to determine an exercise price for the option grants based in part on input from an independent third-party valuation. Our determinations of the fair value of our common stock was done using methodologies, approaches and assumptions consistent with the American Institute of Certified Public Accountants, or AICPA, Audit and Accounting Practice Aid Series: Valuation of Privately Held Company Equity Securities Issued as Compensation, or the AICPA Practice Guide. In addition, our board of directors considered various objective and subjective factors, along with input from management and the independent third-party valuation, to determine the fair value of our common stock, including: external market conditions affecting the life sciences and diagnostic industries, the prices at which we sold shares of preferred stock, the superior rights and preferences of the preferred stock relative to our common stock at the time of each grant, the results of operations, financial position, status of our research and development efforts, our stage of development and business strategy, the lack of an active public market for our common and our preferred stock, and the likelihood of achieving a liquidity event such as an initial public offering, or IPO, or sale of our company in light of prevailing market conditions.

        In determining the exercise prices of our stock option grants, our board of directors also considered the most recent contemporaneous valuation of our common stock, which was prepared as of March 31, 2011 and based its determination in part on the analyses summarized below.

    Contemporaneous Valuations

        Prior to June 30, 2012, our contemporaneous valuations utilized the option pricing method, or OPM, to allocate the equity value of the company to each class of our capital stock. The OPM values each equity class by creating a series of call options on the equity value, with exercise prices based on the liquidation preferences, participation rights and strike prices of derivatives. This method is generally preferred when future outcomes are difficult to predict and dissolution or liquidation is not imminent. Prior to starting preparations for this offering, the OPM was utilized because we could not reasonably estimate the form and timing of potential liquidity events.

        To determine the equity value utilized in the OPM, we analyzed the Company's equity value using a weighted combination of two methodologies, the discounted cash flow method and the public company market multiple method. The discounted cash flow method estimates the value of a company based on its expected future cash flows discounted to present value at a rate of return commensurate with the risks associated with the cash flows. For each valuation date, management determined a financial forecast to be used in the computation of the equity value under this approach. These financial forecasts took into account our past financial and operational results and our expected future results. A discount rate was then applied based on market-required rates of return observed in the venture capital industry, as well as the specific perceived risks of achieving the forecasted financial performance. The public company market multiple generally estimates the equity value of a company by applying market multiples of comparable companies that are publicly traded. Comparable publicly-traded companies were selected on the basis of operational and economic similarity to our business, including comparable industry (laboratory service and diagnostics) and enterprise value, stage of development and risk profile at the time of the valuation. A multiple of key metrics implied by the enterprise values of these comparable companies were then calculated. Based on our historical and

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expected financial and operational performance as compared to the comparable companies, appropriate multiples were selected and applied to our metrics to derive an indication of equity value.

        The following table sets forth the per share exercise price of the stock options at each grant date, the estimated fair value based on our independent third-party valuation and our estimated fair value per share. In addition, in preparation for this offering and in connection with the receipt of our June 30, 2012 contemporaneous valuation report, we subsequently reassessed the fair values of these option grants solely for the purpose of calculating the fair value of the stock options. The following table also includes the reassessed fair value per share for the stock option grants.

Grant Date   Number of
Options Granted
  Per Share
Exercise
Price of
Options
  Fair Value
Per Share
of
Common
Stock
  Updated Fair
Value Per
Share of
Common Stock
 

October 13, 2011

    173,050   $ 0.79   $ 0.79   $ 7.04  

February 15, 2012

    112,206   $ 0.79   $ 0.79   $ 7.04  

May 3 and 7, 2012

    91,348   $ 0.79   $ 0.79   $ 12.80  
                         

    376,603                    

        October 13, 2011 Stock Option Grants.    On October 13, 2011, our Board of Directors granted stock options with an exercise price of $0.79 per share. The exercise price per share was supported by an independent third-party valuation as of March 31, 2011. The valuation report utilized the OPM and employed multiple valuation approaches to derive the Company's equity value used in the OPM, including the discounted cash flow method and comparable public company market multiple method. A discount for lack of marketability of 25% was then applied in the calculation of final fair value per share. The valuation report determined a common stock value of $0.55 per share as of March 31, 2011. Utilizing this valuation report and considering the developments in our business since March 31, 2011, our Board of Directors determined the fair value per common share as of October 13, 2011 to be $0.79. Specifically, our Board of Directors considered the launch of our Advanced CVD Monitoring services in July 2010 and the resulting increase in revenues and expenses, the substantial cash resources required to scale our Advanced CVD Monitoring services, the volatility in the public markets, particularly in the life sciences industry, and the expected significant increase in capital required to develop our second generation system.

        February 15, 2012 Stock Option Grants.    On February 15, 2012, our Board of Directors granted stock options with an exercise price of $0.79 per share. The exercise price per share was supported by the independent third-party valuation as of March 31, 2011. Utilizing this valuation report and considering the developments in our business since March 31, 2011, our Board of Directors determined the fair value per common share as of February 15, 2012 to be $0.79. Specifically, our Board of Directors considered our recent Series F Preferred Stock financing in which shares of our Series F Preferred Stock were sold at a price that represented only a nominal increase in the equity value of the Company from our prior preferred stock financing in December 2008, raising approximately $5.0 million in additional capital. In addition, the Board considered the growth in our Advanced CVD Monitoring services since March 31, 2011 and October 13, 2011 and the resulting increase in revenues and expenses, the substantial cash resources required to scale our Advanced CVD Monitoring services, the volatility in the public markets, particularly in the life sciences industry, and the expected significant increase in capital required to develop our second generation system.

        May 3 and 7, 2012 Stock Option Grants.    On May 3, 2012 and May 7, 2012, our Board of Directors granted stock options with an exercise price of $0.79 per share. The exercise price per share was supported by the independent third-party valuation as of March 31, 2011. Utilizing this valuation report and considering the developments in our business since March 31, 2011, our Board of Directors determined the fair value per common share as of May 3, 2012 and May 7, 2012 to be $0.79.

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Specifically, our Board of Directors considered our recent Series F Preferred Stock financing in which shares of our Series F Preferred Stock were sold at a price that represented only a nominal increase in the equity value of the Company from our prior preferred stock financing in December 2008, raising approximately $5.1 million in additional capital. In addition, the Board considered the growth in our Advanced CVD Monitoring services since March 31, 2011 and October 13, 2011 and the resulting increase in revenues and expenses, the substantial cash resources required to scale our Advanced CVD Monitoring services, the volatility in the public markets, particularly in the life sciences industry, and the expected significant increase in capital required to develop our second generation system.

    June 30, 2012 Valuation and Reassessment of Fair Value

        In connection with the preparation for this offering, we obtained a valuation report as of June 30, 2012. The June 30, 2012 valuation utilized the probability-weighted expected return method, or PWERM, to allocate the enterprise value to the common stock. Under this method, the per share value of the common stock is estimated based upon the probability-weighted present value of expected future equity values for our common stock, under various possible future liquidity event scenarios, in light of the rights and preferences of each class of stock, discounted for a lack of marketability. The future liquidity event scenarios and probabilities for such scenarios were: (1) an IPO in the fourth quarter of 2012 (30%); (2) an IPO in early to mid-2013 (15%), (3) an IPO in early to mid-2014 (25%); (4) a strategic merger or sale of our company at a premium to the cumulative liquidation preference of the preferred stockholders in mid-2015 (25%); and (5) a dissolution or sale of our company at a value below the cumulative liquidation preference of the preferred stockholders (5%). The timing of these future liquidity event scenarios was determined based primarily on input from our board of directors and management. Our Board of Directors in consultation with management, after an evaluation of the growth in our Advanced CVD Monitoring services, weighted the aggregate probability of an IPO at 70%. Within the IPO scenarios, the Board of Directors determined that it was more likely for a near term (fourth quarter of 2012 or early to mid-2013) IPO to occur; however, given market conditions for life sciences IPOs, we considered an alternative long-term IPO scenario (early to mid-2014) approximating our expected timeline for completion of the development of our second generation system. The future values of our common stock in the IPO scenarios and the strategic merger or sale scenarios were estimated by application of the market approach based on certain key assumptions, including the following:

    our expected pre-money IPO valuation based on recently completed initial public offerings of similar stage companies in the laboratory and diagnostic segment of the life sciences industry;

    estimated third-party trade sale values based on recent transactions involving companies in the laboratory and diagnostic segment of the life sciences industry; and

    expected dates for a future exit or liquidity event based on key events and company timelines.

        The discount for marketability utilized in this valuation was 15% and was based on two put option methodologies applied consistent with the AICPA Practice Guide for which we utilized the mean. This discount was based primarily on our progress toward an initial public offering following our organizational meeting in late May 2012, as well as the relative uncertainty in the public markets for IPOs, particularly in the life sciences industry.

        This valuation resulted in a $12.80 fair value per share at June 30, 2012. Following receipt of this valuation, we performed an analysis to reassess the fair value of common stock as of October 13, 2011, February 15, 2012, May 3, 2012, and May 7, 2012 in light of our progression toward an IPO and commencement of related activities subsequent to these grant dates. During this analysis, we considered several additional factors: the effects of changing our valuation model from an OPM to a PWERM method; the effects of updating the probability weighting of an IPO as a result of the starting the registration process for our IPO in May 2012, including the holding of an organizational meeting for

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our IPO on May 30, 2012, and the commencement of activities with our investment bankers during June 2012; and the February 2012 sale of Series F Preferred Stock at $7.0387 per share, which included the conversion of convertible bridge loans issued in May and June 2011. Offsetting these factors, we took into consideration the continued volatility of the capital markets, particularly for life sciences IPOs, and the lack of recent examples of comparable companies with successful IPOs. These factors led us to an updated fair value of common stock of $7.04 per share for the stock options granted on October 13, 2011 and February 15, 2012, and of $12.80 per share for the stock options granted on May 3, 2012 and May 7, 2012, solely for purposes of calculating the fair value of our outstanding stock options.

        The effect of these fair value updates on our results of operations was to increase our net loss for the year ended December 31, 2011 by $53,000 and by $196,000 for the six months ended June 30, 2012.

    Comparison of June 30, 2012 Fair Value to Estimated Initial Public Offering Price

        While our expected initial public offering price of $16.00 per share is greater than the most recent valuation of our common stock of $12.80 per share determined by our board of directors at June 30, 2012 in connection with the reassessment stock options, the primary factor that accounts for the increase is the different valuation methodology employed for each valuation. As discussed above, our board of directors utilized the PWERM valuation methodology at June 30, 2012 in determining the fair value of our common stock as of such date. In particular, because the PWERM analysis is a probability-weighted approach, the resulting common stock valuation reflects the potential for liquidity events other than an initial public offering, which inherently decreases the common stock valuation due to both (a) the mix of other expected business equity values that are lower than the initial public offering scenarios and (b) discounting the business equity values, which in certain cases are contemplated to occur farther in the future, for present value. In addition, because no public market existed for our common stock during the most recent valuation, a discount of marketability of 15% was applied to derive the fair value per share. In contrast, our initial public offering price range necessarily assumes that (a) the initial public offering has occurred in 2012, (b) our preferred stock has converted into common stock in connection with the initial public offering and (c) a public market for our common stock has been created and therefore no discount for marketability is applied. Accordingly, this price range excludes any marketability or illiquidity discount for our common stock and any liquidation preference of our then-existing preferred stock, which were appropriately taken into account in our board's fair market value determination in June 2012. Notably, the estimated exit value of the company used in the PWERM analysis at June 30, 2012 for the fourth quarter 2012 IPO scenario is substantially the same as the business equity value at the estimated initial public offering price.

Convertible Preferred Stock Warrant Liability

        We account for warrants to purchase shares of convertible preferred stock as liabilities at fair value because these warrants may obligate us to transfer assets to the holders at a future date under certain circumstances, such as a change of control. We re-measure these warrants to current fair value at each balance sheet date, and any change in fair value is recognized as a component of interest income and interest (expense) in its statements of operations. We estimated the fair value of these warrants at the respective balance sheet dates using an enterprise value option pricing model. We use a number of assumptions to estimate the fair value including the remaining expected life of the warrant, risk-free interest rates, expected dividend yield, and expected volatility of the price of the underlying stock. These assumptions are subjective and the fair value of these warrants may have differed significantly had we used different assumptions. We will continue to adjust the convertible preferred stock warrant liability for changes in fair value until the earlier of the exercise or expiration of the convertible preferred stock warrants or until holders of our outstanding preferred stock can no longer trigger a deemed liquidation event.

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JOBS Act

        In April 2012, the JOBS Act was enacted. Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. Thus, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this extended transition period and, as a result, we will adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other companies.

Recent Accounting Pronouncements

        In May 2011, the Financial Accounting Standards Board, or FASB, issued new guidance for fair value measurements to provide a consistent definition of fair value and ensure that the fair value measurement and disclosure requirements are similar between U.S. GAAP and International Financial Reporting Standards. The guidance changes certain fair value measurement principles and enhances the disclosure requirements particularly for level 3 fair value measurements. The guidance is effective for us prospectively beginning in the first quarter of fiscal 2012. The adoption of this guidance did not have a material impact on our financial statements.

        In June 2011, the FASB issued Accounting Standards Update, or ASU, No. 2011-05, Presentation of Comprehensive Income (ASU 2011-05). ASU 2011-05 requires entities to report components of comprehensive income in either a continuous statement of comprehensive income or two separate but consecutive statements. Under the continuous statement approach, the statement would include the components and total of net income, the components and total of other comprehensive income and the total of comprehensive income. Under the two statement approach, the first statement would include the components and total of net income and the second statement would include the components and total of other comprehensive income and the total of comprehensive income. Comprehensive income may no longer be presented only within the consolidated statement of stockholders' equity. ASU 2011-05 does not change the items that must be reported in other comprehensive income. ASU 2011-05 is effective retrospectively for interim and annual periods beginning after December 15, 2011, with early adoption permitted. We adopted this ASU in the first quarter of 2012 and are reporting under the two statement approach which did not have a material impact on our financial statements.

Change in Independent Registered Public Accounting Firm

        In April 2012, our Board of Directors, upon recommendation from our Audit Committee, replaced Burr Pilger Mayer, Inc., as our independent registered public accounting firm with Ernst & Young LLP. Burr Pilger Mayer, Inc. had served as our independent registered public accounting firm since 2006. Burr Pilger Mayer, Inc.'s reports on the financial statements for the fiscal years ended December 31, 2009 and 2010 contained no adverse opinion or disclaimer of opinion, and were not qualified or modified as to uncertainty, audit scope or accounting principles. During the fiscal years ended December 31, 2009 and 2010 and through April 2012, there were no disagreements with Burr Pilger Mayer, Inc. on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Burr Pilger Mayer, Inc. would have caused it to make reference to the subject matter of the disagreements in its reports on our financial statements. During the fiscal years ended December 31, 2009 and 2010 and through April, 2012, there were no reportable events as defined in Item 304(a)(1)(v) of Regulation S-K.

