10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

____________________________________________

FORM 10-K

____________________________________________

(Mark One)

ý ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2013

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period             to             .

Commission file number: 001-35318

____________________________________________

ZELTIQ Aesthetics, Inc.

(Exact name of registrant as specified in its charter)

____________________________________________

Delaware	27-0119051
(State or other jurisdiction of incorporation or organization)	(I.R.S. employer identification no.)

4698 Willow Road, Suite 100

Pleasanton, CA 94588

(Address of principal executive offices and Zip Code)

(925) 474-2500

(Registrant’s telephone number, including area code)

____________________________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class: Common Stock

Name of each exchange on which registered: The NASDAQ Global Select Market

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ¨    No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.    Yes  ¨    No  x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ý    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K   ¨

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 definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (check one):

Large accelerated filer	¨	Accelerated filer	ý
Non-accelerated filer	¨	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.):    Yes  ¨    No  ý

Aggregate market value of registrant's common stock held by non-affiliates of the registrant, based upon the closing price of a share of the registrant's common stock on June 28, 2013 (the last business day of the registrant's most recently completed second quarter) as reported by NASDAQ Global Select Market on that date: $115,299,901. Shares of the registrant's common stock held by each executive officer, director and person who owns 15% or more of the outstanding common stock of the registrant have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

As of February 20, 2014, there were 37,210,444 shares of the registrant’s common stock, par value $0.001 per share, outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant's definitive Proxy Statement to be filed with Commission pursuant to Regulation 14A in connection with the registrant's 2014 Annual Meeting of Stockholders, to be filed on or before April 30, 2014, are incorporated by reference into Part III of this Form 10-K.

ZELTIQ Aesthetics, Inc.

FORM 10-K

For the Year Ended December 31, 2013

TABLE OF CONTENTS

		PAGE NUMBER
PART I
Item 1.	Business	3
Item 1A.	Risk Factors	21
Item 1B.	Unresolved Staff Comments	39
Item 2.	Properties	39
Item 3.	Legal Proceedings	40
Item 4.	Mine Safety Disclosures	40
PART II
Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	41
Item 6.	Selected Financial Data	42
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	44
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	55
Item 8.	Financial Statements and Supplementary Data	57
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	89
Item 9A.	Controls and Procedures	89
Item 9B.	Other Information	90
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	91
Item 11.	Executive Compensation	91
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	91
Item 13.	Certain Relationships and Related Transactions, and Director Independence	92
Item 14.	Principal Accounting Fees and Services	92
PART IV
Item 15.	Exhibits, Financial Statement Schedules	93
Signatures		94

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This Annual Report on Form 10-K for the year ended December 31, 2013, or “Form 10-K,” contains forward-looking statements concerning our business, operations, and financial performance and condition as well as our plans, objectives, and expectations for business operations and financial performance and condition. Any statements contained herein that are not of historical facts may be deemed to be forward-looking statements. You can identify these statements by words such as “anticipate,” “assume,” “believe,” “could,” “estimate,” “expect,” “goal,” “intend,” “may,” “objective,” “plan,” “predict,” “potential,” “continue,” “should,” “project,” “will,” “would,” and other similar expressions that are predictions of or indicate future events and future trends. These forward-looking statements are based on 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 Form 10-K may turn out to be inaccurate. Factors that could materially affect our business operations and financial performance and condition include, but are not limited to, less than anticipated growth in the number of customers electing to purchase CoolSculpting systems, insufficient patient demand for CoolSculpting procedure, our failure to correctly estimate and control our future expenditures, the success of our sales and marketing, and our ability to protect and enforce our intellectual property relating to our technology, as well as those other risks and uncertainties described herein under “Risk Factors”. You are urged to consider these factors carefully in evaluating the forward- looking statements and are cautioned not to place undue reliance on the forward-looking statements. The forward-looking statements are based on information available to us as of the filing date of this Annual Report on Form 10-K. Unless required by law, we do not intend to publicly update or revise any forward-looking statements to reflect new information or future events or otherwise. You should, however, review the factors and risks we describe in the reports we will file from time to time with the Securities and Exchange Commission, or SEC, after the date of this Form 10-K.

PART I

ITEM 1. BUSINESS

Overview

ZELTIQ Aesthetics, Inc. is a medical technology company focused on developing and commercializing products utilizing our proprietary controlled cooling technology platform. Our first commercial product, the CoolSculpting system, is designed to selectively reduce stubborn fat bulges. CoolSculpting is based on the scientific principle that fat cells are more sensitive to cold than the overlying skin and surrounding tissues. CoolSculpting utilizes precisely controlled cooling to reduce the temperature of fat cells in the treated area, which is intended to cause fat cell elimination through a natural biological process known as apoptosis, without causing scar tissue or damage to the skin, nerves, or surrounding tissue. We developed CoolSculpting to safely, noticeably, and measurably reduce the fat layer within a treated fat bulge without requiring the patient to diet or exercise. In our pivotal U.S. clinical trial involving 60 patients, physicians were able to accurately differentiate between pre- and post-treatment photographs in 88% of the patients, while unable to identify aesthetic benefits in the remaining 12%. We received clearance from the FDA in September 2010 to market CoolSculpting for the selective reduction of fat around the flanks, an area commonly referred to as the “love handles.” We received further FDA clearance in May 2012 for the selective reduction of fat around the abdomen area. We sell our CoolSculpting system primarily to dermatologists, plastic surgeons, and aesthetic specialists and generate revenue from sales of our CoolSculpting system and from sales of consumables to our customers. Consumables are the CoolSculpting procedure packs we sell that are needed to perform procedures using our CoolSculpting system.

The global market for aesthetic procedures is significant. In the United States alone, the American Society of Aesthetic Plastic Surgery, or the ASAPS, estimates that consumers spent approximately $11 billion on aesthetic procedures in 2012. Invasive procedures (such as liposuction and tummy tucks, arm, buttock and thigh lifts) and minimally-invasive procedures (such as laser-assisted liposuction or laser lipolysis) effectively reduce fat but involve surgical procedures that require significant physician skill and resources, may involve pain, downtime, and expense for the patient, and carry the risks associated with any surgical procedure. Existing non-invasive procedures, which currently include those based on radio frequency, laser, or high intensity focused ultrasound, avoid the patient downtime and high costs of invasive and minimally-invasive procedures, but often are painful, produce limited or inconsistent results, may require multiple treatments, and ongoing maintenance treatments. In addition, existing non-invasive procedures are not capable of selectively targeting fat cells, which can lead to damage to the surrounding tissues. Further, the treatment methods used by many existing invasive, minimally-invasive, and non-invasive procedures acutely injure fat cells in the treated area, which leads to fat cell elimination through a biological process known as necrosis. Unlike apoptosis, necrosis triggers the body's wound-healing response and can result in scar tissue formation in the treated area. This scar tissue can lead to stiffening of the treated area and limits the number of times a patient can undergo these types of procedures in one area or the efficacy of any repeat treatments.

We developed CoolSculpting to provide patients with a safe, effective, non-invasive, and convenient procedure to reduce stubborn fat bulges that are not satisfactorily served by existing fat reduction and body contouring procedures. CoolSculpting is clinically

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proven to reduce fat bulges, allowing most patients to achieve noticeable and measurable aesthetic results without the pain, expense, downtime, and risks associated with invasive and minimally-invasive procedures. Further, these results are achieved without the pain, multiple procedures, and maintenance programs required with other non-invasive procedures. Because the fat layer in the treated area is reduced by eliminating fat cells that will not be replaced by the body, we believe the aesthetic benefits patients achieve through CoolSculpting will be durable. In addition, patients can elect to repeat the CoolSculpting procedure multiple times on the same treatment area if they desire further fat reduction. We offer training to our customers to better enable them to identify those patients whose aesthetic appearance will be noticeably improved by the reduction of their fat bulges through CoolSculpting. Due to these advantages, we believe CoolSculpting is appealing to both existing consumers who have previously had one or more aesthetic procedures, and to new consumers who have not previously elected to undergo an aesthetic procedure.

Our customers can market CoolSculpting as a premium, highly-differentiated, non-invasive fat reduction procedure. Based on our commercial data and customer experiences, we have seen attractive economic benefits for our customers. In addition, the CoolSculpting procedure does not require significant training or skill, as it is largely automated. Once the procedure is initiated, the CoolSculpting system is self-monitoring, allowing our customer to see and treat other patients or perform concurrent procedures (such as injections or other dermal treatments) on the same patient during the balance of the CoolSculpting procedure. Further, we believe CoolSculpting's appeal will allow our customers to target the aesthetic first-time user market and expand their aesthetic practices.

We market CoolSculpting to dermatologists, plastic surgeons, and aesthetic specialists. Aesthetic specialists are physicians who elect to offer aesthetic procedures as a significant part of their practices, but are not board-certified dermatologists or plastic surgeons. A market research study we commissioned through Easton Associates in 2011, estimates that there are over 70,000 physicians that perform aesthetic procedures at approximately 30,000 practice sites worldwide, including over 20,000 physicians and approximately 10,000 practice sites within North America. Some of our practices have purchased or may elect to purchase more than one CoolSculpting system. We utilize our direct sales organization to market and sell CoolSculpting in our North American market which includes the United States and related territories, as well as Canada. In our markets located outside of North America, we market and sell CoolSculpting through both a direct sales force and a network of distributors. Our sales force and distributors also target dermatologists, plastic surgeons and aesthetic specialists who have practices focused on aesthetic procedures and who express a willingness to position CoolSculpting as a premium, differentiated treatment and participate in our practice marketing and support programs. Markets outside of North America are located in Asia-Pacific, Europe, the Middle East, Africa and Latin America. Revenue from markets outside of North America accounted for 20%, 26%, and 26% of our total revenue for the years ended December 31, 2013, 2012, and 2011, respectively. We are driving growth in CoolSculpting procedures through our targeted marketing programs, which provide our customers with practice development programs which include organization assessments and recommendations, sales training, practice marketing strategies, and metric analysis. After we establish a significant installed base of CoolSculpting systems in specific markets, we partner with our customers' practices on marketing, advertising, and promotional activities in their local markets to drive demand for CoolSculpting.

We generate revenue from sales of our CoolSculpting system and from sales of cycles in the form of consumable procedure packs to our customers. As of December 31, 2013, we had an installed base of 2,175 CoolSculpting systems installed across approximately 1,900 practices worldwide. As of December 31, 2013, 972,612 CoolSculpting cycles had been shipped to our customers and distributors. A cycle is an authorization to perform one procedure to one specific area on the body; customers can only perform a treatment if they have purchased a cycle. We generated revenue of $111.6 million, $76.2 million, and $68.1 million for the years ended December 31, 2013, 2012, and 2011, respectively. System revenue represented 55%, 51% and 68% of our total revenue for the years endedDecember 31, 2013, 2012 and 2011, respectively. Consumable revenue accounted for approximately 45%, 49% and 32% of our total revenue for the years endedDecember 31, 2013, 2012 and 2011, respectively.

On October 24, 2011, we completed our initial public offering, or IPO, of 8,050,000 shares of our common stock at an offering price of $13.00 per share, of which 7,743,000 shares were sold by us and 307,000 shares were sold by existing stockholders. We received net proceeds of approximately $90.7 million, after deducting underwriting discounts, commissions, and offering related transaction costs.

Our business is dependent upon the success of CoolSculpting, and we cannot assure you that we will be successful in significantly expanding physician and patient demand for CoolSculpting. In addition, we will continue to incur significant expenses for the foreseeable future as we expand our commercialization and other business activities. Although, based upon our current plans and market conditions, we believe that our existing cash, cash equivalents and short-term investments will be sufficient to satisfy our anticipated cash requirements for the foreseeable future, we cannot assure you that we will be able to achieve or maintain profitability.

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Market Overview

The global market for aesthetic procedures is significant. The ASAPS estimates that U.S. consumers spent approximately $11 billion on approximately fifteen million aesthetic procedures in 2012. According to the ASAPS, total aesthetic procedures in the United States have grown by 98% between 2000 and 2012, with non-invasive aesthetic procedures growing by 137% during this same period. According to the ASAPS, the top five surgical procedures in 2012 were breast augmentation, nose reshaping, eyelid surgery, liposuction and facelift, and the top five non-invasive procedures in 2012 were botox, soft tissue fillers, chemical peel, laser hair removal and microdermabrasion. No one treatment procedure is offered by all physicians, and treatments vary in terms of the treatment goal and desired effect. As a result, the total aesthetic market as reported by the ASAPS does not represent the market potential for CoolSculpting or any other single product or treatment, but illustrates that each year patients elect to have millions of procedures to enhance their appearance.

We believe several factors are contributing to the ongoing growth in aesthetic procedures, including:

• Continuing focus on body image and appearance. Both women and men continue to be concerned with their body image and appearance, fueled in part by popular culture's perpetuation of the ideal thin body type for women and the ideal lean and defined body type for men. We believe the size and wealth of the aging “baby boomer” demographic segment and its desire to retain a youthful appearance for professional and personal reasons have driven the growth in aesthetic procedures.

• Broader availability of safe non-invasive aesthetic procedures. Technological developments have resulted in the introduction of a broader range of safe, non-invasive aesthetic procedures. According to the ASAPS, non-invasive aesthetic treatments are growing faster than invasive surgical procedures.

• Increased physician focus on aesthetic procedures. We believe increased restrictions imposed by managed care and government agencies on reimbursement for medical treatments are motivating our customers to establish or expand their elective aesthetic practices, which generally consist of procedures paid for directly by patients. We expect this trend to continue as our customers look for ways to expand their practices and improve profitability.

Limitations of Existing Fat Reduction and Body Contouring Procedures

Fat reduction and body contouring procedures, including invasive, minimally-invasive, and non-invasive procedures, have become increasingly popular. The following discussion outlines the benefits of these existing procedures, as well as our opinion of the inherent limitations of these procedures when compared to CoolSculpting. Many of the companies marketing these procedures have greater resources and brand recognition than we do. In addition, some of the procedures offered by our competitors have broad market acceptance with our target customers and their patients.

Invasive and Minimally-Invasive Procedures

Physicians currently perform a number of invasive surgical procedures for fat reduction and body contouring, including liposuction, abdominoplasty (tummy tucks), gluteoplasty (buttock lifts), brachioplasty (arm lift), and thighplasty (thigh lift). Laser-assisted liposuction, laser lipolysis, and ultrasound lipolysis are minimally-invasive alternatives for fat reduction and body contouring. These minimally-invasive procedures require the physician to surgically insert a cannula, or metal tube, into the area to be treated and to use heat or ultrasound energy from the cannula to damage fat cells. Patients who are obese and require significant fat reduction to achieve aesthetic results are candidates for invasive and minimally-invasive procedures. Although effective at reducing a significant amount of fat, these invasive and minimally-invasive procedures present the following limitations:

• Surgical risks. Like all surgical procedures, invasive and minimally-invasive procedures carry risks of infection, local or widespread scarring, perforation, and hemorrhage. These procedures generally require a general or local anesthesia, which carries additional risks.

• Pain and downtime. Invasive procedures may involve pain and may require weeks of post-surgical recovery. As a result, patients may need to spend significant time away from work and take prescribed pain medications for extended periods of time post-surgery. In addition, body lifts may severely limit muscle movement in the treated area during recovery, which can limit a patient's mobility for a significant period of time. Minimally-invasive procedures require a surgical incision, and may cause patient pain. Patients generally require at least two days of recovery time after a minimally-invasive procedure, which may require the patient to miss work and necessitate prescribed pain medications post-surgery.

• Potentially undesired results. Invasive procedures may cause non-uniform fat reduction, dimpling, lumpiness, numbness, scarring, discoloration, or sagging skin in the treated area. Follow-up surgeries may be required to correct these problems. Minimally-invasive procedures can cause skin or tissue damage if, among other things, the physician does not carefully control the heat or ultrasound energy delivered in the treatment area.

• Limited repeatability. The process of removing or destroying fat cells with invasive or minimally-invasive procedures triggers the body's wound healing response, which leads to the formation of scar tissue in the treated area. If a patient desires further fat reduction or is not satisfied with the aesthetic results from a procedure, the scar tissue in the treated area may prevent the patient from undergoing follow-up procedures to enhance or correct the original treatment results.

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• Physician skill and technique dependent. The aesthetic results achieved through invasive and minimally-invasive procedures are dependent upon a physician's skill and training, which can vary from physician to physician. In addition, these procedures require a significant amount of direct physician time to perform.

• High cost. Invasive and minimally-invasive procedures can be significantly more expensive for patients than non-invasive aesthetic procedures. In addition, there is an opportunity cost for physicians as these procedures require direct physician involvement and supervision.

Non-Invasive Procedures

Patients who do not require significant fat reduction to achieve aesthetic results may explore non-invasive fat reduction and body contouring procedures to avoid the pain, expense, downtime, and surgical risks associated with invasive and minimally-invasive procedures. Existing non-invasive procedures used for body contouring or fat reduction, other than CoolSculpting, currently include those based on various forms of energy, including radiofrequency, laser, or ultrasound. Although these procedures are generally safer and less expensive than invasive and minimally-invasive procedures, these procedures have the following limitations when compared to CoolScuplting:

• Limited, inconsistent, and unpredictable results. We believe existing non-invasive procedures have limited efficacy and produce inconsistent fat reduction results. In addition, these procedures are not capable of selectively targeting fat cells, which can lead to unpredictable results, including damage to surrounding tissue.

• Multiple steps required. Existing non-invasive procedures based on radio frequency or laser energy often require multiple steps spread over several weeks before the patient obtains noticeable aesthetic results, requiring the patient to schedule and coordinate multiple, time-consuming office visits.

• Maintenance requirements. Some existing non-invasive procedures have only a temporary treatment effect, and thus require periodic maintenance treatments to sustain the desired aesthetic results.

• Technique dependent. Existing non-invasive procedures often require highly trained personnel to conduct the treatment. Poor technique may lead to reduced efficacy and inconsistent aesthetic results.

• Pain. Energy based products that utilize heat to destroy fat cells are associated with significant procedural pain and discomfort. Patients may require pain medications to tolerate the procedure. Pain management considerations may complicate the procedure and impose additional risks associated with pain medications.

Our Solution

CoolSculpting is a non-invasive fat reduction procedure that is clinically proven to be safe and effective and provides most patients with noticeable and measurable aesthetic results. CoolSculpting utilizes our proprietary controlled cooling technology to selectively reduce stubborn fat bulges. CoolSculpting is based on the scientific principle that fat cells are more sensitive to cold than the overlying skin and surrounding tissues. CoolSculpting precisely cools the targeted fat bulge, and is designed to eliminate fat cells through a natural biological process known as apoptosis, without causing scar tissue or damage to the skin, nerves, or surrounding tissues.

We believe that CoolSculpting provides the following benefits to our customers and their patients:

• Clinically proven, consistent, and durable results. Clinical studies involving more than 300 patients demonstrate that a single CoolSculpting procedure can noticeably and measurably reduce the fat layer within a treated fat bulge without requiring diet or exercise. In our pivotal U.S. clinical trial involving 60 patients, physicians were able to accurately differentiate between pre- and post-treatment photographs in 88% of the patients. Patients typically notice results as soon as three weeks following the CoolSculpting procedure, with the most dramatic results occurring over a period of two to four months for most patients. Because the fat layer in the treated area is reduced by eliminating fat cells that will not be replaced by the body, we believe the aesthetic benefits patients achieve in the treated area will be durable.

• Safety profile. CoolSculpting selectively targets fat cells. Our proprietary treatment algorithms are designed to sufficiently cool the fat cells in the treated area to obtain the desired aesthetic results while preserving the skin and surrounding tissues. We designed the CoolSculpting system to constantly monitor the controlled cooling process and to automatically terminate the procedure if it detects any errors and warm the treated area if the detected temperature falls below our cooling algorithms. As of December 31, 2013, we have shipped 972,612 cycles. 1,392 clinical complaints have been reported to us, representing 0.14% of all cycles. The most common clinical complaints relate to pain associated with the procedure, as well as common side effects, such as redness and edema. Medical Device Reports were filed when we believed reporting requirements were met.

• Patient satisfaction. CoolSculpting allows most patients to achieve noticeable and measurable aesthetic results without the pain, expense, downtime, and risks associated with invasive and minimally-invasive procedures for fat reduction. In addition, unlike many other non-invasive procedures, patients are not required to undergo multiple treatment procedures or adopt special

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diet or exercise programs following the procedure to obtain aesthetic results. Patients have the flexibility to undergo a CoolSculpting procedure discreetly, scheduling an appointment for the procedure in the morning before work, during a lunch break, or in the evening. In our pivotal clinical study, 82% of the participating patients reported satisfaction with the CoolSculpting procedure. As a further indication of patient satisfaction, our customers reported that 45% of their patients returned for an additional CoolSculpting treatment, according to the market research study we commissioned through Easton Associates.

• Repeatability enabled by natural biological process. CoolSculpting is designed to reduce the fat layer in the treated area through apoptosis, a natural biological process that leads to gradual elimination of the fat cells from the body. Unlike other treatment methods, we designed CoolSculpting to avoid triggering the body's wound-healing response, which can lead to the formation of scar tissue. As a result, patients can elect to have the CoolSculpting procedure repeated multiple times on the same treatment area if they desire further fat reduction. Because fat cells are gradually eliminated from the body following a CoolSculpting treatment over a three to 16 week period, we recommend that patients wait at least six weeks before repeating a CoolSculpting procedure on the same treatment area.

• Reproducible results. The CoolSculpting procedure requires limited training and skill to obtain successful aesthetic results. We designed the CoolSculpting system to be easy to operate and largely automated which results in a more consistent application and reproducible results. Once the procedure is started, the clinician is not required to monitor or make any adjustments to the CoolSculpting system during the balance of the procedure.

• Differentiated, high-value product for physician practices. Our selective distribution strategy is designed to enable our customers to market CoolSculpting as a premium, highly-differentiated, non-invasive fat reduction procedure. Based on our commercial data and customer experiences, we have seen attractive economic benefits for our customers. In addition, the clinician is not required to administer the procedure and can see and treat other patients or perform concurrent procedures, such as injections or other dermal treatments, on the same patient during the CoolSculpting procedure.

• Ability to expand the aesthetic market. Through recent market research we have confirmed there is strong consumer demand for a non-invasive procedure that can address the aesthetic concerns of individuals who have stubborn fat bulges. During the third quarter of 2013, we conducted a quantitative survey of 3,515 adults in the United States through Berglas Research, an independent marketing research company, and are able to project that more than 85 million consumers are considered aesthetically-oriented and qualify for CoolSculpting. Among this group and based on this study, we project that 22.4 million consumers would be interested in learning more about the CoolSculpting procedure after reading the product description. The ASAPS reported 77,000 non-invasive body-contouring procedures in 2012. When we compare our potential audience to the number of procedures conducted we find that our market penetration is lower than 1%. Additionally, according to a separate market research study we commissioned through Easton Associates in 2011, our customers participating in the study reported that 30% of their CoolSculpting patients were aesthetic first-time users. Based on these results, we believe our customers will be able to target the aesthetic first-time user market and expand their aesthetic practice due to CoolSculpting's appeal.

Our Strategy

Our goal is to become a leading medical technology company focused on developing and commercializing products utilizing our proprietary controlled cooling technology platform. To achieve this goal, we intend to:

• Selectively market and sell our CoolSculpting system. With CoolSculpting established as a premium, highly-differentiated treatment we plan to market and sell our CoolSculpting system to dermatologists, plastic surgeons, and aesthetic specialists. Some of our target practice sites have purchased or may elect to purchase more than one CoolSculpting system. Our sales force and distributors target dermatologists, plastic surgeons and aesthetic specialists who have practices focused on aesthetic procedures and who express a willingness to position CoolSculpting as a premium, differentiated treatment and participate in our practice marketing and support programs.

• Re-Aligned, Focused and Efficient Marketing Strategy. We also recently re-aligned our marketing strategy in order to accelerate revenues while reducing overall sales and marketing spend. Our strategy changed from a model focused on national consumer advertising to a more efficient model, focused on establishing co-operative customer partnerships that create tailored, local patient marketing programs, with strong digital emphasis, to achieve greater awareness and demand. As part of this marketing strategy, we recently launched Treatment to Transformation, or T2T, a customized assessment and treatment protocol, which has revolutionized the way our customers use CoolSculpting to deliver improved outcomes and high patient satisfaction. We believe this clinical protocol will be instrumental in improving our system utilization and driving incremental system sales in existing practices. Its adoption is expected to be a significant contributor as we seek to achieve our long term growth objectives. Our recently launched connectivity and data management tool, CoolConnect, is being rolled out across our installed base to collect real-time sales, demographic and marketing data that we believe can further optimize marketing strategies for both us and our customers.

• Highly Optimized, Experienced and Fully Trained Sales Force. In the first quarter of 2013, we restructured our North American sales force into a bifurcated organization that has produced stronger focus and results on system sales and high-margin consumable sales. This organization is split between Area Sales Managers, who focus on system sales, and Product

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Development Managers, who focus on assisting practices to market CoolSculpting to patients, product training and driving system utilization. During 2013, we hired several high quality, experienced sales representatives and sales management personnel in both categories and retrained the sales organization to optimize performance in their respective roles. This initiative has resulted in improved system placements to both existing and new practices, as well as increased system utilization, contributing to our recent revenue growth. We believe our sales force will continue to generate increased customer adoption and patient awareness momentum in the marketplace. We also believe that our focus on driving system utilization will offer the opportunity to drive increased sales of our high gross margin procedure packs.

• Increase utilization of CoolSculpting through our marketing and customer support programs. We are driving demand for CoolSculpting procedures through our marketing and customer support programs. Through our Practice Development Managers, or PDMs, we provide our customers with training on patient assessments, how to apply the CoolSculpting technology, practice development and marketing support to help our customers make CoolSculpting a key offering within their practices. We also intend to continue our co-operative marketing strategy with individual practices which is designed to encourage our customers to promote CoolSculpting to their aesthetic patients and those outside of their practices. To further support our customized marketing approach, we created the ZELTIQ Training Center where we hold our training program, CoolSculpting University, or CSU. CSU is focused on customer training and education programs to optimize patient outcomes. This program invites practices to attend hands-on training where they learn the proper techniques for T2T, including a complete treatment assessment, applicator placement and patient consultation. Customers are also trained on a specific practice enhancement execution protocols designed to accelerate utilization and maximize the use of their CoolSculpting offering that includes branding, grassroots initiatives and digital marketing tactics. Customers are then visited in the field by our PDMs to further customize and optimize the program at a local level to ensure it is delivering improved patient flow. We believe this program is particularly well suited to the aesthetics industry. We also intend to continue to participate in industry trade shows, clinical workshops, and company-sponsored conferences with expert panelists.

• Increase our international presence. There is strong global demand for aesthetic procedures outside of North America, especially in Asia, Latin America, and Europe. We intend to increase our market penetration outside of North America and build global brand recognition. We have received regulatory approval or are otherwise free to market CoolSculpting in numerous international markets, where use of the product is generally not limited to specific treatment areas. Our customers in these markets commonly perform CoolSculpting procedures on the inner thighs, back, and chest, in addition to the flanks and abdomen. We intend to seek regulatory approval to market CoolSculpting in additional international markets, as well as intend to grow our international sales and marketing organization to focus on increasing sales and strengthening our customer relationships. As part of that strategy, we are and intend to continue to opportunistically deploy a direct sales force in select international markets.

• Expand our FDA-cleared indications for CoolSculpting. We currently have FDA clearance to market CoolSculpting in the United States for the selective reduction of fat in the flanks, an area commonly known as the “love handles”, and the abdomen area. We intend to seek additional regulatory clearances from the FDA to expand our United States marketable indications for CoolSculpting to other areas on the body.

• Leverage our technology platform. We are exploring additional uses of our proprietary controlled cooling technology platform for the dermatology, plastic surgery, and aesthetic markets. We are also exploring potential therapeutic uses for our platform technology, either directly or through collaborative arrangements with strategic partners.

• Streamlined R&D Focus and Capital Deployment.Our R&D efforts and associated capital deployment have been recently streamlined to focus on making the CoolSculpting procedure safer, faster and more efficacious. Our early research is focused on optimizing the patient experience and increasing practice efficiency by reducing treatment duration. In the long-term, we remain focused on expanding applications and indications for CoolSculpting into areas with a smaller volume of fat on the body. We expect to introduce a new applicator, CoolSmooth, during the second quarter of 2014. CoolSmooth is a non-suction based, flat applicator that conforms to the body thus increasing our ability to provide customizable approaches for non-invasive fat reduction.

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The CoolSculpting Experience

Patient Consultation

The first step of the CoolSculpting process is a patient consultation. We designed our CoolSculpting system to address the aesthetic concerns of individuals who are not considered obese but have stubborn fat bulges. Utilizing our PDMs and CoolSculpting University program, we train our customers to properly identify those patients who would be good candidates for CoolSculpting and educate their patients on the aesthetic results they should expect from a CoolSculpting procedure. We also instruct our customers to explain to their patients the natural process of fat cell elimination triggered by a CoolSculpting procedure, so that they understand the expected time period before they will notice the full aesthetic results as well as the potential to repeat the procedure for additional aesthetic results. While some patients may notice results as soon as three weeks following a CoolSculpting procedure, the full aesthetic results are generally achieved over a period of two to four months following treatment. Because we believe the consultation process is an important step in ensuring patients are pleased with their CoolSculpting procedure, we encourage our customers to personally conduct the patient consultation. Our customers participating in the market research study we commissioned through Easton Associates in 2011, reported that 95% of their patients were happy with the results of their CoolSculpting procedure, with the degree of satisfaction based in part on the physician's management of the patient's expectations.

The CoolSculpting Procedure

CoolSculpting is a non-invasive procedure that is clinically proven to be safe and effective and provides most patients with noticeable and measurable aesthetic results. Once the desired treatment area has been identified, the clinician applies our consumable CoolGel to the skin surface of the treatment area to ensure consistent thermal contact and to protect the skin from freezing. The CoolSculpting applicator is then positioned on the treatment area over the CoolGel, and the fat bulge is drawn into the applicator and positioned between its two cooling panels. Once the applicator is affixed on the treatment area, no further clinician intervention is required for the duration of the procedure. The rate of the controlled cooling is modulated by thermoelectric cooling elements and controlled by sensors in the applicator that monitor the cooling of the fat bulge. Just prior to the end of the procedure, the CoolSculpting system signals the clinician that the treatment is ending. When the procedure is completed, the CoolSculpting system automatically terminates the cooling, and the clinician then removes the CoolSculpting applicator from the treatment area.

Patient Experience

Our surveys indicate that most patients find the CoolSculpting procedure easy to tolerate. Generally, anesthesia and pain medications are not required before, during, or after a CoolSculpting procedure. Patients feel a tugging sensation from the suction created when the CoolSculpting applicator is placed on the treatment area. At the onset of the procedure, patients also experience a chilling sensation in the treatment area that subsides after a few minutes, as the cooling produces an anesthetic effect. Patients can talk on their cell phones, read, listen to music, work on their laptop, relax, or sleep during the procedure.

After completion of a CoolSculpting procedure, patients may resume their normal activities, including work and exercise. CoolSculpting patients generally do not experience any significant adverse side effects.

Our CoolSculpting System

We generate revenue from sales of our CoolSculpting system and from sales of consumables to our customers. Sales of our CoolSculpting system include the CoolSculpting control unit and our CoolSculpting applicators. We generate consumable revenue through sales of cycles in the form of consumable procedure packs, each of which includes our consumable CoolGels and CoolLiners and a disposable computer cartridge that we market as the CoolCard. The CoolCard contains enabling software that permits our customers to perform a fixed number of CoolSculpting cycles.

CoolSculpting Control Unit

The CoolSculpting control unit is the base of the CoolSculpting system and contains the simple user interface, power management and control functions, and chiller unit that is responsible for the controlled cooling. Our CoolSculpting control unit also contains a Health Insurance Portability and Accountability Act of 1996, or HIPAA, complaint connectivity and data management tool that locally tracks and collects data about each procedure performed as well as any error messages that may be generated during the procedure. We can collect and analyze this information to help our customers better understand their usage patterns and improve their marketing plans, utilization, and profitability.

Additionally, the CoolSculpting control unit features: (1) a color touch screen which provides operators with clear visual directions to initiate a CoolSculpting procedure, continuous status updates, and easy to follow notifications or corrective actions in the rare event of a procedure interruption; (2) vents which provide airflow and reduce heat build-up allowing our CoolSculpting system to be used in a standard physician treatment room without any special ventilation requirements or room modifications; (3) a drawer which provides storage space for our CoolSculpting CoolGels and CoolLiners and user documentation; and (4) the unit is mobile,

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allowing a physician to easily transfer the CoolSculpting unit between treatment rooms and reach different treatment areas on a patient.

CoolSculpting Applicators

The CoolSculpting applicator: (1) delivers vacuum suction and cooling to the fat bulge being treated; (2) can be used to start and stop a CoolSculpting procedure and to turn the vacuum suction on and off; and, (3) has a thermoelectric cooling panel with temperature and pressure sensors which provide precise thermal control and monitoring of the fat bulge being treated and will automatically stop the procedure if a problem is detected.

With the introduction of our CoolFit applicator in February 2013, we now offer four CoolSculpting applicators for use with our CoolSculpting system. Each CoolSculpting applicator is designed to allow the physician to treat a different size and shape fat bulge.

1. CoolFit - designed for use on long, narrow fat bulges.

2. CoolCurve+ - designed to fit tightly curved contours.

3. CoolCore - designed for use on small and medium fat bulges.

4. CoolMax - designed for use on larger fat bulges.

CoolSculpting Procedure Packs

A CoolCard is required to operate the CoolSculpting control unit and is programmed with enabling software that permits the CoolSculpting control unit to perform a fixed number of procedures, or cycles. In addition, each CoolCard is programmed with an encrypted security certificate that prevents the performance of a CoolSculpting procedure unless the CoolCard is recognized and authenticated by the specific CoolSculpting control unit and CoolSculpting applicator. The security certificate is designed to ensure that customers pay for each CoolSculpting procedure and prevent the use of counterfeit CoolCards. Our consumable CoolGels are cotton sheets saturated in a solution that protects the skin and ensures proper thermal coupling during a CoolSculpting procedure. One CoolGel is required for each treated area and is not reusable. Our consumable plastic CoolLiners protect the applicator from gel contact. One CoolLiner is recommended per patient for hygienic reasons.

Our Technology

Our Technology Platform

Our controlled cooling technology platform is based on the scientific principle that cooling can be delivered safely and non-invasively to achieve specific biological outcomes, selectively affecting certain cells, tissues, or structures in and below the skin. The ability to predict and control the impact of cold exposure by developing algorithms to control the rate and period of the cooling is well established in the field of cryobiology and cryogenic medicine. Moderate cold has been demonstrated to trigger cellular apoptosis (programmed cell death), whereas more extreme cold causes uncontrolled cell death. Additionally, certain cells and tissue types exhibit particular sensitivity or resistance to cold injury. This principle enables the selective elimination of certain cells or tissues via a desired biologic pathway using precise cooling temperatures. In addition, the function of certain biological systems can be affected by cold exposure. Cold is known to reduce nerve conduction, and can produce either a transient or a prolonged interruption in nerve function depending on the specific thermal parameters applied. We believe the ability to control tissue effects by modulating the cooling algorithm with our technology platform enables multiple potential therapeutic applications in addition to our CoolSculpting fat reduction application.

Our CoolSculpting Technology

Our CoolSculpting technology utilizes the sensitivity of fat cells to cold injury to selectively eliminate subcutaneous fat tissue without affecting the skin or other surrounding tissues. Termed cryolipolysis, this technology enables a non-invasive alternative for subcutaneous fat reduction through cellular apoptosis. Cellular apoptosis is a normally occurring biological process whereby cells are eliminated as part of normal cell turnover. When injurious external stimuli (such as cold) are applied to a target cell, the apoptotic process may be triggered. If triggered, the injured cell consequently enters an orderly, regulated process of gradual degradation into smaller bodies which are absorbed by the body's immune system over time. This pathway to cellular elimination is in contrast to cellular necrosis, or uncontrolled cell death, in which an acute injury to the cell leads to lysis of the cell. Cellular necrosis triggers an aggressive inflammatory response leading to fibrotic scar tissue formation, which is not observed with cellular apoptosis. The cold treatment algorithm implemented by the CoolSculpting technology is designed to trigger apoptosis, eliminating fat cells without generating a wound healing reaction.

The CoolSculpting technology has been clinically demonstrated to cause reductions in fat layer thickness without impacting the skin or other tissues or structures in the treatment area. Fat cells are particularly sensitive to cold injury due to their composition; they contain a large lipid droplet within the cell membrane which constitutes the majority of the cell's volume. When cooled, lipids crystallize (undergo phase transition to an ordered molecular state) at a temperature well above the freezing point of water. Exposure

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of fat cells to these moderately cold temperatures causes the lipid droplets to crystallize, causing a subtle molecular injury which triggers the apoptotic sequence. However, the cooling does not affect cell types without high lipid content, preserving the health of the epidermis, dermis, and the underlying tissue. The interactions between cold and different cell and tissue types have been investigated extensively in scientific studies and are well documented in the literature.

A simplified description of the CoolSculpting process is as follows:

1. Cooling applicator is applied and the fat bulge being treated is suctioned into the applicator head.

2. Subcutaneous fat in the treatment area is precisely cooled at a rate that does not cause scar tissue or damage to the skin, nerves, or surrounding tissues.

3. Maintained cooling causes lipid crystallization in the fat cells and triggers apoptosis of the fat cells.

4. Patient's natural immune response leads to gradual elimination of the fat cells, resulting in a reduction in the fat layer thickness and an improvement in the appearance of the treated fat bulge.

Clinical History and Development of CoolSculpting

The founding principles of controlled cooling for the non-invasive and selective reduction of fat cells were originated at the Wellman Center for Photomedicine at the Massachusetts General Hospital, or MGH, a teaching affiliate of Harvard Medical School. CoolSculpting’s core technology was developed by Harvard scientists Dr. R. Rox Anderson and Dr. Deiter Manstein, two pioneers in the aesthetic industry. Researchers at MGH were prompted by published reports of cold-induced panniculitis, or inflammation of subcutaneous adipose tissue, in a syndrome frequent in young children called popsicle panniculitis, whereby inflammation of the fatty tissue in the lower cheek occurred after children sucked for a prolonged time on frozen treats. Clinical reports of popsicle panniculitis suggested that human adipose tissue may be preferentially damaged by exposure to cold. Based on these reports, research scientists at MGH conducted further research and patented certain aspects of cyrolipolysis technology. In May 2005, we secured an exclusive, worldwide license to the cyrolipolysis technology developed at MGH.

Following our licensing of the cryolipolysis technology from MGH, we initiated animal and human clinical testing to support the development of the CoolSculpting procedure. These scientific studies used objective endpoints, including histologic and ultrasound assessments and outcome evaluation by blinded, independent panel review, and provided evidence of the safety and efficacy of the CoolSculpting procedure. As of December 31, 2013, there were 15 peer-reviewed scientific journal articles discussing the effects of our CoolSculpting technology and 17 abstracts had been presented at medical conferences, both by physicians affiliated with our company as clinical and scientific advisors, as well as by unaffiliated physicians.

Preclinical Studies

We conducted animal testing primarily in pig models. In the original MGH studies, Manstein et al. investigated the feasibility of cryolipolysis, established correlations between cold treatment parameters (temperature, time) and fat reduction, and evaluated the impact on serum lipid levels in Yucatan pigs (see Manstein D, Laubach H, Watanabe K, et al: Selective cryolysis: A novel method of non-invasive fat removal. Lasers Surg Med 40:595-604, 2009). All sites treated with cold exposure less than -1°C developed panniculitis and fat layer reduction. No significant changes in the lipid profiles of the animals were noted immediately post-treatment or at any time point studied.

A subsequent study was performed by Zelickson et al. (see Zelickson B, Egbert BM, Preciado J, et al: Cryolipolysis for non-invasive fat cell destruction: Initial results from a pig model. Dermatol Surg 35:1462-1470, 2009). In this study, three pigs underwent a single cryolipolysis treatment, while the fourth pig underwent seven treatments with the cryolipolysis device at different time points before euthanasia. Histopathology demonstrated an approximate reduction of 50% in the thickness of the superficial fat layer. No adverse impact on the skin was observed and lipid panels revealed no significant variations in lipid profiles at any time in the study.

Clinical Studies

We have conducted multiple institutional review board-approved (IRB-approved), non-significant risk human clinical studies to assess the use of controlled cooling for selective fat reduction.

Pre-abdominoplasty study. An initial exploratory human clinical study of cryolipolysis was performed at a single site in the United States on 180 patients. In this study, patients who were scheduled to undergo abdominoplasty were treated with our technology in the lower abdomen at different intervals up to 180 days prior to their scheduled surgery date. At the time of abdominoplasty, the treated tissue was excised and processed for histologic evaluation. There were no significant changes in the fat tissue at seven days post-treatment, relative to the untreated control. This supports that controlled cooling triggers an apoptotic mechanism of fat cell elimination, as this process occurs gradually and is not evident immediately after cold exposure. At 14 days post-treatment, infiltration of immune cells (macrophages) were observed in the fat layer, as indicated by intense nuclei staining. These cells are responsible for the removal of the apoptotic fat cells via phagocytosis. At 90 days post-treatment, the fibrous septae (connective

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tissue fibers) in the fat layer were condensed due to elimination of fat cells. There was no evidence of dermal, epidermal, nerve, or blood vessel inflammation, and there was no evidence of fibrosis (scar tissue formation).

Pivotal study.To support our 510(k) application, we completed a prospective, multi-center U.S. human clinical trial in 2007. A total of 60 patients were treated at 12 dermatology or plastic surgery centers in the United States. Follow-up periods for both safety and efficacy were at two and six months. An additional one-week assessment was performed via telephone interview to document potential side effects. The primary endpoint was assessed on the basis of blinded, independent panel review of photographs. Patients were treated with our technology for 30 to 60 minutes. Patients were treated on one flank only to aid in the assessment of the primary endpoint. Outcomes were assessed via photographs, ultrasound measurements, and patient satisfaction questionnaires.

Primary endpoint. The primary effectiveness endpoint was the correct identification of the series of pre-treatment images versus six-month post-treatment images by the three independent physician reviewers who specialize in dermatology or plastic surgery. High resolution digital photographs were made of the patients' abdomens at specific degrees of rotation. The physicians were blinded to the identification of which photograph corresponded to the baseline image. Each reviewer was then asked to determine which photograph corresponded to the baseline photograph series and record their selections onto individual data collection forms. Intra-rater consistency among reviewers was determined by the inclusion of repeat sets. The order in which the patients were presented to the reviewer was randomized; within each patient, the set presentation was also randomized (e.g., left or right side of the presentation slide). It was expected that the percentage of correct identification of the pre-treatment images would be at least 80% based on past identification rates.

For all patients, regardless of weight change during the study period, reviewers were able to correctly identify baseline photos in 88% of the cases. Because fluctuations in weight can confound photo identifications, the primary endpoint outcome was also calculated for the patients who maintained their weight within five pounds of their baseline weight, and found that the correct identification percentage rose to 92%. These results suggest that clinically-meaningful changes were produced in the vast majority of patients regardless of subsequent weight change.

Secondary endpoints. The study also evaluated the following secondary outcome measures: reduction in the fat layer thickness as demonstrated by comparison of pre-treatment and post-treatment ultrasound measurements and patient satisfaction as determined by the results of a patient satisfaction questionnaire at the six-month follow-up visit. Standardized techniques for obtaining ultrasound images were developed and validated to ensure consistency throughout the study. A percent change in fat layer thickness was determined for an untreated area of the abdomen to account for patient weight variation during the study. A percent change in fat layer thickness was determined for the treated area to account for fat layer thickness reduction due to fat cell elimination through cryolipolysis and patient weight variation during the study. Fat layer thickness changes were normalized for each patient by subtracting the percent change in fat layer thickness in the untreated area from the percent change in fat layer thickness in the treated area to remove the influence of weight variations.

Ultrasound results demonstrated a mean reduction in the fat layer of 19% for the entire study population. These fat layer reductions were statistically significant as compared to the control region. Since the pivotal study, we have continued to enhance and optimize the CoolSculpting procedure. The CoolSculpting algorithms used during the pivotal study used a lower CIF (Cooling Intensity Factor) and/or shorter treatment times than the algorithm currently in commercial use with our CoolSculpting system. As a result, we believe the average percentage fat layer reduction produced by our current commercial version of the CoolSculpting system may exceed the percentage fat layer reduction measured by ultrasound in our pivotal study. Patient surveys showed that 82% of the participants were satisfied with the CoolSculpting procedure, and 79% agreed that there was a noticeable improvement in the appearance of their treated fat bulge.

Safety results. Treatment sites were evaluated immediately after treatment and at subsequent follow-up visits. Evidence of local inflammation was anticipated after a CoolSculpting treatment based on the body's reaction to a cold stimulus, and resolved spontaneously in all cases. Erythema, in most cases minor or moderate, was seen immediately post-treatment in virtually all patients. However, this condition had resolved itself within one week in the large majority of cases (93%). Purpura/bruising occurred in 27% of patients after the procedure was performed, and by the one week assessment had resolved in all but 5% of the patients. Minor or moderate edema was reported in only 13% of patients immediately after the procedure, and had universally resolved within a week. Numbness was common immediately after the CoolSculpting procedure, occurring in 87%. A week later only approximately half of the patients still experienced some degree of numbness (in no case marked), and by two months only 7% still had numbness; in all cases it was mild. At the six-month follow-up visit, no patient complained of numbness or tingling.

Blood was drawn from a subset of patients (n=10) for evaluation of serum lipids and liver tests. The mean values in all patient groups show no trends over time and there were no clinically meaningful differences between baseline and post-treatment values.

A total of four adverse events were reported in our pivotal study. Two involved pain during the initial cooling exposure; in both cases treatment was discontinued. These events resolved without intervention approximately one week after treatment. One patient reported bruising in the treated area one-day post treatment. Resolution was documented at an optional follow-up conducted four

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weeks post treatment. The fourth adverse event involved a report of pain and muscle spasm in the treatment area rated as a one (minor in severity) occurring once a month for three months. In a follow-up visit three weeks after the complaint, the patient stated the muscle spasm had resolved and the patient did not feel that the spasms were related to the treatment. None of the adverse events reported during this study were considered serious.

Conclusions. The clinical findings of our pivotal study confirmed the safety and effectiveness of our CoolSculpting technology and procedure. Photographic review and ultrasound measurements demonstrated clinically significant and measurable reductions in the fat layer thickness in the treated area. Independent photo review of baseline and post-treatment images (the primary endpoint) yielded a correct identification percentage exceeding the 80% criteria, and a statistically significant achievement of the success criteria. No serious adverse events were reported. Side effects and adverse events were typically mild and transient and all resolved spontaneously without medical intervention. Post-treatment lipid profile and liver function test results exhibited only normal variations with no discernible difference from baseline. Patient survey results supported overall patient satisfaction with the treatment.

Research and Development

Our ongoing research and development activities are primarily focused on improving and enhancing our CoolSculpting system and the CoolSculpting procedure. Our research and development efforts related to CoolSculpting currently include:

• Additional treatment indications. We intend to seek additional regulatory clearances from the FDA to expand our marketed indications for CoolSculpting in the United States to other areas of the body.

• Additional applicators. We are developing additional applicators for the CoolSculpting system to expand our range of available applicator sizes and configurations, which will provide our customers with additional flexibility in selecting the applicator that best fits the body contour to be treated. We expect to introduce a new applicator, CoolSmooth, during the second quarter of 2014. CoolSmooth is a non-suction based, flat applicator that conforms to the body thus increasing our ability to provide customizable approaches for non-invasive fat reduction.

• Enhanced algorithms. CoolSculpting utilizes our proprietary treatment algorithms to ensure the fat cells in the treated area are sufficiently cooled to obtain the desired aesthetic results while preserving the overlying skin and surrounding tissues. We are continuing to examine the interaction between controlled cooling and tissue response to enhance our proprietary treatment algorithms.

• Point of Sale information feature. Our CoolSculpting system currently records information locally at the unit level about each treatment procedure, including information regarding procedure and patient statistics. Our direct sales force and our distributors can collect this information for analysis. During 2013, we launched CoolConnect, which is a HIPAA compliant connectivity and data management tool that allows the accumulation and analysis of treatment procedure information at the point of sale. This data will assist our sales force in discussions with customers regarding their marketing efforts and program effectiveness. CoolConnect is being rolled out across our installed base to collect real-time sales, demographic and marketing data that we believe can further optimize the marketing strategies for both us and our customers.

• Procedure tracking. To help ensure we capture each procedure performed with our CoolSculpting system, we are continuing to optimize the security encryption in our CoolCards to protect against third-party manipulation or the use of counterfeit CoolCards with our CoolSculpting system.

• Design improvements. We are continuing to optimize the design of our CoolSculpting system to improve reliability and to reduce our manufacturing and repair costs.

In addition to these development activities related to CoolSculpting, we are exploring additional uses of our proprietary controlled cooling technology platform for the dermatology, plastic surgery, and aesthetic markets. We are also exploring potential therapeutic uses for our platform technology, either directly or through collaborative arrangements with strategic partners. Although MGH cannot restrict our future product development efforts, the terms of our license agreement with MGH may require us to pay MGH a royalty on commercial sales of future products we develop or that may be developed by our strategic partners. Whether we are required to pay a royalty will depend on whether our future products incorporate the intellectual property we license from MGH. Any royalty we are required to pay will reduce our proceeds from sales of such future products and may make it more difficult for us to successfully commercialize these products directly or through a strategic partner.

As of December 31, 2013, we had 52 employees focused on research and development. In addition to our internal team, we retain third-party contractors from time to time to provide us with assistance on specialized projects. We also work closely with experts in the medical community to supplement our internal research and development resources. Research and development expenses for the years ended December 31, 2013, 2012, and 2011 were $17.1 million, $12.7 million, and $10.5 million, respectively.

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Sales and Marketing

Sales

In North America, we utilize a direct sales force to sell CoolSculpting. As of December 31, 2013, we had a North American sales force of approximately 70 employees. To support the continued roll-out of CoolSculpting, we intend to continue to invest in our North American sales force.

In international markets, we sell CoolSculpting primarily through a network of distributors. As of December 31, 2013, we had an international sales team of approximately 10 employees supporting approximately 35 independent distributors. Additionally, we utilize a separate direct sales force of approximately 10 employees to sell into certain key markets in Europe. Our product currently has regulatory approval in 62 countries. We are increasing and intend to continue to increase penetration of our installed base in international markets in which CoolSculpting is currently sold and expand into attractive new international markets by identifying and training qualified distributors. We require our distributors to provide customer training, to invest in equipment and marketing, and to attend certain exhibitions and industry meetings. In addition, we are opportunistically pursuing direct sales and expanding our marketing campaigns in select international markets.

We enter into distribution agreements with our distributors outside of North America. Our distribution agreements generally provide the distributor with a right to distribute our product for a term of three years and are renewable by written agreement and terminable upon a material breach by either party, insolvency of the distributor, or a change of control of the distributor. Following the expiration or termination of the agreement, the distributor has an obligation to continue servicing existing customers for a period ranging from two to three months, upon our written request. Our distribution agreements generally provide the exclusive right to distribute our products within a designated territory, with certain distributors only receiving non-exclusive rights within a designated territory. We require distributors that have an exclusive territory right to purchase a fixed number of CoolSculpting systems each year over the term of the agreement to maintain their exclusivity. In such a case, the agreement sets forth the minimum quarterly purchase obligations for the first calendar year of the term of the agreement, and the parties will agree each year on the minimum quarterly purchase obligations for the remaining quarters during the term of the agreement. If we fail to agree on new minimum purchase obligations after the first calendar year of the term of the agreement, or the distributor fails to meet one of its minimum quarterly purchase obligations, we can convert the distributor to a non-exclusive distributor during the remaining term or terminate the agreement. These agreements also provide customary indemnities to the distributor including claims of patent infringement in the designated territory, material product defects, and our negligence or willful misconduct.

Customers

As of December 31, 2013 and 2012, no individual customer accounted for 10% or more of our accounts receivable. Furthermore, no individual customer accounted for greater than 10% of total revenue during the years ended December 31, 2013, 2012 and 2011, respectively.

Customer Marketing and Support Programs

We intend to drive CoolSculpting procedures through our targeted marketing and customer support programs. We have hired and trained a group of Practice Development Managers, or PDMs. Our PDMs train our customers on the use of the CoolSculpting system when the CoolSculpting system is first delivered to the customer's practice site. Following this initial training, our PDMs educate our customers on current CoolSculpting best practices and provide customers and their staff with sales and marketing training and support to help them increase patient demand for CoolSculpting procedures.

We also continue to offer a comprehensive practice certification program, originally launched in 2011. A customer's participation in this certification program and our other practice support programs, other than the initial training program, is voluntary. We have found that the most successful practices have the customer involved in every part of the training and marketing process. To become certified, customers must commit to engage in quarterly business strategy meetings with one of our PDMs, educate members of their office in our CoolSculpting best practices, and adopt our guidelines for before and after patient photographs. Once certified, customers receive distinction on our website. Furthermore, in late 2013 we launched the first of our customer training programs, CooSculpting University. This program enables new and existing customers to successfully launch their CoolSculpting programs through a curriculum that includes hands-on education, live treatments and lecture-style presentations.

In 2013, we launched our first point of sale information tool, CoolConnect. The point of sale information we will obtain from CoolConnect will provide our PDMs detailed, customer specific information that will allow us to discuss with our customers their marketing efforts and program effectiveness on a more real-time basis. We believe this automated tool will assist our customers in improving patient conversion rates as well as with setting sales goals. We also intend to continue our co-operative marketing strategy with individual practices, designed to stimulate customers to promote CoolSculpting to both new and existing aesthetic patients. We also intend to continue to participate in industry trade shows, clinical workshops, and company-sponsored conferences with expert panelists.

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Customer Support

We strive to provide our customers and authorized distributors with superior customer support. We maintain a staff of Customer Care personnel primarily in our facility in Pleasanton, California to support our customers worldwide. This staff is available by telephone and email to field inquiries, troubleshoot product issues, facilitate sales activities and support the commercial activities of our international distributors. In addition, we provide worldwide technical support to our customers and distributors year round. Our goal is to minimize the disruption caused by a service event, and we strive to repair our customer's CoolSculpting system or provide the customer with a replacement CoolSculpting system within one day after notifying us of a problem. In the event of a technical issue with a CoolSculpting system , one of our Customer Care personnel will call the customer and determine whether the technical issue may be resolved over the telephone or whether the issue requires intervention. If the issue cannot be resolved by telephone, our Customer Care personnel will request our third-party logistics provider to ship and setup a replacement CoolSculpting system, or the applicable module of the CoolSculpting system, at the customer's office. To reduce shipping times and costs, we ensure that a number of CoolSculpting systems and replacement modules are available in specific regions throughout North America and other international locations. Upon arrival at the customer site, our logistics provider will move the replacement CoolSculpting system or module into the customer's office, unpack it, set it up and power on the CoolSculpting system to ensure it is working properly. Because of the modular design of our CoolSculpting system, our logistics provider is not required to have any specialized training or expertise, and a number of logistics providers are available to provide these services. Upon completion, our logistics provider calls our Customer Care personnel and confirms the successful delivery and setup, and then ships the defective CoolSculpting system or module to our headquarters for repair. We allow our customers to keep the newly delivered CoolSculpting system or the applicable module, and we repair and reuse the defective CoolSculpting system or module received from our customer for future service calls. In the direct markets outside of North America and our Europe direct markets, our CoolSculpting system is serviced and supported through our independent distributors. We pro-actively deploy replacement CoolSculpting systems, modules, and components to strategic hubs worldwide to facilitate quick response time to service events and to maximize customer “up time.”

Effective in the second quarter of 2013, we provide a standard limited warranty on our products of generally one year for both control units and applicators for our direct customers. Prior to this change, we provided a standard limited warranty on our products of generally three years for control units and one year for applicators, while for direct customers in Europe, we offered a one year standard warranty on control units. For indirect customers in our international markets, we provide a standard limited warranty on our products of generally three years for control units and one year for applicators.

Manufacturing

We occupy an approximately 43,000 square foot facility in Pleasanton, California, approximately 13,825 square feet in our manufacturing facility in Dublin, California and 15,755 of warehouse space in Livermore, California. We manufacture and distribute our CoolSculpting system, including procedure packs, at our Dublin facility. The Livermore facility is used primarily for raw material storage. Through 2012 and the beginning of 2013, we had utilized OnCore Manufacturing LLC, or OnCore, to manufacture and supply to us our CoolSculpting system. During the second quarter of 2013, we fully in-sourced the manufacturing of our CoolSculpting system.

We depend upon suppliers for some critical components of our manufacturing processes and for materials used in our manufacturing processes. Some of these components and materials are supplied by a single vendor, and some are subject to certain minimum order quantities. Generally, we rely on purchase orders rather than long-term contracts with our suppliers, which subjects us to risks, including price increases and component shortages. We continue to evaluate alternative sources of supply for these components and materials.

CoolGels and CoolLiners continue to be manufactured by third-party manufacturers. In addition, our CoolSculpting system contains two critical components, the integrated circuit contained in the CoolSculpting control unit and the CoolCard, which is supplied by a company in Japan, and the connector that attaches our applicators to the control unit, which is supplied by a separate company in the United States. We do not have supply agreements with the suppliers of these critical components beyond purchase orders. However, we maintain a safety stock inventory for these critical components equal to one year of forecasted part requirements of the integrated circuit and one month of connectors in finished assemblies, as well as at least a three month supply of connectors to support open sales orders.

Manufacturing facilities that produce finished medical devices intended for distribution in the United States and internationally are subject to regulation and periodic unannounced inspection by the FDA and other domestic and international regulatory agencies. In the United States, we are required to manufacture our products in compliance with the FDA's Quality System Regulation, or QSR, which cover the methods and documentation of the design, testing, control, manufacturing, labeling, quality assurance, packaging, storage, and shipping of our products. The FDA inspected our Pleasanton facility in April 2011 and April 2013, and had no findings or observations. In international markets, we are required to obtain and maintain various quality assurance and quality management certifications. We have obtained the following international certifications: EN ISO 13485:2012 Quality

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Management Systems Requirements for regulatory purposes, ISO 13485:2003 under CMDCAS (Canada), Ordinance 169 certification (Japan), 93/42/EEC MDD certification to Annex II Full Quality System (Europe). We have recently been audited by our Notified Body, TUV Rheinland, and all certifications have been extended to cover all of our facilities.

Neither our third-party contract manufacturers nor our suppliers are currently required to comply with the FDA's QSR, as these parties do not provide us with a finished medical device. However, we maintain a quality system designed to be compliant to QSR and have procedures in place designed to ensure that all products and materials purchased by us conform to specified requirements, including evaluation of suppliers, and where required, qualification of the components supplied.

Our current facilities are adequate to support our near term operations; however, they may not be sufficient in the long term. Leases for our manufacturing and warehouse locations expire in 2014. We are currently in the process of renegotiating lease terms for some of our facilities.

Our business typically has a short sales cycle, and to date we have not had a significant backlog of orders at the end of any given quarter. We define backlog as unshipped orders resulting from lack of available product to fulfill non-cancelable sales orders. 

Competition

The medical technology and aesthetic product markets are highly competitive and dynamic, and are characterized by rapid and substantial technological development and product innovations. Demand for CoolSculpting could be limited by the products and technologies offered now or in the future by our competitors. We designed CoolSculpting to address the aesthetic concerns of individuals who have stubborn fat bulges. Patients who are significantly obese and who do not have specific fat bulges but require significant fat reduction to achieve aesthetic results are candidates for invasive and minimally-invasive procedures, such as liposuction and laser-assisted liposuction. Although effective at reducing fat, these invasive and minimally-invasive procedures may involve patient pain, expense, downtime, and the risks typically associated with surgical procedures. As a result, patients who do not require significant fat reduction to achieve meaningful aesthetic results explore non-invasive fat reduction and body contouring procedures to avoid the pain, expense, downtime, and surgical risks associated with invasive and minimally-invasive procedures.

In the United States, the FDA has cleared the marketing of a laser energy-based product for body contouring. The laser energy-based product, marketed by Erchonia Corporation, is used to perform a non-invasive procedure reported to be safe and easy to perform, without causing patient pain. This product does not eliminate fat cells, however. In addition, the patient is required to undergo multiple treatments and is required to adopt a special diet and exercise program as part of the treatment protocol.

In September 2011, the FDA cleared the marketing of a high intensity focused ultrasound (HIFU) product for body contouring offered by Solta Medical, Inc., a publicly traded company. This HIFU product delivers focused ultrasound and utilizes heat to non-invasively eliminate fat cells in a single procedure. Utilizing heat to eliminate fat cells, however, has a number of significant limitations compared to the elimination of fat cells through cooling as provided by CoolSculpting. The high temperatures generated by focused ultrasound energy may cause patient pain during and after the procedure. In addition, heat cannot be used to specifically target fat cells, which makes the procedure more difficult to perform and can lead to collateral damage to tissues in the target zone, including nerves and connective tissues. Acutely injuring fat cells through heat also causes fat cell elimination through a biological process known as necrosis. Unlike the fat-selective apoptosis process utilized by CoolSculpting, necrosis destroys all tissues in the target zone, triggers the body's wound-healing response and can result in scar tissue formation.

In the fourth quarter of 2012, Cutera, Inc. a publicly traded company, introduced TruSculpt, a radio frequency (RF) product used to heat the fat to cause apoptosis. Cutera has a large installed base of products that address a number of other aesthetic needs. Their target audience for TruSculpt will be this existing customer base as well as the dermatologists, plastic surgeons and aesthetic customers that we target. TruSculpt uses a contact electrode applied to the surface of the skin to conduct RF current through the patient to a larger ground electrode generally placed on the back. This causes Joule (resistive) heating everywhere in that path, but the heat is generally concentrated in the volume directly underneath the contact electrode. Temperatures at the surface of the skin are set to 45 degrees Centigrade or somewhat higher, depending on patient tolerance. Superficial fat temperatures can get somewhat higher than the skin because blood perfusion of the skin is greater than in the fat. No active cooling is provided. TruSculpt is labor intensive and repetitive, requiring about 4 minutes for each manually applied treatment pulse. Significant overlap of treatment sites is necessary to treat effectively because the Joule heating underneath the contact electrode dissipates rapidly with depth. Unlike the devices provided by Erchonia, Solta or ZELTIQ, the Cutera device is not cleared by the FDA for fat reduction. TruSculpt has a clearance for deep heating and for temporary reduction in the appearance of cellulite. The latter clearance is based entirely on an adjunct hand-held roller that is not attached to the RF system.

Due to less stringent regulatory requirements, there are many more aesthetic products and procedures available for use in international markets than are approved for use in the United States. For example, multiple ultrasound based products have been cleared for marketing outside the United States. There are also fewer limitations on the claims our competitors in international

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markets can make about the effectiveness of their products and the manner in which they can market them. As a result, we face more competition in these markets than in the United States.

We also generally compete against medical technology and aesthetic companies, including those offering products and technologies unrelated to fat reduction, for physician resources and mind share. Some of our competitors have a broad range of product offerings, large direct sales forces, and long-term customer relationships, which could inhibit our market penetration efforts. Our potential customers also may need to recoup the cost of expensive products that they have already purchased from our competitors, and thus they may decide to delay or not to purchase our CoolSculpting system.

We believe that CoolSculpting competes largely on the basis of the following competitive factors:

• CoolSculpting only affects fat cells without endangering any other structures in the skin resulting in more consistent, more predictable and durable outcomes;

• CoolSculpting is able to achieve measurable results with minimal patient discomfort and high patient satisfaction;

• CoolSculpting does not require a person to administer the procedure after the procedure is started which creates favorable customer practice economics by freeing up time for the practice to generate additional revenue with new patients or with the patient undergoing CoolSculpting; and

• Effectiveness of sales and marketing programs and initiatives along with product placement and distribution strategy.

Patents and Proprietary Technology

To establish and protect our proprietary technologies and products, we rely on a combination of patent, copyright, trademark, and trade-secret laws, as well as confidentiality provisions in our contracts. We have implemented a patent strategy designed to protect our technology and facilitate commercialization of our current and future products. As of December 31, 2013, our patent portfolio comprised 89 issued patents and 102 pending patent applications, each of which we either own directly or for which we are the exclusive licensee. Our intellectual property portfolio for our core Cryolipolysis technology was built through the combination of licensing patents from third parties and the issuance of new patents to us as the result of our ongoing development activities. Many of our issued and pending patents were exclusively licensed from MGH and generally relate to our core technology relating to our CoolSculpting system. In general, patents have a term of 20 years from the application filing date or earliest claimed priority date. We expect our issued and exclusively licensed patents to expire in 2023 or later.

We also rely on trade secrets, technical know-how, contractual arrangements, and continuing innovation to protect our intellectual property and maintain our competitive position. We have a policy to enter into confidentiality agreements with third parties, employees, and consultants. We also have a policy that our employees and consultants sign agreements requiring that they assign to us their interests in intellectual property such as patents and copyrights arising from their work for us. It is our policy that all employees sign an agreement not to compete unfairly with us during their employment and upon termination of their employment through the misuse of confidential information, soliciting employees, and soliciting customers.

ZELTIQ^®, CoolSculpting^®, and our logo are registered trademarks in the United States and in certain foreign countries.

Seasonal Fluctuations

Seasonal fluctuations in the number of doctors in their offices and available to take appointments have affected, and are likely to continue to affect, our business. Specifically, our customers often take vacation or are on holiday during the summer months and therefore tend to perform fewer procedures, particularly in Europe. These seasonal trends have caused and will likely continue to cause, fluctuations in our quarterly results, including fluctuations in sequential revenue growth rates.

Material Agreements

Massachusetts General Hospital License Agreement

In May 2005, we entered into an exclusive license agreement with the General Hospital Corporation, which owns and operates the Massachusetts General Hospital, or MGH, which was amended and restated in September 2011. Under this agreement, MGH granted to us an exclusive worldwide, royalty-bearing license to patent applications related to our controlled cooling platform technology, including the removal of cutaneous, subcutaneous or subdermal fat, treatment or removal of cellulite, and any therapy or procedures to the tissues and structures of the skin, subcutaneous tissue, and tumors, lesions and adipose tissue of the skin and of subdermal tissue. As consideration for the license granted to us by MGH, we agreed to pay to MGH (i) an upfront, non-refundable license issue fee of $0.3 million, (ii) a non-refundable minimum annual license maintenance payment of $75,000, $0.1 million, $0.2 million, and $0.2 million upon the first, second, third, and each subsequent anniversary of the effective date of the agreement following our first commercial sale, respectively, credited against royalty payments due to MGH on net income and distributor income in the same year, (iii) payments totaling approximately $8.1 million upon the successful achievement of regulatory and commercial milestones, including (a) $1.1 million due upon receipt of FDA clearance to market our CoolSculpting system for the

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selective reduction of fat, (b) $1 million due upon achieving cumulative net sales of $70 million, and (c) $6 million due upon the earlier to occur of achieving cumulative net sales of $200 million or the completion of a change of control as defined in the agreement, including a qualifying initial public offering and (iv) a 7% royalty on net sales (as defined in the agreement) of CoolSculpting. We have the option to buy down up to 25% of the future royalty payments. We also agreed to pay to MGH a percentage of sublicense royalties in certain circumstances and to reimburse MGH for all costs associated with the preparation, filing, prosecution, and maintenance of the patent rights under the agreement.

The agreement will remain in full force and effect for the later of (i) the life of any patents that issue from the underlying patent applications, which are expected to expire in 2023 or (ii) one year after the last commercial sale for which a royalty is due to MGH, unless terminated in accordance with its terms and conditions. MGH may terminate the agreement upon our insolvency, failure to maintain insurance, breach of the agreement, failure to satisfy our development progress obligations, or failure to make required payments. We may terminate the agreement for any reason upon 90 days' advance written notice to MGH.

As of December 31, 2013, we have completed all milestones associated with the license agreement with MGH and have made all required license fee and milestone payments to MGH, described above. We continue to pay the royalty on net sales as required by the agreement and currently have no additional obligations to MGH resulting from any sublicensing agreement.

Government Regulation

The design, development, manufacture, testing and sale of our products are subject to regulation by numerous governmental authorities, principally the FDA, and corresponding state and foreign regulatory agencies.

Regulation by the FDA

In the United States, the Federal Food, Drug, and Cosmetic Act, or FDCA, FDA regulations and other federal and state statutes and regulations govern, among other things, medical device design and development, pre-clinical and clinical testing, premarket clearance or approval, registration and listing, manufacturing, labeling, storage, advertising and promotion, sales and distribution, export and import, and post-market surveillance. The FDA regulates the design, manufacturing, servicing, sale, and distribution of medical devices, including aesthetic devices. Failure to comply with applicable U.S. requirements may subject a company to a variety of administrative or judicial sanctions, such as warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, civil penalties, and criminal prosecution. The FDA can also refuse to approve pending applications.

Each medical device we wish to distribute commercially in the United States will require marketing authorization from the FDA prior to distribution. The two primary types of FDA marketing authorization applicable to a device are premarket notification, also called 510(k) clearance, and premarket approval, also called PMA approval. The type of marketing authorization is generally linked to the classification of the device. The FDA classifies medical devices into one of three classes (Class I, II, or III) based on the degree of risk the FDA determines to be associated with a device and the level of regulatory control deemed necessary to ensure the device's safety and effectiveness. Devices requiring fewer controls because they are deemed to pose lower risk are placed in Class I or II. Class I devices are deemed to pose the least risk and are subject only to general controls applicable to all devices, such as requirements for device labeling, premarket notification, and adherence to the FDA's current Good Manufacturing Practices, or cGMP, and Quality System Regulation, or QSR. Class II devices are intermediate risk devices that are subject to general controls and may also be subject to special controls such as performance standards, product-specific guidance documents, special labeling requirements, patient registries, or post-market surveillance. Class III devices are those for which insufficient information exists to assure safety and effectiveness solely through general or special controls and include life-sustaining, life-supporting or implantable devices, devices of substantial importance in preventing impairment of human health, or which present a potential, unreasonable risk of illness or injury.

Most Class I devices and some Class II devices are exempted by regulation from the 510(k) clearance requirement and can be marketed without prior authorization from the FDA. Some Class I devices that have not been so exempted and Class II devices are eligible for marketing through the 510(k) clearance pathway. By contrast, devices placed in Class III generally require PMA approval or 510(k) de novo clearance prior to commercial marketing. The PMA approval process is more stringent, time-consuming, and expensive than the 510(k) clearance process; however, the 510(k) clearance process has also become increasingly stringent and expensive.

The CoolSculpting system originally received 510(k) clearance in 2008 as a skin cooling device to minimize pain and thermal injury during laser and dermatological treatments. An additional 510(k) notification was submitted to the FDA in 2008 for the indication of cold-assisted lipolysis and a reduction in the subcutaneous fat layer. That premarket notification was subsequently determined by the FDA to be not substantially equivalent to the predicates identified because the device had a new intended use that alters the therapeutic effect impacting safety and effectiveness; therefore, our device for cold-assisted lipolysis and a reduction in the subcutaneous fat layer was automatically classified as Class III. We petitioned the FDA that this classification should be Class II because it does not support or sustain human life, is not of substantial importance in preventing impairment of human

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health, and does not present a potential, unreasonable risk of illness or injury. In September 2010, the FDA approved our de novo petition for Class II reclassification and issued a clearance letter for non-invasive fat reduction of the flanks (love handles). Subsequently on May 2, 2012, we received FDA clearance for expansion of the indication to include the abdomen area. We are currently conducting clinical trials of the CoolSculpting system on fat reduction for additional indications.

510(k) clearance.To obtain 510(k) clearance for a medical device, an applicant must submit a premarket notification to the FDA demonstrating that the device is “substantially equivalent” to a device legally marketed in the United States that is not subject to PMA approval, commonly known as the “predicate device.” A device is substantially equivalent if, with respect to the predicate device, it has the same intended use and has either (i) the same technological characteristics or (ii) different technological characteristics and the information submitted demonstrates that the device is as safe and effective as a legally marketed device and does not raise different questions of safety or effectiveness. A showing of substantial equivalence sometimes, but not always, requires clinical data. Generally, the 510(k) clearance process can exceed 90 days and may extend to a year or more.

After a device has received 510(k) clearance for a specific intended use, any change or modification that significantly affects its safety or effectiveness, such as a significant change in the design, materials, method of manufacture or intended use, may require a new 510(k) clearance or PMA approval and payment of an FDA user fee. The determination as to whether or not a modification could significantly affect the device's safety or effectiveness is initially left to the manufacturer using available FDA guidance; however, the FDA may review this determination to evaluate the regulatory status of the modified product at any time and may require the manufacturer to cease marketing and recall the modified device until 510(k) clearance or PMA approval is obtained. The manufacturer may also be subject to significant regulatory fines or penalties.

Before we can submit a medical device for 510(k) clearance, we may have to perform a series of generally short studies over a period of months, including method comparison, reproducibility, interference and stability studies to ensure that users can use the device successfully. Some of these studies may take place in clinical environments, but are not usually considered clinical trials. For PMA submissions, we would generally be required to conduct a longer clinical trial over a period of years that supports the clinical utility of the device and how the device will be used.

PMA approval. A PMA application requires the payment of significant user fees to the FDA. PMA applications must be supported by valid scientific evidence, which typically requires extensive data, including technical, pre-clinical, clinical, and manufacturing data, to demonstrate to the FDA's satisfaction the safety and effectiveness of the device. A PMA application must also include, among other things, a complete description of the device and its components, a detailed description of the methods, facilities and controls used to manufacture the device, and proposed labeling.

The FDA has 45 days from its receipt of a PMA to determine whether the application will be accepted for filing based on the agency's threshold determination that it is sufficiently complete to permit substantive review. Once the submission is accepted for filing, the FDA begins an in-depth review. During this review period, the FDA may request additional information or clarification of information already provided. In addition, the FDA will conduct a pre-approval inspection of the manufacturing facility or facilities to ensure compliance with the QSR, which requires manufacturers to follow design, testing, control, documentation and other quality assurance procedures.

FDA review of an initial PMA application is required by statute to take between six to 10 months, although the process typically takes significantly longer, and may require several years to complete. The FDA can delay, limit, or deny approval of a PMA application for many reasons, including:

• it is not demonstrated that there is reasonable assurance that the device is safe or effective under the conditions of use prescribed, recommended, or suggested in the proposed labeling;

• the data from pre-clinical studies and clinical trials may be insufficient; and

• the manufacturing process, methods, controls, or facilities used for the manufacture, processing, packing, or installation of the device do not meet applicable requirements.

If the FDA evaluations of both the PMA application and the manufacturing facilities are favorable, the FDA will either issue an approval letter or an approvable letter, which usually contains a number of conditions that must be met to secure final approval of the PMA. If the FDA's evaluation of the PMA or manufacturing facilities is not favorable, the FDA will deny approval of the PMA or issue a not approvable letter. A not approvable letter will outline the deficiencies in the application and, where practical, will identify what is necessary to make the PMA approvable. The FDA may also determine that additional clinical trials are necessary, in which case the PMA approval may be delayed for several months or years while the trials are conducted and then the data is submitted in an amendment to the PMA. Once granted, PMA approval may be withdrawn by the FDA if compliance with post approval requirements, conditions of approval or other regulatory standards is not maintained or problems are identified following initial marketing.

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Approval by the FDA of new PMA applications or PMA supplements may be required for modifications to the manufacturing process, labeling, device specifications, materials or design of a device that is approved through the PMA process. PMA supplements often require submission of the same type of information as an initial PMA application, except that the supplement is limited to information needed to support any changes from the device covered by the original PMA application and may not require as extensive clinical data or the convening of an advisory panel.

Regulation After FDA Clearance or Approval

Any devices we manufacture or distribute pursuant to clearance or approval by the FDA are subject to pervasive and continuing regulation by the FDA and certain state agencies. We are required to adhere to applicable regulations setting forth detailed cGMP requirements, as set forth in the QSR, which include, among other things, testing, control and documentation requirements. Non-compliance with these standards can result in, among other things, fines, injunctions, civil penalties, recalls or seizures of products, total or partial suspension of production, refusal of the government to grant 510(k) clearance or PMA approval of devices, withdrawal of marketing approvals and criminal prosecutions. We have designed and operate our manufacturing facilities under the FDA's cGMP requirements.

Because we are a manufacturer of medical devices, we must also comply with medical device reporting requirements by reviewing and reporting to the FDA whenever there is evidence that reasonably suggests that one of our products may have caused or contributed to a death or serious injury. We must also report any incident in which our product has malfunctioned if that malfunction would likely cause or contribute to a death or serious injury if it were to recur. Labeling and promotional activities are subject to scrutiny by the FDA and, in certain circumstances, by the Federal Trade Commission. Medical devices approved or cleared by the FDA may not be promoted for unapproved or uncleared uses, otherwise known as “off-label” promotion. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses may be subject to significant liability, including substantial monetary penalties and criminal prosecution.

Export of Our Products

Export of products subject to the 510(k) notification requirements, but not yet cleared to market, is permitted with FDA authorization provided certain requirements are met. Unapproved products subject to the PMA approval requirements may be exported if the exporting company and the device meet certain criteria, including, among other things, that the device complies with the laws of the receiving country and the company submits a “Simple Notification” to the FDA when the company begins to export. If the company or device does not comply with such criteria, FDA approval must be obtained for export. To obtain FDA export approval, if required, we must meet certain requirements, including, among other things and with some exceptions, documentation demonstrating that the product is approved for import into the country to which it is to be exported and, in some instances, safety data to demonstrate that export of the device will not be contrary to public health or safety.

Foreign Government Regulation

The regulatory review process for medical devices varies from country to country, and many countries also impose product standards, packaging requirements, environmental requirements, labeling requirements and import restrictions on devices. Each country has its own tariff regulations, duties, and tax requirements. Failure to comply with applicable foreign regulatory requirements may subject a company to fines, suspension or withdrawal of regulatory approvals, product recalls, seizure of products, operating restrictions, criminal prosecution, or other consequences.

Fraud and Abuse Regulations

We may be subject to numerous federal and state health care anti-fraud laws, including the federal anti-kickback statute and False Claims Act, that are intended to reduce waste, fraud, and abuse in the health care industry. These laws are broad and subject to evolving interpretations. They prohibit many arrangements and practices that are lawful in industries other than health care, including certain payments for consulting and other personal services, some discounting arrangements, the provision of gifts and business courtesies, the furnishing of free supplies and services, and waivers of payments. In addition, many states have enacted or are considering laws that limit arrangements between medical device manufacturers and physicians and other health care providers and require significant public disclosure concerning permitted arrangements. These laws are vigorously enforced against medical device manufacturers and have resulted in manufacturers paying significant fines and penalties and being subject to stringent corrective action plans and reporting obligations. We must operate our business within the requirements of these laws and, if we were accused of violating them, could be forced to expend significant resources on investigation, remediation, and monetary penalties. Companies targeted in such prosecutions have paid substantial fines in the hundreds of millions of dollars or more, have been forced to implement extensive corrective action plans, can be excluded from federal health care programs and become subject to substantial civil and criminal penalties, and have often become subject to consent decrees severely restricting the manner in which they conduct their business.

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Because we have commercial operations overseas, we are subject to the Foreign Corrupt Practices Act, or FCPA, and other countries' anti-corruption/anti-bribery regimes, such as the U.K. Bribery Act. The FCPA prohibits improper payments or offers of payments to foreign governments and their officials for the purpose of obtaining or retaining business. Safeguards we implement to discourage improper payments or offers of payments by our employees, consultants, sales agents or distributors may be ineffective, and violations of the FCPA and similar laws may result in severe criminal or civil sanctions, or other liabilities or proceedings against us, any of which would likely harm our reputation, business, financial condition and result of operations.

Patient Protection and Affordable Care Act

Our operations are impacted by the federal Patient Protection and Affordable Care Act of 2010, or PPACA. Effective January 1, 2013, we began to incur a 2.3% excise tax on sales of medical devices in the United States. Compliance with the PPACA has imposed significant administrative and financial burdens on us.

Environmental Regulation

We are subject to numerous foreign, federal, state, and local environmental, health and safety laws and regulations relating to, among other matters, safe working conditions, product stewardship and end-of-life handling or disposition of products, and environmental protection, including those governing the generation, storage, handling, use, transportation and disposal of hazardous or potentially hazardous materials. Some of these laws and regulations require us to obtain licenses or permits to conduct our operations. Environmental laws and regulations are complex, change frequently and have tended to become more stringent over time. Although the costs to comply with applicable laws and regulations, including requirements in the European Union relating to the restriction of use of hazardous substances in products, have not been material, we cannot predict the impact on our business of new or amended laws or regulations or any changes in the way existing and future laws and regulations are interpreted or enforced, nor can we ensure we will be able to obtain or maintain any required licenses or permits.

Employees

As of December 31, 2013, we had 297 employees, with 141 employees in sales and marketing, 52 in research and development, including clinical, regulatory and certain quality functions, 60 employees in operations, and 44 employees in general and administrative. We have never had a work stoppage and none of our employees are covered by collective bargaining agreements or represented by a labor union. We believe our employee relations are good.

Financial Information About Geographic Areas

Financial information regarding revenue and long-lived assets by geographic area is included in Note 15-“Segment Information” in “Notes to Consolidated Financial Statements” included in this Annual Report on Form 10-K. Financial information regarding revenue, profit and loss and total assets is included in the financial statements in this Annual Report on Form 10-K.

General Information

We were originally incorporated in Delaware in March 2005 as Juniper Medical, Inc. In July 2007, we changed our name to ZELTIQ Aesthetics, Inc. Our principal corporate offices are located at 4698 Willow Road, Suite 100, Pleasanton, CA 94588 and our telephone number is (925) 474-2500. Our website is located at www.coolsculpting.com. The information contained on, or that can be accessed through, our website is not part of this Annual Report on Form 10-K.

We make available free of charge on our website our Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the United State Securities and Exchange Commission, or SEC. You may obtain a free copy of these reports in the "investor relations, corporate governance" section of our website, www.coolsculpting.com. The reports filed with the SEC are also available at www.sec.gov.

ITEM 1A. RISK FACTORS

Our operations and financial results are subject to various risks and uncertainties, including those described below, which could adversely affect our business, financial condition, results of operations, cash flows, and the trading price of our common stock. The risks and uncertainties described below are not the only ones we face. Additional risks that we currently do not know about or that we currently believe to be immaterial may also impair our business operations.

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Risks Related to Our Business

We have limited operating experience and a history of net losses, and we may never achieve or maintain profitability.

We have a limited operating history, with our first commercial sales of CoolSculpting for the selective reduction of fat in the United States occurring in late 2010. We have incurred significant net losses since our inception, including net losses of approximately $19.3 million in 2013, $30.1 million in 2012 and $9.6 million in 2011 and as of December 31, 2013, we had an accumulated deficit of approximately $133.1 million. We will continue to incur significant expenses for the foreseeable future as we expand our sales and marketing, research and development, and clinical and regulatory activities. We may never generate sufficient revenue to achieve or sustain profitability. Even if we do achieve profitability, we may not be able to sustain or increase profitability. Further, because of our limited operating history and because the market for aesthetic products is rapidly evolving, we have limited insight into the trends or competitive products that may emerge and affect our business. We may make errors in predicting and reacting to relevant business trends, which could harm our business. We may not be able to successfully address any or all of these risks, and the failure to adequately do so could cause our business, results of operations, and financial condition to suffer.

We may not be able to correctly estimate or control our future operating expenses, which could lead to cash shortfalls.

Our operating expenses may fluctuate significantly in the future as a result of a variety of factors, many of which are outside of our control. These factors include:

• our commercialization strategy;

• the time, resources, and expense required to develop and conduct clinical trials and seek additional regulatory clearances and approvals for additional treatment indications for CoolSculpting and for any additional products we may develop;

• the costs of preparing, filing, prosecuting, defending, and enforcing patent claims and other patent related costs, including litigation costs and the results of such litigation;

• any adverse events associated with CoolSculpting or product liability or other lawsuits related to our products and the costs associated with defending them or the results of such lawsuits;

• the costs to attract and retain personnel with the skills required for effective operations; and

• the costs associated with being a public company.

Further, our budgeted expense levels are based in part on our expectations concerning future revenue from CoolSculpting. We may be unable to reduce our expenditures in a timely manner to compensate for any unexpected shortfalls in revenue. Accordingly, a significant shortfall in market acceptance or demand for CoolSculpting could have an immediate and material adverse impact on our business and financial condition.

Economic uncertainty has reduced and may continue to reduce patient demand for our products; if there is not sufficient patient demand for the procedures for which our products are used, practitioner demand for these systems could drop, resulting in unfavorable operating results.

The aesthetic industry in which we operate is particularly vulnerable to economic trends. The decision to undergo a procedure from our systems is driven by consumer demand. Procedures performed using our systems are elective procedures, the cost of which must be borne by the patient, and are not reimbursable through government or private health insurance. In times of economic uncertainty or recession, individuals often reduce the amount of money that they spend on discretionary items, including aesthetic procedures. The general economic difficulties being experienced and the lack of availability of consumer credit for some of our customers' patients are adversely affecting the market in which we operate.

If the economic hardships our customers' patients face continue or worsen, our business would be negatively impacted and our financial performance would be materially harmed in the event that any of the above factors discourage patients from seeking the procedures for which our products are used.

Due to a number of factors outside of our direct control, our financial results may fluctuate unpredictably, which could adversely affect our stock price.

Our limited operating history and the rapid evolution of the markets for medical technologies and aesthetic products make it difficult for us to predict our future performance. In addition, a number of factors, many of which are outside of our control, may contribute to fluctuations in our financial results, such as:

• quarter to quarter variation in customer demand for purchasing CoolSculpting systems;

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• the inability for our customers to obtain any necessary financing;

• changes in the length of the sales process;

• performance of our international distributors;

• media coverage of CoolSculpting and positive or negative patient experiences, the procedures or products of our competitors, or our industry;

• our ability to maintain our current or obtain further regulatory clearances or approvals;

• delays in, or failure of, product and component deliveries by our third-party contract manufacturers or suppliers;

• seasonal or other variations in patient demand for aesthetic procedures;

• introduction of new aesthetic procedures or products that compete with CoolSculpting; and

• adverse changes in the economy that reduce patient demand for elective aesthetic procedures.

Fluctuations in our financial results could negatively affect our stock price.

We are dependent upon the success of CoolSculpting, which has a limited commercial history. If the market acceptance for CoolSculpting fails to grow significantly, our business and future prospects will be harmed.

We commenced commercial sales of CoolSculpting for the selective reduction of fat in the United States in late 2010, and expect that the revenue we generate from sales of our CoolSculpting system and CoolSculpting consumables will account for substantially all of our revenue for at least the next several years. Accordingly, our success depends on the continued and growing acceptance among customers and patients of CoolSculpting as a preferred aesthetic treatment for the selective reduction of fat. Although we have received FDA clearance to market CoolSculpting for the selective reduction of fat in the flanks and abdomen in the United States and are approved or are otherwise free to market CoolSculpting in numerous international markets, increased acceptance among customers and patients of CoolSculpting may not occur. We cannot assure you that demand for CoolSculpting will continue or grow among customers and patients. Because we expect to derive substantially all of our revenue for the foreseeable future from sales of CoolSculpting systems and from fees associated with each CoolSculpting cycle, any failure of this product to satisfy customer or patient demand will harm our business and future prospects.

We have limited experience with our direct sales and marketing force and any failure to build and manage our direct sales and marketing force effectively could have a material adverse effect on our business.

We rely on a direct sales force to sell CoolSculpting in the United States, Canada and certain markets in Europe. To meet our anticipated sales objectives, we expect to grow our direct sales and marketing organization in these countries significantly over the next several years and intend to opportunistically build a direct sales and marketing force in certain international markets. There are significant risks involved in building and managing our sales and marketing organization, including risks related to our ability to:

• hire qualified individuals as needed;

• generate sufficient leads within our target customer group for our sales force;

• provide adequate training for the effective sale and marketing of CoolSculpting;

• retain and motivate our direct sales and marketing professionals; and

• effectively oversee geographically dispersed sales and marketing teams.

Our failure to adequately address these risks could have a material adverse effect on our ability to increase sales and use of our CoolSculpting systems, which would cause our revenue to be lower than expected and harm our results of operations. In addition, as we transition to direct sales in certain international markets, consistent with our sales strategy, the transition may result in a slow-down of growth or even a reduction in sales in those markets during the transition process as our distributors anticipate losing the ability to sell our products. Furthermore, our transition to direct sales in certain international markets could impact the performance of distributors in otherwise unaffected international markets as distributors may anticipate that their territories may be transitioned in the future.

Our ability to market CoolSculpting in the United States is limited to the non-invasive reduction of fat around the flanks and abdomen, and if we want to expand our marketing claims, we will need to obtain additional FDA clearances or approvals, which may not be granted.

We currently have FDA clearance to market CoolSculpting in the United States for the non-invasive reduction of fat around the flanks, an area commonly known as the “love handles,” and for the abdomen area. This clearance restricts our ability to market or advertise CoolSculpting treatment for other specific body areas, which could limit customer and patient adoption of CoolSculpting. Developing and promoting new treatment indications and protocols and new treatment applicators for our CoolSculpting system are elements of our growth strategy, but we cannot predict when or if we will receive the clearances required to so implement those elements. In addition, we will be required to conduct additional clinical trials or studies to support our

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applications, which may be time-consuming and expensive, and may produce results that do not result in FDA clearances. In the event that we do not obtain additional FDA clearances, our ability to promote CoolSculpting in the United States will be limited. Because we anticipate that sales in the United States will account for a substantial majority of our revenue for the foreseeable future, ongoing restrictions on our ability to market CoolSculpting in the United States could harm our business and limit our revenue growth.

Customers must make significant capital expenditures to purchase our CoolSculpting systems, which makes it difficult to increase our customer base, and if we are not able to convince customers to make this capital expenditure, our ability to grow our business will be harmed.

Customers must make significant capital expenditures to purchase our CoolSculpting systems, and our ability to increase the number of customers willing to make these significant capital expenditures and make CoolSculpting a significant part of their practices depends on the success of our sales and marketing programs. We must be able to demonstrate that the cost of our CoolSculpting system and the revenue that a customer can derive from performing CoolSculpting cycle are compelling when compared to the cost and revenue associated with alternative aesthetic treatments our customer may offer. In addition, alternative treatments may be invasive, minimally-invasive, or non-invasive, and we must, in some cases, overcome a bias against non-invasive aesthetic procedures for fat reduction, principally from plastic surgeons. Further, we believe our marketing programs, including our co-operative marketing strategy with individual practices, will be critical in driving additional CoolSculpting procedures, but these programs require customers commitment and involvement to succeed. If we are unable to increase customer adoption and use of CoolSculpting, our financial performance will be adversely affected.

If there is not sufficient patient demand for CoolSculpting procedures, our financial results and future prospects will be harmed.

The CoolSculpting procedure is an elective procedure, the cost of which must be borne by the patient, and is not reimbursable through government or private health insurance. The decision to undergo a CoolSculpting procedure is thus driven by patient demand, which may be influenced by a number of factors, such as:

• the success of our sales and marketing programs, including our co-operative marketing strategy with individual practices, as to which we have limited experience;

• the cost, safety, and effectiveness of CoolSculpting versus other aesthetic treatments;

• the price of CoolSculpting relative to other aesthetic products and alternative treatments;

• the willingness of patients to wait up to four months post-treatment to notice the aesthetic results of a CoolSculpting procedure;

• the ability to obtain regulatory clearance to market CoolSculpting for additional treatment indications in the United States;

• the adverse event profile of CoolSculpting, including warnings, side effects, and contraindications, which are subject to change;

• the extent to which our customers recommend CoolSculpting to their patients;

• our success in attracting consumers who have not previously purchased an aesthetic procedure;

• the extent to which our CoolSculpting procedure satisfies patient expectations;

• our ability to properly train our customers in the use of CoolSculpting such that their patients do not experience excessive discomfort during treatment or adverse side effects;

• consumer sentiment about the benefits and risks of aesthetic procedures generally and CoolSculpting in particular;

• the success of any direct-to-consumer marketing efforts we initiate; and

• general consumer confidence, which may be impacted by economic and political conditions.

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Our success depends in part upon patient satisfaction with the effectiveness of CoolSculpting.

To generate repeat and referral business, patients must be satisfied with the effectiveness of CoolSculpting. Our clinical studies demonstrate that a single CoolSculpting procedure noticeably and measurably reduces the fat layer within a treated fat bulge without requiring diet or exercise. However, we designed CoolSculpting to address the aesthetic concerns of individuals who have stubborn fat bulges. Although there are no technical or regulatory restrictions on the use of CoolSculpting based on patient weight, we believe patients who are significantly obese and who do not have specific fat bulges but require significant fat reduction to achieve aesthetic results are better candidates for invasive and minimally-invasive procedures not offered by us. In addition, results obtained from a CoolSculpting procedure occur gradually over a period of two to four months after treatment and patient perception of their results may vary. Although we train our customers to select the appropriate patient candidates for a CoolSculpting procedure, explain to their patients the time period over which the results from a CoolSculpting procedure will occur, and take before and after photographs of a patient, our customers may not select appropriate patient candidates or CoolSculpting may produce results that may not meet patients' expectations. If patients are not satisfied with the long term aesthetic benefits or safety of CoolSculpting, or feel that it is too expensive for the results obtained, our reputation and future sales will suffer. As market experience of CoolSculpting increases and more procedures are performed, we may learn more about the risk profile of the CoolSculpting system and receive reports of new side effects. For example, we have received reports of rare side effects, including late-onset pain, subcutaneous induration, which is hardening of normally soft tissue under the skin, hernia, and paradoxical hyperplasia, which is unusually enlarged tissue volume in the treatment area.

To market and sell CoolSculpting in markets outside of North America, we mainly depend on third-party distributors.

We currently depend on third-party distributors to sell, market, and service our CoolSculpting systems in certain markets outside of North America and to train our customers in these markets. We may need to engage additional third-party distributors to expand in new markets outside of North America. We are subject to a number of risks associated with our dependence on these third parties, including:

• we lack day-to-day control over the activities of third-party distributors;

• third-party distributors may not commit the necessary resources to market, sell, and service our systems to the level of our expectations;

• third-party distributors may not be as selective as we would be in choosing customers to purchase CoolSculpting systems or as effective in training customers in marketing and patient selection;

• third-party distributors may terminate their arrangements with us on limited, or no, notice or may change the terms of these arrangements in a manner unfavorable to us; and

• disagreements with our distributors could require or result in costly and time-consuming litigation or arbitration which we could be required to conduct in jurisdictions with which we are not familiar.

If we fail to establish and maintain satisfactory relationships with our third-party distributors, our revenue and market share may not grow as anticipated, and we could be subject to unexpected costs, each of which would harm our results of operations and financial condition.

To successfully market and sell CoolSculpting in markets outside of North America, we must address many issues with which we have limited experience.

We believe that a significant percentage of our business will continue to come from sales in markets outside of North America through increased penetration in countries where we currently market and sell CoolSculpting directly and through our third-party distributor network, combined with expansion into new international markets. However, international sales are subject to a number of risks, including:

• difficulties in staffing and managing our international operations;

• increased competition as a result of more products and procedures receiving regulatory approval or otherwise free to market in international markets;

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

• reduced or varied protection for intellectual property rights in some countries;

• export restrictions, trade regulations, and foreign tax laws;

• fluctuations in currency exchange rates;

• foreign certification and regulatory clearance or approval requirements;

• difficulties in developing effective marketing campaigns in unfamiliar foreign countries;

• customs clearance and shipping delays;

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

• preference for locally produced products;

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• 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;

• the burdens of complying with a wide variety of foreign laws and different legal standards; and

• increased financial accounting and reporting burdens and complexities.

If one or more of these risks were realized, it could require us to dedicate significant financial and management resources which could negatively affect our financial results.

Our inability to effectively compete with our competitors may prevent us from achieving significant market penetration or improving our operating results.

The medical technology and aesthetic product markets are highly competitive and dynamic, and are characterized by rapid and substantial technological development and product innovations. Demand for CoolSculpting could be limited by the products and technologies offered by our competitors, including newly announced products and technologies, whether or not effective. We designed CoolSculpting to address the aesthetic concerns of individuals who have stubborn fat bulges. Patients who are obese and who do not have specific fat bulges but require significant fat reduction to achieve aesthetic results are candidates for invasive and minimally-invasive procedures, such as liposuction and laser-assisted liposuction. Patients who do not require significant fat reduction to achieve meaningful aesthetic results explore non-invasive fat reduction and body contouring procedures to avoid the pain, expense, downtime, and surgical risks associated with invasive and minimally-invasive procedures. In the United States, the FDA has cleared the marketing of a laser energy-based product for body contouring. The laser energy-based product, marketed by Erchonia Corporation, is used to perform a non-invasive procedure reported to be safe and easy to perform, without causing patient pain. In September 2011, the FDA cleared the marketing of an ultrasound energy-based product for body contouring offered by Solta Medical, Inc., a publicly traded company. This ultrasound energy-based product utilizes heat to non-invasively eliminate fat cells in a single procedure. We believe that the marketing of this product extended the sales cycle for CoolSculpting during 2013 and may continue to have an impact on our sales in the future. The timing of, and publicity around, the introduction of such products or other technologies is outside our control, and may have an adverse impact on our sales and the rate at which practices purchase Coolsculpting systems and/or cycles in the form of consumable procedure packs.

Due to less stringent regulatory requirements, there are many more aesthetic products and procedures available for use in international markets than are approved for use in the United States. For example, multiple ultrasound energy-based products have been cleared for marketing outside the United States. There are also fewer limitations on the claims our competitors in international markets can make about the effectiveness of their products and the manner in which they can market them. As a result, we face more competition in these markets than in the United States.

We also compete generally against medical technology and aesthetic companies, including those offering products and technologies unrelated to fat reduction, for customer resources and mind share. Some of our competitors have a broad range of product offerings, large direct sales forces, and long-term customer relationships with our target customers, which could inhibit our market penetration efforts. Our potential customers also may need to recoup the cost of expensive products that they have already purchased from our competitors, and thus they may decide to delay purchasing, or not to purchase, our CoolSculpting system.

Many of our competitors are large, experienced companies that have substantially greater resources and brand recognition than we do. Competing in the medical technology and aesthetic markets could result in price-cutting, reduced profit margins, and limited market share, any of which would harm our business, financial condition, and results of operations.

Third parties may attempt to produce counterfeit versions of our products and may harm our ability to collect fees from sales of consumables, negatively affect our reputation, or harm patients and subject us to product liability.

Third parties may seek to develop counterfeit CoolCards and procedure packs that are compatible with our CoolSculpting system and available to practitioners at lower prices than our own. If security features incorporated into the design of our CoolSculpting system are unable to prevent the introduction of counterfeit CoolCards, we may not be able to monitor the number of procedures performed using our CoolSculpting system. Practitioners may be able to make unauthorized use of our CoolSculpting system and our ability to collect fees from sales of consumables may be compromised. Consumable revenue accounts for a significant portion of our revenue, and an inability to collect fees from the sale of consumables in the future would have a material adverse effect on our results of operations.

In addition, if counterfeit products are used with or in place of our own, we could be subject to product liability lawsuits resulting from the use of damaged or defective goods and suffer damage to our reputation.

For example, in January 2013, the Mercantile Court in Spain rendered its ruling on the merits of Massachusetts General Hospital's, or MGH, and our request for a permanent injunction against Clinipro's LipoCryo device based on Clinipro's infringement of two

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European patents owned by MGH and globally licensed exclusively to us. While the Mercantile Court had earlier granted in 2012 MGH's and our request for a preliminary injunction, the Court, in a January ruling, denied the request for a permanent injunction. The Mercantile Court's ruling affects only Clinipro's activities in Spain and we have appealed the ruling. Further, although we and MGH did prevail against Clinipro in a patent infringement case in France, holding that an MGH patent exclusively licensed to us is valid and enforceable and enjoining Clinpro and its distributors from selling LipoCryo in France, Clinipro has appealed that ruling, and there is no assurance that Clinipro will not prevail.

We have limited experience in manufacturing our CoolSculpting system, and if we are unable to manufacture our CoolSculpting system in high-quality commercial quantities successfully and consistently to meet demand, our growth will be limited.

Our CoolSculpting system consists of a CoolSculpting control unit and our CoolSculpting applicators. Our CoolSculpting procedure packs are composed of consumable CoolGels and CoolLiners and a disposable computer cartridge that we market as the CoolCard. The CoolCard contains enabling software that permits our customer to perform a fixed number of CoolSculpting cycles. Prior to the second quarter of 2013, we manufactured our CoolSculpting system and related procedure packs through a combination of direct manufacturing and third-party contract manufacturers. During the second quarter of 2013, we fully in-sourced the manufacturing of our CoolSculpting system. CoolGels and CoolLiners continue to be manufactured through third-party contract manufacturers. To manufacture our CoolSculpting system in the quantities that we believe will be required to meet anticipated market demand, we will need to increase manufacturing capacity, which will involve significant challenges and may require additional regulatory approvals. In addition, the development of these manufacturing capabilities will require us to invest substantial additional funds and hire and retain the technical personnel who have the necessary manufacturing experience. We may not successfully complete any required increase to existing manufacturing processes in a timely manner, or at all.

If there is a disruption to our manufacturing operations, we will have no other means of producing our CoolSculpting systems until we restore the affected facilities or develop alternative manufacturing facilities or methods, including potentially re-outsourcing our manufacturing operations. Additionally, any damage to or destruction of our facilities or equipment may significantly impair our ability to manufacture CoolSculpting systems on a timely basis.

If we are unable to produce CoolSculpting systems in sufficient quantities to meet anticipated customer demand, our revenue, business, and financial prospects would be harmed. The lack of experience we have in producing commercial quantities of our CoolSculpting system may also result in quality issues, and result in product recalls. Manufacturing delays related to quality control could negatively impact our ability to bring our CoolSculpting system and procedure packs to market, harm our reputation, and decrease our revenue. Any recall could be expensive and generate negative publicity, which could impair our ability to market our CoolSculpting system and further affect our results of operations.

We outsource the manufacturing of key components to third-party contract manufacturers.

CoolGels and CoolLiners are manufactured by third-party contract manufacturers. If the operations of third-party contract manufacturers are interrupted or if they are unable to meet our delivery requirements due to capacity limitations, regulatory problems or other constraints, we may be limited in our ability to fulfill new customer orders or to repair equipment at current customer sites. Any change to another contract manufacturer would likely entail significant delay, require us to devote substantial time and resources, and could involve a period in which our products could not be produced in a timely or consistently high-quality manner, any of which could harm our reputation and results of operations.

Our manufacturing operations are dependent upon third-party suppliers, making us vulnerable to supply shortages and price fluctuations, which could harm our business.

Our CoolSculpting system contains two critical components, the integrated circuit contained in the CoolSculpting control unit and the CoolCard, which is supplied by a company in Japan, and the connector that attaches our applicators to the control unit, which is supplied by a separate company in the United States. The single source suppliers of these two critical components may not be replaced without significant effort and delay in production. We do not have supply agreements with the suppliers of these critical components beyond purchase orders. However, we attempt to maintain a safety stock inventory for these critical components equal to one year of forecasted part requirements of the integrated circuit and one month of connectors in finished assemblies, as well as at least three months' supply of connectors to support open purchase orders. Such forecasted amounts may be inaccurate and we may experience shortages as a result of serious supply problems or longer lead times with these suppliers as well as an increased demand for our products. In addition, several other non-critical components and materials that compose our CoolSculpting system are currently supplied by a single supplier or a limited number of suppliers. In many of these cases, we have not yet qualified alternate suppliers and rely upon purchase orders, rather than long-term supply agreements. A supply interruption or an increase in demand beyond our current suppliers' capabilities could harm our ability to manufacture our CoolSculpting system until new

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sources of supply are identified and qualified. Our reliance on these suppliers subjects us to a number of risks that could harm our business, including:

• interruption of supply resulting from modifications to or discontinuation of a supplier's operations;

• delays in product shipments resulting from uncorrected defects, reliability issues, or a supplier's variation in a component;

• a lack of long-term supply arrangements for key components with our suppliers;

• inability to obtain adequate supply in a timely manner, or to obtain adequate supply on commercially reasonable terms;

• difficulty and cost associated with locating and qualifying alternative suppliers for our components in a timely manner;

• production delays related to the evaluation and testing of products from alternative suppliers, and corresponding regulatory qualifications;

• delay in delivery due to our suppliers prioritizing other customer orders over ours;

• damage to our brand reputation caused by defective components produced by our suppliers;

• increased cost of our warranty program due to product repair or replacement based upon defects in components produced by our suppliers; and

• fluctuation in delivery by our suppliers due to changes in demand from us or their other customers.

Any interruption in the supply of components or materials, or our inability to obtain substitute components or materials from alternate sources at acceptable prices in a timely manner, could impair our ability to meet the demand of our customers, which would have an adverse effect on our business.

Recent regulations related to conflict minerals could adversely impact our business.

The Dodd-Frank Wall Street Reform and Consumer Protection Act contains provisions to improve transparency and accountability concerning the supply of tin, tantalum, tungsten and gold, known as conflict minerals, originating from the Democratic Republic of Congo, or DRC, and adjoining countries. As a result, in August 2012 the United States Security and Exchange Commission, or SEC, adopted annual disclosure and reporting requirements for public companies that use conflict minerals mined from the DRC and adjoining countries in their products. We have determined that we use at least one of these conflict minerals in the manufacture of our CoolSculpting system, although we have not yet determined the source of the minerals that we use. These new disclosure requirements require us to use diligent efforts to determine which conflict minerals we use and the source of those conflict minerals. The first report in which we will disclose the results of our findings is due on May 31, 2014 for the 2013 calendar year. There are and will be costs associated with complying with these disclosure requirements, including those costs incurred in conducting diligent efforts to determine which conflict minerals we use and the sources of conflict minerals used in our CoolSculpting system and related consumables. Further, the implementation of these rules could adversely affect the sourcing, supply and pricing of materials used in our CoolSculpting system and related consumables. As there may be only a limited number of suppliers offering conflict free minerals, we cannot be sure that we will be able to obtain necessary conflict free conflict minerals in sufficient quantities or at competitive prices. In addition, we may face reputational challenges if we determine that our CoolSculpting system and/or related consumables contain minerals not determined to be conflict free or if we are unable to sufficiently verify the origins for all conflict minerals used in our CoolSculpting system and related consumables through the procedures we may implement. If we determine it is necessary to redesign our CoolSculpting system and/or related consumables to not use conflict minerals, we would incur costs associated with doing so.

We forecast sales to determine requirements for components and materials used in our CoolSculpting system, and if our forecasts are incorrect, we may experience delays in shipments or increased inventory costs.

We keep limited materials, components, and finished products on hand. To manage our operations with our third-party contract manufacturers and suppliers, we forecast anticipated product orders and material requirements to predict our inventory needs and enter into purchase orders on the basis of these requirements. Several components of our CoolSculpting system require an order lead time of six months or more. Our limited historical commercial experience and growth may not provide us with enough data to consistently and accurately predict future demand. If our business expands, and our demand for components and materials increases beyond our estimates, our contract manufacturers and suppliers may be unable to meet our demand. In addition, if we underestimate our component and material requirements, we may have inadequate inventory, which could interrupt, delay, or prevent delivery of our CoolSculpting system to our customers. In contrast, if we overestimate our component and material requirements, we may have excess inventory, which would increase our expenses. Any of these occurrences would negatively affect our financial performance and the level of satisfaction our customers have with our business.

There exists a potential for misuse of our CoolSculpting system, which could harm our reputation and our business.

Under state law in the United States, our customers can generally allow nurse practitioners, technicians, and other non-physicians to perform CoolSculpting procedures under their direct supervision. Similarly, in markets outside of the United States, our customers can allow non-physicians to perform CoolSculpting procedures under their supervision. Although we and our distributors provide

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training on the use of CoolSculpting systems, we do not supervise the procedures performed with our CoolSculpting system, nor can we be assured that direct physician supervision of procedures occurs according to our recommendations. The potential misuse of our CoolSculpting system by physicians and non-physicians may result in adverse treatment outcomes, which could harm our reputation and expose us to costly product liability litigation.

Product liability suits could be brought against us due to defective design, labeling, material, workmanship, or misuse of our CoolSculpting system, or unanticipated adverse events, and could result in expensive and time-consuming litigation, payment of substantial damages, an increase in our insurance rates and substantial harm to our reputation.

If our CoolSculpting system is defectively designed, manufactured, or labeled, contains defective components, or is misused, we may become subject to substantial and costly litigation by our customers or their patients. Misusing our CoolSculpting system or failing to adhere to operating guidelines can cause skin damage and underlying tissue damage and, if our operating guidelines are found to be inadequate, we may be subject to liability. Furthermore, if a patient is injured in an unexpected manner after undergoing a CoolSculpting procedure, even if the procedure was performed in accordance with our operating guidelines, we may be subject to product liability claims. We may also be subject to additional liability from claims related to known rare side effects such as late-onset pain, subcutaneous induration, hernia, and paradoxical hyperplasia. Product liability claims could divert management attention from our core business, be expensive to defend, and result in sizable damage awards against us. We currently have product liability insurance, but it may not be adequate to cover us against potential liability and it may be subject to material deductibles. In addition, we may not be able to maintain insurance in amounts or scope sufficient to provide us with adequate coverage against all potential liabilities. Any product liability claims brought against us, with or without merit, could increase our product liability insurance rates or prevent us from securing continuing coverage, could harm our reputation in the industry, and could reduce product sales. Product liability claims in excess of our insurance coverage, as well as deductibles under insurance policies, would be paid out of cash reserves, harming our financial condition and reducing our operating results.

Security breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation to suffer.

We rely on networks, information management software and other technology, or information systems, including the Internet and third-party hosted services, to support a variety of business processes and activities, including procurement and supply chain, manufacturing, distribution, invoicing, order processing and collection of payments. We use information systems to process financial information and results of operations for internal reporting purposes and to comply with regulatory financial reporting, legal and tax requirements. In addition, we depend on information systems for digital marketing activities and electronic communications among our locations around the world and between company personnel as well as customers and suppliers. Because information systems are critical to many of our operating activities, our business processes may be impacted by system shutdowns or service disruptions. These disruptions may be caused by failures during routine operations such as system upgrades or user errors, as well as network or hardware failures, malicious or disruptive software, computer hackers, geopolitical events, natural disasters, failures or impairments of telecommunications networks, or other catastrophic events. These events could result in unauthorized disclosure of material confidential information. If our information systems suffer severe damage, disruption or shutdown and our business continuity plans do not effectively resolve the issues in a timely manner, we could experience delays in reporting our financial results and we may lose revenue and profits as a result of our inability to timely manufacture, distribute, invoice and collect payments. Misuse, leakage or falsification of information could result in a violation of data privacy laws and regulations and damage our reputation and credibility, and could expose us to liability. We may also be required to spend significant financial and other resources to remedy the damage caused by a security breach or to repair or replace networks and information systems.

Like most major corporations, our information systems are a target of attacks. Although the disruptions to our information systems that we have experienced to date have not had a material effect on our business, financial condition or results of operations, there can be no assurance that such disruptions will not have a material adverse effect on us in the future.

We have increased the size of our company significantly and over a short period, and difficulties managing our growth could adversely affect our business, operating results, and financial condition.

We have increased our headcount from 208 at January 1, 2013 to 297 at December 31, 2013, and plan to continue to hire a substantial number of additional employees as we increase our commercialization and sales activities for CoolSculpting. This growth has placed and may continue to place a strain on our management and our administrative, operational, and financial infrastructure. Our ability to manage our operations and growth requires the continued improvement of our operational, financial and management controls, reporting systems, and procedures, particularly to meet the reporting requirements of the Securities Exchange Act of 1934. If we are unable to manage our growth effectively or if we are unable to attract additional highly qualified personnel, our business, operating results, and financial condition may be harmed.

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We depend on skilled and experienced personnel to operate our business effectively. If we are unable to recruit, hire, and retain these employees, our ability to manage and expand our business will be harmed, which would impair our future revenue and profitability.

Our success largely depends on the skills, experience, and efforts of our executive officers and other key employees. We do not have employment contracts with any of our executive officers or other key employees that require these officers to stay with us for any period of time. Any of our executive officers and other key employees may terminate their employment with us at any time. The loss of any of our executive officers and other key employees could weaken our management expertise and harm our business operations.

In addition, our ability to retain our skilled employees and our success in attracting and hiring new skilled employees will be a critical factor in determining whether we will be successful in the future. We may not be able to meet our future hiring needs or retain our existing employees. We will face significant challenges and risks in hiring, training, managing, and retaining sales and marketing, product development, financial reporting, and regulatory compliance employees, many of whom are geographically dispersed. Failure to attract and retain personnel, particularly our sales and marketing, product development, financial reporting, and regulatory compliance personnel, would materially harm our ability to compete effectively and grow our business.

We may need to raise additional funds in the future, and such funds may not be available on a timely basis, or at all.

Until such time, if ever, as we can achieve positive cash flows from sales of our CoolSculpting system and from sales of cycles in the form of consumable procedure packs, we will be required to finance our operations with our cash resources. We may need to raise additional funds in the future to support our operations. We cannot be certain that additional capital will be available as needed on acceptable terms, or at all. If we require additional capital at a time when investment in our company, in medical technology or aesthetic product companies or the marketplace in general is limited, we may not be able to raise such funds at the time that we desire, or at all. If we do raise additional funds through the issuance of equity or convertible securities, the percentage ownership of holders of our common stock could be significantly diluted and these newly issued securities may have rights, preferences, or privileges senior to those of holders of our common stock. If we obtain debt financing, a substantial portion of our operating cash flow may be dedicated to the payment of principal and interest on such indebtedness, and the terms of the debt securities issued could impose significant restrictions on our operations. If we raise additional funds through collaborations and licensing arrangements, we could be required to relinquish significant rights to our technologies and products, or grant licenses on terms that are not favorable to us.

If we fail to manage our exposure to global financial and securities market risk successfully, our operating results and financial statements could be materially impacted.

The primary objective of most of our investment activities is to preserve principal. To achieve this objective, a majority of our marketable investments are investment grade, liquid, fixed-income securities and money market instruments denominated in U.S. dollars. If the carrying value of our investments exceeds the fair value, and the decline in fair value is deemed to be other-than-temporary, we will be required to write down the value of our investments, which could materially harm our results of operations and financial condition. Moreover, the performance of certain securities in our investment portfolio correlates with the credit condition of the U.S. financial sector. In our current unstable credit environment, we might incur significant realized, unrealized or impairment losses associated with these investments.

Our ability to use net operating losses and tax credit carryforwards to offset future tax liabilities may be limited.

We have substantial federal net operating loss carryforwards, or NOLs, and state and federal tax credit carryforwards. A lack of future taxable income would adversely affect our ability to utilize these NOLs and tax credit carryforwards. In addition, under Section 382 of the U.S. Internal Revenue Code, or the Code, a corporation that experiences a more-than 50% ownership change over a three-year testing period is subject to limitations on its ability to utilize its pre-change NOLs and tax credit carryforwards to offset future taxable income. Future changes in our stock ownership, many of the causes of which are outside of our control, could result in an ownership change under Section 382 of the Code. Our NOLs and tax credit carryforwards may also be impaired under state law. As a result of these limitations, we may not be able to utilize a material portion of the NOLs and tax credit carryforwards.

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Risks Related to Regulation

The regulatory clearance and approval process is expensive, time-consuming, and uncertain, and the failure to obtain and maintain required regulatory clearances and approvals could prevent us from commercializing our CoolSculpting system and any future products we develop.

We are investing in the research and development of new products and procedures based on our proprietary controlled cooling technology platform. Our products are subject to 510(k) clearance by the FDA prior to their marketing for commercial use in the United States, and to any approvals required by foreign governmental entities prior to their marketing outside the United States. In addition, if we make any changes or modifications to our CoolSculpting system that could significantly affect its safety or effectiveness, or would constitute a change in its intended use, we may be required to submit a new application for 510(k) clearance, premarketing approval or foreign regulatory approvals. For example, we will be required to submit new 510(k) applications to expand our ability to market CoolSculpting for use on other areas of the body beyond the flanks and abdomen.

The 510(k) clearance processes, as well as the process for obtaining foreign approvals, can be expensive, time-consuming, and uncertain. We anticipate that the direct clinical costs to support a 510(k) application for an additional indication for CoolSculpting will range from $0.25 million to $0.5 million. In addition to the time required to conduct clinical trials, it generally takes from four to twelve months from submission of an application to obtain 510(k) clearance; however, it may take longer, and 510(k) clearance may never be obtained. Delays in receipt of, or failure to obtain, clearances or approvals for any product enhancements or new products we develop would result in delayed, or no, realization of revenue from such product enhancements or new products and in substantial additional costs which could decrease our profitability.

In addition, we are required to continue to comply with applicable FDA and other regulatory requirements once we have obtained clearance or approval for a product. There can be no assurance that we will successfully maintain the clearances or approvals we have received or may receive in the future. Our clearances can be revoked if safety or effectiveness problems develop. Any failure to maintain compliance with FDA and applicable international regulatory requirements could harm our business, financial condition, and results of operations.

We will be subject to significant liability if we are found to have improperly promoted CoolSculpting for off-label uses.

The FDA strictly regulates the promotional claims that may be made about FDA-cleared products. In particular, a product may not generally be promoted for uses that are not cleared or approved by the FDA as reflected in the product's labeling. Our current FDA labeling only permits marketing CoolSculpting in the United States for use on the flanks and for the abdomen and restricts us from promoting it for use on other parts of the body. The FDA does not regulate the practice of medicine however, and, we are aware that CoolSculpting is used by our customers on other parts of the body. If we are found to have inappropriately promoted such off-label uses, we may become subject to significant liability. The federal government has levied large civil and criminal fines against companies for alleged improper promotion and entered agreements with several companies that require cumbersome reporting and oversight of sales and marketing practices. The FDA has also requested that companies enter into consent decrees or permanent injunctions under which specified promotional conduct is changed or curtailed.

CoolSculpting may cause or contribute to adverse medical events that we are required to report to the FDA and if we fail to do so, we could be subject to sanctions that would materially harm our business.

Rare side effects have been reported after receiving CoolSculpting treatments, such as late-onset pain, subcutaneous induration, hernia, and paradoxical hyperplasia. There may be other new side effects that are reported to us as use of CoolSculpting increases. We may need to update our labeling, or take other regulatory action, in response to adverse event reports. In addition, FDA regulations require that we report certain information about adverse medical events if our medical devices may have caused or contributed to those adverse events, or if our device has malfunctioned. The timing of our obligation to report is triggered by the date we become aware of the adverse event as well as the nature of the event. We may fail to report adverse events we become aware of within the prescribed timeframe. We may also fail to appreciate that we have become aware of a reportable adverse event, especially if it is not reported to us as an adverse event or if it is an adverse event that is unexpected or removed in time from the use of our products. If we fail to comply with our reporting obligations, the FDA could take action including criminal prosecution, the imposition of civil monetary penalties, revocation of our device clearance or approval, seizure of our products, or delay in approval or clearance of future products.

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We are currently, and in the future our contract manufacturers may be, subject to various governmental regulations related to the manufacturing of CoolSculpting, and we may incur significant expenses to comply with, experience delays in our product commercialization as a result of, and be subject to material sanctions if we or our contract manufacturers violate these regulations.

Our manufacturing processes and facilities are required to comply with the FDA's Quality System Regulation, or QSR, which covers the procedures and documentation of the design, testing, production, control, quality assurance, labeling, packaging, sterilization, storage, and shipping of our devices. Although we believe we are compliant with the QSRs, the FDA enforces the QSR through periodic announced or unannounced inspections of manufacturing facilities. We have been, and anticipate in the future being, subject to such inspections, as well as to inspections by other federal and state regulatory agencies.

Failure to comply with applicable FDA requirements, or later discovery of previously unknown problems with our products or manufacturing processes, including our failure or the failure of one of our third-party contract manufacturers to take satisfactory corrective action in response to an adverse QSR inspection, can result in, among other things:

• administrative or judicially-imposed sanctions;

• injunctions or the imposition of civil penalties;

• recall or seizure of our products;

• total or partial suspension of production or distribution;

• the FDA's refusal to grant pending future clearance or pre-market approval for our products;

• withdrawal or suspension of marketing clearances or approvals;

• clinical holds;

• warning letters;

• refusal to permit the import or export of our products; and

• criminal prosecution of us or our employees.

Any of these actions, in combination or alone, could prevent us from marketing, distributing, or selling our products and would likely harm our business.

We could have to issue a correction or removal to reduce a risk to health posed by our device or to remedy a violation which may present a risk to health. In addition, a product defect or regulatory violation could lead to a government-mandated or voluntary recall by us. The FDA could request that we initiate a voluntary recall if a product was defective or presented a risk of injury or gross deception. The FDA could order a recall if there is a reasonable probability that our product would cause serious adverse health consequences or death. Regulatory agencies in other countries have similar authority to recall devices because of material deficiencies or defects in design or manufacture that could endanger health. Any recall would divert management attention and financial resources, could cause the price of our shares of common stock to decline and expose us to product liability or other claims, including contractual claims from parties to whom we sold products and harm our reputation with customers. A recall involving our CoolSculpting system would be particularly harmful to our business and financial results and, even if we remedied a particular problem, would have a lasting negative effect on our reputation and demand for our products.

Legislative or regulatory healthcare reforms may make it more difficult and costly for us to obtain regulatory clearance or approval of our products and to produce, market, and distribute our products after clearance or approval is obtained.

From time to time, legislation is drafted and introduced in Congress that could significantly change the statutory provisions governing the regulatory clearance or approval, manufacture, and marketing of regulated products or the reimbursement thereof. In addition, FDA regulations and guidance are often revised or reinterpreted by the FDA in ways that may significantly affect our business and our products. For example, in the future, the FDA may require more burdensome premarket approval of our procedures rather than the 510(k) clearance process we have used to date and anticipate primarily using in the future. Our CoolSculpting Platform is also subject to state regulations which are, in many instances, in flux. Any new regulations or revisions or reinterpretations of existing regulations may impose additional costs or lengthen review times of our products. We cannot determine what effect changes in regulations, statutes, legal interpretation or policies, when and if promulgated, enacted or adopted may have on our business in the future. Such changes could, among other things, require:

• changes to manufacturing methods;

• recall, replacement, or discontinuance of certain products;

• additional record keeping; and,

• additional warnings.

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Each of these would likely entail substantial time and cost and could materially harm our financial results. In addition, delays in receipt of or failure to receive regulatory clearances or approvals for our new products would harm our business, financial condition, and results of operations.

Federal and state governments in the United States are also undertaking efforts to control growing health care costs through legislation, regulation, and voluntary agreements with medical care providers, and third-party payers. In March 2010, Congress enacted comprehensive health care reform legislation known as the Patient Protection and Affordable Care Act of 2010, or PPACA. Among other things, PPACA established the framework for new regulatory mandates and other measures designed to constrain medical costs. PPACA also established significant taxes on medical technology manufacturers that are expected to result in significant cost to the medical technology industry. PPACA imposes a 2.3% excise tax on certain sales of medical devices by manufacturers in the United States. There is no exemption for small companies, and we began paying the tax in 2013. We expect compliance with PPACA to continue to impose significant administrative and financial burdens on us, which may harm our results of operations.

We may be subject to various federal and state laws pertaining to health care marketing and promotional practices and other business practices, and any violations by us of such laws could result in fines or other penalties.

State and federal authorities have targeted medical technology companies for alleged violations of laws and regulations, based on off-label marketing schemes and other improper promotional practices. Companies targeted in such prosecutions have paid substantial fines in the hundreds of millions of dollars or more, have been forced to implement extensive corrective action plans, and have often become subject to consent decrees severely restricting the manner in which they conduct their business. If we become the target of such an investigation or prosecution based on our marketing and promotional practices, we could face similar sanctions which would materially harm our business.

Also, the U.S. Foreign Corrupt Practices Act and similar worldwide anti-bribery laws generally prohibit companies and their intermediaries from making improper payments to non-U.S. officials for the purpose of obtaining or retaining business. Some of our distribution partners are located in parts of the world that have experienced governmental corruption to some degree and, in certain circumstances, strict compliance with anti-bribery laws may conflict with local customs and practices. We cannot assure you that our internal control policies and procedures will protect us from reckless or negligent acts committed by our employees, distributors, partners, or agents. Violations of these laws, or allegations of such violations, could result in fines, penalties, or prosecution and have a negative impact on our business, results of operations and reputation.

We are subject to numerous environmental, health and safety laws and regulations, and must maintain licenses or permits, and non-compliance with these laws, regulations, licenses, or permits may expose us to significant costs or liabilities.

We are subject to numerous foreign, federal, state, and local environmental, health and safety laws and regulations relating to, among other matters, safe working conditions and environmental protection, including those governing the generation, storage, handling, use, transportation, and disposal of hazardous or potentially hazardous materials. Some of these laws and regulations require us to obtain licenses or permits to conduct our operations. Environmental laws and regulations are complex, change frequently and have tended to become more stringent over time. If we violate or fail to comply with these laws, regulations, licenses, or permits, we could be fined or otherwise sanctioned by regulators. We cannot predict the impact on our business of new or amended laws or regulations or any changes in the way existing and future laws and regulations are interpreted or enforced, nor can we ensure we will be able to obtain or maintain any required licenses or permits.

Risks Related to Our Intellectual Property

If we are unable to obtain, maintain, and enforce intellectual property protection covering our CoolSculpting system and any future products we develop, others may be able to make, use, or sell products substantially the same as ours, which could adversely affect our ability to compete in the market.

Our commercial success is dependent in part on obtaining, maintaining, and enforcing our intellectual property rights, including our patents and the patents we exclusively license. If we are unable to obtain, maintain, and enforce intellectual property protection covering our CoolSculpting system and any other products we develop, others may be able to make, use, or sell products that are substantially the same as ours without incurring the sizable development and licensing costs that we have incurred, which would adversely affect our ability to compete in the market.

We seek to obtain and maintain patents and other intellectual property rights to restrict the ability of others to market products that compete with our products. As of December 31, 2013, our patent portfolio comprised 89 issued patents and 102 pending patent applications, each of which we own solely or license exclusively. However, patents may not be issued on any pending or future patent applications we file and, moreover, issued patents owned or licensed to us now or in the future may be found by a

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court to be invalid or otherwise unenforceable. Also, even if our patents are determined by a court to be valid and enforceable, they may not drafted or interpreted sufficiently broadly to prevent others from marketing products and services similar to ours or designing around our patents, and they may not provide us with freedom to operate unimpeded by the patent rights of others.

We have a number of foreign patents and applications, and expect to continue to pursue patent protection in the jurisdictions in which we do or intend to business. However, the laws of some foreign jurisdictions do not protect intellectual property rights to the same extent as laws in the United States, and many companies have encountered significant difficulties in obtaining, protecting, and defending such rights in foreign jurisdictions. If we encounter such difficulties or we are otherwise precluded from effectively protecting our intellectual property rights in foreign jurisdictions, our business prospects could be substantially harmed.

The patent positions of medical technology companies can be highly uncertain and involve complex legal and factual questions for which important legal principles remain unresolved. No consistent policy regarding the breadth of claims allowed in patents in these fields has emerged to date in the United States or in many foreign jurisdictions. Both the U.S. Supreme Court and the Court of Appeals for the Federal Circuit have made, and will likely continue to make, changes in how the patent laws of the United States are interpreted. Similarly, foreign courts have made, and will likely continue to make, changes in how the patent laws in their respective jurisdictions are interpreted. In addition, the U.S. Congress is currently considering legislation that would change provisions of the patent law. We cannot predict future changes U.S. and foreign courts may make in the interpretation of patent laws or changes to patent laws which might be enacted into law by U.S. and foreign legislative bodies. Those changes may materially affect our patents, our ability to obtain patents or the patents and applications of our collaborators and licensors.

Future protection for our proprietary rights is uncertain because legal means afford only limited protection and may not adequately protect our rights or permit us to gain or keep our competitive advantage, which could adversely affect our financial condition and results of operations. For example:

• others may be able to make systems or devices that are similar to ours but that are not covered by the claims of our patents;

• others may assert that our licensors or we were not the first to make the inventions covered by our issued patents or pending patent applications;

• our pending patent applications may not result in issued patents;

• our issued patents may not provide us with any competitive advantages or may be held invalid or unenforceable as a result of legal challenges by third parties;

• the claims of our issued patents or patent applications when issued may not cover our CoolSculpting system or the future products we develop;

• there may be dominating patents relevant to our controlled cooling technology of which we are not aware;

• there may be prior public disclosures that could invalidate our inventions or parts of our inventions of which we are not aware;

• the laws of foreign countries may not protect our proprietary rights to the same extent as the laws of the United States; and

• we may not develop additional proprietary technologies that are patentable.

From time to time, we analyze our competitors' products and services, and may in the future seek to enforce our patents or other rights to counter perceived infringement. However, infringement claims can be expensive and time-consuming. In addition, in an infringement proceeding, a court may decide that the patent we seek to enforce is invalid or unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that the patent in question does not cover the technology in question. An adverse result in any litigation could put one or more of our patents at risk of being invalidated or interpreted narrowly. Similarly, some of our competitors may be able to devote significantly more resources to intellectual property litigation, and may have significantly broader patent portfolios to assert against us if we assert our rights against them. Finally, because of the substantial discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be disclosed or otherwise compromised during this type of litigation.

For example, in January 2013, the Mercantile Court in Spain rendered its ruling on the merits of Massachusetts General Hospital's, or MGH, and our request for a permanent injunction against Clinipro's LipoCryo device based on Clinipro's infringement of two European patents owned by MGH and globally licensed exclusively to us. While the Mercantile Court had earlier granted in 2012 MGH's and our request for a preliminary injunction, the Court, in a January ruling, denied the request for a permanent injunction. The Mercantile Court's ruling affects only Clinipro's activities in Spain and we have appealed the ruling. Further, although we and MGH did prevail against Clinipro in a patent infringement case in France, holding that an MGH patent exclusively licensed to us is valid and enforceable and enjoining Clinpro and its distributors from selling LipoCryo in France, there is no assurance that Clinipro will not appeal that ruling or, if it does so, that it will not prevail.

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We rely on a license relationship with Massachusetts General Hospital for much of our core intellectual property, and this arrangement could restrict the scope and enforcement of our intellectual property rights and limit our ability to successfully commercialize our products.

We have exclusively licensed certain intellectual property from the General Hospital Corporation, a not-for-profit Massachusetts Corporation, which owns and operates MGH related to our CoolSculpting system. We rely on MGH to file and prosecute patent applications and maintain patents and otherwise protect the intellectual property we license. We have not had and do not have primary control over these activities for certain of our patents or patent applications and other intellectual property rights we license, and therefore cannot guarantee that these patents and applications will be prosecuted or immediately enforced in a manner consistent with the best interests of our business. We cannot be certain that such activities by third parties have been or will be conducted in compliance with applicable laws and regulations or will result in valid and enforceable patents and other intellectual property rights. Additionally, we cannot control the publication or other disclosures of research carried out by MGH relating to technology that could otherwise prove patentable.

Pursuant to the terms of the license agreement with MGH, MGH has the right to control enforcement of our licensed patents or defense of any claims asserting the invalidity of these patents. Even if we are permitted to pursue such enforcement or defense, we will require the cooperation of MGH, and cannot guarantee that we would receive it. We cannot be certain that MGH will allocate sufficient resources or prioritize its or our enforcement of such patents or defense of such claims to protect our interests in the licensed patents. If we cannot obtain patent protection, or enforce existing or future patents against third parties, our competitive position and our financial condition could suffer.

We are exploring additional uses of our proprietary controlled cooling technology platform for the dermatology, plastic surgery, and aesthetic markets. We also plan to explore potential therapeutic uses for our platform technology, either directly or through collaborative arrangements with strategic partners. Although MGH cannot restrict our future product development efforts, the terms of our license agreement with MGH may require us to pay MGH a royalty of up to 7% of net sales of future products we develop or that may be developed by our strategic partners. Whether we are required to pay a royalty will depend on whether our future products incorporate the intellectual property we licensed from MGH. Any royalty we are required to pay will reduce our income from sales of such future products and may make it more difficult for us to successfully commercialize these products directly or through a strategic partner.

If we are unable to protect the confidentiality of our proprietary information and know-how, the value of our technology and products could be adversely affected.

We rely on trade-secret protection to protect our interests in proprietary know-how and for processes for which patents are difficult or impossible to obtain or enforce. We may not be able to protect our trade secrets adequately. We have limited control over the protection of trade secrets used by our third-party contract manufacturers and suppliers. Although we use reasonable efforts to protect our trade secrets, our employees, consultants, contractors and outside scientific advisors may unintentionally or willfully disclose our information to competitors. Enforcing a claim that a third-party illegally obtained and is using any of our trade secrets is expensive and time consuming, and the outcome is unpredictable. In addition, courts outside the United States are sometimes less willing to protect trade secrets. We rely, in part, on non-disclosure and confidentiality agreements with our employees, consultants and other parties to protect our trade secrets and other proprietary technology. These agreements may be breached and we may not have adequate remedies for any breach. Moreover, others may independently develop equivalent proprietary information, and third parties may otherwise gain access to our trade secrets and proprietary knowledge. We may now or in the future incorporate open source software in our products' firmware. Open source software licenses can be ambiguous, and there is a risk that these licenses could be construed to require us to disclose or publish, in source code form, some or all of our proprietary firmware code. Any disclosure of confidential information into the public domain or to third parties could allow our competitors to learn our trade secrets and use the information in competition against us, which could adversely affect our competitive advantage.

Our CoolSculpting system and any future products or services we develop could be alleged to infringe patent rights of others, which may require costly litigation and, if we are not successful, could cause us to pay substantial damages or limit our ability to commercialize our products.

Our commercial success depends on our ability to develop, manufacture, and market our CoolSculpting system and use our proprietary controlled cooling technology without infringing the patents and other proprietary rights of third parties. As the medical technology and aesthetic product industries expand and more patents are issued, the risk increases that there may be patents issued to third parties that relate to our products and technology of which we are not aware or that we must challenge to continue our operations as currently contemplated. Our products may infringe or may be alleged to infringe these patents.

In addition, because patent applications in the United States and many foreign jurisdictions are typically not published until eighteen months after filing (or, in some cases, are not published until they issue as patents) and because publications in the scientific

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literature often lag behind actual discoveries, we cannot be certain that others have not filed patent applications for technology covered by our issued patents or our pending applications. Another party may have filed, and may in the future file, patent applications covering our products or technology similar to ours. Any such patent application may have priority over our patent applications or patents, which could further require us to obtain rights to issued patents covering such technologies. If another party has filed a U.S. patent application on inventions similar to ours, we may have to participate in an interference proceeding declared by the Patent and Trademark Office, or PTO, to determine priority of invention in the United States. The costs of these proceedings could be substantial, and it is possible that such efforts would be unsuccessful if the other party had independently arrived at the same or similar invention prior to our own invention, resulting in a loss of our U.S. patent position with respect to such inventions.

There is substantial litigation involving patent and other intellectual property rights in the medical technology and aesthetic industries generally. If a third party claims that we or any collaborator infringes its intellectual property rights, we may face a number of issues, including, but not limited to:

• infringement and other intellectual property claims which, regardless of merit, may be expensive and time-consuming to litigate and may divert our management's attention from our core business;

• substantial damages for infringement, which we may have to pay if a court decides that the product at issue infringes on or violates the third party's rights, and if the court finds that the infringement was willful, we could be ordered to pay treble damages and the patent owner's attorneys' fees;

• a court prohibiting us from selling or licensing our products unless the third party licenses its product rights to us, which it is not required to do at a commercially reasonable price or at all;

• if a license is available from a third party, we may have to pay substantial royalties, upfront fees or grant cross-licenses to intellectual property rights for our products; and

• redesigning our products or processes so they do not infringe, which may not be possible at all or may require substantial monetary expenditures and time, during which our products may not be available for sale.

Some of our competitors may be able to sustain the costs of complex patent litigation more effectively than we can because they have substantially greater resources. Even if resolved in our favor, litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses, and could distract our technical and management personnel from their normal responsibilities. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock. Finally, any uncertainties resulting from the initiation and continuation of any litigation could have a material adverse effect on our ability to raise the funds necessary to continue our operations.

Our intellectual property rights will further be affected in ways that are difficult to anticipate by the provisions of the America Invents Act (2011).

Enacted in September 2011, the America Invents Act, or AIA, is the first major overhaul of the U.S. patent system since 1952, and includes a number of changes to established practices, which came into effect between September 2011 and March 2013. The most significant changes include the transition to a modified first-to-file system, the availability of new post-grant review for issued patents, various procedural changes including the third-party submission of prior art and the availability of derivation proceedings and supplemental examination, and an expanded prior commercial user rights defense to a claim of patent infringement. The scope of these changes and the lack of experience with their practical implementation, suggest a transitional period with some uncertainty over the next few years. Several provisions of the AIA will likely be tested in U.S. federal courts over time.

The changes to the U.S. patent system in the AIA will have an impact on our intellectual property rights and how business is conducted in general. For example, the recently implemented modified first-to-file system places a premium on filing as early as possible and appears to increase what is available as prior art, by changing the applicable definitions. In particular, the grace period in the year prior to the filing date is now limited to an inventor’s own publications, and third party publications occurring after a publication by the inventor. For patent applications filed on or after March 16, 2013, we may expect post-grant review challenges initiated up to nine months after the corresponding patent issues.

While the AIA was intended to make the resolution of intellectual property disputes easier and less expensive, we may in the future have to prove that we are not infringing patents or we may be required to obtain licenses to such patents. However, we do not know whether such licenses will be available on commercially reasonable terms, or at all. Prosecution of patent applications, post-grant opposition proceedings, and litigation to establish the validity and scope of patents, to assert patent infringement claims against others and to defend against patent infringement claims by others will be expensive and time-consuming. There can be no assurance that, in the event that claims of any of our owned or licensed patents are challenged by one or more third parties, any court or patent authority ruling on such challenge will determine that such patent claims are valid and enforceable. An adverse outcome in such litigation or post grant proceeding could cause us to lose exclusivity relating to the subject matter delineated by

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such patent claims and may have a material adverse effect on our business. If a third party is found to have rights covering products or processes used by us, we could be forced to cease using the products or processes covered by the disputed rights, be subject to significant liabilities to such third party and/or be required to license technologies from such third party.

Risks Related to Our Common Stock

Our stock price has been and will likely continue to be volatile.

Our stock price is volatile and from October 19, 2011, the first day of trading of our common stock, to February 20, 2014, our stock has had low and high sales prices per share in the range from $3.20 to $24.79 per share. Among the factors that may cause the market price of our common stock to fluctuate are the risks described in this “Risk Factors” section and other factors, including:

• fluctuations in our operating results or the operating results of our competitors;

• changes in estimates of our financial results or recommendations or cessation of coverage by securities analysts;

• changes in the estimates of the future size and growth rate of our market opportunity;

• changes in accounting principles or changes in interpretations of existing principles, which could affect our financial results;

• conditions and trends in the markets we serve;

• changes in general economic, industry, and market conditions;

• success of competitive technologies and procedures;

• changes in our pricing policies;

• announcements of significant new technologies, procedures, or acquisitions by us or our competitors;

• changes in legislation or regulatory policies, practices or actions;

• the commencement or outcome of litigation involving our company, our general industry or both;

• recruitment or departure of our executives and other key employees;

• changes in our capital structure, such as future issuances of securities or the incurrence of debt;

• actual or expected sales of our common stock by the holders of our common stock; and

• the trading volume of our common stock.

In addition, the stock market in general and the market for medical technology and aesthetic product companies in particular may experience a loss of investor confidence. The stock markets recently have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. These fluctuations often have been unrelated or disproportionate to the operating performance of those companies. These broad market and industry fluctuations, as well as general economic, political and market conditions such as recessions, interest rate changes or international currency fluctuations, may negatively impact the market price of our common stock. In the past, companies that have experienced volatility in the market price of their stock have been subject to securities class-action litigation. Further, class-action litigation, even if unsuccessful, could be costly to defend and divert management's attention and resources, which could further materially harm our financial condition and results of operations.