        The Audit Committee conducted a competitive process to select a firm to serve as our independent registered public accounting firm for the year ended December 31, 2011 and upon the conclusion of such process, the Audit Committee recommended that Ernst & Young LLP be engaged as our independent registered public accounting firm. During the fiscal years ended December 31, 2009

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and 2010, and through April 2012, neither we nor anyone on our behalf had consulted with Ernst & Young LLP regarding either (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on our financial statements; or (ii) any matter that was the subject of a disagreement (as that term is defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions to Item 304 of Regulation S-K) or a reportable event (as that term is defined in Item 304(a)(1)(v) of Regulation S-K).

Internal Controls

        We have restated our previously reported June 30, 2012 financial results to correct an error relating to the accounting for preferred stock warrants that were issued prior to our current Chief Financial Officer and Corporate Controller assuming their respective positions. In connection with this restatement, our management identified a material weakness in our internal control over financial reporting. A material weakness is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

        The material weakness pertains to ineffective controls in the financial statement close process. Specifically, we did not have a sufficient number of accounting personnel with relevant technical accounting and financial reporting expertise to effectively design and operate controls over various non-routine and estimation classes of transactions including the evaluation of the completeness and accuracy of the accounting for preferred stock warrants issued in connection with debt arrangements. As a result of this material weakness, errors were identified in the previously issued unaudited interim June 30, 2012 consolidated financial statements related to the accounting for preferred stock warrants, which were corrected in the unaudited interim consolidated financial statements as of June 30, 2012 and for the six-month period then ended.

        With the oversight of senior management and our audit committee, we have begun taking steps and plan to take additional measures to remediate the underlying causes of the material weakness, primarily through the development and implementation of formal policies, improved processes and documented procedures, as well as the hiring of additional finance personnel. In addition to these efforts, we are in the process of documenting and testing our internal control over financial reporting in order to report on the effectiveness of our internal controls as of December 31, 2013, as required following this offering. We have expended significant internal resources in this effort. In particular, in May 2012 we hired a new Chief Financial Officer and in September 2012 we hired a new Corporate Controller. However, we can provide no assurance at this time that management will be able to report that our internal control over financial reporting is effective as of December 31, 2013.

        Notwithstanding the identified material weakness, management believes the restated consolidated financial statements included in this prospectus fairly represent in all material respects our financial condition, results of operations and cash flows at and for the periods presented in accordance with U.S. GAAP.

Quantitative and Qualitative Disclosure About Market Risk

        Market risk is the risk of loss to future earnings, to fair values or to future cash flows that may result from changes in price of a financial instrument. The value of a financial instrument may change as a result of changes in interest rates, exchange rates, commodity prices, equity prices and other market changes.

    Interest Rate Sensitivity

        We are exposed to market risk related to changes in interest rates as it impacts our interest income and expense. Our primary exposure to market risk is interest income sensitivity, which is affected by changes in the general level of U.S. interest rates.

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        Cash and Cash Equivalents.    As of June 30, 2012, we had cash and cash equivalents of $7.9 million, and restricted cash of $47,000. Our cash equivalents are invested in interest-bearing certificates of deposit and money market funds. We do not enter into investments for trading or speculative purposes. Due to the conservative nature of our investment portfolio, which is predicated on capital preservation and mainly consists of investments with short maturities, we do not believe an immediate one percentage point change in interest rates would have a material effect on the fair market value of our portfolio, and therefore we do not expect our operating results or cash flows to be significantly affected by changes in market interest rates.

        Term Loan.    As of June 30, 2012, we had debt obligations of $5.0 million and $3.6 million under our loans with Bridge Bank and Horizon, respectively. Our debt obligation to Horizon carries a fixed interest rate of 11%. Our Bridge Bank Growth Capital Term Loan carries a variable interest rate of Bridge Bank prime rate plus 1.50%, with a prime rate floor of 3.25%. If there is a rise in interest rates, our debt service obligations under the Bridge Bank loan agreement would increase even though the amount borrowed remained the same, which would affect our results of operations, financial condition and liquidity. Assuming no changes in our debt obligations from the initial loan amount, a hypothetical one percentage point change in underlying variable rates would change our annual interest expense and cash flow from operations by approximately $50,000 without taking into account the effect of any hedging instruments. We have not entered into, and do not expect to enter into, hedging arrangements.

    Foreign Currency Exchange Risk

        We bill all of our Advanced CVD Monitoring payors and most of our Life Sciences customers in U.S. dollars and receive payment in U.S. dollars. We bill a portion of our Life Sciences customers located in Europe in Euros and receive payment in Euros. For the year ended December 31, 2011, revenues of $1.8 million were billed in Euros, which represented 7% of our total revenues. Invetech, Inc., our contract manufacturer of digital technology instruments, bills us in Australian dollars and we make payments in Australian dollars. For the year ended December 31, 2011, payments to Invetech represented 3% of our combined costs of revenues and operating expenses. We do not expect these proportions to increase as we continue to sell Advanced CVD Monitoring services in the U.S., and, therefore, we do not expect our operating results or cash flows to be more affected by changes in foreign currency exchange rates in the near term. We do not currently hedge any foreign currency exposure.

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Business

Overview

        We are an innovative diagnostics company committed to improving patient care and enabling the reduction of healthcare costs by providing high-value, advanced tests for the diagnosis and monitoring of chronic diseases. We have initially focused on cardiovascular disease, or CVD, the leading cause of death globally. Our high precision digital immunoassay platform and advanced CVD test menu, which includes our proprietary digital heart function and inflammatory tests, provide clinically important diagnostic information that facilitates personalized disease management by physicians. Our innovative technology platform enables a significant improvement in measurement sensitivity over other commercially available technologies and measures biomarker concentrations at previously undetectable levels, providing physicians with information that can allow them to earlier diagnose, better monitor and more effectively manage chronic disease progression prior to the onset of acute clinical symptoms.

        According to the Centers for Disease Control and Prevention, or CDC, CVD is the leading cause of death in the United States. According to CDC statistics, nearly one in every three deaths is from heart disease or cerebrovascular diseases, such as stroke, an average of over 1,900 deaths per day. The American Heart Association, or AHA, estimates that approximately 40% of the U.S. population will have some form of CVD by 2030. However, the World Health Organization, or WHO, estimates that approximately 80% of premature CVD deaths are potentially preventable through early diagnosis and management of CVD risk factors.

        Our CVD menu covers four categories of tests: heart function, inflammatory, lipid and metabolic tests. Our menu features our proprietary Sgx HD cTnI test for cardiac troponin-I, a key component of our heart function panel, as well as our proprietary inflammatory test panel (Sgx HD IL-6, Sgx HD IL-17A, Sgx HD TNF-a). Cardiac troponin-I, or cTnI, is a clinically validated biomarker that has been used primarily in the acute setting for the diagnosis of myocardial infarctions, or heart attacks. Our proprietary inflammatory test panel measures levels of selected cytokines, which, when present in elevated levels in the blood, may be positively correlated to coronary heart disease, or CHD, risk, a leading cause of heart attacks.

        Our proprietary cTnI and inflammatory tests allows physicians to actively measure these biomarkers at previously undetectable levels, enabling these biomarkers to become clinically relevant in the chronic disease setting. The high precision of our digital technology platform enables these proprietary tests, together with our other CVD tests, to be used as a monitoring tool by physicians in routine care to manage patients across the continuum of CVD progression. As a result, physicians can establish and deliver personalized treatment and monitoring plans to patients to mitigate the risk of an acute cardiac event. The prognostic value of high sensitivity cTnI for CVD detection in the chronic setting is cited in numerous studies and clinical peer-reviewed publications, including Clinical Chemistry and European Heart Journal.

        In July 2010, we launched our Advanced CVD Monitoring services through which we offer our CVD menu utilizing our CLIA certified laboratory in Alameda, CA. We currently market our tests in 28 U.S. states and, as of June 30, 2012, we have received over 190,000 patient samples and performed approximately 1,350,000 tests. Because our tests target well-known biomarkers, reimbursement for our tests is based on existing Medicare CPT codes and private payors, including major U.S. insurance providers, as well as Medicare and Medicaid pay for our tests. In addition, we market and sell our digital technology platform and immunoassay development services to customers in the life sciences industry to facilitate their research and drug development efforts. For the year ended December 31, 2011 and the six months ended June 30, 2012, our revenues were $24.8 million and $20.5 million, respectively, and our net loss was $12.5 million and $10.3 million, respectively.

        In order to expand into the global in vitro diagnostic, or IVD, market, we are developing a second generation high precision, digital immunoassay monitoring platform, which is currently in the design

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and development stage, with expected prototype development commencing in the first half of 2013. We expect this system to be a higher-throughput, fully-automated platform focused on high precision immunoassays for advanced management of CVD and other chronic diseases. We currently expect to begin utilizing our second generation platform in our CLIA laboratory in 2014. We expect to focus our initial test panels on high-value, high sensitivity proprietary tests for chronic CVD detection and monitoring. We intend to seek applicable regulatory clearances in selected markets in order to allow us to make our technology platform and CVD menu more widely available through clinical and reference laboratories and hospital laboratories with a goal of making the second generation system commercially available by 2016.

Market Overview

        Chronic diseases are the leading cause of death and disability worldwide and, according to a 2011 report by the WHO, disease rates relating to chronic diseases such as CVD, cancer, chronic obstructive pulmonary disease and type 2 diabetes, are accelerating on a global basis. According to estimates by the WHO, by 2020 their contribution is expected to rise to 73% of all deaths and 60% of the global burden of disease. A 2011 report by the United Health Foundation estimated chronic disease healthcare costs in the United States to be over $2.0 trillion annually. CVD is one of the most common chronic diseases and, according to the CDC, an estimated $444 billion was spent in the United States in 2010 on CVD-related healthcare costs. However, approximately 80% of premature CVD deaths are potentially preventable through early diagnosis and management of CVD risk factors according to the WHO.

        Effective management of chronic disease requires cost-effective tools for early diagnosis, evaluation of treatment efficacy and monitoring of disease progression. While our current focus is on the detection and monitoring of CVD, we believe our technology can be broadly applied to detecting and monitoring a wide variety of chronic diseases. We intend to become a leader in these areas through our proprietary platform and test menu offerings, providing physicians with the ability to better measure disease risk and progression and potentially limit acute events and reduce healthcare costs associated with chronic disease.

    CVD Diagnostic Market

        The AHA estimates that 82.6 million people in the United States suffer from one or more forms of CVD, the most common forms of which are CHD, the narrowing or blockage of coronary arteries, and hypertension. Myocardial infarction, also referred to as a heart attack, is one of the most common manifestations of CHD and occurs when blood supply to a part of the heart is interrupted, resulting in permanent damage or death of heart tissue. In the United States alone, a heart attack occurs every minute on average.

        The chronic CVD patient population can be segmented generally into two categories: primary at-risk patients and secondary prevention patients. Primary at-risk patients have not had a prior CVD event, such as a heart attack, stroke or congestive heart failure, but are considered to be at an elevated risk for a CVD event in the future due to biologic and/or lifestyle risk factors. These risk factors include obesity, hypertension, diabetes, high serum cholesterol and family history of CVD. Secondary prevention patients are those patients who have suffered one or more prior CVD events.

        Lipid Testing.    Lipid panel testing is currently accepted as the standard of care for assessing an individual's risk for coronary heart disease and, specifically, atherosclerosis, which is the hardening and narrowing of the arteries caused by a buildup of plaque composed of cholesterol and other lipids, such as triglycerides, in the arterial wall. A conventional lipid panel is a group of tests that measures high density lipoprotein cholesterol, or HDL, low density lipoprotein cholesterol, or LDL, and triglycerides in an individual's blood. These measurements are used as predictive indicators of an individual's risk of atherosclerosis, a leading cause of CHD.

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        Lipid panel tests are among the most frequently ordered lab tests in the United States. According to the 2012 Global Strategic Business Report on Cholesterol and Other Cardiovascular Testing, an estimated 200 million lipid panel tests are performed annually in the United States by clinical laboratories and hospital outreach laboratories for patient management. Additionally, the same report indicated that lipid panel tests/complete lipid profiles accounted for nearly 50% of all cholesterol and other cardiovascular tests performed in clinical reference laboratories, and hospital, public health and private laboratories, in 2011, and the total cholesterol and lipid U.S. market totaled 437 million test units in 2011.

        Cardiac Troponin Testing.    In the acute care setting, the measurement of cardiac troponin biomarkers is the current standard of care for the diagnosis of a heart attack and has long assisted physicians in improving diagnostic strategies for the effective management of patients with severe chest pain. While limited to the acute setting in the United States, cardiac troponin testing accounted for over $800 million of the total domestic cardiac marker laboratory testing market in 2010, according to a 2011 report by TriMark Publications, a third party industry source. Troponin is comprised of three regulatory proteins that are integral to non-smooth muscle contraction in skeletal and cardiac muscle. Cardiac troponins are released from the heart muscle into the blood circulation in response to heart cell death, or myocardial necrosis. Because patients with myocardial necrosis have significantly elevated cardiac troponin levels, the cardiac troponin test in the acute care setting can differentiate patients with an acute myocardial infarction from those with unstable angina, acute pulmonary embolism or an aortic dissection in a timely fashion to facilitate targeted patient management.

        Inflammatory Biomarkers.    Recent advances in atherosclerosis research have indicated that chronic inflammation of the blood vessels plays a significant role in the initiation and subsequent progression of atherosclerosis. Inflammation occurs primarily within the walls of arterial blood vessels as white blood cells migrate from the blood stream and accumulate in the artery wall. Small protein molecules called cytokines are secreted by a variety of cells within the artery wall and accelerate the process of inflammation. The accumulation of these inflammatory white blood cells and other lipids, such as cholesterol in the artery, form diseased lesions or plaques within the vessel wall which build up over time. These lesions include cells that release cytokines into the bloodstream. These cytokines (Interleukin, or IL,-6,-17A and tumor necrosis factor, or TNF-a), if measured in blood samples, can be used as early indicators of inflammatory disease, enabling further risk stratification of those patients susceptible for future CVD events.

        The inflammatory testing market is comprised of C-reactive proteins, or CRPs, a well known protein associated with low grade chronic inflammation, and high sensitivity-, or hs-CRPs. The CRP and hs-CRP testing market alone was estimated to be $66.5 million in 2010 in the U.S. according to a 2011 report by TriMark Publications.

Limitations of Existing CVD Testing

        Lipid panel testing is generally a well-accepted approach to determine a patient's need for LDL-lowering or HDL-targeted statin therapy and monitoring treatment response. While traditional lipid profiles can be potentially predictive of atherosclerosis, lipid profiles are not effective for the prognosis of the onset of chronic CVD prior to an acute event. A recent study has indicated that almost half of patients hospitalized with some form of coronary heart disease have LDL cholesterol levels traditionally considered to be low risk, and so would not necessarily have been thought to be at risk.

        In addition, there is increasing awareness that lipid testing alone is insufficient to significantly reduce the occurrence of CVD events. In "Efficacy and Safety of Cholesterol-Lowering Treatment," a study published in 2005 in The Lancet, a peer-reviewed medical journal, an analysis of the data from 14 different lipid lowering statin trials involving approximately 90,000 patients showed an overall reduction in major cardiovascular events of only 21%. Nonetheless, lipid panel testing, when combined with an assessment of various lifestyle factors, including diet, frequency of exercise, psychosocial stress levels

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and medication usage, is the primary method used to evaluate a patient's CVD risk. As such, there is a significant need to include in the current standard testing regimen a non-cholesterol-based indicator that enables healthcare providers to better predict an adverse cardiac event.

        While advanced non-cholesterol-based indicators, such as cTnI and other cardiac biomarkers and certain inflammatory biomarkers, have been identified in multiple studies as having the potential to predict adverse cardiac events, their utility has been limited given the lack of clinical utility data or in some cases the lack of commercially available technology to detect these biomarkers at lower concentrations. At commercially available detection levels, cardiac troponin and certain inflammatory biomarkers have either been limited to the diagnosis of a cardiac event in an acute setting or have not been commercially utilized as CVD indicators. The current cardiac troponin testing market is largely limited to the acute care setting, as most other commercially available technologies can only accurately measure cardiac troponin at levels elevated above 30 - 50 pg/mL, which is generally not sensitive enough for use in non-acute settings. Yet, multiple studies have suggested that troponin is present in circulation at significantly lower levels in advance of an adverse cardiac event. Normal cardiac troponin levels in healthy individuals have been indicated to be 10.1 pg/mL by a Minnesota Heart Survey in 2012. A seminal study by Apple et. al. published in Clinical Chemistry, a journal of clinical laboratory science, for which we tested samples without remuneration, indicated that individuals who have currently not been diagnosed with cardiovascular disease but who have cardiac troponin levels above 10 pg/mL are at an 850% increased risk of dying due to a cardiac event over the next eight to 15 years. In other words, according to the Apple study, slightly elevated cTnI means that a healthy person remains at risk of suffering from a future myocardial infarction or stroke.

        Inflammatory and advanced CVD tests for assessment of apolipoproteins and CRPs are, along with other lipid parameters, emerging as potential tools in improving CVD risk prediction. A 2002 primary prevention study published in the New England Journal of Medicine showed that CRP increases during an inflammatory response, and suggests it was a stronger predictor of future cardiovascular events than high LDL cholesterol. In 2003, a CDC and AHA writing group issued guidelines concluding that it is reasonable to use hs-CRP to assess CHD risk for primary prevention. Recent publications on multiple independent clinical studies have continued to build upon these initial findings and have shown that increased levels of additional inflammatory biomarkers in the blood may correlate with increased heart disease risk. These studies indicate that the measurement of individual cytokines can provide additional risk stratification for future cardiovascular events in acute and chronic disease patients as well as in asymptomatic patients. Furthermore, combinations of these inflammatory biomarkers, such as IL-6, IL-17A, TNF-a and hs-CRP, are synergistic and together may provide additional power towards future CVD risk stratification.

Our Solution

        Cardiac diseases are progressive in nature. As a result, there is a significant unmet need for prognostic biomarkers in the chronic setting that help doctors better identify and stratify patients with CVD risk in advance of an acute episode. Our proprietary digital immunoassay platform technology enables the early detection and monitoring of biomarkers with a significantly greater sensitivity than other commercially available platforms, allowing for the measurement and monitoring of biomarkers at previously undetectable levels. We have initially focused our clinical test offerings on CVD through our Advanced CVD Monitoring services. We offer an advanced CVD menu, which includes our proprietary digital heart function and inflammatory tests, as well as non-proprietary tests, to provide physicians with clinically important diagnostic information that enables personalized disease management for both the primary at-risk and secondary prevention patient populations.

        Our test results are provided to physicians via easy-to-interpret patient reports that utilize color coding to highlight risk and track the biomarker concentrations in four CVD-related categories—heart function, inflammation, metabolic and lipids. Our reports enable physicians to develop a personalized treatment plan for patients and to track the success of that plan between office visits.

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    Proprietary Platform Technology

        Our proprietary platform technology measures relevant biomarker concentrations at significantly lower levels than other commercially available technologies, providing physicians with a tool to better stratify CVD risk. The high precision of our platform technology enables physicians to monitor the progression of chronic disease before the onset of severe clinical symptoms. We have improved upon the sensitivity limitations of current immunoassay tests and platforms by utilizing our proprietary nanofluid single molecule immunoassay fluorescence detection platform. Specifically, within our proprietary platform, liquid samples containing fluorescently labeled antibodies flow through a capillary tube that contains a small interrogation space that is illuminated by a laser. These fluorescently labeled antibodies, each one corresponding to a single analyte molecule, are detected by the confocal microscopy as they pass through the interrogation space and generate intense flashes of light. Detected signals with peak intensities above the threshold of background fluorescence are counted as digital events. Our platform thus eliminates the immunoassay background that other technologies include in their detected signal, which allows us to digitize and count the signal generated by each single molecule with a high degree of confidence.

        Current commercially available testing methods generally do not have sufficient sensitivity or precision to enable early detection of chronic disease or monitor subtle changes in biomarker concentration levels. These current methods are thus often limited for use well into the disease progression or even, as in the case of current testing for cTnI, at the time of an acute cardiac event. Numerous studies performed using our proprietary platform technology have shown that people have very low levels of cTnI released into their blood well in advance of an acute cardiac event and also that individuals have a baseline, or stable, concentration level of cTnI. In fact, 99% of healthy individuals have very low, but measurable, cTnI concentration levels which are less than 10 pg/mL, meaning they are at relatively low risk of having a future cardiac event.


Singulex HD cTnI sensitivity for CVD

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        The Apple study demonstrated that people who are not currently diagnosed with CVD, but who have cTnI concentration levels above 10 pg/mL, are at a significantly increased risk of dying due to a cardiac event over the next eight to 15 years. This study examined several biomarkers, including cTnI, to evaluate their predictive ability with respect to CVD mortality in 211 participants and 253 controls, matched on age, sex and study year, who were enrolled in the Minnesota Heart Survey, or MHS. Initiated in 1980, MHS is an ongoing metropolitan population-based study of risk factors of coronary heart disease. The figure above shows that the ability of our platform technology to measure cTnI concentration levels as low as 0.1 pg/mL enables the detection of this biomarker in a much greater number of patients.

Our Advanced CVD Monitoring Services

        In July 2010, we launched our Advanced CVD Monitoring services utilizing our CLIA certified laboratory. The key components of our advanced CVD menu, depicted in the figure below, cover the spectrum of cardiovascular diseases, including coronary heart disease, or CHD, heart attacks, heart failure and stroke, and features four categories of CVD-related tests: heart function, inflammation, metabolic and lipids. The heart function and inflammatory test menu includes our digital proprietary cTnI and inflammatory biomarker tests (Sgx HD IL-6, Sgx HD IL-17A, Sgx HD TNF-a). Physicians can order our complete menu or they can construct an appropriate menu of only specific tests that they believe are relevant to their patients.


Singulex Advanced CVD Test Menu

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        Our digital cTnI assay, which has been used in numerous studies of adults with acute coronary syndromes and has shown the potential for predicting cardiovascular events in patients, offers specific information across the spectrum of CVD progression. By monitoring changes in the amount of cTnI in the blood at levels undetectable by other commercially available technologies, we offer insight into disease progression and a risk assessment tool for physicians to assess whether the patient may require immediate or sustained, medium- or long-term treatment or intervention.

        Our advanced CVD test menu covers the spectrum of CVD progression, including CVD, heart attacks, heart failure and stroke. The progression of CHD includes plaque formation (early stage), plaque progression and plaque rupture (final stage of the disease), as illustrated in the figure below. To help physician's assess the patient's level of chronic inflammation, our advanced CVD menu includes a panel of known inflammatory biomarkers (including our proprietary HD IL-6, IL-17A and TNF-a) associated with atherosclerosis to determine the potential for early stage inflammation in the artery, while our lipid panel provides information on the concentration of lipids in the blood. If elevated levels of inflammatory biomarkers are detected in conjunction with an abnormal lipid panel result, the risk of progression may be compounded.

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The Progression of CHD

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        Our focus is on enabling the improvement of cardiovascular health through innovative technology and personalized treatment tools. Our proprietary tests and testing capabilities provide information to physicians that can help them determine patient risk characteristics with a higher degree of precision, increasing the accuracy of baseline risk characterization and improving the ability to determine the most appropriate degree of aggressiveness in establishing a treatment plan. Potential early adopters of our tests include primary care physicians and cardiologists that are advanced CVD diagnostic users, have offices with in-house phlebotomy capabilities and are members of small practices (with fewer than four physicians). According to a study we funded by, and for which we retained, L.E.K. Consulting, these potential early adopters represent a target market size of approximately 35,000 physicians in the United States, presenting a total market opportunity of approximately $1.2 billion, based on various assumptions.

        Physicians order from us sample processing kits, which include requisitions, blood collection tubes, and pre-labeled specimen shipping containers, required to support their anticipated testing volume. Physicians typically order additional sample processing kits on a weekly basis. The physician will have a phlebotomist or other healthcare professional perform the blood draw for each patient, typically in the physician's office. On average, one to four blood collection tubes are collected per patient based on the number of tests ordered by the physician. The physician or his/her office staff then processes the sample as per our specifications, completes our testing requisition, specifying the patient's demographic and insurance information, and lists all of our tests to be performed for that patient. The patient's blood collection tubes are then packaged with an ice-pack and shipped in our pre-labeled containers to our CLIA laboratory. Depending on the physician's practice test volume, multiple patient samples may be shipped in one of our containers. Blood collection tubes must be kept refrigerated and, in general, must be received by us for testing within four days from the time of blood draw. We enter into written agreements with physicians and laboratories under which we provide reimbursement for the specimen collection, processing and handling services performed by such providers. We believe this reimbursement is based on fair market value for the performance of the described services and that our written agreements are in compliance with applicable law.

        We provide our test results to physicians using easy-to-interpret reports that record the concentrations of biomarkers from the four CVD categories covered by our Advanced CVD Monitoring services. Our test reports include both current test results and historical patient test-related data. Physicians can use this data to monitor the patient's CVD risk, therapeutic response and disease progression over time. Using this comparative data, physicians can make better informed recommendations for subsequent therapeutic/lifestyle interventions and develop a customized treatment plan.

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        We also engage clinical health educators, or CHEs, who educate, support and answer the questions of both physicians and patients on the added value of our CVD menu. Our goal is to enable a physician to have a comprehensive view of a patient's risk for CVD and enable the patient to better comply with the physician's treatment plan. An effective treatment plan can be tailored to the patient's test results and can include the use of therapeutics, lifestyle changes and/or other alternative therapy supplements. In addition, for patients at more elevated levels of risk, additional or follow-up visits may be scheduled to retest the elevated biomarkers as an assessment of the effectiveness of the treatment and the compliance of the patient with the treatment plan. Our test report provides the testing physician the biomarker test history of the patient so it may be used as a monitoring tool for the physician and the patient.

        We believe that our Advanced CVD Monitoring services provide the following benefits to our patients, enabling the reduction in overall healthcare costs and better patient compliance with treatment protocols.

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Our Competitive Strengths

        We believe that our competitive strengths include the following:

    Proprietary digital technology platform:  Our immunoassay diagnostic technology platform is capable of measuring single molecules in previously undetectable biomarker concentrations. Our high precision measurement enables the detection and periodic monitoring of CVD throughout the disease progression continuum. While we have initially utilized our technology for the detection and monitoring of CVD, our digital technology platform can be used to detect and monitor biomarkers that may be predictive of other chronic diseases, including Alzheimer's disease, Parkinson's disease, rheumatoid arthritis, Crohn's disease, certain cancers and inflammatory- and autoimmune-based disease.

    Use of well-known biomarkers:  Our focus on utilizing well-known biomarkers with our digital technology platform allows us to leverage biomarkers known or validated in the acute setting and establish their prognostic value in the chronic monitoring setting. The prognostic value of high sensitivity cTnI for CVD detection in the chronic setting is cited in numerous studies and clinical peer-reviewed publications, including Clinical Chemistry and European Heart Journal. We believe this will reduce barriers to market adoption, lower clinical acceptance costs and alleviate reimbursement coverage decision challenges.

    Focus on large and growing CVD market:  According to the AHA, CVD is the number one cause of death in the United States and is projected to grow substantially. In particular, the AHA estimates that approximately 40% of the U.S. population will have some form of CVD by 2030. Key factors driving increased incidence and prevalence of CVD include an aging population, obesity, smoking, hypertension, diabetes and stress. Approximately 80% of premature CVD deaths are potentially preventable through early identification and management of CVD risk factors according to the WHO. We believe our strategy to provide prognostic value in the growing CVD market will result in physicians using our Advanced CVD Monitoring service to

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      test their patients on a regular basis to detect chronic CVD early and effectively monitor disease progression.

    Differentiated chronic CVD testing solution:  Our Advanced CVD Monitoring services combine our CVD menu with integrated comprehensive reports providing physicians with tools to enable the development of a personalized treatment plan for, and improved monitoring of, patients across the continuum of CVD progression. In addition, our CVD tests enable physicians to better identify and stratify patients at risk of developing CVD in advance of an actual cardiac event. As physicians continue to integrate our CVD testing solution in their patient treatment and monitoring plans, we believe we will be able to leverage these relationships to offer new testing solutions in chronic diseases beyond CVD.