The requirements of being a public company may strain our resources, divert management's attention, and affect our ability to attract and retain qualified board members.

As a public company, we are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, the Sarbanes-Oxley Act of 2002, the Dodd-Frank Act, the listing requirements of the securities exchange on which we trade and other applicable federal and state securities rules and regulations. Compliance with these rules and regulations has increased our legal and financial compliance costs, made some activities more difficult, time-consuming, or costly and increased demand on our business systems and resources. The Exchange Act requires, among other things, that we file annual, quarterly, and current reports with respect to our business and operating results.

As a public company in the United States, we and our independent registered public accounting firm are required pursuant to Section 404 of the Sarbanes-Oxley Act, or Section 404, to furnish a report, among other things, on the effectiveness of our internal control over financial reporting. These controls may become inadequate because of changes in conditions or the degree of compliance with these policies or procedures may deteriorate and weaknesses in our internal control over financial reporting may be discovered. In the event that we are not able to demonstrate compliance with Section 404 in a timely manner, or are unable to produce timely or accurate financial statements, we may be subject to sanctions or investigations by regulatory authorities such as the SEC and the securities exchange on which we trade and investors may lose confidence in our operating results, which would have a material adverse effect on our business and on the price of our common stock and our ability to access the capital markets.

In addition, changing laws, regulations, and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs and making some activities more time-consuming. These laws, regulations, and standards are subject to varying interpretations, in many cases due to their lack of specificity, and, as a

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result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We intend to invest resources to comply with evolving laws, regulations, and standards, and this investment may result in increased general and administrative expenses and a diversion of management's time and attention from revenue-generating activities to compliance activities. If our efforts to comply with new laws, regulations, and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to practice, regulatory authorities may initiate legal proceedings against us and our business may be harmed.

Our financial controls and procedures may not be sufficient to ensure timely and reliable reporting of financial information, which, as a public company, could materially harm our stock price and the listing of our common stock on the NASDAQ Global Select Market.

We cannot assure you that our finance department has or will maintain adequate resources to ensure that we will not have any future material weakness in our system of internal controls. The effectiveness of our controls and procedures may in the future be limited by a variety of factors, including:

• faulty human judgment and simple errors, omissions or mistakes;

• fraudulent action of an individual or collusion of two or more people;

• inappropriate management override of procedures; and

• the possibility that any enhancements to controls and procedures may still not be adequate to assure timely and accurate financial control.

If we fail to have effective controls and procedures for financial reporting in place, we could be unable to provide timely and accurate financial information and be subject to de-listing on the NASDAQ Global Select Market, SEC investigation, and civil or criminal sanctions.

We do not currently intend to pay dividends on our common stock.

We have never paid cash dividends on our common stock and do not anticipate paying cash dividends on our common stock in the foreseeable future. We currently intend to invest our future earnings, if any, to fund the development and growth of our business. The payment of dividends will be at the discretion of our Board of Directors and will depend on our results of operations, capital requirements, financial condition, future prospects, restrictions imposed by applicable law, any limitations on payments of dividends present in any debt agreements we may enter into and other factors our Board of Directors may deem relevant. If we do not pay dividends, your ability to achieve a return on our common stock will depend on any future appreciation in the market price of our common stock. There is no guarantee that our common stock will appreciate in value or even maintain the price at which our holders have purchased their common stock.

Our directors, executive officers, and entities with which they are affiliated hold a significant portion of our common stock, which may lead to conflicts of interest with other stockholders over corporate transactions and other corporate matters.

Our directors, executive officers, and entities with which they are affiliated beneficially own approximately 30% of our outstanding common stock as of February 20, 2014. This concentration of ownership may not be in the best interests of our other stockholders. We are not aware of any stockholder or voting agreements or understandings between or among our directors, officers, or holders of our outstanding common stock currently in place. However, these stockholders, acting together, would be able to exercise significant influence on all matters requiring stockholder approval, including the election of directors and significant corporate transactions such as mergers or other business combinations. This influence could delay, deter, or prevent a third party from acquiring or merging with us, which could adversely affect the market price of our common stock.

Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us more difficult, limit attempts by our stockholders to replace or remove our current directors and management team, and limit the market price of our common stock.

Our amended and restated certificate of incorporation and amended and restated bylaws contain provisions that may delay or prevent a change of control, discourage bids at a premium over the market price of our common stock, and adversely affect the market price of our common stock and the voting and other rights of the holders of our common stock. These provisions include:

• dividing our board into three classes, with each class serving a staggered three-year term;

• prohibiting our stockholders from calling a special meeting of stockholders or acting by written consent;

• permitting our board to issue additional shares of our preferred stock, with such rights, preferences and privileges as they may designate, including the right to approve an acquisition or other changes in control;

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• establishing an advance notice procedure for stockholder proposals to be brought before an annual meeting, including proposed nominations of persons for election to our Board of Directors;

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

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

• requiring the approval of our Board of Directors or the holders of a super-majority of our outstanding shares of capital stock to amend our bylaws and certain provisions of our certificate of incorporation.

Although we believe these provisions collectively provide for an opportunity to receive higher bids by requiring potential acquirers to negotiate with our board, they would apply even if the offer may be considered beneficial by some stockholders. In addition, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management team by making it more difficult for stockholders to replace members of our board, which is responsible for appointing the members of our management.

Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which prohibits a person who owns in excess of 15% of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner. The restrictions contained in Section 203 are not applicable to any of our existing stockholders that currently own 15% or more of our outstanding voting stock.

ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

We occupy an approximately 43,000 square foot facility in Pleasanton, California, 13,825 square feet in our manufacturing facility in Dublin, California and 15,755 square feet of warehouse space in Livermore, California, all of which are under leases that extend through December 2014. We manufacture and distribute our CoolSculpting system, including procedure packs, at our Dublin facility. The Livermore facility is used primarily for raw material storage. We also occupy office and warehouse space in Gatwick, United Kingdom, under a lease which extends through December 2018, as well as office space in Dubai, United Arab Emirates, under a lease which extends through March 2014 and Seoul, South Korea under a lease which extends through October 2014. We are currently in the process of renegotiating lease terms for our facilities with expiration dates in 2014.

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ITEM 3. LEGAL PROCEEDINGS

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

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PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information for Common Stock

Our common stock has been traded on the NASDAQ Global Select Market under the symbol of “ZLTQ” since it began trading on October 19, 2011. The following table sets forth on a per share basis, for the periods indicated, the high and low sale prices of our common stock as reported by the NASDAQ Global Select Market.

2013	High		Low
First Quarter	$	5.11	$	3.47
Second Quarter	6.70		3.20
Third Quarter	9.79		5.85
Fourth Quarter	19.42		8.71
2012
First Quarter	$	12.66	$	5.60
Second Quarter	6.40		3.85
Third Quarter	6.50		4.25
Fourth Quarter	7.08		4.00

As of February 20, 2014, there were approximately 34 holders of record of our common stock. In addition, we believe that a significant number of beneficial owners of our common stock held their shares in street name.

Dividend Policy

We have never declared or paid any cash dividends on our common stock. We currently intend to retain all future earnings, if any, for use in our business and do not anticipate paying any cash dividends on our common stock in the foreseeable future.

Performance Graph

The following graph shows the total stockholder return of an investment of $100 in cash on October 19, 2011 through December 31, 2013, for (1) our common stock, (2) the NASDAQ Composite index and (3) the NASDAQ Medical Equipment Index. All values assume reinvestment of the full amount of all dividends. No cash dividends have been declared on shares of our common stock. Stockholder returns over the indicated period are based on historical data and are not necessarily indicative of future stockholder returns.

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	Cumulative Total Return
	December 31, 2011		December 31, 2012		December 31, 2013
ZELTIQ Aesthetics, Inc.	$	73.29	$	29.87	$	122.00
NASDAQ Composite	109.19		127.48		180.63
NASDAQ Medical Equipment	111.68		123.77		144.21

Repurchases of Equity Securities

Not applicable.

ITEM 6. SELECTED FINANCIAL DATA

The following tables set forth the selected consolidated financial data for each of the years in the five-year period ended December 31, 2013. The selected consolidated financial data is qualified in its entirety and should be read in conjunction with the Consolidated Financial Statements and related Notes thereto and Management's Discussion and Analysis of Financial Condition and Results of Operations contained elsewhere in this Annual Report on Form 10-K. We have derived the statement of operations data for the years ended December 31, 2013, 2012 and 2011, and the balance sheet data as of December 31, 2013 and 2012, from the consolidated audited financial statements included elsewhere in this Annual Report on Form 10-K. The statement of operations data for the years ended December 31, 2010 and 2009, and the balance sheet data as of December 31, 2011, 2010 and 2009, were derived from the audited financial statements that are not included in this Annual Report on Form 10-K.

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Selected Consolidated Financial Data
(in thousands, except per share data)
Year Ended December 31,
	2013			2012			2011			2010			2009
Revenue	$	111,626		$	76,194		$	68,144		$	25,461		$	1,587
Cost of revenue (1)	34,189			25,506			26,101			12,295			2,243
Gross profit	77,437			50,688			42,043			13,166			(656		)
Operating expenses:
Research and development (1)	17,090			12,693			10,488			8,222			8,034
Sales and marketing (1)	63,185			51,167			28,953			11,987			4,519
General and administrative (1)	16,510			16,867			11,299			5,873			3,966
Total operating expenses	96,785			80,727			50,740			26,082			16,519
Loss from operations	(19,348		)	(30,039		)	(8,697		)	(12,916		)	(17,175		)
Interest income (expense), net	80			129			(93		)	(497		)	(516		)
Other income (expense), net	103			(92		)	(765		)	(120		)	47
Loss before provision for income taxes	(19,165		)	(30,002		)	(9,555		)	(13,533		)	(17,644		)
Provision for income taxes	140			141			48			—			—
Net loss	(19,305		)	(30,143		)	(9,603		)	(13,533		)	(17,644		)
Cumulative dividends on convertible preferred stock	—			—			(5,099		)	(5,426		)	(4,208		)
Net loss attributable to common stockholders	$	(19,305	)	$	(30,143	)	$	(14,702	)	$	(18,959	)	$	(21,852	)
Net loss per share attributable to common stockholders, basic and diluted (2)	$	(0.53	)	$	(0.87	)	$	(1.96	)	$	(20.19	)	$	(28.02	)

	As of December 31,
	2013		2012		2011		2010			2009
Balance Sheet Data:
Cash and cash equivalents	$	25,798	$	22,876	$	83,908	$	12,667		$	3,100
Restricted cash, short- and long-term investments	30,613		36,173		255		425			341
Working capital (deficit)	42,430		49,590		84,086		7,694			(3,346		)
Total assets	88,054		90,269		105,999		19,283			6,928
Total notes payable	—		—		310		1,596			7,784
Convertible preferred stock warrant liability	—		—		—		257			146
Convertible preferred stock	—		—		—		93,888			63,054
Total stockholders' equity (deficit)	62,576		72,580		94,303		(84,493		)	(67,142		)

(1) The following table presents stock-based compensation related to stock based awards granted to employees and non-employees in each expense category:

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	Year Ended December 31,
	2013		2012		2011		2010		2009
Cost of revenue	$	248	$	131	$	54	$	39	$	14
Research and development	1,645		894		542		100		98
Sales and marketing	1,783		827		533		89		65
General and administrative	2,984		3,137		1,150		1,059		266
Total stock-based compensation	$	6,660	$	4,989	$	2,279	$	1,287	$	443

(2) See Notes 2 and 13 to our audited consolidated financial statements for an explanation of the calculations of our basic and diluted net loss per share of common stock attributable to common stockholders.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with “Selected Financial Data” and our consolidated financial statements and the notes thereto included elsewhere in this Annual Report on Form 10-K. In addition to historical information, the following discussion contains forward-looking statements that are subject to risks and uncertainties. Actual results may differ substantially from those referred to herein due to a number of factors, including but not limited to risks described in the section entitled Risk Factors in this Annual Report on Form 10-K.

Overview

We are a medical technology company focused on developing and commercializing products utilizing our proprietary controlled cooling technology platform. Our first commercial product, the CoolSculpting system, is designed to selectively reduce stubborn fat bulges. We generate revenue from sales of our CoolSculpting system and from sales of cycles in the form of consumable procedure packs to our customers. We received clearance from the Food and Drug Administration, or FDA, in September 2010 to market CoolSculpting for the selective reduction of fat around the flanks, an area commonly referred to as the “love handles.” In May 2012, CoolSculpting was cleared by the FDA for treatment the abdomen area. We may seek additional regulatory clearances from the FDA to expand our United States marketed indications for CoolSculpting to areas on the body other than the flanks and abdomen. We have received regulatory approval or are otherwise free to market CoolSculpting in numerous international markets where use of the product is generally not limited to specific treatment areas. Customers in these markets commonly perform CoolSculpting procedures on the inner thighs, back, and chest, in addition to the flanks and abdomen.

In the United States and related territories as well as Canada we use our direct sales organization to selectively market CoolSculpting. In markets outside of North America, including Asia Pacific and Europe, we sell CoolSculpting through a direct sales organization as well as a network of distributors. We intend to continue developing our international sales and marketing organization to focus on increasing sales and strengthening our customer relationships. We also intend to seek regulatory approval to market CoolSculpting in key additional international markets, including China. Revenue from markets outside of North America accounted for 20%, 26% and 26% of our total revenue for the years endedDecember 31, 2013, 2012 and 2011, respectively.

Our ongoing research and development activities are primarily focused on improving and enhancing our CoolSculpting system and CoolSculpting procedure. In addition to these development activities related to CoolSculpting, we are exploring additional uses of our proprietary controlled cooling technology platform for the dermatology, plastic surgery, and aesthetic markets. We are also exploring potential therapeutic uses for our platform technology, either directly or through collaborative arrangements with strategic partners.

In October 2011, we completed our initial public offering, or IPO, at which time we received net proceeds of $90.7 million, net of underwriting discounts and commissions and other costs associated with the offering.

Revenue

We generate revenue from sales of our CoolSculpting system and from sales of consumables to our customers. We generated revenue of $111.6 million; $76.2 million and $68.1 million for the years endedDecember 31, 2013, 2012 and 2011, respectively.

System revenue. Sales of our CoolSculpting system include the CoolSculpting control unit and our CoolSculpting applicators. Some practices may purchase more than one CoolSculpting system. Our standard terms do not allow for trial or evaluation periods, rights of return, or refund payments contingent upon the customer obtaining financing or other terms that could impact the customer’s obligation. System revenue represented 55%, 51% and 68% of our total revenue for the years endedDecember 31,

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2013, 2012 and 2011, respectively. Our worldwide installed base grew by 47% from 1,483 units as of December 31, 2012, to 2,175 units as of December 31, 2013.

Consumable revenue. We generate consumable revenue through sales of cycles in the form of consumable procedure packs, each of which includes our consumable CoolGels and CoolLiners and a disposable computer cartridge that we market as the CoolCard. The CoolCard contains enabling software that permits our customers to perform a fixed number of CoolSculpting cycles. Consumable revenue accounted for approximately 45%, 49% and 32% of our total revenue for the years endedDecember 31, 2013, 2012 and 2011, respectively. We shipped 426,912, 300,692 and 190,314 CoolSculpting cycles to our customers during the years endedDecember 31, 2013, 2012 and 2011, respectively.

Our business plan focuses on expanding our installed base of systems at customers, and increasing our consumable revenue by driving demand for CoolSculpting procedures through our targeted marketing programs. We anticipate that as we implement our business plan our consumable revenue will increase as a percentage of our total revenue.

Seasonality. Seasonal fluctuations in the number of patients seeking treatments and the availability of our customers are likely to continue to affect, our business. Specifically, our customers often take vacation or are on holiday during the summer months and therefore tend to perform fewer procedures, particularly in Europe. These seasonal trends have caused and will likely continue to cause, fluctuations in our quarterly results, including fluctuations in sequential revenue growth rates.

Market in which we operate. The medical technology and aesthetic product markets are highly competitive and dynamic, and are characterized by rapid and substantial technological development and product innovations. We compete with many other technologies for consumer demand. Further, the aesthetic industry in which we operate is particularly vulnerable to economic trends. The decision to undergo a procedure from our systems is driven by consumer demand. Procedures performed using our systems are elective procedures, the cost of which must be borne by the patient, and are not reimbursable through government or private health insurance. In times of economic uncertainty or recession, individuals often reduce the amount of money that they spend on discretionary items, including aesthetic procedures. The general economic difficulties being experienced and the lack of availability of consumer credit for some of our customers' patients could adversely affect the markets in which we operate.

Critical Accounting Policies and Estimates

Our consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America, or GAAP. The preparation of our consolidated financial statements requires management to make judgments and estimates that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Our management believes that we consistently apply these judgments and estimates and the consolidated financial statements and accompanying notes fairly represent all periods presented. However, any differences between these judgments and estimates and actual results could have a material impact on our consolidated statements of income and financial position.

Critical accounting estimates, as defined by the Securities and Exchange Commission, are those that are most important to the portrayal of our consolidated financial condition and results of operations and require our management’s most difficult and subjective judgments and estimates of matters that are inherently uncertain. Historically, our critical accounting estimates have not differed materially from actual results. However, if our assumptions change, we may need to revise our estimates, or take other corrective actions, either of which may also have a material adverse effect on our statements of operations, liquidity, and financial condition.

We believe the following critical accounting policies involve significant areas where management applies judgments and estimates in the preparation of our financial statements.

Revenue Recognition

We derive our revenue from the sales of the CoolSculpting system, consisting of a control unit and applicators, and from the sale of cycles in the form of consumable procedure packs, each of which includes our consumable CoolGels and CoolLiners and a disposable computer cartridge that we market as the CoolCard. Embedded software exists in the CoolCard product to permit our customers to perform a fixed number of CoolSculpting procedures, or cycles. We do not market this software separately from the CoolSculpting system or from the CoolCard. Rather, the functionality that the software provides is part of the overall CoolCard product. We market the CoolSculpting system as a non-invasive aesthetic device for the reduction of fat, not for its embedded software attributes included in the CoolCard that enable its use. We do not provide rights to upgrades and enhancements or post contract customer support for the embedded software. In addition, we do not incur significant software development costs or capitalize our software development costs. Based on this assessment, we consider the embedded software in the CoolCard incidental to the CoolCard product as a whole and determined that revenue recognition should not be governed by the provisions of Topic 985 of the FASB Accounting Standards Codification, or ASC. We earn revenue from the sale of our products to our customers

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and to distributors. We recognize revenue when persuasive evidence of an arrangement exists, transfer of title to the customer has occurred, the sales price is fixed or determinable, and collectability is probable. We defer revenue in the event that any of the revenue recognition criteria is not met.

Persuasive Evidence of an Arrangement. We use contracts or customer purchase orders to determine the existence of an arrangement.

Transfer of title. Our standard terms generally specify that title transfers upon shipment to the customer. We use third party shipping documents to verify that title has transferred.

Sales Price Fixed or Determinable. We assess whether the sales price is fixed or determinable at the time of the transaction. Sales prices are documented in the executed sales contract or purchase order received prior to shipment. Our standard terms do not allow for trial or evaluation periods, rights of return or refund, payments contingent upon the customer obtaining financing or other terms that could impact the customer's obligation.

Collectability. We assess whether collection is reasonably assured based on a number of factors, including the customer's past transaction history and credit worthiness.

Multiple-Element Arrangements. Typically, all products sold to a customer are delivered at the same time. If a partial delivery occurs as authorized by the customer, we allocate revenue to the various products based on their vendor-specific objective evidence of fair value, or VSOE, if VSOE exists according to ASC 605-25 as the basis of determining the relative selling price of each element. If VSOE does not exist, we may use third party evidence of fair value, or TPE, to determine the relative selling price of each element. If neither VSOE nor TPE exists, we may use management's best estimate of the sales price, or ESP, of each element to determine the relative selling price. We base the relative selling prices for control units, applicators, CoolCards and extended warranty on established price lists and separate, stand-alone sales of these elements. We establish best estimates within a range of selling prices considering multiple factors including, but not limited to, factors such as size of transaction, pricing strategies and market conditions. We believe the use of the ESP allows revenue recognition in a manner consistent with the underlying economics of the transaction. Our products do not require maintenance or support.

Shipping and handling costs. We expense shipping and handling costs as incurred and include them in cost of revenue. In those cases where we bill shipping and handling costs to customers, we classify the amounts billed as revenue.

Accruals for Customer Programs

We record an accrued liability for cooperative marketing arrangements and customer incentive programs. The estimated cost of these programs is recorded as a reduction of revenue or as an operating expense, if we receive a separately identifiable benefit from the customer and can reasonably estimate the fair value of that benefit. Significant management judgment and estimates must be used to determine the cost of these programs in any accounting period.

Cooperative Marketing Arrangements.  We offer cooperative marketing programs to our North American customers, allowing the customer to receive partial reimbursement for qualifying advertising expenditures which promote our product and brand. Customer participation, as well as reimbursement amounts, is predicated upon purchase levels of CoolCards. The objective of these arrangements is to encourage advertising and promotional events to increase sales of our products. Accruals for these marketing arrangements are recorded at the time of sale, or time of commitment, based on the related program parameters, review of related advertising and historical experience.

Customer Incentive Programs.  Our customer incentive program consists of rebates for our North American customers based on purchase levels of CoolCards. Estimated costs of consumer rebates and similar incentives are recorded at the time the incentive is offered, based on the specific terms and conditions of the program.

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Investments

We invest our excess cash balances primarily in certificates of deposit, commercial paper, corporate bonds, and U.S. Government agency securities. Investments with original maturities greater than 90 days that mature less than one year from the consolidated balance sheet date are classified as short-term investments. We classify all of our investments as available-for-sale and record such assets at estimated fair value in the consolidated balance sheets, with unrealized gains and losses, if any, reported as a component of accumulated other comprehensive income (loss) in stockholders' equity. We report realized gains and losses from maturities of all such securities in earnings and computed using the specific identification cost method. We report realized gains or losses and charges for other-than-temporary declines in value, if any, on available-for-sale securities in other income (expense), net as incurred.  We periodically evaluate these investments for other-than-temporary impairment.

Product Warranty

Effective in the second quarter of 2013, we provide a standard limited warranty on our products of generally one year for both control units and applicators for our direct customers. Prior to this change, we provided a standard limited warranty on our products of generally three years for control units and one year for applicators, while for direct customers in Europe, we offered a one year standard warranty on control units. For indirect customers in our international markets, we provide a standard limited warranty on our products of generally three years for control units and one year for applicators.

We estimate and provide for future costs for initial product warranties upon shipment. We base product warranty costs on related freight, material, technical support labor, and overhead costs. We provide for the estimated product warranty costs by considering our historical costs and applying the experience rates to each product sold over the outstanding warranty period. We must exercise judgment in estimating our expected product warranty costs. If actual product failure rates, freight, material, technical support, labor, and overhead costs differ from our estimates, we will be required to revise our estimated warranty liability. We have recorded a liability of $0.7 million and $0.9 million as of December 31, 2013 and 2012, respectively, for future warranty expense.

We offer an extended warranty on both our CoolSculpting control units and CoolSculpting applicators. We recognize the revenue from the sale of an extended warranty over the extended warranty coverage period. Our revenue and related obligations from sale of extended warranties to date has not been significant.

Stock-Based Compensation

We recognize stock-based compensation cost for only those shares ultimately expected to vest on a straight-line basis over the requisite service period of the award. We estimate the fair value of stock options using a Black-Scholes valuation model, which requires the input of highly subjective assumptions, including the option’s expected term and stock price volatility. In addition, judgment is also required in estimating the number of stock-based awards that we expect to be forfeited. Forfeitures are estimated based on historical experience at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The assumptions used in calculating the fair value of share-based payment awards represent management’s best estimates, but these estimates involve inherent uncertainties and the application of management’s judgment. As a result, if factors change and we use different assumptions, our stock-based compensation expense could be materially different in the future.

Income Taxes

We are subject to income taxes in multiple jurisdictions, including but not limited to the United States and United Kingdom, and we use estimates in determining our provision for income taxes. We use the asset and liability method of accounting for income taxes. Under this method, we calculate deferred tax asset or liability account balances at the balance sheet date using current tax laws and rates in effect for the year in which the differences are expected to affect our taxable income.

Recognition of deferred tax assets is appropriate when realization of such assets is more likely than not. We recognize a valuation allowance against our net deferred tax assets if it is more likely than not that some portion of the deferred tax assets will not be fully realizable. This assessment requires judgment as to the likelihood and amounts of future taxable income by tax jurisdiction. At December 31, 2013, we had a $51.0 million valuation allowance against $51.1 million of deferred tax assets.

We follow the accounting guidance for uncertainties in income taxes, which prescribes a recognition threshold and measurement process for recording uncertain tax positions taken, or expected to be taken in a tax return, in the consolidated financial statements. None of our currently unrecognized tax benefits would affect our effective income tax rate if recognized, due to the valuation allowance that currently offsets our deferred tax assets. We do not anticipate the total amount of unrecognized income tax benefits relating to tax positions existing at December 31, 2013, will significantly increase or decrease in the next 12 months.

We assess all material positions taken in any income tax return, including all significant uncertain tax positions, in all tax years that are still subject to assessment or challenge by relevant taxing authorities. Assessing an uncertain tax position begins with the initial determination of the position's sustainability and is measured at the largest amount of benefit that is greater than 50% likely to be realized upon ultimate settlement. As of each balance sheet date, unresolved uncertain tax positions must be reassessed, and

47

we will determine whether the factors underlying the sustainability assertion have changed and whether the amount of the recognized tax benefit is still appropriate. The recognition and measurement of tax benefits requires significant judgment. Our judgments concerning the recognition and measurement of a tax benefit might change as new information becomes available.

Utilization of net operating losses and tax credit carryforwards may be limited by “ownership change” rules, as defined in Section 382 of the Internal Revenue Code. Similar rules may apply under state tax laws. We have assessed the application of Internal Revenue Code Section 382, during the fourth quarter of 2013, and concluded no limitation currently applies, and we will continue to monitor activities in the future. In the event we experience any subsequent changes in ownership, the amount of net operating losses and research and development credit carryovers available in any taxable year could be limited and may expire unutilized.

Results of Operations

Revenue (in thousands, except for percentages):

	Year Ended
	December 31,
	2013		2012		$ Change		% Change
Revenue
System revenue	$	61,359	$	39,145	$	22,214	57	%
Consumable revenue	50,267		37,049		13,218		36	%
Total revenue	$	111,626	$	76,194	$	35,432	47	%

	Year Ended
	December 31,
	2012		2011		$ Change			% Change
Revenue
System revenue	$	39,145	$	46,552	$	(7,407	)	(16	)%
Consumable revenue	37,049		21,592		15,457			72	%
Total revenue	$	76,194	$	68,144	$	8,050		12	%

Overall, we experienced an increase in revenue driven primarily by the expansion of our sales force into new and existing key markets, increased focus and prioritization of our business through our revamped sales team structure and training, a larger percentage of total revenue contribution from North America revenue which has a higher average selling price, the introduction of new applicators and an increase in our installed base of CoolSculpting systems.

System revenue. We experienced incremental growth in system revenue for the year ended December 31, 2013, as compared to the year ended December 31, 2012, as a result of increased North American system sales due to the reasons stated above and to a lesser extent increased international sales as result of the launch of our international direct sales organization during the second quarter of 2012. Our North American system sales increased while maintaining consistent average selling price. International direct system sales increased, offset by a slight decline in average selling price for these sales as we continue to focus on market penetration in these key markets. We also continue to experience a high rate of new system placements. Additionally, our system revenue increased as result of the launch of our CoolCurve+ applicator during the third quarter of 2012 and the launch of our CoolFit applicator during the first quarter of 2013, which increased the number of applicators included in each standard CoolSculpting system. We also experienced increased sales of applicators, primarily of our CoolFit applicator and some CoolCurve+ applicators, to existing customers, as our customers look to optimize their existing system to fit different body shapes and sizes.

The system revenue decreased in the year ended December 31, 2012, as compared to the year ended December 31, 2011, as we were impacted by new product launches and trial offers by our competitors that created competition for physician capital equipment dollars as well as by changes in our sales force in the North American market. International systems sales were impacted by the transition to a direct sales model.

Consumable revenue. The increase in consumable revenue for the year ended December 31, 2013, as compared to the year ended December 31, 2012, was primarily due to the growth of our worldwide installed base of CoolSculpting systems, and an increased number of consumable procedure packs shipped to our customers driven by our targeted marketing programs. Our installed base increased primarily in North America and to a lesser extent in Europe resulting from the launch of our international direct sales organization during the second quarter of 2012. This increase was partially offset by rebates associated with the Crystal Rewards Program, our customer loyalty program related to consumable purchases, that was launched in the third quarter of 2012.

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The increase in consumable revenue for the year ended December 31, 2012, as compared to the year ended December 31, 2011, was primarily due to the growth of our installed base of worldwide CoolSculpting systems, and an increased number of CoolSculpting procedures performed by our customers driven by our targeted marketing programs.

Cost of Revenue and Gross Profit (in thousands, except for percentages):

	Year Ended
	December 31,
	2013			2012			$ Change		% Change
Cost of revenue	$	34,189		25,506			$	8,683	34	%
% of total revenue	31		%	33		%
Gross profit	$	77,437		$	50,688		$	26,749	53	%
Gross profit %	69		%	67		%

	Year Ended
	December 31,
	2012			2011			$ Change			% Change
Cost of revenue	$	25,506		$	26,101		$	(595	)	(2	)%
% of total revenue	33		%	38		%
Gross profit	$	50,688		$	42,043		$	8,645		21	%
Gross profit %	67		%	62		%

Gross profit as a percentage of revenue typically fluctuates with product and regional mix, selling prices, material costs and revenue levels. The increase in gross profit as a percentage of revenue for the year ended December 31, 2013, as compared to the year ended December 31, 2012, was primarily attributable to higher overall sales volumes while maintaining consistent average selling prices with the prior year, as well due to our increase in consumable revenue which carries higher margins than our systems. We also achieved increased gross profit due to our continued focus on cost reduction across our product portfolio and the completion of the in-sourced manufacturing structure during the second quarter of 2013. Specifically, higher production from higher sales led to better utilization on a relatively fixed base of overhead costs. We also experienced an increase in gross profit as result of a decrease in warranty charges as we continue to experience a reduction in product failure rates. These increases were offset in part due to the inclusion of the 2.3% Medical Device Excise Tax on all equipment sales in the United States as part of the Patient Protection and Affordable Care Act of 2010 which went into effect on January 1, 2013.

The increase in gross profit as a percentage of revenue for the year ended December 31, 2012, as compared to the year ended December 31, 2011, was driven by an increase in consumable revenue as a percentage of total revenue and a decrease in the per unit manufacturing cost of systems primarily due to lower direct material costs driven by our continued focus on product cost reductions and negotiations with suppliers.

Operating Expenses (in thousands, except for percentages):

	Year Ended
	December 31,
	2013			2012			$ Change			% Change
Operating expenses:
Research and development	$	17,090		$	12,693		$	4,397		35	%
% of total revenue	15		%	17		%
Sales and marketing	$	63,185		$	51,167		$	12,018		23	%
% of total revenue	57		%	67		%
General and administrative	$	16,510		$	16,867		$	(357	)	(2	)%
% of total revenue	15		%	22		%
Total operating expenses	$	96,785		$	80,727		$	16,058		20	%

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	Year Ended
	December 31,
	2012			2011			$ Change		% Change
Operating expenses:
Research and development	$	12,693		$	10,488		$	2,205	21	%
% of total revenue	17		%	15		%
Sales and marketing	$	51,167		$	28,953		$	22,214	77	%
% of total revenue	67		%	42		%
General and administrative	$	16,867		$	11,299		$	5,568	49	%
% of total revenue	22		%	17		%
Total operating expenses	$	80,727		$	50,740		$	29,987	59	%

Research and development. Research and development expenses increased for the year ended December 31, 2013, as compared to the year ended December 31, 2012, primarily due to a $1.6 million increase in payroll related costs attributed to higher headcount and an increase in performance-based compensation, an increase in stock-based compensation expense of $0.8 million attributed to higher headcount and new grants, as well as a $1.8 million increase in consulting, development and clinical costs, as we continue to explore ways to leverage our proprietary cooling platform for additional applications and indications.

Research and development expenses increased for the year ended December 31, 2012, as compared to the year ended December 31, 2011, primarily due to an increase of $1.2 million in payroll related costs and higher stock-based compensation expenses by approximately $0.4 million. The increase in payroll related costs was attributed to a higher headcount and severance costs incurred during the year ended December 31, 2012, while the increase in stock-based compensation expenses were related to new grants related to the higher headcount. These increases in headcount also resulted in additional facilities and allocation charges of $0.3 million.

Sales and marketing. Sales and marketing expenses increased for the year ended December 31, 2013, as compared to the year ended December 31, 2012, primarily due to a $10.5 million increase in payroll related costs resulting from higher headcount, an increase in performance-based compensation, and the expansion of our sales force into new and existing markets driving growth in revenue. We also had increased stock-based compensation expense of $0.9 million attributed to higher headcount and new grants. Sales and marketing expenses also increased by $0.9 million as result of actions taken to retrofit systems for CoolConnect, a tool used as a point of sale initiative which launched during the second quarter of 2013. These increases were offset in part by a $2.4 million decrease in advertising expenses resulting from our shift in emphasis from Direct-to-Consumer advertising programs to a more localized co-operative marketing strategy with individual practices.

Sales and marketing expenses increased for the year ended December 31, 2012, as compared to the year ended December 31, 2011, primarily due to a $10.1 million increase in advertising expenses incurred in conjunction with our direct marketing campaign and other sales and marketing initiatives, a $6.2 million increase in payroll related costs and a $1.9 million increase in sales commission expenses driven by higher sales levels. The remaining increase was attributed to higher stock-based compensation expenses, higher travel expenses and higher public relations expenses during the year ended December 31, 2012. The increase in these expenses is directly related to the growth of our sales and marketing organization.

General and administrative. General and administrative expenses remained relatively flat for the year ended December 31, 2013, as compared to the year ended December 31, 2012, primarily due to a $1.4 million decrease in legal expenses due to the resolution of various legal matters in 2013, including shareholder and certain IP related litigation. This decrease was offset by a $1.3 million increase in payroll related costs resulting from higher headcount in certain functions to support growth in our business and an increase in performance-based compensation, which was offset in part by a reduction in costs associated with non-recurring severance expenses.

General and administrative expenses increased for the year ended December 31, 2012, as compared to the year ended December 31, 2011, primarily due to a $2.8 million increase in legal expenses primarily related to our ongoing litigation and IP enforcement activities, a $2.3 million increase in payroll related costs and higher stock-based compensation expenses by $2.0 million. Consulting, recruiting and travel expenses also increased during the year ended December 31, 2012. The increase was partially offset by lower accounting fees of $1.2 million incurred during the year ended December 31, 2012 compared to the prior year. Higher accounting fees during the year ended December 31, 2011, were incurred in the preparation for our initial public offering, or IPO. The increase in payroll related costs was attributed to a higher headcount and severance costs recognized during the year

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ended December 31, 2012. The stock-based compensation expense for the year ended December 31, 2012, included $0.7 million in modification charges incurred in connection with the severance packages to our former executives.

Interest Income (Expense) and Other Income (Expense), Net (in thousands, except for percentages):

	Year Ended
	December 31,
	2013			2012			$ Change			% Change
Interest income (expense), net	$	80		$	129		$	(49	)	(38	)%
% of total revenue	—		%	—		%
Other income (expense), net	$	103		$	(92	)	$	195		(212	)%
% of total revenue	—		%	—		%

	Year Ended
	December 31,
	2012			2011			$ Change		% Change
Interest income (expense), net	$	129		$	(93	)	$	222	(239	)%
% of total revenue	—		%	—		%
Other income (expense), net	$	(92	)	$	(765	)	$	673	(88	)%
% of total revenue	—		%	(1		)%

Interest income (expense), net. During the years ended December 31, 2013 and 2012, interest income was earned on our available-for-sale securities. The amount of income earned varies based on the type of investments held, market conditions and other factors.

During the year ended December 31, 2011, interest expense was incurred in relation to our notes payable that was paid in full in the quarter ended March 31, 2012.

Other income (expense), net. The increase in other income for the year ended December 31, 2013, as compared to the year ended December 31, 2012, was primarily the result of a favorable patent defense ruling.

Higher expense during the year ended December 31, 2011 was related to the loss incurred on the change in the fair value of the convertible preferred stock warrant.

Liquidity and Capital Resources

Since our inception, we have financed our operations to date primarily through private placements of convertible preferred stock, promissory notes, borrowings under a loan agreement, product sales and the proceeds from our initial public offering, or IPO.

The following table summarizes our working capital, cash and cash equivalents, short-term and long-term investments as of December 31,2013, 2012 and 2011, as follows (in thousands):

	Year Ended December 31,
	2013		2012		2011
Cash and cash equivalents	$	25,798	$	22,876	$	83,908
Short-term investments	18,840		22,563		—
Long-term investments	11,442		13,141		—
Total	$	56,080	$	58,580	$	83,908
Working capital	$	42,430	$	49,590	$	84,086

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Summary Statement of Cash Flows

The following table summarizes our cash flows for the years endedDecember 31, 2013, 2012 and 2011 (in thousands):

	Year Ended
	December 31,
	2013			2012			2011
Net cash used in operating activities	$	(4,081	)	$	(26,626	)	$	(10,296	)
Net cash provided by (used in) investing activities	4,384			(37,507		)	(8,405		)
Net cash provided by financing activities	2,562			3,101			89,942
Effect of exchange rate on cash and cash equivalents	57			—			—
Net increase (decrease) in cash and cash equivalents	$	2,922		$	(61,032	)	$	71,241

Cash Flows for the Years Ended December 31, 2013, 2012 and 2011

Operating activities.

Net cash used in operating activities was $4.1 million during the year ended December 31, 2013, and consisted of a net loss of $19.3 million, offset by a net change in operating assets and liabilities of $6.5 million and non-cash items of $8.8 million. Non-cash items for the year ended December 31, 2013, consisted primarily of a stock-based compensation expense of $6.7 million and depreciation and amortization expense of $1.7 million. The significant items in the change in operating assets and liabilities include cash generated from decreases in inventory of $2.5 million and an increase in accounts payable, accrued and other non-current liabilities of $7.5 million, offset in part by an increase in accounts receivable of $3.1 million. The decrease in inventory was as result of our continued focus on the management of inventory levels and increased sales. The increase in accounts payable, accrued and other non-current liabilities was driven by the timing of invoice receipt and payments to vendors as well as higher accrued payroll related to performance-based compensation, while the increase in accounts receivable is driven by the increase in sales as well as timing of payment receipts from customers.

Net cash used in operating activities was $26.6 million during the year ended December 31, 2012, resulting primarily from our net loss of $30.1 million and a net change in operating assets and liabilities of $3.9 million, offset by non-cash items of $7.4 million. Non-cash items for the year ended December 31, 2012, consisted primarily of a stock-based compensation expense of $5.0 million and depreciation and amortization expense of $1.6 million. The significant items in the change in operating assets and liabilities include an increase in inventory of $6.6 million attributed to the preparation of our transition from the use of OnCore Manufacturing LLC, to manufacture and supply to us our CoolSculpting control units and certain of our applicators to our in-sourcing of these services and an increase in accounts receivable of $2.5 million attributed to a larger number of customers with credit terms that reduced our cash flow from operating activities, partially offset by an increase in accounts payable, accrued and other non-current liabilities of $5.4 million mainly due to higher advertising expenses and customer and patient rebates that were introduced as part of certain marketing programs in fiscal year 2012 that increased our cash flow from operating activities.

Net cash used in operating activities was $10.3 million during the year ended December 31, 2011, resulting primarily from our net loss of $9.6 million. Non-cash items including depreciation and amortization, stock-based compensation, change in fair value of preferred stock warrant liability, amortization of debt discount and loss on disposal of property and equipment resulted in net increase of $4.1 million. The significant items in the change in operating assets and liabilities include an increase in accounts receivable of $4.3 million, an increase in inventory of $2.3 million and an increase in prepaid and other assets of $1.4 million offset by an increase of $3.5 million in accounts payable, accrued and other non-current liabilities. The increase in accounts receivable was attributed to a larger number of customers with credit terms in 2011 compared to 2010. The increase in inventory was due to purchases of inventory component parts and finished goods to fulfill customer orders as demand for our systems increased. The increase in prepaid and other assets was primarily driven by additional insurance costs and higher prepayments for trade shows and other marketing and sales events. The increase in accounts payable and accrued liabilities during 2011 was due to increased expenses incurred as a result of the growth in our business activities, higher accrued compensation due to higher headcount and sales related expenses such as commissions, higher warranty and royalty accruals as a result of an increase in system sales and an increase in total revenue, respectively.

Investing activities.

Net cash provided by (used in) investing activities was $4.4 million, $(37.5) million and $(8.4) million for the years ended December 31, 2013, 2012, and 2011, respectively. In 2013, we received proceeds from the sale and maturity, net of purchases, of $5.1 million of short-term and long-term investments, offset in part by $0.8 million related to purchases of property and equipment. In 2012, the net cash used in investing activities was primarily attributable to our net purchases of $49.4 million of short-term and long-term investments and purchases of $1.4 million of property and equipment and offset in part by our receipt of $13.5 million

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upon the maturity of investments. In 2011, we capitalized a $7.0 million milestone payment under our license agreement with Massachusetts General Hospital, or MGH, and purchased $1.6 million of property and equipment that reduced our cash flows from investing activities.

Financing activities.

Net cash provided by financing activities during the year ended December 31, 2013, of $2.6 million consisted of $3.4 million proceeds received from the issuance of common stock upon the exercise of stock options and the employee stock purchase plan, offset in part by $0.9 million of tax payments related to shares withheld for vested restricted stock units.

Net cash provided by financing activities during the year ended December 31, 2012, of $3.1 million consisted of $3.2 million proceeds received from the issuance of common stock upon the exercise of stock options and $0.2 million of proceeds from the payment of the note receivable by a stockholder, offset in part by the repayment of notes payable of $0.3 million to Silicon Valley Bank.

Net cash provided by financing activities during the year ended December 31, 2011, of $89.9 million consisted primarily of IPO proceeds of $90.7 million, net of underwriter discount and issuance costs. Cash received for other issuances of common stock and warrants during the year amounted to $0.6 million, while repayment of notes payable accounted for $1.3 million that reduced the cash flows from financing activities.

Our cash, cash equivalents and investments declined by $2.5 million during 2013.  Based on our current plans and market conditions, we believe that our existing cash, cash equivalents and short-term investments will be sufficient to satisfy our anticipated cash requirements for at least the next twelve months. However, we cannot be certain that our planned levels of revenue, costs and expenses will be achieved. If our operating results fail to meet our expectations or if we fail to manage our inventory, accounts receivable or other assets, we could be required to seek additional funding through public or private financings or other arrangements. In such event, adequate funds may not be available when needed or may not be available on favorable or commercially acceptable terms, which could have a negative effect on our business and results of operations.

Contractual Obligations and Commitments

We have certain fixed contractual obligations and commitments that include operating lease obligations and purchase commitments. Changes in our business needs, fluctuating interest rates, and other factors may result in actual payments differing from the estimates. We have presented below a summary of the most significant assumptions used in our determination of amounts presented in the table to assist in the review of this information within the context of our consolidated financial position and results of operations. The following table summarizes our fixed contractual obligations and commitments, as of December 31, 2013 (in thousands):

	Payments due in Fiscal Year
	2014		2015-2016		2017-2018		After 2018		Total
Contractual Obligations:
Operating lease obligations	$	1,252	$	91	$	122	$	—	$	1,465
Purchase commitments	6,036		—		—		—		6,036
Total	$	7,288	$	91	$	122	$	—	$	7,501

Massachusetts General Hospital Royalty Payments

In May 2005, we entered into an agreement with Massachusetts General Hospital, or MGH, to obtain an exclusive license to develop and commercialize the patent and the core technology that underlies our CoolSculpting system. We are obligated to pay a 7% royalty on net sales, as defined in the agreement, of CoolSculpting systems, applicators and procedure packs.

Lease Commitments

We occupy a facility in Pleasanton, a manufacturing facility in Dublin, California and a warehouse space in Livermore, California, all of which are under leases that extend through December 2014. We also occupy office and warehouse space in Gatwick, United Kingdom, under a lease which extends through December 2018, as well as office space in Dubai, United Arab Emirates, under a lease which extends through March 2014 and Seoul, South Korea under a lease which extends through October 2014. Rent expense for non-cancellable operating leases with scheduled rent increases is recognized on a straight-line basis over the lease term. Rent expense for the years endedDecember 31, 2013, 2012 and 2011 was $1.4 million, $1.2 million and $0.9 million, respectively.

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Future minimum lease payments under the non-cancellable operating leases as of December 31, 2013, are as follows (in thousands):

Year Ending December 31,	Amount
2014	1,252
2015	30
2016	61
2017	61
2018	61
Total future minimum lease payments	$	1,465

Purchase Commitments

We had non-cancellable purchase obligations to contract manufacturers and suppliers for $6.0 million and $2.2 million at December 31, 2013 and 2012, respectively.

Unrecognized Tax Benefits

The table above excludes our gross liability for unrecognized tax benefits which totaled $0.1 million, including estimated interest and penalties, as of December 31, 2013, and are classified in long-term income taxes payable. We are unable to make a reasonably reliable estimate of the timing of payments in individual years due to uncertainties in the timing of tax audits, if any, or their outcomes. Accordingly, we have excluded this obligation from the schedule summarizing our significant obligations to make future payments under contractual obligations as of December 31, 2013 presented above.

Product Warranty

The estimated product warranty accrual was as follows (in thousands):

	December 31,
	2013			2012
Balance at the beginning of the period	$	902		$	742
Accruals for warranties issued	197			869
Settlements of warranty claims	(423		)	(709		)
Balance at the end of the period	$	676		$	902

Severance and Separation Agreements

On December 3, 2013, our Chief Scientific Officer and Senior Vice President of Clinical entered into a separation agreement with our company. As a result of this separation agreement, we incurred $0.3 million in termination benefits and $0.7 million in costs related to the modification of the employee's stock-based compensation, which were recorded during the year ended December 31, 2013. Amounts outstanding related to this separation agreement was $0.3 million as of December 31, 2013.

Effective April 3, 2012, our Vice President of North American Sales resigned from our company. On April 18, 2012, our then President and CEO resigned from the positions he held with our company. As a result of these resignations, we incurred $0.9 million in termination benefits and $0.7 million in costs related to the modification of the employees' stock-based compensation, which were recorded during the year ended December 31, 2012. Subsequent to these resignations, during the second quarter of 2012, we made the decision to terminate, as well as accept resignations from several employees. As a result of these actions, we incurred approximately $0.8 million in termination benefits. Amounts outstanding related to these termination benefits were $0.4 million as of December 31, 2012. As of December 31, 2013, all of the termination benefits incurred during December 31, 2012 had been paid.

No similar costs were incurred during the year ended December 31, 2011.

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Related Party Transactions

Notes Receivable from a Stockholder

In December 2007, we issued 445,509 shares of our common stock to an executive in exchange for full recourse promissory notes in the aggregate amount of approximately $0.2 million. The promissory notes bore interest from the date of issuance until January 1, 2010, at a rate of 4.72% per annum compounded annually and last bore interest at a rate of 4.00% per annum, and were collateralized by the related common stock and the executive’s assets. The executive separated from us on December 3, 2010. The promissory notes were due and payable in full (including all accrued and unpaid interest) upon nine months following our initial public offering of our common stock. These notes receivable were related to a prior exercise of stock options and were recorded as a contra stockholders’ equity account.

In July 2012, the promissory notes were paid in full.

Brazilian Distribution Agreement

We entered into a distribution agreement with ADVANCE Medical, Inc. and its wholly owned subsidiaries, or ADVANCE, dated March 18, 2011, and amended on February 27, 2012, and September 4, 2012, appointing ADVANCE as the exclusive distributor of CoolSculpting in Brazil and Mexico. ADVANCE is required to purchase a minimum quantity of our products each calendar quarter throughout the term of the distribution agreement which expires on December 31, 2018. Venrock, a principal stockholder of ZELTIQ, owns a significant equity interest in ADVANCE Medical, Ltd., the parent company of ADVANCE. Dr. Bryan E. Roberts, who is a member of our Board of Directors, is also a partner of Venrock Associates. The revenue recognized by us under this distribution agreement for the years ended December 31, 2013, 2012 and 2011 was $2.3 million, $2.5 million and $2.0 million, respectively. The accounts receivable balance as of December 31, 2013 and 2012, was $0.2 million and $0.1 million, respectively.

Recent Accounting Pronouncements

On February 5, 2013, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. This guidance is the culmination of the FASB's redeliberation on reporting reclassification adjustments from accumulated other comprehensive income. We adopted this guidance during the first quarter of 2013 and this adoption did not have a material impact on our consolidated financial statements.

Off-balance Sheet Arrangements

As of December 31, 2013, 2012 and 2011, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risks in the ordinary course of our business. These risks primarily include interest rate fluctuations and inflation. Our exposure to foreign currency exchange risk has been insignificant because the majority of our revenue and our expenses are incurred and paid in U.S. dollars.

Interest Rate Fluctuations

We hold cash equivalents as well as short-term and long-term fixed income securities. All maturities are less than two years. Our holdings include fixed and floating rate securities. Changes in interest rates could impact our anticipated interest income. The fair market value of our holdings may be adversely impacted due to a rise in interest rates; as a result, our future investment income may fall short of expectations due to changes in interest rates or we may suffer losses in principal if forced to sell securities which have declined in market value due to changes in interest rates. As of December 31, 2013 and 2012, we had approximately $30.3 million and $35.7 million invested in available-for-sale short-term and long-term investments, respectively. An immediate 10% change in interest rates would not have a material adverse impact on our future operating results and cash flows.

We do not have interest bearing liabilities as of December 31, 2013, and therefore, we are not subject to risks from immediate interest rate decreases.

Inflation

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We do not believe that inflation has had a material effect on our business, financial condition, or results of operations. If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition, and results of operations.

Foreign Exchange

Our exposure to foreign currency exchange risk has been insignificant because our revenue and our expenses are generally incurred and paid in U.S. dollars.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	PAGE NUMBER
Report of Independent Registered Public Accounting Firm	58
Consolidated Balance Sheets	59
Consolidated Statements of Operations	60
Consolidated Statements of Comprehensive Loss	61
Consolidated Statements of Convertible Preferred Stock and Stockholders' Equity (Deficit)	62
Consolidated Statements of Cash Flows	65
Notes to Consolidated Financial Statements	66

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of ZELTIQ Aesthetics, Inc:

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, comprehensive loss, convertible preferred stock and stockholders' equity (deficit), and cash flows present fairly, in all material respects, the financial position of ZELTIQ Aesthetics, Inc. and its subsidiary at December 31, 2013 and 2012 and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2013 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control—Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Company's management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Management's Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on these financial statements and on the Company's internal control over financial reporting based on our audits (which were integrated audits in 2013 and 2012). We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PRICEWATERHOUSECOOPERS LLP

San Jose, California

February 25, 2014

58

ZELTIQ Aesthetics, Inc.

Consolidated Balance Sheets

(In thousands, except share and per share data)

	December 31, 2013			December 31, 2012
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	25,798		$	22,876
Short-term investments	18,840			22,563
Accounts receivable, net	10,221			7,133
Inventory	8,406			10,871
Prepaid expenses and other current assets	4,368			3,600
Total current assets	67,633			67,043
Long-term investments	11,442			13,141
Restricted cash	331			469
Property and equipment, net	2,158			2,336
Intangible asset, net	6,481			7,181
Other assets	9			99
Total assets	$	88,054		$	90,269
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	5,165		$	4,976
Accrued liabilities	18,364			11,076
Deferred revenue	1,674			1,401
Total current liabilities	25,203			17,453
Other non-current liabilities	275			236
Total liabilities	$	25,478		$	17,689
Commitments and contingencies (Note 8)
STOCKHOLDERS’ EQUITY:
Preferred stock, $0.01 par value: 50,000,000 shares authorized and no shares issued and outstanding at December 31, 2013 and December 31, 2012	—			—
Common stock, $0.001 par value: 500,000,000 shares authorized at December 31, 2013 and December 31, 2012; 37,038,374 and 35,852,105 shares issued and outstanding at December 31, 2013 and December 31, 2012, respectively	41			39
Additional paid-in capital	195,507			186,287
Accumulated other comprehensive income	87			8
Accumulated deficit	(133,059		)	(113,754		)
Total stockholders’ equity	62,576			72,580
Total liabilities and stockholders’ equity	$	88,054		$	90,269

The accompanying notes are an integral part of these consolidated financial statements.

59

ZELTIQ Aesthetics, Inc.

Consolidated Statements of Operations

(In thousands, except share and per share data)

	Year Ended
	December 31,
	2013			2012			2011
Revenue	$	111,626		$	76,194		$	68,144
Cost of revenue	34,189			25,506			26,101
Gross profit	77,437			50,688			42,043
Operating expenses:
Research and development	17,090			12,693			10,488
Sales and marketing	63,185			51,167			28,953
General and administrative	16,510			16,867			11,299
Total operating expenses	96,785			80,727			50,740
Loss from operations	(19,348		)	(30,039		)	(8,697		)
Interest income (expense), net	80			129			(93		)
Other income (expense), net	103			(92		)	(765		)
Loss before provision for income taxes	(19,165		)	(30,002		)	(9,555		)
Provision for income taxes	140			141			48
Net loss	(19,305		)	(30,143		)	(9,603		)
Cumulative dividends on convertible preferred stock	—			—			(5,099		)
Net loss attributable to common stockholders	$	(19,305	)	$	(30,143	)	$	(14,702	)
Net loss per share attributable to common stockholders, basic and diluted	$	(0.53	)	$	(0.87	)	$	(1.96	)
Weighted average shares of common stock outstanding used in computing net loss attributable to common stockholders, basic and diluted	36,209,051			34,776,380			7,506,282

The accompanying notes are an integral part of these consolidated financial statements.

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ZELTIQ Aesthetics, Inc.

Consolidated Statements of Comprehensive Loss

(In thousands)

	Year Ended
	December 31,
	2013			2012			2011
Net loss	$	(19,305	)	$	(30,143	)	$	(9,603	)
Other comprehensive income, net of tax:
Foreign currency translation adjustments	77			—			—
Changes in unrealized gains on available-for-sale securities	2			8			—
Other comprehensive income, net of tax	79			8			—
Comprehensive loss	$	(19,226	)	$	(30,135	)	$	(9,603	)

The accompanying notes are an integral part of these consolidated financial statements.

61

ZELTIQ Aesthetics, Inc.

Consolidated Statements of Convertible Preferred Stock and Stockholders' Equity (Deficit)

(In thousands, except share and per share data)

	Convertible Stock Preferred					Common Stock
	Shares		Amount			Shares	Amount		Additional Paid-in Capital		Note Receivable from a Stockholder			Accumulated Other Comprehensive Income		Accumulated Deficit			Total Stockholders' Equity (Deficit)
Balance at December 31, 2010	23,381,764		$	93,888		1,216,167	$	4	$	—	$	(245	)	$	—	$	(84,252	)	$	(84,493	)
Issuance of common stock upon exercise of stock options	—		—			553,023	1		591		—			—		—			592
Issuance of restricted stock for services	—		—			11,495	—		34		—			—		—			34
Revision to correct prior accretion on convertible preferred stock	—		(12,724		)	—	—		2,480		—			—		10,244			12,724
Exercise of common stock warrants for cash	—		—			58,159	—		3		—			—		—			3
Conversion of preferred stock into common stock upon initial public offering	(23,381,764	)	(81,164		)	24,415,965	24		81,140		—			—		—			81,164
Reclassification of preferred stock warrant liability into additional paid-in capital upon initial public offering	—		—			—	—		921		—			—		—			921
Issuance of common stock in initial public offering, net of underwriter discount of $7,046 and issuance costs of $2,931	—		—			7,743,000	8		90,674		—			—		—			90,682
Stock-based compensation	—		—			—	—		2,279		—			—		—			2,279
Net loss	—		—			—	—		—		—			—		(9,603		)	(9,603		)
Balance at December 31, 2011	—		$	—		33,997,809	$	37	$	178,122	$	(245	)	$	—	$	(83,611	)	$	94,303

The accompanying notes are an integral part of these consolidated financial statements.

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ZELTIQ Aesthetics, Inc.

Consolidated Statements of Convertible Preferred Stock and Stockholders' Equity (Deficit)

(In thousands, except share and per share data)

	Convertible Stock Preferred			Common Stock
	Shares	Amount		Shares	Amount		Additional Paid-in Capital		Note Receivable from a Stockholder			Accumulated Other Comprehensive Income		Accumulated Deficit			Total Stockholders' Equity (Deficit)
Balance at December 31, 2011	—	$	—	33,997,809	$	37	$	178,122	$	(245	)	$	—	$	(83,611	)	$	94,303
Issuance of common stock upon exercise of stock options	—	—		1,612,233	2		2,667		—			—		—			2,669
Issuance of common stock in connection with ESPP	—	—		133,363	—		497		—			—		—			497
Proceeds for repayment of notes receivable from a stockholder	—	—		—	—		—		245			—		—			245
Issuance of common stock upon vesting of RSUs	—	—		106,959	—		—		—			—		—			—
Issuance of common stock in exchange for services	—	—		1,741	—		12		—			—		—			12
Stock-based compensation	—	—		—	—		4,989		—			—		—			4,989
Change in unrealized gain (loss) on marketable securities, net of tax	—	—		—	—		—		—			8		—			8
Net loss	—	—		—	—		—		—			—		$	(30,143	)	(30,143		)
Comprehensive loss	—	—		—	—		—		—			—		—			(30,135		)
Balance at December 31, 2012	—	$	—	35,852,105	$	39	$	186,287	$	—		$	8	$	(113,754	)	$	72,580

The accompanying notes are an integral part of these consolidated financial statements.

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ZELTIQ Aesthetics, Inc.

Consolidated Statements of Convertible Preferred Stock and Stockholders' Equity (Deficit)

(In thousands, except share and per share data)

	Convertible Stock Preferred			Common Stock
	Shares	Amount		Shares		Amount		Additional Paid-in Capital			Note Receivable from a Stockholder		Accumulated Other Comprehensive Income		Accumulated Deficit			Total Stockholders' Equity (Deficit)
Balance at December 31, 2012	—	$	—	35,852,105		$	39	$	186,287		$	—	$	8	$	(113,754	)	$	72,580
Issuance of common stock upon exercise of stock options	—	—		791,198		2		2,645			—		—		—			2,647
Issuance of common stock in connection with ESPP	—	—		188,467		—		791			—		—		—			791
Issuance of common stock upon vesting of RSUs	—	—		292,265		—		—			—		—		—			—
Common stock traded for employee tax obligation	—	—		(85,661	)	—		(876		)	—		—		—			(876		)
Stock-based compensation	—	—		—		—		6,660			—		—		—			6,660
Change in unrealized gain on marketable securities, net of tax	—	—		—		—		—			—		2		—			2
Currency translation adjustments, net of tax	—	—		—		—		—			—		77		—			77
Net loss	—	—		—		—		—			—		—		(19,305		)	(19,305		)
Comprehensive loss	—	—		—		—		—			—		—		—			(19,226		)
Balance at December 31, 2013	—	$	—	37,038,374		$	41	$	195,507		$	—	$	87	$	(133,059	)	$	62,576

The accompanying notes are an integral part of these consolidated financial statements.

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ZELTIQ Aesthetics, Inc.

Consolidated Statements of Cash Flows

(In thousands)

	Year Ended
	December 31,
	2013			2012			2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(19,305	)	$	(30,143	)	$	(9,603	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	1,729			1,602			826
Stock-based compensation	6,660			4,989			2,279
Change in fair value of preferred stock warrant liability	—			—			664
Deferred income tax provision (benefit)	19			(66		)	—
Amortization of debt discount	—			—			49
Amortization of investment premium	343			212			—
(Recovery from) provision for doubtful accounts receivable	(12		)	290			—
Issuance of common stock for services	—			12			34
Provision for excess and obsolete inventory	22			183			—
Loss on disposal and write-off of property and equipment	2			192			291
Changes in operating assets and liabilities:
Accounts receivable	(3,064		)	(2,482		)	(4,328		)
Inventory	2,465			(6,578		)	(2,312		)
Prepaid expenses and other assets	(693		)	(1,240		)	(1,400		)
Deferred revenue, net of deferred costs	267			1,026			(316		)
Accounts payable, accrued and other non-current liabilities	7,486			5,377			3,520
Net cash used in operating activities	(4,081		)	(26,626		)	(10,296		)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of investments	(31,591		)	(58,658		)	—
Sale of investments	11,143			9,250			—
Maturity of investments	25,528			13,500			—
Purchase of property and equipment	(834		)	(1,385		)	(1,575		)
Purchase of intangible asset	—			—			(7,000		)
Restricted cash	138			(214		)	170
Net cash provided by (used in) investing activities	4,384			(37,507		)	(8,405		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of notes payable	—			(310		)	(1,335		)
Proceeds from issuance of common stock in initial public offering, net of underwriter discount and issuance costs	—			—			90,682
Proceeds from repayment of note receivable by a stockholder	—			245			—
Proceeds from issuance of common stock upon exercise of stock options and issuance of ESPP shares	3,438			3,166			595
Tax payments related to shares withheld for vested restricted stock units	(876		)	—			—
Net cash provided by financing activities	2,562			3,101			89,942
Effect of exchange rate on cash and cash equivalents	57			—			—
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	2,922			(61,032		)	71,241
CASH AND CASH EQUIVALENTS—Beginning of period	22,876			83,908			12,667
CASH AND CASH EQUIVALENTS—End of period	$	25,798		$	22,876		$	83,908

The accompanying notes are an integral part of these consolidated financial statements.

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ZELTIQ Aesthetics, Inc.

Notes to Consolidated Financial Statements

1. The Company and Basis of Presentation

ZELTIQ Aesthetics, Inc. (“we” or the “Company”) was incorporated in the state of Delaware on March 22, 2005. The Company was founded to develop and commercialize a non-invasive product for the selective reduction of fat. Its first commercial product, the CoolSculpting system, is designed to selectively reduce stubborn fat bulges. CoolSculpting is based on the scientific principle that fat cells are more sensitive to cold than the overlying skin and surrounding tissues. CoolSculpting utilizes precisely controlled cooling to reduce the temperature of fat cells in the treated area, which leads to fat cell elimination through a natural biological process known as apoptosis, without causing scar tissue or damage to the skin, nerves, or surrounding tissues. The Company generates revenue from sales of our CoolSculpting system and from sales of consumables to our customers.

In August 2011, the Company incorporated ZELTIQ Limited as a wholly-owned subsidiary in the United Kingdom to serve as its sales office for direct sales in Europe.

Reverse Stock Split

On October 13, 2011, the Company filed a certificate of amendment to the Company’s amended and restated certificate of incorporation that effected a reverse stock split of the Company’s common stock in which each 3.670069 shares of common stock outstanding or held in treasury immediately prior to such time was combined into one share of common stock. The par value of the common stock remained $0.001 per share. Accordingly, all share and per share amounts for all periods presented in these consolidated financial statements and notes thereto, have been adjusted retroactively, where applicable, to reflect this reverse stock split.

Initial Public Offering

On October 24, 2011, the Company completed its initial public offering, or IPO, of 8,050,000 shares of common stock at an offering price of $13.00 per share, of which 7,743,000 shares were sold by the Company and 307,000 shares were sold by existing stockholders. The Company received net proceeds of approximately $90.7 million, after deducting underwriting discounts, commissions and offering related transaction costs. In connection with the IPO, the Company’s outstanding shares of convertible preferred stock were automatically converted into 24,415,965 shares of common stock.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America, or GAAP.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. All significant intercompany accounts and transactions have been eliminated.

Based on an evaluation of economic facts and circumstances together with the functional currency analysis prescribed in Accounting Standards Codification Topic 830, Foreign Currency Matters, on October 1, 2013, we changed the functional and reporting currency of our foreign subsidiary from the U.S. Dollar to the Great Britain Pound. Such change did not have a material impact on the consolidated financial statements of the Company.

All assets and liabilities of these foreign operations are translated to U.S. Dollars at current period end exchange rates, and revenues and expenses are translated to U.S. Dollars using average exchange rates in effect during the period. The gains and losses from the foreign currency translation of this subsidiary's financial statements are included as a separate component of stockholders' equity under "Accumulated other comprehensive income". Gains or losses arising from currency exchange rate fluctuations on transactions denominated in a currency other than the local functional currency are included in other income (expense), net.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reported periods. The primary estimates underlying the Company's financial statements include the value of revenue elements, product warranty, inventory valuation, allowance for doubtful accounts receivable, assumptions regarding variables used in calculating the fair value of the Company's equity awards,

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fair value of investments, useful lives of intangibles, income taxes and contingent liabilities. Actual results could differ from those estimates.

Significant Risks and Uncertainties

The Company's future results of operations involve a number of risks and uncertainties. Factors that could affect the Company's future operating results and cause actual results to vary materially from expectations include, but are not limited to, rapid technological change, continued acceptance of the Company's products, competition from substitute products and larger companies, protection of proprietary technology, strategic relationships and dependence on key individuals. If the Company fails to adhere to ongoing FDA Quality System Regulation, the FDA may withdraw its market clearance or take other action. The Company relies on sole-source suppliers to manufacture some of the components used in its product. The Company's manufacturers and suppliers may encounter supply interruptions or problems during manufacturing due to a variety of reasons, including failure to comply with applicable regulations, including the FDA's Quality System Regulation, equipment malfunction and environmental factors, any of which could delay or impede the Company's ability to meet demand.

Concentration of Credit Risk

Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash equivalents, marketable securities and trade receivables. Our cash equivalents and marketable securities are held in safekeeping by large, credit worthy financial institutions. The Company invests our excess cash primarily in U.S. banks, government and agency bonds, money market funds and corporate obligations. The Company has established guidelines relative to credit ratings, diversification and maturities that seek to maintain safety and liquidity. Deposits in these banks may exceed the amounts of insurance provided on such deposits. To date, the Company has not experienced any losses on our deposits of cash and cash equivalents.

The Company controls credit risk through credit approvals, credit limits, and monitoring procedures. The Company performs periodic credit evaluations of its customers and generally does not require collateral. Accounts receivable are recorded net of an allowance for doubtful accounts. The allowance for doubtful accounts is based on management's assessment of the collectability of specific customer accounts and the aging of the related invoices, and represents our best estimate of probable credit losses in our existing trade accounts receivable. The Company did not have an allowance for doubtful accounts as of December 31, 2013. At December 31, 2012, the Company's allowance for doubtful accounts was $0.3 million.

The allowance for doubtful accounts consisted of the following activity for fiscal years ended December 31, 2013, 2012 and 2011 (in thousands):

Description	Balance at Beginning of Year		Additions		Reductions		Balance at End of Year
Year ended December 31, 2011	$	62	$	50	$	72	$	40
Year ended December 31, 2012	40		329		39		330
Year ended December 31, 2013	330		59		389		—

As of December 31, 2013 and 2012, no individual customer accounted for 10% or more of the Company's accounts receivable. Furthermore, no individual customer accounted for greater than 10% of total revenue during the years ended December 31, 2013, 2012 and 2011, respectively.

Cash and Cash Equivalents

The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.

Investments

The Company invests its excess cash balances primarily in certificates of deposit, commercial paper, corporate bonds, and U.S. Government agency securities. Investments with original maturities greater than 90 days that mature less than one year from the consolidated balance sheet date are classified as short-term investments. The Company classifies all of its investments as available-for-sale and records such assets at estimated fair value in the consolidated balance sheets, with unrealized gains and losses, if any, reported as a component of accumulated other comprehensive income (loss) in stockholders' equity. Realized gains and losses from maturities of all such securities are reported in earnings and computed using the specific identification cost method.  Realized gains or losses and charges for other-than-temporary declines in value, if any, on available-for-sale securities are reported in other income (expense), net as incurred.  The Company periodically evaluates these investments for other-than-temporary impairment.

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Inventory

Inventory is stated at the lower of cost (which approximates actual cost on a first-in, first-out basis) or market, computed on a standard cost basis. Inventory that is obsolete or in excess of forecasted usage is written down to its estimated net realizable value based on assumptions about future demand and market conditions. Inventory write-downs are charged to cost of revenue and establish a new cost basis for the inventory.

Property and Equipment

Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Maintenance and repairs are charged to expense as incurred. Assets not yet placed in use are not depreciated.

The useful lives of the property and equipment are as follows:

Lab equipment, tooling, and molds	5 years
Computer equipment	3 years
Computer software	3 years
Furniture and fixtures	5 years
Vehicles	5 years
Leasehold improvements	Shorter of lease term or estimated useful life

Capitalized Software

The Company capitalizes costs associated with customized internal-use software systems that have reached the application development stage and meet recoverability tests. Such capitalized costs mainly include external direct costs utilized in developing or obtaining the applications. Capitalization of such costs begins when the preliminary project stage is complete and ceases at the point in which the project is substantially complete and is ready for its intended purpose. The capitalized costs associated with internal-use software are depreciated on a straight-line basis over each asset's estimated useful life, which is generally three years.

Restricted Cash

At December 31, 2013 and 2012, cash of $0.3 million and $0.5 million, respectively, was restricted from withdrawal and held by banks in the form of certificates of deposit. At December 31, 2013 and 2012, the certificates of deposit were held as collateral for the facility lease agreement in Pleasanton, California, statutory French VAT requirements and for our United Kingdom banking facilities.

Intangible Asset

The intangible asset consists of an exclusive license agreement for commercializing patents and other technology. All milestone payments subsequent to the date of the FDA approval are capitalized as purchased technology when paid, and are subsequently amortized into cost of revenue using the straight-line method over the estimated remaining useful life of the technology, not to exceed the term of the agreement or the life of the patent.