    Relationships with established Life Sciences customers:  We also market and sell our digital technology platform and immunoassay development services to customers in the Life Sciences industry to facilitate their research and drug development efforts. These customers serve as an important validation of our high precision technology platform. We believe that the immunoassay development we undertake for our Life Sciences customers will continue to serve as a pipeline for our diagnostic services by generating additional assays that we may make commercially available in our menu.

Business Strategy

        Our strategy is to be a leader in chronic disease detection and monitoring through our proprietary technology and CVD menu. The key elements of our strategy are the following:

    Achieve broad-based adoption of our advanced CVD menu:  We plan to achieve broad-based adoption of our CVD menu by increasing our sales and marketing presence in the United States with both direct and contracted sales representatives. We believe that our Sgx HD cTnI test, together with our comprehensive CVD menu, is a critical factor in driving this adoption. We also expect to increase our brand awareness through our physician and patient education initiatives, as well as through sponsored research efforts in chronic disease detection and monitoring.

    Increase market awareness and educate physicians about the clinical utility of our advanced CVD menu:  We intend to fund studies which will further demonstrate the clinical utility of well-known biomarkers through peer-reviewed publications. In addition, we intend to continue to work with our clinical advocates and key opinion leaders to further educate our current and potential customers on the clinical utility of our CVD menu. We intend to fund evidence-based healthcare economic studies which will provide empirical support for the potential healthcare cost savings of earlier detection and monitoring of CVD and other chronic diseases.

    Expand our advanced CVD menu:  We will continue to focus on the expansion of our current CVD menu. We intend to introduce additional high-value tests in order to provide physicians with additional tools to implement a personalized treatment and monitoring program. In addition to optimizing our CVD menu, our research and development efforts are targeted at identifying other clinically-relevant and well-known biomarkers in CVD and other chronic diseases.

    Develop and commercialize our second generation platform:  We are currently developing a second generation platform to enable the expansion of our business to the global IVD market. Our second generation system is a benchtop analyzer that we believe will offer significant throughput enhancements, faster results and expanded dynamic range than our current digital platform. We believe securing appropriate regulatory clearances will enable us to widely commercialize our second generation platform and significantly increase our market opportunity. We intend to initially focus our menu on CVD and subsequently on other chronic diseases.

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    Leverage our Life Sciences customer base:  Our Life Sciences customers include many top-tier pharmaceutical companies, academic institutions and CROs focused on biomarker discovery and drug research and development. The use of our digital technology platform in therapeutic research and drug development efforts enables us to work closely with these customers to develop new assays across a variety of chronic diseases. Because we generally retain the proprietary rights to any new assays we develop, we believe these Life Sciences customer relationships can result in new assays expanding our product offering.

Our Digital Technology Platform

        Our digital technology platform is a benchtop single-molecule counting instrument. We combine our digital technology platform with standard commercially available immunoassay sample preparation processes to digitally measure biomarker concentration. Since 2007, we have deployed our digital technology platform to over 20 Life Sciences customer locations for research use. Our open architecture allows our Life Sciences customers to utilize our platform either on their proprietary or conventional immunoassay to get a digital precision benefit for their clinical research and drug development across diseases. In 2009, we validated our digital technology platform and we received CLIA certification for our laboratory in Alameda, CA.

        Our digital technology platform achieves significantly improved sensitivity over other commercially available technologies to accurately quantify biomarker concentration in a variety of biological fluids, including blood plasma/serum and tissue lysates, due to our single molecule fluorescent detection capability. While we have initially focused our test menu on the detection and monitoring of CVD, our digital technology platform can be used to detect and monitor biomarkers that may be predictive of other chronic diseases, including Alzheimer's disease, Parkinson's disease, rheumatoid arthritis, Crohn's disease, certain cancers, and inflammatory- and autoimmune-based disease.

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        Our technology platform enables the accurate and reproducible monitoring of biomarkers at a very low concentration levels of 0.1 pg/mL, to high concentration levels over 1,000 pg/mL. To achieve this level of performance, five key steps are required (depicted in the figure below):

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Life Sciences

        In addition to our Advanced CVD Monitoring service, we also sell our high precision digital technology platform and immunoassay development services to leading pharmaceutical companies, academic institutions and CROs. These Life Sciences customers purchase our immunoassay products, which consist of our digital technology instruments and reagents for use with the instruments, as well as contract for our immunoassay development services whereby we perform testing of customer samples at our laboratory, or we develop specific assays targeted to help them study therapeutic efficacy, pharmacodynamics, pharmacokinetics and drug safety. Our Life Sciences customers utilize our technology to assist in their research and development efforts. Specifically, our digital technology platform enables these customers to remove bottlenecks from their clinical development programs caused by a lack of high sensitivity measurement capabilities. For example, our technology can allow a pharmaceutical company to test the cardiotoxicity profile of a product candidate at a much earlier stage, resulting in more effective development efforts and potential for significant cost savings.

        In addition, the research and development teams of our customers incorporate our digital technology into early-stage biomarker monitoring and validation to identify biomarker candidates for chronic disease management and therapeutic development. Low abundance biomarkers have the potential to provide indications of specific conditions, thus allowing for more precise stratification of patient populations. Chronic low-level inflammation contributes to the pathogenesis of seven of the top 10 causes of mortality in the United States—heart disease, diabetes, stroke, cancer, Alzheimer's, lower respiratory disease and nephritis. Our digital inflammatory panels are currently focused on detecting and monitoring inflammation early, allowing physicians to better manage patients' inflammation. We believe our proprietary inflammatory panel tests will provide the basis for us to utilize our high precision technology in the detection and management of other chronic diseases in addition to CVD.

        We generally retain the proprietary rights to the assays we develop for our Life Sciences customers. We regularly evaluate these assays for potential synergies with our clinical offerings and consider them for potential inclusion in our test menu. We believe that the research and development efforts by our Life Sciences customers will help us expand our advanced monitoring services pipeline in other chronic disease areas, including those that we are currently pursuing in Alzheimer's disease, rheumatoid arthritis and Crohn's disease.

Competition

        We generally compete against providers of conventional lipid panel tests, as well as those providers of more advanced lipoprotein testing systems, with respect to our lipid panel. The lipid panel test is widely ordered by physician offices and performed in substantially all clinical diagnostic laboratories. It is relatively inexpensive and reimbursed by virtually all payors. However, the market for lipid panel tests is highly fragmented, and there is no dominant provider for these tests. Our lipid panel offering also competes against companies that offer other methods for measuring lipoproteins. Among the companies providing these tests are Berkeley HeartLab, Inc., now part of Quest Diagnostics, Atherotech, Inc., LipoScience, Inc., SpectraCell Laboratories, Inc. and Health Diagnostics Laboratory, Inc.

        There are also diagnostic tests available that measure other lipoprotein indicators of cardiovascular disease risk, including apolipoprotein B, or apoB, a protein found on both LDL and VLDL particles. The apoB assay is a non-proprietary test offered by many clinical diagnostic laboratories.

        We do not sell our proprietary Sgx HD cTnI test for use in the acute care setting. Thus, we do not compete with providers of cardiac troponin testing in the acute care setting.

        We expect the competition to intensify within the CVD market as there are several companies in the process of developing new technologies, products and services, including potentially other high-sensitivity troponin assays that may compete with our proprietary cTnI test in the chronic care setting or companies that provide cardiac troponin testing in the acute care setting.

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        We compete against other life science tool companies in our sales efforts to our Life Science customers.

Sales and Marketing

    Advanced CVD Monitoring Services

        We utilize a two-pronged commercial approach in our Advanced CVD Monitoring services by using both contracted sales representatives through our relationship with BlueWave Healthcare Consultants, Inc., or BlueWave, and a direct sales force. We currently have a direct sale force covering 10 states and BlueWave sells our proprietary tests in 19 states. For the year ended December 31, 2011 and the six months ended June 30, 2012, a substantial portion of our revenues from our Advanced CVD Monitoring services was generated by our contracted sales force.

        BlueWave.    In June 2010, we entered into a seven-year agreement with BlueWave to provide our contract sales support. BlueWave is appointed as the exclusive sales agent of our proprietary tests in 18 states and non-exclusive sales agent in one state. BlueWave receives a sales commission based on cash collected by us from sales within these states between approximately 17% and approximately 27% depending on the state. On an annual basis, we mutually agree with BlueWave on certain predefined sales targets. In the event that BlueWave fails to attain these sales targets, we have the option to make BlueWave's appointment non-exclusive. As our exclusive contracted sales agent, BlueWave has agreed not to offer for sale any third party testing services similar to our proprietary tests in the jurisdictions that we have appointed them as exclusive during the term of our sales agreement. In addition, BlueWave has a right of first negotiation to serve as our exclusive sales agent in any states in which we plan to expand our business subject to certain exceptions, including offering all of our proprietary tests that we intend to offer in any such new state. After expiration of the term of our agreement in June 2017, the agreement automatically renews for one-year periods, unless we or BlueWave decide otherwise. We also retain the right to terminate the agreement if BlueWave fails to attain predefined sales goals.

        Direct Sales Force.    In late 2010, we initiated a pilot direct sales force, consisting of two representatives, located in California and northern New Jersey to sell our full CVD menu. Based on the results of this pilot sales force initiative, we have added six additional sales representatives.

    Life Sciences

        We maintain a direct sales force in the United States and a direct and contracted sales force in Europe covering our Life Sciences customers. We intend to expand our direct sales force for Life Sciences customers in the United States, and we also intend to transition from a contracted sales organization in Europe to direct sales and customer support in the three key regions: Northern Europe, including the United Kingdom, Central Europe and Southern Europe. We may also explore business relationships with parties in Japan and other key Asian markets.

Testing and CLIA Laboratory Operations

        We operate our CLIA certified laboratory in Alameda, CA. This laboratory occupies 4,770 of usable square feet of space in our headquarters building in Alameda and is operational six days a week. Currently, the laboratory processes approximately 25,000 tests per week on average and, with additional laboratory staffing, the capacity can be increased to approximately 39,000 tests per week on average using the existing equipment and facilities. We estimate that an additional 15 full-time laboratory employees would be required to support these higher capacity operations.

        Approximately 50% of all ordered tests are our proprietary assays that are run on automated liquid handling robots and read on our digital platform instruments. The remaining ancillary tests are chemistry and immunoassays run on other automated and manual instruments. Typical turn-around time between receipt of a patient blood sample and completion of all ordered tests for each sample for final reporting is approximately four to five business days.

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        Our proprietary tests are internally manufactured, while the majority of the other assays are purchased from Roche, Siemens AG and R&D Systems, Inc.

Research and Development

        Our primary research and development focus is the development of our second generation immunoassay platform for the IVD market. In connection with the commercialization of our second generation system, we intend to pursue regulatory approvals and clearances in target markets, including the United States, with a view towards allowing us to expand our customer base in the United States to include reference laboratories and to enable the decentralization of our technology both in the United States and internationally.

        We believe that our second generation system will be a cost-effective, easy-to-use, high-performance, fully automated platform focused on high-precision immunoassays for advanced management of CVD and other chronic diseases. Our second generation system is expected to include an advanced single-molecule fluorescence detector, which will be based on scanning the sample, as well as integrated reagent dispenser, washing and incubation systems. We anticipate that our second generation system will be less expensive to manufacture and feature an easy-to-use workflow with higher throughput and dynamic range performances.

        We also intend to develop a high-value, high-sensitivity immunoassay IVD test menu for use with our second generation system. We expect to focus our initial test menu on chronic CVD detection and monitoring.

        We are targeting implementation of the initial units of the second generation system in our CLIA laboratory in 2014. As part of our development plans, we may have to conduct clinical studies and seek the appropriate regulatory clearances necessary to enable commercialization of the second generation system and immunoassay tests broadly to clinical and reference laboratories and hospital laboratories with a goal of making the second generation system commercially available by 2016.

        Additionally, we continue to fund early-stage research and clinical studies involving our digital high-precision immunoassay technology and existing biomarkers to identify potential new applications in chronic disease detection and monitoring, as well as studies to identify and validate other biomarkers for our CLIA laboratory.

        As of June 30, 2012, we had 32 employees engaged in research and development functions. Our research and development expenses were $4.4 million, $3.7 million and $6.1 million for the years ended December 31, 2009, 2010 and 2011, respectively, and $4.6 million for the six months ended June 30, 2012.

Intellectual Property

        Our success will depend in part on our ability to develop and maintain patent and other intellectual property rights for key aspects of our technology. We rely upon patents, unpatented trade secrets, know-how and continuing technological innovation to develop and maintain our competitive position. We intend to aggressively protect, defend and extend our intellectual property rights in our technology.

    Patents

        As of June 30, 2012, our patent estate included five issued U.S. and foreign patents and 61 patent applications pending in the United States and various foreign jurisdictions throughout the world. One issued patent covers methods for using our digital platform technology, and one issued patent relates to our second generation system. These patents expire between 2025 and 2029.

    License from the Regents of the University of California

        We co-own with the Regents and have broadly and exclusively licensed from the Regents, under a royalty-bearing license, their interest in U.S. 7,838,250, which expires in 2027, and its related U.S. and

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foreign applications. This patent family covers methods for determining the cardiovascular health of an individual, cardiac damage in an individual and cardiac damage progression in an individual using high sensitivity detection of cTnI. The license provides that the Regents retain rights to make use of the licensed rights for educational and research purposes. Upon entry into the license, we paid the Regents a one-time $25,000 license fee and we are required to pay low single-digit royalites based on net sales of licensed products and methods, subject to a minimum annual royalty of $15,000. Upon the grant of first marketing approval by the FDA for a licensed product, we will be obligated to pay the Regents a one-time $10,000 milestone payment and, upon achievement of a specified sales threshold for licensed products, a one-time $50,000 milestone payment. To date, we have paid the Regents $100,920 pursuant to our obligations under the license agreement. We are obligated under the license to diligently proceed with the development, approval, manufacture and sale of licensed products and services and diligently market licensed products and services in quantities sufficient to meet market demand for the licensed products and services. We are also obligated to submit an application for marketing approval for products covered by the license agreement to the FDA by November 2013, with up to two one-year extensions available. We are obligated to pay the Regents $10,000 for each one-year extension under the license agreement with regard to a submission of an application for marketing approval to the FDA, and we currently anticipate utilizing at least one of the one-year extensions. This license lasts until the expiration or abandonment of the patent rights licenses; however, the Regents may terminate our license if we fail to perform our obligations under the license agreement and do not cure our failure within 60-days after receipt of a notice of default.

    Supply and License Agreement with Invitrogen Corporation/Molecular Probes Inc.

        In June 2006, we entered into a supply and license agreement with Invitrogen Corporation/Molecular Probes Inc. (now a subsidiary of Life Technology Corporation) covering the supply of the fluorescent dye for use in our digital platform technology instruments. The related license for the intellectual property associated with the fluorescent dye is non-exclusive and worldwide and covers the right to use and make use for sale the fluorescent dye. The license agreement also contains an option to license additional intellectual property, should we choose to purchase additional products for supply. We pay a nominal annual minimum royalty, single-digit royalties on net sales of relevant product and services after costs to us, which is creditable against the annual minimum royalty, and a royalty on any technology access fees. Unless terminated earlier, the supply and license agreement lasts until the last to expire of the patents covering the intellectual property. Subject to certain conditions, we may terminate the agreement on 30 days written notice. Invitrogen may terminate the license upon 60 days written notice to us in the event we have not purchased any product supply for a period of at least 12 consecutive months. Either party may terminate the agreement following written notification of a material breach and failure to resolve the breach pursuant to the dispute resolutions provisions of the agreement.

    Trademarks

        We hold registered trademarks in the United States for our marks "Singulex®," "Erenna®" and pending trademark applications for "Sgx LINK" (both for plain text and as a stylized mark), "Sgx HD" and the Singulex logo.

    Trade Secrets

        We require all employees and technical consultants working for us to execute confidentiality agreements, which provide that all confidential information received by them during the course of the employment, consulting or business relationship shall be kept confidential, except in specified circumstances. Our agreements with our employees and consultants provide that all inventions, discoveries and other types of intellectual property, whether or not patentable or copyrightable, conceived by the employee or consultant while the employee or consultant is employed or engaged by us are assigned to us. We cannot provide any assurance, however, that employees and consultants will abide by the terms of these agreements. Despite measures taken to protect our intellectual property,

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unauthorized parties might copy or commercially exploit aspects of our technology or obtain and use information that we regard as proprietary.

Manufacturing

        We manufacture our reagents and proprietary assay research test kits in approximately 2,235 square feet of our laboratory operations facility in Alameda, CA. Our research test kits are manufactured using off-the-shelf components available through multiple suppliers. The manufacturing process uses general laboratory equipment, formulation tanks and overhead mixers to produce the reagents that are assembled into assay kits. In 2011, our manufacturing group produced over 12,000 assay kits and other ancillary reagents and components. Kit capacity in our current facility is a function of the kit batch size and the number of kit batches that can be made. Our current infrastructure is capable of producing six kit batches per month to provide an annual production capacity of 57,600 kits if the kit batch sizes are 800 kits or larger.

        Our current benchtop analyzers are assembled at Invetech Pty, Ltd., a certified diagnostic contract manufacturer located in Australia. The components are sourced from a multitude of U.S. and Australian suppliers. The finished instruments are shipped to our Alameda, CA facilities for final testing and release into inventory.

Reimbursement

        Physicians and other healthcare providers order our tests directly from us. We have the responsibility for securing reimbursement from payors. Billing for laboratory tests is based on complex federal, state and third party payor laws, regulations and requirements governing billing and payments. Such requirements are also subject to change on an ongoing basis.

        Clinical laboratory tests, as with most other healthcare services, are classified for reimbursement purposes according to their respective current procedural terminology, or CPT, codes. We obtain reimbursement for our tests under existing, specific and non-specific CPT codes. Our tests are reimbursed by Medicare, some state Medicaid programs and commercial third party payors. Under current law, most of the tests performed for Medicare beneficiaries or Medicaid recipients are required to be billed to Medicare or Medicaid directly, and we must accept Medicare or Medicaid reimbursement as payment in full. For the year ended December 31, 2011 and the six months ended June 30, 2012, approximately 17% and 19%, respectively, of our revenue was derived from reimbursement from Medicare for tests performed on Medicare covered patients. Outpatient clinical laboratory tests are frequently paid under a clinical laboratory fee schedule, including a Medicare fee schedule. The Medicare clinical laboratory fee schedule and reimbursement levels frequently serve as reference points for commercial third party payors. As of June 30, 2012, major commercial third party payors such as Aetna, United Healthcare, Cigna, Blue Cross Blue Shield and Humana have reimbursed our tests. We do not currently have contracts in place with any commercial third party payor specifying reimbursement rates and other terms, and as a result we are currently reimbursed by these payors on an out-of-network basis.

        Both government and commercial payors are actively involved in efforts to reduce healthcare costs, including reimbursement for clinical laboratory tests. Such efforts, coupled with the complex nature of billing and reimbursement requirements can have a significant impact on our business. The Patient Protection and Affordable Care Act, and the related Healthcare and Education Reconciliation Act, or PPACA, which was recently upheld by the United States Supreme Court, will make substantial changes to the current systems for providing insurance coverage and paying for healthcare services in the United States. We monitor the mix of payors reimbursing for our tests and evaluate our responsibilities under various federal and state regulations governing reimbursement for laboratory tests, as well as the requirements of commercial third party payors.

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Government Regulation

    Laboratory Certification, Accreditation and Licensing

        We have obtained all federal and state licenses, certificates and permits necessary to conduct our diagnostic testing business. CLIA requires us and most clinical laboratories operating in the United States to maintain federal certification. The State of California also requires us to maintain a laboratory license. In addition, the laws of some states require licensure for our laboratory, even though we do not operate a laboratory in those states.

        CLIA imposes requirements relating to test processes, personnel qualifications, facilities and equipment, record keeping, quality assurance and participation in proficiency testing, which involves comparing the results of tests on specimens that have been specifically prepared for our laboratory to the known results of the specimens. The CLIA requirements also apply as a condition for participation by clinical laboratories under the Medicare program. Under the CLIA regulations, the complexity of the tests performed determines the level of regulatory control.

        HHS or an organization to which HHS delegates authority verifies compliance with CLIA standards through periodic on-site inspections. Sanctions for failure to meet these certification, accreditation and licensure requirements include suspension or revocation of the certification, accreditation or license, as well as imposition of plans to correct deficiencies, injunctive actions and civil monetary and criminal penalties. If HHS should remove or suspend our CLIA certificate, we would be forced to cease testing.

    Advertising

        Advertising of our tests is subject to regulation by the Federal Trade Commission, or FTC, under the FTC Act. The FTC Act prohibits unfair or deceptive acts or practices in or affecting commerce. Violations of the FTC Act, such as failure to have substantiation for product claims, would subject us to a variety of enforcement actions, including compulsory process, cease and desist orders and injunctions, which can require, among other things, limits on advertising, corrective advertising, consumer redress and restitution, as well as substantial fines or other penalties. Any enforcement actions by the FTC could have a material adverse effect our business.

    HIPAA and Other Privacy Laws

        The Health Insurance Portability and Accountability Act of 1996, or HIPAA, established for the first time comprehensive protection for the privacy and security of health information, and the Health Information Technology for Economic and Clinical Health Act of 2009, or HITECH, expanded upon the data security requirements of HIPAA. The HIPAA standards apply to three types of organizations, or "Covered Entities": health plans, healthcare clearing houses, and healthcare providers which conduct certain healthcare transactions electronically. Covered Entities and their business associates must have in place administrative, physical, and technical standards to guard against the misuse of individually identifiable health information. Because we are a healthcare provider and we conduct certain healthcare transactions electronically, we are presently a Covered Entity, and we must have in place the administrative, physical, and technical safeguards required by HIPAA, HITECH and their implementing regulations. Additionally, some state laws impose privacy protections more stringent than HIPAA. We may perform future activities which may subject us to HIPAA, such as providing clinical additional laboratory testing services or entering into specific kinds of relationships with a Covered Entity or a business associate of a Covered Entity.

        If we or our operations are found to be in violation of HIPAA, HITECH or their implementing regulations, we may be subject to penalties, including civil and criminal penalties, fines, exclusion from participation in U.S. federal or state healthcare programs and the curtailment or restructuring of our

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operations. HITECH increased the civil and criminal penalties that may be imposed against Covered Entities, their business associates and possibly other persons and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorneys' fees and costs associated with pursuing federal civil actions.

        Our activities must also comply with other applicable privacy laws. For example, there are also international privacy laws that impose restrictions on the access, use and disclosure of health information. All of these laws may impact our business. Our failure to comply with these privacy laws or significant changes in the laws restricting our ability to obtain tissue samples and associated patient information could significantly impact our business and our future business plans.

    Federal and State Billing and Fraud and Abuse Laws

        Antifraud Laws/Overpayments.    As participants in federal and state healthcare programs, we are subject to numerous federal and state antifraud and abuse laws. Many of these antifraud laws are broad in scope, and neither the courts nor government agencies have extensively interpreted these laws. Prohibitions under some of these laws include:

    the submission of false claims or false information to government programs;

    deceptive or fraudulent conduct;

    excessive or unnecessary services or services at excessive prices; and

    under federal law, prohibitions in defrauding private sector health insurers.

        We could be subject to substantial penalties for violations of these laws, including denial of payment and refund demands, suspension of Medicare payments and exclusion from participation in the federal healthcare programs, as well as civil monetary and criminal penalties and imprisonment. One of these statutes, the Civil False Claims Act, is a key enforcement tool used by the government to combat healthcare fraud. The Civil False Claims Act imposes liability on any person who, among other things, knowingly presents, or causes to be presented, a false or fraudulent claim for payment by a federal healthcare program. In addition, violations of the federal physician self-referral laws, such as the Stark laws discussed below, may also violate false claims laws. Liability under the Civil False Claims Act can result in treble damages and imposition of penalties. For example, we could be subject to penalties of $5,500 to $11,000 per false claim, and each use of our tests could potentially be part of a different claim submitted to the government. Separately, the HHS office of the Office of Inspector General, or OIG, can exclude providers found liable under the Civil False Claims Act from participating in federally funded healthcare programs, including Medicare. The steep penalties that may be imposed on laboratories and other providers under this statute may be disproportionate to the relatively small dollar amounts of the claims made by these providers for reimbursement. In addition, even the threat of being excluded from participation in federal healthcare programs can have significant financial consequences on a provider.

        Numerous federal and state agencies enforce the antifraud and abuse laws. In addition, private insurers may also bring private actions or may encourage and support federal and state legislation regarding reimbursement. In some circumstances, private whistleblowers are authorized to bring fraud suits on behalf of the government against providers and are entitled to receive a portion of any final recovery.

    Federal and State "Self-Referral" and "Antikickback" Restrictions

        Self-Referral law.    We are subject to a federal "self-referral" law, commonly referred to as the "Stark" law, which provides that physicians who, personally or through a family member, have ownership interests in or compensation arrangements with a laboratory are prohibited from making a

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referral to that laboratory for laboratory tests reimbursable by Medicare. The Stark law also prohibits laboratories from submitting a claim for Medicare payments for laboratory tests referred by physicians who, personally or through a family member, have ownership interests in or compensation arrangements with the testing laboratory. The Stark law contains a number of specific exceptions which, if met, permit physicians who have ownership or compensation arrangements with a testing laboratory to make referrals to that laboratory and permit the laboratory to submit claims for Medicare payments for laboratory tests performed pursuant to such referrals.

        We are also subject to comparable state laws, some of which apply to all payors regardless of source of payment and do not contain identical exceptions to the Stark law.

        We monitor the impact of such Stark laws on requests for our testing services from physicians who are members of our advisory board. We do not bill Medicare, or any other federal program, or seek reimbursement from other third party payors for tests ordered by such physicians. The self-referral laws may cause some physicians who would otherwise use our laboratory to use other laboratories for their testing.

        Providers are subject to sanctions for claims submitted for each service that is furnished based on a referral prohibited under the federal self-referral laws. These sanctions include denial of payment and refunds, civil monetary payments and exclusion from participation in federal healthcare programs and civil monetary penalties.

        Anti-Kickback Statute.    The federal Anti-Kickback Statute prohibits persons from knowingly and willfully soliciting, receiving, offering or paying remuneration, directly or indirectly, to induce either the referral of an individual, or the furnishing, recommending, or arranging for a good or service, for which payment may be made under a federal healthcare program, such as the Medicare and Medicaid programs. The term "remuneration" is not defined in the federal Anti-Kickback Statute and has been broadly interpreted to include anything of value, including for example, gifts, discounts, the furnishing of supplies or equipment, credit arrangements, payments of cash, waivers of payment, ownership interests and providing any item, service or compensation for something other than fair market value. The reach of the Anti-Kickback Statute was also broadened by the Patient Protection and Affordable Care Act of 2010, or PPACA, which, among other things, amends the intent requirement of the federal Anti-Kickback Statute and certain criminal healthcare fraud statutes, effective March 23, 2010. Pursuant to the statutory amendment, a person or entity no longer must have actual knowledge of this statute or specific intent to violate it in order to violate the statute. In addition, PPACA provides that the federal government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the Civil False Claims Act or the civil monetary penalties statute. The civil monetary penalties statute imposes penalties against any person who is determined to have presented, or caused to be presented, to a federal health program a claim that the person knows or should know is for an item or service that was not provided as claimed or is false or fraudulent. Sanctions for violations of the federal Anti-Kickback Statute may include imprisonment and other criminal penalties, civil monetary penalties and exclusion from participation in federal healthcare programs.

        The OIG has criticized a number of the business practices in the clinical laboratory industry as potentially implicating the Anti-Kickback Statute, including compensation arrangements intended to induce referrals between laboratories and entities from which they receive, or to which they make, referrals.

        Many states have also adopted laws similar to the federal Anti-Kickback Statute, some of which apply to the referral of patients for healthcare items or services reimbursed by any source, not only the Medicare and Medicaid programs, and do not contain identical safe harbors.

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        Both the federal Anti-Kickback Statute and some state anti-kickback law are broad in scope. Neither the courts nor federal or state agencies have extensively interpreted these laws. The anti-kickback laws clearly prohibit payments for patient referrals. Under a broad interpretation, these laws could also prohibit a broad array of practices involving remuneration where one party is a potential source of referrals for the other.