Impairment of Long-lived Assets

The Company reviews property and equipment and the intangible asset for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability is measured by comparison of the carrying amount to the future undiscounted net cash flows which the assets are expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the assets' fair value determined using the projected discounted future net cash flows arising from the asset. ThroughDecember 31, 2013, there have been no such impairments.

Revenue Recognition

The Company’s revenue is derived from the sales of the CoolSculpting system, consisting of a control unit and applicators, and from the sale of cycles in the form of consumable procedure packs, each of which includes consumable CoolGels and CoolLiners and a disposable computer cartridge that the Company markets as the CoolCard. Embedded software exists in the CoolCard product to permit the Company’s customers to perform a fixed number of CoolSculpting procedures, or cycles. This software is not marketed separately from the CoolSculpting system or from the CoolCard. Rather, the functionality that the software provides is part of the overall CoolCard product. The CoolSculpting system is marketed as a non-invasive aesthetic device for the reduction of fat, not for its embedded software attributes included in the CoolCard that enable its use. The Company does not provide rights to upgrades and enhancements or post-contract customer support for the embedded software. In addition, the Company does not incur significant software development costs or capitalize its software development costs. Based on this assessment, the Company considers the

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embedded software in the CoolCard incidental to the CoolCard product as a whole and determined that revenue recognition should not be governed by the provisions of Topic 985 of the FASB Accounting Standards Codification, or ASC. The Company earns revenue from the sale of its products to its customers and to distributors. The Company recognizes revenue when persuasive evidence of an arrangement exists, transfer of title to the customer has occurred, the sales price is fixed or determinable, and collectability is probable. Revenue is deferred in the event that any of the revenue recognition criteria is not met.

Persuasive Evidence of an Arrangement. The Company uses contracts or customer purchase orders to determine the existence of an arrangement.

Transfer of title. Our standard terms generally specify that title transfers upon shipment to the customer. The Company uses third party shipping documents to verify that title has transferred.

Sales Price Fixed or Determinable. The Company assesses whether the sales price is fixed or determinable at the time of the transaction. Sales prices are documented in the executed sales contract or purchase order received prior to shipment. The Company’s standard terms do not allow for trial or evaluation periods, rights of return or refund, payments contingent upon the customer obtaining financing or other terms that could impact the customer’s obligation.

Collectability. The Company assesses whether collection is reasonably assured based on a number of factors, including the customer’s past transaction history and credit worthiness.

Multiple-Element Arrangements. Typically, all products sold to a customer are delivered at the same time. If a partial delivery occurs as authorized by the customer, the Company allocates revenue to the various products based on their vendor-specific objective evidence of fair value, or VSOE, if VSOE exists according to ASC 605-25 as the basis of determining the relative selling price of each element. If VSOE does not exist, the Company may use third party evidence of fair value, or TPE, to determine the relative selling price of each element. If neither VSOE nor TPE exists, the Company may use management’s best estimate of the sales price, or ESP, of each element to determine the relative selling price. The relative selling prices for control units, applicators, CoolCards and extended warranty are based on established price lists and separate, stand-alone sales of these elements. The Company establishes best estimates within a range of selling prices considering multiple factors including, but not limited to, factors such as size of transaction, pricing strategies and market conditions. The Company believes the use of the ESP allows revenue recognition in a manner consistent with the underlying economics of the transaction. The Company’s products do not require maintenance or support.

Accruals for Customer Programs

The Company records an accrued liability for cooperative marketing arrangements and customer incentive programs. The estimated cost of these programs is recorded as a reduction of revenue or as an operating expense, if the Company receives a separately identifiable benefit from the customer and can reasonably estimate the fair value of that benefit. Significant management judgment and estimates must be used to determine the cost of these programs in any accounting period.

Cooperative Marketing Arrangements.  The Company offers cooperative marketing programs to its North American customers, allowing the customer to receive partial reimbursement for qualifying advertising expenditures which promote the Company's product and brand. Customer participation, as well as reimbursement amounts, is predicated upon purchase levels of CoolCards. The objective of these arrangements is to encourage advertising and promotional events to increase sales of the Company's products. Accruals for these marketing arrangements are recorded at the time of sale, or time of commitment, based on the related program parameters, review of related advertising and historical experience.

Customer Incentive Programs.  The Company's customer incentive program consists of rebates for our North American customers based on purchase levels of CoolCards. Estimated costs of consumer rebates and similar incentives are recorded at the time the incentive is offered, based on the specific terms and conditions of the program.

Cost of Revenue

Cost of revenue consists primarily of cost of finished and semi-finished products purchased from our third-party suppliers, labor, material, and overhead involved in our internal manufacturing processes, technology amortization and royalty fees and cost of product warranty. In the event that a revenue transaction is deferred, the corresponding cost associated with the transaction will also be deferred.

Shipping and Handling

Shipping and handling costs charged to customers are recorded as revenue. Shipping costs are included in cost of revenue.

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Research and Development

Research and development costs primarily consist of salaries, benefits, incentive compensation, stock-based compensation, and allocated facilities costs for employees and contractors engaged in research, clinical studies, regulatory affairs, and development. The Company expenses all research and development costs in the periods in which they are incurred.

Advertising costs

The cost of advertising and media is expensed as incurred. For the years endedDecember 31, 2013, 2012 and 2011, advertising costs totaled $8.9 million, $12.0 million and $1.9 million, respectively.

Product Warranty

Effective in the second quarter of 2013, the Company provides a standard limited warranty on its products of generally one year for both control units and applicators for its direct customers. Prior to this change, the Company provided a standard limited warranty on its products of generally three years for control units and one year for applicators, while for direct customers in Europe, the Company offered a one year standard warranty on control units. For indirect customers in international markets the Company provides a standard limited warranty on its products of generally three years for control units and one year for applicators.

The Company accrues for the estimated future costs of repair or replacement upon shipment. The warranty accrual is recorded to cost of revenue and is based upon historical and forecasted trends in the volume of product failures during the warranty period and the cost to repair or replace the equipment. The Company bases product warranty costs on related freight, material, technical support labor, and overhead costs. The estimated product warranty costs are assessed by considering historical costs and applying the experienced failure rates to the outstanding warranty period for products sold. The Company exercises judgment in estimating the expected product warranty costs, using data such as the actual and projected product failure rates, and average repair costs, including freight, material, technical support labor, and overhead costs, for products returned under warranty.

The Company offers an extended warranty of up to two years on both our CoolSculpting control units and CoolSculpting applicators. The Company recognizes the revenue from the sale of an extended warranty over the extended warranty coverage period. Our revenue and related obligations from sale of extended warranties to date has not been significant.

Stock-Based Compensation

The Company maintains incentive plans under which incentive and nonqualified stock options are granted primarily to employees and non-employee consultants.

Stock-based compensation cost is measured at the grant date, based on the fair value of the award, and is recognized as expense on a straight-line basis over the requisite service period. The fair value of stock-based awards to employees is estimated using the Black-Scholes option pricing model. The Company estimates its forfeiture rate based on an analysis of its actual forfeitures and will continue to evaluate the adequacy of the forfeiture rate assumption based on actual forfeitures, analysis of employee turnover, and other related factors.

Stock-based compensation expense related to stock options granted to non-employees is recognized as the stock options are earned. The awards generally vest ratably over the time period the Company expects to receive services from the non-employee. The fair values attributable to these options are amortized over the service period and the unvested portion of these options is remeasured at each vesting date.

Income Taxes

The Company utilizes the asset and liability method of accounting for income taxes, under which deferred taxes are determined based on the temporary differences between the financial statement and tax basis of assets and liabilities using tax rates expected to be in effect during the years in which the basis differences reverse and for operating losses and tax credit carryforwards. The Company estimates our provision for income taxes and amounts ultimately payable or recoverable in multiple tax jurisdictions around the world. Estimates involve interpretations of regulations and are inherently complex. Resolution of income tax treatments in individual jurisdictions may not be known for many years after completion of any fiscal year. The Company is required to evaluate the realizability of our deferred tax assets on an ongoing basis to determine whether there is a need for a valuation allowance with respect to such deferred tax assets. A valuation allowance is recorded when it is more likely than not that some or all of the deferred tax assets will not be realized. Significant management judgment is required in determining any valuation allowance recorded against deferred tax assets. In evaluating the ability to recover deferred tax assets, the Company considers all available positive and negative evidence giving greater weight to our recent cumulative losses and our ability to carryback losses against prior taxable income and, commensurate with objective verifiability, the forecast of future taxable income including the reversal of temporary differences and the implementation of feasible and prudent tax planning strategies.

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The Company recognizes and measures uncertain tax positions taken or expected to be taken in a tax return if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such positions are then measured based on the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement. The Company reports a liability for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in a tax return. The Company adjusts these reserves in light of changing facts and circumstances, such as the closing of a tax audit or the refinement of an estimate. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will impact the provision for income taxes in the period in which such determination is made. The provision for income taxes includes the impact of reserve provisions and changes to reserves that are considered appropriate, as well as the related net interest. The Company recognizes interest and penalties related to unrecognized tax benefits within the income tax provision. Accrued interest and penalties are included within the related tax liability line in the consolidated balance sheet.

The Company files annual income tax returns in multiple taxing jurisdictions around the world. A number of years may elapse before an uncertain tax position is audited and finally resolved. While it is often difficult to predict the final outcome or the timing of resolution of any particular uncertain tax position, the Company believes that our reserves for income taxes reflect the most likely outcome. The Company adjusts these reserves, as well as the related interest, in light of changing facts and circumstances. Settlement of any particular position could require the use of cash.

Net Loss Per Share

Basic net loss per share of common stock is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding for the period. Diluted net loss per share of common stock is computed by giving effect to all potentially dilutive securities outstanding during the period, including options, restricted stock units, stock issuable pursuant to the employee stock purchase plan, warrants, and convertible preferred stock. Basic and diluted net loss per share attributable to common stockholders was the same for all periods presented as the inclusion of all potentially dilutive securities outstanding were anti-dilutive. As such, the numerator and the denominator used in computing both basic and diluted net loss are the same for each period presented.

Comprehensive Income (Loss)

Accumulated other comprehensive income includes foreign currency translation adjustments and unrealized gains (losses) on available-for-sale securities net of tax, the impact of which has been excluded from earnings and reflected as components of stockholders' equity.

Components of accumulated other comprehensive income was as follows (in thousands):

	December 31,
	2013		2012
Cumulative translation adjustments	$	77	$	—
Unrealized gain on marketable securities, net of tax	10		8
Accumulated other comprehensive income	$	87	$	8

Recent Accounting Pronouncements

On February 5, 2013, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. This guidance is the culmination of the FASB's redeliberation on reporting reclassification adjustments from accumulated other comprehensive income. The Company adopted this guidance effective during the first quarter of 2013 and such adoption did not have a material impact on the Company's consolidated financial statements.

3. Fair Value of Financial Instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The accounting guidance establishes a three-tiered hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:

Level 1—Quoted prices in active markets for identical assets or liabilities.

Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

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Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The Company did not hold any Level 3 assets or liabilities at December 31, 2013.

The categorization of a financial instrument within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement.

The Company classifies its cash equivalents and investments within Level 1 and Level 2, as it uses quoted market prices or alternative pricing sources and models utilizing market observable inputs. The following tables set forth the fair value of the Company’s financial assets and liabilities by level within the fair value hierarchy (in thousands):

	As of December 31, 2013
	Level 1		Level 2		Level 3		Fair Value
Financial Assets
Cash equivalents:
Money market funds	$	12,796	$	—	$	—	$	12,796
Short-term investments:
U.S. Agency securities	—		6,772		—		6,772
U.S. Treasury	—		1,001		—		1,001
Corporate bonds	—		8,870		—		8,870
Commercial paper	—		999		—		999
Certificates of deposit	1,198		—		—		1,198
Long-term investments:
U.S. Agency securities	—		6,956		—		6,956
U.S. Treasury	—		1,014		—		1,014
Corporate bonds	—		2,795		—		2,795
Certificates of deposit	$	677	$	—	$	—	$	677
	$	14,671	$	28,407	$	—	$	43,078

	As of December 31, 2012
	Level 1		Level 2		Level 3		Fair Value
Financial Assets
Cash equivalents:
Money market funds	$	18,274	$	—	$	—	$	18,274
Short-term investments:
U.S. Agency securities	—		11,077		—		11,077
Corporate bonds	—		8,417		—		8,417
Commercial paper	—		1,998		—		1,998
Certificates of deposit	1,071		—		—		1,071
Long-term investments:
U.S. Agency securities	—		7,753		—		7,753
Corporate bonds	—		5,388		—		5,388
	$	19,345	$	34,633	$	—	$	53,978

During the years ended December 31, 2013 and 2012, the Company did not have any transfers of financial assets measured at fair value on a recurring basis to or from Level 1, Level 2 or Level 3. The Company did not hold any Level 3 assets or liabilities as of December 31, 2013, and December 31, 2012.

The carrying amounts of the Company’s cash equivalents, accounts receivable, accounts payable and accrued liabilities, approximate fair value due to their relatively short maturities.

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4. Balance Sheet Components

Investments

The Company's short-term and long-term investments as of December 31, 2013 are as follows (in thousands):

Short-term
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Agency securities	$	6,771	$	2	$	(1	)	$	6,772
U.S. Treasury	1,000		1		—			1,001
Corporate bonds	8,867		3		—			8,870
Commercial paper	999		—		—			999
Certificates of deposit	1,198		—		—			1,198
Total	$	18,835	$	6	$	(1	)	$	18,840
Long-term
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Agency securities	$	6,957	$	2	$	(3	)	$	6,956
U.S. Treasury	1,013		1		—			1,014
Corporate bonds	2,790		5		—			2,795
Certificates of deposit	677		—		—			677
Total	$	11,437	$	8	$	(3	)	$	11,442

The Company's short-term and long-term investments as of December 31, 2012, are as follows (in thousands):

Short-term
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Agency securities	$	11,071	$	6	$	—		$	11,077
Corporate bonds	8,414		3		—			8,417
Commercial paper	1,998		—		—			1,998
Certificates of deposit	1,071		—		—			1,071
Total	$	22,554	$	9	$	—		$	22,563
Long-term
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Agency securities	$	7,750	$	3	$	—		$	7,753
Corporate bonds	5,392		1		(5		)	5,388
Total	$	13,142	$	4	$	(5	)	$	13,141

For the years ended December 31, 2013 and December 31, 2012, gains or losses realized on the sale of investments were insignificant.

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The contractual maturities of the Company's short-term and long-term investments as of December 31, 2013, are as follows (in thousands):

	December 31, 2013
	Amortized Cost		Fair Value
Due in one year or less	$	18,835	$	18,840
Due in one year to five years	11,437		11,442
	$	30,272	$	30,282

When evaluating the investments for other-than-temporary impairment, the Company reviews factors such as the length of time and extent to which fair value has been below the amortized cost basis, review of current market liquidity, interest rate risk, the financial condition of the issuer, as well as credit rating downgrades.  The Company believes that the unrealized losses are not other-than-temporary. The Company does not have a foreseeable need to liquidate the portfolio and anticipates recovering the full cost of the securities either as market conditions improve, or as the securities mature.

Inventory

Inventory is stated at the lower of cost (which approximates actual cost on a first-in, first-out basis) or market, computed on a standard cost basis. Inventory that is obsolete or in excess of forecasted usage is written down to its estimated net realizable value based on assumptions about future demand and market conditions.

The components of inventory consist of the following (in thousands):

	December 31,
	2013		2012
Raw materials	$	4,520	$	8,302
Finished goods	3,886		2,569
Total inventory	$	8,406	$	10,871

Property and equipment, net

Property and equipment, net comprised the following (in thousands):

	December 31,
	2013			2012
Lab equipment, tooling and molds	$	2,071		$	1,987
Computer software	1,562			1,243
Computer equipment	801			753
Leasehold improvements	743			636
Furniture and fixtures	334			288
Vehicles	35			35
Total property and equipment	5,546			4,942
Less: Accumulated depreciation and amortization	(3,594		)	(2,610		)
Construction in progress	206			4
Property and equipment, net	$	2,158		$	2,336

Depreciation expense for the years ended December 31, 2013, 2012 and 2011 was $1.0 million, $0.9 million and $0.7 million, respectively.

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Accrued Liabilities

The following table shows the components of accrued liabilities (in thousands):

	December 31,
	2013		2012
Accrued payroll and employee related expenses	$	7,863	$	3,430
Accrued marketing expenses	3,739		3,287
Accrued royalty	2,458		1,343
Sales and other taxes payable	1,787		1,177
Accrued warranty	676		902
Accrued legal expenses	284		415
Other accrued liabilities	1,557		522
Total accrued liabilities	$	18,364	$	11,076

Product Warranty

The estimated product warranty accrual was as follows (in thousands):

	December 31,
	2013			2012
Balance at the beginning of the period	$	902		$	742
Accruals for warranties issued	197			869
Settlements of warranty claims	(423		)	(709		)
Balance at the end of the period	$	676		$	902

5. License Agreement with Massachusetts General Hospital

In May 2005, the Company entered into an exclusive license agreement with the General Hospital Corporation, a not for profit Massachusetts corporation, which owns and operates the Massachusetts General Hospital, or MGH. This agreement was amended and restated in September 2011. Under this agreement, the Company obtained an exclusive license to develop and commercialize the patent and the core technology that underlies its CoolSculpting system. The Company conducted development from 2005 through 2009, and thereafter started commercialization of the products. The agreement will remain in full force and effect for the later of (i) the life of any patents that issue from the underlying patent applications, which are expected to expire in 2023 or (ii) one year after the last commercial sale for which a royalty is due to MGH, unless terminated in accordance with its terms and conditions. MGH may terminate the agreement upon the Company's insolvency, failure to maintain insurance, material breach of the agreement including failure to satisfy the Company's post-sales requirements, or failure to make required payments. The Company may terminate the agreement for any reason upon 90 days' advance written notice to MGH. The Company has complied with its contractual requirements to date.

The Company is obligated to make various payments to MGH, including (i) a 7% royalty on net sales (as defined in the agreement) of CoolSculpting and (ii) milestone payments. During the year ended December 31, 2010, the Company paid MGH a $1.1 million milestone payment upon receipt of FDA clearance to market its CoolSculpting system for the selective reduction of fat. The remaining milestone payments including (i) $1 million due upon achieving cumulative net sales (as defined in the agreement) of $70 million and (ii) $6 million due upon the earlier to occur of achieving cumulative net sales (as defined in the agreement) of $200 million, or the completion of a qualifying initial public offering were made during the quarter ended December 31, 2011. As of December 31, 2011, the Company had completed all the milestones associated with the license agreement with MGH and had no milestone payments to MGH outstanding.

All payments made to MGH prior to the FDA product approval were expensed as incurred as research and development costs. All milestone payments payable by the Company pursuant to the terms of the agreement subsequent to the date of the FDA approval were capitalized as purchased technology when paid, and are subsequently amortized into cost of revenue using the straight-line method over the estimated remaining useful life of the technology, not to exceed the term of the agreement or the life of the patent. Royalty payments are accrued as the Company recognizes revenue, and are included in cost of revenue.

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The intangible asset, net comprised the following (in thousands):

	December 31, 2013			December 31, 2012
Purchased technology	$	8,050		$	8,050
Less: Accumulated amortization	(1,569		)	(869		)
Intangible asset, net	$	6,481		$	7,181

The amortization expense of the intangible asset was $0.7 million and $0.7 million for the years ended December 31, 2013 and 2012, respectively. The total estimated annual future amortization expense of this intangible asset as of December 31, 2013 is as follows (in thousands):

Fiscal Year
2014	$	701
2015	701
2016	701
2017	701
2018	701
Thereafter	2,976
Total	$	6,481

6. Notes Payable

On January 14, 2009, the Company entered into a Loan and Security Agreement (the “Loan Agreement”) with Silicon Valley Bank. The Loan Agreement provided for total borrowings of $5.0 million to be made available to the Company in three separate tranches. Tranche A, for $1.5 million, was received by the Company in January 2009. Tranche B, for $2.0 million, was received by the Company on April 30, 2009, and Tranche C, for $1.5 million, was available until September 30, 2009 and was not drawn upon. The notes payable were collateralized by substantially all the assets of the Company, excluding intellectual property. The notes carried an interest rate of 7.28% per annum. The repayment of principal, plus interest, was via monthly installments over a 36-month period for each tranche, beginning with the disbursement date of each tranche.

On January 14, 2009, in accordance with the Loan Agreement, the Company issued a warrant to Silicon Valley Bank to purchase 47,683 shares of Series C preferred stock at $3.67 per share. The fair value of this warrant was recorded as a debt discount at issuance and has been amortized to interest expense over the term of the notes.

During the quarter ended March 31, 2012, the remaining loan balance of $0.3 million and the final payment of 5.75% of the advanced amount, or $0.2 million, were paid in full to Silicon Valley Bank.

7. Related Party Transactions

Notes Receivable from a Stockholder

In December 2007, the Company issued 445,509 shares of its common stock to an executive in exchange for full recourse promissory notes in the aggregate amount of approximately $0.2 million. The promissory notes bore interest from the date of issuance until January 1, 2010 at a rate of 4.72% per annum compounded annually and last bore interest at a rate of 4.00% per annum, and were collateralized by the related common stock and the executive’s assets. The executive separated from the Company on December 3, 2010. The promissory notes were due and payable in full (including all accrued and unpaid interest) upon nine months following the Company’s initial public offering of its common stock. These notes receivable were related to a prior exercise of stock options and were recorded as a contra stockholders’ equity account.

In July 2012, the promissory notes were paid in full.

Brazilian Distribution Agreement

The Company entered into a distribution agreement with ADVANCE Medical, Inc. and its wholly owned subsidiaries, or ADVANCE, dated March 18, 2011 and amended on February 27, 2012 and September 4, 2012, appointing ADVANCE as the exclusive distributor of CoolSculpting in Brazil and Mexico. ADVANCE is required to purchase a minimum quantity of the Company’s products each calendar quarter throughout the term of the distribution agreement which expires on December 31,

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2018. Venrock, a principal stockholder of the Company, owns a significant equity interest in ADVANCE Medical, Ltd., the parent company of ADVANCE. Dr. Bryan E. Roberts, who is a member of the Company's Board of Directors, is also a partner of Venrock Associates. The revenue recognized by the Company under this distribution agreement for the years ended December 31, 2013, 2012 and 2011 was $2.3 million, $2.5 million and $2.0 million, respectively. The accounts receivable balance as of December 31, 2013 and 2012, was $0.2 million and $0.1 million, respectively.

8. Commitments and Contingencies

Lease Commitments

The Company occupies a facility in Pleasanton, a manufacturing facility in Dublin, California and a warehouse space in Livermore, California, all of which are under leases that extend through December 2014. The Company also occupies office and warehouse space in Gatwick, United Kingdom, under a lease which extends through December 2018, as well as office space in Dubai, United Arab Emirates, under a lease which extends through March 2014 and Seoul, South Korea under a lease which extends through October 2014. Rent expense for non-cancellable operating leases with scheduled rent increases is recognized on a straight-line basis over the lease term. Rent expense for the years endedDecember 31, 2013, 2012 and 2011 was $1.4 million, $1.2 million and $0.9 million, respectively.

Future minimum lease payments under the non-cancellable operating leases as of December 31, 2013 are as follows (in thousands):

Year Ending December 31,	Amount
2014	$	1,252
2015	30
2016	61
2017	61
2018	61
Total future minimum lease payments	$	1,465

Purchase Commitments

The Company had non-cancellable purchase obligations to contract manufacturers and suppliers for $6.0 million and $2.2 million at December 31, 2013 and 2012, respectively.

Unrecognized Tax Benefits

The table above excludes the Company's gross liability for unrecognized tax benefits which totaled $0.1 million, including estimated interest and penalties, as of December 31, 2013, and are classified in long-term income taxes payable. The Company is unable to make a reasonably reliable estimate of the timing of payments in individual years due to uncertainties in the timing of tax audits, if any, or their outcomes. Accordingly, the Company has excluded this obligation from the schedule summarizing its significant obligations to make future payments under contractual obligations as of December 31, 2013 presented above.

Legal Matters

From time to time, the Company may be involved in legal and administrative proceedings and claims of various types. The Company records a liability in its consolidated financial statements for these matters when a loss is known and considered probable and the amount can be reasonably estimated. Management reviews these estimates in each accounting period as additional information becomes known and adjusts the loss provision when appropriate. If the loss is not probable or cannot be reasonably estimated, a liability is not recorded in the consolidated financial statements. If a loss is probable but the amount of loss cannot be reasonably estimated, the Company discloses the loss contingency and an estimate of possible loss or range of loss (unless such an estimate cannot be made). The Company does not recognize gain contingencies until they are realized. Legal costs incurred in connection with loss contingencies are expensed as incurred.

On March 13, 2012, an alleged purchaser of the Company's publicly traded common stock, Ivan Marcano, filed a securities class action in the Superior Court of California, County of Alameda, entitled Marcano v. Nye, et al., Case No. RG12621290. The complaint alleged that the Company made false and misleading statements or omitted to state facts necessary to make the disclosures not misleading in its Form S-1, and the amendments thereto, issued in connection with the Company's initial public offering.  The claims were asserted under Sections 11 and 15 of the Securities Act of 1933. On March 15, 2012, April 3, 2012, and May 24, 2012, three additional and substantially similar lawsuits were filed in the same court, some adding the Company's underwriters as

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defendants.  All four cases were consolidated and a consolidated complaint was deemed operative.  On August 24, 2012, the Company filed a demurrer to the consolidated complaint.  Subsequently, Plaintiffs agreed to dismiss the Company's outside directors and its underwriters from the litigation without prejudice. On November 9, 2012, the court sustained the Company's demurrer with leave to amend. Plaintiffs filed a second amended complaint on January 14, 2013, again asserting claims under Sections 11 and 15 of the Securities Act of 1933. The second amended complaint sought compensatory damages and equitable relief on behalf of the class for an amount to be proven at trial. On February 25, 2013, the Company filed a demurrer to the second amended complaint. On May 17, 2013, the Court issued an order sustaining the demurrer without leave to amend and ordering the action dismissed. On June 7, 2013, the Court entered a judgment dismissing the action with prejudice.  Plaintiffs’ time in which to appeal the judgment has lapsed and the Court’s dismissal is final.

Indemnifications

In the normal course of business, the Company enters into contracts that contain a variety of representations and warranties and provide for general indemnifications. The Company's exposure under these agreements is unknown because it involves claims that may be made against the Company in the future, but have not yet been made. To date, the Company has not paid any claims , and the Company believes that the estimated fair value of these indemnification obligations is minimal and has not accrued any amounts for these obligations.

Severance and Separation Agreements

Effective December 3, 2013, the Company's Chief Scientific Officer and Senior Vice President of Clinical entered into a separation agreement with the Company. As a result of this separation agreement, the Company incurred $0.3 million in termination benefits and $0.7 million in costs related to the modification of the employee's stock-based compensation, which were recorded during the year ended December 31, 2013. Amounts outstanding related to this separation agreement was $0.3 million as of December 31, 2013.

Effective April 3, 2012, the Company's Vice President of North American Sales resigned from the Company. On April 18, 2012, the Company's President and CEO resigned from the positions he held with the Company. As a result of these resignations, the Company incurred $0.9 million in termination benefits and $0.7 million in costs related to the modification of the employees' stock-based compensation, which were recorded during the year ended December 31, 2012. Subsequent to these resignations, during the second quarter of 2012, the Company's management made a decision to terminate as well as accept resignations from several employees. As a result of these actions, the Company incurred approximately $0.8 million in termination benefits. Amounts outstanding related to these termination benefits were $0.4 million as of December 31, 2012. As of December 31, 2013, all of the termination benefits incurred during December 31, 2012 had been paid.

No similar costs were incurred during the year ended December 31, 2011.

9. Stockholders' Equity

Preferred Stock

The Company's Certificate of Incorporation, as amended in October 2011, authorizes the Company to issue 50,000,000 shares of preferred stock with a par value of $0.01 per share. In connection with the IPO, all of the Company's outstanding shares of convertible preferred stock were automatically converted into 24,415,965 shares of common stock. At December 31, 2013 and 2012, the Company had no preferred stock issued or outstanding.

Common Stock

Each share of common stock has the right to one vote. The holders of common stock are also entitled to receive dividends whenever funds are legally available and when declared by the Board of Directors, subject to the prior rights of holders of all classes of stock outstanding having priority rights as to dividends. No dividends have been declared or paid as of December 31, 2013.

10. Stock-Based Compensation Plans

2005 Stock Option Plan

In 2005, the Company established its 2005 Stock Option Plan (the “ 2005 Plan”), which provided for the granting of stock options to employees and consultants of the Company. Options granted under the Plan were either incentive stock options (“ISOs”) or nonqualified stock options (“NSOs”). ISOs were granted only to Company employees (including officers and directors who are also employees). NSOs were granted to Company employees and consultants.

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Options under the Plan were granted for periods of up to ten years. The exercise price of an ISO and NSO should not be less than 100% and 85% of the estimated fair value of the shares on the date of grant, as determined by the Board of Directors. The exercise price of an ISO and NSO granted to a 10% stockholder should not be less than 110% of the estimated fair value of the shares on the date of grant, as determined by the Board of Directors. To date, options granted generally vested over four years at a rate of 25% upon the first anniversary of the issuance date and monthly thereafter. Cash received from employees for early exercise of unvested options was treated as a liability. Amounts so recorded were transferred into common stock and additional paid-in capital as the shares vested. The number of unvested shares and the associated liability amounts were immaterial at all reporting dates presented. As of December 31, 2013, no shares of the Company's common stock remained available for issuance under the 2005 Plan as a result of the adoption of the 2011 Equity Incentive Plan (the "2011 Plan").

2011 Equity Incentive Plan

In September 2011, the Company's Board of Directors approved the 2011 Plan that became effective upon the completion of the IPO.

The 2011 Plan serves as the successor equity incentive plan to our 2005 Plan and started with 89,234 shares of common stock available for issuance plus any shares of common stock issued pursuant to the 2005 Plan or subject to awards granted under the 2005 Plan that are forfeited, repurchased, returned or otherwise become available for issuance in accordance with the terms of the 2005 Plan. In addition, this plan reserve automatically increases on January 1 and each subsequent anniversary through January 1, 2021, by an amount equal to the smaller of five percent of the number of shares of common stock issued and outstanding on the immediately preceding December 31, or an amount determined by the Company's Board of Directors. The 2011 Plan provides for granting awards in the form of options, stock appreciation rights, restricted stock purchase rights, restricted stock bonuses, restricted stock units, performance shares, performance units, cash-based awards and other stock-based awards. Options granted under the 2011 Plan may be either ISOs or NSOs. ISOs may be granted only to the Company's employees. Any person who is not an employee of the Company on the effective date of the grant of an option may be granted only a NSO. Options under the 2011 Plan may be granted for periods of up to ten years and generally vest over a period of four years. The exercise price of an ISO and NSO shall not be less than 100% of the fair value of the shares on the date of grant. The exercise price of an ISO granted to a 10% stockholder shall not be less than 110% of the fair value of the underlying stock on the date of grant.

2012 Stock Plan

In April 2012, the Company's Board of Directors approved the 2012 Stock Plan ("2012 Plan") that became effective upon approval by the stockholders of the Company on June 15, 2012. The purpose of the 2012 Plan is to advance the interests of the Company and its stockholders by providing an incentive to attract, retain and reward persons performing services for the Company and by motivating such persons to contribute to the growth and profitability of the Company. The 2012 Plan seeks to achieve this purpose by providing for awards in the form of options, stock appreciation rights, restricted stock purchase rights, restricted stock bonuses, restricted stock units, performance shares, performance units, cash-based awards, other stock-based awards, and deferred compensation awards.

The 2012 Plan started with 1,500,000 shares of common stock available for issuance and there are no provisions in the 2012 Plan to increase the shares available for issuance. Options granted under the 2012 Plan may be either ISOs or NSOs. ISOs may be granted only to the Company's employees. Any person who is not an employee of the Company on the effective date of the grant of an option may be granted only a NSO. Options under the 2012 Plan may be granted for periods of up to ten years and generally vest over a period of four years. The exercise price of an ISO and NSO shall not be less than 100% of the fair value of the shares on the date of grant. The exercise price of an ISO granted to a 10% stockholder shall not be less than 110% of the fair value of the underlying stock on the date of grant.

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Stock-based Compensation Activity

Activity under the Company’s stock-based compensation plans is set forth below:

			Options Outstanding
	Shares Available for Grant		Number of Shares		Weighted- Average Exercise Price		Weighted-Average Remaining Contractual Life (in Years)	Aggregate Intrinsic Value
								(in thousands)
Balance, December 31, 2011	57,437		4,847,972		3.00
Additional shares reserved	3,199,890		—		—
Options granted	(2,989,279	)	2,989,279		5.87
Restricted stock awards granted	(4,083	)	—		—
Restricted stock units granted	(1,540,417	)	—		—
Options exercised	—		(1,612,233	)	1.65
Options canceled	2,096,684		(2,096,684	)	4.28
Restricted stock award canceled	2,342		—		—
Restricted stock units canceled	281,262		—		—
Balance, December 31, 2012	1,103,836		4,128,334		$	4.96
Additional shares reserved	1,200,000		—		—
Options granted	(568,987	)	568,987		6.60
Restricted stock units granted	(1,205,200	)	—		—
Options exercised	—		(791,198	)	3.34
Options canceled	307,738		(307,738	)	7.36
Restricted stock award canceled	—		—		—
Restricted stock units canceled	163,689		—		—
Restricted stock units withheld for tax	85,661		—		—
Balance, December 31, 2013	1,086,737		3,598,385		$	5.36	8.20	$	48,741
Vested and expected to vest, December 31, 2013			3,440,249		$	5.34	8.18	$	46,693
Exercisable, December 31, 2013			1,795,156		$	4.94	7.86	$	25,075

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The following table summarizes information about stock options outstanding as of December 31, 2013:

	Options Outstanding
Exercise Price	Stock Options Outstanding	Weighted-Average Remaining Contractual Life (in Years)	Options Exercisable
$0.55-2.42	374,146	5.7	329,604
2.83-4.30	461,190	7.9	98,163
4.60-4.62	190,000	9.0	40,625
5.04-5.04	1,431,092	8.6	822,879
5.06-6.34	499,199	9.0	221,171
6.38-9.49	370,471	8.8	186,401
9.55-10.20	149,122	7.2	65,065
11.30-11.30	54,094	4.8	20,834
12.12-12.12	19,071	8.0	10,414
17.33-17.33	50,000	10.0	—
	3,598,385		1,795,156

Restricted Stock Activity

Activity related to restricted stock units and awards is set forth below:

		Number of Units and Awards		Weighted- Average Grant Date Fair Value
Balance,	December 31, 2011	4,684		$	10.20
Restricted stock units granted		1,544,500		5.77
Restricted stock units released		(108,130	)	6.42
Restricted stock units canceled		(283,604	)	7.14
Balance,	December 31, 2012	1,157,450		$	5.38
Restricted stock units granted		1,205,200		5.57
Restricted stock units released		(292,265	)	5.35
Restricted stock units canceled		(163,689	)	4.31
Balance,	December 31, 2013	1,906,696		$	5.60

During the year ended December 31, 2013, 292,265 shares vested subject to previously granted restricted stock units. A majority of these vested restricted stock units were net share settled. During the year ended December 31, 2013, the Company withheld 85,661 shares based upon the Company's closing stock price on the vesting date to settle the employee's minimum statutory obligation for the applicable income and other employment taxes. During the year ended December 31, 2012, 108,130 shares vested subject to previously granted restricted stock units.

2011 Employee Stock Purchase Plan

In September 2011, the Company's Board of Directors approved the 2011 Employee Stock Purchase Plan (“2011 ESPP”) that became effective upon the completion of the IPO. The 2011 ESPP is designed to enable eligible employees to purchase shares of the Company's common stock at a discount. Each offering period consists of one six-month purchase period. The purchase price for shares of common stock under the 2011 ESPP is 85% of the of lesser of the fair market value of the Company's common stock on the first day of the applicable offering period or the purchase date.

There were 470,018 shares of the Company's common stock initially reserved for future purchase under our 2011 ESPP. On the first day of each year, beginning January 1, 2012 and through and including January 1, 2021, the maximum aggregate number of shares of common stock that may be issued under the 2011 ESPP will be increased by a number of shares equal to the smallest of a) one percent of the number of shares of common stock issued and outstanding on the immediately preceding December 31, or

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b) an amount determined by the Company's Board of Directors. During 2013, the number of shares of the Company's common stock reserved for future purchase under the 2011 ESPP was increased by 150,000 shares.

The initial offering period commenced on October 19, 2011, and ended on May 31, 2012. The future offering periods will commence on or about the first trading days of December and June of each year and end on or about the last trading days of the next May and November, respectively.

During the year ended December 31, 2013, employees purchased 188,467 shares under the 2011 ESPP at a weighted average exercise price of $4.20. As of December 31, 2013, there were 298,188 shares of the Company's common stock available for future purchase under our 2011 ESPP.

Stock-Based Compensation Expense

The stock-based compensation expense related to all of our stock-based awards and employee stock purchases was allocated as follows (in thousands):

	Year Ended December 31,
	2013		2012		2011
Cost of revenue	$	248	$	131	$	54
Research and development	1,645		894		542
Sales and marketing	1,783		827		533
General and administrative	2,984		3,137		1,150
Total stock-based compensation	$	6,660	$	4,989	$	2,279

Stock-based compensation expense includes charges related to performance based stock options and restricted stock units granted to certain executives. Stock-based compensation expense related to performance based stock options and restricted stock units was $1.0 million and $0.3 million for the years ended December 31, 2013 and 2012, respectively. There were no such charges in the year ended December 31, 2011.

Additionally, stock-based compensation expense for the year ended December 31, 2013 and 2012, includes $0.7 million and $0.7 million, respectively, in modification charges incurred in connection with the severance packages to the Company's former executives. There were no such charges in the year ended December 31, 2011.

As of December 31, 2013, the total unrecognized compensation cost related to outstanding stock options, awards and employee stock purchases was $13.0 million, which will recognized using the straight-line attribution method over 2.7 years.

Stock-Based Compensation Associated with Awards to Employees

The Company uses the Black-Scholes option pricing model to determine the fair value of stock options. The valuation model for stock compensation expense requires the Company to make assumptions and judgments about the variables used in the calculation including the expected term (weighted-average period of time that the options granted are expected to be outstanding); volatility of the Company's common stock, an assumed-risk-free interest rate and the estimated forfeitures of unvested stock options. The fair value of employee stock options was estimated using the following weighted-average assumptions:

	Year Ended December 31,
	2013		2012		2011
Expected term (in years)	4.8		5.2		6.0
Expected volatility	51	%	61	%	59	%
Risk-free interest rate	1.02	%	0.76	%	1.05-2.65%
Expected dividend yield	0	%	0	%	0	%

Fair Value of Common Stock. The fair value of the underlying common stock was determined by the Board of Directors until the IPO when the Company's common stock started trading on the NASDAQ Global Select Market under ticker symbol ZLTQ on October 19, 2011. Consequently, after the IPO the fair value of the shares of common stock underlying the stock options is the closing price on the option grant date. Prior to the IPO, the fair value of the shares of common stock underlying the stock options was determined by the Board of Directors. Because there was no public market for the Company's common stock, the Board of Directors determined fair value of the common stock at the time of grant of the option by considering a number of objective and subjective factors including valuation of comparable companies, sales of convertible preferred stock to unrelated third parties,

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operating and financial performance, the lack of liquidity of capital stock, and general and industry specific economic outlook, amongst other factors.

Expected Term. Prior to the IPO, the Company derived the expected term using the “simplified” method (the expected term is determined as the average of the time-to-vesting and the contractual life of the options), as the Company had limited historical information to develop expectations about future exercise patterns and post-vesting employment termination behavior. Subsequent to the IPO, the expected term used was based on expected term of a group of similar entities, referred to as “guideline” companies. In evaluating similarity, the Company considered factors such as industry, stage of life cycle and size.

Volatility. Prior to the IPO, because the Company was a private entity with no historical data regarding the volatility of its common stock, the expected volatility used was based on volatility of a group of similar entities, referred to as “guideline” companies. In evaluating similarity, the Company considered factors such as industry, stage of life cycle and size. Subsequent to the IPO, the Company has continued to estimate its volatility based on this group of similar entities as the Company does not have sufficient historical data regarding its specific volatility.

Risk-Free Interest Rate. The risk-free interest rate is based on U.S. Treasury zero-coupon issues with remaining terms similar to the expected term on the options.

Dividend Yield. The Company has never paid any dividends and does not plan to pay dividends in the foreseeable future, and, therefore, used an expected dividend yield of zero in the valuation model.

Forfeitures. The Company is required to estimate forfeitures at the time of grant, and revise those estimates in subsequent periods if actual forfeitures differ from those estimates. The Company uses 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 actual forfeitures differ from the estimates, the difference will be recorded as a cumulative adjustment in the period that the estimates are revised.

During the years ended December 31, 2013, 2012 and 2011, the Company granted 543,987; 2,860,927 and 1,305,620 stock options, respectively, to employees with a weighted-average grant date fair value of $6.75, $3.07, and $5.65 per share, respectively. The aggregate intrinsic value of options exercised was $6.8 million, $6.0 million and $5.7 million for the years ended December 31, 2013, 2012, and 2011, respectively. The aggregate intrinsic value is calculated as the difference between the exercise price and the estimated fair value of the Company's common stock at the date of exercise. The total fair value of shares vested was $4.9 million, $2.1 million and $0.9 million for the years ended December 31, 2013, 2012 and 2011, respectively.

During the years ended December 31, 2013, 2012 and 2011, the Company granted 1,180,200; 1,412,066 and 11,495 restricted stock units and restricted awards, respectively, to employees. The weighted-average grant date fair value as of the respective grant date of restricted stock units and restricted stock awards was $5.62, $5.70 and $10.20 for the years ended December 31, 2013, 2012 and 2011, respectively. There were no such awards granted for the year ended December 31, 2011. The fair value as of the respective vesting dates of restricted stock units and restricted stock awards was $1.4 million and $0.3 million for the year ended December 31, 2013 and December 31, 2012, respectively. The fair value as of the respective vesting dates of restricted stock units and restricted stock awards for the year ended December 31, 2011, was immaterial.

There was no capitalized stock-based compensation cost and no recognized stock-based compensation tax benefits during the years ended December 31, 2013, 2012 and 2011.

Stock-Based Compensation for Non-employees

Stock-based compensation expense related to stock-based awards to non-employees is recognized as the stock-based awards are earned, generally through the provision of services. The Company believes that the fair value of the stock-based awards is more reliably measurable than the fair value of the services received. The fair value of the granted stock-based awards is calculated at each reporting date using the Black-Scholes option pricing model. During the year ended December 31, 2013, the Company granted stock-based awards to non-employees which vest over 0.5 years. During the year ended December 31, 2012, the Company granted stock-based awards to non-employees which vest over 0.5 years. Stock-based compensation expense related to non-employee grants was $0.5 million and $0.8 million for the years ended December 31, 2013 and 2012, respectively. Stock-based compensation expense related to non-employee grants was insignificant for the year ended December 31, 2011.

11. Employee Benefit Plans

In 2005, the Company adopted a retirement savings plan under Section 401(k) of the Internal Revenue Code. This plan covers all employees in the United States who meet minimum age and service requirements and allows participants to defer a portion of their annual compensation on a pre-tax basis. Company contributions to the plan may be made at the discretion of the Board of

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Directors. Matching 401(k) contributions expensed were $1.1 million, $0.7 million, and $0.5 million for the years ended December 31, 2013, 2012, and 2011, respectively.

12. Income Taxes

The domestic and foreign components of loss before provision for income taxes were as follows (in thousands):

	Year Ended December 31,
	2013			2012			2011
Domestic	$	(19,535	)	$	(30,329	)	$	(9,051	)
Foreign	370			327			(504		)
Loss before provision for income taxes	$	(19,165	)	$	(30,002	)	$	(9,555	)

The provision for income taxes consisted of the following (in thousands):

	As of December 31,
	2013		2012			2011
Current provision:
Federal	$	—	$	—		$	—
State	60		37			48
Foreign	61		170			—
Total current	121		207			48
Deferred provision (benefit):
Federal	—		—			—
State	—		—			—
Foreign	19		(66		)	—
Total deferred	19		(66		)	—
Total provision	$	140	$	141		$	48

The following is a reconciliation of the statutory federal income tax rate to the Company's effective tax:

	Year Ended December 31,
	2013		2012		2011
Tax at federal statutory rate	35	%	35	%	35	%
State income taxes, net of federal benefit	2		(1	)	(1	)
Non-deductible permanent difference	(1	)	—		(3	)
Change in valuation allowance	(34	)	(34	)	(31	)
Research & development credits	(2	)	1		3
Stock-based compensation	(1	)	(1	)	(5	)
Other	—		—		2
Provision for income taxes	(1	)%	—	%	—	%

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Tax effects of temporary differences that give rise to significant portions of the deferred tax assets are presented below (in thousands):

	December 31,
	2013			2012
Net operating loss carryforwards	$	45,401		$	38,385
Research & development credits	2,335			2,703
Depreciation & amortization	583			312
Accruals & reserves	2,731			3,592
Total deferred tax assets	51,050			44,992
Valuation allowance	(51,003		)	(44,926		)
Net deferred tax assets	$	47		$	66

As of December 31, 2013, the Company had federal and state net operating loss carryforwards of $121.3 million and $108.2 million, respectively. Unrecognized deferred tax benefits of approximately $7.9 million resulted from the exercises of employee stock awards will be accounted for as a credit to the additional paid-in capital if and when realized through a reduction in income tax payable. The federal net operating losses begin expiring in 2026 and state net operating losses begin expiring in 2015. As of December 31, 2013, the Company had research and development credit carryforwards of approximately $2.8 million and $3.0 million available to reduce future taxable income, if any, for federal and state income tax purposes, respectively. The federal research and development credit carryforwards expire beginning 2026, and state credits can be carried forward indefinitely.

On January 2, 2013, the President signed into law The American Taxpayer Relief Act of 2012, or ATRA. Under prior law, a taxpayer was entitled to a research tax credit for qualifying amounts incurred through December 31, 2011. The ATRA extends the research credit for two years for qualified research expenditures incurred through the end of 2013. The extension of the research credit is retroactive and includes amounts incurred after 2011. The benefit of the reinstated credit did not impact the income statement in the period of enactment, which was the first quarter of 2013, as the research and development credit carryforwards are offset by a full valuation allowance.

Management believes that, based on a number of factors, which includes the Company’s historical operating performance and accumulated deficit, it is more likely than not that the U.S. deferred tax assets will not be utilized, such that a full valuation allowance has been recorded against our U.S. deferred tax assets. Valuation allowance increased by approximately $6.1 million, and $12.1 million for the years ended December 31, 2013 and 2012, respectively.

The valuation allowance for deferred tax assets consisted of the following activity for the fiscal years ended December 31, 2013, 2012 and 2011 (in thousands):

Description	Balance at Beginning of Year		Additions		Reductions		Balance at End of Year
Year ended December 31, 2011	$	29,231	$	3,605	$	—	$	32,836
Year ended December 31, 2012	32,836		12,090		—		44,926
Year ended December 31, 2013	$	44,926	$	6,077	$	—	$	51,003

Utilization of net operating losses and tax credit carryforwards may be limited by “ownership change” rules, as defined in Section 382 of the Internal Revenue Code. Similar rules may apply under state tax laws. The Company has assessed the application of Internal Revenue Code Section 382, during the fourth quarter of 2013, and concluded no limitation currently applies, and the Company will continue to monitor activities in the future. In the event the Company experiences any subsequent changes in ownership, the amount of net operating losses and research and development credit carryovers available in any taxable year could be limited and may expire unutilized.

During the year ended December 31, 2013, the amount of gross unrecognized tax benefits increased by $2.0 million. The total amount of unrecognized tax benefits was $2.9 million as of December 31, 2013, of which $0.1 million, if recognized, would affect the effective tax rate due to the valuation allowance that currently offsets deferred tax assets. The Company recognizes interest and penalties related to uncertain tax positions as part of the income tax provision. To date, such interest and penalties have not been material.

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A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):

Balance as of January 1, 2011	$	678
Additions based on tax positions related to the current year	146
Balance as of December 31, 2011	824
Additions based on tax positions related to the current year	78
Balance as of December 31, 2012	902
Additions based on tax positions related to the current year	2,023
Balance as of December 31, 2013	$	2,925

The Company files income tax returns in the U.S. federal and state jurisdictions and in the United Kingdom and all returns since inception remain open to examination.

13. Net Loss per Share of Common Stock

Basic net loss per share of common stock is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding for the period. Diluted net loss per share of common stock is computed by giving effect to all potentially dilutive securities outstanding during the period, including options, restricted stock units, stock issuable pursuant to the ESPP, warrants, and convertible preferred stock. Basic and diluted net loss per share attributable to common stockholders was the same for all periods presented as the inclusion of all potentially dilutive securities outstanding were anti-dilutive. As such, the numerator and the denominator used in computing both basic and diluted net loss are the same for each period presented.

A reconciliation of the numerator and denominator used in the calculation of the basic and diluted net loss per share is as follows:

	Year Ended
	December 31,
	2013			2012			2011
Historical net loss per share:
Numerator
Net loss attributable to common stockholders (in thousands)	$	(19,305	)	$	(30,143	)	$	(14,702	)
Denominator
Weighted average shares of common stock outstanding used in computing net loss per share attributable to common stockholders - basic and diluted	36,209,051			34,776,380			7,506,282
Basic and diluted net loss per share attributable to common stockholders	$	(0.53	)	$	(0.87	)	$	(1.96	)

The following outstanding shares of potentially dilutive securities were excluded from the computation of diluted net loss per share of common stock for the periods presented, because including them would have been anti-dilutive:

	Year Ended
	December 31,
	2013	2012	2011
Options to purchase common stock	3,598,385	4,128,334	4,847,972
Restricted stock units	1,906,696	119,507	—
Common stock issuable pursuant to the ESPP	86,026	21,586	—
Total	5,591,107	4,269,427	4,847,972

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14. Supplemental Cash Flow Information

The supplemental cash flow information consists of the following (in thousands):

	Year Ended
	December 31,
	2013			2012			2011
Cash paid for interest	$	—		$	2		$	69
Cash paid for income taxes	$	188		$	47		$	—
Non-cash investing and financing activities:
Changes in accounts payable and accrued liabilities related to property, plant and equipment purchases	$	(33	)	$	(100	)	$	147
Reclassification of warrant liability to additional paid-in capital upon initial public offering	$	—		$	—		$	921
Conversion of preferred stock into common stock upon initial public offering	$	—		$	—		$	81,164

15. Segment Information

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision maker is its Chief Executive Officer. The Company has one business activity and there are no segment managers who are held accountable for operations. Accordingly, the Company has a single reportable segment structure. All of the Company’s principal operations and decision-making functions are located in the United States.

The Company’s revenue by geographic region, based on the location to where the product was shipped, is summarized as follows (in thousands):

	Year Ended
	December 31,
	2013		2012		2011
North America	$	89,150	$	56,657	$	50,332
International	22,476		19,537		17,812
Total	$	111,626	$	76,194	$	68,144

North America includes the United States and related territories as well as Canada. International is the rest of the world. Revenue for the United States was $83.7 million, $54.7 million and $47.5 million for the years endedDecember 31, 2013, 2012 and 2011, respectively.

The following table sets forth revenue by product expressed as dollar amounts (in thousands):

	Year Ended
	December 31,
	2013		2012		2011
System revenue	$	61,359	$	39,145	$	46,552
Consumable revenue	50,267		37,049		21,592
Total	$	111,626	$	76,194	$	68,144

Substantially all of the Company’s long-lived assets are located in the United States of America.

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16. Selected Quarterly Financial Data (unaudited)

The following table presents selected unaudited consolidated financial data for each of the eight quarters in the two-year period ended December 31, 2013. The selected quarterly financial data should be read in conjunction with our consolidated financial statements and the related notes and "Item 7: Management's Discussion and Analysis of Financial Condition and Results of Operations". This information has been derived from our unaudited consolidated financial statements that, in our opinion, reflect all recurring adjustments necessary to fairly state this information when read in conjunction with our consolidated financial statements and the related notes appearing in the section entitled "Consolidated Financial Statements". Net loss per share-basic and diluted, for the four quarters of each fiscal year may not sum to the total for the fiscal year because of the different number of shares outstanding during each period. The results of operations for any quarter are not necessarily indicative of the results to be expected for any future period.

	Quarter
	First			Second			Third			Fourth
	(In thousands, except share and per share data)
Year Ended December 31, 2013
Total revenue	$	19,982		$	26,338		$	29,465		$	35,841
Gross profit	$	12,634		$	18,460		$	21,229		$	25,114
Net loss	$	(7,482	)	$	(3,607	)	$	(2,811	)	$	(5,405	)
Net loss per share, basic and diluted	$	(0.21	)	$	(0.10	)	$	(0.08	)	$	(0.15	)
Shares used in calculation-basic and diluted	35,890,084			36,045,346			36,206,008			36,686,053
Year Ended December 31, 2012
Total revenue	$	17,404		$	22,265		$	17,928		$	18,597
Gross profit	$	11,411		$	15,115		$	11,975		$	12,186
Net loss	$	(10,345	)	$	(8,101	)	$	(5,182	)	$	(6,515	)
Net loss per share, basic and diluted	$	(0.30	)	$	(0.24	)	$	(0.15	)	$	(0.18	)
Shares used in calculation-basic and diluted	34,010,432			34,253,357			35,068,076			35,764,666

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Based on our management's evaluation (with the participation of our principal executive officer and principal financial officer), as of the end of the period covered by this report, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, (the "Exchange Act")) were effective to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Management's Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) for ZELTIQ. Our management with the participation of our principal executive officer and principal financial officer conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2013. This evaluation was based on the framework established in Internal Control—Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on our assessment under the framework in Internal Control—Integrated Framework (1992), our management concluded that our internal control over financial reporting was effective as of December 31, 2013.

The effectiveness of our internal control over financial reporting as of December 31, 2013, has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears in this Annual Report on Form 10-K.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the last fiscal quarter of 2013 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on the Effectiveness of Controls

Control systems, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control systems' objectives are being met. Further, the design of any control systems must reflect the fact that there are resource constraints, and the benefits of all controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision making can be faulty and that breakdowns can occur because of simple error or mistake. Control systems can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls is based, in part, on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

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ITEM 9B. OTHER INFORMATION

Not applicable

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PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The following information is included in our Notice of Annual Meeting of Stockholders and Proxy Statement to be filed within 120 days after our fiscal year end of December 31, 2013, or the Proxy Statement, and is incorporated herein by reference:

• Information regarding our directors and any persons nominated to become a director, as well as with respect to some other required board matters, set forth under Proposal 1 entitled “Election of Directors” and under “Information Regarding the Board of Directors and Corporate Governance” in the Proxy Statement.

• Information regarding our executive officers is set forth under “Executive Officers” in the Proxy Statement.

• Information regarding our audit committee and our designated “audit committee financial expert” is set forth under the caption “Information Regarding the Board of Directors and Corporate Governance” in the Proxy Statement.

• Information on our code of business conduct and ethics for directors, officers and employees set forth under the caption “Code of Business Conduct” under “Information Regarding the Board of Directors and Corporate Governance - Information Regarding Committees of the Board of Directors” in the Proxy Statement.

• Information regarding Section 16(a) beneficial ownership reporting compliance set forth under the caption “Section 16(a) Beneficial Ownership Reporting Compliance” in the Proxy Statement.

• Information regarding procedures by which stockholders may recommend nominees to our board of directors is set forth under the caption “Consideration and Qualifications of Director Nominees” under “Information Regarding the Board of Directors and Corporate Governance” in the Proxy Statement.

ITEM 11. EXECUTIVE COMPENSATION

Information regarding compensation of our named executive officers is set forth under the caption “Executive Compensation” in the Proxy Statement, which information is incorporated herein by reference.

Information regarding compensation of our directors is set forth under the caption "Director Compensation" in the Proxy Statement, which information is incorporated herein by reference.

Information relating to compensation policies and practices as they relate to risk management is set forth under the caption “Information Regarding the Board of Directors and Corporate Governance - Information Regarding Committees of the Board of Directors - Compensation Committee” in the Proxy Statement, which information is incorporated herein by reference.

Information regarding compensation committee interlocks is set forth under the caption “Information Regarding the Board of Directors and Corporate Governance - Information Regarding Committees of the Board of Directors - Compensation Committee Interlocks and Insider Participation" in the Proxy Statement, which information is incorporated herein by reference.

The Compensation Committee Report is set forth under the caption "Compensation Committee Report" under “Information Regarding the Board of Directors And Corporate Governance - Information Regarding Committees of the Board of Directors” in the Proxy Statement, which report is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Information regarding security ownership of certain beneficial owners and management is set forth under the caption “Security Ownership of Certain Beneficial Owners and Management” in the Proxy Statement, which information is incorporated herein by reference.

Information regarding securities authorized for issuance under our equity compensation plans is set forth under the caption “Securities Authorized for Issuance under Equity Compensation Plans” in the Proxy Statement, which information is incorporated herein by reference.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Information regarding certain relationships and related transactions is set forth under the caption "Transactions With Related Persons" in the Proxy Statement, which information is incorporated herein by reference.'

Information regarding director independence is set forth under the caption “Information Regarding the Board of Directors and Corporate Governance - Independence of The Board of Directors” in the Proxy Statement, which information is incorporated herein by reference.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

Information regarding principal auditor fees and services is set forth under “Proposal 2 - Ratification of Selection of Independent Registered Public Accounting Firm - Principal Accountant Fees and Services” in the Proxy Statement, which information is incorporated herein by reference.

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PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a) The following documents are filed as part of this Form 10-K

1. Consolidated Financial Statements:

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated Statements of Comprehensive Loss

Consolidated Statements of Convertible Preferred Stock and Stockholders' Equity (Deficit)

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

2. Financial Statements Schedules

All schedules have been omitted because they are not required, not applicable, or the required information is included in the consolidated financial statements or notes thereto.

3.Exhibits

The exhibits listed in the Exhibits Index, immediately following the signature page to this Form 10-K, are filed or incorporated by reference as part of this Form 10-K.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		ZELTIQ Aesthetics, Inc.
Date:	February 25, 2014	By:	/s/ Patrick F. Williams
			Patrick F. Williams
			Senior Vice President and Chief Financial Officer
			(Duly Authorized Officer, Principal Financial and Accounting Officer)

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POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Mark J. Foley and Patrick F. Williams, and each of them, as his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution for him or her and in his or her name, place, and stead, in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, and any of them or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/ Mark J. Foley	President, Chief Executive Officer	February 25, 2014
Mark J. Foley	and Director (Principal Executive Officer)
/s/ Patrick F. Williams	Senior Vice President and Chief	February 25, 2014
Patrick F. Williams	Financial Officer (Duly Authorized Officer, Principal Financial and Accounting Officer)
/s/ Mary M. Fisher	Director	February 25, 2014
Mary M. Fisher
/s/ Jean M. George	Director	February 25, 2014
Jean M. George
/s/ D. Keith Grossman	Director	February 25, 2014
D. Keith Grossman
/s/ Kevin C. O'Boyle	Director	February 25, 2014
Kevin C. O'Boyle
/s/ Bryan E. Roberts, Ph.D	Director	February 25, 2014
Bryan E. Roberts, Ph.D.
/s/ Andrew N. Schiff, M.D.	Director	February 25, 2014
Andrew N. Schiff, M.D.

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EXHIBIT INDEX

Listed and indexed below are all Exhibits filed as part of this report.

				Incorporated by Reference
Exhibit No.		Description	Filed Herewith	Form	File No.	Exhibit No.	Date Filed
3.1		Amended and Restated Certificate of Incorporation of ZELTIQ Aesthetics, Inc.		10-Q	001-35318	3.1	4/26/2013
3.2		Amended and Restated Bylaws of ZELTIQ Aesthetics, Inc.		S-1	333-175514	3.4	7/13/2011
4.1		Reference is made to Exhibits 3.1 and 3.2.
4.2		Form of Stock Certificate.		S-1/A	333-175514	4.1	9/23/2011
10.1	#	Amended and Restated Exclusive License Agreement, dated September 21, 2011, by and between ZELTIQ Aesthetics, Inc. (as successor in interest to Juniper Medical, Inc.) and The General Hospital Corporation d/b/a Massachusetts General Hospital.		S-1/A	333-175514	10.4	10/11/2011
10.2		Office Building Lease, dated December 22, 2006, by and between ZELTIQ Aesthetics, Inc. (as successor in interest to Juniper Medical, Inc.) and Hacienda Portfolio Venture LLC (as successor in interest to Crosstown Ventures II, LLC).		S-1/A	333-175514	10.4	8/17/2011
10.3		First Amendment to Office Building Lease, dated December 22, 2006, by and between ZELTIQ Aesthetics, Inc. (as successor in interest to Juniper Medical, Inc.) and Hacienda Portfolio Venture LLC (as successor in interest to Crosstown Ventures II, LLC).		S-1/A	333-175514	10.5	8/17/2011
10.4		Second Amendment to Office Building Lease, dated September 24, 2010, by and between ZELTIQ Aesthetics, Inc. (as successor in interest to Juniper Medical, Inc.) and Hacienda Portfolio Venture LLC (as successor in interest to Crosstown Ventures II, LLC).		S-1/A	333-175514	10.6	8/17/2011
10.5		Third Amendment to Office Building Lease, dated August 7, 2012, by and between ZELTIQ Aesthetics, Inc. (as successor in interest to Juniper Medical, Inc.) and Hacienda Portfolio Venture LLC (as successor in interest to Crosstown Ventures II, LLC).	X
10.6		Fourth Amendment to Office Building Lease, dated April 22, 2013, by and between ZELTIQ Aesthetics, Inc. (as successor in interest to Juniper Medical, Inc.) and Hacienda Portfolio Venture LLC (as successor in interest to Crosstown Ventures II, LLC).	X
10.7		Building Lease, dated October 3, 2013, by and between ZELTIQ Aesthetics, Inc. and Westcore Greenville, LLC.	X
10.8		Third Amended and Restated Investor Rights Agreement, dated May 26, 2010, by and among ZELTIQ Aesthetics, Inc. and the individuals and entities listed on Exhibit A attached thereto.		S-1	333-175514	10.23	7/13/2011
10.9	*	Form of Indemnification Agreement, by and between ZELTIQ Aesthetics, Inc. and each of its directors and officers.		S-1	333-175514	10.17	7/13/2011
10.10	*	Offer Letter Agreement, dated March 24, 2011, by and between ZELTIQ Aesthetics, Inc. and Dr. Kristine N. Tatsutani.		S-1/A	333-175514	10.31	9/7/2011

96

10.11	*	2005 Stock Incentive Plan.		S-1/A	333-175514	10.11	8/17/2011
10.12	*	Form of Stock Option Agreement under 2005 Stock Incentive Plan.		S-1/A	333-175514	10.12	8/17/2011
10.13	*	Amendment to 2005 Stock Incentive Plan.		S-1/A	333-175514	10.13	8/17/2011
10.14	*	2011 Equity Incentive Plan.		S-8	333-175514	99.1	3/13/2013
10.15	*	Form of Stock Option Agreement under 2011 Equity Incentive Plan.		S-1/A	333-175514	10.15	9/23/2011
10.16	*	Form of Restricted Stock Unit Agreement under the 2011 Stock Incentive Plan.		S-1/A	333-175514	10.16	9/23/2011
10.17	*	Form of Restricted Stock Agreement under the 2011 Stock Incentive Plan.		S-1/A	333-175514	10.17	9/23/2011
10.18	*	Form of Notice of Grant of Restricted Stock Unit under the 2011 Stock Incentive Plan.		S-1/A	333-175514	10.18	9/23/2011
10.19	*	Form of Notice of Grant of Restricted Stock under the 2011 Stock Incentive Plan.		S-1/A	333-175514	10.19	9/23/2011
10.20	*	Form of Notice of Grant of Stock Option under the 2011 Stock Incentive Plan.		S-1/A	333-175514	10.20	9/23/2011
10.21	*	2011 Employee Stock Purchase Plan.		S-1/A	333-175514	10.21	9/23/2011
10.22	*	Employment Offer Letter, dated February 9, 2012, by and between ZELTIQ Aesthetics, Inc. and Sergio Garcia.		10-Q	001-35318	10.2	5/11/2012
10.23	*	Employment Offer Letter Agreement, dated August 23, 2012, by and between ZELTIQ Aesthetics, Inc. and Mark J. Foley.		10-Q	001-35318	10.12	11/8/2012
10.24	*	Employment Offer Letter, dated September 18, 2012, by and between ZELTIQ Aesthetics, Inc. and Len DeBenedictis.		10-Q	001-35318	10.13	11/8/2012
10.25	*	Employment Offer Letter, dated October 1, 2012, by and between ZELTIQ Aesthetics, Inc. and Keith Sullivan.		10-Q	001-35318	10.14	11/8/2012
10.26		Third Amendment to Office Building Lease dated August 7, 2012 by and between ZELTIQ Aesthetics, Inc. and Hacienda Portfolio Venture LLC.		10-Q	001-35318	10.15	11/8/2012
10.27	*	ZELTIQ Aesthetics, Inc. 2012 Stock Plan.		S-8	333-183131	99.1	8/7/2012
10.28	*	Separation Agreement dated December 3, 2013, between ZELTIQ Aesthetics, Inc. and Kristine N. Tatsutani.	X
10.29	*	2013 Bonus Plan for Executive Officers.		10-Q	001-35318	10.2	10/31/2013
10.30	*	Form of Stock Option Agreement Under 2012 Stock Plan.		10-K	001-35318	10.50	3/13/2013
10.31	*	Form of Restricted Stock Units Agreement Under 2012 Stock Plan.		10-K	001-35318	10.51	3/13/2013
10.32	*	Form of Restricted Stock Agreement Under 2012 Stock Plan.		10-K	001-35318	10.52	3/13/2013
10.33	*	Form of Notice of Grant of Stock Option Under 2012 Stock Plan.		10-K	001-35318	10.53	3/13/2013
10.34	*	Form of Notice of Grant of Restricted Stock Units Under 2012 Stock Plan.		10-K	001-35318	10.54	3/13/2013
10.35	*	Form of Notice of Grant of Restricted Stock Under 2012 Stock Plan.		10-K	001-35318	10.55	3/13/2013
10.36	*	Employment Offer Letter dated November 13, 2012 by and between ZELTIQ Aesthetics, Inc. and Patrick Williams.		10-K	001-35318	10.56	3/13/2013
10.37	*	Directors Compensation Arrangements.		10-K	001-35318	10.59	3/13/2013
10.38		Amendment to Offer Letter, dated April 23, 2013, between Keith Sullivan and ZELTIQ Aesthetics, Inc.		10-Q	001-35318	10.1	8/1/2013

97

10.39	First Amendment to Offer Letter, dated November 26, 2012, between Sergio Garcia and ZELTIQ Aesthetics, Inc.		10-Q	001-35318	10.2	8/1/2013
10.40	Second Amendment to Offer Letter, dated April 29, 2013, between Sergio Garcia and ZELTIQ Aesthetics, Inc.		10-Q	001-35318	10.3	8/1/2013
10.41	Promotion Offer Letter, dated July 17, 2013, between Keith Sullivan and ZELTIQ Aesthetics, Inc.		10-Q	001-35318	10.1	10/31/2013
12.1	Calculation of Ratio of Earnings to Fixed Charges.	X
21.1	List of subsidiaries.		10-K	001-35318	21.1	3/13/2013
23.1	Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm.	X
24.1	Power of Attorney (see signature page to this Form 10-K).	X
31.1	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	X
31.2	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	X
32.1	Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	X
101.INS	XBRL Instance Document	X
101.SCH	XBRL Taxonomy Extension Schema	X
101.CAL	XBRL Taxonomy Extension Calculation Linkbase	X
101.DEF	XBRL Taxonomy Extension Definition Linkbase	X
101.LAB	XBRL Taxonomy Extension Label Linkbase	X
101.PRE	XBRL Taxonomy Extension Presentation Linkbase	X

 ______________________

# Portions of this exhibit have been omitted and filed separately with the Securities and Exchange Commission, pending a determination by the Securities and Exchange Commission as to whether these portions should be granted confidential treatment.

* Management Compensation Plan or Arrangement

(1) As described in Item 5.02 of the Form 8-K with respect to target bonus. See Exhibit [10.30] for the 2013 Bonus Plan for Executive Officers.

(2) As described in Item 5.02 of the Form 8-K.

98

EX-10.5

Exhibit 10.5

THIRD AMENDMENT TO OFFICE BUILDING LEASE

THIS THIRD AMENDMENT TO OFFICE BUILDING LEASE (this "Amendment" or 'Third Amendment") is made as of August 7, 2012 (the "Effective Date"), by and between HACIENDA PORTFOLIO VENTURE LLC, a Delaware limited liability company ("Landlord"), and ZELTIQ AESTHETICS, INC., formally known as Juniper Medical Inc., a Delaware corporation ("Tenant").

RECITALS

A. Crosstown Ventures II, LLC, predecessor-in-interest to Landlord, and Tenant, entered into that certain Office Building Lease dated as of December 22, 2006 ("Initial Lease"), as amended by that certain First Amendment to Office Building Lease (the "First Amendment"), by and between Landlord and Tenant, dated as of July 11, 2007, and as further amended by that certain Second Amendment to Office Building Lease (the "Second Amendment"), by and between Landlord and Tenant, dated as of September 24, 2010 (the initial Lease as amended by the First Amendment and the Second Amendment, the "Lease") for approximately 42,620 rentable square feet (the "Leased Premises") consisting of the entire Building located at 4696-4698 Willow Road, Pleasanton, California (Building One).

B. The term of the Lease is presently scheduled to expire on December 31, 2013. Tenant desires to extend the term of the Lease by a period of twelve (12) months.

C. Landlord and Tenant desire to amend the Lease as set forth in this Amendment. Any capitalized term used but not defined herein shall have the meaning given to it in the Lease.

NOW, THEREFORE, in consideration of the foregoing, and for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Landlord and Tenant hereby agree as follows:

AGREEMENT

1. Recitals. The parties hereby confirm the accuracy of the foregoing Recitals which are incorporated herein by this reference.

2. Term. The term of the Lease is hereby extended by a period of twelve (12) months such that the term expiration date shall be December 31, 2014 (the "Term Expiration Date").

3. Base Rent. The Base Rent for the Leased Premises from January 1, 2014 through and including December 31, 2014 shall be as follows:

January 1, 2014 through December 31, 2014: $78,847.00 per month (which equals $1.85 per rentable square foot per month)

4. Base Year. Effective on January 1, 2014, the Base Year for the Leased Premises shall be revised to the calendar year 2014.

5. Effect of Amendment; Ratification. Except to the extent the Lease is expressly modified by this Amendment, the terms and provisions of the Lease shall remain unmodified and in full force and effect. In the event of conflict between the terms of the Lease and the terms of this Amendment, the terms of this Amendment shall prevail. There are no covenants, promises, agreements, conditions or understandings, either oral or written, between Landlord and Tenant except as are set forth in the Lease and in this Amendment. All negotiations and oral agreements acceptable to both parties have been merged into and are included in the Lease and in this Amendment. It is understood that the Lease and this Amendment supersedes and cancels any and all previous negotiations, arrangements, agreements, understandings, and representations.

6. Authority. If Tenant is a corporation, partnership, trust or other entity, Tenant and each person executing this Amendment on behalf of Tenant hereby covenants and warrants that (i) Tenant is duly incorporated or otherwise established or formed and validly existing under the laws of its state of incorporation, establishment or formation; (ii) Tenant has and is duly qualified to do business in the State of California; (iii) Tenant has full corporate, partnership, trust or other appropriate power and authority to enter into this Amendment and to perform all of Tenant's obligations under the Lease, as amended by

this Amendment; and (iv) each person (and all of the persons if more than one signs) signing this Amendment on behalf of Tenant is duly and validly authorized to do so.

7. Representations and Warranties. Tenant hereby represents, warrants and agrees that as of the date hereof: (i) to Tenant's knowledge, there exists no default under the Lease, as amended by this Amendment; (ii) the Lease, as amended by this Amendment, continues to be a legal, valid and binding agreement and obligation of Tenant; (iii) Landlord is not in default under the Lease, as amended by this Amendment; and (iv) Tenant has no offset or defense to its performance or obligations under the Lease, as amended by this Amendment.

8. Confidentiality Provision. Tenant and its employees and agents agree to keep the terms of this Amendment and all documentary or verbal information concerning the circumstances leading to or surrounding this Amendment absolutely confidential and will not publicize or disclose such confidential information to anyone, except his or her own attorneys, accountants or tax preparers, pursuant to court order, or if advised by legal counsel that such disclosure is legally required.

9. Brokers. Tenant represents and warrants to Landlord that CB Richard Ellis ("Tenant's Broker") is the only agent, broker, finder or other similar party with whom Tenant has had any dealing in connection with the negotiation of this Amendment and the consummation of the transaction contemplated hereby. Landlord represents and warrants to Tenant that CB Richard Ellis ("Landlord's Broker") is the only agent, broker, finder or other similar party with whom Landlord has had any dealing in connection with the negotiation of this Amendment and the consummation of the transaction contemplated hereby. Except for Tenant's Broker and Land lord's Broker, the parties hereby agree to indemnify, defend and hold each other free and h arm less from and against liability for compensation or charges which may be claimed by any agent, broker, finder or other similar party by reason of any dealings with or actions of such party in connection with the negotiation of this Amendment and the consummation of this transaction, including any costs, expenses and attorney's fees incurred with respect thereto.

10. Counterparts; Signatures. This Amendment may be executed in counterparts. All executed counterparts shall constitute one agreement, and each counterpart shall be deemed an original. The parties hereby acknowledge and agree that facsimile signatures or signatures transmitted by electronic mail in so-called "pdf' format shall be legal and binding and shall have the same full force and effect as if an original of this Amendment had been delivered. Landlord and Tenant (i) intend to be bound by the signatures on any document sent by facsimile or electronic mail, (ii) are aware that the other party will rely on such signatures, and (iii) hereby waive any defenses to the enforcement of the terms of this Amendment based on the foregoing forms of signature.

[SIGNATURES ON NEXT PAGE]

11. Governing Law. This Amendment and any enforcement of the agreements set forth above shall be governed by and construed in accordance with the laws of the State of California.

IN WITNESS WHEREOF, this Amendment is being executed by the parties on the date set forth above.

"LANDLORD":

HACIENDA PORTFOLIO VENTURE LLC,

a Delaware limited liability company

By:     HACIENDA VENTURE MEMBER, LLC,

a Delaware limited liability company,

                its Co-Managing Member

By:     PRINCIPAL REAL ESTATE INVESTORS, LLC,

                a Delaware limited liability company,

                its authorized signator

By:/s/ Robert T. Klinkner

Name:Robert T. Klinkner

Title:Assistant Managing Director Asset Management

By:    EPI HACIENDA LLC,

a California limited liability company,

its Managing Member

By:    ELLIS PARTNERS LLC,

a California limited liability company,

its Manager

By:/s/ James F. Ellis

Name:James F. Ellis

Title:Managing Member

"TENANT":

ZELTIQ AESTHETICS, INC.,

a Delaware corporation

By:/s/ Sergio Garcia

Name:Sergio Garcia

Title:Senior Vice President, General Legal Counsel & Corporate Secretary

EX-10.6

Exhibit 10.6

FOURTH AMENDMENT TO OFFICE BUILDING LEASE

THIS FOURTH AMENDMENT TO OFFICE BUILDING LEASE (this "Amendment" or "Fourth Amendment") is made as of April 22, 2013 (the "Effective Date"), by and between HACIENDA PORTFOLIO VENTURE LLC, a Delaware limited liability company ("Landlord"), and ZELTIQ AESTHETICS, INC., formally known as Juniper Medical Inc., a Delaware corporation ("Tenant").

RECITALS

A. Crosstown Ventures II, LLC, predecessor-in-interest to Landlord, and Tenant, entered into that certain Office Building Lease dated as of December 22, 2006 ("Initial Lease"), as amended by that certain First Amendment to Office Building Lease (the "First Amendment"), by and between Landlord and Tenant, dated as of July 11, 2007, as further amended by that certain Second Amendment to Office Building Lease (the "Second Amendment"), by and between Landlord and Tenant, dated as of September 24, 2010, and as further amended by that certain Third Amendment to Office Building Lease (the "Third Amendment"), by and between Landlord and Tenant, dated as of August 7, 2012 (the Initial Lease as amended by the First Amendment, the Second Amendment, and the Third Amendment is collectively referred to herein as the "Lease") for approximately 42,620 rentable square feet (the "Existing Space") consisting of the entire building located at 4696-4698 Willow Road, Pleasanton, California (Building One).

B. The scheduled term expiration date for the Existing Space is December 31, 2014.

C. Tenant desires to lease from Landlord approximately 3,228 rentable square feet, Suite 205, located on the 2nd floor of the building located at 5934 Gibraltar Drive, Pleasanton, California (Building Two) (the "Additional Space"). On the Additional Space Term Commencement Date (as defined in Paragraph 5 below), the Existing Space and the Additional Space shall be collectively referred to as the "Leased Premises."

D. Landlord and Tenant desire to amend the Lease as set forth in this Amendment. Any capitalized term used but not defined herein shall have the meaning given to it in the Lease.

NOW, THEREFORE, in consideration of the foregoing, and for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Landlord and Tenant hereby agree as follows:

AGREEMENT

1. Recitals. The parties hereby confirm the accuracy of the foregoing Recitals which are incorporated herein by this reference.

2. Leased Premises. Effective as of the Additional Space Term Commencement Date, the definition of Leased Premises defined in the Basic Lease Information sheet of the Lease shall be deleted in its entirety and replaced with the following:

"Leased Premises: Approximately 45,848 rentable square feet consisting of (i) approximately 42,620 rentable square feet consisting of the entire building located at 4696-4698 Willow Road, Pleasanton, California (Building One), and (ii) approximately 3,228 rentable square feet, Suite 205, located on the 2nd floor of the building located at 5934 Gibraltar Drive, Pleasanton, California (Building Two), as outlined on Exhibit A"

Effective as of the Additional Space Term Commencement Date, Exhibit A of the Lease (Floor Plan of the Leased Premises) shall be deleted in its entirety and the floor plan for the Leased Premises shall be as shown on the replacement Exhibit A attached hereto and made a part hereof.

3. Base Year- Additional Space. The Base Year for the Additional Space shall be the calendar year 2013.

4. Rentable Area. Effective as of the Additional Space Term Commencement Date, the definition of Rentable Area defined in the Basic Lease Information sheet of the Lease shall be deleted in its entirety and replaced with the following:

"Rentable Area:

Leased Premises: Approximately 45,848 rentable square feet

Building One: Approximately 42,620 rentable square feet

Building Two: Approximately 41,700 rentable square feet

Project: Approximately 84,320 rentable square feet

5. Additional Space Term Commencement Date. The term commencement date for the Additional Space shall be the date that Landlord delivers the Additional Space to Tenant, estimated to occur on or about June 15, 2013.

6. Term Expiration Date. The term expiration date for the Additional Space shall be June 30, 2014, subject to the option to extend set forth in Paragraph 7 below. The term expiration date for the Existing Space shall remain December 31, 2014.

7. Option to Extend - Additional Space. Tenant has the option (the "Additional Space Option") to extend the term for the Additional Space from July 1, 2014 through and including December 31, 2014 (the "Additional Space Option Term"), all on the following terms and conditions: (i) the Additional Space Option must be exercised, if at all, by written notice irrevocably exercising the Additional Space Option ("Additional Space Option Notice") delivered by Tenant to Landlord not later than April 15, 2014, (ii) the Additional Space Option shall not be deemed to be properly exercised if, as of the date of the Additional Space Option Notice, Tenant is in default under the Lease or Tenant is in possession of less than all of the square footage of the Leased Premises. Provided Tenant has properly and timely exercised the Additional Space Option, the term for the Additional Space shall be extended for the period of the Additional Space Option Term, and all terms, covenants and conditions of the Lease with respect to the Additional Space shall remain unmodified and in full force and effect, except that the Base Rent payable for the Additional Space during the Additional Space Option Term shall be the greater of (i) $1.85 per rentable square foot of the Additional Space per month, or (ii) the FMRR (as defined in Section 8.1 of the Initial Lease) for the Additional Space.

8. Base Rent. The Base Rent from the Additional Space Term Commencement

Date through the Term Expiration Date for the Additional Space shall be as follows:

Additional Space Term

Commencement Date

through June 30, 2014: $5,971.80 per month ($1.85 per rentable square foot of the Additional Space per month).

Notwithstanding the foregoing, no Base Rent shall be payable for the Additional

Space for the first three (3) weeks after the Additional Space Term Commencement Date.

The Base Rent for the Existing Space shall remain unchanged and is as set forth in the Third Amendment.

9. Tenant's Proportionate Share. Effective as of the Additional Space Term Commencement Date, the definition of Tenant's Proportionate Share defined in the Basic Lease Information sheet of the Lease shall be deleted in its entirety and replaced with the following:

"Tenant's Proportionate Share

(Building One): 100.00%

Tenant's Proportionate Share

(Building Two): 7.74%

Tenant's Proportionate Share

(Project): 54.37%"

10. Parking. Effective on the Additional Space Term Commencement Date, the definition of Parking set forth in the Basic Lease Information sheet of the Lease shall be deleted in its entirety and replaced with the following:

"Parking: One hundred eighty-three (183) unreserved, surface parking spaces (based on four (4) parking spaces per one thousand (1,000) rentable square feet)."

11. Acceptance of the Additional Space. Landlord shall deliver the Additional Space to Tenant in a clean and broom-swept condition. Except as set forth above, Tenant accepts the Additional Space in its existing "AS IS" condition.

12. Security Deposit- Additional Space. Concurrently with the execution of this

Amendment, Tenant shall pay to Landlord a security deposit for the Additional Space of

$5,971.80 as additional security for the full and faithful performance of Tenant's obligations under the Lease.

13. Brokers. Except for CBRE, Inc. (Landlord's and Tenant's broker), the parties represent and warrant to each other that it has not had any dealings with any brokers, agents, finders or other similar parties in connection with the negotiation of this Amendment and the consummation of the transaction contemplated hereby. The parties hereby agree to indemnify, defend and hold each other free and harmless from and against liability for compensation or charges which may be claimed by any agent, broker, finder or other similar party (other than CBRE, Inc.) by reason of any dealings with or actions of such party in connection with the negotiation of this Amendment and the consummation of this transaction, including any costs, expenses and attorney's fees incurred with respect thereto.

14. Effect of Amendment; Ratification. Except to the extent the Lease is expressly modified by this Amendment, the terms and provisions of the Lease shall remain unmodified and in full force and effect. In the event of conflict between the terms of the Lease and the terms of this Amendment, the terms of this Amendment shall prevail. There are no covenants, promises, agreements, conditions or understandings, either oral or written, between Landlord and Tenant except as are set forth in the Lease and in this Amendment. All negotiations and oral agreements acceptable to both parties have been merged into and are included in the Lease and in this Amendment. It is understood that the Lease and this Amendment supersedes and cancels any and all previous negotiations, arrangements, agreements, understandings, and representations.

15. Confidentiality Provision. Tenant and its employees and agents agree to keep the terms of this Amendment and all documentary or verbal information concerning the circumstances leading to or surrounding this Amendment absolutely confidential and will not publicize or disclose such confidential information to anyone, except his or her own attorneys, accountants or tax preparers, pursuant to court order, or if advised by legal counsel that such disclosure is legally required.

16. Representations and Warranties. Tenant hereby represents, warrants and agrees that as of the date hereof: (i) to Tenant's knowledge, there exists no default under the Lease, as amended by this Amendment; (ii) the Lease, as amended by this Amendment, continues to be a legal, valid and binding agreement and obligation of Tenant; (iii) Landlord is not in default under the Lease, as amended by this Amendment; and (iv) Tenant has no offset or defense to its performance or obligations under the Lease, as amended by this Amendment.

17. Counterparts; Signatures. This Amendment may be executed in counterparts. All executed counterparts shall constitute one agreement, and each counterpart shall be deemed an original. The parties hereby acknowledge and agree that facsimile signatures or signatures transmitted by electronic mail in so-called "pdf' format shall be legal and binding and shall have the same full force and effect as if an original of this Amendment had been delivered.

[SIGNATURE PAGE FOLLOWS]

18. Governing Law. This Amendment and any enforcement of the agreements set forth above shall be governed by and construed in accordance with the laws of the State of California.

IN WITNESS WHEREOF, this Amendment is being executed by the parties on the date set forth above.

"LANDLORD":

By:    EPI HACIENDA LLC,

a California limited liability company,

its Managing Member

By:    ELLIS PARTNERS LLC,

a California limited liability company,

its Manager

By: /s/ James F. Ellis            

Name: James F. Ellis            

Title: Managing Member            

"TENANT":

ZELTIQ AESTHETICS, INC.,

a Delaware corporation

By: /s/ Matthew W. Rosinack        

Name: Matthew W. Rosinack        

Title: Corporate Controller            

EXHIBIT A

FLOOR PLAN OF THE LEASED PREMISES

(Existing Space and Additional Space)

[Floor Plan of Premises]

EX-10.7

Exhibit 10.7

GREENVILLE BUSINESS CENTER

Multi-Tenant Industrial/Commercial Lease

(Net)

Between

WESTCORE GREENVILLE, LLC,

a Delaware limited liability company

(LESSOR)

and

ZELTIQ AESTHETICS, INC.,

a Delaware corporation

(LESSEE)

Date: October 3, 2013

TABLE OF CONTENTS

SUBJECT MATTERPAGE

1.Basic Provisions                                            1

2.Premises, Parking and Common Areas                                2

3.Term                                                4

4.Rent.                                                4

5.Security Deposit.                                            5

6.Use.                                                6

7.Maintenance, Repairs, Utility Installations, Trade Fixtures and Alterations                7

8.Insurance; Indemnity.                                        10

9.Damage or Destruction.                                        12

10.Real Property Taxes.                                        14

11.Utilities                                                14

12.Assignment and Subletting.                                    15

13.Default; Breach; Remedies.                                    17

14.Condemnation.                                            19

15.Brokers                                                19

16.Estoppel Certificate and Financial Statements.                            19

17.Lessor’s Liability.                                        19

18.Severability.                                            19

19.Interest on Past-Due Obligations.                                    19

20.Time of Essence.                                            20

21.Rent Defined.                                            20

22.No Prior or Other Agreements.                                    20

23.Notices.                                                20

24.Waivers.                                                20

25.Recording.                                            20

26.No Right to Holdover.                                        20

27.Cumulative Remedies.                                        20

28.Covenants and Conditions.                                    20

29.Binding Effect; Choice of Law.                                    20

30.Subordination; Attornment; Non-Disturbance                            20

31.Attorneys’ Fees.                                            21

32.Lessor’s Access; Showing Premises; Repairs.                            21

33.Auctions.                                            21

34.Signs.                                                21

35.Termination; Merger.                                        21

36.Consents.                                            22

37.Access to the Premises.                                        22

38.Quiet Possession.                                            22

39.Rules and Regulations.                                        22

40.Substitution Space.                                        22

41.Security Measures.                                        22

42.Reservations.                                            22

43.OFAC Compliance                                        22

44.Authority.                                            22

45.Conflict.                                                22

46.Offer; Counterparts.                                        22

47.Amendments.                                            23

48.Multiple Parties                                            23

49.Construction.                                            23

Exhibit A PREMISES

Exhibit B INDUSTRIAL CENTER

Exhibit C INTENTIONALLY OMITTED

Exhibit D INTENTIONALLY OMITTED

Exhibit E RULES AND REGULATIONS

Exhibit F INTENTIONALLY OMITTED

Exhibit G HAZARDOUS SUBSTANCES SURVEY FORM

Exhibit H MOVE OUT STANDARDS

Westcore Greenville, LLC

Multi-Tenant Industrial/Commercial Lease

(Net)

GREENVILLE BUSINESS CENTER

1. Basic Provisions

1.1Parties: This Lease (“Lease”), effective October 3, 2013 (“Effective Date”), is made by and between WESTCORE GREENVILLE, LLC, a Delaware limited liability company (“Lessor”), and ZELTIQ AESTHETICS, INC., a Delaware corporation (“Lessee”), (collectively the “Parties,” or individually a “Party”).

1.2Premises; Parking.

(a)Premises: All or a portion of that certain building (“Building”), including all improvements therein or to be provided by Lessor under the terms of this Lease, commonly known by the street address of 7085 Las Positas Road, Suite G, Livermore, California, and containing approximately fifteen thousand seven hundred fifty five (15,755) square feet as outlined on Exhibit A attached hereto (“Premises”). In addition to Lessee’s rights to use and occupy the Premises as hereinafter specified, Lessee shall have non-exclusive rights to the Common Areas (as defined in Paragraph 2.7 below) as hereinafter specified, but shall not have any rights to the roof, exterior walls, structural components or utility raceways of the Building or to any other buildings in the Industrial Center (defined below). The Premises, the Building, the Common Areas, the land upon which they are located (the “Land”), along with all other buildings and improvements now or hereafter thereon, including, without limitation, those certain three (3) adjacent buildings and the land upon which they are located commonly known by the street addresses of 174 Lawrence Drive, 7041 Las Positas Road and 7066 Las Positas Road, commonly known as the “Greenville Business Center,” are herein collectively referred to as the “Industrial Center” and are depicted on Exhibit B. The Industrial Center contains an aggregate of approximately 475,099 square feet (Also see Paragraph 2.)

(b)Parking: So long as Lessee shall not be in Default (as defined below), Lessee shall be entitled to the use, on an unreserved as-available basis, of a proportionate share of vehicle parking spaces within the Industrial Center based upon Lessee’s Share (as defined in Paragraph 1.7 below), which is equal to seventeen (17) unreserved parking spaces (“Parking Spaces”). (Also see Paragraph 2.6.)

1.3Term: The term of this Lease shall be for a period of fifteen (15) months (“Original Term”) commencing on October 4, 2013 (“Commencement Date”). The term “Expiration Date” shall mean December 31, 2014. For purposes of this Lease, the “Term” of this Lease shall refer to the Original Term, as it may be extended or renewed by any properly exercised options granted hereunder. (Also see Paragraph 3.)

1.4Early Possession: Lessee shall be entitled to early possession of the Premises following the date of the mutual execution and delivery of this Lease and the completion of the Lessor’s Work (as defined below), provided that Lessee has delivered to Lessor advance rent required under Paragraph 1.6 below, the Security Deposit required under Paragraph 1.8 below and the insurance certificates required under Paragraph 8 below (the “Early Possession Date”). (Also see Paragraphs 3.2 and 3.3.)

1.5Base Rent: Payable monthly, on the first day of each month, in the amount described below, calculated on a net basis (“Base Rent”), and commencing on the Commencement Date. (Also see Paragraph 4.)

Period	Monthly Installment of Base Rent
October 4, 2013 - September 30, 2014	$8,192.60
October 1, 2014 - December 31, 2014	$8,665.25

1.6Advance Rent Paid Upon Execution: Ten Thousand Five Hundred Fifty Five and 85/100 Dollars ($10,555.85) representing Lessee’s first installment of Base Rent and Lessee’s Share of estimated Common Area Operating Expenses due for the Original Term.

1.7Lessee’s Share of Common Area Operating Expenses: Three and 32/100 percent (3.32%) as to the Industrial Center and seventeen and 3/10 percent (17.3%) as to the Building (“Lessee’s Share”) which may be adjusted by Lessor from time to time, in Lessor’s sole discretion based on changes in the size of and/or number of buildings comprising the Industrial Center.

1.8Security Deposit: Eleven Thousand Twenty Eight and 50/100 Dollars ($11,028.50) (“Security Deposit”). (Also see Paragraph 5.)

1.9Permitted Use: Lessee shall use and occupy the Premises solely for the purpose of general office use and warehousing, as may be permitted under existing laws governing the Premises and for no other use or purpose (“Permitted Use”). (Also see Paragraph 6.)

1.10(a)Real Estate Brokers. The following real estate broker(s) (collectively, the “Brokers”) and brokerage relationships exist in this transaction and are consented to by the Parties (check applicable boxes):

Lee & Associates represents Lessor exclusively (“Lessor’s Broker”);

CBRE represents Lessee exclusively (“Lessee’s Broker”); or

represents both Lessor and Lessee (“Dual Agency”). (Also see Paragraph 15.)

(b)Payment to Brokers. Following the execution of this Lease by both Parties, Lessor shall pay to said Broker(s) jointly, or in such separate shares as they may mutually designate in writing, a fee as set forth in a separate written agreement between Lessor and said Broker(s)

1.11Guarantor(s): None. (See also Paragraph 37)

1.12Lessee Insurance Coverage Minimums:

(a)Liability: $1,000,000 per occurrence/$2,000,000 general aggregate

(b)Property: Full Replacement Cost

(c)Umbrella: $2,000,000

(d)Business Interruption: 12 months

(e)Automobile Liability: $1,000,000

(f)Workers’ Compensation: As required by law

(g)Employer’s Liability: $1,000,000

1.13Exhibits. Attached hereto are Exhibits A through H, all of which constitute a part of this Lease.

2.Premises, Parking and Common Areas

2.1Letting. Lessor hereby leases to Lessee, and Lessee hereby leases from Lessor, the Premises, for the Term, at the Rent (defined below), and upon all of the terms, covenants and conditions set forth in this Lease. Unless otherwise provided herein, any statement of square footage set forth in this Lease, or that may have been used in calculating Base Rent, Lessee’s Share and/or Common Area Operating Expenses, is an approximation which Lessor and Lessee agree is reasonable and Lessee’s Share based thereon is not subject to revision whether or not the actual square footage is more or less.

2.2Condition. Lessee agrees (i) to accept the Premises on the date possession is delivered to Lessee by Lessor, and by taking possession of the Premises, Lessee shall be deemed to have accepted the Premises as then being suitable for Lessee's intended use and in good operating order, condition and repair in its then existing "AS-IS" condition, except as otherwise set forth in this Paragraph 2, and (ii) that neither Lessor nor any of Lessor’s agents, representatives or employees has made any representations as to the suitability, fitness or condition of the Premises for the conduct of Lessee’s business or for any other purpose. Lessor shall deliver the Premises to Lessee clean and free of debris on the date Lessor tenders possession of the Premises to Lessee (the “Delivery Date”), and the existing plumbing, electrical systems, lighting, air conditioning and heating systems and loading doors, if any, in the Premises, other than those constructed or modified by Lessee, shall be in good operating condition on the Delivery Date. If a non-compliance with the foregoing exists as of the Delivery Date, Lessor shall, except as otherwise provided in this Lease, promptly after receipt of written notice from Lessee setting forth with specificity the nature and extent of such non-compliance, commence to rectify same at Lessor’s expense. If Lessee does not give Lessor written notice of a non-compliance within forty-five (45) days after the Delivery Date, correction of that non-compliance shall be the obligation of Lessee at Lessee’s sole cost and expense. In addition, Lessor shall, at Lessor’s sole cost and expense using building standard materials, repair the insulation in the warehouse area of the Premises prior to the Delivery Date as reasonably determined by Lessor (“Lessor’s Work”).

2.3Compliance with Covenants, Restrictions and Building Code. Lessee warrants that any improvements, Alterations or Utility Installations (other than those constructed by Lessor or at Lessor’s direction) on or in the Premises, which are constructed or installed by Lessee, shall comply with all applicable covenants or restrictions of record and applicable building codes, regulations and ordinances in effect on the Commencement Date and throughout the Term of this Lease. If the Premises do not comply with said warranties, Lessee shall within thirty (30) days after receipt of written notice from Lessor or any governmental authority, take all necessary action to rectify the non-compliance. Lessor makes no warranty that the Permitted Use in Paragraph 1.9 is permitted for the Premises under Applicable Laws (as defined in Paragraph 2.4).

2.4Acceptance of Premises. Lessee hereby acknowledges that it has made such investigations as it deems necessary with respect to the condition of the Premises (including but not limited to the electrical and fire sprinkler systems, security, environmental aspects, seismic and earthquake requirements) and compliance with the Americans With Disabilities Act and applicable zoning, municipal, county, state and federal laws, ordinances and regulations and any covenants or restrictions of record (collectively, “Applicable Laws”) and the present and future suitability of the Premises for Lessee’s intended use and is satisfied with reference thereto, and assumes all responsibility therefor as the same relate to Lessee’s occupancy of the Premises and/or the terms of this Lease. Pursuant to California Civil Code Section 1938, Lessor is required to inform Lessee whether the Premises has undergone inspection by a Certified Access Specialist (“CASp”) to determine whether the Premises meets all applicable construction-related accessibility standards pursuant to Section 55.53 of the California Civil Code. Lessor hereby informs Lessee that the Premises have not been so inspected by a CASp. Lessee hereby waives any and all rights under and benefits of California Civil Code Section 1938 and acknowledges that neither the Project nor the Premises has undergone inspection by a CASp.

2.5Lessee as Prior Owner/Occupant. The warranties made by Lessor in this Paragraph 2, if any, shall be of no force or effect if immediately prior to the date set forth in Paragraph 1.1 Lessee was the owner or occupant of the Premises or any portion thereof. In such event, Lessee shall, at Lessee’s sole cost and expense, correct any noncompliance of the Premises with said warranties.

2.6Vehicle Parking. Lessee shall be entitled to use Parking Spaces in accordance with Subparagraph 1.2 (b) of the Basic Provisions on those portions of the Common Areas designated from time to time by Lessor for parking. Lessee shall not use more parking spaces than said number. Said Parking Spaces shall be used for parking by vehicles no larger than full-size passenger automobiles, SUVs or pick-up trucks, herein called “Permitted Size Vehicles.” Vehicles other than Permitted Size Vehicles shall be parked and loaded or unloaded as directed by Lessor in the Rules and Regulations (as defined in Paragraph 39) issued by Lessor. Lessee’s violation of this subparagraph shall constitute a material breach of this Lease. (Also see Paragraph 2.9.)

a.Lessee shall not permit or allow any vehicles that belong to or are controlled by Lessee or Lessee’s employees, suppliers, shippers, customers, contractors or invitees to be loaded, unloaded, or parked in areas other than those designated by Lessor for such activities.

b.If Lessee permits or allows any of the prohibited activities described in this Paragraph 2.6, then Lessor shall have the right, without notice, in addition to such other rights and remedies that it may have, to remove or tow away the vehicle involved and charge the cost to Lessee, which cost shall be immediately payable upon demand by Lessor.

2.7    Common Areas - Definition. The term “Common Areas” is defined as all areas and facilities outside the Premises and within the exterior boundary line of the Industrial Center and interior utility raceways within the Premises that are provided and designated by the Lessor from time to time for the general non-exclusive use of Lessor, Lessee and other lessees of the Industrial Center and their respective employees, suppliers, shippers, customers, contractors and invitees, including parking areas, loading and unloading areas, trash areas, roadways, sidewalks, walkways, parkways, driveways and landscaped areas.

2.8     Common Areas - Lessee’s Rights. Lessor hereby grants to Lessee, for the benefit of Lessee and its employees, suppliers, shippers, contractors, customers and invitees, during the Original Term of this Lease, the non-exclusive right to use, in common with others entitled to such use, the Common Areas as they exist from time to time, subject to any rights, powers, and privileges reserved by Lessor under the terms hereof or under the terms of any rules and regulations or restrictions governing the use of the Industrial Center. Under no circumstances shall the right herein granted to use the Common Areas be deemed to include the right to store any property, temporarily or permanently, in the Common Areas. In the event that any unauthorized storage shall occur, then Lessor shall have the right, without notice, in addition to such other rights and remedies that it may have, to remove the property and charge the cost to Lessee, which cost shall be immediately payable upon demand by Lessor.

2.9     Common Areas - Rules and Regulations. Lessor or such other person(s) as Lessor may appoint shall have the exclusive control and management of the Common Areas and shall have the right, from time to time, to establish, modify, amend and enforce reasonable Rules and Regulations with respect thereto in accordance with Paragraph 39. Lessee agrees to abide by and conform to all such Rules and Regulations, and to cause its employees, suppliers, shippers, customers, contractors and invitees to so abide and conform. Lessor shall not be responsible to Lessee for the non-compliance with said Rules and Regulations by other lessees of the Industrial Center.

2.10Common Areas - Changes. Lessor shall have the right, in Lessor’s sole discretion, from time to time to: (a) make changes to the Common Areas, including, without limitation, changes in the location, size, shape and number of driveways, entrances, parking spaces, parking areas, loading and unloading areas, ingress, egress, direction of traffic, landscaped areas, walkways and utility raceways; (b) close temporarily any of the Common Areas for maintenance purposes so long as reasonable access to the Premises remains available; (c) designate other land outside the boundaries of the Industrial Center to be a part of the Common Areas; (d) add additional buildings and improvements to the Common Areas; (e) use the Common Areas while engaged in making additional improvements, repairs or alterations to the Industrial Center, or any portion thereof; and (f) do and perform such other acts and make such other changes in, to or with respect to the Common Areas and Industrial Center as Lessor may, in the exercise of sound business judgment, deem to be appropriate.

3.Term

3.1Term. The Commencement Date, Expiration Date and Original Term of this Lease are as specified in Paragraph 1.3.

3.2Early Possession. If an Early Possession Date is specified in Paragraph 1.4, Lessee shall be entitled to early occupancy of the Premises solely for the purpose of installing Lessee’s furniture, fixtures, equipment and other specialized leasehold improvements approved by Lessor in writing and otherwise preparing the Premises for Lessee’s occupancy, but in no event for conducting Lessee’s business; provided, however, that Lessee shall not interfere with Lessor’s work or activities, if any, in preparing the Premises for Lessee’s occupancy. Lessor and Lessee shall coordinate their respective work to be performed at the Premises during Lessee’s early occupancy. All other terms of this Lease, however (including, but not limited to, the obligations to pay for all utilities and if Lessee is conducting business from the Premises, Lessee’s Share of Common Area Operating Expenses, and to carry the insurance required by Paragraph 8), shall be in effect during such period. Lessee’s early occupancy shall in no way interfere with Lessor’s completion of any improvements in the Premises required to be completed by Lessor under this Lease prior to the Commencement Date and Lessee agrees that Lessor’s completion of any improvements in the Premises during the period of Lessee’s early occupancy of the Premises shall in no way constitute a constructive eviction of Lessee nor entitle Lessee to any abatement of Rent. Furthermore, Lessor shall have no responsibility and shall not be liable to Lessee for, and Lessee hereby waives any claim against Lessor in connection with, (a) any injury or damage to persons or property at the Premises, (b) any interference with Lessee’s business, (c) any loss of the use of the whole or any part of the Premises or of Lessee’s personal property or improvements, or (d) any inconvenience or annoyance, occasioned by or arising from the completion of any improvements in the Premises or work elsewhere in the Industrial Center performed by Lessor or its agents during Lessee’s early occupancy of the Premises. Any such early possession shall not affect nor advance the Expiration Date of the Term.

3.3Delay in Possession. If for any reason Lessor cannot deliver possession of the Premises to Lessee by the Early Possession Date, if one is specified in Paragraph 1.4, or if no Early Possession Date is specified, by the Commencement Date, Lessor shall not be subject to any liability therefor, nor shall such failure affect the validity of this Lease, or the obligations of Lessee hereunder, or extend the Term hereof, but in such case, Lessee shall not, except as otherwise provided herein, be obligated to pay rent or perform any other obligation of Lessee under the terms of this Lease until Lessor delivers possession of the Premises to Lessee.

4.Rent.

4.1Base Rent. Lessee shall pay Base Rent and other rent or charges (collectively referred to from time to time as “Rent”), as the same may be adjusted from time to time, to Lessor in lawful money of the United States, without notice, offset or deduction, on or before the day on which it is due under the terms of this Lease. Rent for any period during the Term hereof which is for less than one (1) full month shall be prorated on the basis of a thirty (30) day month. Payment of Rent shall be made to Lessor at its address stated herein or to such other persons or at such other addresses as Lessor may from time to time designate in writing to Lessee.

4.2Common Area Operating Expenses. Lessee shall pay to Lessor during the Term hereof, in addition to the Base Rent, Lessee’s Share of all Common Area Operating Expenses, as hereinafter defined, during each calendar year of the Term of this Lease, in accordance with the following provisions:

a.“Common Area Operating Expenses” are defined, for purposes of this Lease, as all costs incurred by Lessor relating to the ownership and operation of the Industrial Center, including, but not limited to, the following:

i.Management, administration operation, repair, replacement and maintenance, in neat, clean, good order and condition, of the following: (A) the Common Areas, including parking areas, loading and unloading areas, trash areas, roadways, sidewalks, walkways, parkways, driveways, landscaped areas, striping, bumpers, irrigation systems, Common Area lighting facilities, fences and gates, elevators, exterior building walls and roofs; (B) all heating, air conditioning, plumbing, electrical systems, life safety equipment, telecommunication and other equipment used in common by, or for the benefit of, lessees or other occupants of the Industrial Center; (C) exterior signs and any tenant directories; and (D) fire detection and sprinkler systems.

ii.Water, sewer, gas, electricity, telephone and any other utility systems to service the Common Areas.

iii.Trash disposal, property management and security services and the costs of any environmental inspections.

iv.Reserves set aside for maintenance and repair of Common Areas.

v.Real Property Taxes (as defined in Paragraph 10.2) to be paid by Lessor for the Building and the Common Areas under Paragraph 10 hereof, subject to Paragraph 4.2(b) below.

vi.Premiums for the insurance policies maintained by Lessor under Paragraph 8 hereof.

vii.Any deductible portion of an insured loss concerning the Building or the Common Areas.

viii.Any other services to be provided by Lessor that are stated elsewhere in this Lease to be a Common Area Operating Expense.

ix.Replacing and/or adding improvements mandated by any governmental agency and any repairs or removals necessitated thereby amortized over their useful life according to Federal income tax regulations or guidelines for depreciation thereof (including interest on the un-amortized balance as is then reasonable in the judgment of Lessor’s accountants).

x.Capital improvements made to the Industrial Center necessary in order to keep the Industrial Center in good working order,amortized over its useful life according to Federal income tax regulations or guidelines for depreciation thereof (including interest on the un-amortized balance as is then reasonable in the judgment of Lessor’s accountants).

b.If the Industrial Center is less than ninety-five percent (95%) occupied during any calendar year, the variable components of the Common Area Operating Expenses as determined by Lessor shall be calculated as if the Industrial Center had been 95% occupied for the full calendar year.Any Common Area Operating Expenses and Real Property Taxes that are specifically attributable to the Building or to any other building in the Industrial Center or to the operation, repair and maintenance thereof, may be allocated entirely to the Building or to such other building. However, any Common Area Operating Expenses and Real Property Taxes that are not specifically attributable to the Building or to any other building or to the operation, repair and maintenance thereof, may be equitably allocated by Lessor to all buildings in the Industrial Center.

c.The inclusion of the improvements, facilities and services set forth in Subparagraph 4.2 (a) shall not be deemed to impose an obligation upon Lessor to either have said improvements or facilities or to provide those services unless the Industrial Center already has the same, Lessor already provides the services, or Lessor has agreed elsewhere in this Lease to provide the same or some of them.

d.Lessee’s Share of Common Area Operating Expenses shall be payable by Lessee within ten (10) days after a reasonably detailed statement of actual expenses is presented to Lessee by Lessor. At Lessor’s option, however, an amount may be estimated by Lessor from time to time of Lessee’s Share of annual Common Area Operating Expenses and the same shall be payable monthly or quarterly, as Lessor shall designate, during each 12-month period of the Term, on the same day as the Base Rent is due hereunder. Lessor shall deliver to Lessee, within one hundred and twenty (120) days after the expiration of each calendar year or as soon thereafter as practicable, a reasonably detailed statement showing Lessee’s Share of the actual Common Area Operating Expenses incurred during the preceding year. If Lessee’s payments under this Subparagraph 4.2 (d) during said preceding year exceed Lessee’s Share as indicated on said statement, Lessor shall credit the amount of such over-payment against Lessee’s Share of Common Area Operating Expenses next becoming due. If Lessee’s payments under this Subparagraph 4.2 (d) during said preceding year were less than Lessee’s Share as indicated on said statement, Lessee shall pay to Lessor the amount of the deficiency within ten (10) days after delivery by Lessor to Lessee of said statement.

5.Security Deposit. Lessee shall deposit with Lessor upon Lessee’s execution hereof the Security Deposit set forth in Paragraph 1.8 of the Basic Provisions as security for Lessee’s faithful performance of Lessee’s obligations under this Lease. If Lessee fails to pay Base Rent or other Rent or charges due hereunder before or after the termination or expiration of this Lease, or otherwise Defaults under this Lease (as defined in Paragraph 13.1), Lessor may use, apply or retain all or any portion of said Security Deposit for the payment of any amount due Lessor or to

reimburse or compensate Lessor for any liability, cost, expense, loss or damage (including attorneys’ fees and costs) which Lessor may suffer or incur by reason thereof. If Lessor uses or applies all or any portion of said Security Deposit, Lessee shall within ten (10) days after written request therefor deposit monies with Lessor sufficient to restore said Security Deposit to the full amount required by this Lease. Lessor shall not be required to keep all or any part of the Security Deposit separate from its general accounts. Lessor shall, at the expiration or earlier termination of the Term hereof and after Lessee has vacated the Premises, return to Lessee (or, at Lessor’s option, to the last approved assignee, if any, of Lessee’s interest herein), that portion of the Security Deposit not used or applied by Lessor within thirty (30) days after the expiration of the Term. Unless otherwise expressly agreed in writing by Lessor, no part of the Security Deposit shall be considered to be held in trust, to bear interest or other increment for its use, or to be prepayment for any monies to be paid by Lessee under this Lease. Lessee hereby waives any and all rights under California Civil Code Section 1950.7, as amended or recodified from time to time, and any and all other laws, rules and regulations, now or hereafter in force, applicable to security deposits in the commercial context (“Security Deposit Laws”).

6. Use.

6.1Use. Lessee shall use and occupy the Premises only for the Permitted Use set forth in Paragraph 1.9 of the Basic Provisions and for no other purpose. Lessee shall not use or permit the use of the Premises in a manner that is unlawful, creates waste or a nuisance, or that disturbs owners and/or occupants of, or causes damage to the Premises or neighboring premises or properties. Lessee further covenants and agrees that it shall not use, or suffer or permit any person or persons to use, the Premises in violation of the laws of the United States of America, the State of California, or the ordinances, regulations or requirements of the local municipal or county governing body or other lawful authorities having jurisdiction over the Building. Lessee shall comply with all recorded covenants, conditions, and restrictions, and the provisions of all ground or underlying leases, now or hereafter affecting the Land. Lessee shall not use or allow another person or entity to use any part of the Premises for the storage, use, treatment, manufacture or sale of "Hazardous Substances," as that term is defined in Subparagraph 6.2 (a) of this Lease. The use, storage and disposal by Lessee of products in the Premises which are incidental to the operation of its business office operations (such as photocopy supplies, secretarial supplies and limited janitorial supplies, which products contain chemicals which are categorized as Hazardous Substances) in compliance with Applicable Requirements (as defined below) and in the manner in which such products are designed to be used shall not be a violation by Lessee of this Paragraph 6.1.

6.2Hazardous Substances.

a.Reportable Uses Require Consent. The term “Hazardous Substance” as used in this Lease shall mean any product, substance, chemical, material or waste whose presence, nature, quantity and/or intensity of existence, use, manufacture, disposal, transportation, spill, release or effect, either by itself or in combination with other materials expected to be on the Premises, is either: (i) potentially injurious to the public health, safety or welfare, the environment, or the Premises; (ii) regulated or monitored by any governmental authority; or (iii) a basis for potential liability of Lessor to any governmental agency or third party under any applicable statute or common law theory. Hazardous Substance shall include, but not be limited to, hydrocarbons, petroleum, gasoline, PCBs, crude oil or any products or by-products thereof. Lessee shall not engage in any activity in or about the Premises, which constitutes a Reportable Use (as hereinafter defined) of Hazardous Substances without the express prior written consent of Lessor and compliance in a timely manner (at Lessee’s sole cost and expense) with all Applicable Requirements (as defined in Paragraph 6.3). “Reportable Use” shall mean (i) the installation or use of any above or below ground storage tank, (ii) the generation, possession, storage, use, transportation, or disposal of a Hazardous Substance that requires a permit from, or with respect to which a report, notice, registration or business plan is required to be filed with, any governmental authority, and (iii) the presence in, on or about the Premises of a Hazardous Substance with respect to which any Applicable Requirements require that a notice be given to persons entering or occupying the Premises or neighboring properties.

b.Duty to Inform Lessor. If Lessee knows, or has reasonable cause to believe, that a Hazardous Substance has come to be located in, on, under or about the Premises, the Building, or the Industrial Center other than as previously consented to by Lessor, Lessee shall immediately give Lessor written notice thereof, together with a copy of any statement, report, notice, registration, application, permit, business plan, license, claim, action, or proceeding given to, or received from, any governmental authority or private party concerning the presence, spill, release, discharge of, or exposure to, such Hazardous Substance including but not limited to all such documents as may be involved in any Reportable Use involving the Premises, the Building or the Industrial Center. Lessee shall not cause or permit any Hazardous Substance to be spilled or released in, on, under or about the Premises, the Building or the Industrial Center (including, without limitation, through the plumbing or sanitary sewer system).

c.Indemnification. Lessee shall indemnify, protect, defend and hold Lessor (with counsel approved by Lessor), its directors, officers, agents, partners, members, managers, employees, lenders and ground lessor, if any, and their respective successors and assigns (collectively, “Lessor Parties”) and the Industrial Center, harmless from and against any and all damages, liabilities, judgments, costs, claims, liens, expenses, penalties, loss of permits and attorneys’ and consultants’ fees and costs (collectively, “Claims”) arising out of or involving any (i) Hazardous Substance brought, released or used or allowed to be brought, released or used on the Premises, the Building or the Industrial Center by Lessee or by anyone under Lessee’s control, or (ii) the breach of any term, condition, representation or warranty contained in this Paragraph 6. Lessee’s obligations under this Subparagraph 6.2 (c) shall include, but not be limited to, the effects of any contamination or injury to person, property or the environment created or suffered by Lessee, and the cost of investigation (including consultants’ and attorneys’ fees and costs and testing), removal, remediation, restoration and/or abatement thereof, or of any contamination therein involved, and shall survive the expiration or earlier termination of this Lease. No termination, cancellation or release agreement entered into by Lessor and Lessee shall release Lessee from its obligations under this Lease with respect to Hazardous Substances, unless specifically so agreed by Lessor in writing at the time of such agreement. The provisions of this Paragraph 6.2(c) shall survive the expiration or earlier termination of this Lease.

d.Exculpation of Lessor. Other lessees of the Industrial Center may be using, handling or storing certain Hazardous Substances in connection with such lessees’ use of their premises. The failure of another lessee to comply with Applicable Requirements and procedures could result in a release of Hazardous Substances and contamination to the Industrial Center, or any part thereof, the soil and ground water thereunder or the air quality of the Industrial Center. In the event of such release, the lessee or occupant responsible for the release, and not Lessor, shall be solely responsible for any claim, damage or expense incurred by Lessee by reason of such contamination. Lessee waives any rights it may have to later assert that the foregoing release does not cover unknown claims. Lessee and anyone claiming by, through or

under Lessee hereby fully and irrevocably releases Lessor and Lessor Parties from any and all claims that it may now have or hereafter acquire against such persons and entities for any cost, loss, liability, damage, expense, demand, action or cause of action arising from or related to any Hazardous Substance release or contamination to the Industrial Center caused by another lessee or occupant at the Industrial Center. This release includes claims of which Lessee is presently unaware or which Lessee does not presently suspect to exist in its favor, which, if known by Lessee, would materially affect Lessee’s release of Lessor. Lessee specifically waives the provision of California Civil Code § 1542, which provides as follows:

“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.”

e.Environmental Questionnaire Disclosure. Prior to the execution of this Lease, Lessee shall complete, execute and deliver to Lessor a Hazardous Substances Survey Form in the form of Exhibit G attached hereto (“Survey Form”), and Lessee shall certify to Lessor that all information contained in the Survey Form is true and correct. The completed Survey Form shall be deemed incorporated into this Lease for all purposes, and Lessor shall be entitled to rely on the information contained therein. Within ten (10) days following receipt by Lessee of a written request therefore from Lessor (which request shall not be made more often than annually), Lessee shall disclose to Lessor in writing the names and amounts of all Hazardous Substances, or any combination thereof, which were stored, generated, used or disposed of on, under or about the Premises for the twelve (12) month period prior to and after each such request, or which Lessee intends to store, generate, use or dispose of on, under or about the Premises. At Lessor’s option, Lessee’s disclosure obligation under this Subparagraph shall include the requirement that Lessee update, execute and deliver to Lessor the Survey Form, as the same may be modified by Lessor from time to time.

6.3Lessee’s Compliance with Requirements. Lessee shall, at Lessee’s sole cost and expense, fully, diligently and in a timely manner, comply with all “Applicable Requirements,” which term is used in this Lease to mean all laws, rules, regulations, ordinances, directives, covenants, easements and restrictions of record, permits, the requirements of any applicable fire insurance underwriter or rating bureau, and the recommendations of Lessor’s engineers and/or consultants, relating in any manner to the Premises (including but not limited to matters pertaining to (i) industrial hygiene, (ii) environmental conditions on, in, under or about the Premises, including air quality, soil and groundwater conditions, and (iii) the use, generation, manufacture, production, installation, maintenance, removal, transportation, storage, spill, or release of any Hazardous Substance), now in effect or which may hereafter come into effect. Lessee shall, within five (5) days after receipt of Lessor’s written request, provide Lessor with copies of all documents and information, including but not limited to permits, registrations, manifests, applications, reports and certificates, evidencing Lessee’s compliance with any Applicable Requirements specified by Lessor, and shall immediately upon receipt, notify Lessor in writing (with copies of any documents involved) of any threatened or actual claim, notice, citation, warning, complaint or report pertaining to or involving failure by Lessee or the Premises to comply with any Applicable Requirements.

6.4Inspection; Compliance with Law. Lessor, Lessor’s agents, employees, contractors and designated representatives, and the holders of any mortgages, deeds of trust or ground leases on the Premises (“Lenders”) shall have the right to enter the Premises at any time in the case of an emergency, and otherwise at reasonable times, for the purpose of inspecting the condition of the Premises and for verifying compliance by Lessee with this Lease and all Applicable Requirements, and Lessor shall be entitled to employ experts and/or consultants in connection therewith to advise Lessor with respect to Lessee’s activities, including but not limited to Lessee’s installation, operation, use, monitoring, maintenance, or removal of any Hazardous Substance on or from the Premises. The costs and expenses of any such inspections shall be paid by the Party requesting same, unless a Default or Breach of this Lease by Lessee or a violation of Applicable Requirements or a contamination, caused or materially contributed to by Lessee, is found to exist or to be imminent, or unless the inspection is requested or ordered by a governmental authority as the result of any such existing or imminent violation or contamination. In such case, Lessee shall upon request reimburse Lessor or Lessor’s Lender, as the case may be, for the costs and expenses of such inspections.

7. Maintenance, Repairs, Utility Installations, Trade Fixtures and Alterations

7.1Lessee’s Obligations.

a.Subject to the provisions of Paragraphs 2.2 (Condition), 2.3 (Compliance with Covenants, Restrictions and Building Code), 7.2 (Lessor’s Obligations), 9 (Damage or Destruction), and 14 (Condemnation), Lessee shall, at Lessee’s sole cost and expense and at all times, keep the Premises and every part thereof in good order, condition and repair (whether or not such portion of the Premises requiring repair, or the means of repairing the same, are reasonably or readily accessible to Lessee, and whether or not the need for such repairs occurs as a result of Lessee’s use, any prior use, the elements or the age of such portion of the Premises), including, without limiting the generality of the foregoing, all equipment or facilities specifically serving the Premises, such as plumbing, heating, air conditioning, ventilating, electrical, lighting facilities, boilers, fire hose connections if within the Premises, fixtures, interior walls, interior surfaces of exterior walls, ceilings, floors, windows, doors, plate glass, and skylights, but excluding any items which are the responsibility of Lessor pursuant to Paragraph 7.2 below. Lessee, in keeping the Premises in good order, condition and repair, shall exercise and perform good maintenance practices. Lessee’s obligations shall include restorations, replacements or renewals when necessary to keep the Premises and all improvements thereon or a part thereof in good order, condition and state of repair.

b.Notwithstanding the foregoing, Lessor shall procure and maintain a contract with a contractor specializing and experienced in the inspection, maintenance and service of the heating, air conditioning and ventilation for the Premises and a contract for fire/life safety inspections, repairs and monitoring. Such HVAC maintenance contract shall provide for maintenance of the HVAC system not less than quarterly and replacement of the air filters not less than monthly. Lessee shall reimburse Lessor upon demand for the cost of such contracts or as part of Common Area Operating Expenses.

c.If Lessee fails to perform Lessee’s obligations under this Paragraph 7.1, Lessor may enter upon the Premises after ten (10) days’ prior written notice to Lessee (except in the case of an emergency, in which case no notice shall be required), to perform such obligations on Lessee’s behalf, and put the Premises in good order, condition and repair, in accordance with Paragraph 13.2 below.

7.2Lessor’s Obligations. Subject to the provisions of Paragraphs 2.2 (Condition), 2.3 (Compliance with Covenants, Restrictions and Building Code), 4.2 (Common Area Operating Expenses), 6 (Use), 7.1 (Lessee’s Obligations), 9 (Damage or Destruction) and 14 (Condemnation), and subject to the reimbursement requirements of Paragraph 4.2, Lessor, shall keep in good order, condition and repair the foundations, exterior walls, structural condition of interior bearing walls, exterior roof, fire sprinkler and/or standpipe and hose (if located in the Common Areas) or other automatic fire extinguishing system including fire alarm and/or smoke detection systems and equipment, fire hydrants, parking lots, walkways, parkways, driveways, landscaping, fences, signs and utility systems serving the Common Areas and all parts thereof, as well as providing the services for which there is a Common Area Operating Expense pursuant to Paragraph 4.2. Lessor shall not be obligated to paint the exterior or interior surfaces of exterior walls nor shall Lessor be obligated to maintain, repair or replace windows, doors (or any parts thereof), skylights or plate glass of the Premises. Lessee expressly waives the benefit of any statute now or hereafter in effect which would otherwise afford Lessee the right to make repairs at Lessor’s expense or to terminate this Lease because of Lessor’s failure to keep the Building, Industrial Center or Common Areas in good order, condition and repair.

7.3Utility Installations, Trade Fixtures, Alterations.

a.Definitions; Consent Required. The term “Utility Installations” is used in this Lease to refer to all air lines, power panels, electrical distribution, security, fire protection systems, communications systems, lighting fixtures, heating, ventilating and air conditioning equipment, plumbing, and fencing in, on or about the Premises. The term “Trade Fixtures” shall mean Lessee’s machinery and equipment, which can be removed without doing damage to the Premises, including all warehouse racks installed by Lessee in the Premises. The term “Alterations” shall mean any modification of the improvements on the Premises, which are provided by Lessor or by Lessee, with Lessor’s prior written approval, under the terms of this Lease, other than Utility Installations or Trade Fixtures. “Lessee-Owned Alterations and/or Utility Installations” are defined as Alterations and/or Utility Installations made by Lessee that are not yet owned by Lessor pursuant to Subparagraph 7.4 (a). Lessee shall not make nor cause to be made any Alterations or Utility Installations in, on, under or about the Premises without Lessor’s prior written consent. Notwithstanding anything to the contrary contained in this Lease, Lessee shall have the right to install warehouse racks during the Term, provided that such installation is in compliance with Applicable Laws, and Lessee agrees to remove all such racks prior to the expiration or earlier termination of this Lease and repair any damage caused by such installation and removal at Lessee’s sole cost and expense.

b.Consent. Any Alterations or Utility Installations that Lessee shall desire to make and which require the consent of the Lessor shall be presented to Lessor in written form with detailed plans. All consents given by Lessor, whether by virtue of Subparagraph 7.3 (a) or by subsequent specific consent, shall be deemed conditioned upon: (i) Lessee’s acquiring all applicable permits required by governmental authorities; (ii) the furnishing of copies of such permits together with a copy of the plans and specifications for the Alteration or Utility Installation to Lessor prior to commencement of the work thereon; and (iii) the compliance by Lessee with all conditions of said permits in a prompt and expeditious manner. In connection with approving any Alterations or Utility Installations, Lessor shall have the right to approve Lessee’s contractor(s). Any Alterations or Utility Installations by Lessee during the Term of this Lease shall be done in a good and workmanlike manner, with good and sufficient materials, and be in compliance with all Applicable Requirements. Lessor’s approval of the plans, specifications and working drawings for Lessee’s Alterations or Utility Installations shall create no responsibility or liability on the part of Lessor for their completeness, design sufficiency, or compliance with all laws, rules and regulations of governmental agencies or authorities. All work with respect to any Alterations or Utility Installations must be done in a good and workmanlike manner and diligently prosecuted to completion to the end that the Premises shall at all times be a complete unit except during the period of work. In performing the work of any such Alterations or Utility Installations, Lessee shall have the work performed in such manner as not to obstruct access to the Building or the Common Areas for any other lessee of the Building or the Industrial Center, and as not to obstruct the business of Lessor or other lessees or occupants in the Building or the Industrial Center, or interfere with the labor force working in the Building or the Industrial Center. In the event that Lessee makes any Alterations or Utility Installations, Lessee agrees to carry “Builder’s All Risk” insurance in an amount approved by Lessor covering the construction of such Alterations or Utility Installations, and such other insurance as Lessor may require, it being understood and agreed that all of such Alterations or Utility Installations shall be insured by Lessee pursuant to Article 8 of this Lease immediately upon completion thereof. Upon completion of any Alterations or Utility Installations, Lessee agrees to cause a Notice of Completion to be recorded in the office of the Recorder of the county in which the Building is located in accordance with Section 3093 of the Civil Code of the State of California or any successor statute, and Lessee shall deliver to Lessor a reproducible copy of the “as built” drawings, and specifications therefor of the Alterations or Utility Installations. Lessor may (but without obligation to do so) condition its consent to any requested Alteration or Utility Installation that costs Five Thousand Dollars ($5,000.00) or more upon Lessee’s providing Lessor with a lien and completion bond in an amount equal to one and one-half times the estimated cost of such Alteration or Utility Installationor provide such assurances to Lessor, including without limitation, establishing an escrow account, as Lessor shall require to assure payment of the costs thereof to protect Lessor and the Industrial Center from and against any mechanic’s, materialmen’s or other liens. Lessee shall keep the Premises lien free. Lessee shall pay to Lessor all of Lessor’s actual costs incurred in conjunction with the review of Lessee’s proposed Alterations or Utility Installations within fifteen (15) days of Lessee’s receipt of an invoice therefor.

c.Lien Protection. Lessee shall pay when due all claims for labor or materials furnished or alleged to have been furnished to or for Lessee at or for use on the Premises, which claims are or may be secured by any mechanic’s or materialmen’s lien against the Premises or any interest therein. Lessee shall give Lessor not less than ten (10) days’ notice prior to the commencement of any work in, on, or about the Premises, and Lessor shall have the right to post notices of non-responsibility in or on the Premises and to record the same, as provided by law. If Lessee shall, in good faith, contest the validity of any such lien, claim or demand, then Lessee shall, at its sole expense, defend and protect itself, Lessor and the Premises against the same and shall pay and satisfy any such adverse judgment that may be rendered thereon before the enforcement thereof against the Lessor or the Premises. If Lessor shall require, Lessee shall furnish to Lessor a surety bond satisfactory to Lessor in an amount equal to one and one-half times the amount of such contested lien claim or demand, indemnifying Lessor against liability for the same, as required by law for the holding of the Premises free from the effect of such lien or claim. In addition, Lessor may require Lessee to pay Lessor’s attorneys’ fees and costs in participating in such action if Lessor shall decide it is to its best interest to do so.

7.4Ownership, Removal, Surrender, and Restoration.

a.Ownership. Subject to Lessor’s right to require their removal and to cause Lessee to become the owner thereof as hereinafter provided in this Paragraph 7.4, all Alterations and Utility Installations made to the Premises by Lessee shall be the property of and owned by Lessee, but considered a part of the Premises. Lessor may, at any time and at its option, elect in writing to Lessee to be the owner of all or any specified part of the Lessee‑Owned Alterations and Utility Installations. Unless otherwise instructed per Subparagraph 7.4 (b) hereof, all Lessee‑Owned Alterations and Utility Installations shall, at the expiration or earlier termination of this Lease, automatically and without further action on the part of Lessor, become the property of Lessor and remain upon the Premises and be surrendered with the Premises by Lessee.

b.Removal. Unless otherwise agreed in writing, Lessor may require that any or all Lessee‑Owned Alterations or Utility Installations be removed by the expiration or earlier termination of this Lease, notwithstanding that Lessor may have consented to their installation. Lessor may require the removal at any time of all or any part of any Alterations or Utility Installations made without the required consent of Lessor.

c.Surrender/Restoration. Lessee shall surrender the Premises by the end of the last day of the Term or any earlier termination date, clean and free of debris and in good operating order, condition and state of repair (including, but not limited to: all plumbing in working order with sinks and toilets cleaned; all lights, ballasts, and lenses are operational; overhead doors are serviced and repaired; anything mounted on a door, window or wall removed (including names on office doors, white boards and any cohesive residue from such items); all electronic, fiber, phone and data cabling and related equipment that has been installed by or for the exclusive benefit of Lessee in or around the Premises removed (unless Lessor notifies Lessee in writing that it may remain in place); missing or damaged dock bumpers, levelers, seals, locks, and lights are repaired or replaced; any damaged sheetrock is repaired; floors are clean and free of paint, glue and chips; all racking bolts and other protrusions are removed from the floor and patched with epoxy; and all floor cracks ¼ inch wide or larger are filled with epoxy; and exterior signage is removed and the fascia is repaired and repainted), as more particularly described in the Move Out Standards attached as Exhibit H to this Lease, and shall provide Lessor with keys for all interior doors. Except as otherwise agreed or specified herein, the Premises, as surrendered, shall include the Alterations and Utility Installations. The obligations of Lessee shall include the repair of any damage occasioned by the installation, maintenance or removal of Lessee’s Trade Fixtures, furnishings, equipment, and Lessee‑Owned Alterations and Utility Installations, as well as the removal of any storage tank installed by or for Lessee, and the removal, replacement, or remediation of any air quality, soil, material or ground water contaminated by Lessee, all as may then be required by Applicable Requirements and/or good practice. Lessee’s Trade Fixtures shall remain the property of Lessee and shall be removed by Lessee subject to its obligation to repair and restore the Premises pursuant to this Lease.

8. Insurance; Indemnity.

8.1Lessor’s Insurance. At all times during the Term of this Lease, Lessor will purchase and maintain, as part of the Common Area Operating Expenses, Commercial General Liability Insurance and Commercial Property Insurance covering the Common Areas and Lessor’s equipment and furnishings in such reasonable amounts and with such reasonable coverages as determined by Lessor. Lessee acknowledges that it shall not be a named insured on such policies and that it has no right to receive any proceeds from any such insurance policies carried by Lessor. Lessee further acknowledges that Lessor shall not be required to carry insurance covering (1) Lessee-Owned Alterations and Utility Installations, Trade Fixtures and Lessee’s personal property; (2) Business Income Insurance against, or be responsible for, any loss suffered by Lessee due to interruption of Lessee’s business from any cause; (3) loss to the Premises resulting from flood, earthquake, windstorm or hurricane; and (4) any other type of property. Lessee shall cooperate with Lessor’s insurance companies in the adjustment of any claims for any damage to the Building.

8.2Lessee’s Insurance. At all times during the Term of this Lease, Lessee will purchase and maintain, at Lessee’s sole expense, the following insurance, in amounts not less than those specified below or such other amounts as Lessor may from time to time reasonably request, with insurance companies and on forms satisfactory to Lessor:

a.Commercial General Liability Insurance written on an I.S.O. “occurrence” form or its equivalent covering the use, occupancy and maintenance of the Premises and all operations of Lessee. Such coverage shall include a limit of $1,000,000 per occurrence for Bodily Injury and Property Damage, $2,000,000 General Aggregate, $2,000,000 Products/Completed Operations aggregate, $1,000,000 limit for Personal & Advertising Injury and $250,000 Fire Damage Legal Liability limit. The policy shall also contain an endorsement or its equivalent amending the “Primary Insurance” clause as follows: “The insurance afforded to Additional Insureds under this policy is primary insurance and the insurer will not seek contribution from other insurance available to the Additional Insureds.”

b.Umbrella or Excess Liability Insurance to be excess over the Commercial General Liability, Automobile Liability and Employers’ Liability Insurance. The Umbrella Liability policy shall be written on an “occurrence” form with a limit of liability of Two Million Dollars ($2,000,000.00) and a Self-Insured Retention no greater than Ten Thousand Dollars ($10,000.00).

c.Commercial Property Insurance covering all Lessee’s furniture, fixtures, machinery, equipment, stock and any other personal property owned and/or used in Lessee’s business and all leasehold improvements, whether made or acquired at the Lessee’s expense or Lessor’s expense, plate glass that is part of the Premises and any other property in the Premises that Lessee is responsible for repairing or replacing under this Lease, in an amount equal to their full replacement cost without deduction for depreciation. At a minimum, such policy shall insure against destruction or damage by fire and other perils covered on an ISO Causes of Loss - Special Form including wind. Such policy shall further provide Replacement Cost Coverage. Such policy shall not contain a per occurrence deductible greater than Ten Thousand Dollars ($10,000.00). Further, the policy shall contain a provision specifically naming Lessor as loss payee for property which Lessor has an insurable interest (i.e., leasehold improvements).

d.Lessee agrees to use its best efforts to obtain Business Income and/or Extra Expense Insurance in an amount sufficient to insure payment of Rent and all other expenses to be borne by Lessee under this Lease, for a period of not less than Twelve (12) months, during any interruption of Lessee’s business by reason of the Premises or personal property being damaged by fire or other perils covered on an ISO Causes of Loss - Special Form or its equivalent. In addition, such coverage shall be written on an Agreed Amount Basis. Notwithstanding

the foregoing, Lessee shall have no obligation to obtain such business interruption insurance during the Original Term. Lessee acknowledges that it assumes all risks of loss due to interruption of Lessee’s business by any cause.

e.If reasonably required by Lessor because of special environmental concerns regarding the Lessee’s operations, Pollution Legal Liability Insurance and/or Environmental Impairment Insurance covering claims for damage or injury caused by hazardous materials, including, without limitation, bodily injury, wrongful death, property damage, including loss of use, removal, cleanup and restoration of work and materials necessary to return the Premises and any other property of whatever nature located on the Premises to their condition existing prior to the appearance of Lessee’s hazardous materials on the Premises. If such coverage is required, Lessor shall determine limits of liability.

f.Automobile Liability Insurance to include coverage for any owned, non-owned or hired automobiles entering and exiting from the Premises and automobile contractual liability with limits of: $1,000,000 per Person/$1,000,000 per Accident - Bodily Injury; $1,000,000 per Accident - Property Damage; and Basic No-Fault coverage as required by law or regulation if any, in the State in which the Premises is located.

g.Workers’ Compensation coverage shall be carried as required by law in the State in which the employees are hired and to further include: Voluntary Compensation Coverage and Other States’ Coverage, if applicable, with statutory limits for Workers’ Compensation and limits for Employers’ Liability of: $1,000,000 Each Accident; $1,000,000 Disease - Policy Limit; and $1,000,000 Disease - Each Employee.

8.3General Requirements.

a.Certificates of Insurance evidencing all such insurance and acceptable to Lessor shall be filed with Lessor prior to occupancy of the Premises and at least five (5) days prior to the expiration of the term of each policy thereafter. Such Certificates of Insurance must specifically show all of the special policy conditions required in this Article including “additional insured”, “waiver of subrogation”, “notice of cancellation”, and “primary insurance” wording applicable to each policy. Alternatively, a certified, true and complete copy of each properly endorsed policy may be submitted. All coverage shall be written by an admitted insurer in the State in which the Premises is located with a current Best Rating of A-10 or better.

b.Each policy shall contain: (i) a waiver of subrogation endorsement for each coverage included in Section 8.2 of this Lease; (ii) an endorsement specifically naming the following as additional insureds: (1) Lessor, (2) Westcore Properties, LLC, and (3) Wellcorp Properties, LLC,,and their officers, members, managers, directors, partners and employees (the “Additional Insured Parties”); (iii) an endorsement amending the “Other Insurance” clause as follows: “Subject to the terms and conditions of this policy, the insurance afforded to Additional Insureds, (1) Lessor, (2) Westcore Properties, LLC, and (3) Wellcorp Properties, LLC, under this policy shall be considered to be primary to any insurance they may have in force which also applies to a loss covered hereunder and, further, the insurer shall not seek contribution from other insurance available to the Additional Insureds.”

c.All insurance policies required hereunder shall be specifically endorsed to state that coverages afforded under the policies will not be cancelled or allowed to expire for any reason until at least thirty (30) days’ prior written notice has been mailed to the Lessor. The Certificate of Insurance for each policy must state that “the issuing company will mail thirty (30) days’ written notice of cancellation or modification to the certificate holder.” The words “endeavor to” and “failure to mail such notice shall impose no obligation for liability . . .” are unacceptable and these two phrases must be crossed out if they appear in the printed certificate form.

d.The amounts of such insurance shall not limit Lessee’s liability nor relieve Lessee of any obligation hereunder. Each policy shall insure Lessee’s performance of the indemnity provisions contained in this Lease. If the limits of available liability coverage required herein become substantially reduced as a result of claim payments, Lessee shall immediately, at its own expense, purchase insurance to reinstate the limits of liability coverage required by this Lease.

Lessee shall not settle any claim or accept any proceeds in satisfaction of any claim involving damage to the Premises or liability of Lessor without Lessor’s express prior written consent.

e.Lessee may maintain the insurance required under this Paragraph under blanket or umbrella policies, as applicable, issued to Lessee covering other properties owned or leased by Lessee; provided that the policies otherwise comply with this Paragraph and allocate to the Premises the coverage specified by this Paragraph, without possibility of reduction or coinsurance penalty by reason of, or damage to, any other properties named therein, and if the insurance required by this Paragraph shall be effected by any such blanket or umbrella policies, Lessee shall furnish to Lessor certified copies of policies with schedules thereto attached showing the amount of insurance afforded by such policies to the Premises. Lessor, its agents and employees, make no representation that the limits of liability specified to be carried by Lessee pursuant to this Paragraph are adequate to protect Lessee. If Lessee believes that any of such insurance coverage is inadequate, Lessee will obtain such additional insurance coverage as Lessee deems adequate, at Lessee’s sole expense. Lessor hereby reserves the right to make commercially reasonable changes at any time to the insurance requirements herein.

8.4Waiver of Subrogation. To the extent permitted by law and without affecting the coverage provided by insurance required to be maintained hereunder, Lessor and Lessee each hereby waives, on their behalf and on behalf of their respective insurance carriers, any claim which either Party might otherwise have against the other Party, arising out of loss or damage, including consequential loss or damage, to any property of such Party from any risk required to be insured against hereunder. Lessor and Lessee shall each indemnify the other against any loss or expense, including reasonable attorneys’ fees, resulting from the failure of either Party, respectively, to obtain the waivers required by this Paragraph 8.4.

8.5Indemnity. Except for Lessor’s gross negligence or willful misconduct, Lessee shall indemnify, protect, defend and hold harmless the Premises, the Industrial Center, Lessor and Lessor Parties from and against any and all Claims arising out of, involving, or in connection with, the occupancy of the Premises by Lessee, the conduct of Lessee’s business, any act, omission or neglect of Lessee, its agents, contractors, employees or invitees, and out of any Default or Breach by Lessee in the performance in a timely manner of any obligation on Lessee’s part to be performed under this Lease. The foregoing shall include, but not be limited to, the defense or pursuit of any claim or any action or proceeding involved therein, and whether or not (in the case of claims made against Lessor) litigated and/or reduced to judgment. In case any action or proceeding is brought against Lessor by reason of any of the foregoing matters, Lessee, upon notice from Lessor, shall defend

the same at Lessee’s expense by counsel reasonably satisfactory to Lessor and Lessor shall cooperate with Lessee in such defense. Lessor need not have first paid any such claim in order to be so indemnified. Lessor need not have first paid any such claim in order to be so indemnified. The provisions of this Paragraph 8.5 shall survive the expiration or earlier termination of this Lease.