        Other Compliance Requirements.    If we or our operations are found to be in violation of any of the laws described above or any other governmental regulations that apply to us, we may be subject to penalties, including civil and criminal penalties, damages, fines, exclusion from participation in U.S. federal or state healthcare programs and the curtailment or restructuring of our operations. We may also be subject to penalties, damages, and civil liabilities for violations of HIPAA, HITECH and other privacy laws. We are subject to federal and state laws that require healthcare providers to adopt written policies and procedures for billing, sales and marketing and reimbursement activities, designate privacy and compliance officers, provide ongoing training and, in some cases, self-reporting of overpayments to government and other payors. To the extent that any of our tests are sold in a foreign country in the future, we may be subject to similar foreign laws and regulations, which may include, for instance, applicable post-marketing requirements, including safety surveillance, anti-fraud and abuse laws, implementation of corporate compliance programs, reporting of payments or transfers of value to healthcare professionals and privacy laws that may be more stringent than those applicable to our business in the United States. To reduce the risks associated with these various laws and governmental regulations, we are in the process of adopting a written compliance plan based on the model compliance program for clinical laboratories published by the Office of Inspector General. We will monitor and amend, as needed, such compliance plan as our business grows and changes. Although compliance programs can mitigate the risk of investigation and prosecution for violations of these laws, the risks cannot be entirely eliminated. Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management's attention from the operation of our business. Moreover, achieving and sustaining compliance with applicable federal and state privacy, security and fraud laws may prove costly.

        In addition, governmental regulations and commercial third party payor rules governing the ordering, reporting and reimbursement for laboratory tests are continually subject to review and refinement. We anticipate that we may need to adapt our policies, procedures and compliance plan in the future to address any such changes.

    Other Laws

        Laboratory-Developed Tests.    Our proprietary tests are considered laboratory-developed tests, or LDTs. The FDA maintains that LDTs are subject to the FDA's authority as diagnostic medical devices under the FDCA, but historically the FDA has exercised its enforcement discretion and not enforced applicable regulations with respect to most tests performed by CLIA-certified laboratories. The FDA has recently indicated that it intends to reconsider its current policy of enforcement discretion and to begin drafting an oversight framework for LDTs.

        Specimen Transportation.    We also are subject to regulations of the Department of Transportation, the United States Postal Service and the CDC which apply to the surface and air transportation of clinical laboratory specimens.

        Environmental Compliance.    We handle and dispose of human fluids and medical waste, such as vials and needles, in connection with our operations. The fluids and waste are treated as biohazardous material. We must comply with numerous federal, state and local statutes and regulations, particularly, to the extent applicable, the Medical Waste Tracking Act of 1988 and the Resource Conservation and Recovery Act. The statutes with which we must comply relate to public health and the environment, including practices and procedures for labeling, handling and storage of, and public disclosure

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requirements regarding, medical waste, hazardous and toxic materials or other substances generated by operation of clinical laboratories. We must also comply with environmental protection requirements, such as standards relating to the discharge of pollutants into the air, water and land, emergency response and remediation or cleanup in connection with medical waste, hazardous and toxic materials or other substances.

Additional Government Regulation That May Apply to us in the Future

        Although we are continuing to develop our commercialization strategy for our second generation system, we expect that as we commercialize such second generation system to make our technology platform and CVD menu more widely available through clinical and reference laboratories and hospitals we will become subject to additional government regulations both in the United States and internationally relating to regulatory clearances for IVDs.

        In the United States, IVDs are regulated by the FDA as medical devices under the Federal Food, Drug and Cosmetic Act, or FDCA. There are two regulatory pathways to receive authorization to market in vitro diagnostics: a 510(k) premarket notification and a premarket approval application, or PMA. The FDA makes a risk-based determination as to the pathway for which a particular in vitro diagnostic is eligible.

        The information that must be submitted to the FDA in order to obtain clearance or approval to market a new medical device varies depending on how the medical device is classified by the FDA. Medical devices are classified into one of three classes on the basis of the controls deemed by the FDA to be necessary to reasonably ensure their safety and effectiveness. Class I devices are subject to general controls, including labeling and adherence to FDA's quality system regulation, which are device-specific good-manufacturing practices. Class II devices are subject to general controls and special controls, including performance standards and postmarket surveillance. Class III devices are subject to most of these requirements, as well as to premarket approval. Most Class I devices are exempt from premarket submissions to the FDA; most Class II devices require the submission of a 510(k) premarket notification to the FDA; and Class III devices require submission of a PMA. Most in vitro diagnostic kits are regulated as Class I or II devices and are either exempt from premarket notification or require a 510(k) submission.

        A 510(k) notification requires the sponsor to demonstrate that a medical device is substantially equivalent to another marketed device, termed a "predicate device," that is legally marketed in the United States and for which a PMA was not required. A device is substantially equivalent to a predicate device if it has the same intended use and technological characteristics as the predicate or if it has the same intended use but different technological characteristics and the information submitted to the FDA does not raise new questions of safety and effectiveness and demonstrates that the device is at least as safe and effective as the legally marketed device. The FDA's performance goal review time for a 510(k) notification is 90 days from the date of receipt, however, in practice, the review often takes longer. In addition, the FDA may require information regarding clinical data in order to make a decision regarding the claims of substantial equivalence. Clinical studies of in vitro diagnostic products are typically designed with the primary objective of obtaining analytical or clinical performance data. If the FDA believes that the device is not substantially equivalent to a predicate device, it will issue a "Not Substantially Equivalent" letter and designate the device as a Class III device, which will require the submission and approval of a PMA before the new device may be marketed.

        The PMA process is more complex, costly and time-consuming than the 510(k) process. A PMA must be supported by more detailed and comprehensive scientific evidence, including clinical data, to demonstrate the safety and efficacy of the medical device for its intended purpose. If the device is determined to present a "significant risk," the sponsor may not begin a clinical trial until it submits an investigational device exemption, or IDE, to the FDA and obtains approval from the FDA to begin the

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trial. After the PMA is submitted, the FDA has 45 days to make a threshold determination that the PMA is sufficiently complete to permit a substantive review. If the PMA is complete, the FDA will file the PMA. The FDA is subject to a performance goal review time for a PMA of 180 days from the date of filing, although in practice this review time is longer. Questions from the FDA, requests for additional data and referrals to advisory committees may delay the process considerably. Indeed, the total process may take several years, and there is no guarantee that the PMA will ever be approved. Even if approved, the FDA may limit the indications for which the device may be marketed. The FDA may also request additional clinical data as a condition of approval or after the PMA is approved. Any changes to the medical device may require a supplemental PMA to be submitted and approved.

        Under the medical device regulations, the FDA regulates quality control and manufacturing procedures by requiring medical device manufacturers to demonstrate and maintain compliance with the quality system regulation, which sets forth the FDA's current good-manufacturing practices requirements for medical devices. The FDA monitors compliance with the quality system regulation and current good-manufacturing practices requirements by conducting periodic inspections of manufacturing facilities. In the future, we could be subject to unannounced inspections by the FDA. Violations of applicable regulations noted by the FDA, during inspections of our manufacturing facilities or the manufacturing facilities of these third parties, could adversely affect the continued marketing of our tests.

        The FDA also enforces post-marketing controls that include the requirement to submit medical device reports to the agency when a manufacturer becomes aware of information suggesting that any of its marketed products may have caused or contributed to a death, serious injury or serious illness or when any of its products has malfunctioned and a recurrence of a malfunction would likely cause or contribute to a death or serious injury or illness. The FDA relies on medical device reports to identify product problems and utilizes these reports to determine, among other things, whether it should exercise its enforcement powers. The FDA may also require postmarket surveillance studies for specified devices.

        FDA regulations also govern, among other things, the preclinical and clinical testing, manufacture, distribution, labeling and promotion of medical devices. In addition to compliance with good-manufacturing practices and medical device reporting requirements, we will be required to comply with the FDCA's general controls, including establishment registration, device listing and labeling requirements. If we fail to comply with any requirements under the FDCA, we could be subject to, among other things, fines, injunctions, civil penalties, recalls or product corrections, total or partial suspension of production, denial of premarket notification clearance or approval of products, rescission or withdrawal of clearances and approvals, and criminal prosecution. We cannot assure you that any final FDA policy, once issued, or future laws and regulations concerning the manufacture or marketing of medical devices will not increase the cost or time to market of new or existing tests. Furthermore, any current or future federal and state regulations also will apply to future tests developed by us.

        If our promotional activities fail to comply with these FDA regulations or guidelines, we may be subject to warnings from, or enforcement action by, these authorities. In addition, our failure to follow FDA rules and guidelines relating to promotion and advertising may cause the FDA to issue warning letters or untitled letters, suspend or withdraw a product from the market, require a recall or institute fines or civil fines, or could result in disgorgement of money, operating restrictions, injunctions or criminal prosecution.

        International sales of medical devices are subject to foreign government regulations, which vary substantially from country to country. The primary regulatory environment in Europe is that of the European Union, or EU, which includes most of the major countries in Europe. Currently, 27 countries make up the EU. Other countries, such as Switzerland, have voluntarily adopted laws and regulations that mirror those of the EU with respect to medical devices. The EU has adopted numerous directives

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and standards regulating the design, manufacture, clinical trials, labeling and adverse event reporting for medical devices. Devices that comply with the requirements of a relevant directive will be entitled to bear the CE conformity marking, indicating that the device conforms to the essential requirements of the applicable directives and, accordingly, can be commercially distributed throughout Europe.

        Outside of the EU, regulatory approval needs to be sought on a country-by-country basis in order to market medical devices. Although there is a trend towards harmonization of quality system standards, regulations in each country may vary substantially which can affect timelines of introduction.

Employees

        As of June 30, 2012, we had 177 total employees. We have no collective bargaining agreements with our employees and we have not experienced any work stoppages. We consider our employee relations to be good.

Facilities

        Our corporate headquarters, including our CLIA laboratory, are located in Alameda, California, where we currently lease approximately 34,000 square feet of office and laboratory space. The primary lease for these facilities, as amended in January 2008, covers approximately 34,000 square feet of office and laboratory space and expires in February 2013. The short-term lease covers additional office space of approximately 1,754 square feet and is terminable upon 60 days' written notice from either party. In August 2012, we entered into a new lease for our corporate headquarters, including a CLIA laboratory, in Alameda, California covering approximately 52,000 square feet. This lease commences on February 1, 2013 and expires in June 2023. We have the option to renew the lease for two five-year additional terms.

        We believe that our current facilities are suitable and adequate to meet our current needs and that suitable additional or substitute space will be available to accommodate future growth of our business.

Legal Proceedings

        We are not currently a party to any pending legal proceedings. However, we may be subject to various claims and legal actions arising in the ordinary course of business from time to time.

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Management

Executive Officers and Directors

        The following table sets forth information regarding our executive officers and directors, as of October 1, 2012:

Name
  Age   Position(s)

Executive Officers

         

Philippe J. Goix, Ph.D. 

    52   Director, President and Chief Executive Officer

Michael Bell

    43   Chief Financial Officer

Frederick Steven Feinberg

    60   Senior Vice President of Sales and Marketing and Chief Commercial Officer

Guido Baechler

    47   Senior Vice President, Operations

Non-Employee Directors

         

Heiner Dreismann, Ph.D.(2)(3)

    59   Lead Independent Director

Carl L. Gordon, Ph.D., CFA(1)(2)

    47   Director

André Marion(1)(3)

    77   Director

R. Douglas Norby(1)(2)

    77   Director

Stephen L. Rose, CMA(3)

    47   Director

Fred K. Vogt

    67   Director

(1)
Member of the audit committee.

(2)
Member of the compensation committee.

(3)
Member of the nominating and corporate governance committee.

Executive Officers

        Philippe J. Goix, Ph.D. has served as our President and Chief Executive Officer and a member of our board of directors since September of 2004. Dr. Goix has more than a decade of entrepreneurial biotechnology experience leading product-centered innovation companies backed by institutional venture capitalists. Prior to joining us, Dr. Goix held successive positions as President and Chief Technology Officer of Guava Technologies, Inc., a biotechnology and medical device company that he founded in June of 1997. Prior to this experience, Dr. Goix worked for more than 15 years in the field of laser analytical devices applied to fluid mechanics. He worked at the French National Center for Scientific Research, as a research associate, at Sandia National Laboratories and at Stanford University, as a scientist working with laser-based diagnostic tools and complex fluidics systems. Dr. Goix holds a doctorate in Physics from University of Rouen, France and an MBA from the University of San Francisco. As our President and Chief Executive Officer for over seven years, Dr. Goix brings expertise and knowledge regarding our business and operations to our board of directors. He also brings to our board of directors leadership skills, strategic guidance and operational vision from prior experience in our industry.

        Michael Bell has served as our Chief Financial Officer since May of 2012. As a finance professional, Mr. Bell has more than 18 years of international experience gained from a range of strategic, commercial and operational finance positions. From 2008 to 2012, Mr. Bell held finance positions at Novartis Diagnostics, and prior to joining us served as Global Head of Finance where he was a member of the Diagnostics Leadership Team and had overall responsibility for finance and accounting across the worldwide business. From 2006 to 2008, Mr. Bell served as Finance Head for the Asia Pacific, Middle East & Africa regions for Novartis Vaccines, where he focused on commercial finance strategies and operations in emerging markets. Prior to this, Mr. Bell was a Finance Director

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for Chiron Corporation, a multinational biotechnology firm. Before joining the healthcare industry, Mr. Bell spent 10 years in public accounting with Ernst & Young LLP and Deloitte Touche Tohmatsu Limited, where he led a wide-range of audit and consulting engagements. Mr. Bell is a Fellow of the Institute of Chartered Accountants in England & Wales and received a bachelor's degree in Mathematics with Computing from the University of Leicester in the United Kingdom.

        Frederick Steven Feinberg has served as our Senior Vice President of Sales and Marketing and our Chief Commercial Officer since October 2011 and has more than 30 years of experience in the healthcare industry. Prior to joining us, from 2008 until 2011, Mr. Feinberg was the Vice President and Zone General Manager for Siemens Healthcare, an international supplier of diagnostic and therapeutic equipment, where he was responsible for the healthcare business in the western zone of the United States. From 2006 to 2008, Mr. Feinberg served as President and Chief Executive Officer of Siemens Asahi Medical Technologies in Japan, and from 2001 until 2006, he served as President of Siemens China Medical Solutions Group and was appointed Executive Vice President and a member of the Management Board for Siemens China. From 2002 until 2008, Mr. Feinberg served as member of the boards of directors of several subsidiaries of Siemens AG. Prior to joining Siemens, Mr. Feinberg held various senior management positions for medical device companies such as Acuson Corporation, Diasonics, Inc., General Electric, Inc. and Medtronic, Inc. Mr. Feinberg holds a bachelor's degree in Biological Sciences from the University of California, Davis and a Nuclear Medicine Technology Diploma from the University of Southern California/LA County Medical Center.