8.6Exemption of Lessor from Liability. Lessor shall not be liable for injury or damage to the person or goods, wares, merchandise or other property of Lessee’s employees, contractors, invitees, customers, or any other person in or about the Premises, whether such damage or injury is caused by or results from fire, steam, electricity, gas, water or rain, or from the breakage, leakage, obstruction or other defects of pipes, fire sprinklers, wires, appliances, plumbing, air conditioning or lighting fixtures, or from any other cause, whether said injury or damage results from conditions arising upon the Premises or upon other portions of the Building of which the Premises are a part, from other sources or places, and regardless of whether the cause of such damage or injury or the means of repairing the same is accessible or not. Lessor shall not be liable for any damages arising from any act or neglect of any other lessee of Lessor nor from the failure by Lessor to enforce the provisions of any other lease or occupancy agreement in the Industrial Center. Notwithstanding Lessor’s negligence or breach of this Lease, Lessor shall under no circumstances be liable for injury to Lessee’s business or for any loss of income or profit therefrom.

9. Damage or Destruction.

9.1Definitions.

a.“Premises Partial Damage” shall mean damage or destruction to the Premises, other than Lessee‑Owned Alterations and Utility Installations, the repair cost of which damage or destruction is less than seventy-five percent (75%) of the then Replacement Cost (as defined in Subparagraph 9.1 (d)) of the Premises (excluding Lessee‑Owned Alterations and Utility Installations and Trade Fixtures) immediately prior to such damage or destruction.

b.“Premises Total Destruction” shall mean damage or destruction to the Premises, other than Lessee‑Owned Alterations and Utility Installations, the repair cost of which damage or destruction is seventy-five percent (75%) or more the then Replacement Cost of the Premises (excluding Lessee‑Owned Alterations and Utility Installations and Trade Fixtures) immediately prior to such damage or destruction. In addition, damage or destruction to the Building, other than Lessee‑Owned Alterations and Utility Installations and Trade Fixtures of any lessees of the Building, the cost of which damage or destruction is seventy-five percent (75%) or more of the then Replacement Cost (excluding Lessee‑Owned Alterations and Utility Installations and Trade Fixtures of any lessees of the Building) of the Building shall, at the option of Lessor, be deemed to be Premises Total Destruction.

c.“Insured Loss” shall mean damage or destruction to the Premises, other than Lessee‑Owned Alterations and Utility Installations and Trade Fixtures, which was caused by an event required to be covered by the insurance described in Paragraph 8.1 irrespective of any deductible amounts or coverage limits involved, and where adequate insurance proceeds are available to Lessor for the reconstruction of the Premises.

d.“Replacement Cost” shall mean the cost to repair or rebuild the improvements owned by Lessor at the time of the occurrence to their condition existing immediately prior thereto, including demolition, debris removal and upgrading required by the operation of applicable building codes, ordinances or laws, and without deduction for depreciation.

e.“Hazardous Substance Condition” shall mean the occurrence or discovery of a condition involving the presence of, or a contamination by, a Hazardous Substance as defined in Subparagraph 6.2 (a), in, on or under the Premises.

9.2Premises Partial Damage - Insured Loss. If Premises Partial Damage occurs, and such damage or destruction is an Insured Loss, then Lessor shall, at Lessor’s expense, repair such damage (but not Lessee’s Trade Fixtures or Lessee‑Owned Alterations and Utility Installations) as soon as reasonably possible and this Lease shall continue in full force and effect. In the event, however, that there is a shortage of insurance proceeds available to Lessor, Lessor shall have no obligation to pay for the shortage in insurance proceeds or to fully restore the unique aspects of the Premises unless Lessee provides Lessor with the funds to cover same, or adequate assurance thereof, within ten (10) days following receipt of written notice of such shortage and request therefor. If Lessor receives said funds or adequate assurance thereof within said ten (10) day period, Lessor shall complete them as soon as reasonably possible and this Lease shall remain in full force and effect. If Lessor does not receive such funds or assurance within said period, Lessor may nevertheless elect by written notice to Lessee within ten (10) days thereafter to make such restoration and repair as is commercially reasonable with Lessor paying any shortage in proceeds, in which case this Leases shall remain in full force and effect. If Lessor does not receive such funds or assurance within such ten (10) day period, and if Lessor does not so elect to restore and repair, then this Lease shall terminate sixty (60) days following the occurrence of the damage or destruction. Unless otherwise agreed, Lessee shall in no event have any right to reimbursement from Lessor for any funds contributed by Lessee to repair any such damage or destruction. Premises Partial Damage due to flood or earthquake shall be subject to Paragraph 9.3.

9.3Partial Damage - Uninsured Loss. If Premises Partial Damage occurs and such damage or destruction is not an Insured Loss, then unless such damage or destruction was caused by a negligent or willful act of Lessee, its agents, contractors or employees (in which the event Lessee shall make the repairs at Lessee’s expense and this Lease shall continue in full force and effect), Lessor may at Lessor’s option, either (i) repair such damage as soon as reasonably possible at Lessor’s expense, in which event this Lease shall continue in full force and effect, or (ii) give written notice to Lessee within sixty (60) days after receipt by Lessor of knowledge of the occurrence of such damage of Lessor’s desire to terminate this Lease as of the date sixty (60) days following the date of such notice. In the event Lessor elects to give such notice of Lessor’s intention to terminate this Lease, Lessee shall have the right within ten (10) days after the receipt of such notice to give written notice to Lessor of Lessee’s commitment to pay for the repair of such damage totally at Lessee’s expense and without reimbursement from Lessor. Lessee shall provide Lessor with the required funds or satisfactory assurance thereof within thirty (30) days following such commitment from Lessee. In such event this Lease shall continue in full force and effect, and Lessor shall proceed to make such repairs as soon as reasonably possible after the required funds are available. If Lessee does not give such notice and provide the funds or assurance thereof within in the times specified above, this Lease shall terminate as of the date specified in Lessor’s notice of termination.

9.4Total Destruction. Notwithstanding any other provision hereof, if Premises Total Destruction occurs (including any destruction required by any authorized public authority), and Lessee is prevented from utilizing the Premises and from deriving any beneficial use therefrom, this Lease shall as of the date of such Premises Total Destruction, whether or not the damage or destruction is an Insured Loss

or was caused by a negligent or willful act of Lessee. In the event, however, that the damage or destruction was caused by Lessee, Lessor shall have the right to recover Lessor’s damages from Lessee except as released and waived in Paragraph 8.6.

9.5Damage Near End of Term. If at any time during the last six (6) months of the Term of this Lease there is damage for which the cost to repair exceeds one (1) month’s Base Rent, whether or not an Insured Loss, Lessor may, at Lessor’s option, terminate this Lease effective sixty (60) days following the date of occurrence of such damage by giving written notice to Lessee of Lessor’s election to do so within thirty (30) days after the date of occurrence of such damage. Provided, however, if Lessee at that time has an exercisable option to extend this Lease or to purchase the Premises, then Lessee may preserve this Lease by (a) exercising such option, and (b) providing Lessor with any shortage in insurance proceeds (or adequate assurance thereof) needed to make the repairs on or before the earlier of (i) the date which is ten (10) days after Lessee’s receipt of Lessor’s written notice purporting to terminate this Lease, or (ii) the day prior to the date upon which such option expires. If Lessee duly exercises such option during such period and provides Lessor with funds (or adequate assurance thereof) to cover any shortage in insurance proceeds, Lessor shall, at Lessor’s expense repair such damage as soon as reasonably possible and this Lease shall continue in full force and effect. If Lessee fails to exercise such option and provide such funds or assurance during such period, then this Lease shall terminate as of the date set forth in the first sentence of this Paragraph 9.5.

9.6Abatement of Rent; Lessee’s Remedies.

a.In the event of (i) Premises Partial Damage or (ii) Hazardous Substance Condition for which Lessee is not legally responsible, the Base Rent, Common Area Operating Expenses and other charges, if any, payable by Lessee hereunder for the period during which such damage or condition, its repair, remediation or restoration continues, shall be abated in proportion to the degree to which, in Lessor’s good faith reasonable business judgment, Lessee’s use of the Premises is impaired, but not in excess of proceeds from insurance required to be carried under Subparagraph 8.2 (d). Except for abatement of Base Rent, Common Area Operating Expenses and other charges, if any, as aforesaid, all other obligations of Lessee hereunder shall be performed by Lessee, and Lessee shall have no claim against Lessor for any damage suffered by reason of any such damage, destruction, repair, remediation or restoration.

b.If Lessor is obligated to repair or restore the Premises under the provisions of this Paragraph 9 and does not commence the repair or restoration of the Premises within one hundred eighty (180) days after either (i) such obligation shall accrue, or (ii) receipt of all applicable insurance proceeds, whichever time period is greater, then Lessee may, at any time prior to the commencement of such repair or restoration, give written notice to Lessor and to any Lenders of which Lessee has actual notice of Lessee’s election to terminate this Lease on a date not less than sixty (60) days following the giving of such notice. If Lessee gives such notice to Lessor and such Lenders and such repair or restoration is not commenced within sixty (60) days after receipt of such notice, this Lease shall terminate as of the date specified in said notice. If Lessor or a Lender commences the repair or restoration of the Premises within sixty (60) days after the receipt of such notice, this Lease shall continue in full force and effect. “Commence” as used in this Paragraph 9.6 shall mean either the authorization of the preparation of the required plans, or the beginning of the actual work on the Premises, whichever occurs first.

9.7Hazardous Substance Condition. If a Hazardous Substance Condition occurs, unless Lessee is legally responsible therefor (in which case Lessee shall make the investigation and remediation thereof required by Applicable Requirements and this Lease shall continue in full force and effect, but subject to Lessor’s rights under Subparagraph 6.2 (c) and Paragraph 13), Lessor may at Lessor’s option (which option shall be exercised in Lessor’s sole and absolute discretion) either (i) investigate and remediate such Hazardous Substance Condition, if and to the extent required by Applicable Requirements, as soon as reasonably possible at Lessor’s expense, in which event this Lease shall continue in full force and effect, or (ii) if the estimated cost to investigate and remediate such condition exceeds twelve (12) times the then monthly Base Rent or One Hundred Thousand Dollars ($100,000.00) whichever is greater, give written notice to Lessee, within thirty (30) days after receipt by Lessor of knowledge of the occurrence of such Hazardous Substance Condition and the estimated cost and time to remediate such Hazardous Substance Condition, of Lessor’s desire to terminate this Lease as of the date sixty (60) days following the date of such notice. In the event Lessor elects to give such notice of Lessor’s intention to terminate this Lease, Lessee shall have the right within ten (10) days after the receipt of such notice to give written notice to Lessor of Lessee’s commitment to pay for the excess costs of (a) investigation and remediation of such Hazardous Substance Condition to the extent required by Applicable Requirements, over (b) an amount equal to twelve (12) times the then monthly Base Rent or One Hundred Thousand Dollars ($100,000.00), whichever is greater. Lessee shall provide Lessor with the funds required of Lessee or satisfactory assurance thereof within thirty (30) days following said commitment by Lessee. In such event this Lease shall continue in full force and effect, and Lessor shall proceed to make such investigation and remediation as soon as reasonably possible after the required funds are available. If Lessee does not give such notice and provide the required funds or assurance thereof within the time period specified above, this Lease shall terminate as of the date specified in Lessor’s notice of termination.

9.8Termination - Advance Payments. Upon termination of this Lease pursuant to this Paragraph 9, Lessor shall return to Lessee any advance payment made by Lessee to Lessor and so much of Lessee’s Security Deposit as has not been or is not then required to be, used by Lessor under the terms of this Lease.

9.9Waiver of Statutes. Lessor and Lessee agree that the terms of this Lease shall govern the effect of any damage to or destruction of the Premises and the Building with respect to the termination of this Lease and hereby waive the provisions of any present or future statute to the extent it is inconsistent herewith.

10. Real Property Taxes.

10.1Payment of Taxes. Lessor shall pay the Real Property Taxes, as defined in Paragraph 10.2, applicable to the Industrial Center, and except as otherwise provided in Paragraph 10.3, any such amounts shall be included in the calculation of Common Area Operating Expenses in accordance with the provisions of Paragraph 4.2.

10.2Real Property Tax Definition. As used herein, the term “Real Property Taxes” shall include any form of real estate tax or assessment, general, special, ordinary or extraordinary, and any license fee, commercial rental tax, improvement bond or bonds, levy or tax (other than inheritance, personal income or estate taxes) imposed upon the Industrial Center by any authority having the direct or indirect power to tax, including any city, state or federal government, or any school, agricultural, sanitary, fire, street, drainage, or other improvement district thereof, levied against any legal or equitable interest of Lessor in the Industrial Center or any portion thereof, Lessor’s right to rent or other income therefrom, and/or Lessor’s business of leasing the Premises. The term “Real Property Taxes” shall also include any tax, fee, levy,

assessment or charge, or any increase therein, imposed by reason of events occurring, or changes in Applicable Law taking effect, during the Term of this Lease, including but not limited to a change in the ownership of the Industrial Center (or any portion thereof) or in the improvements thereon, the execution of this Lease, or any modification, amendment or transfer thereof, and whether or not contemplated by the Parties. In calculating Real Property Taxes for any calendar year, the Real Property Taxes for any real estate tax year shall be included in the calculation of Real Property Taxes for such calendar year based upon the number of days, which such calendar year and tax year have in common. Each year, at Lessor’s election, Lessor may protest real property assessments. In the event Lessor elects to protest a real property tax assessment, Lessor may utilize the services of a tax consultant to protest the real property tax assessment. If as a result of the protest, the Real Property Taxes are lowered, and a tax consultant has been utilized in connection with the protest, Lessee agrees to pay, as additional rent during the Term, its prorated Lessee’s Share of all fees payable to tax consultants in the manner set forth in this Lease, as long as there is a net benefit to Lessee from such lowering of Real Property Taxes.

10.3Additional Improvements. Common Area Operating Expenses shall not include Real Property Taxes specified in the tax assessor’s records and work sheets as being caused by additional improvements placed upon the Industrial Center by other lessees or by Lessor for the exclusive enjoyment of such other lessees. Notwithstanding Paragraph 10.1 hereof, Lessee shall, however, pay to Lessor at the time Common Area Operating Expenses are payable under Paragraph 4.2, the entirety of any increase in Real Property Taxes if assessed solely by reason of Alterations, Trade Fixtures or Utility Installations placed upon the Premises by Lessee or at Lessee’s request.

10.4Joint Assessment. If the Building is not separately assessed, Real Property Taxes allocated to the Building shall be an equitable proportion of the Real Property Taxes for all of the land and improvements included within the tax parcel assessed, such proportion to be determined by Lessor from the respective valuations assigned in the assessor’s work sheets or such other information as may be reasonably available. Lessor’s reasonable determination thereof, in good faith, shall be conclusive.

10.5Lessee’s Property Taxes. Lessee shall pay, prior to delinquency, all taxes assessed against and levied upon Lessee‑Owned Alterations and Utility Installations, Trade Fixtures, furnishings, equipment and all personal property of Lessee contained in the Premises or stored within the Industrial Center. When possible, Lessee shall cause its Lessee‑Owned Alterations and Utility Installations, Trade Fixtures, furnishings, equipment and all other personal property to be assessed and billed separately from the real property of Lessor. If any of Lessee’s said property shall be assessed with Lessor’s real property, Lessee shall pay Lessor the taxes attributable to Lessee’s property within ten (10) days after receipt of a written statement setting forth the taxes applicable to Lessee’s property.

11.Utilities. Lessee shall pay directly for all utilities and services supplied to the Premises, including but not limited to electricity, telephone, security, gas, and cleaning of the Premises, together with any taxes thereon. Upon Lessor’s request, Lessee shall deliver to Lessor copies of all bills for separately metered utilities supplied to the Premises for the past twelve (12) month period within thirty (30) days of Lessor’s request. Lessee shall provide all necessary authorizations for Lessor to obtain any bills relating to utility usage at the Premises directly from the utility provider. If any such utilities or services are not separately metered to the Premises or separately billed to the Premises, Lessee shall pay to Lessor a reasonable proportion to be determined by Lessor of all such charges jointly metered or billed with other premises in the Building, in the manner and within the time periods set forth in Subparagraph 4.2 (d).

12. Assignment and Subletting.

12.1Lessor’s Consent Required.

(a)Lessee shall not voluntarily or by operation of law assign, transfer, mortgage or otherwise transfer or encumber (collectively, “assign” or “assignment”) or sublet all or any part of Lessee’s interest or obligations in this Lease or in the Premises without Lessor’s prior written consent given under and subject to the terms of this Paragraph 12 and Paragraph 36, which Lessor shall not withhold unreasonably; provided, that it shall not be unreasonable for Lessor to withhold its consent if any of the following circumstances exist or may exist: (i) the transferee’s contemplated use of the Premises following the proposed assignment or subletting is different from the permitted use specified herein; (ii) in Lessor’s reasonable business judgment, the transferee lacks sufficient business reputation or experience to operate a successful business of the type and quality permitted under the Lease; (iii) in Lessor’s reasonable business judgment, the present net worth of the transferee is less than the greater of Lessee’s net worth at the Effective Date or Lessee’s “Net Worth” (as defined below) at the date of Lessee’s request for consent to the assignment or subletting; (iv) in Lessor’s reasonable business judgment, the Rent that Lessor reasonably anticipates receiving from the transferee is less than that which Lessor has received from Lessee; (v) the proposed assignment or subletting would breach any covenant of Lessor in any other lease, financing agreement or other agreement relating to the Industrial Center or otherwise; or (vi) the transferee requests an amendment to the Lease other than the identity of Lessee. “Net Worth” for purposes of this Lease shall be the net worth of Lessee (excluding any guarantors) established under generally accepted accounting principles consistently applied.

(b)Regardless of Lessor’s consent, any assignment or subletting shall not (i) be effective without the express written assumption by such assignee or sublessee of the obligations of Lessee under this Lease; (ii) release Lessee of any obligations hereunder; nor (iii) alter the primary liability of Lessee for the payment of Base Rent and other sums due Lessor hereunder or for the performance of any other obligations to be performed by Lessee under this Lease.

(c)A “Change of Control” of Lessee shall constitute an assignment requiring Lessor’s consent. Change of Control shall mean the transfer by sale, assignment, death, incompetency, mortgage, deed of trust, trust, operation of law, or otherwise, of any shares, voting rights or ownership interest which will result in a change in the identity of the entity, entities, person or persons exercising, or who may exercise, effective control of Lessee, unless such change results from the trading of shares listed on a recognized public stock exchange and such trading is not for the purpose of acquiring effective control of Lessee. If Lessee is a private corporation whose stock becomes publicly held, the transfers of such stock from private to public ownership shall not be deemed a Change of Control. The transfer, on a cumulative basis, of twenty-five percent (25%) or more of the voting control of Lessee shall constitute a change in control for this purpose.

In addition, the involvement of Lessee or its assets in any transaction, or series of transactions (by way of merger, sale, acquisition, financing, refinancing, transfer, leveraged buy-out or otherwise), which may, in Lessor’s reasonable business judgment, result in a reduction of the Net Worth of Lessee by an amount equal to or greater than twenty-five percent (25%) of the greater of (i) such Net Worth of Lessee as it was represented to Lessor at the time of full execution and delivery of this Lease or at the time of the most recent assignment to which Lessor has

consented, or (ii) as it exists immediately prior to said transaction or transactions constituting such reduction shall be considered an assignment of this Lease by Lessee to which Lessor may reasonably withhold its consent.

(d)An assignment of Lessee’s interest in this Lease or subletting of the Premises or any part thereof without Lessor’s specific prior written consent shall, at Lessor’s option, breach under this Lease. In the event of any Default or Breach of Lessee’s obligation under this Lease, Lessor may proceed directly against Lessee, any Guarantors or anyone else responsible for the performance of the Lessee’s obligations under this Lease, including any sublessee, without first exhausting Lessor’s remedies against any other person or entity responsible therefor to Lessor, or any security held by Lessor.

Lessee’s remedy for any breach of this Paragraph 12.1 by Lessor shall be limited to compensatory damages and/or injunctive relief.

12.2Additional Terms and Conditions Applicable to Assignment and Subletting.

(a)Lessor may accept any Rent or performance of Lessee’s obligations from any person other than Lessee pending approval or disapproval of an assignment. Neither a delay in the approval or disapproval of such assignment nor the acceptance of any Rent for performance shall constitute a waiver or estoppel of Lessor’s right to exercise its remedies for the Default or Breach by Lessee of any of the terms, covenants or conditions of this Lease.

(b)The consent of Lessor to any assignment or subletting shall not constitute consent to any subsequent assignment or subletting by Lessee or to any subsequent or successive assignment or subletting by the assignee or sublessee. However, Lessor may consent to subsequent sublettings and assignments of the sublease or any amendments or modifications thereto without notifying Lessee or anyone else liable under this Lease or the sublease and without obtaining their consent, and such action shall not relieve such persons from liability under this Lease or the sublease.

(c)Should Lessee desire to enter into an assignment or subletting transaction, Lessee shall give notice thereof to Lessor by requesting in writing Lessor’s consent to such assignment or subletting at least ninety (90) days before the proposed effective date of any such assignment or subletting and shall provide Lessor with the following: (i) the full particulars of the proposed assignment or subletting transaction, including its nature, effective date, terms and conditions, and copies of any documents pertaining to such proposed transaction; (ii) a description of the identity, net worth and previous business experience of the transferee, including, without limitation, copies of transferee’s latest income, balance sheet and change-of-financial-position statements (with accompanying notes and disclosures of all material changes thereto) in audited form, if available, and certified as accurate by the transferee; and (iii) any further information relevant to the transaction which Lessor shall have requested within thirty (30) days after receipt of Lessee’s request for consent and all information specified above in Subparagraphs (i), (ii) and (iii).Each assignment or subletting to which Lessor has consented shall be evidenced by an instrument made in such written form as is satisfactory to Lessor and executed by Lessee and transferee. By such instrument, transferee shall assume all the terms, covenants and conditions of this Lease, which are obligations of Lessee. Lessee shall remain fully liable to perform its duties under this Lease following the assignment or subletting. Lessee shall, on demand of Lessor, reimburse Lessor for Lessor’s reasonable costs, including legal fees, incurred in obtaining advice and preparing documentation for each assignment or subletting to which Lessor has consented.

(d)Any assignee of, or sublessee under, this Lease shall, by reason of accepting such assignment or entering into such sublease, be deemed, for the benefit of Lessor, to have assumed and agreed to conform and comply with each and every term, covenant, condition and obligation herein to be observed or performed by Lessee during the term of said assignment or sublease, other than such obligations as are contrary to or inconsistent with provisions of an assignment or sublease to which Lessor has specifically consented in writing.

(e)If Lessor consents to an assignment or subletting, as a condition thereto which the Parties hereby agree is reasonable, Lessee shall pay to Lessor any “Transfer Premium,” as that term is defined in this Paragraph, received by Lessee from such assignee or sublessee. “Transfer Premium” shall mean fifty percent (50%) of all rent, additional rent or other consideration (including, without limitation, key money, bonus money or other cash consideration of any kind) payable by the assignee or sublessee to Lessee or any person or entity affiliated with Lessee in connection with the assignment or sublease in excess of the Base Rent under this Lease during the term of the assignment or sublease, deducting any documented marketing and commission expenses incurred by Lessee, but excluding expenses incurred in improving the space or loss of rent. The determination of the amount of Lessor’s applicable share of the Transfer Premium shall be made on a monthly basis as rent or other consideration is received by Lessee under the assignment or sublease.

(f)Lessor shall have the right, by notice to Lessee within fifteen (15) days following receipt of a written notice of proposed assignment or sublease from Lessee, to terminate this Lease in the event of an assignment as to all of the Premises and, in the event of a sublease, as to the subleased portion of the Premises and to require that all or part, as the case may be, of the Premises be surrendered to Lessor for the balance of the Term (collectively “Recapture the Lease”).

12.3Additional Terms and Conditions Applicable to Subletting. The following terms and conditions shall apply to any subletting by Lessee of all or any part of the Premises and shall be deemed included in all subleases under this Lease whether or not expressly incorporated therein:

(a)Lessee hereby assigns and transfers to Lessor all of Lessee’s interest in all rentals and income arising from any sublease of all or a portion of the Premises heretofore or hereafter made by Lessee, and Lessor may collect such rent and income and apply same toward Lessee’s obligations under this Lease; provided, however, that until a Breach shall occur in the performance of Lessee’s obligations under this Lease, Lessee may, except as otherwise provided in this Lease, receive, collect and enjoy the rents accruing under such sublease. Lessor shall not, by reason of the foregoing provision or any other assignment of such sublease to Lessor, nor by reason of the collection of the rents from a sublessee, be deemed liable to the sublessee for any failure of Lessee to perform and comply with any of Lessee’s obligations to such sublessee under such Sublease. Lessee hereby irrevocably authorizes and directs any such sublessee, upon receipt of a written notice from Lessor stating that a Breach exists in the performance of Lessee’s obligations under this Lease, to pay to Lessor the rents and other charges due and to become due under the sublease. Sublessee shall rely upon any such statement and request from Lessor and shall pay such rents and other charges to Lessor without any obligation or right to inquire as to whether such Breach exists and notwithstanding any notice from or claim from Lessee to the contrary. Lessee shall have no right or claim against such sublessee, or, until the Breach has been cured, against Lessor, for any such rents and other charges so paid by said sublessee to Lessor.

(b)In the event of a Breach by Lessee in the performance of its obligations under this Lease, Lessor, at its option and without any obligation to do so, may require any sublessee to attorn to Lessor, in which event Lessor shall undertake the obligations of the sublessor under such sublease from the time of the exercise of said option to the expiration of such sublease; provided, however, Lessor shall not be liable for any prepaid rents or security deposit paid by such sublessee to such sublessor or for any other prior defaults or breaches of such sublessor under such sublease.

(c)Any matter or thing requiring the consent of the sublessor under a sublease shall also require the consent of Lessor herein.

(d)No sublessee under a sublease approved by Lessor shall further assign or sublet all or any part of the Premises without Lessor’s prior written consent, which consent may be granted or denied in Lessor’s sole discretion.

13. Default; Breach; Remedies.

13.1Default; Breach. Lessee’s obligations to Lessor hereunder shall include any and all costs or expenses incurred by Lessor in conjunction with enforcing Lessor’s rights and remedies hereunder, which shall include, but shall not be limited to, any attorneys’ fees or other legal expenses or costs associated therewith, and that Lessor may include the cost of such services and costs in any notice of Default as rent due and payable to cure said default. A “Default” by Lessee is defined as a failure by Lessee to observe, comply with or perform any of the terms, covenants, conditions or rules applicable to Lessee under this Lease. A “Breach” by Lessee is defined as the occurrence of any Default, including but not limited to those listed below, and, where a grace period for cure after notice is specified herein, the failure by Lessee to cure such Default prior to the expiration of the applicable grace period, and shall entitle Lessor to pursue the remedies set forth in Paragraphs 13.2 and/or 13.3:

a.The vacating of the Premises without the intention to reoccupy same, or the abandonment of the Premises.

b.Except as expressly otherwise provided in this Lease, the failure by Lessee to make any payment of Rent, Lessee’s Share of Common Area Operating Expenses, or any other monetary payment required to be made by Lessee hereunder as and when due, the failure by Lessee to provide Lessor with reasonable evidence of insurance or surety bond required under this Lease, or the failure of Lessee to fulfill any obligation under this Lease which endangers or threatens life or property, where such failure continues for a period of three (3) days following written notice thereof by or on behalf of Lessor to Lessee.

c.Except as expressly otherwise provided in this Lease, the failure by Lessee to provide Lessor with reasonable written evidence (in duly executed original form, if applicable) of (i) compliance with Applicable Requirements per Paragraph 6.3, (ii) the inspection, maintenance and service contracts required under Subparagraph 7.1 (b), (iii) the rescission of an unauthorized assignment or subletting per Paragraph 12.1, (iv) an Estoppel Certificate or financial statement per Paragraphs 16 or 37, (v) the subordination or non-subordination of this Lease per Paragraph 30, (vi) the Guaranty of the performance of Lessee’s obligations under this Lease if required under Paragraphs 1.11 and 37, (vii) the execution of any document requested under Paragraph 42 (Reservations), or (viii) any other documentation or information which Lessor may reasonably require of Lessee under the terms of this Lease, where any such failure continues for a period of ten (10) days following written notice by or on behalf of Lessor to Lessee.

d.A Default by Lessee as to the terms, covenants, conditions or provisions of this Lease, or of the Rules and Regulations adopted under Paragraph 39 hereof that are to be observed, complied with or performed by Lessee, other than those described in Subparagraphs 13.1(a), (b) or (c), above, where such Default continues for a period of thirty (30) days after written notice thereof by or on behalf of Lessor to Lessee; provided, however, that if the nature of Lessee’s Default is such that more than thirty (30) days are reasonably required for its cure, then it shall not be deemed to be a Breach of this Lease by Lessee if Lessee commences such cure within said thirty (30) day period and thereafter diligently prosecutes such cure to completion.

e.The occurrence of any of the following events: (i) the making by Lessee of any general arrangement or assignment for the benefit of creditors; (ii) Lessee’s becoming a “debtor” as defined in 11 U.S. Code Section 101 or any successor statute thereto (unless, in the case of a petition filed against Lessee, the same is dismissed within sixty (60) days); (iii) the appointment of a trustee or receiver to take possession of substantially all of Lessee’s assets located at the Premises or of Lessee’s interest in this Lease, where possession is not restored to Lessee within thirty (30) days; or (iv) the attachment, execution or other judicial seizure of substantially all of Lessee’s assets located at the Premises or of Lessee’s interest in this Lease, where such seizure is not discharged within thirty (30) days; provided, however, in the event that any provision of this Subparagraph 13.1(e) is contrary to any applicable law, such provision shall be of no force or effect, and shall not affect the validity of the remaining provisions.

f.The discovery by Lessor that any financial statement of Lessee or of any Guarantor, given to Lessor by Lessee or any Guarantor, was materially false.

13.2Remedies. If Lessee fails to perform any affirmative duty or obligation of Lessee under this Lease, within ten (10) days after written notice to Lessee (or in case of an emergency, without notice), Lessor may at its option (but without obligation to do so), perform such duty or obligation on Lessee’s behalf, including but not limited to the obtaining of reasonably required bonds, insurance policies, or governmental licenses, permits or approvals. The costs and expenses of any such performance by Lessor shall be due and payable by Lessee to Lessor upon invoice therefor. If any check given to Lessor by Lessee shall not be honored by the bank upon which it is drawn, Lessor at its own option, may require all future payments to be made under this Lease by Lessee to be made only by cashier’s check. In the event of a Breach of this Lease by Lessee, with or without further notice or demand, and without limiting Lessor in the exercise of any right or remedy, which Lessor may have by reason of such Breach, Lessor may:

a.Terminate Lessee’s right to possession of the Premises by any lawful means, in which case this Lease and the Term hereof shall terminate and Lessee shall immediately surrender possession of the Premises to Lessor. In such event Lessor shall be entitled to recover from Lessee: (i) the worth at the time of the award of the unpaid rent which had been earned at the time of termination; (ii) the worth at the time of award of the amount by which the unpaid rent which would have been earned after termination until the time of award exceeds the amount of such rental loss that the Lessee proves could have been reasonably avoided; (iii) the worth at the time of award of the amount by which the unpaid rent for the balance of the Term after the time of award exceeds the amount of such rental loss that the Lessee proves could

be reasonably avoided; and (iv) any other amount necessary to compensate Lessor for all the detriment proximately caused by the Lessee’s failure to perform its obligations under this Lease or which in the ordinary course of things would be likely to result therefrom, including but not limited to the cost of recovering possession of the Premises, expenses of reletting, including necessary renovation and alteration of the Premises, reasonable attorneys’ fees, and that portion of any leasing commission paid by Lessor in connection with this Lease applicable to the unexpired Term of this Lease. The worth at the time of award of the amount referred to in provision (iii) of the immediately preceding sentence shall be computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco or the Federal Reserve Bank District in which the Premises are located at the time of award plus one percent (1%). Efforts by Lessor to mitigate damages caused by Lessee’s Default or Breach of this Lease shall not waive Lessor’s right to recover damages under this Paragraph 13.2. If termination of this Lease is obtained through the provisional remedy of unlawful detainer, Lessor shall have the right to recover in such proceeding the unpaid rent and damages as are recoverable therein, or Lessor may reserve the right to recover all or any part thereof in a separate suit for such rent and/or damages. If a notice and grace period required under Subparagraph 13.1 (b), (c) or (d) was not previously given, a notice to pay rent or quit, or to perform or quit, as the case may be, given to Lessee under any statute authorizing the forfeiture of leases for unlawful detainer shall also constitute the applicable notice for grace period purposes required by Subparagraph 13.1 (b), (c) or (d). In such case, the applicable grace period under the unlawful detainer statute shall run concurrently after the one such statutory notice, and the failure of Lessee to cure the Default within the greater of the two (2) such grace periods shall constitute both an unlawful detainer and a Breach of this Lease entitling Lessor to the remedies provided for in this Lease and/or by said statute.

b.Continue the Lease and Lessee’s right to possession in effect (in California under California Civil Code Section 1951.4) after Lessee’s Breach and recover the rent as it becomes due, provided Lessee has the right to sublet or assign, subject only to reasonable limitations. Lessor and Lessee agree that the limitations on assignment and subletting this Lease are reasonable. Acts of maintenance or preservation, efforts to relet the Premises, or the appointment of a receiver to protect the Lessor’s interest under this Lease, shall not constitute a termination of the Lessee’s right to possession.

c.Pursue any other remedy now or hereafter available to Lessor under the laws or judicial decisions of the state wherein the Premises are located.

d.The expiration or termination of this Lease and/or the termination of Lessee’s right to possession shall not relieve Lessee from liability under any indemnity provisions of this Lease as to matters occurring or accruing during the Term hereof or by reason of Lessee’s occupancy of the Premises.

13.3Inducement Recapture in Event of Breach. Any agreement by Lessor for free or abated rent or other charges applicable to the Premises, or for the giving or paying by Lessor to or for Lessee of any cash or other bonus, inducement or consideration for Lessee’s entering into this Lease, all of which concessions are hereinafter referred to as “Inducement Provisions” shall be deemed conditioned upon Lessee’s full and faithful performance of all of the terms, covenants and conditions of this Lease to be performed or observed by Lessee during the Term hereof as the same may be extended. Upon the occurrence of a Breach of this Lease by Lessee, any such Inducement Provision shall automatically be deemed deleted from this Lease and of no further force or effect, and any rent, other charge, bonus, inducement or consideration theretofore abated, given or paid by Lessor under such an Inducement Provision shall be immediately due and payable by Lessee to Lessor, and recoverable by Lessor, as additional rent due under this Lease, notwithstanding any subsequent cure of said Breach by Lessee. The acceptance by Lessor of rent or the cure of the Breach which initiated the operation of this Paragraph 13.3 shall not be deemed a waiver by Lessor of the provisions of this Paragraph 13.3 unless specifically so stated in writing by Lessor at the time of such acceptance.

13.4Late Charges. Lessee hereby acknowledges that late payment by Lessee to Lessor of rent and other sums due hereunder will cause Lessor to incur costs not contemplated by this Lease, the exact amount of which will be extremely difficult to ascertain. Such costs include, but are not limited to, processing and accounting charges, and late charges, which may be imposed upon Lessor by the terms of any ground lease, mortgage or deed of trust covering the Premises. Accordingly, if any installment of rent or other sum due from Lessee shall not be received by Lessor or Lessor’s designee within five (5) days after such amount shall be due, then, without any requirement for notice to Lessee, Lessee shall pay to Lessor a late charge equal to ten percent (10%) of such overdue amount. The Parties hereby agree that such late charge represents a fair and reasonable estimate of the costs Lessor will incur by reason of late payment by Lessee. Acceptance of such late charge by Lessor shall in no event constitute a waiver of Lessee’s Default or Breach with respect to such overdue amount, nor prevent Lessor from exercising any of the other rights and remedies granted hereunder. In the event that a late charge is payable hereunder, whether or not collected, for three (3) installments of Base Rent in any twelve (12) month period, then notwithstanding Paragraph 4.1 or any other provision of this Lease to the contrary, Base Rent shall, at Lessor’s option, become due and payable quarterly in advance.

13.5Breach by Lessor. Lessor shall not be deemed in breach of this Lease unless Lessor fails within a reasonable time to perform an obligation required to be performed by Lessor. For purposes of this Paragraph 13.5, a reasonable time shall in no event be less than thirty (30) days after receipt by Lessor, and by any Lender(s) whose name and address shall have been furnished to Lessee in writing for such purpose, of written notice specifying wherein such obligation of Lessor has not been performed; provided, however, that if the nature of Lessor’s obligation is such that more than thirty (30) days after such notice are reasonably required for its performance, then Lessor shall not be in breach of this Lease if performance is commenced within such thirty (30) day period and thereafter diligently pursued to completion.

14.Condemnation. If the Premises or any portion thereof are permanently taken under the power of eminent domain or sold under the threat of the exercise of said power (all of which are herein called “condemnation”, this Lease shall terminate as to the part so taken as of the date the condemning authority takes title or possession, whichever first occurs. If more than ten percent (10%) of the floor area of the Premises, or more than twenty-five percent (25%) of the portion of the Common Areas designated for Lessee’s parking, is taken by condemnation, Lessee may, at Lessee’s option, to be exercised in writing within ten (10) days after Lessor shall have given Lessee written notice of such taking (or in the absence of such notice, within ten (10) days after the condemning authority shall have taken possession) terminate this Lease as of the date the condemning authority takes such possession. If Lessee does not terminate this Lease in accordance with the foregoing, this Lease shall remain in full force and effect as to the portion of the Premises remaining, except that the Base Rent shall be reduced in the same proportion as the rentable floor area of the Premises taken bears to the total rentable floor area of the Premises. No reduction of Base Rent shall occur if the condemnation does not apply to any portion of the Premises. Any award for the taking of all or any part of the Premises under the power of eminent domain or any payment made under threat of the exercise of such power shall be the property of Lessor, whether such award shall be

made as compensation for diminution of value of the leasehold or for the taking of the fee, or as severance damages; provided, however, that Lessee shall be entitled to seek a separate award for Lessee’s relocation expenses and/or loss of Lessee’s Trade Fixtures. In the event that this Lease is not terminated by reason of such condemnation, Lessor shall to the extent of its net severance damages received, over and above Lessee’s Share of the legal and other expenses incurred by Lessor in the condemnation matter, repair any damage to the Premises caused by such condemnation authority.

15.Brokers.

15.1The Broker(s) named in Paragraph 1.10 is/are the procuring cause of this Lease.

15.2Lessee and Lessor each represent and warrant to the other that it has had no dealings with any person, firm, broker or finder other than as named in Paragraph 1.10 in connection with the negotiation of this Lease and/or the consummation of the transaction contemplated hereby, and that no broker or other person, firm or entity other than said named Broker(s) is entitled to any commission or finder’s fee in connection with said transaction. Lessee and Lessor do each hereby agree to indemnify, protect, defend and hold the other harmless from and against liability for compensation or charges which may be claimed by any such unnamed broker, finder or other similar party by reason of any dealings or actions of the indemnifying Party, including any costs, expenses, and/or attorneys’ fees reasonably incurred with respect thereto.

16. Estoppel Certificate and Financial Statements.

16.1Estoppel Certificate. Within ten (10) days after written notice from Lessor, Lessee shall execute and deliver to Lessor a certificate stating such matters reflecting the status of this Lease or the Premises as Lessor or Lessor’s lender, purchaser or ground lessor may reasonably request.

16.2Financial Statement. If Lessee is in Default under this Lease or Lessor desires to finance, refinance, or sell the Premises, the Building, or the Industrial Center, or any part thereof, Lessee and all Guarantors shall deliver to Lessor and any potential lender or purchaser designated by Lessor such financial statements of Lessee and such Guarantors as may be reasonably required by Lessor and/or such lender or purchaser, including but not limited to Lessee’s financial statements for the past three (3) years. All such financial statements shall be received by Lessor and such lender or purchaser in confidence and shall be used only for the purposes herein set forth.

17.Lessor’s Liability. The term “Lessor” as used herein shall mean the owner or owners at the time in question of the fee title to the Premises. In the event of a transfer of Lessor’s title or interest in the Premises or in this Lease, Lessor shall deliver to the transferee or assignee (in cash or by credit) any unused Security Deposit held by Lessor at the time of such transfer or assignment. Upon such transfer or assignment and delivery of the Security Deposit, as aforesaid, the prior Lessor shall be relieved of all liability with respect to the obligations and/or covenants under this Lease thereafter to be performed by the Lessor. Subject to the foregoing, the obligations and/or covenants in this Lease to be performed by the Lessor shall be binding only upon the Lessor as hereinabove defined. In no event shall the obligations of Lessor under this Lease constitute personal obligations of Lessor, its direct or indirect partners, members, managers, directors, officers, shareholders, employees or representatives, and Lessee hereby expressly waives such personal liability on behalf of itself and all persons claiming by, through or under Lessee. Further, Lessee, for satisfaction of any liability of Lessor under this Lease, may seek recourse only against Lessor’s interest in the Premises and shall not seek recourse against Lessor’s other assets or against Lessor’s direct or indirect partners, members, managers, directors, officers, shareholders, employees or representatives or any of their respective personal assets.

18. Severability. The invalidity of any provision of this Lease, as determined by a court of competent jurisdiction, shall in no way affect the validity of any other provision hereof.

19.Interest on Past-Due Obligations. Any monetary payment due Lessor hereunder, other than late charges, not received by Lessor within ten (10) days following the date on which it was due, shall bear interest from the date due at the prime rate charged by the largest state chartered bank in the State in which the Premises are located plus four percent (4%) per annum, but not exceeding the maximum rate allowed by law, in addition to the potential late charge provided for in Paragraph 13.4.

20.Time of Essence. Time is of the essence with respect to the performance of all obligations to be performed or observed by the Parties under this Lease.

21.Rent Defined. All monetary obligations of Lessee to Lessor under the terms of this Lease are deemed to be rent.

22.No Prior or Other Agreements. This Lease (including all exhibits and addenda) contains all agreements, representations and warranties between the Parties with respect to any matter mentioned herein and supersedes and cancels any and all previous negotiations, arrangements, brochures, marketing materials, agreements and understandings, if any, and no other prior or contemporaneous agreement or understanding (whether verbal or written) shall be effective. This Lease may not be modified, deleted or added to except by a writing signed by the Parties hereto. The Parties acknowledge that (i) each Party and/or its counsel have reviewed and revised this Lease, and (ii) no rule of construction to the effect that any ambiguities are to be resolved against the drafting Party shall be employed in the interpretation or enforcement of this Lease.

23.Notices. All notices required or permitted by this Lease shall be in writing and shall be and deemed duly served or given when actually delivered, if personally delivered or delivered by overnight courier (including delivery by FedEx, which confirms delivery in writing), or within three (3) business days after deposit in the U.S. Mail, if sent by certified mail, postage prepaid, return receipt requested, and shall be deemed sufficiently given if served in a manner specified in this Paragraph 23. If notice is received on a Saturday or a Sunday or a legal holiday, it shall be deemed received on the next business day. The addresses noted adjacent to a Party’s signature on this Lease shall be that Party’s address for delivery or mailing of notice purposes. Either Party may by written notice to the other specify a different address for notice purposes, except that upon Lessee’s taking possession of the Premises, the Premises shall constitute Lessee’s address for the purpose of mailing or delivering notices to Lessee. A copy of all notices required or permitted to be given to Lessor hereunder shall be concurrently transmitted to such Party or Parties at such addresses as Lessor may from time to time hereafter designate by written notice to Lessee.

24.Waivers. No waiver by Lessor of the Default or Breach of any term, covenant or condition hereof by Lessee, shall be deemed a waiver of any other term, covenant or condition hereof, or of any subsequent Default or Breach by Lessee of the same or any other term, covenant or condition hereof. Lessor’s consent to, or approval of, any such act shall not be deemed to render unnecessary the obtaining of Lessor’s consent to, or approval of, any subsequent or similar act by Lessee, or be construed as the basis of an estoppel to enforce the provision or provisions of

this Lease requiring such consent. Regardless of Lessor’s knowledge of a Default or Breach at the time of accepting rent, the acceptance of rent by Lessor shall not be a waiver of any Default or Breach by Lessee of any provision hereof. Any payment given Lessor by Lessee may be accepted by Lessor on account of moneys or damages due Lessor, notwithstanding any qualifying statements or conditions made by Lessee in connection therewith, which such statements and/or conditions shall be of no force or effect whatsoever unless specifically agreed to in writing by Lessor at or before the time of deposit of such payment.

25.Recording. Lessee shall not record this Lease or any memorandum of this Lease.

26.No Right to Holdover. Lessee has no right to retain possession of the Premises or any part thereof beyond the expiration or earlier termination of this Lease. In the event that Lessee holds over in violation of this Paragraph 26 then the Base Rent payable from and after the time of the expiration or earlier termination of this Lease shall be increased to two hundred percent (200%) of the Base Rent applicable during the month immediately preceding such expiration or earlier termination. Lessee shall protect, defend, indemnify and hold Lessor harmless from all loss, costs (including reasonable attorneys’ fees) and liability resulting from Lessee’s holding over, including, without limiting the generality of the foregoing, the cost of unlawful detainer proceedings instituted by Lessor against Lessee, increased construction costs to Lessor as a result of Lessor’s inability to timely commence construction of improvements for a new tenant for the Premises, lost profits that results from Lessor’s inability to timely deliver the Premises to such new tenant, and any claims made by any succeeding tenant founded upon such failure to surrender and any lost profits to Lessor resulting therefrom. Nothing contained herein shall be construed as consent by Lessor to any holding over by Lessee.

27.Cumulative Remedies. No remedy or election hereunder shall be deemed exclusive but shall, wherever possible, be cumulative with all other remedies at law or in equity.

28.Covenants and Conditions. All provisions of this Lease to be observed or performed by Lessee are both covenants and conditions.

29.Binding Effect; Choice of Law. This Lease shall be binding upon the Parties, their personal representatives, successors and assigns and be governed by the laws of the State in which the Premises are located. Lessee expressly agrees that any and all disputes arising out of or in connection with this Lease shall be litigated only in the Superior Court of the State of California for the county in which the Premises are located (and in no other), and Lessee hereby consents to the jurisdiction of said court.

30.Subordination; Attornment; Non-Disturbance.

30.1Subordination. This Lease and any Option granted hereby shall automatically be subject and subordinate to any ground lease, mortgage, deed of trust, or other hypothecation or security device or amendment or modification thereto (collectively, “Security Device”), now or hereafter placed by Lessor upon the real property of which the Premises are a part, to any and all advances made on the security thereof, and to all renewals, modifications, consolidations, replacements and extensions thereof. Lessee agrees that the Lenders holding any such Security Device shall have no duty, liability or obligation to perform any of the obligations of Lessor under this Lease, but that in the event of Lessor’s default with respect to any such obligation, Lessee will give any Lender whose name and address have been furnished Lessee in writing for such purpose notice of Lessor’s default pursuant to Paragraph 13.5. If any Lender shall elect to have this Lease and/or any Option granted hereby superior to the lien of its Security Device and shall give written notice thereof to Lessee, this Lease and such Options shall be deemed prior to such Security Device, notwithstanding the relative dates of the documentation or recordation thereof.

30.2Attornment. Subject to the non-disturbance provisions of Paragraph 30.3, Lessee agrees to attorn to a Lender or any other party who acquires ownership of the Premises by reason of a foreclosure of a Security Device, and that in the event of such foreclosure, such new owner shall not: (i) be liable for any act or omission or any prior lessor or with respect to events occurring prior to acquisition of ownership, (ii) be subject to any offsets or defenses which Lessee might have against any prior lessor, or (iii) be bound by prepayment of more than one month’s rent.

30.3Non-Disturbance. With respect to Security Devices entered into for the first time (as opposed to amendments or modifications to existing Security Devices) by Lessor after the execution of this Lease, Lessee’s subordination of this Lease shall be subject to receipt of an assurance (a “Non-Disturbance Agreement”) from the Lender that Lessee’s possession and this Lease, including any options to extend the Term hereof, will not be disturbed so long as Lessee is not in Breach hereof and attorns to the record owner of the Premises.

30.4Self-Executing. The agreements contained in this Paragraph 30 shall be effective without the execution of any further documents; provided, however, that upon written request from Lessor or a Lender in connection with a sale, financing or refinancing of Premises, Lessee shall, within ten (10) days following the date of such request, execute such further writings as may be reasonably required to separately document any such subordination or non-subordination, attornment and/or non-disturbance agreement as is provided for herein.

31.Attorneys’ Fees. If any Party brings an action or proceeding to enforce the terms hereof or declare rights hereunder, the Prevailing Party (defined below) in any such proceeding, action, or appeal thereon, shall be entitled to reasonable attorneys’ fees. Such fees may be awarded in the same suit or recovered in a separate suit, whether or not such action or proceeding is pursued to decision or judgment. The term “Prevailing Party” shall include, without limitation, a Party who substantially obtains or defeats the relief sought, as the case may be, whether by compromise, settlement, judgment, or the abandonment by the other Party of its claim or defense. The attorneys’ fee award shall not be computed in accordance with any court fee schedule, but shall be such as to fully reimburse all attorneys’ fees reasonably incurred. Lessor shall be entitled to attorneys’ fees, costs and expenses incurred in preparation and service of notices of Default and consultations in connection therewith, whether or not a legal action is subsequently commenced in connection with such Default or resulting Breach.

32.Lessor’s Access; Showing Premises; Repairs. Lessor and Lessor’s agents shall have the right to enter the Premises at any time, in the case of an emergency, and otherwise at reasonable times for the purpose of showing the same to prospective purchasers, lenders, or lessees, and making such alterations, repairs, improvements or additions to the Premises or to the Building, as Lessor may reasonably deem necessary, including the right to take photographs of the Premises in connection with such entry. Lessor may at any time place on or about the Premises or Building any ordinary “For Sale” signs and Lessor may at any time during the last one hundred eighty (180) days of the Term hereof place on or about the Premises any ordinary “For Lease” signs. All such activities of Lessor shall be without abatement of rent or liability to Lessee.

33.Auctions. Lessee shall not conduct, nor permit to be conducted, either voluntarily or involuntarily, any auction upon the Premises without first having obtained Lessor’s prior written consent. Notwithstanding anything to the contrary in this Lease, Lessor shall not be obligated to exercise any standard of reasonableness in determining whether to grant such consent.

34.Signs. Lessee shall not place any sign upon the exterior of the Premises or the Building, except that Lessee may, with Lessor’s prior written consent and at Lessee’s sole cost and expense, install (but not on the roof) such signs as are reasonably required to advertise Lessee’s own business so long as such signs are in a location designated by Lessor and comply with Applicable Requirements and the signage criteria established for the Industrial Center by Lessor. The installation of any sign on the Premises by or for Lessee shall be subject to the provisions of Paragraph 7 (Maintenance, Repairs, Utility Installations, Trade Fixtures and Alterations). Unless otherwise expressly agreed herein, Lessor reserves all rights to the use of the roof of the Building, and the right to install advertising signs on the Building, including the roof, which do not unreasonably interfere with the conduct of Lessee’s business; Lessor shall be entitled to all revenues from such advertising signs.

35.Termination; Merger. Unless specifically stated otherwise in writing by Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual termination or cancellation hereof, or a termination hereof by Lessor for Breach by Lessee, shall automatically terminate any sublease or lesser estate in the Premises; provided, however, Lessor shall, in the event of any such surrender, termination or cancellation, have the option to continue any one or all of any existing subtenancies. Lessor’s failure within ten (10) days following any such event to make a written election to the contrary by written notice to the holder of any such lesser interest, shall constitute Lessor’s election to have such event constitute the termination of such interest.

36.Consents. Except for Paragraph 33 hereof (Auctions) or as otherwise provided herein, wherever in this Lease the consent of a Party is required to an act by or for the other Party, such consent shall not be unreasonably withheld or delayed. Lessor’s actual costs and expenses (including but not limited to architects’, attorneys’, engineers’ and other consultants’ fees) incurred in the consideration of, or response to, a request by Lessee for any Lessor consent pertaining to this Lease or the Premises, including but not limited to consents to an assignment a subletting or the presence or use of a Hazardous Substance, shall be paid by Lessee to Lessor upon receipt of an invoice therefor. Lessor’s consent to any act, assignment of this Lease or subletting of the Premises by Lessee shall not constitute an acknowledgment that no Default or Breach by Lessee of this Lease exists, nor shall such consent be deemed a waiver of any then existing Default or Breach, except as may be otherwise specifically stated in writing by Lessor at the time of such consent. Lessee acknowledges all conditions to Lessor’s consent authorized by this Lease as being reasonable. The failure to specify herein any particular condition to Lessor’s consent shall not preclude the impositions by Lessor at the time of consent of such further or other conditions as are then reasonable with reference to the particular matter for which consent is being given.

37. Access to the Premises. Subject to the terms of this Lease, including but not limited to, the Rules and Regulations attached hereto as Exhibit E, Lessee and its employees shall have access to the Premises twenty-four (24) hours per day, 365 days per year.

38.Quiet Possession. Upon payment by Lessee of the Rent for the Premises and the performance of all of the covenants, conditions and provisions on Lessee’s part to be observed and performed under this Lease, and unless specifically provided herein, Lessee shall have quiet possession of the Premises for the entire Term hereof subject to all of the provisions of this Lease.

39.Rules and Regulations. Lessee agrees that it will abide by, and keep and observe all reasonable rules and regulations (“Rules and Regulations”) which Lessor may make from time to time for the management, safety, care, and cleanliness of the grounds, the parking and unloading of vehicles and the preservation of good order, as well as for the convenience of other occupants or Lessee of the Building and the Industrial Center and their invitees. The current Rules and Regulations for the Industrial Center are attached hereto as Exhibit E.

40.Substitution Space. Intentionally deleted.

41.Security Measures. Lessee hereby acknowledges that the rental payable to Lessor hereunder does not include the cost of guard service or other security measures, and that Lessor shall have no obligation whatsoever to provide same. Lessee assumes all responsibility for the protection of the Premises, Lessee, its agents and invitees and their property from the acts of third parties and shall install, at Lessee’s sole cost and expense, any and all necessary security devices.

42.Reservations. Lessor reserves the right, from time to time, to grant, without the consent or joinder of Lessee, such easements, rights of way, utility raceways, and dedications that Lessor deems necessary, and to cause the recordation of parcel maps and restrictions, so long as such easements, rights of way, utility raceways, dedications, maps and restrictions do not unreasonably interfere with the use of the Premises by Lessee. Lessee agrees to sign any documents reasonably requested by Lessor to effectuate any such easement rights, dedication, map or restrictions.

43.OFAC Compliance. Lessee represents, warrants and covenants to Lessor that neither they are not, and, after making due inquiry, that no person or entity that owns a 10% or greater equity interest in or otherwise controls Lessee, nor any of their respective officers, directors or managing members, (i) is a person or entity with whom U.S. persons or entities are restricted from doing business under regulations of the Office of Foreign Asset Control (“OFAC”) of the Department of the Treasury (including those named on OFAC’s Specially Designated and Blocked Persons List or any similar list) or under any statute, executive order (including Executive Order 13224 (the “Executive Order”) signed on September 24, 2001 and entitled “Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism”), or other governmental action, (ii) is currently subject to any U.S. sanctions administered by OFAC, (iii) is in violation of the International Money Laundering Abatement and Financial Anti-Terrorism Act of 2001 or the regulations or orders promulgated thereunder (as amended from time to time, the “Money Laundering Act”) and none of the activities of such person violate the Money Laundering Act, and (iv) that throughout the term of this Lease the Lessee shall comply with the Executive Order and with the Money Laundering Act.

44.Authority. If either Party hereto is a corporation, limited liability company, trust, or general or limited partnership, each individual executing this Lease on behalf of such entity represents and warrants that he or she is duly authorized to execute and deliver this Lease on its behalf. If Lessee is a corporation, limited liability company, trust or partnership, Lessee shall, within five (5) days after request by Lessor, deliver to Lessor evidence satisfactory to Lessor of such authority.

45.Conflict. The typewritten or handwritten provisions shall control any conflict between the printed provisions of this Lease and the typewritten or handwritten provisions.

46.Offer; Counterparts. Preparation of this Lease by either Lessor or Lessee or Lessor’s agent or Lessee’s agent and submission of same to Lessee or Lessor shall not be deemed an offer to lease. This Lease is not intended to be binding until executed and delivered by all

Parties hereto. This Lease may be executed in counterparts, each of which shall be deemed an original, but such counterparts, when taken together, shall constitute one agreement.

47.Amendments. This Lease may be modified only in writing, signed by the parties in interest at the time of the modification. The Parties shall amend this Lease from time to time to reflect any adjustments that are made to the Base Rent or other rent payable under this Lease. As long as they do not materially change Lessee’s obligations hereunder, Lessee agrees to make such reasonable non-monetary modifications to this Lease as may be reasonably required by an institutional insurance company or pension plan Lender in connection with the obtaining of normal financing or refinancing of the property of which the Premises are a part.

48.Multiple Parties. Except as otherwise expressly provided herein, if more than one person or entity is named herein as either Lessor or Lessee, the obligations of such multiple parties shall be the joint and several responsibility of all persons or entities named herein as such Lessor or Lessee.

49.Construction. Headings at the beginning of each paragraph and subparagraph are solely for the convenience of the Parties and are not a part of the Lease. Whenever required by the context of this Lease, the singular shall include the plural and the masculine shall include the feminine and vice versa. This Lease shall not be construed as if it had been prepared by one of the Parties, but rather as if both Parties had prepared the same and, consequently, any inconsistencies or ambiguities herein shall not be interpreted against either Party as the drafter of the Lease. Unless otherwise indicated, all references to paragraphs and subparagraphs are to this Lease. All exhibits referred to in this Lease are attached and incorporated by this reference. Except as specifically provided herein, Lessee hereby agrees that Lessee shall not disclose any of the economic terms of this Lease to any person or entity not a party to this Lease, nor shall Lessee issue any press releases or make any public statements relating to the terms or provisions of this Lease; provided, however, Lessee may make necessary disclosures to potential lenders, attorneys, accountants and space planning consultants, and/or as may be required by applicable Laws or court order, so long as such Parties agree to keep all of the economic terms of this Lease strictly confidential. The obligation of Lessee set forth in this section shall survive the expiration or any earlier termination of this Lease.

THE PARTIES HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE PREMISES.

IF THIS LEASE HAS BEEN FILLED IN, IT HAS BEEN PREPARED FOR YOUR ATTORNEY’S REVIEW AND APPROVAL. FURTHER, EXPERTS SHOULD BE CONSULTED TO EVALUATE THE CONDITION OF THE PROPERTY AS TO THE POSSIBLE PRESENCE OF ASBESTOS OR HAZARDOUS SUBSTANCES. THE PARTIES SHALL RELY SOLELY UPON THE ADVICE OF THEIR OWN COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS LEASE. IF THE SUBJECT PROPERTY IS LOCATED IN A STATE OTHER THAN CALIFORNIA, AN ATTORNEY FROM THE STATE WHERE THE PROPERTY IS LOCATED SHOULD BE CONSULTED.

[SIGNATURES ON NEXT PAGE]

The Parties hereto have executed this Lease as of the Effective Date.

LESSOR WESTCORE GREENVILLE, LLC, a Delaware limited liability company Westcore Greenville, LLC, a Delaware limited liability company By:Westcore Investments I, LLC, a Delaware limited liability company, its sole member By:Westcore Properties, LLC, a Delaware limited liability company, its sole member By:/s/ Donald Ankeny Name:Donald Ankeny Title:Authorized Officer Address: c/o Westcore Properties, LLC 4435 Eastgate Mall, Suite 300 San Diego, CA 92121 Telephone: (858) 625-4100 Facsimile: (858) 678-0060 LESSEE ZELTIQ AESTHETICS, INC., a Delaware corporation By: /s/ Patrick F. Williams Name: Patrick F. Williams Title: CFO Address: ____________________________________ ____________________________________ ____________________________________ Telephone: (___) ______________________ Facsimile: (___) _______________________

EXHIBIT A

PREMISES

THE SITE PLAN SET FORTH HEREIN IS FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE A WARRANTY OR REPRESENTATION CONCERNING THE SIZE OR LAYOUT OF THE PREMISES.

[Floor Plan of Premises]

EXHIBIT B

INDUSTRIAL CENTER

THE SITE PLAN SET FORTH HEREIN IS FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSTITUTE AN EXACT MEASUREMENT OF THE PARCELS OWNED BY LESSOR, NOR DOES IT CONSTITUTE A WARRANTY, REPRESENTATION OR AGREEMENT ON THE PART OF LESSOR THAT THE TENANT MIX OR LAYOUT OF THE INDUSTRIAL CENTER IS OR WILL REMAIN AS INDICATED HEREON.

[Floor Plan of Premises]

EXHIBIT C

INTENTIONALLY OMITTED

EXHIBIT D

INTENTIONALLY OMITTED

EXHIBIT E

RULES AND REGULATIONS

1.No sign, placard, picture, advertisement, name or notice shall be inscribed, displayed or affixed on or to any part of the outside or inside of the Industrial Center, the Premises or the surrounding area without the written consent of the Lessor being first obtained. If Lessor gives such consent, Lessor may regulate the manner of display of the sign, placard, picture, advertisement, name or notice. Lessor shall have the right to remove any sign, placard, picture, advertisement, name or notice which has not been approved by Lessor or is being displayed in a non-approved manner without notice to and at the expense of the Lessee. All approved signs or lettering on doors shall be printed, painted, affixed of inscribed at the expense of Lessee by a person approved by Lessor. Lessee shall not place anything or allow anything to be placed near window, door, partition or wall, which may appear unsightly from outside of the Premises.

2.The directory of the Industrial Center (if any) will be provided exclusively for the display of the name and location of the lessees only, and Lessor reserves the right to exclude any other names therefrom.

3.The sidewalks, halls, passages, exits and entrances shall not be obstructed by any of the lessees or used by them for any purpose other than for ingress to and egress from their respective Premises. The halls, passages, exits, entrances and roof are not for the use of the general public and the Lessor shall in all cases retain the right to control thereof and prevent access thereto by all persons whose presence in the judgment of the Lessor shall be prejudicial to the safety, character, reputation and interests of the Industrial Center or its lessees; provided, however, that nothing herein contained shall be construed to prevent access by persons with whom the Lessee normally deals in the ordinary course of Lessee’s business unless such persons are engaged in illegal activities. No lessee and no employees or invitees of any lessee shall go upon the roof of the Industrial Center.

4.Lessee shall not alter any lock or install any new additional locks or bolts on any exterior door of the Premises without the written consent of Lessor. Lessee may install an electronic alarm system.

5.The toilet rooms, urinals, wash bowls and other apparatus shall not be used for any purpose other than that for which they were constructed and no foreign substance of any kind whatsoever shall be thrown therein. The expense of any breakage, stoppage or damage resulting from a violation of this rule shall be borne by the Lessee who, or whose employees or invitees, shall have caused it.

6.Lessee shall not overload the floor of the Premises and shall not deface the Premises.

7.Lessee shall not use, keep or permit to be used or kept any food or noxious gas or substance in the Premise, or permit or suffer the Premises to be occupied or used in a manner offensive or objectionable to the Lessor or other occupants of the Industrial Center by reason of noise, odors and/or vibrations, or interfere in any way with other lessees or those having business in the Industrial Center. Neither animals nor birds shall be brought in or kept in or about the Premises of the Industrial Center. No lessee shall make or permit to be made any disturbing noises or disturb or interfere with occupants of this or neighboring Industrial Centers or Premises, or with those having business with such occupants, by the use of any musical instruments, radio, phonograph, unusual noise, or in any other way. No lessee shall throw anything out of doors. No cooking shall be done or permitted by Lessee in the Premises beyond the use of a microwave oven or other small appliances.

8.No Lessee shall occupy or permit any portion of its Premises to be occupied for the manufacture, sale, or use of liquor or narcotics in any form, or as a medical office, or as a barbershop or manicure shop, except without prior written consent of Lessor. The Premises shall not be used for lodging or sleeping or for illegal purposes.

9.Lessor will direct electricians as to where and how telephone wires are to be introduced. No boring or cutting for or stringing of wires will be allowed without the consent of Lessor. The location of telephones, call boxes and other office equipment affixed to the Premises shall be subject to the approval of Lessor.

10. Lessee upon termination of the tenancy, shall deliver to the Lessor the keys to the Premises, offices, rooms, and toilet rooms which shall have been furnished and shall pay the Lessor the cost of replacing any lost key or of changing the lock or locks opened by such lost key if Lessor deems it necessary to make such change.

11.No lessee shall lay linoleum, tile, carpet or other similar floor coverings so that the same shall be affixed to the floor of the Premises in any manner except as approved by the Lessor. The expense of repairing any damage resulting from a violation of this rule or removal of any floor covering shall be borne by the lessee by whom, or by whose contractors, employees or invitees, the floor covering shall have been laid.

12.In case of invasion, mob riot, public excitement, or other commotion, the Lessor reserves the right to prevent access to the Industrial Center during the continuance of the same, by closing the doors or otherwise, for the safety of the lessees and protection of the Industrial Center and property located therein. Anything to the foregoing notwithstanding, Lessor shall have no duty to provide security protection for the Industrial Center at any time or to monitor access thereto.

13.Lessee shall see that the doors of the Premises are closed and securely locked before leaving the Premises and that all water faucets, water apparatus and electricity are entirely shut off before Lessee or Lessee’s employee’s leave the Premises. Lessee shall be responsible for any damage to the Industrial Center or other lessees’ premises caused by a failure to comply with this rule.

14.Lessor reserves the right to exclude or expel from the Industrial Center any person who, in the judgment of Lessor, is intoxicated or under the influence of liquor or drugs, or who shall in any manner do any act in violation of any of the rules and regulations of the Industrial Center.

15.Any requests of Lessee will be considered only upon application at the Office of Lessor. Employees of Lessor shall not be requested to perform any work or do anything outside of their regular duties unless under special instructions from the Lessor.

16.Lessor shall have the right, exercisable with reasonable notice and without liability to Lessee, to change the name and the street address of the Industrial Center of which the Premises are a part, where such change is required by any government agency.

17.Lessee agrees that it shall comply with all fire regulations that may be issued from time to time by Lessor, and Lessee also shall provide Lessor with the name of a designated responsible employee to represent Lessee in all matters pertaining to fire regulations.

18.Lessor reserves the right by written notice to Lessee, to rescind, alter or waive any rule or regulation at any time prescribed for the Industrial Center when, in Lessor’s judgment, it is necessary, desirable or proper for the best interest of the Industrial Center or its Lessees.

19.Lessee shall not disturb, solicit, or canvas any occupant of the Industrial Center and shall cooperate to prevent same.

20.Without the written consent of Lessor, Lessee shall not use the name of the Industrial Center in connection with or in promotion or advertising the business of Lessee except as Lessee’s address.

21.Lessee shall be entitled to use parking spaces during working hours. Lessee shall not park in driveways or loading areas, or reserved parking spaces of other lessees. In the event that Lessee (a) parks any tractor or trailer in an area not designated for parking of tractors or trailers, (b) parks any vehicle in a reserved parking space of another lessee of the Industrial Center, or (c) parks any vehicle overnight in an area not permitted for overnight parking, Lessee shall pay to Lessor upon demand a per diem parking fee of $20 per day per tractor or trailer. Lessor or its agents shall have the right to cause to be removed any car of Lessee, its employees or agents, that may be parked in unauthorized areas, and Lessee agrees to save and hold harmless Lessor, its agents and employees from any and all claims, losses, damages and demands asserted or arising in respect to or in connection with the removal of any such vehicle and for all expense incurred by Lessor in connection with such removal. Lessee will from time to time, upon request of Lessor, supply Lessor with a list of license plate numbers or vehicles owned or operated by its employees and agent.

EXHIBIT F

INTENTIONALLY OMITTED

EXHIBIT G

HAZARDOUS SUBSTANCES SURVEY FORM

The purpose of this form is to obtain information regarding the use of Hazardous Substances on the Premises. Prospective lessees should answer the questions in light of their proposed operations on the Premises. Existing lessees should answer the questions as they relate to ongoing operations on the Premises and should update any information previously submitted. If additional space is needed to answer the questions, you may attach separate sheets of paper to this form.

Your cooperation in this matter is appreciated. Any questions should be directed to, and when completed, the form should be mailed to:

Carl Lamm

Vice President of Operations

1.GENERAL INFORMATION

Company Name: Zeltiq Aesthetics

Check Applicable Status:     Prospective Lessee: XCurrent Lessee:

Mailing Address:     4698 Willow RdPleasanton, CA 94588

Contact Person & Title: Carl Lamm VP, Operations

Phone #: (925) 474-2542

Address of Premises:

Describe the proposed operations to take place on the Premises, including principal products manufactured or services to be conducted. Existing lessees should describe any proposed changes to ongoing operations.

Warehousing of inventory                            

2.STORAGE OF HAZARDOUS SUBSTANCES

2.1Will any Hazardous Substances be used or stored on the Premises?

WastesYes No X

Chemical ProductsYes No X

Attach the list of any Hazardous Substances to be used or stored, the quantities that will be on site at any given time, and the location and method of storage.

3.STORAGE TANKS & SUMPS

3.1 Is any above or below ground storage of gasoline, diesel, or other Hazardous Substances in tanks or sumps proposed or currently conducted on the Premises?

Yes No X

If yes, describe the materials to be stored, and the type, size and construction of the sump or tank. Attach copies of any permits obtained for the storage of such substances.

3.2Have any of the tanks or sumps been inspected or tested for leakage?

Yes No X N/A

If so, attach results.

3.3Have any spills or leaks occurred from such tanks or sumps?

Yes No X N/A

If so, describe.

3.4Were any regulatory agencies notified of the spill or leak?

Yes No X N/A

If so, attach copies of any spill reports filed, any clearance letters or other correspondence from regulatory agencies relating to the spill or leak.

3.5Have any underground storage tanks or sumps been taken out of service or been removed?

Yes No X N/A

If yes, attach copies of any closure permits and clearance obtained from regulatory agencies relating to closure and removal of such tanks.

4.SPILLS

4.1During the past year, have any spills occurred on the Premises?

Yes No X

If so, please describe the spill and attach the results of any testing conducted to determine the extent of such spills.

4.2     Were any agencies notified in connection with such spills?

Yes No X N/A

If so, attach copies of any spill reports or other correspondence with regulatory agencies.

4.3    Were any cleanup actions undertaken in connection with the spill?

Yes No X N/A

If so, briefly describe the actions taken. Attach copies of any clearance letters obtained from any regulatory agencies involved and the results of any final soil or ground water sampling done upon completion of the cleanup work.

5.     WASTE MANAGEMENT

5.1Has your company been issued an EPA Hazardous Waste Generator I.D. Number?

Yes No X

5.2    Has your company filed a biennial report as a hazardous waste generator?

Yes No X

If so, attach a copy of the most recent report files.

5.3     Attach a list of the Hazardous Substances, if any, generated or to be generated at the Premises, its hazard class and the quality generated on a monthly basis. N/A

5.4    Describe the method(s) of disposal for each substance. Indicate where and how often disposal will take place.5.5    Indicate the name of the person(s) responsible for maintaining copies of hazardous manifests completed for off-site shipments of Hazardous Substances. N/A

5.6    Is any treatment or processing of Hazardous Substances currently conducted or proposed to be conducted at the Premises:

Yes No X

If yes, please describe any existing or proposed treatment met

5.7     Attach copies of any hazardous waste permits or licenses issued to your company with respect to its operations on the Premises.

6.     WATER TREATMENT / DISCHARGE

6.1    Do you discharge waste water to:

No     storm drain?No    sewer?

No    surface water:No    no industrial discharge.

6.2    Is your wastewater treated before discharge?

Yes No X

If yes, describe the type of treatment conducted.

Attach copies of any wastewater discharge permits issued to your company with respect to its operations on the Premises.

7.     AIR DISCHARGES

7.1    Do you have any filtration systems or stacks that discharge into the air?

Yes No X

7.2    Do you operate any of the following types of equipment, or any other equipment requiring an air emissions permit?

Spray booth

Dip tank

Drying oven

Incinerator

Other

X    No Equipment Requiring Air Permits

7.3    Are air emissions from your operation monitored?

Yes No X

If so, indicate the frequency of monitoring and a description of the monitoring results.

7.4    Attach copies of any air emissions permits pertaining to your operations on the Premises.

8.    HAZARDOUS SUBSTANCES DISCLOSURES

8.1    Does your company handle Hazardous Substances in a quantity equal to or exceeding an aggregate of 500 pound, 5 gallons, or 200 cubic feet?

Yes No X

8.2    Has your company prepared a Hazardous Substances management plan (“Business Plan”) pursuant to the Fire Department requirements for the County in which the Premises is located?

Yes No X

8.3    Are any of the chemicals used in your operation regulated under Proposition 65?

Yes No X

If so, describe the actions taken, or proposed actions to be taken, to comply with the proposition.

8.4    Describe the procedure followed to comply with OSHA Hazard Communication Standard requirements.

9.     ENFORCEMENT ACTIONS, COMPLAINTS

9.1     Has your company ever been subject to any agency enforcement actions, administrative orders, or consent decrees?

Yes No X

If so, describe the actions and any continuing compliance obligations imposed as a result of these actions.

9.2    Has your company ever received requests for information, notice or demand letters, or any other inquiries regarding its operation?

Yes No X

9.3    Have there ever been, or are there now pending, any lawsuits against the company regarding any environmental or health and safety concerns?

Yes No X

9.4    Has an environmental audit ever been conducted at your company’s current facility?

Yes No X

9.5     Have there been any problems or complaints from neighbors at the company’s current facility?

Yes No X

Zeltiq Aesthetics

Company

By:Carl Lamm

Title: VP, Operations

Date: 9-10-13

EXHIBIT H

MOVE OUT STANDARDS

Before surrendering the Premises, Lessee shall remove all of its personal property, trade fixtures and such improvements, alterations or additions to the Premises made by Lessee as may be specified for removal by Lessor and repair any damage caused by such removal such that the damaged area is returned to the condition that existed prior to the installation of such personal property, trade fixtures, improvements, alterations or additions. Lessee shall, at its sole cost and expense, engage consultant(s) acceptable to Lessor to oversee the removal if it is deemed necessary by Lessor, in its sole discretion. Ordinary wear and tear shall not include any damage or deterioration that would have been prevented by good maintenance practices, Lessee’s proper and orderly occupation and use of the Premises or by Lessee timely performing its obligations in this Lease.

If Lessee fails to remove its personal property, trade fixtures, improvements, alterations or additions upon the Expiration Date or earlier termination of this Lease, the same shall be deemed abandoned and shall become the property of the Lessor. Notwithstanding the foregoing, Lessee shall be liable to Lessor for all costs and damages incurred by Lessor in removing, storing or selling such personal property, trade fixtures, improvements, alterations or additions and in restoring the Premises the condition required as provided in this Lease.

Notwithstanding anything to the contrary in this Lease and in addition to the requirements of Section 7.4 of the Lease, Lessee shall surrender the Premises, at the time of the Expiration Date or earlier termination of this Lease, in a condition that shall include, without limitation, the following:

1. Lights: Office, warehouse and exterior lights and ballasts must be fully operational with all bulbs functioning. Broken light lenses must be replaced with matching lenses. Ballast color should all be uniform (either all “cool” or all “warm”).

2. Dock Levelers & Roll-Up Doors: Must be fully operational. Damaged panels must be replaced and painted to match. All missing or damaged dock bumpers, dock levelers, Dok-loks and Dok-lok lights must be replaced.

3. Truck Doors, Dock Seals, and Awnings: Metal and fabric awnings must be free of damage and tears. Frames and fasteners must be secure and undamaged. Dock seals must be free of damage, operational and securely fastened in place.

4. Warehouse Floors and Columns: Must be free of stains and swept with no racking bolts and other protrusions left in floor. Bolts must be ground down or removed and patched with an appropriate epoxy filing; bolts must not be removed with a gas torch. Cracks in the floor which are ¼” or greater must be repaired with an epoxy sealer. Heavily scarred floor seal requires re-sealing. Damaged or bent columns, bollards, railing, etc. must be repaired.

5. Lessee Installed Equipment & Wiring: Must be removed and space returned to original condition when originally leased (remove air lines, junction boxes, conduit, etc.). Security systems must be disarmed and removed with damage, if any, repaired. Phone systems must be removed and damage, if any, repaired.

6. Walls: All nails, shelves, and toggle bolts must be removed from walls. Holes must be professionally filed and sanded. Large damaged areas may require tape, bed and sanding. Holes must not remain in either office or warehouse walls. Any sticky residue from placards or signs must be completely removed.

7. Roof: Any lessee-installed equipment must be removed and roof penetrations properly repaired by a licensed roofing contractor. If maintenance of the roof is a Lessee responsibility, then active leaks must be fixed and the most recent Lessor maintenance and repairs recommendations must have been completed.

8. Signs: All exterior Lessee signage must be removed, holes patched, fixings remediated and paint touched up to match, as necessary. All door and window signs must be removed and damage, if any, repaired.

9. Heating & Air Conditioning System: If maintenance of the HVAC equipment is a Lessee responsibility, then a written report from a licensed contractor must be submitted to Lessor within the last two (2) months of the Term. The report must (i) state that all evaporative coolers and/or

heaters within the warehouse are operational and safe and that office HVAC system is also in good and safe operating condition, and (ii) set out detailed specifications of work necessary to put any equipment and installations into such condition. All repairs/maintenance specified in the HVAC report must be completed by Lessee.

10. Painting: All touch up painting must match existing paint. Scarred and damaged walls and rooms may need to be entirely repainted.

11. Doors: All interior and exterior personnel doors (for office and warehouse) must be in good appearance and fully operational including fixtures, door closures, etc. Holes/scars in doors must be repaired and painted to match. Irreparable holes will require door replacement of matching and like quality doors. Any signs or name placards on doors must be removed as well as any residue leftover from adhesion.

12. Ceiling Tiles Any damaged or stained ceiling tiles in the office area should be replaced.

13. Overall Cleanliness: Clean windows, kitchens, and restrooms to full janitorial standard (i.e., strip/wax floors, sanitize toilets, sinks, clean under cabinets, exhaust fans must be operational, fixtures must be operational, etc.), professionally clean carpet, VCT floors require stripping and waxing, and remove any and all debris from office and warehouse areas. Remove all pallets and debris from exterior of Premises. Debris and trash may not be stored temporarily outside of the Building. Parking lot must be swept and dumpster removed. If appropriate, interior pest control treatment must be completed.

14. Building Systems: All building systems must be in good and safe working order (e.g., plumbing, electrical, fire alarms, intruder alarms, etc.). Provide certification of recent fire sprinkler inspection by a licensed company, if a Lessee responsibility.

15. External All landscaping, parking and other external areas must be repaired as necessary if a lessee responsibility, including but not limited to the removal of all debris and trash, remarking/repainting parking lots, repair/replacement of generic and emergency signage, resetting/replacing damaged curb stones, and replacing/repairing damaged gulley grids and manhole covers.

16. Upon Completion: Contact Lessor’s property manager to coordinate date of turning off power and utilities, turning in keys, and obtaining final Lessor Inspection of the Premises.

EX-10.28

Exhibit 10.28

ELECTRONIC MAIL

December 3, 2013

Kristine Tatsutani

Dear Kristine,

This letter sets forth the substance of the separation and consulting agreement (the “Agreement”) that Zeltiq Aesthetics, Inc. (the “Company”) is offering to you to aid in your employment transition.

1.Separation Date. Your last date of employment with the Company will be December 31, 2013 (the “Separation Date”). Between the date you sign this Agreement and the Separation Date (the “Transition Period”), you will continue to perform your assigned job duties and will comply with all of your obligations to the Company. The Company will continue to provide you with your full salary and benefits during the Transition Period and you also will remain eligible for a 2013 merit bonus pursuant to the terms of the Company’s bonus plan. If you are awarded such a bonus, it will be paid to you at the same time it is paid to the other Company executives. On the Separation Date, the Company will pay you all accrued salary and all accrued but unused PTO time, less applicable deductions and withholdings, up through your Separation Date. You are entitled to these salary and PTO payments even if you do not sign this Agreement.

2.Severance Benefits. If you: (i) sign this Agreement and allow the releases contained herein to become effective; and (ii) on or within 21 days after the Separation Date, you sign the Separation Date Release attached hereto as Exhibit A and allow the releases contained therein to become effective; then the Company will provide you with the following severance benefits:

(i)Severance Payments. The Company will continue to pay you your current base salary for a period of six months after the Separation Date. These severance payments will be made on the Company’s customary payroll schedule and will begin on the first regularly scheduled pay day following the expiration of the 7-day revocation period set forth in the Separation Date Release.

(ii)COBRA Payments.

(a)    Provided that you timely elect continuing health, dental and vision coverage through COBRA, the Company will pay the COBRA premiums necessary to continue your current health, dental and vision insurance coverage for you and all covered dependents for a period of six months after the Separation Date, or until you become eligible for coverage through a subsequent employer, whichever is earlier (the “COBRA Premiums”). You agree to notify the Company immediately in writing if you become eligible for such coverage through a subsequent employer.         

(b)    Notwithstanding the foregoing, if the Company determines, in its sole discretion, that it cannot pay the COBRA Premiums without potentially incurring financial costs or penalties under applicable law (including, without limitation, Section 2716 of the Public Health Service Act), the Company instead shall pay to you, on the first day of each month, a fully taxable cash payment equal to the amount of the monthly COBRA premium you would be required to pay to continue your group health coverage (including coverage for any covered dependents) for that month (such amount, the “Special Cash Payments”). In the event the Company opts for the Special Cash Payments, you could use, but would not be obligated to use, the Special Cash Payments toward the cost of COBRA premiums.

3.Consulting Agreement. You will serve as a consultant to the Company under the terms specified below. The consulting relationship commences on the Separation Date and continues for one year from the Separation Date (the “Consulting Period”).

a.Consulting Services. You agree to provide consulting services to the Company in any area of your expertise upon request by the Company. The Company anticipates that you will provide services in the following areas: preclinical and clinical research study design, scientific analysis and interpretation of pre and post market data, support of publication strategies and development of regulatory strategies. During the Consulting Period, you will report directly to Mark Foley, President and Chief Executive Officer and will hold the title of Chief Scientific Officer. You agree to exercise the highest degree of professionalism and utilize your expertise and creative talents in performing these

services. You agree to make yourself available to perform such consulting services throughout the Consulting Period, up to a maximum of 16 hours per week.

b.Consulting Fees and Benefits.

(i)Consulting Fees. During the Consulting Period, you will receive as consulting fees $12,303.00 (twelve thousand, three hundred three dollars) per month (“Consulting Fees”); provided, however, that if you begin full-time employment (i.e., 40 hours per week) with another employer pursuant to Section 3(b)(vii) herein, you shall not receive any Consulting Fees for the period beginning on your first date of employment with another employer through the end of the Consulting Period.

(ii)Independent Contractor Relationship. Your relationship with the Company during the Consulting Period is that of an independent contractor, and nothing in this Agreement is intended to, or should be construed to, create a partnership, agency, joint venture or employment relationship. Except as specifically provided in this Agreement, you will not be entitled to any of the benefits which the Company may make available to its employees, including, but not limited to, group health or life insurance, profit-sharing or retirement benefits.

(iii)Taxes and Withholding. As a consultant, the Company will not withhold from the Consulting Fees any amount for taxes, social security or other payroll deductions. The Company will issue you a Form 1099 with respect to your Consulting Fees. You acknowledge that you will be entirely responsible for payment of any such taxes, and you hereby indemnify, defend and save harmless the Company, and its officers and directors in their individual capacity, from any liability for any taxes, penalties or interest that may be assessed by any taxing authority with respect to all compensation you receive under this Agreement, with the exception of the employer’s share of social security, if any.

(iv)Equity Awards. Your outstanding equity awards will continue to vest through the Consulting Period, provided that you remain in compliance with the terms of this Agreement. You will have three months to exercise any vested shares following the end of the Consulting Period.

(v)Limitations on Authority. You will have no responsibilities or authority as a consultant to the Company other than as provided above. You agree not to represent or purport to represent the Company in any manner whatsoever to any third party unless authorized by the Company, in writing, to do so.

(vi)Proprietary Information and Inventions. You agree that your Employee Propriety Information and Inventions Agreement (the “Confidentiality Agreement”), a copy of which is attached hereto as Exhibit B, shall govern any Company information to which you have access or which you develop, or inventions made by you, while performing services during the Consulting Period.

            (vii)    Other Work Activities. Throughout the Consulting Period, you retain the right to engage in employment, consulting, or other work relationships in addition to your work for the Company. The Company will make reasonable arrangements to enable you to perform your work for the Company at such times and in such a manner so that it will not interfere with other activities in which you may engage. In order to protect the trade secrets and confidential and proprietary information of the Company, you agree that, during the Consulting Period, you will notify the Company, in writing, and obtain the Company’s written consent, before you obtain competitive employment, perform competitive work for any business entity, or engage in any other work activity that is competitive with the Company. For purposes of this Agreement, the term “competitive” shall mean any entity involved in the commercialization of any competing, non-invasive fat reducing technology.

(vii)Termination of the Consulting Period. The Consulting Period shall end on the earliest to occur of the following:

(1)Expiration of the Consulting Period. The Consulting Period shall end on December 31, 2014, unless terminated earlier as provided herein.

(2)Your Notice. You may terminate the Consulting Period at any time upon two (2) weeks’ written advance notice. If the Consulting Period is terminated by you for any reason, you will be entitled to all Consulting Fees (or pro rata portion thereof) and equity vesting earned through the last date that you provide consulting services, but you shall not receive any Consulting Fees or continued equity vesting through the scheduled end of the Consulting Period (December 31, 2014).

(3)    Notice by the Company For Breach. The Company may end the Consulting Period immediately if you breach any of your obligations hereunder or breach any of your obligations under your Confidentiality Agreement. In such an event, you will be entitled to all Consulting Fees (or pro rata portion thereof) and equity vesting earned through the last date that you provide consulting services, but you shall not receive any Consulting Fees or continued equity vesting through the scheduled end of the Consulting Period (December 31, 2014).

4.Other Compensation or Benefits. You acknowledge that, except as expressly provided in this Agreement, you will not receive any additional compensation, severance, or benefits after the Separation Date, with the exception of any vested right you have pursuant to any Company benefit plan. You acknowledge and agree that the benefits set forth in this Agreement are in lieu of any severance benefits to which you may be entitled under your employee offer letter or any other agreements with the Company.

5.Expense Reimbursements. Youagree that, within thirty (30) days after the Separation Date, you will submit your final documented expense reimbursement statement reflecting all business expenses you incurred through the Separation Date, if any, for which you seek reimbursement. The Company will reimburse you for these expenses pursuant to its regular business practice.

6.Confidential Information Obligations. You acknowledge and agree to abide by your continuing obligations under your Confidentiality Agreement. You agree to sign and return to the Company the Termination Certificate attached to the Confidentiality Agreement.

7.Nondisparagement. You agree not to disparage the Company, its officers, directors, employees, shareholders, and agents, in any manner likely to be harmful to its or their business, business reputation or personal reputation; provided that you will respond accurately and fully to any question, inquiry or request for information when required by legal process. The Company agrees to direct Mark Foley and Keith Sullivan not to disparage you in any manner likely to be harmful to you or your business, business reputation or personal reputation; provided that the Company will respond accurately and fully to any question, inquiry or request for information when required by legal process.

8.Nonsolicitation. You agree that for a period of twelve (12) months following the end of the Consultancy Period, you shall not either directly or indirectly solicit, induce, recruit or encourage any of the Company’s employees or consultants to terminate their relationship with the Company, or take away such employees or consultants, or attempt to solicit, induce, recruit, encourage or take away employees or consultants of the Company, either for yourself or for any other person or entity.

9.No Admissions. You understand and agree that the promises and payments in consideration of this Agreement shall not be construed to be an admission of any liability or obligation by the Company to you or to any other person, and that the Company makes no such admission.

10.Release of Claims.

a.General Release. In exchange for the consideration under this Agreement to which you would not otherwise be entitled (including, without limitation, the Consulting Period), you hereby generally and completely release the Company and its directors, officers, employees, shareholders, partners, agents, attorneys, predecessors, successors, parent or subsidiary entities, insurers, affiliates and assigns from any and all claims, liabilities and obligations, both known and unknown, that arise out of or are in any way related to events, acts, conduct, or omissions prior to or on the date you sign this Agreement.

b.Scope of Release. This general release includes, but is not limited to: (1) all claims arising out of or in any way related to your employment with the Company or the termination of that employment; (2) all claims related to your compensation or benefits from the Company, including salary, bonuses, commissions, vacation pay, expense reimbursements, severance pay, fringe benefits, stock, stock options or any other ownership interests in the Company; (3) all claims for breach of contract, wrongful termination or breach of the implied covenant of good faith and fair dealing; (4) all tort claims, including claims for fraud, defamation, emotional distress and discharge in violation of public policy; and (5) all federal, state, and local statutory claims, including claims for discrimination, harassment, retaliation, attorneys’ fees, or other claims arising under the federal Civil Rights Act of 1964 (as amended), the federal Americans with Disabilities Act of 1990, the federal Age Discrimination in Employment Act (the “ADEA”) (as amended), or the California Fair Employment and Housing Act (as amended).

c.Excluded Claims. Notwithstanding the foregoing, you are not hereby releasing the Company from any of the following claims (collectively, the “Excluded Claims”): (a) any rights or claims for indemnification you may have pursuant to any written indemnification agreement with the Company to which you are a party, the charter, bylaws, or operating agreements of the Company, or under applicable law; (b) any rights which cannot be waived as a matter of law; or (c) any claims arising from the breach of this Agreement. In addition, nothing in this Agreement prevents you from filing, cooperating with, or participating in any proceeding before the Equal Employment Opportunity Commission, the Department of Labor, or the California Department of Fair Employment and Housing, except that you hereby waive your right to any monetary benefits in connection with any such claim, charge or proceeding. You hereby represent and warrant that, other than the Excluded Claims, you are not aware of any claims you have or might have against the Company or its directors, officers, employees, shareholders, partners, agents, attorneys, predecessors, successors, parent or subsidiary entities, insurers, affiliates or assigns.

11.ADEA Waiver. You acknowledge that you are knowingly and voluntarily waiving and releasing any rights you may have under the ADEA (“ADEA Waiver”). You also acknowledge that the consideration given for the ADEA Waiver is in addition to anything of value to which you were already entitled. You further acknowledge that you have been advised by this writing, as required by the ADEA, that: (a) your ADEA Waiver does not apply to any rights or claims that arise after the date you sign this Agreement; (b) you should consult with an attorney prior to signing this Agreement; (c) you have twenty-one (21) days to consider this Agreement (although you may choose to voluntarily sign it sooner); (d) you have seven (7) days following the date you sign this Agreement to revoke (in a written revocation sent to me); and (e) this Agreement will not be effective until the date upon which the revocation period has expired, which will be the eighth day after you sign this Agreement (the “Effective Date”).

12.Section 1542 Waiver. In granting the release herein, which includes claims that may be unknown to you at present, you acknowledge that you have read and understand Section 1542 of the California Civil Code: “A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor.” You hereby expressly waive and relinquish all rights and benefits under that section and any law or legal principle of similar effect in any jurisdiction with respect to the releases granted herein, including but not limited to the release of unknown and unsuspected claims granted in this Agreement.

13.No Voluntary Adverse Action; Cooperation. You agree that you will not voluntarily assist any person in bringing or pursuing any claim or action of any kind against the Company or its parent, subsidiary, or affiliate entities, or their officers, directors, members, employees or agents, except in the course of a government investigation or as required by compulsion of law (including as required by subpoena or deposition notice). In addition, you agree to cooperate fully with the Company in connection with its actual or contemplated defense, prosecution, or investigation of any claims or demands by or against third parties (e.g., demands to produce documents or testimony pursuant to subpoena), or other matters arising from events, acts, or failures to act that occurred during the period of your employment by the Company. Such cooperation includes, without limitation, making yourself available to the Company upon reasonable notice, without subpoena, to provide truthful and accurate information in witness interviews with the Company or its counsel, and in deposition and trial testimony. The Company will reimburse you for reasonable out-of-pocket expenses you may incur in connection with any such cooperation (excluding forgone wages, salary, or other compensation) and will make reasonable efforts to accommodate your scheduling needs. In addition, you agree to execute all documents (if any) necessary to carry out the terms of this Agreement.

14.Representations. You hereby represent that you have been paid all compensation owed and for all hours worked, you have received all the leave and leave benefits and protections for which you are eligible pursuant to FMLA, CFRA, or any applicable law or Company policy, and you have not suffered any on-the-job injury or illness for which you have not already filed a workers’ compensation claim.

15.Miscellaneous. This Agreement, including Exhibits A and B, constitutes the complete, final and exclusive embodiment of the entire agreement between you and the Company with regard to its subject matter. It is entered into without reliance on any promise or representation, written or oral, other than those expressly contained herein, and it supersedes any other such promises, warranties or representations. This Agreement may not be modified or amended except in a writing signed by both you and a duly authorized officer of the Company. This Agreement will bind the heirs, personal representatives, successors and assigns of both you and the Company, and inure to the benefit of both you and the Company, their heirs, successors and assigns. If any provision of this Agreement is determined to be invalid or unenforceable, in whole or in part, this determination will not affect any other provision of this Agreement and the provision in question will be modified so as to be rendered enforceable. This Agreement will be deemed to have been entered into and will be construed and enforced in accordance with the laws of the State of California as applied to contracts made and to be performed entirely within California. Any ambiguity in this Agreement shall not be construed against either party as the drafter. Any waiver of a breach of this Agreement shall be in writing and shall not be deemed to be a waiver of any successive breach. This Agreement may be executed in counterparts and facsimile signatures will suffice as original signatures.

If this Agreement is acceptable to you, please sign below and return the original to me.

We wish you the best in your future endeavors.

Sincerely,

ZELTIQ AESTHETICS, Inc.

/s/ Mark Foley

Mark Foley, President & CEO

I have read, understand and agree fully to the foregoing Agreement:

/s/ Kristine Tatsutani            12/3/13                

Kristine Tatsutani                    Date

EXHIBIT A

Separation Date Release

(To Be Signed On or Within 21 Days After the Separation Date)

In exchange for the consideration under this Agreement to which I am not otherwise be entitled (including, without limitation, the Consulting Period), I hereby generally and completely release the Company and its directors, officers, employees, shareholders, partners, agents, attorneys, predecessors, successors, parent or subsidiary entities, insurers, affiliates and assigns from any and all claims, liabilities and obligations, both known and unknown, that arise out of or are in any way related to events, acts, conduct, or omissions prior to or on the date I sign this Separation Date Release.

This general release includes, but is not limited to: (1) all claims arising out of or in any way related to my employment with the Company or the termination of that employment; (2) all claims related to my compensation or benefits from the Company, including salary, bonuses, commissions, vacation pay, expense reimbursements, severance pay, fringe benefits, stock, stock options or any other ownership interests in the Company; (3) all claims for breach of contract, wrongful termination or breach of the implied covenant of good faith and fair dealing; (4) all tort claims, including claims for fraud, defamation, emotional distress and discharge in violation of public policy; and (5) all federal, state, and local statutory claims, including claims for discrimination, harassment, retaliation, attorneys’ fees, or other claims arising under the federal Civil Rights Act of 1964 (as amended), the federal Americans with Disabilities Act of 1990, the federal Age Discrimination in Employment Act (the “ADEA”) (as amended), or the California Fair Employment and Housing Act (as amended).

Notwithstanding the foregoing, I am not hereby releasing the Company from any of the following claims (collectively, the “Excluded Claims”): (a) any rights or claims for indemnification I may have pursuant to any written indemnification agreement with the Company to which I am a party, the charter, bylaws, or operating agreements of the Company, or under applicable law; (b) any rights which cannot be waived as a matter of law; or (c) any claims arising from the breach of this Agreement. In addition, nothing in this Agreement prevents me from filing, cooperating with, or participating in any proceeding before the Equal Employment Opportunity Commission, the Department of Labor, or the California Department of Fair Employment and Housing, except that I hereby waive my right to any monetary benefits in connection with any such claim, charge or proceeding. I hereby represent and warrant that, other than the Excluded Claims, I am not aware of any claims I have or might have against the Company or its directors, officers, employees, shareholders, partners, agents, attorneys, predecessors, successors, parent or subsidiary entities, insurers, affiliates or assigns.

I acknowledge that I am knowingly and voluntarily waiving and releasing any rights I may have under the ADEA (“ADEA Waiver”). I also acknowledge that the consideration given for the ADEA Waiver is in addition to anything of value to which I am already entitled. I further acknowledge that I have been advised by this writing, as required by the ADEA, that: (a) my ADEA Waiver does not apply to any rights or claims that arise after the date I sign this Agreement; (b) I should consult with an attorney prior to signing this Agreement; (c) I have twenty-one (21) days to consider this Agreement (although I may choose to voluntarily sign it sooner); (d) I have seven (7) days following the date I sign this Agreement to revoke (in a written revocation sent to me); and (e) this Agreement will not be effective until the date upon which the revocation period has expired, which will be the eighth day after I sign this Agreement (the “Effective Date”).

In granting the release herein, which includes claims that may be unknown to me at present, I acknowledge that I have read and understand Section 1542 of the California Civil Code: “A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor.” I hereby expressly waive and relinquish all rights and benefits under that section and any law or legal principle of similar effect in any jurisdiction with respect to the releases granted herein, including but not limited to the release of unknown and unsuspected claims granted in this Agreement.

I have read, understand and agree fully to the foregoing Agreement:

/s/ Kristine Tatsutani            12/3/13                

Kristine Tatsutani                    Date

EX-12.1

Exhibit 12.1

ZELTIQ Aesthetics, Inc.

Ratio of Earnings to Fixed Charges

The following table sets forth the calculation of the ratio of earnings to fixed charges for the periods indicated.

(In thousands)

	Year Ended December 31,
	2013			2012			2011			2010			2009
Earnings (loss), calculated as follows:
Income (loss) from continuing operations before income taxes	$	(19,165	)	$	(30,002	)	$	(9,555	)	$	(13,533	)	$	(17,644	)
Add: Fixed charges	450			396			410			720			735
Total adjusted earnings	(18,715		)	(29,606		)	(9,145		)	(12,813		)	(16,909		)
Fixed Charges, calculated as follows:
Interest expensed	$	—		$	2		$	72		$	449		$	467
Amortized premiums, discounts and capitalized expenses related to indebtedness	—			—			49			49			39
Estimate of interest within rental expense (1)	450			394			289			222			229
Total fixed charges	$	450		$	396		$	410		$	720		$	735
Deficiency of Earnings to Cover Fixed Charges	$	19,165		$	30,002		$	9,555		$	13,533		$	17,644

(1) Interest component of rental expense is estimated to equal 1/3 of all such expense, which management believes is a reasonable approximation of the interest factor.

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (No. 333-177606, 333-183131 and 333-187226) and Form S-3 (No. 333-190620) of ZELTIQ Aesthetics, Inc. of our report dated February 25, 2014 relating to the consolidated financial statements and the effectiveness of internal control over financial reporting, which appears in this Form 10-K.

/s/ PRICEWATERHOUSECOOPERS LLP

San Jose, CA

February 25, 2014

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Mark J. Foley, certify that:

    1.    I have reviewed this Form 10-K of ZELTIQ Aesthetics, Inc.;

    2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

    3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

    4.    The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

    (a)    Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

    (b)    Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)    Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

    (d)    Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

    5.    The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

    (a)    All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

    (b)    Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

February 25, 2014

/s/ Mark J. Foley

Mark J. Foley

President and Chief Executive Officer

(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Patrick F. Williams, certify that:

    1.    I have reviewed this Form 10-K of ZELTIQ Aesthetics, Inc.;

    2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

    3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

    4.    The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

    (a)    Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

    (b)    Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)    Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

    (d)    Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

    5.    The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

    (a)    All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

    (b)    Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

February 25, 2014

/s/ Patrick F. Williams

Patrick F. Williams

Chief Financial Officer

(Principal Financial and Accounting Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of ZELTIQ Aesthetics, Inc. (the “Company”) on Form 10-K for the period ended December 31, 2013, as filed with the Securities and Exchange Commission (the “Report”), we the undersigned officers of the Company, do hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of our knowledge:

• The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

• The information in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

February 25, 2014

/s/ Mark J. Foley

Mark J. Foley

President and Chief Executive Officer

(Principal Executive Officer)

/s/ Patrick F. Williams

Patrick F. Williams

Chief Financial Officer

(Principal Financial and Accounting Officer)

XML

Summary Of Significant Accounting Policies - Concentration Of Credit Risk (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Allowance for Doubtful Accounts Receivable [Roll Forward]
Balance at Beginning of Year	$ 330	$ 40	$ 62
Additions	59	329	50
Reductions	389	39	72
Balance at End of Year	$ 0	$ 330	$ 40

XML

Related Party Transactions - Brazilian Distribution Agreement (Details) (Distributor [Member], USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Distributor [Member]
Related Party Transaction [Line Items]
Revenue from related parties	$ 2.3	$ 2.5	$ 2.0
Accounts receivable, related parties	$ 0.2	$ 0.1

XML

Balance Sheet Components - Warranty (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Movement in Standard Product Warranty Accrual [Roll Forward]
Balance at the beginning of the period	$ 902	$ 742
Accruals for warranties issued	197	869
Settlements of warranty claims	(423)	(709)
Balance at the end of the period	$ 676	$ 902

XML

Income Taxes - Domestic And Foreign Components Of Loss Before Provision For Income Taxes (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Income Tax Disclosure [Abstract]
Domestic	$ (19,535)	$ (30,329)	$ (9,051)
Foreign	370	327	(504)
Loss before provision for income taxes	$ (19,165)	$ (30,002)	$ (9,555)

XML

Commitments And Contingencies - Lease Commitments (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Commitments and Contingencies Disclosure [Abstract]
Rent expense	$ 1,400,000	$ 1,200,000	$ 900,000
Operating Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract]
2014	1,252,000
2015	30,000
2016	61,000
2017	61,000
2018	61,000
Total future minimum lease payments	$ 1,465,000

XML

Net Loss Per Share Of Common Stock (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2013	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Earnings Per Share [Abstract]
Net loss attributable to common stockholders									$ (19,305)	$ (30,143)	$ (14,702)
Weighted average shares of common stock outstanding used in computing net loss attributable to common stockholders, basic and diluted	36,686,053	36,206,008	36,045,346	35,890,084	35,764,666	35,068,076	34,253,357	34,010,432	36,209,051	34,776,380	7,506,282
Basic and diluted net loss per share attributable to common stockholders (dollars per share)	$ (0.15)	$ (0.08)	$ (0.10)	$ (0.21)	$ (0.18)	$ (0.15)	$ (0.24)	$ (0.30)	$ (0.53)	$ (0.87)	$ (1.96)

XML

Balance Sheet Components - Property and Equipment, Net (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 5,546,000	$ 4,942,000
Less: Accumulated depreciation and amortization	(3,594,000)	(2,610,000)
Property and equipment, net	2,158,000	2,336,000
Depreciation	1,000,000	900,000	700,000
Lab Equipment, Tooling and Molds [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	2,071,000	1,987,000
Computer Software [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	1,562,000	1,243,000
Computer Equipment [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	801,000	753,000
Leasehold Improvements [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	743,000	636,000
Furniture and Fixtures [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	334,000	288,000
Vehicles [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	35,000	35,000
Construction in Progress [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 206,000	$ 4,000

XML

Net Loss Per Share Of Common Stock (Tables)

12 Months Ended

Dec. 31, 2013

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted

A reconciliation of the numerator and denominator used in the calculation of the basic and diluted net loss per share is as follows:

	Year Ended
	December 31,
	2013			2012			2011
Historical net loss per share:
Numerator
Net loss attributable to common stockholders (in thousands)	$	(19,305	)	$	(30,143	)	$	(14,702	)
Denominator
Weighted average shares of common stock outstanding used in computing net loss per share attributable to common stockholders - basic and diluted	36,209,051			34,776,380			7,506,282
Basic and diluted net loss per share attributable to common stockholders	$	(0.53	)	$	(0.87	)	$	(1.96	)

Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share

The following outstanding shares of potentially dilutive securities were excluded from the computation of diluted net loss per share of common stock for the periods presented, because including them would have been anti-dilutive:

	Year Ended
	December 31,
	2013	2012	2011
Options to purchase common stock	3,598,385	4,128,334	4,847,972
Restricted stock units	1,906,696	119,507	—
Common stock issuable pursuant to the ESPP	86,026	21,586	—
Total	5,591,107	4,269,427	4,847,972

XML

Net Loss Per Share Of Common Stock - Outstanding Shares of Potentially Dilutive Securities (Details)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share, amount (Shares)	5,591,107	4,269,427	4,847,972
Options to purchase common stock [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share, amount (Shares)	3,598,385	4,128,334	4,847,972
Restricted stock units [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share, amount (Shares)	1,906,696	119,507	0
Common stock issuable pursuant to the ESPP [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share, amount (Shares)	86,026	21,586	0

XML

Income Taxes - Deferred Tax Assets (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Income Tax Disclosure [Abstract]
Net operating loss carryforwards	$ 45,401	$ 38,385
Research & development credits	2,335	2,703
Depreciation & amortization	583	312
Accruals & reserves	2,731	3,592
Deferred tax assets	51,050	44,992
Valuation allowance	(51,003)	(44,926)	(32,836)	(29,231)
Net deferred tax assets	$ 47	$ 66

XML

Commitments and Contingencies - Unrecognized Tax Benefits (Details) (USD $) In Millions, unless otherwise specified	Dec. 31, 2013
Commitments and Contingencies Disclosure [Abstract]
Unrecognized tax benefits	$ 0.1

XML

Income Taxes Income Taxes - Valuation Allowance (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Movement in Deferred Tax Asset Valuation Allowance [Roll Forward]
Change in valuation allowance	$ 6,100,000	$ 12,100,000
Balance at Beginning of Year	44,926,000	32,836,000	29,231,000
Additions	6,077,000	12,090,000	3,605,000
Reductions	0	0	0
Balance at End of Year	$ 51,003,000	$ 44,926,000	$ 32,836,000

XML

Segment Information (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2013	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2013 business_activity	Dec. 31, 2012	Dec. 31, 2011
Segment Reporting Information [Line Items]
Number of business activities									1
Revenue	$ 35,841	$ 29,465	$ 26,338	$ 19,982	$ 18,597	$ 17,928	$ 22,265	$ 17,404	$ 111,626	$ 76,194	$ 68,144
North America [Member]
Segment Reporting Information [Line Items]
Revenue									89,150	56,657	50,332
United States
Segment Reporting Information [Line Items]
Revenue									83,700	54,700	47,500
International [Member]
Segment Reporting Information [Line Items]
Revenue									22,476	19,537	17,812
Systems [Member]
Segment Reporting Information [Line Items]
Revenue									61,359	39,145	46,552
Consumable Revenues [Member]
Segment Reporting Information [Line Items]
Revenue									$ 50,267	$ 37,049	$ 21,592

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Income Taxes - Unrecognized Tax Benefits (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Reconciliation of Unrecognized Tax Benefits, Excluding Amounts Pertaining to Examined Tax Returns [Roll Forward]
Beginning balance	$ 902,000	$ 824,000	$ 678,000
Additions based on tax positions related to the current year	2,023,000	78,000	146,000
Ending balance	2,925,000	902,000	824,000
Unrecognized tax benefits that would affect effective tax rate due to valuation allowance if recognized	$ 100,000

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Income Taxes - Provision For Income Taxes (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Current provision:
Federal	$ 0	$ 0	$ 0
State	60	37	48
Foreign	61	170	0
Total current	121	207	48
Deferred provision (benefit):
Federal	0	0	0
State	0	0	0
Foreign	19	(66)	0
Total deferred	19	(66)	0
Total provision	$ 140	$ 141	$ 48

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Summary Of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2013

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America, or GAAP.

Principles of Consolidation

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. All significant intercompany accounts and transactions have been eliminated.

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reported periods. The primary estimates underlying the Company's financial statements include the value of revenue elements, product warranty, inventory valuation, allowance for doubtful accounts receivable, assumptions regarding variables used in calculating the fair value of the Company's equity awards, fair value of investments, useful lives of intangibles, income taxes and contingent liabilities. Actual results could differ from those estimates.

Significant Risks and Uncertainties

Significant Risks and Uncertainties

The Company's future results of operations involve a number of risks and uncertainties. Factors that could affect the Company's future operating results and cause actual results to vary materially from expectations include, but are not limited to, rapid technological change, continued acceptance of the Company's products, competition from substitute products and larger companies, protection of proprietary technology, strategic relationships and dependence on key individuals. If the Company fails to adhere to ongoing FDA Quality System Regulation, the FDA may withdraw its market clearance or take other action. The Company relies on sole-source suppliers to manufacture some of the components used in its product. The Company's manufacturers and suppliers may encounter supply interruptions or problems during manufacturing due to a variety of reasons, including failure to comply with applicable regulations, including the FDA's Quality System Regulation, equipment malfunction and environmental factors, any of which could delay or impede the Company's ability to meet demand.

Concentration of Credit Risk

Concentration of Credit Risk

Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash equivalents, marketable securities and trade receivables. Our cash equivalents and marketable securities are held in safekeeping by large, credit worthy financial institutions. The Company invests our excess cash primarily in U.S. banks, government and agency bonds, money market funds and corporate obligations. The Company has established guidelines relative to credit ratings, diversification and maturities that seek to maintain safety and liquidity. Deposits in these banks may exceed the amounts of insurance provided on such deposits. To date, the Company has not experienced any losses on our deposits of cash and cash equivalents.

The Company controls credit risk through credit approvals, credit limits, and monitoring procedures. The Company performs periodic credit evaluations of its customers and generally does not require collateral. Accounts receivable are recorded net of an allowance for doubtful accounts. The allowance for doubtful accounts is based on management's assessment of the collectability of specific customer accounts and the aging of the related invoices, and represents our best estimate of probable credit losses in our existing trade accounts receivable.

Cash and Cash Equivalents

Cash and Cash Equivalents

The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.

Investments

Investments

The Company invests its excess cash balances primarily in certificates of deposit, commercial paper, corporate bonds, and U.S. Government agency securities. Investments with original maturities greater than 90 days that mature less than one year from the consolidated balance sheet date are classified as short-term investments. The Company classifies all of its investments as available-for-sale and records such assets at estimated fair value in the consolidated balance sheets, with unrealized gains and losses, if any, reported as a component of accumulated other comprehensive income (loss) in stockholders' equity. Realized gains and losses from maturities of all such securities are reported in earnings and computed using the specific identification cost method.  Realized gains or losses and charges for other-than-temporary declines in value, if any, on available-for-sale securities are reported in other income (expense), net as incurred.  The Company periodically evaluates these investments for other-than-temporary impairment.

Inventory

Inventory

Inventory is stated at the lower of cost (which approximates actual cost on a first-in, first-out basis) or market, computed on a standard cost basis. Inventory that is obsolete or in excess of forecasted usage is written down to its estimated net realizable value based on assumptions about future demand and market conditions. Inventory write-downs are charged to cost of revenue and establish a new cost basis for the inventory.

Property and Equipment

Property and Equipment

Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Maintenance and repairs are charged to expense as incurred. Assets not yet placed in use are not depreciated.

The useful lives of the property and equipment are as follows:

Lab equipment, tooling, and molds	5 years
Computer equipment	3 years
Computer software	3 years
Furniture and fixtures	5 years
Vehicles	5 years
Leasehold improvements	Shorter of lease term or estimated useful life

Capitalized Software

Capitalized Software

The Company capitalizes costs associated with customized internal-use software systems that have reached the application development stage and meet recoverability tests. Such capitalized costs mainly include external direct costs utilized in developing or obtaining the applications. Capitalization of such costs begins when the preliminary project stage is complete and ceases at the point in which the project is substantially complete and is ready for its intended purpose. The capitalized costs associated with internal-use software are depreciated on a straight-line basis over each asset's estimated useful life, which is generally three years.

Intangible Asset

Intangible Asset

The intangible asset consists of an exclusive license agreement for commercializing patents and other technology. All milestone payments subsequent to the date of the FDA approval are capitalized as purchased technology when paid, and are subsequently amortized into cost of revenue using the straight-line method over the estimated remaining useful life of the technology, not to exceed the term of the agreement or the life of the patent.

Impairment of Long-Lived Assets

Impairment of Long-lived Assets

The Company reviews property and equipment and the intangible asset for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability is measured by comparison of the carrying amount to the future undiscounted net cash flows which the assets are expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the assets' fair value determined using the projected discounted future net cash flows arising from the asset.

Revenue Recognition

Revenue Recognition

The Company’s revenue is derived from the sales of the CoolSculpting system, consisting of a control unit and applicators, and from the sale of cycles in the form of consumable procedure packs, each of which includes consumable CoolGels and CoolLiners and a disposable computer cartridge that the Company markets as the CoolCard. Embedded software exists in the CoolCard product to permit the Company’s customers to perform a fixed number of CoolSculpting procedures, or cycles. This software is not marketed separately from the CoolSculpting system or from the CoolCard. Rather, the functionality that the software provides is part of the overall CoolCard product. The CoolSculpting system is marketed as a non-invasive aesthetic device for the reduction of fat, not for its embedded software attributes included in the CoolCard that enable its use. The Company does not provide rights to upgrades and enhancements or post-contract customer support for the embedded software. In addition, the Company does not incur significant software development costs or capitalize its software development costs. Based on this assessment, the Company considers the embedded software in the CoolCard incidental to the CoolCard product as a whole and determined that revenue recognition should not be governed by the provisions of Topic 985 of the FASB Accounting Standards Codification, or ASC. The Company earns revenue from the sale of its products to its customers and to distributors. The Company recognizes revenue when persuasive evidence of an arrangement exists, transfer of title to the customer has occurred, the sales price is fixed or determinable, and collectability is probable. Revenue is deferred in the event that any of the revenue recognition criteria is not met.

Persuasive Evidence of an Arrangement. The Company uses contracts or customer purchase orders to determine the existence of an arrangement.

Transfer of title. Our standard terms generally specify that title transfers upon shipment to the customer. The Company uses third party shipping documents to verify that title has transferred.

Sales Price Fixed or Determinable. The Company assesses whether the sales price is fixed or determinable at the time of the transaction. Sales prices are documented in the executed sales contract or purchase order received prior to shipment. The Company’s standard terms do not allow for trial or evaluation periods, rights of return or refund, payments contingent upon the customer obtaining financing or other terms that could impact the customer’s obligation.

Collectability. The Company assesses whether collection is reasonably assured based on a number of factors, including the customer’s past transaction history and credit worthiness.

Multiple-Element Arrangements. Typically, all products sold to a customer are delivered at the same time. If a partial delivery occurs as authorized by the customer, the Company allocates revenue to the various products based on their vendor-specific objective evidence of fair value, or VSOE, if VSOE exists according to ASC 605-25 as the basis of determining the relative selling price of each element. If VSOE does not exist, the Company may use third party evidence of fair value, or TPE, to determine the relative selling price of each element. If neither VSOE nor TPE exists, the Company may use management’s best estimate of the sales price, or ESP, of each element to determine the relative selling price. The relative selling prices for control units, applicators, CoolCards and extended warranty are based on established price lists and separate, stand-alone sales of these elements. The Company establishes best estimates within a range of selling prices considering multiple factors including, but not limited to, factors such as size of transaction, pricing strategies and market conditions. The Company believes the use of the ESP allows revenue recognition in a manner consistent with the underlying economics of the transaction. The Company’s products do not require maintenance or support.

Accruals for Customer Programs

Accruals for Customer Programs

The Company records an accrued liability for cooperative marketing arrangements and customer incentive programs. The estimated cost of these programs is recorded as a reduction of revenue or as an operating expense, if the Company receives a separately identifiable benefit from the customer and can reasonably estimate the fair value of that benefit. Significant management judgment and estimates must be used to determine the cost of these programs in any accounting period.

Cooperative Marketing Arrangements.  The Company offers cooperative marketing programs to its North American customers, allowing the customer to receive partial reimbursement for qualifying advertising expenditures which promote the Company's product and brand. Customer participation, as well as reimbursement amounts, is predicated upon purchase levels of CoolCards. The objective of these arrangements is to encourage advertising and promotional events to increase sales of the Company's products. Accruals for these marketing arrangements are recorded at the time of sale, or time of commitment, based on the related program parameters, review of related advertising and historical experience.

Customer Incentive Programs.  The Company's customer incentive program consists of rebates for our North American customers based on purchase levels of CoolCards. Estimated costs of consumer rebates and similar incentives are recorded at the time the incentive is offered, based on the specific terms and conditions of the program.

Cost of Revenues

Cost of Revenue

Cost of revenue consists primarily of cost of finished and semi-finished products purchased from our third-party suppliers, labor, material, and overhead involved in our internal manufacturing processes, technology amortization and royalty fees and cost of product warranty. In the event that a revenue transaction is deferred, the corresponding cost associated with the transaction will also be deferred.

Shipping and Handling

Shipping and Handling

Shipping and handling costs charged to customers are recorded as revenue. Shipping costs are included in cost of revenue.

Research and Development

Research and Development

Research and development costs primarily consist of salaries, benefits, incentive compensation, stock-based compensation, and allocated facilities costs for employees and contractors engaged in research, clinical studies, regulatory affairs, and development. The Company expenses all research and development costs in the periods in which they are incurred.

Advertising Costs

Advertising costs

The cost of advertising and media is expensed as incurred.

Product Warranty

Product Warranty

Effective in the second quarter of 2013, the Company provides a standard limited warranty on its products of generally one year for both control units and applicators for its direct customers. Prior to this change, the Company provided a standard limited warranty on its products of generally three years for control units and one year for applicators, while for direct customers in Europe, the Company offered a one year standard warranty on control units. For indirect customers in international markets the Company provides a standard limited warranty on its products of generally three years for control units and one year for applicators.

The Company accrues for the estimated future costs of repair or replacement upon shipment. The warranty accrual is recorded to cost of revenue and is based upon historical and forecasted trends in the volume of product failures during the warranty period and the cost to repair or replace the equipment. The Company bases product warranty costs on related freight, material, technical support labor, and overhead costs. The estimated product warranty costs are assessed by considering historical costs and applying the experienced failure rates to the outstanding warranty period for products sold. The Company exercises judgment in estimating the expected product warranty costs, using data such as the actual and projected product failure rates, and average repair costs, including freight, material, technical support labor, and overhead costs, for products returned under warranty.

The Company offers an extended warranty of up to two years on both our CoolSculpting control units and CoolSculpting applicators. The Company recognizes the revenue from the sale of an extended warranty over the extended warranty coverage period. Our revenue and related obligations from sale of extended warranties to date has not been significant.

Stock-Based Compensation

Stock-Based Compensation

The Company maintains incentive plans under which incentive and nonqualified stock options are granted primarily to employees and non-employee consultants.

Stock-based compensation cost is measured at the grant date, based on the fair value of the award, and is recognized as expense on a straight-line basis over the requisite service period. The fair value of stock-based awards to employees is estimated using the Black-Scholes option pricing model. The Company estimates its forfeiture rate based on an analysis of its actual forfeitures and will continue to evaluate the adequacy of the forfeiture rate assumption based on actual forfeitures, analysis of employee turnover, and other related factors.

Stock-based compensation expense related to stock options granted to non-employees is recognized as the stock options are earned. The awards generally vest ratably over the time period the Company expects to receive services from the non-employee. The fair values attributable to these options are amortized over the service period and the unvested portion of these options is remeasured at each vesting date.

Income Taxes

Income Taxes

The Company utilizes the asset and liability method of accounting for income taxes, under which deferred taxes are determined based on the temporary differences between the financial statement and tax basis of assets and liabilities using tax rates expected to be in effect during the years in which the basis differences reverse and for operating losses and tax credit carryforwards. The Company estimates our provision for income taxes and amounts ultimately payable or recoverable in multiple tax jurisdictions around the world. Estimates involve interpretations of regulations and are inherently complex. Resolution of income tax treatments in individual jurisdictions may not be known for many years after completion of any fiscal year. The Company is required to evaluate the realizability of our deferred tax assets on an ongoing basis to determine whether there is a need for a valuation allowance with respect to such deferred tax assets. A valuation allowance is recorded when it is more likely than not that some or all of the deferred tax assets will not be realized. Significant management judgment is required in determining any valuation allowance recorded against deferred tax assets. In evaluating the ability to recover deferred tax assets, the Company considers all available positive and negative evidence giving greater weight to our recent cumulative losses and our ability to carryback losses against prior taxable income and, commensurate with objective verifiability, the forecast of future taxable income including the reversal of temporary differences and the implementation of feasible and prudent tax planning strategies.

The Company recognizes and measures uncertain tax positions taken or expected to be taken in a tax return if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such positions are then measured based on the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement. The Company reports a liability for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in a tax return. The Company adjusts these reserves in light of changing facts and circumstances, such as the closing of a tax audit or the refinement of an estimate. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will impact the provision for income taxes in the period in which such determination is made. The provision for income taxes includes the impact of reserve provisions and changes to reserves that are considered appropriate, as well as the related net interest. The Company recognizes interest and penalties related to unrecognized tax benefits within the income tax provision. Accrued interest and penalties are included within the related tax liability line in the consolidated balance sheet.

The Company files annual income tax returns in multiple taxing jurisdictions around the world. A number of years may elapse before an uncertain tax position is audited and finally resolved. While it is often difficult to predict the final outcome or the timing of resolution of any particular uncertain tax position, the Company believes that our reserves for income taxes reflect the most likely outcome. The Company adjusts these reserves, as well as the related interest, in light of changing facts and circumstances. Settlement of any particular position could require the use of cash.

Net Loss Per Share

Net Loss Per Share

Basic net loss per share of common stock is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding for the period. Diluted net loss per share of common stock is computed by giving effect to all potentially dilutive securities outstanding during the period, including options, restricted stock units, stock issuable pursuant to the employee stock purchase plan, warrants, and convertible preferred stock. Basic and diluted net loss per share attributable to common stockholders was the same for all periods presented as the inclusion of all potentially dilutive securities outstanding were anti-dilutive. As such, the numerator and the denominator used in computing both basic and diluted net loss are the same for each period presented.

Comprehensive Income (Loss)

Comprehensive Income (Loss)

Accumulated other comprehensive income includes foreign currency translation adjustments and unrealized gains (losses) on available-for-sale securities net of tax, the impact of which has been excluded from earnings and reflected as components of stockholders' equity.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

On February 5, 2013, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. This guidance is the culmination of the FASB's redeliberation on reporting reclassification adjustments from accumulated other comprehensive income. The Company adopted this guidance effective during the first quarter of 2013 and such adoption did not have a material impact on the Company's consolidated financial statements.

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License Agreement With Massachusetts General Hospital - Intangible Asset, Net Comprises (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Goodwill and Intangible Assets Disclosure [Abstract]
Purchased technology	$ 8,050	$ 8,050
Less: accumulated amortization	(1,569)	(869)
Intangible asset, net	$ 6,481	$ 7,181

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Summary of Significant Accounting Policies - Comprehensive Income (Loss) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Accounting Policies [Abstract]
Cumulative translation adjustments	$ 77	$ 0
Unrealized gain on marketable securities, net of tax	10	8
Accumulated other comprehensive income	$ 87	$ 8

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Income Taxes - Tax Credit Carryforward (Details) (Research Tax Credit Carryforward [Member], USD $) In Millions, unless otherwise specified	Dec. 31, 2013
Federal [Member]
Tax Credit Carryforward [Line Items]
Research and development credit carryforwards	$ 2.8
State [Member]
Tax Credit Carryforward [Line Items]
Research and development credit carryforwards	$ 3.0

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The Company And Basis Of Presentation (Details) (USD $) In Thousands, except Share data, unless otherwise specified	12 Months Ended				0 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Oct. 13, 2011	Oct. 24, 2011 IPO [Member]	Oct. 24, 2011 Common Stock [Member] IPO [Member]	Oct. 24, 2011 Parent Company [Member] IPO [Member]	Oct. 24, 2011 Existing Stockholders [Member] IPO [Member]
Equity [Line Items]
Stockholders' equity note, reverse stock split, conversion ratio (Shares)				3.670069
Common stock, par value (per share)	$ 0.001	$ 0.001		$ 0.001
Stock issued during period, (Shares)					8,050,000		7,743,000	307,000
Share price (per share)					$ 13.00
Net proceeds from issuance initial public offering (USD)	$ 0	$ 0	$ 90,682		$ 90,700
Stock issued during period, shares, conversion of convertible securities (Shares)						24,415,965

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Notes Payable (Details) (USD $)	12 Months Ended			3 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Mar. 31, 2012 Secured Debt [Member]	Jan. 14, 2009 Secured Debt [Member]	Jan. 14, 2009 Secured Debt [Member] Loan Agreement [Member]	Jan. 31, 2009 Secured Debt [Member] Tranche A [Member]	Apr. 30, 2009 Secured Debt [Member] Tranche B [Member]	Sep. 30, 2009 Secured Debt [Member] Tranche C [Member]	Jan. 14, 2009 Series C Convertible Preferred Stock [Member]
Debt Instrument [Line Items]
Debt instrument, maximum borrowing amount						$ 5,000,000.0
Debt instrument, face amount							1,500,000.0	2,000,000.0	1,500,000.0
Debt instrument, interest rate, stated percentage					7.28%
Debt instrument, monthly installments	36 months
Preferred stock warrants, number of securities called by warrants (shares)										47,683
Preferred stock warrants, exercise price (per share)										3.67
Repayments of notes payable	0	310,000	1,335,000	300,000
Final payment, balloon payment interest rate				5.75%
Final payment, balloon payment amount				$ 200,000

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Stock-Based Compensation Plans - Assumptions (Details) (Stock Options [Member])	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected term	4 years 9 months 18 days	5 years 2 months 12 days	6 years
Expected volatility	51.00%	61.00%	59.00%
Risk-free interest rate	1.02%	0.76%
Risk free interest rate, minimum			1.05%
Risk free interest rate, maximum			2.65%
Expected dividend yield	0.00%	0.00%	0.00%

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Stockholders' Equity - Common Stock (Details) (Common Stock [Member], USD $)	12 Months Ended
	Dec. 31, 2013 vote
Common Stock [Member]
Class of Stock [Line Items]
Number of votes per share	1
Dividends declared	$ 0
Dividends paid	$ 0

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Balance Sheet Components - Accrued Liabilities (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Balance Sheet Related Disclosures [Abstract]
Accrued payroll and employee related expenses	$ 7,863	$ 3,430
Accrued marketing expenses	3,739	3,287
Accrued royalty	2,458	1,343
Sales and other taxes payable	1,787	1,177
Accrual warranty	676	902
Accrued legal expense	284	415
Other accrued liabilities	1,557	522
Total accrued liabilities	$ 18,364	$ 11,076

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The Company And Basis Of Presentation

12 Months Ended

Dec. 31, 2013

Organization, Consolidation and Presentation of Financial Statements [Abstract]

The Company and Basis of Presentation

The Company and Basis of Presentation

ZELTIQ Aesthetics, Inc. (“we” or the “Company”) was incorporated in the state of Delaware on March 22, 2005. The Company was founded to develop and commercialize a non-invasive product for the selective reduction of fat. Its first commercial product, the CoolSculpting system, is designed to selectively reduce stubborn fat bulges. CoolSculpting is based on the scientific principle that fat cells are more sensitive to cold than the overlying skin and surrounding tissues. CoolSculpting utilizes precisely controlled cooling to reduce the temperature of fat cells in the treated area, which leads to fat cell elimination through a natural biological process known as apoptosis, without causing scar tissue or damage to the skin, nerves, or surrounding tissues. The Company generates revenue from sales of our CoolSculpting system and from sales of consumables to our customers.

In August 2011, the Company incorporated ZELTIQ Limited as a wholly-owned subsidiary in the United Kingdom to serve as its sales office for direct sales in Europe.

Reverse Stock Split

On October 13, 2011, the Company filed a certificate of amendment to the Company’s amended and restated certificate of incorporation that effected a reverse stock split of the Company’s common stock in which each 3.670069 shares of common stock outstanding or held in treasury immediately prior to such time was combined into one share of common stock. The par value of the common stock remained $0.001 per share. Accordingly, all share and per share amounts for all periods presented in these consolidated financial statements and notes thereto, have been adjusted retroactively, where applicable, to reflect this reverse stock split.

Initial Public Offering

On October 24, 2011, the Company completed its initial public offering, or IPO, of 8,050,000 shares of common stock at an offering price of $13.00 per share, of which 7,743,000 shares were sold by the Company and 307,000 shares were sold by existing stockholders. The Company received net proceeds of approximately $90.7 million, after deducting underwriting discounts, commissions and offering related transaction costs. In connection with the IPO, the Company’s outstanding shares of convertible preferred stock were automatically converted into 24,415,965 shares of common stock.

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Stock-Based Compensation Plans (Details) (USD $)	12 Months Ended			12 Months Ended				12 Months Ended				12 Months Ended				12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2013 2005 Equity Incentive Plan [Member]	Dec. 31, 2013 2005 Equity Incentive Plan [Member] Maximum [Member]	Dec. 31, 2013 2011 Equity Incentive Plan [Member]	Sep. 30, 2011 2011 Equity Incentive Plan [Member]	Dec. 31, 2013 2011 Equity Incentive Plan [Member] Maximum [Member]	Dec. 31, 2013 2011 Equity Incentive Plan [Member] Minimum [Member]	Dec. 31, 2013 2012 Stock Plan [Member]	Apr. 30, 2012 2012 Stock Plan [Member]	Dec. 31, 2013 2012 Stock Plan [Member] Maximum [Member]	Dec. 31, 2013 2012 Stock Plan [Member] Minimum [Member]	Dec. 31, 2013 2011 Employee Stock Purchase Plan [Member]	Sep. 30, 2011 2011 Employee Stock Purchase Plan [Member]	Dec. 31, 2013 10% Stockholder [Member] 2005 Equity Incentive Plan [Member] Minimum [Member]	Dec. 31, 2013 10% Stockholder [Member] 2011 Equity Incentive Plan [Member] Minimum [Member]	Dec. 31, 2013 10% Stockholder [Member] 2012 Stock Plan [Member] Minimum [Member]	Dec. 31, 2013 ISO [Member] 2005 Equity Incentive Plan [Member] Minimum [Member]	Dec. 31, 2013 NSO [Member] 2005 Equity Incentive Plan [Member] Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Percentage of stock purchase price									100.00%				100.00%	85.00%		110.00%	110.00%	110.00%	100.00%	85.00%
Vesting period				4 years		4 years				4 years
Vesting rate	25.00%
Common stock available for issuance				0			89,234				1,500,000				470,018
Increase in shares at each annual anniversary, percent						5.00%								1.00%
Period options may be granted					10 years			10 years				10 years
Additional shares reserved for future purchase under plan	1,200,000	3,199,890												150,000
Shares purchased														188,467
Weighted average exercise price														$ 4.20
Shares reserved for future issuance	1,086,737	1,103,836	57,437											298,188

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Fair Value Of Financial Instruments (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale, fair value sale securities, fair value disclosure	$ 30,282
Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, fair value disclosure	14,671	19,345
Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, fair value disclosure	28,407	34,633
Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, fair value disclosure	0	0
Fair Value [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Assets, fair value disclosure	43,078	53,978
Money Market Funds [Member] | Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents, fair value disclosure	12,796	18,274
Money Market Funds [Member] | Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents, fair value disclosure	0	0
Money Market Funds [Member] | Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents, fair value disclosure	0	0
Money Market Funds [Member] | Fair Value [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents, fair value disclosure	12,796	18,274
Short-term Investments [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale, fair value sale securities, fair value disclosure	18,840	22,563
Short-term Investments [Member] | U.S. Agency Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale, fair value sale securities, fair value disclosure	6,772	11,077
Short-term Investments [Member] | U.S. Agency Securities [Member] | Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale, fair value sale securities, fair value disclosure	0	0
Short-term Investments [Member] | U.S. Agency Securities [Member] | Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale, fair value sale securities, fair value disclosure	6,772	11,077
Short-term Investments [Member] | U.S. Agency Securities [Member] | Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale, fair value sale securities, fair value disclosure	0	0
Short-term Investments [Member] | U.S. Agency Securities [Member] | Fair Value [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale, fair value sale securities, fair value disclosure	6,772	11,077
Short-term Investments [Member] | U.S. Treasury [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale, fair value sale securities, fair value disclosure	1,001
Short-term Investments [Member] | U.S. Treasury [Member] | Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale, fair value sale securities, fair value disclosure	0
Short-term Investments [Member] | U.S. Treasury [Member] | Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale, fair value sale securities, fair value disclosure	1,001
Short-term Investments [Member] | U.S. Treasury [Member] | Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale, fair value sale securities, fair value disclosure	0
Short-term Investments [Member] | U.S. Treasury [Member] | Fair Value [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale, fair value sale securities, fair value disclosure	1,001
Short-term Investments [Member] | Corporate Bonds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale, fair value sale securities, fair value disclosure	8,870	8,417
Short-term Investments [Member] | Corporate Bonds [Member] | Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale, fair value sale securities, fair value disclosure	0	0
Short-term Investments [Member] | Corporate Bonds [Member] | Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale, fair value sale securities, fair value disclosure	8,870	8,417
Short-term Investments [Member] | Corporate Bonds [Member] | Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale, fair value sale securities, fair value disclosure	0	0
Short-term Investments [Member] | Corporate Bonds [Member] | Fair Value [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale, fair value sale securities, fair value disclosure	8,870	8,417
Short-term Investments [Member] | Commercial Paper [Member] | Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale, fair value sale securities, fair value disclosure	0	0
Short-term Investments [Member] | Commercial Paper [Member] | Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale, fair value sale securities, fair value disclosure	999	1,998
Short-term Investments [Member] | Commercial Paper [Member] | Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale, fair value sale securities, fair value disclosure	0	0
Short-term Investments [Member] | Commercial Paper [Member] | Fair Value [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale, fair value sale securities, fair value disclosure	999	1,998
Short-term Investments [Member] | Certificates of Deposit [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale, fair value sale securities, fair value disclosure	1,198	1,071
Short-term Investments [Member] | Certificates of Deposit [Member] | Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale, fair value sale securities, fair value disclosure	1,198	1,071
Short-term Investments [Member] | Certificates of Deposit [Member] | Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale, fair value sale securities, fair value disclosure	0	0
Short-term Investments [Member] | Certificates of Deposit [Member] | Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale, fair value sale securities, fair value disclosure	0	0
Short-term Investments [Member] | Certificates of Deposit [Member] | Fair Value [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale, fair value sale securities, fair value disclosure	1,198	1,071
Long-term Investments [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale, fair value sale securities, fair value disclosure	11,442	13,141
Long-term Investments [Member] | U.S. Agency Securities [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale, fair value sale securities, fair value disclosure	6,956	7,753
Long-term Investments [Member] | U.S. Agency Securities [Member] | Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale, fair value sale securities, fair value disclosure	0	0
Long-term Investments [Member] | U.S. Agency Securities [Member] | Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale, fair value sale securities, fair value disclosure	6,956	7,753
Long-term Investments [Member] | U.S. Agency Securities [Member] | Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale, fair value sale securities, fair value disclosure	0	0
Long-term Investments [Member] | U.S. Agency Securities [Member] | Fair Value [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale, fair value sale securities, fair value disclosure	6,956	7,753
Long-term Investments [Member] | U.S. Treasury [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale, fair value sale securities, fair value disclosure	1,014
Long-term Investments [Member] | U.S. Treasury [Member] | Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale, fair value sale securities, fair value disclosure	0
Long-term Investments [Member] | U.S. Treasury [Member] | Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale, fair value sale securities, fair value disclosure	1,014
Long-term Investments [Member] | U.S. Treasury [Member] | Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale, fair value sale securities, fair value disclosure	0
Long-term Investments [Member] | U.S. Treasury [Member] | Fair Value [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale, fair value sale securities, fair value disclosure	1,014
Long-term Investments [Member] | Corporate Bonds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale, fair value sale securities, fair value disclosure	2,795	5,388
Long-term Investments [Member] | Corporate Bonds [Member] | Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale, fair value sale securities, fair value disclosure	0	0
Long-term Investments [Member] | Corporate Bonds [Member] | Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale, fair value sale securities, fair value disclosure	2,795	5,388
Long-term Investments [Member] | Corporate Bonds [Member] | Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale, fair value sale securities, fair value disclosure	0	0
Long-term Investments [Member] | Corporate Bonds [Member] | Fair Value [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale, fair value sale securities, fair value disclosure	2,795	5,388
Long-term Investments [Member] | Certificates of Deposit [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale, fair value sale securities, fair value disclosure	677
Long-term Investments [Member] | Certificates of Deposit [Member] | Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale, fair value sale securities, fair value disclosure	677
Long-term Investments [Member] | Certificates of Deposit [Member] | Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale, fair value sale securities, fair value disclosure	0
Long-term Investments [Member] | Certificates of Deposit [Member] | Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale, fair value sale securities, fair value disclosure	0
Long-term Investments [Member] | Certificates of Deposit [Member] | Fair Value [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Available-for-sale, fair value sale securities, fair value disclosure	$ 677

XML

License Agreement With Massachusetts General Hospital (Tables)

12 Months Ended

Dec. 31, 2013

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Intangible Assets

The intangible asset, net comprised the following (in thousands):

	December 31, 2013			December 31, 2012
Purchased technology	$	8,050		$	8,050
Less: Accumulated amortization	(1,569		)	(869		)
Intangible asset, net	$	6,481		$	7,181

Schedule of Estimated Future Amortization Expense of Intangible Assets

The total estimated annual future amortization expense of this intangible asset as of December 31, 2013 is as follows (in thousands):

Fiscal Year
2014	$	701
2015	701
2016	701
2017	701
2018	701
Thereafter	2,976
Total	$	6,481

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Balance Sheet Components (Tables)

12 Months Ended

Dec. 31, 2013

Balance Sheet Related Disclosures [Abstract]

Schedule of Investments

The Company's short-term and long-term investments as of December 31, 2013 are as follows (in thousands):

Short-term
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Agency securities	$	6,771	$	2	$	(1	)	$	6,772
U.S. Treasury	1,000		1		—			1,001
Corporate bonds	8,867		3		—			8,870
Commercial paper	999		—		—			999
Certificates of deposit	1,198		—		—			1,198
Total	$	18,835	$	6	$	(1	)	$	18,840
Long-term
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Agency securities	$	6,957	$	2	$	(3	)	$	6,956
U.S. Treasury	1,013		1		—			1,014
Corporate bonds	2,790		5		—			2,795
Certificates of deposit	677		—		—			677
Total	$	11,437	$	8	$	(3	)	$	11,442

The Company's short-term and long-term investments as of December 31, 2012, are as follows (in thousands):

Short-term
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Agency securities	$	11,071	$	6	$	—		$	11,077
Corporate bonds	8,414		3		—			8,417
Commercial paper	1,998		—		—			1,998
Certificates of deposit	1,071		—		—			1,071
Total	$	22,554	$	9	$	—		$	22,563
Long-term
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Agency securities	$	7,750	$	3	$	—		$	7,753
Corporate bonds	5,392		1		(5		)	5,388
Total	$	13,142	$	4	$	(5	)	$	13,141

Schedule of Contractual Maturities of Investments

The contractual maturities of the Company's short-term and long-term investments as of December 31, 2013, are as follows (in thousands):

	December 31, 2013
	Amortized Cost		Fair Value
Due in one year or less	$	18,835	$	18,840
Due in one year to five years	11,437		11,442
	$	30,272	$	30,282