        Guido Baechler has served as our Senior Vice President of Operations since January of 2010, and prior to this, he served as our Vice President of Diagnostics from 2008 until 2009. From 1989 until 2008, Mr. Baechler held leadership positions at Roche Molecular Diagnostics, or RMD, in both Switzerland and California, within research, development, marketing and executive management. Immediately prior to joining us, Mr. Baechler served as the Head of Operational Project Management at RMD where he led the implementation of the diagnostic project pipeline. Prior to this experience, he served as Vice President of Global Program Management and a member of the RMD executive team. Mr. Baechler holds a bachelor's degree in Electrical Engineering from Fachhochschule Brugg-Windisch in Switzerland. He also completed a series of executive finance and management classes at the London School of Business and at the Haas Business School in Berkeley.

Non-Employee Directors

        Heiner Dreismann, Ph.D. has been a member of our board of directors since June of 2007 and has over 26 years of experience in biotech and healthcare companies. Since May of 2008, Dr. Dreismann has served as Interim Chief Executive Officer of GeneNews Limited, a public diagnostics company. From 2006 until 2009, Dr. Dreismann served as the Chief Executive Officer of Vectrant Technologies, Inc., an early-stage molecular diagnostic company. From 2001 until 2006, Dr. Dreismann served as President and Chief Executive Officer of Roche Molecular Systems, Inc., a division of Hoffmann-La Roche Ltd., or Roche, focused on clinical molecular diagnostics. Before serving in these roles, he held various management positions in Roche, among them Head of Integration Office Diagnostics and Head of Global Business Development for Roche Diagnostics. Dr. Dreismann currently serves on the boards of directors of Myriad Genetics, Inc., Med BioGene Inc. and GeneNews Ltd., each a public company in the life sciences and healthcare diagnostics sectors. Dr. Dreismann received his M.A. in Biology and his Ph.D. in Microbiology/Molecular Biology both from Westfaelische Wilhelms University (The University of Münster) in Germany. Dr. Dreismann brings to our board of directors significant expertise in the biotech and healthcare sectors from both his advanced degree and from previous executive leadership positions. In addition, Dr. Dreismann's experience as a director of public life sciences companies provides the board of directors with valuable insights to assist in achieving our goals.

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        Carl L. Gordon, Ph.D., CFA has been a member of our board of directors since June of 2007. Dr. Gordon co-founded OrbiMed Advisors LLC, or OrbiMed, in 1998, and since that time, he has served as a General Partner and Co-Head of Private Equity. He is experienced in both private equity and small-capitalization public equity investments. Prior to his experience at OrbiMed, Dr. Gordon was a senior biotechnology analyst at Mehta and Isaly, a pharmaceutical consulting firm and predecessor to OrbiMed, from 1995 to 1997. From 1993 to 1995, Dr. Gordon was a fellow at The Rockefeller University. He received his Ph.D. in Molecular Biology from the Massachusetts Institute of Technology and a bachelor's degree from Harvard College. From August 2009 until June 2012, Dr. Gordon also served on the board of directors of Complete Genomics, Inc., a life sciences company. As a venture capitalist focused on life science companies who sits on numerous boards, Dr. Gordon provides financial and operational expertise regarding our industry. In addition, Dr. Gordon provides substantial expertise in the particularly relevant scientific field of molecular biology, and his financial credentials are valuable toward his service on our audit committee.

        André Marion has been a member of our board of directors since June of 2006. Mr. Marion is an experienced entrepreneur and industry expert who obtained over 25 years of management and commercialization experience in the life sciences industry before his retirement in 1995. Mr. Marion was a founder of Applied Biosystems, Inc., or ABI, a large supplier of instruments for the biotechnology research market, where he worked from 1981 until 1995. He served as President, Chief Executive Officer and chairman of the board of directors from 1987 through the time of ABI's merger with Perkin Elmer Corporation in 1993. Prior to founding ABI, Mr. Marion held several research and development managerial positions at Hewlett-Packard Corporation. Mr. Marion holds an advanced degree from the French École Nationale Supérieure d'Arts et Métiers in both Mechanical and Electrical Engineering. With decades of experience in the life science sector, Mr. Marion provides our board of directors with seasoned business judgment and valuable insights relevant to our industry.

        R. Douglas Norby has been a member of our board of directors since July of 2012. Mr. Norby acquired more than 25 years of experience working as a financial executive in a range of industries for both early-stage and public companies before he retired from full-time employment in 2006. From 2003 until 2006, Mr. Norby served as the Senior Vice President and Chief Financial Officer for Tessera Technologies, Inc., a public semiconductor intellectual property company. Prior to his experience at Tessera, from 2000 to 2003, Mr. Norby served as the Chief Financial Officer for Zambeel, Inc., a data storage company, and Novalux, Inc., a manufacturer of lasers for optical networks. Prior to holding these positions, from 1996 to 2000, Mr. Norby served as the Senior Vice President and Chief Financial Officer of LSI Logic Corporation, a semiconductor company, where he also served as a director. From 1993 to 1996, Mr. Norby served as the Senior Vice President and Chief Financial Officer of Mentor Graphics Corporation, a software company. Mr. Norby served as President of Pharmetrix Corporation, a drug delivery company, from 1992 to 1993, and from 1985 to 1992, he was President and Chief Operating Officer of Lucasfilm, Ltd., an entertainment company. Prior to this experience, from 1979 to 1985, Mr. Norby was Senior Vice President and Chief Financial Officer of Syntex Corporation, a pharmaceutical company. Mr. Norby is currently a director of several semiconductor companies including Ikanos Communications, Inc., InvenSense, Inc., MagnaChip Semiconductor Corp and STATS ChipPAC, Ltd. He is also currently a director of Alexion Pharmaceuticals, Inc., a pharmaceutical company, and was a director of Intellon Corporation, a semiconductor company, from 2007 to 2009. Mr. Norby received a bachelor's degree in Economics from Harvard University and an M.B.A. from Harvard Business School. Mr. Norby brings to our board or directors extensive experience related to business and financial issues as well as financial credentials and expertise conducive to his service on our audit committee.

        Stephen L. Rose, CMA has been a member of our board of directors since September of 2004. Since 1997, Mr. Rose has managed the venture capital investments of H. Fisk Johnson, Ph.D., Chairman of the Board, the Chairman and Chief Executive Officer of S.C. Johnson and Son Inc., or S.C. Johnson.

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In January of 2001, Mr. Rose became a member of Fisk Ventures, LLC, or Fisk, which was formed to manage these investments. In 2005, Mr. Rose was appointed as a Managing Director of Fisk, and he continues in these roles to this day. In this capacity, Mr. Rose serves on the boards of several early-stage, technology-based companies and has over 15 years of experience in venture investing. Mr. Rose previously has held several positions with S.C. Johnson, both in the United States and in Canada, including positions in strategic planning, new business and new product development, and financial and business management. Mr. Rose has an Honors Bachelor of Commerce degree from McMaster University and is also a Certified Management Accountant. As a venture capitalist with experience on several emerging company boards, Mr. Rose provides our board of directors with financial and operational expertise.

        Fred K. Vogt has been a member of our board of directors since our incorporation in 2002. Prior to his retirement in 2000, Mr. Vogt amassed 28 years of operations and manufacturing experience in the pharmaceutical industry, and he currently provides consulting services to senior management executives through FKV Enterprises LLC. From 1997 until 2000, Mr. Vogt served as a Senior Vice President of Specialty Chemicals at Tetra Technologies Inc., a chemical manufacturer. Prior to this experience, he worked for 25 years for Mallinckrodt, Inc., a chemical and pharmaceutical company, in a variety of manufacturing and business positions. Mr. Vogt has a bachelor's degree in Chemical Engineering, a master's degree in Engineering Administration and Honorary Professional Chemical Engineering degree from the University of Missouri at Rolla. Mr. Vogt brings to our board of directors a long-standing familiarity with our business, including industry and operational experience.

Board Composition

Director Independence

        Our board of directors currently consists of seven members, including our Chief Executive Officer, Dr. Goix. Effective immediately prior to the effectiveness of the registration statement of which this prospectus is a part, Mr. Vogt will cease to be a member of our board of directors and our board of directors will consist of six directors. Our board of directors has determined that all of our directors qualify as "independent" directors in accordance with the New York Stock Exchange, or NYSE, listing requirements, other than Dr. Goix. Dr. Goix is not considered independent because he is an employee of Singulex. The NYSE independence definitions include a series of objective tests, such as that the director is not, and has not been for at least three years, one of our employees and that neither the director nor any of his family members has engaged in various types of business dealings with us. In making these determinations, our board of directors will review and discuss information provided by the directors and us with regard to each director's business and personal activities and relationships as they may relate to us and our management. There are no family relationships among any of our current directors or executive officers.

Classified Board of Directors

        In accordance with our amended and restated certificate of incorporation to be in effect immediately prior to the consummation of this offering, our board of directors will be divided into three classes with staggered, three-year terms. At each annual meeting of stockholders, the successors to directors whose terms then expire will be elected to serve from the time of election and qualification until the third annual meeting following election. Effective upon the consummation of this offering, our directors will be divided among the three classes as follows:

    the Class I directors will be Heiner Dreismann, Ph.D. and Philip J. Goix, Ph.D. and their terms will expire at the annual meeting of stockholders to be held in 2013;

    the Class II directors will be Carl L. Gordon, Ph.D., CFA and R. Douglas Norby and their terms will expire at the annual meeting of stockholders to be held in 2014; and

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    the Class III directors will be André Marion and Stephen L. Rose, CMA and their terms will expire at the annual meeting of stockholders to be held in 2015.

        Our amended and restated certificate of incorporation will provide that the authorized number of directors may be changed only by resolution of the board of directors. Any additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors. The division of our board of directors into three classes with staggered three-year terms may delay or prevent a change of our management or a change in control of our company.

Voting Arrangements

        The election of the members of our board of directors is governed by the amended and restated investors rights agreement that we have entered into with certain holders of our common stock and holders of our convertible preferred stock. Pursuant to the amended and restated investors rights agreement the authorized number of directors on our board of directors shall be established at nine directors. The amended and restated investors rights agreement also provides that:

    the holders of a majority of our Series A Preferred Stock, voting separately as a single class, have the right to designate one director to our board of directors, and the holders have designated Mr. Vogt;

    for so long as Prolog Ventures, LLC and certain of its affiliates hold at least 25% of the number of shares of Series B Preferred Stock initially purchased by them (or shares issued upon conversion thereof), Prolog has the right to designate one director to our board of directors, and this seat is currently vacant;

    for so long as Fisk Ventures, LLC and certain of its affiliates hold at least 25% of the number of shares of Series C Preferred Stock initially purchased by them (or shares issued upon conversion thereof), Fisk has the right to designate one director to our board of directors, and Fisk has designated Mr. Rose;

    for so long as OrbiMed Advisors, LLC and certain of its affiliates hold at least 25% of the number of shares of Series D Preferred Stock initially purchased by them (or shares issued upon conversion thereof), OrbiMed has the right to designate one director to our board of directors, and OrbiMed has designated Dr. Gordon;

    for so long as JAFCO Co. Ltd. and certain of its affiliates hold at least 25% of the number of shares of Series E Preferred Stock initially purchased by them (or shares issued upon conversion thereof), JAFCO has the right to designate one director to our board of directors, and this seat is currently vacant;

    one director on our board of directors is to be the current Chief Executive Officer of the Company, who is currently Dr. Goix; and

    three additional directors on our board of directors are designated by a majority of the directors listed above, and such directors have designated Dr. Dreismann, Mr. Marion and Mr. Norby.

        The holders of our common stock and preferred stock who are parties to our amended and restated investors rights agreement are obligated to vote for such designees indicated above. The provisions of this agreement will terminate upon the consummation of this offering, after which there will be no further contractual obligations regarding the election of our directors. Our directors hold office until their successors have been elected and qualified or appointed, or the earlier of their death, resignation or removal.

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Leadership Structure of the Board

        Our bylaws and corporate governance guidelines provide our board of directors with flexibility to combine or separate the positions of Chairman of the Board and Chief Executive Officer and/or the implementation of a lead director in accordance with its determination that utilizing one or the other structure would be in the best interests of our company. At the current time, we do not have a Chairman of the Board. Our board of directors believes that oversight of our company is the responsibility of our board of directors as a whole, and this responsibility can be properly discharged without a Chairman. Our President and Chief Executive Officer, Dr. Goix, facilitates communications between members of our board of directors and works with management in the preparation of the agenda for each board meeting. All of our directors are encouraged to make suggestions for board of director's agenda items or pre-meeting materials. Heiner Dreismann, Ph.D. currently serves as the lead independent director of the board of directors. In his role as Lead Independent Director, Dr. Dreismann presides over the executive sessions of the board of directors in which Dr. Goix does not participate and serves as a liaison to Dr. Goix and management on behalf of the independent members of the board of directors.

        Our board of directors has concluded that our current leadership structure is appropriate at this time. However, our board of directors will continue to periodically review our leadership structure and may make such changes in the future as it deems appropriate

Role of Board in Risk Oversight Process

        Risk assessment and oversight are an integral part of our governance and management processes. Our board of directors encourages management to promote a culture that incorporates risk management into our corporate strategy and day-to-day business operations. Management discusses strategic and operational risks at regular management meetings, and conducts specific strategic planning and review sessions during the year that include a focused discussion and analysis of the risks facing us. Throughout the year, senior management reviews these risks with the board of directors at regular board meetings as part of management presentations that focus on particular business functions, operations or strategies, and presents the steps taken by management to mitigate or eliminate such risks.

        Our board of directors does not have a standing risk management committee, but rather administers this oversight function directly through our board of directors as a whole, as well as through various standing committees of our board of directors that address risks inherent in their respective areas of oversight. In particular, our board of directors is responsible for monitoring and assessing strategic risk exposure, our audit committee is responsible for overseeing our major financial risk exposures and the steps our management has taken to monitor and control these exposures. The audit committee also monitors compliance with legal and regulatory requirements. Our nominating and governance committee monitors the effectiveness of our corporate governance guidelines and considers and approves or disapproves any related-persons transactions. Our compensation committee assesses and monitors whether any of our compensation policies and programs has the potential to encourage excessive risk-taking.

Board Committees

Audit Committee

        Our audit committee oversees our corporate accounting and financial reporting process. Among other matters, the audit committee:

    appoints our independent registered public accounting firm;

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    evaluates the independent registered public accounting firm's qualifications, independence and performance;

    determines the engagement of the independent registered public accounting firm;

    reviews and approves the scope of the annual audit and the audit fee;

    discusses with management and the independent registered public accounting firm the results of the annual audit and the review of our quarterly financial statements;

    approves the retention of the independent registered public accounting firm to perform any proposed permissible non-audit services;

    monitors the rotation of partners of the independent registered public accounting firm on our engagement team as required by law;

    is responsible for reviewing our financial statements and our management's discussion and analysis of financial condition and results of operations to be included in our annual and quarterly reports to be filed with the SEC;

    reviews our critical accounting policies and estimates; and

    annually reviews the audit committee charter and the committee's performance.

        The current members of our audit committee are R. Douglas Norby, who serves as chairperson of the committee, Carl L. Gordon, Ph.D., CMA, and André Marion. All members of our audit committee meet the requirements for financial literacy under the applicable rules and regulations of the SEC, NASDAQ and NYSE. Our board of directors has determined that Mr. Norby is an audit committee financial expert as defined under the applicable rules of the SEC and has the requisite financial sophistication as defined under the applicable rules and regulations of NYSE. Under the rules of the SEC, members of the audit committee must also meet heightened independence standards under Rule 10A-3 of the Exchange Act. Our board has determined that each member of the audit committee meets these heightened independence requirements. The audit committee operates under a written charter that satisfies the applicable standards of the SEC and the NYSE.

Compensation Committee

        Our compensation committee reviews and recommends policies relating to compensation and benefits of our officers and employees. The compensation committee reviews and recommends corporate goals and objectives relevant to compensation of our Chief Executive Officer and other executive officers, evaluates the performance of these officers in light of those goals and objectives and recommends to our board of directors the compensation of these officers based on such evaluations. The compensation committee also recommends to our board of directors the issuance of stock options and other awards under our stock plans. The compensation committee will review and evaluate, at least annually, the performance of the compensation committee and its members, including compliance by the compensation committee with its charter. The current members of our compensation committee are Heiner Dreismann, Ph.D., who serves as chairperson of the committee, Carl L. Gordon, Ph.D., CFA and R. Douglas Norby. Each of the members of our compensation committee are independent under the applicable rules and regulations of NYSE, is a "non-employee director" as defined in Rule 16b-3 promulgated under the Exchange Act and is an "outside director" as that term is defined in Section 162(m) of the U.S. Internal Revenue Code of 1986, as amended, or Section 162(m). The compensation committee operates under a written charter.

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Nominating and Corporate Governance Committee

        The nominating and corporate governance committee is responsible for making recommendations to our board of directors regarding candidates for directorships and the size and composition of our board of directors. In addition, the nominating and corporate governance committee is responsible for overseeing our corporate governance policies and reporting and making recommendations to our board of directors concerning governance matters. The current members of our nominating and corporate governance committee are André Marion, who serves as chairperson of the committee, Heiner Dreismann, Ph.D. and Stephen L. Rose, CMA. Each of the members of our nominating and corporate governance committee are independent under the applicable rules and regulations of NYSE relating to nominating and corporate governance committee independence. The nominating and corporate governance committee operates under a written charter.

Compensation Committee Interlocks and Insider Participation

        During 2011, our compensation committee consisted of Heiner Dreismann, Ph.D., Carl L. Gordon, Ph.D., CFA, André Marion and Fred K. Vogt. Dr. Gordon served as Chairperson of the compensation committee. None of the members of our compensation committee has at any time been one of our officers or employees. None of our executive officers currently serves, or in the past fiscal year has served, as a member of the board of directors or compensation committee of any entity that has one or more executive officers on our board of directors or compensation committee.

Board Diversity

        Upon consummation of this offering, our nominating and corporate governance committee will be responsible for reviewing with the board of directors, on an annual basis, the appropriate characteristics, skills and experience required for the board of directors as a whole and its individual members. In evaluating the suitability of individual candidates (both new candidates and current members), the nominating and corporate governance committee, in recommending candidates for election, and the board of directors, in approving (and, in the case of vacancies, appointing) such candidates, will take into account many factors, including the following:

    personal and professional integrity;

    ethics and values;

    experience in corporate management, such as serving as an officer or former officer of a publicly held company;

    experience in the industries in which we compete;

    experience as a board member or executive officer of another publicly held company;

    diversity of expertise and experience in substantive matters pertaining to our business relative to other board members;

    conflicts of interest; and

    practical and mature business judgment.

        Currently, our board of directors evaluates, and following the consummation of this offering will evaluate, each individual in the context of the board of directors as a whole, with the objective of assembling a group that can best maximize the success of the business and represent stockholder interests through the exercise of sound judgment using its diversity of experience in these various areas.

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Code of Business Conduct and Ethics

        We have adopted a code of business conduct and ethics that applies to all of our employees, officers and directors, including those officers responsible for financial reporting. Following the consummation of this offering, the code of business conduct and ethics will be available on our website at www.singulex.com. We expect that any amendments to the code, or any waivers of its requirements, will be disclosed on our website. The reference to our web address does not constitute incorporation by reference of the information contained at or available through our website.

Limitation on Liability and Indemnification Matters

        Our amended and restated certificate of incorporation, which will become effective immediately prior to the consummation of this offering, contains provisions that limit the liability of our directors for monetary damages to the fullest extent permitted by Delaware law. Consequently, our directors will not be personally liable to us or our stockholders for monetary damages for any breach of fiduciary duties as directors, except liability for:

    any breach of the director's duty of loyalty to us or our stockholders;

    any act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;

    unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the Delaware General Corporation Law; or

    any transaction from which the director derived an improper personal benefit.

        Our amended and restated certificate of incorporation and amended and restated bylaws, which will become effective immediately prior to the consummation of this offering, provide that we are required to indemnify our directors and officers, in each case to the fullest extent permitted by Delaware law. Our amended and restated bylaws also provide that we are obligated to advance expenses incurred by a director or officer in advance of the final disposition of any action or proceeding, and permit us to secure insurance on behalf of any officer, director, employee or other agent for any liability arising out of his or her actions in that capacity regardless of whether we would otherwise be permitted to indemnify him or her under Delaware law. We have entered and expect to continue to enter into agreements to indemnify our directors, executive officers and other employees as determined by our board of directors. With specified exceptions, these agreements provide for indemnification for related expenses including, among other things, attorneys' fees, judgments, fines and settlement amounts incurred by any of these individuals in any action or proceeding. We believe that these bylaw provisions and indemnification agreements are necessary to attract and retain qualified persons as directors and officers. We also maintain directors' and officers' liability insurance.

        The limitation of liability and indemnification provisions in our amended and restated certificate of incorporation and amended and restated bylaws may discourage stockholders from bringing a lawsuit against our directors and officers for breach of their fiduciary duty. They may also reduce the likelihood of derivative litigation against our directors and officers, even though an action, if successful, might benefit us and our stockholders. Further, a stockholder's investment may be adversely affected to the extent that we pay the costs of settlement and damage.

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Director Compensation

2011 Director Compensation Table

        The following table sets forth information for the year ended December 31, 2011 regarding the compensation awarded to, earned by or paid to our non-employee directors who served on our board of directors during 2011:

Name(1)
  Fees
Earned or
Paid in
Cash($)
  Option
Awards(2)($)
  Total($)  

Heiner Dreismann, Ph.D. 

  $ 60,000   $ 4,680   $ 64,680  

Carl L. Gordon, Ph.D., CFA

             

Hironori Hozoji(3)

             

Gregory R. Johnson, Ph.D.(3)

             

André Marion

    18,000     4,680     22,680  

Stephen L. Rose, CMA

             

Fred K. Vogt

    18,000     4,680     22,680  

(1)
Dr. Goix, who is President and Chief Executive Officer, receives no compensation for his service as a director, and, consequently, is not included in this table. The compensation received by Dr. Goix as an employee during 2011 is presented in the 2011 Summary Compensation Table in "Executive Compensation." In addition, other than in the case of Mr. Vogt, the non-employee members of our board of directors who serve as directors on behalf of some of our principal security holders received no compensation for their service as directors in 2011.

(2)
The amounts reported in the Option Awards column represent the grant date fair value of the stock options granted to the non-employee members of our board of directors during 2011 as computed in accordance with FASB ASC Topic 718. The assumptions used in calculating the grant date fair value of the stock options reported in the Option Awards column are set forth in Note 9 to the audited consolidated financial statements included in this prospectus. Note that the amounts reported in this column reflect the accounting cost for these stock options, and do not correspond to the actual economic value that may be received by the non-employee members of our board of directors from the options. The table below shows the aggregate numbers of option awards (exercisable and unexercisable) held as of December 31, 2011 by each non-employee director who was serving as of December 31, 2011. Our non-employee directors did not hold any unvested stock awards as of December 31, 2011.

Name
  Options
Outstanding at
Fiscal Year End
 

Heiner Dreismann, Ph.D. 

    26,049  

Carl L. Gordon, Ph.D., CFA

     

Hironori Hozoji

     

Gregory R. Johnson, Ph.D. 

     

André Marion

    24,399  

Stephen L. Rose, CMA

     

Fred K. Vogt

    59,655  
(3)
Each of Mr. Hozoji and Dr. Johnson resigned from our Board in July 2012.

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        We intend to adopt a policy pursuant to which, following the completion of this offering, each non-employee director will receive an annual fee of $36,000, with the exception of the chairman of the board who will receive $49,000. Non-employee directors serving on the audit committee, compensation committee and nominating and governance committee will receive an additional $10,000, $6,000 and $3,000, respectively, for serving on such committees of the board of directors or an additional $18,000, $12,000 and $8,000, respectively, for serving as chairman for such committees of the board of directors. Non-employee directors will also receive an initial grant of options with a grant date fair value of $130,000 ($150,000 in the case of the chairman of the board), vesting over three years, upon election to the board of directors and thereafter an annual grant of options with a grant date fair value of $65,000 ($85,000 in the case of the chairman of the board), vesting over approximately one-year. The exercise price per share of director options is equal to the closing trading price of a share of common stock on the grant date or the immediately preceding trading day if the grant date is not a trading day, and director options expire 10 years from the date of grant, or earlier if the optionee ceases to be a director. Members of our board of directors will continue to be reimbursed for travel and other out-of-pocket expenses.

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Executive Compensation

2011 Summary Compensation Table

        The following table shows information regarding the compensation of our named executive officers for services performed in the year ended December 31, 2011.

Name and Principal Position
  Year   Salary($)   Bonus($)   Stock Option
Awards($)(1)
  Non-Equity
Incentive Plan
Compensation($)(2)
  Total($)  

Philippe J. Goix, Ph.D. 

    2011   $ 362,792 (3) $   $ 93,316   $ 355,350   $ 811,458  

President and Chief Executive Officer

                                     

Guido Baechler

   
2011
 
$

270,692
   
 
$

12,643
 
$

135,346
 
$

418,681
 

Sr. Vice President of Operations

                                     

F. Steven Feinberg(4)

   
2011
 
$

113,250
   
   
 
$

32,292
 
$

145,542
 

Sr. Vice President of Sales and Marketing, Chief Commercial Officer

                                     

(1)
Amounts shown represent the aggregate grant date fair value of the option awards granted during 2011 computed in accordance with FASB Topic ASC 718. These amounts do not correspond to the actual value that will be recognized by the named executive officer with respect to such awards. The assumptions used in the valuation of these awards are set forth in Note 9 to the audited consolidated financial statements included in this prospectus.

(2)
The annual cash incentives awarded to the executives were in accordance with the Company's annual bonus program. Each named executive officer received a cash incentive equal to 200% of his target bonus based on the Company exceeding its pre-established revenue objectives in 2011 and the Board's evaluation of each named executive officer's individual performance during 2011. Dr. Goix's annual bonus was based on his base salary prior to the November 2011 increase. Additionally, with Mr. Baechler's consent, the Company determined to pay Mr. Baechler's full 2011 annual bonus in cash.

(3)
The amount shown reflects the increase in Dr. Goix's annual base salary from $355,350 to $400,000, effective November 1, 2011.

(4)
Mr. Feinberg commenced employment with the Company on October 17, 2011. This table reflects his compensation earned beginning on that date.

Narrative Disclosure to Summary Compensation Table

Terms and Conditions of Employment Agreement with Philippe Goix, Ph.D.

        Effective March 3, 2009, the Company entered into an employment agreement with Dr. Goix, or the Agreement, to serve as the Company's President and Chief Executive Officer. Under his employment agreement, Dr. Goix was initially entitled to a base salary of $335,000, and an annual bonus targeted at 35% of base salary. The Board subsequently reviewed and determined to increase Dr. Goix's (i) base salary from $335,350 to $400,000, effective as of November 1, 2011, and (ii) annual target bonus, such that as of December 31, 2011, Dr. Goix was entitled to an annual bonus targeted at 50% of his initial base salary for the applicable year. In addition, the employment agreement provides for participation in our standard health, welfare and retirement (401(k)) plans and standard vacation benefits.

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        Under the Agreement, in the event of Dr. Goix's termination by the Company without "good cause" or by Dr. Goix for "good reason," Dr. Goix will be paid 75% of his base salary, as in effect on the date of his termination, for a period of 12 months following the date of termination. In addition, he will be entitled to COBRA continuation coverage for the same 12 month period and accelerated vesting of any stock options granted more than one year prior to his termination. "Good cause" is defined as: (i) executive's failure to perform his material duties (other than as a result of physical or mental disability), (ii) a material breach of the Agreement by the executive, or (iii) executive's commission of fraud or dishonestly against the Company, or gross negligence or willful misconduct involving a third party or conviction of a felony which significantly impairs the reputation or otherwise harms the Company or its affiliates. "Good reason" is defined as: (i) any failure by the Company to comply with the material terms of the Agreement, (ii) any request by the Company that executive perform an illegal act, (iii) any material reduction in executive's responsibility, duties or authority (not consented to by executive), (iv) any reduction in executive's base salary set forth in the Agreement (not consented to by executive), or (v) a relocation of executive to a location outside of California (not consented to by executive). In addition, in the event of any termination after January 1 but prior to March 31 of each year, Dr. Goix will be paid his annual bonus with respect to the prior year at the regularly scheduled time as determined by the Board.

        In addition, under the Agreement, Dr. Goix is subject to a customary non-compete provision during his employment as well a non-solicitation provision during his employment and for 12 months thereafter.

Terms and Conditions of Offer of Employment Letters with Messrs. Baechler and Feinberg

        Effective as of December 19, 2007 and September 27, 2011, respectively, the Company entered into offer of employment letters with each of Messrs. Baechler and Feinberg. Under their employment agreements, Messrs. Baechler and Feinberg are entitled, respectively, to (i) base salaries which, as of December 31, 2011, were $270,692 and $113,250, and (ii) annual bonuses which, as of December 31, 2011, were targeted at 25% and 50% of applicable base salary. In addition, the offe