Schedule of Inventory

The components of inventory consist of the following (in thousands):

	December 31,
	2013		2012
Raw materials	$	4,520	$	8,302
Finished goods	3,886		2,569
Total inventory	$	8,406	$	10,871

Schedule of Property and Equipment

The useful lives of the property and equipment are as follows:

Lab equipment, tooling, and molds	5 years
Computer equipment	3 years
Computer software	3 years
Furniture and fixtures	5 years
Vehicles	5 years
Leasehold improvements	Shorter of lease term or estimated useful life

Property and equipment, net comprised the following (in thousands):

	December 31,
	2013			2012
Lab equipment, tooling and molds	$	2,071		$	1,987
Computer software	1,562			1,243
Computer equipment	801			753
Leasehold improvements	743			636
Furniture and fixtures	334			288
Vehicles	35			35
Total property and equipment	5,546			4,942
Less: Accumulated depreciation and amortization	(3,594		)	(2,610		)
Construction in progress	206			4
Property and equipment, net	$	2,158		$	2,336

Schedule of Accrued Liabilities

The following table shows the components of accrued liabilities (in thousands):

	December 31,
	2013		2012
Accrued payroll and employee related expenses	$	7,863	$	3,430
Accrued marketing expenses	3,739		3,287
Accrued royalty	2,458		1,343
Sales and other taxes payable	1,787		1,177
Accrued warranty	676		902
Accrued legal expenses	284		415
Other accrued liabilities	1,557		522
Total accrued liabilities	$	18,364	$	11,076

Schedule of Product Warranty Accrual

The estimated product warranty accrual was as follows (in thousands):

	December 31,
	2013			2012
Balance at the beginning of the period	$	902		$	742
Accruals for warranties issued	197			869
Settlements of warranty claims	(423		)	(709		)
Balance at the end of the period	$	676		$	902

XML

Commitments And Contingencies - Purchase Commitments (Details) (USD $) In Millions, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Commitments and Contingencies Disclosure [Abstract]
Purchase obligation	$ 6.0	$ 2.2

XML

Balance Sheet Components - Investments (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	$ 30,272
Fair value	30,282
Available-for-sale Securities, Debt Maturities [Abstract]
Amortized Cost, Due in one year or less	18,835
Amortized Cost, Due in one year to five years	11,437
Amortized cost	30,272
Fair Value, Due in one year or less	18,840
Fair Value, Due in one year to five years	11,442
Fair value	30,282
Short-term Investments [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	18,835	22,554
Gross unrealized gains	6	9
Gross unrealized losses	(1)	0
Fair value	18,840	22,563
Available-for-sale Securities, Debt Maturities [Abstract]
Amortized cost	18,835	22,554
Fair value	18,840	22,563
Long-term Investments [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	11,437	13,142
Gross unrealized gains	8	4
Gross unrealized losses	(3)	(5)
Fair value	11,442	13,141
Available-for-sale Securities, Debt Maturities [Abstract]
Amortized cost	11,437	13,142
Fair value	11,442	13,141
U.S. Agency Securities [Member] | Short-term Investments [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	6,771	11,071
Gross unrealized gains	2	6
Gross unrealized losses	(1)	0
Fair value	6,772	11,077
Available-for-sale Securities, Debt Maturities [Abstract]
Amortized cost	6,771	11,071
Fair value	6,772	11,077
U.S. Agency Securities [Member] | Long-term Investments [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	6,957	7,750
Gross unrealized gains	2	3
Gross unrealized losses	(3)	0
Fair value	6,956	7,753
Available-for-sale Securities, Debt Maturities [Abstract]
Amortized cost	6,957	7,750
Fair value	6,956	7,753
U.S. Treasury [Member] | Short-term Investments [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	1,000
Gross unrealized gains	1
Gross unrealized losses	0
Fair value	1,001
Available-for-sale Securities, Debt Maturities [Abstract]
Amortized cost	1,000
Fair value	1,001
U.S. Treasury [Member] | Long-term Investments [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	1,013
Gross unrealized gains	1
Gross unrealized losses	0
Fair value	1,014
Available-for-sale Securities, Debt Maturities [Abstract]
Amortized cost	1,013
Fair value	1,014
Corporate Bonds [Member] | Short-term Investments [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	8,867	8,414
Gross unrealized gains	3	3
Gross unrealized losses	0	0
Fair value	8,870	8,417
Available-for-sale Securities, Debt Maturities [Abstract]
Amortized cost	8,867	8,414
Fair value	8,870	8,417
Corporate Bonds [Member] | Long-term Investments [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	2,790	5,392
Gross unrealized gains	5	1
Gross unrealized losses	0	(5)
Fair value	2,795	5,388
Available-for-sale Securities, Debt Maturities [Abstract]
Amortized cost	2,790	5,392
Fair value	2,795	5,388
Commercial Paper [Member] | Short-term Investments [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	999	1,998
Gross unrealized gains	0	0
Gross unrealized losses	0	0
Fair value	999	1,998
Available-for-sale Securities, Debt Maturities [Abstract]
Amortized cost	999	1,998
Fair value	999	1,998
Certificates of Deposit [Member] | Short-term Investments [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	1,198	1,071
Gross unrealized gains	0	0
Gross unrealized losses	0	0
Fair value	1,198	1,071
Available-for-sale Securities, Debt Maturities [Abstract]
Amortized cost	1,198	1,071
Fair value	1,198	1,071
Certificates of Deposit [Member] | Long-term Investments [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost	677
Gross unrealized gains	0
Gross unrealized losses	0
Fair value	677
Available-for-sale Securities, Debt Maturities [Abstract]
Amortized cost	677
Fair value	$ 677

XML

Commitments And Contingencies (Tables)

12 Months Ended

Dec. 31, 2013

Commitments and Contingencies Disclosure [Abstract]

Schedule of Future Minimum Rental Payments for Operating Leases

Future minimum lease payments under the non-cancellable operating leases as of December 31, 2013 are as follows (in thousands):

Year Ending December 31,	Amount
2014	$	1,252
2015	30
2016	61
2017	61
2018	61
Total future minimum lease payments	$	1,465

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Stock-Based Compensation Plans (Tables)

12 Months Ended

Dec. 31, 2013

Share-based Compensation [Abstract]

Stock Options Activity

Activity under the Company’s stock-based compensation plans is set forth below:

			Options Outstanding
	Shares Available for Grant		Number of Shares		Weighted- Average Exercise Price		Weighted-Average Remaining Contractual Life (in Years)	Aggregate Intrinsic Value
								(in thousands)
Balance, December 31, 2011	57,437		4,847,972		3.00
Additional shares reserved	3,199,890		—		—
Options granted	(2,989,279	)	2,989,279		5.87
Restricted stock awards granted	(4,083	)	—		—
Restricted stock units granted	(1,540,417	)	—		—
Options exercised	—		(1,612,233	)	1.65
Options canceled	2,096,684		(2,096,684	)	4.28
Restricted stock award canceled	2,342		—		—
Restricted stock units canceled	281,262		—		—
Balance, December 31, 2012	1,103,836		4,128,334		$	4.96
Additional shares reserved	1,200,000		—		—
Options granted	(568,987	)	568,987		6.60
Restricted stock units granted	(1,205,200	)	—		—
Options exercised	—		(791,198	)	3.34
Options canceled	307,738		(307,738	)	7.36
Restricted stock award canceled	—		—		—
Restricted stock units canceled	163,689		—		—
Restricted stock units withheld for tax	85,661		—		—
Balance, December 31, 2013	1,086,737		3,598,385		$	5.36	8.20	$	48,741
Vested and expected to vest, December 31, 2013			3,440,249		$	5.34	8.18	$	46,693
Exercisable, December 31, 2013			1,795,156		$	4.94	7.86	$	25,075

Summary of Stock Options Outstanding by Exercise Price Range

The following table summarizes information about stock options outstanding as of December 31, 2013:

	Options Outstanding
Exercise Price	Stock Options Outstanding	Weighted-Average Remaining Contractual Life (in Years)	Options Exercisable
$0.55-2.42	374,146	5.7	329,604
2.83-4.30	461,190	7.9	98,163
4.60-4.62	190,000	9.0	40,625
5.04-5.04	1,431,092	8.6	822,879
5.06-6.34	499,199	9.0	221,171
6.38-9.49	370,471	8.8	186,401
9.55-10.20	149,122	7.2	65,065
11.30-11.30	54,094	4.8	20,834
12.12-12.12	19,071	8.0	10,414
17.33-17.33	50,000	10.0	—
	3,598,385		1,795,156

Restricted Stock Activity

Activity related to restricted stock units and awards is set forth below:

		Number of Units and Awards		Weighted- Average Grant Date Fair Value
Balance,	December 31, 2011	4,684		$	10.20
Restricted stock units granted		1,544,500		5.77
Restricted stock units released		(108,130	)	6.42
Restricted stock units canceled		(283,604	)	7.14
Balance,	December 31, 2012	1,157,450		$	5.38
Restricted stock units granted		1,205,200		5.57
Restricted stock units released		(292,265	)	5.35
Restricted stock units canceled		(163,689	)	4.31
Balance,	December 31, 2013	1,906,696		$	5.60

Stock-Based Compensation Expense

The stock-based compensation expense related to all of our stock-based awards and employee stock purchases was allocated as follows (in thousands):

	Year Ended December 31,
	2013		2012		2011
Cost of revenue	$	248	$	131	$	54
Research and development	1,645		894		542
Sales and marketing	1,783		827		533
General and administrative	2,984		3,137		1,150
Total stock-based compensation	$	6,660	$	4,989	$	2,279

Summary of Fair Value of Employee Stock Option Assumptions

The fair value of employee stock options was estimated using the following weighted-average assumptions:

	Year Ended December 31,
	2013		2012		2011
Expected term (in years)	4.8		5.2		6.0
Expected volatility	51	%	61	%	59	%
Risk-free interest rate	1.02	%	0.76	%	1.05-2.65%
Expected dividend yield	0	%	0	%	0	%

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Consolidated Statements Of Cash Flows (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$ (19,305)	$ (30,143)	$ (9,603)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	1,729	1,602	826
Stock-based compensation	6,660	4,989	2,279
Change in fair value of preferred stock warrant liability	0	0	664
Deferred income tax provision (benefit)	19	(66)	0
Amortization of debt discount	0	0	49
Amortization of investment premium	343	212	0
(Recovery from) provision for doubtful accounts receivable	(12)	290	0
Issuance of common stock for services	0	12	34
Provision for excess and obsolete inventory	22	183	0
Loss on disposal and write-off of property and equipment	2	192	291
Changes in operating assets and liabilities:
Accounts receivable	(3,064)	(2,482)	(4,328)
Inventory	2,465	(6,578)	(2,312)
Prepaid expenses and other assets	(693)	(1,240)	(1,400)
Deferred revenue, net of deferred costs	267	1,026	(316)
Accounts payable, accrued and other non-current liabilities	7,486	5,377	3,520
Net cash used in operating activities	(4,081)	(26,626)	(10,296)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of investments	(31,591)	(58,658)	0
Sale of investments	11,143	9,250	0
Maturity of investments	25,528	13,500	0
Purchase of property and equipment	(834)	(1,385)	(1,575)
Purchase of intangible asset	0	0	(7,000)
Restricted cash	138	(214)	170
Net cash provided by (used in) investing activities	4,384	(37,507)	(8,405)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of notes payable	0	(310)	(1,335)
Proceeds from issuance of common stock in initial public offering, net of underwriter discount and issuance costs	0	0	90,682
Proceeds from repayment of note receivable by a stockholder	0	245	0
Proceeds from issuance of common stock upon exercise of stock options and issuance of ESPP shares	3,438	3,166	595
Tax payments related to shares withheld for vested restricted stock units	(876)	0	0
Net cash provided by financing activities	2,562	3,101	89,942
Effect of exchange rate on cash and cash equivalents	57	0	0
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	2,922	(61,032)	71,241
CASH AND CASH EQUIVALENTS—Beginning of period	22,876	83,908	12,667
CASH AND CASH EQUIVALENTS—End of period	$ 25,798	$ 22,876	$ 83,908

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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2013

Income Tax Disclosure [Abstract]

Schedule of Domestic and Foreign Loss before Provision for Income Taxes

The domestic and foreign components of loss before provision for income taxes were as follows (in thousands):

	Year Ended December 31,
	2013			2012			2011
Domestic	$	(19,535	)	$	(30,329	)	$	(9,051	)
Foreign	370			327			(504		)
Loss before provision for income taxes	$	(19,165	)	$	(30,002	)	$	(9,555	)

Schedule of Components of Income Tax Provision

The provision for income taxes consisted of the following (in thousands):

	As of December 31,
	2013		2012			2011
Current provision:
Federal	$	—	$	—		$	—
State	60		37			48
Foreign	61		170			—
Total current	121		207			48
Deferred provision (benefit):
Federal	—		—			—
State	—		—			—
Foreign	19		(66		)	—
Total deferred	19		(66		)	—
Total provision	$	140	$	141		$	48

Schedule of Effective Income Tax Rate Reconciliation

The following is a reconciliation of the statutory federal income tax rate to the Company's effective tax:

	Year Ended December 31,
	2013		2012		2011
Tax at federal statutory rate	35	%	35	%	35	%
State income taxes, net of federal benefit	2		(1	)	(1	)
Non-deductible permanent difference	(1	)	—		(3	)
Change in valuation allowance	(34	)	(34	)	(31	)
Research & development credits	(2	)	1		3
Stock-based compensation	(1	)	(1	)	(5	)
Other	—		—		2
Provision for income taxes	(1	)%	—	%	—	%

Schedule of Deferred Tax Assets

Tax effects of temporary differences that give rise to significant portions of the deferred tax assets are presented below (in thousands):

	December 31,
	2013			2012
Net operating loss carryforwards	$	45,401		$	38,385
Research & development credits	2,335			2,703
Depreciation & amortization	583			312
Accruals & reserves	2,731			3,592
Total deferred tax assets	51,050			44,992
Valuation allowance	(51,003		)	(44,926		)
Net deferred tax assets	$	47		$	66

Summary of Valuation Allowance

The valuation allowance for deferred tax assets consisted of the following activity for the fiscal years ended December 31, 2013, 2012 and 2011 (in thousands):

Description	Balance at Beginning of Year		Additions		Reductions		Balance at End of Year
Year ended December 31, 2011	$	29,231	$	3,605	$	—	$	32,836
Year ended December 31, 2012	32,836		12,090		—		44,926
Year ended December 31, 2013	$	44,926	$	6,077	$	—	$	51,003

Summary of Unrecognized Tax Benefits

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):

Balance as of January 1, 2011	$	678
Additions based on tax positions related to the current year	146
Balance as of December 31, 2011	824
Additions based on tax positions related to the current year	78
Balance as of December 31, 2012	902
Additions based on tax positions related to the current year	2,023
Balance as of December 31, 2013	$	2,925

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Summary Of Significant Accounting Policies - Property Plant And Equipment (Details)	12 Months Ended
	Dec. 31, 2013
Lab Equipment, Tooling, and Molds [Member]
Property, Plant and Equipment [Line Items]
Property and Equipment, Useful Life	5 years
Computer Equipment [Member]
Property, Plant and Equipment [Line Items]
Property and Equipment, Useful Life	3 years
Computer Software [Member]
Property, Plant and Equipment [Line Items]
Property and Equipment, Useful Life	3 years
Furniture and Fixtures [Member]
Property, Plant and Equipment [Line Items]
Property and Equipment, Useful Life	5 years
Vehicles [Member]
Property, Plant and Equipment [Line Items]
Property and Equipment, Useful Life	5 years
Capitalized Software [Member]
Property, Plant and Equipment [Line Items]
Property and Equipment, Useful Life	3 years

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Related Party Transactions - Note Receivable From a Stockholder (Details) (USD $) In Millions, except Share data, unless otherwise specified	0 Months Ended	1 Months Ended
	Jan. 02, 2010	Dec. 31, 2007
Related Party Transaction [Line Items]
Stockholders' equity note, subscriptions receivable		$ 0.2
Executive Officer [Member]
Related Party Transaction [Line Items]
Related party transaction, rate	4.00%	4.72%
Common Stock [Member] | Executive Officer [Member]
Related Party Transaction [Line Items]
Stock issued during period, shares, new issues (shares)		445,509

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Income Taxes - Reconciliation Of The Statutory Federal Income Tax Rate (Details)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Income Tax Disclosure [Abstract]
Tax at federal statutory rate	35.00%	35.00%	35.00%
State income taxes, net of federal benefit	2.00%	(1.00%)	(1.00%)
Non-deductible permanent difference	(1.00%)	0.00%	(3.00%)
Change in valuation allowance	(34.00%)	(34.00%)	(31.00%)
Research & development credits	(2.00%)	1.00%	3.00%
Stock-based compensation	(1.00%)	(1.00%)	(5.00%)
Other	0.00%	0.00%	2.00%
Provision for income taxes	(1.00%)	0.00%	0.00%

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Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
ASSETS
Cash and cash equivalents	$ 25,798	$ 22,876
Short-term investments	18,840	22,563
Accounts receivable, net	10,221	7,133
Inventory	8,406	10,871
Prepaid expenses and other current assets	4,368	3,600
Total current assets	67,633	67,043
Long-term investments	11,442	13,141
Restricted cash	331	469
Property and equipment, net	2,158	2,336
Intangible asset, net	6,481	7,181
Other assets	9	99
Total assets	88,054	90,269
LIABILITIES AND STOCKHOLDERS’ EQUITY
Accounts payable	5,165	4,976
Accrued liabilities	18,364	11,076
Deferred revenue	1,674	1,401
Total current liabilities	25,203	17,453
Other non-current liabilities	275	236
Total liabilities	25,478	17,689
Commitments and contingencies (Note 8)
STOCKHOLDERS’ EQUITY:
Preferred stock, $0.01 par value: 50,000,000 shares authorized and no shares issued and outstanding at December 31, 2013 and December 31, 2012	0	0
Common stock, $0.001 par value: 500,000,000 shares authorized at December 31, 2013 and December 31, 2012; 37,038,374 and 35,852,105 shares issued and outstanding at December 31, 2013 and December 31, 2012, respectively	41	39
Additional paid-in capital	195,507	186,287
Accumulated other comprehensive income	87	8
Accumulated deficit	(133,059)	(113,754)
Total stockholders’ equity	62,576	72,580
Total liabilities and stockholders’ equity	$ 88,054	$ 90,269

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Balance Sheet Components - Inventory (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Inventory, Net [Abstract]
Raw materials	$ 4,520	$ 8,302
Finished goods	3,886	2,569
Total inventory	$ 8,406	$ 10,871

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Consolidated Statements of Convertible Preferred Stock and Stockholders' Equity (Deficit) (USD $) In Thousands, except Share data, unless otherwise specified	Total	Convertible Preferred Stock [Member]	Common Stock [Member]	Additional Paid-in Capital [Member]	Note Receivable From Stockholder [Member]	Accumulated Other Comprehensive Income [Member]	Accumulated Deficit [Member]
Balance at Dec. 31, 2010	$ (84,493)	$ 93,888	$ 4	$ 0	$ (245)	$ 0	$ (84,252)
Balance, shares at Dec. 31, 2010		23,381,764	1,216,167
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common stock upon exercise of stock options	592		1	591
Issuance of common stock upon exercise of stock options, shares			553,023
Issuance of stock for services	34		0	34
Issuance of stock for services, shares			11,495
Revision to correct prior accretion on convertible preferred stock	12,724	(12,724)		2,480			10,244
Exercise of common stock warrants for cash	3			3
Exercise of common stock warrants for cash, shares			58,159
Conversion of preferred stock into common stock upon initial public offering	81,164	(81,164)	24	81,140
Conversion of preferred stock into common stock upon initial public offering, shares		23,381,764	24,415,965
Reclassification of preferred stock warrant liability into additional paid-in capital upon initial public offering	921			921
Issuance of common stock in initial public offering, net of underwriter discount of $7,046 and issuance costs of $2,931	90,682		8	90,674
Issuance of common stock in initial public offering, net of underwriter discount of $7,046 and issuance costs of $2,931, shares			7,743,000
Stock-based compensation	2,279			2,279
Change in unrealized gain (loss) on marketable securities, net of tax	0
Currency translation adjustments, net of tax	0
Net loss	(9,603)						(9,603)
Comprehensive loss	(9,603)
Balance at Dec. 31, 2011	94,303	0	37	178,122	(245)	0	(83,611)
Balance, shares at Dec. 31, 2011		0	33,997,809
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common stock upon exercise of stock options	2,669		2	2,667
Issuance of common stock upon exercise of stock options, shares	1,612,233		1,612,233
Issuance of common stock in connection with ESPP	497		0	497
Issuance of common stock in connection with ESPP, shares			133,363
Issuance of stock for services	12		0	12
Issuance of stock for services, shares			1,741
Conversion of preferred stock into common stock upon initial public offering	0
Reclassification of preferred stock warrant liability into additional paid-in capital upon initial public offering	0
Proceeds for repayment of notes receivable from a stockholder	245				245
Issuance of common stock upon vesting of RSUs	0		0
Issuance of common stock upon vesting of RSUs, shares			106,959
Stock-based compensation	4,989			4,989
Change in unrealized gain (loss) on marketable securities, net of tax	8					8
Currency translation adjustments, net of tax	0
Net loss	(30,143)						(30,143)
Comprehensive loss	(30,135)
Balance at Dec. 31, 2012	72,580	0	39	186,287	0	8	(113,754)
Balance, shares at Dec. 31, 2012		0	35,852,105
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issuance of common stock upon exercise of stock options	2,647		2	2,645
Issuance of common stock upon exercise of stock options, shares	791,198		791,198
Issuance of common stock in connection with ESPP	791			791
Issuance of common stock in connection with ESPP, shares			188,467
Issuance of common stock upon vesting of RSUs, shares			292,265
Common stock traded for employee tax obligation	(876)			(876)
Common stock traded for employee tax obligation, shares			(85,661)
Conversion of preferred stock into common stock upon initial public offering	0
Reclassification of preferred stock warrant liability into additional paid-in capital upon initial public offering	0
Stock-based compensation	6,660			6,660
Change in unrealized gain (loss) on marketable securities, net of tax	2					2
Currency translation adjustments, net of tax	77					77
Net loss	(19,305)						(19,305)
Comprehensive loss	(19,226)
Balance at Dec. 31, 2013	$ 62,576	$ 0	$ 41	$ 195,507	$ 0	$ 87	$ (133,059)
Balance, shares at Dec. 31, 2013		0	37,038,374

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Commitments And Contingencies - Severance (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Jun. 30, 2012
Loss Contingencies [Line Items]
Termination benefits			$ 0.8
Stock-based compensation expense due to modification	0.7	0.7
Termination benefits liability	0.3	0.4
Management [Member]
Loss Contingencies [Line Items]
Termination benefits	0.3	0.9
Stock-based compensation expense due to modification	$ 0.7	$ 0.7

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Segment Information (Tables)

12 Months Ended

Dec. 31, 2013

Segment Reporting [Abstract]

Revenue By Geographic Region

The Company’s revenue by geographic region, based on the location to where the product was shipped, is summarized as follows (in thousands):

	Year Ended
	December 31,
	2013		2012		2011
North America	$	89,150	$	56,657	$	50,332
International	22,476		19,537		17,812
Total	$	111,626	$	76,194	$	68,144

Revenue By Product

The following table sets forth revenue by product expressed as dollar amounts (in thousands):

	Year Ended
	December 31,
	2013		2012		2011
System revenue	$	61,359	$	39,145	$	46,552
Consumable revenue	50,267		37,049		21,592
Total	$	111,626	$	76,194	$	68,144

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Stock-Based Compensation Plans Stock-Based Compensation Plans - Restricted Stock Activity (Details) (Restriced Stock Units and Awards [Member], USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Restriced Stock Units and Awards [Member]
Number of Units and Awards
Beginning balance (shares)	1,157,450	4,684
Restricted stock units granted (shares)	1,205,200	1,544,500
Restricted stock units released (shares)	(292,265)	(108,130)
Restricted stock units canceled (shares)	(163,689)	(283,604)
Ending balance (shares)	1,906,696	1,157,450
Weighted-Average Grant Date Fair Value
Beginning Balance (weighted average exercise price) (per share)	$ 5.38	$ 10.20
Restricted stock units granted (weighted average exercise price) (per share)	$ 5.57	$ 5.77
Restricted stock units released (weighted average exercise price) (per share)	$ 5.35	$ 6.42
Restricted stock units canceled (weighted average exercise price) (per share)	$ 4.31	$ 7.14
Ending Balance (weighted average exercise price) (per share)	$ 5.60	$ 5.38

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Supplemental Cash Flow Information

12 Months Ended

Dec. 31, 2013

Supplemental Cash Flow Information [Abstract]

Supplemental Cash Flow Information

Supplemental Cash Flow Information

The supplemental cash flow information consists of the following (in thousands):

	Year Ended
	December 31,
	2013			2012			2011
Cash paid for interest	$	—		$	2		$	69
Cash paid for income taxes	$	188		$	47		$	—
Non-cash investing and financing activities:
Changes in accounts payable and accrued liabilities related to property, plant and equipment purchases	$	(33	)	$	(100	)	$	147
Reclassification of warrant liability to additional paid-in capital upon initial public offering	$	—		$	—		$	921
Conversion of preferred stock into common stock upon initial public offering	$	—		$	—		$	81,164

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Selected Quarterly Financial Data (unaudited) (Tables)

12 Months Ended

Dec. 31, 2013

Quarterly Financial Information Disclosure [Abstract]

Schedule of Quarterly Financial Information

The following table presents selected unaudited consolidated financial data for each of the eight quarters in the two-year period ended December 31, 2013. The selected quarterly financial data should be read in conjunction with our consolidated financial statements and the related notes and "Item 7: Management's Discussion and Analysis of Financial Condition and Results of Operations". This information has been derived from our unaudited consolidated financial statements that, in our opinion, reflect all recurring adjustments necessary to fairly state this information when read in conjunction with our consolidated financial statements and the related notes appearing in the section entitled "Consolidated Financial Statements". Net loss per share-basic and diluted, for the four quarters of each fiscal year may not sum to the total for the fiscal year because of the different number of shares outstanding during each period. The results of operations for any quarter are not necessarily indicative of the results to be expected for any future period.

	Quarter
	First			Second			Third			Fourth
	(In thousands, except share and per share data)
Year Ended December 31, 2013
Total revenue	$	19,982		$	26,338		$	29,465		$	35,841
Gross profit	$	12,634		$	18,460		$	21,229		$	25,114
Net loss	$	(7,482	)	$	(3,607	)	$	(2,811	)	$	(5,405	)
Net loss per share, basic and diluted	$	(0.21	)	$	(0.10	)	$	(0.08	)	$	(0.15	)
Shares used in calculation-basic and diluted	35,890,084			36,045,346			36,206,008			36,686,053
Year Ended December 31, 2012
Total revenue	$	17,404		$	22,265		$	17,928		$	18,597
Gross profit	$	11,411		$	15,115		$	11,975		$	12,186
Net loss	$	(10,345	)	$	(8,101	)	$	(5,182	)	$	(6,515	)
Net loss per share, basic and diluted	$	(0.30	)	$	(0.24	)	$	(0.15	)	$	(0.18	)
Shares used in calculation-basic and diluted	34,010,432			34,253,357			35,068,076			35,764,666

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Selected Quarterly Financial Data (unaudited)

12 Months Ended

Dec. 31, 2013

Quarterly Financial Information Disclosure [Abstract]

Selected Quarterly Financial Data (unaudited)

Selected Quarterly Financial Data (unaudited)

The following table presents selected unaudited consolidated financial data for each of the eight quarters in the two-year period ended December 31, 2013. The selected quarterly financial data should be read in conjunction with our consolidated financial statements and the related notes and "Item 7: Management's Discussion and Analysis of Financial Condition and Results of Operations". This information has been derived from our unaudited consolidated financial statements that, in our opinion, reflect all recurring adjustments necessary to fairly state this information when read in conjunction with our consolidated financial statements and the related notes appearing in the section entitled "Consolidated Financial Statements". Net loss per share-basic and diluted, for the four quarters of each fiscal year may not sum to the total for the fiscal year because of the different number of shares outstanding during each period. The results of operations for any quarter are not necessarily indicative of the results to be expected for any future period.

	Quarter
	First			Second			Third			Fourth
	(In thousands, except share and per share data)
Year Ended December 31, 2013
Total revenue	$	19,982		$	26,338		$	29,465		$	35,841
Gross profit	$	12,634		$	18,460		$	21,229		$	25,114
Net loss	$	(7,482	)	$	(3,607	)	$	(2,811	)	$	(5,405	)
Net loss per share, basic and diluted	$	(0.21	)	$	(0.10	)	$	(0.08	)	$	(0.15	)
Shares used in calculation-basic and diluted	35,890,084			36,045,346			36,206,008			36,686,053
Year Ended December 31, 2012
Total revenue	$	17,404		$	22,265		$	17,928		$	18,597
Gross profit	$	11,411		$	15,115		$	11,975		$	12,186
Net loss	$	(10,345	)	$	(8,101	)	$	(5,182	)	$	(6,515	)
Net loss per share, basic and diluted	$	(0.30	)	$	(0.24	)	$	(0.15	)	$	(0.18	)
Shares used in calculation-basic and diluted	34,010,432			34,253,357			35,068,076			35,764,666

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Stock-Based Compensation Plans - Employee and Nonemployee Stock-Based Compensation (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options granted, Shares	568,987	2,989,279
Capitalized stock-based compensation cost	$ 0	$ 0	$ 0
Recognized stock-based compensation tax benefits	0	0	0
Share-based and Nonemployee Services Transaction, Vesting Period	6 months	6 months
Stock-based compensation expense related to non-employee grants	500,000	800,000
Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options granted, Shares	543,987	2,860,927	1,305,620
Weighted-average grant date fair value	$ 6.75	$ 3.07	$ 5.65
Aggregate intrinsic value	6,800,000	6,000,000	5,700,000
Total fair value	4,900,000	2,100,000	900,000
Employee Restricted Stock Units (RSUs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Awards other than options granted, Shares	1,180,200	1,412,066	11,495
Weighted-average grant date fair value	$ 5.62	$ 5.70	$ 10.20
Fair value of the respective vesting dates	$ 1,400,000	$ 300,000

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Consolidated Statements of Convertible Preferred Stock and Stockholders' Equity (Deficit) (Parenthetical) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2011
Statement of Stockholders' Equity [Abstract]
Issuance of common stock in initial public offering, underwriter discount	$ 7,046
Issuance of common stock in initial public offering, issuance costs	$ 2,931

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Consolidated Balance Sheets (Parenthetical) (USD $)	Dec. 31, 2013	Dec. 31, 2012
Statement of Financial Position [Abstract]
Preferred stock, par value (dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized	50,000,000	50,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value (dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized	500,000,000	500,000,000
Common stock, shares issued	37,038,374	35,852,105
Common stock, shares outstanding	37,038,374	35,852,105

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Stockholders' Equity

12 Months Ended

Dec. 31, 2013

Stockholders' Equity Note [Abstract]

Stockholders' Equity

Stockholders' Equity

Preferred Stock

The Company's Certificate of Incorporation, as amended in October 2011, authorizes the Company to issue 50,000,000 shares of preferred stock with a par value of $0.01 per share. In connection with the IPO, all of the Company's outstanding shares of convertible preferred stock were automatically converted into 24,415,965 shares of common stock. At December 31, 2013 and 2012, the Company had no preferred stock issued or outstanding.

Common Stock

Each share of common stock has the right to one vote. The holders of common stock are also entitled to receive dividends whenever funds are legally available and when declared by the Board of Directors, subject to the prior rights of holders of all classes of stock outstanding having priority rights as to dividends. No dividends have been declared or paid as of December 31, 2013.

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Document And Entity Information (USD $)	12 Months Ended
	Dec. 31, 2013	Feb. 20, 2014	Jun. 28, 2013
Document and Entity Information: [Abstract]
Document Type	10-K
Amendment Flag	false
Document Period End Date	Dec. 31, 2013
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	FY
Entity Registrant Name	Zeltiq Aesthetics Inc
Entity Central Index Key	0001415336
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Current Reporting Status	Yes
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Common Stock, Shares Outstanding		37,210,444
Entity Public Float			$ 115,299,901

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Stock-Based Compensation Plans

12 Months Ended

Dec. 31, 2013

Share-based Compensation [Abstract]

Stock-Based Compensation Plans

Stock-Based Compensation Plans

2005 Stock Option Plan

In 2005, the Company established its 2005 Stock Option Plan (the “ 2005 Plan”), which provided for the granting of stock options to employees and consultants of the Company. Options granted under the Plan were either incentive stock options (“ISOs”) or nonqualified stock options (“NSOs”). ISOs were granted only to Company employees (including officers and directors who are also employees). NSOs were granted to Company employees and consultants.

Options under the Plan were granted for periods of up to ten years. The exercise price of an ISO and NSO should not be less than 100% and 85% of the estimated fair value of the shares on the date of grant, as determined by the Board of Directors. The exercise price of an ISO and NSO granted to a 10% stockholder should not be less than 110% of the estimated fair value of the shares on the date of grant, as determined by the Board of Directors. To date, options granted generally vested over four years at a rate of 25% upon the first anniversary of the issuance date and monthly thereafter. Cash received from employees for early exercise of unvested options was treated as a liability. Amounts so recorded were transferred into common stock and additional paid-in capital as the shares vested. The number of unvested shares and the associated liability amounts were immaterial at all reporting dates presented. As of December 31, 2013, no shares of the Company's common stock remained available for issuance under the 2005 Plan as a result of the adoption of the 2011 Equity Incentive Plan (the "2011 Plan").

2011 Equity Incentive Plan

In September 2011, the Company's Board of Directors approved the 2011 Plan that became effective upon the completion of the IPO.

The 2011 Plan serves as the successor equity incentive plan to our 2005 Plan and started with 89,234 shares of common stock available for issuance plus any shares of common stock issued pursuant to the 2005 Plan or subject to awards granted under the 2005 Plan that are forfeited, repurchased, returned or otherwise become available for issuance in accordance with the terms of the 2005 Plan. In addition, this plan reserve automatically increases on January 1 and each subsequent anniversary through January 1, 2021, by an amount equal to the smaller of five percent of the number of shares of common stock issued and outstanding on the immediately preceding December 31, or an amount determined by the Company's Board of Directors. The 2011 Plan provides for granting awards in the form of options, stock appreciation rights, restricted stock purchase rights, restricted stock bonuses, restricted stock units, performance shares, performance units, cash-based awards and other stock-based awards. Options granted under the 2011 Plan may be either ISOs or NSOs. ISOs may be granted only to the Company's employees. Any person who is not an employee of the Company on the effective date of the grant of an option may be granted only a NSO. Options under the 2011 Plan may be granted for periods of up to ten years and generally vest over a period of four years. The exercise price of an ISO and NSO shall not be less than 100% of the fair value of the shares on the date of grant. The exercise price of an ISO granted to a 10% stockholder shall not be less than 110% of the fair value of the underlying stock on the date of grant.

2012 Stock Plan

In April 2012, the Company's Board of Directors approved the 2012 Stock Plan ("2012 Plan") that became effective upon approval by the stockholders of the Company on June 15, 2012. The purpose of the 2012 Plan is to advance the interests of the Company and its stockholders by providing an incentive to attract, retain and reward persons performing services for the Company and by motivating such persons to contribute to the growth and profitability of the Company. The 2012 Plan seeks to achieve this purpose by providing for awards in the form of options, stock appreciation rights, restricted stock purchase rights, restricted stock bonuses, restricted stock units, performance shares, performance units, cash-based awards, other stock-based awards, and deferred compensation awards.

The 2012 Plan started with 1,500,000 shares of common stock available for issuance and there are no provisions in the 2012 Plan to increase the shares available for issuance. Options granted under the 2012 Plan may be either ISOs or NSOs. ISOs may be granted only to the Company's employees. Any person who is not an employee of the Company on the effective date of the grant of an option may be granted only a NSO. Options under the 2012 Plan may be granted for periods of up to ten years and generally vest over a period of four years. The exercise price of an ISO and NSO shall not be less than 100% of the fair value of the shares on the date of grant. The exercise price of an ISO granted to a 10% stockholder shall not be less than 110% of the fair value of the underlying stock on the date of grant.

Stock-based Compensation Activity

Activity under the Company’s stock-based compensation plans is set forth below:

			Options Outstanding
	Shares Available for Grant		Number of Shares		Weighted- Average Exercise Price		Weighted-Average Remaining Contractual Life (in Years)	Aggregate Intrinsic Value
								(in thousands)
Balance, December 31, 2011	57,437		4,847,972		3.00
Additional shares reserved	3,199,890		—		—
Options granted	(2,989,279	)	2,989,279		5.87
Restricted stock awards granted	(4,083	)	—		—
Restricted stock units granted	(1,540,417	)	—		—
Options exercised	—		(1,612,233	)	1.65
Options canceled	2,096,684		(2,096,684	)	4.28
Restricted stock award canceled	2,342		—		—
Restricted stock units canceled	281,262		—		—
Balance, December 31, 2012	1,103,836		4,128,334		$	4.96
Additional shares reserved	1,200,000		—		—
Options granted	(568,987	)	568,987		6.60
Restricted stock units granted	(1,205,200	)	—		—
Options exercised	—		(791,198	)	3.34
Options canceled	307,738		(307,738	)	7.36
Restricted stock award canceled	—		—		—
Restricted stock units canceled	163,689		—		—
Restricted stock units withheld for tax	85,661		—		—
Balance, December 31, 2013	1,086,737		3,598,385		$	5.36	8.20	$	48,741
Vested and expected to vest, December 31, 2013			3,440,249		$	5.34	8.18	$	46,693
Exercisable, December 31, 2013			1,795,156		$	4.94	7.86	$	25,075

The following table summarizes information about stock options outstanding as of December 31, 2013:

	Options Outstanding
Exercise Price	Stock Options Outstanding	Weighted-Average Remaining Contractual Life (in Years)	Options Exercisable
$0.55-2.42	374,146	5.7	329,604
2.83-4.30	461,190	7.9	98,163
4.60-4.62	190,000	9.0	40,625
5.04-5.04	1,431,092	8.6	822,879
5.06-6.34	499,199	9.0	221,171
6.38-9.49	370,471	8.8	186,401
9.55-10.20	149,122	7.2	65,065
11.30-11.30	54,094	4.8	20,834
12.12-12.12	19,071	8.0	10,414
17.33-17.33	50,000	10.0	—
	3,598,385		1,795,156

Restricted Stock Activity

Activity related to restricted stock units and awards is set forth below:

		Number of Units and Awards		Weighted- Average Grant Date Fair Value
Balance,	December 31, 2011	4,684		$	10.20
Restricted stock units granted		1,544,500		5.77
Restricted stock units released		(108,130	)	6.42
Restricted stock units canceled		(283,604	)	7.14
Balance,	December 31, 2012	1,157,450		$	5.38
Restricted stock units granted		1,205,200		5.57
Restricted stock units released		(292,265	)	5.35
Restricted stock units canceled		(163,689	)	4.31
Balance,	December 31, 2013	1,906,696		$	5.60

During the year ended December 31, 2013, 292,265 shares vested subject to previously granted restricted stock units. A majority of these vested restricted stock units were net share settled. During the year ended December 31, 2013, the Company withheld 85,661 shares based upon the Company's closing stock price on the vesting date to settle the employee's minimum statutory obligation for the applicable income and other employment taxes. During the year ended December 31, 2012, 108,130 shares vested subject to previously granted restricted stock units.

2011 Employee Stock Purchase Plan

In September 2011, the Company's Board of Directors approved the 2011 Employee Stock Purchase Plan (“2011 ESPP”) that became effective upon the completion of the IPO. The 2011 ESPP is designed to enable eligible employees to purchase shares of the Company's common stock at a discount. Each offering period consists of one six-month purchase period. The purchase price for shares of common stock under the 2011 ESPP is 85% of the of lesser of the fair market value of the Company's common stock on the first day of the applicable offering period or the purchase date.

There were 470,018 shares of the Company's common stock initially reserved for future purchase under our 2011 ESPP. On the first day of each year, beginning January 1, 2012 and through and including January 1, 2021, the maximum aggregate number of shares of common stock that may be issued under the 2011 ESPP will be increased by a number of shares equal to the smallest of a) one percent of the number of shares of common stock issued and outstanding on the immediately preceding December 31, or b) an amount determined by the Company's Board of Directors. During 2013, the number of shares of the Company's common stock reserved for future purchase under the 2011 ESPP was increased by 150,000 shares.

The initial offering period commenced on October 19, 2011, and ended on May 31, 2012. The future offering periods will commence on or about the first trading days of December and June of each year and end on or about the last trading days of the next May and November, respectively.

During the year ended December 31, 2013, employees purchased 188,467 shares under the 2011 ESPP at a weighted average exercise price of $4.20. As of December 31, 2013, there were 298,188 shares of the Company's common stock available for future purchase under our 2011 ESPP.

Stock-Based Compensation Expense

The stock-based compensation expense related to all of our stock-based awards and employee stock purchases was allocated as follows (in thousands):

	Year Ended December 31,
	2013		2012		2011
Cost of revenue	$	248	$	131	$	54
Research and development	1,645		894		542
Sales and marketing	1,783		827		533
General and administrative	2,984		3,137		1,150
Total stock-based compensation	$	6,660	$	4,989	$	2,279

Stock-based compensation expense includes charges related to performance based stock options and restricted stock units granted to certain executives. Stock-based compensation expense related to performance based stock options and restricted stock units was $1.0 million and $0.3 million for the years ended December 31, 2013 and 2012, respectively. There were no such charges in the year ended December 31, 2011.

Additionally, stock-based compensation expense for the year ended December 31, 2013 and 2012, includes $0.7 million and $0.7 million, respectively, in modification charges incurred in connection with the severance packages to the Company's former executives. There were no such charges in the year ended December 31, 2011.

As of December 31, 2013, the total unrecognized compensation cost related to outstanding stock options, awards and employee stock purchases was $13.0 million, which will recognized using the straight-line attribution method over 2.7 years.

Stock-Based Compensation Associated with Awards to Employees

The Company uses the Black-Scholes option pricing model to determine the fair value of stock options. The valuation model for stock compensation expense requires the Company to make assumptions and judgments about the variables used in the calculation including the expected term (weighted-average period of time that the options granted are expected to be outstanding); volatility of the Company's common stock, an assumed-risk-free interest rate and the estimated forfeitures of unvested stock options. The fair value of employee stock options was estimated using the following weighted-average assumptions:

	Year Ended December 31,
	2013		2012		2011
Expected term (in years)	4.8		5.2		6.0
Expected volatility	51	%	61	%	59	%
Risk-free interest rate	1.02	%	0.76	%	1.05-2.65%
Expected dividend yield	0	%	0	%	0	%

Fair Value of Common Stock. The fair value of the underlying common stock was determined by the Board of Directors until the IPO when the Company's common stock started trading on the NASDAQ Global Select Market under ticker symbol ZLTQ on October 19, 2011. Consequently, after the IPO the fair value of the shares of common stock underlying the stock options is the closing price on the option grant date. Prior to the IPO, the fair value of the shares of common stock underlying the stock options was determined by the Board of Directors. Because there was no public market for the Company's common stock, the Board of Directors determined fair value of the common stock at the time of grant of the option by considering a number of objective and subjective factors including valuation of comparable companies, sales of convertible preferred stock to unrelated third parties, operating and financial performance, the lack of liquidity of capital stock, and general and industry specific economic outlook, amongst other factors.

Expected Term. Prior to the IPO, the Company derived the expected term using the “simplified” method (the expected term is determined as the average of the time-to-vesting and the contractual life of the options), as the Company had limited historical information to develop expectations about future exercise patterns and post-vesting employment termination behavior. Subsequent to the IPO, the expected term used was based on expected term of a group of similar entities, referred to as “guideline” companies. In evaluating similarity, the Company considered factors such as industry, stage of life cycle and size.

Volatility. Prior to the IPO, because the Company was a private entity with no historical data regarding the volatility of its common stock, the expected volatility used was based on volatility of a group of similar entities, referred to as “guideline” companies. In evaluating similarity, the Company considered factors such as industry, stage of life cycle and size. Subsequent to the IPO, the Company has continued to estimate its volatility based on this group of similar entities as the Company does not have sufficient historical data regarding its specific volatility.

Risk-Free Interest Rate. The risk-free interest rate is based on U.S. Treasury zero-coupon issues with remaining terms similar to the expected term on the options.

Dividend Yield. The Company has never paid any dividends and does not plan to pay dividends in the foreseeable future, and, therefore, used an expected dividend yield of zero in the valuation model.

Forfeitures. The Company is required to estimate forfeitures at the time of grant, and revise those estimates in subsequent periods if actual forfeitures differ from those estimates. The Company uses 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 actual forfeitures differ from the estimates, the difference will be recorded as a cumulative adjustment in the period that the estimates are revised.

During the years ended December 31, 2013, 2012 and 2011, the Company granted 543,987; 2,860,927 and 1,305,620 stock options, respectively, to employees with a weighted-average grant date fair value of $6.75, $3.07, and $5.65 per share, respectively. The aggregate intrinsic value of options exercised was $6.8 million, $6.0 million and $5.7 million for the years ended December 31, 2013, 2012, and 2011, respectively. The aggregate intrinsic value is calculated as the difference between the exercise price and the estimated fair value of the Company's common stock at the date of exercise. The total fair value of shares vested was $4.9 million, $2.1 million and $0.9 million for the years ended December 31, 2013, 2012 and 2011, respectively.

During the years ended December 31, 2013, 2012 and 2011, the Company granted 1,180,200; 1,412,066 and 11,495 restricted stock units and restricted awards, respectively, to employees. The weighted-average grant date fair value as of the respective grant date of restricted stock units and restricted stock awards was $5.62, $5.70 and $10.20 for the years ended December 31, 2013, 2012 and 2011, respectively. There were no such awards granted for the year ended December 31, 2011. The fair value as of the respective vesting dates of restricted stock units and restricted stock awards was $1.4 million and $0.3 million for the year ended December 31, 2013 and December 31, 2012, respectively. The fair value as of the respective vesting dates of restricted stock units and restricted stock awards for the year ended December 31, 2011, was immaterial.

There was no capitalized stock-based compensation cost and no recognized stock-based compensation tax benefits during the years ended December 31, 2013, 2012 and 2011.

Stock-Based Compensation for Non-employees

Stock-based compensation expense related to stock-based awards to non-employees is recognized as the stock-based awards are earned, generally through the provision of services. The Company believes that the fair value of the stock-based awards is more reliably measurable than the fair value of the services received. The fair value of the granted stock-based awards is calculated at each reporting date using the Black-Scholes option pricing model. During the year ended December 31, 2013, the Company granted stock-based awards to non-employees which vest over 0.5 years. During the year ended December 31, 2012, the Company granted stock-based awards to non-employees which vest over 0.5 years. Stock-based compensation expense related to non-employee grants was $0.5 million and $0.8 million for the years ended December 31, 2013 and 2012, respectively. Stock-based compensation expense related to non-employee grants was insignificant for the year ended December 31, 2011.

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Supplemental Cash Flow Information (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Supplemental Cash Flow Information [Abstract]
Cash paid for interest	$ 0	$ 2	$ 69
Cash paid for income taxes	188	47	0
Changes in accounts payable and accrued liabilities related to property, plant and equipment purchases	(33)	(100)	147
Reclassification of warrant liability to additional paid-in capital upon initial public offering	0	0	921
Conversion of preferred stock into common stock upon initial public offering	$ 0	$ 0	$ 81,164

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Consolidated Statements Of Operations (USD $) In Thousands, except Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Income Statement [Abstract]
Revenue	$ 111,626	$ 76,194	$ 68,144
Cost of revenue	34,189	25,506	26,101
Gross profit	77,437	50,688	42,043
Operating expenses:
Research and development	17,090	12,693	10,488
Sales and marketing	63,185	51,167	28,953
General and administrative	16,510	16,867	11,299
Total operating expenses	96,785	80,727	50,740
Loss from operations	(19,348)	(30,039)	(8,697)
Interest income (expense), net	80	129	(93)
Other income (expense), net	103	(92)	(765)
Loss before provision for income taxes	(19,165)	(30,002)	(9,555)
Provision for income taxes	140	141	48
Net loss	(19,305)	(30,143)	(9,603)
Cumulative dividends on convertible preferred stock	0	0	(5,099)
Net loss attributable to common stockholders	$ (19,305)	$ (30,143)	$ (14,702)
Net loss per share attributable to common stockholders, basic and diluted (dollars per share)	$ (0.53)	$ (0.87)	$ (1.96)
Weighted average shares of common stock outstanding used in computing net loss attributable to common stockholders, basic and diluted	36,209,051	34,776,380	7,506,282

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Balance Sheet Components

12 Months Ended

Dec. 31, 2013

Balance Sheet Related Disclosures [Abstract]

Balance Sheet Components

Balance Sheet Components

Investments

The Company's short-term and long-term investments as of December 31, 2013 are as follows (in thousands):

Short-term
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Agency securities	$	6,771	$	2	$	(1	)	$	6,772
U.S. Treasury	1,000		1		—			1,001
Corporate bonds	8,867		3		—			8,870
Commercial paper	999		—		—			999
Certificates of deposit	1,198		—		—			1,198
Total	$	18,835	$	6	$	(1	)	$	18,840
Long-term
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Agency securities	$	6,957	$	2	$	(3	)	$	6,956
U.S. Treasury	1,013		1		—			1,014
Corporate bonds	2,790		5		—			2,795
Certificates of deposit	677		—		—			677
Total	$	11,437	$	8	$	(3	)	$	11,442

The Company's short-term and long-term investments as of December 31, 2012, are as follows (in thousands):

Short-term
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Agency securities	$	11,071	$	6	$	—		$	11,077
Corporate bonds	8,414		3		—			8,417
Commercial paper	1,998		—		—			1,998
Certificates of deposit	1,071		—		—			1,071
Total	$	22,554	$	9	$	—		$	22,563
Long-term
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
U.S. Agency securities	$	7,750	$	3	$	—		$	7,753
Corporate bonds	5,392		1		(5		)	5,388
Total	$	13,142	$	4	$	(5	)	$	13,141

For the years ended December 31, 2013 and December 31, 2012, gains or losses realized on the sale of investments were insignificant.

The contractual maturities of the Company's short-term and long-term investments as of December 31, 2013, are as follows (in thousands):

	December 31, 2013
	Amortized Cost		Fair Value
Due in one year or less	$	18,835	$	18,840
Due in one year to five years	11,437		11,442
	$	30,272	$	30,282

When evaluating the investments for other-than-temporary impairment, the Company reviews factors such as the length of time and extent to which fair value has been below the amortized cost basis, review of current market liquidity, interest rate risk, the financial condition of the issuer, as well as credit rating downgrades.  The Company believes that the unrealized losses are not other-than-temporary. The Company does not have a foreseeable need to liquidate the portfolio and anticipates recovering the full cost of the securities either as market conditions improve, or as the securities mature.

Inventory

Inventory is stated at the lower of cost (which approximates actual cost on a first-in, first-out basis) or market, computed on a standard cost basis. Inventory that is obsolete or in excess of forecasted usage is written down to its estimated net realizable value based on assumptions about future demand and market conditions.

The components of inventory consist of the following (in thousands):

	December 31,
	2013		2012
Raw materials	$	4,520	$	8,302
Finished goods	3,886		2,569
Total inventory	$	8,406	$	10,871

Property and equipment, net

Property and equipment, net comprised the following (in thousands):

	December 31,
	2013			2012
Lab equipment, tooling and molds	$	2,071		$	1,987
Computer software	1,562			1,243
Computer equipment	801			753
Leasehold improvements	743			636
Furniture and fixtures	334			288
Vehicles	35			35
Total property and equipment	5,546			4,942
Less: Accumulated depreciation and amortization	(3,594		)	(2,610		)
Construction in progress	206			4
Property and equipment, net	$	2,158		$	2,336

Depreciation expense for the years ended December 31, 2013, 2012 and 2011 was $1.0 million, $0.9 million and $0.7 million, respectively.

Accrued Liabilities

The following table shows the components of accrued liabilities (in thousands):

	December 31,
	2013		2012
Accrued payroll and employee related expenses	$	7,863	$	3,430
Accrued marketing expenses	3,739		3,287
Accrued royalty	2,458		1,343
Sales and other taxes payable	1,787		1,177
Accrued warranty	676		902
Accrued legal expenses	284		415
Other accrued liabilities	1,557		522
Total accrued liabilities	$	18,364	$	11,076

Product Warranty

The estimated product warranty accrual was as follows (in thousands):

	December 31,
	2013			2012
Balance at the beginning of the period	$	902		$	742
Accruals for warranties issued	197			869
Settlements of warranty claims	(423		)	(709		)
Balance at the end of the period	$	676		$	902

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Fair Value Of Financial Instruments

12 Months Ended

Dec. 31, 2013

Fair Value Disclosures [Abstract]

Fair Value of Financial Instruments

Fair Value of Financial Instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The accounting guidance establishes a three-tiered hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:

Level 1—Quoted prices in active markets for identical assets or liabilities.

Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The Company did not hold any Level 3 assets or liabilities at December 31, 2013.

The categorization of a financial instrument within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement.

The Company classifies its cash equivalents and investments within Level 1 and Level 2, as it uses quoted market prices or alternative pricing sources and models utilizing market observable inputs. The following tables set forth the fair value of the Company’s financial assets and liabilities by level within the fair value hierarchy (in thousands):

	As of December 31, 2013
	Level 1		Level 2		Level 3		Fair Value
Financial Assets
Cash equivalents:
Money market funds	$	12,796	$	—	$	—	$	12,796
Short-term investments:
U.S. Agency securities	—		6,772		—		6,772
U.S. Treasury	—		1,001		—		1,001
Corporate bonds	—		8,870		—		8,870
Commercial paper	—		999		—		999
Certificates of deposit	1,198		—		—		1,198
Long-term investments:
U.S. Agency securities	—		6,956		—		6,956
U.S. Treasury	—		1,014		—		1,014
Corporate bonds	—		2,795		—		2,795
Certificates of deposit	$	677	$	—	$	—	$	677
	$	14,671	$	28,407	$	—	$	43,078

	As of December 31, 2012
	Level 1		Level 2		Level 3		Fair Value
Financial Assets
Cash equivalents:
Money market funds	$	18,274	$	—	$	—	$	18,274
Short-term investments:
U.S. Agency securities	—		11,077		—		11,077
Corporate bonds	—		8,417		—		8,417
Commercial paper	—		1,998		—		1,998
Certificates of deposit	1,071		—		—		1,071
Long-term investments:
U.S. Agency securities	—		7,753		—		7,753
Corporate bonds	—		5,388		—		5,388
	$	19,345	$	34,633	$	—	$	53,978

During the years ended December 31, 2013 and 2012, the Company did not have any transfers of financial assets measured at fair value on a recurring basis to or from Level 1, Level 2 or Level 3. The Company did not hold any Level 3 assets or liabilities as of December 31, 2013, and December 31, 2012.

The carrying amounts of the Company’s cash equivalents, accounts receivable, accounts payable and accrued liabilities, approximate fair value due to their relatively short maturities.

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Segment Information

12 Months Ended

Dec. 31, 2013

Segment Reporting [Abstract]

Segment Information

Segment Information

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision maker is its Chief Executive Officer. The Company has one business activity and there are no segment managers who are held accountable for operations. Accordingly, the Company has a single reportable segment structure. All of the Company’s principal operations and decision-making functions are located in the United States.

The Company’s revenue by geographic region, based on the location to where the product was shipped, is summarized as follows (in thousands):

	Year Ended
	December 31,
	2013		2012		2011
North America	$	89,150	$	56,657	$	50,332
International	22,476		19,537		17,812
Total	$	111,626	$	76,194	$	68,144

North America includes the United States and related territories as well as Canada. International is the rest of the world. Revenue for the United States was $83.7 million, $54.7 million and $47.5 million for the years endedDecember 31, 2013, 2012 and 2011, respectively.

The following table sets forth revenue by product expressed as dollar amounts (in thousands):

	Year Ended
	December 31,
	2013		2012		2011
System revenue	$	61,359	$	39,145	$	46,552
Consumable revenue	50,267		37,049		21,592
Total	$	111,626	$	76,194	$	68,144

Substantially all of the Company’s long-lived assets are located in the United States of America.

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Employee Benefit Plans

12 Months Ended

Dec. 31, 2013

Defined Benefit Pension Plans and Defined Benefit Postretirement Plans Disclosure [Abstract]

Employee Benefit Plans

Employee Benefit Plans

In 2005, the Company adopted a retirement savings plan under Section 401(k) of the Internal Revenue Code. This plan covers all employees in the United States who meet minimum age and service requirements and allows participants to defer a portion of their annual compensation on a pre-tax basis. Company contributions to the plan may be made at the discretion of the Board of Directors. Matching 401(k) contributions expensed were $1.1 million, $0.7 million, and $0.5 million for the years ended December 31, 2013, 2012, and 2011, respectively.

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Related Party Transactions

12 Months Ended

Dec. 31, 2013

Related Party Transactions [Abstract]

Related Party Transactions

Related Party Transactions

Notes Receivable from a Stockholder

In December 2007, the Company issued 445,509 shares of its common stock to an executive in exchange for full recourse promissory notes in the aggregate amount of approximately $0.2 million. The promissory notes bore interest from the date of issuance until January 1, 2010 at a rate of 4.72% per annum compounded annually and last bore interest at a rate of 4.00% per annum, and were collateralized by the related common stock and the executive’s assets. The executive separated from the Company on December 3, 2010. The promissory notes were due and payable in full (including all accrued and unpaid interest) upon nine months following the Company’s initial public offering of its common stock. These notes receivable were related to a prior exercise of stock options and were recorded as a contra stockholders’ equity account.

In July 2012, the promissory notes were paid in full.

Brazilian Distribution Agreement

The Company entered into a distribution agreement with ADVANCE Medical, Inc. and its wholly owned subsidiaries, or ADVANCE, dated March 18, 2011 and amended on February 27, 2012 and September 4, 2012, appointing ADVANCE as the exclusive distributor of CoolSculpting in Brazil and Mexico. ADVANCE is required to purchase a minimum quantity of the Company’s products each calendar quarter throughout the term of the distribution agreement which expires on December 31, 2018. Venrock, a principal stockholder of the Company, owns a significant equity interest in ADVANCE Medical, Ltd., the parent company of ADVANCE. Dr. Bryan E. Roberts, who is a member of the Company's Board of Directors, is also a partner of Venrock Associates. The revenue recognized by the Company under this distribution agreement for the years ended December 31, 2013, 2012 and 2011 was $2.3 million, $2.5 million and $2.0 million, respectively. The accounts receivable balance as of December 31, 2013 and 2012, was $0.2 million and $0.1 million, respectively.

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Stockholders' Equity - Preferred Stock (Details) (USD $)	1 Months Ended
	Oct. 31, 2011	Dec. 31, 2013	Dec. 31, 2012
Stockholders' Equity Note [Abstract]
Preferred stock, shares authorized	50,000,000	50,000,000	50,000,000
Preferred stock, par value (dollars per share)	$ 0.01	$ 0.01	$ 0.01
Conversion of preferred stock into common stock upon initial public offering, shares	24,415,965
Preferred stock, shares issued		0	0
Preferred stock, shares outstanding		0	0

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License Agreement With Massachusetts General Hospital

12 Months Ended

Dec. 31, 2013

Goodwill and Intangible Assets Disclosure [Abstract]

License Agreement with Massachusetts General Hospital

License Agreement with Massachusetts General Hospital

In May 2005, the Company entered into an exclusive license agreement with the General Hospital Corporation, a not for profit Massachusetts corporation, which owns and operates the Massachusetts General Hospital, or MGH. This agreement was amended and restated in September 2011. Under this agreement, the Company obtained an exclusive license to develop and commercialize the patent and the core technology that underlies its CoolSculpting system. The Company conducted development from 2005 through 2009, and thereafter started commercialization of the products. The agreement will remain in full force and effect for the later of (i) the life of any patents that issue from the underlying patent applications, which are expected to expire in 2023 or (ii) one year after the last commercial sale for which a royalty is due to MGH, unless terminated in accordance with its terms and conditions. MGH may terminate the agreement upon the Company's insolvency, failure to maintain insurance, material breach of the agreement including failure to satisfy the Company's post-sales requirements, or failure to make required payments. The Company may terminate the agreement for any reason upon 90 days' advance written notice to MGH. The Company has complied with its contractual requirements to date.

The Company is obligated to make various payments to MGH, including (i) a 7% royalty on net sales (as defined in the agreement) of CoolSculpting and (ii) milestone payments. During the year ended December 31, 2010, the Company paid MGH a $1.1 million milestone payment upon receipt of FDA clearance to market its CoolSculpting system for the selective reduction of fat. The remaining milestone payments including (i) $1 million due upon achieving cumulative net sales (as defined in the agreement) of $70 million and (ii) $6 million due upon the earlier to occur of achieving cumulative net sales (as defined in the agreement) of $200 million, or the completion of a qualifying initial public offering were made during the quarter ended December 31, 2011. As of December 31, 2011, the Company had completed all the milestones associated with the license agreement with MGH and had no milestone payments to MGH outstanding.

All payments made to MGH prior to the FDA product approval were expensed as incurred as research and development costs. All milestone payments payable by the Company pursuant to the terms of the agreement subsequent to the date of the FDA approval were capitalized as purchased technology when paid, and are subsequently amortized into cost of revenue using the straight-line method over the estimated remaining useful life of the technology, not to exceed the term of the agreement or the life of the patent. Royalty payments are accrued as the Company recognizes revenue, and are included in cost of revenue.

The intangible asset, net comprised the following (in thousands):

	December 31, 2013			December 31, 2012
Purchased technology	$	8,050		$	8,050
Less: Accumulated amortization	(1,569		)	(869		)
Intangible asset, net	$	6,481		$	7,181

The amortization expense of the intangible asset was $0.7 million and $0.7 million for the years ended December 31, 2013 and 2012, respectively. The total estimated annual future amortization expense of this intangible asset as of December 31, 2013 is as follows (in thousands):

Fiscal Year
2014	$	701
2015	701
2016	701
2017	701
2018	701
Thereafter	2,976
Total	$	6,481

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Notes Payable

12 Months Ended

Dec. 31, 2013

Debt Disclosure [Abstract]

Notes Payable

Notes Payable

On January 14, 2009, the Company entered into a Loan and Security Agreement (the “Loan Agreement”) with Silicon Valley Bank. The Loan Agreement provided for total borrowings of $5.0 million to be made available to the Company in three separate tranches. Tranche A, for $1.5 million, was received by the Company in January 2009. Tranche B, for $2.0 million, was received by the Company on April 30, 2009, and Tranche C, for $1.5 million, was available until September 30, 2009 and was not drawn upon. The notes payable were collateralized by substantially all the assets of the Company, excluding intellectual property. The notes carried an interest rate of 7.28% per annum. The repayment of principal, plus interest, was via monthly installments over a 36-month period for each tranche, beginning with the disbursement date of each tranche.

On January 14, 2009, in accordance with the Loan Agreement, the Company issued a warrant to Silicon Valley Bank to purchase 47,683 shares of Series C preferred stock at $3.67 per share. The fair value of this warrant was recorded as a debt discount at issuance and has been amortized to interest expense over the term of the notes.

During the quarter ended March 31, 2012, the remaining loan balance of $0.3 million and the final payment of 5.75% of the advanced amount, or $0.2 million, were paid in full to Silicon Valley Bank.

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Commitments And Contingencies

12 Months Ended

Dec. 31, 2013

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Lease Commitments

The Company occupies a facility in Pleasanton, a manufacturing facility in Dublin, California and a warehouse space in Livermore, California, all of which are under leases that extend through December 2014. The Company also occupies office and warehouse space in Gatwick, United Kingdom, under a lease which extends through December 2018, as well as office space in Dubai, United Arab Emirates, under a lease which extends through March 2014 and Seoul, South Korea under a lease which extends through October 2014. Rent expense for non-cancellable operating leases with scheduled rent increases is recognized on a straight-line basis over the lease term. Rent expense for the years endedDecember 31, 2013, 2012 and 2011 was $1.4 million, $1.2 million and $0.9 million, respectively.

Future minimum lease payments under the non-cancellable operating leases as of December 31, 2013 are as follows (in thousands):

Year Ending December 31,	Amount
2014	$	1,252
2015	30
2016	61
2017	61
2018	61
Total future minimum lease payments	$	1,465

Purchase Commitments

The Company had non-cancellable purchase obligations to contract manufacturers and suppliers for $6.0 million and $2.2 million at December 31, 2013 and 2012, respectively.

Unrecognized Tax Benefits

The table above excludes the Company's gross liability for unrecognized tax benefits which totaled $0.1 million, including estimated interest and penalties, as of December 31, 2013, and are classified in long-term income taxes payable. The Company is unable to make a reasonably reliable estimate of the timing of payments in individual years due to uncertainties in the timing of tax audits, if any, or their outcomes. Accordingly, the Company has excluded this obligation from the schedule summarizing its significant obligations to make future payments under contractual obligations as of December 31, 2013 presented above.

Legal Matters

From time to time, the Company may be involved in legal and administrative proceedings and claims of various types. The Company records a liability in its consolidated financial statements for these matters when a loss is known and considered probable and the amount can be reasonably estimated. Management reviews these estimates in each accounting period as additional information becomes known and adjusts the loss provision when appropriate. If the loss is not probable or cannot be reasonably estimated, a liability is not recorded in the consolidated financial statements. If a loss is probable but the amount of loss cannot be reasonably estimated, the Company discloses the loss contingency and an estimate of possible loss or range of loss (unless such an estimate cannot be made). The Company does not recognize gain contingencies until they are realized. Legal costs incurred in connection with loss contingencies are expensed as incurred.

On March 13, 2012, an alleged purchaser of the Company's publicly traded common stock, Ivan Marcano, filed a securities class action in the Superior Court of California, County of Alameda, entitled Marcano v. Nye, et al., Case No. RG12621290. The complaint alleged that the Company made false and misleading statements or omitted to state facts necessary to make the disclosures not misleading in its Form S-1, and the amendments thereto, issued in connection with the Company's initial public offering.  The claims were asserted under Sections 11 and 15 of the Securities Act of 1933. On March 15, 2012, April 3, 2012, and May 24, 2012, three additional and substantially similar lawsuits were filed in the same court, some adding the Company's underwriters as defendants.  All four cases were consolidated and a consolidated complaint was deemed operative.  On August 24, 2012, the Company filed a demurrer to the consolidated complaint.  Subsequently, Plaintiffs agreed to dismiss the Company's outside directors and its underwriters from the litigation without prejudice. On November 9, 2012, the court sustained the Company's demurrer with leave to amend. Plaintiffs filed a second amended complaint on January 14, 2013, again asserting claims under Sections 11 and 15 of the Securities Act of 1933. The second amended complaint sought compensatory damages and equitable relief on behalf of the class for an amount to be proven at trial. On February 25, 2013, the Company filed a demurrer to the second amended complaint. On May 17, 2013, the Court issued an order sustaining the demurrer without leave to amend and ordering the action dismissed. On June 7, 2013, the Court entered a judgment dismissing the action with prejudice.  Plaintiffs’ time in which to appeal the judgment has lapsed and the Court’s dismissal is final.

Indemnifications

In the normal course of business, the Company enters into contracts that contain a variety of representations and warranties and provide for general indemnifications. The Company's exposure under these agreements is unknown because it involves claims that may be made against the Company in the future, but have not yet been made. To date, the Company has not paid any claims , and the Company believes that the estimated fair value of these indemnification obligations is minimal and has not accrued any amounts for these obligations.

Severance and Separation Agreements

Effective December 3, 2013, the Company's Chief Scientific Officer and Senior Vice President of Clinical entered into a separation agreement with the Company. As a result of this separation agreement, the Company incurred $0.3 million in termination benefits and $0.7 million in costs related to the modification of the employee's stock-based compensation, which were recorded during the year ended December 31, 2013. Amounts outstanding related to this separation agreement was $0.3 million as of December 31, 2013.

Effective April 3, 2012, the Company's Vice President of North American Sales resigned from the Company. On April 18, 2012, the Company's President and CEO resigned from the positions he held with the Company. As a result of these resignations, the Company incurred $0.9 million in termination benefits and $0.7 million in costs related to the modification of the employees' stock-based compensation, which were recorded during the year ended December 31, 2012. Subsequent to these resignations, during the second quarter of 2012, the Company's management made a decision to terminate as well as accept resignations from several employees. As a result of these actions, the Company incurred approximately $0.8 million in termination benefits. Amounts outstanding related to these termination benefits were $0.4 million as of December 31, 2012. As of December 31, 2013, all of the termination benefits incurred during December 31, 2012 had been paid.

No similar costs were incurred during the year ended December 31, 2011.

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Stock-Based Compensation Plans - Stock Options Outstanding (Details) (USD $)	12 Months Ended
	Dec. 31, 2013
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Stock options outstanding	3,598,385
Options exercisable	1,795,156
$0.55-2.42 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Stock options outstanding	374,146
Weighted-average remaining contractual life	5 years 8 months 12 days
Options exercisable	329,604
Exercise price, lower limit	$ 0.55
Exercise price, upper limit	$ 2.42
2.83-4.30 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Stock options outstanding	461,190
Weighted-average remaining contractual life	7 years 10 months 24 days
Options exercisable	98,163
Exercise price, lower limit	$ 2.83
Exercise price, upper limit	$ 4.30
4.60-4.62 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Stock options outstanding	190,000
Weighted-average remaining contractual life	9 years
Options exercisable	40,625
Exercise price, lower limit	$ 4.60
Exercise price, upper limit	$ 4.62
5.04-5.04 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Stock options outstanding	1,431,092
Weighted-average remaining contractual life	8 years 7 months 6 days
Options exercisable	822,879
Exercise price, lower limit	$ 5.04
Exercise price, upper limit	$ 5.04
5.06-6.34 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Stock options outstanding	499,199
Weighted-average remaining contractual life	9 years
Options exercisable	221,171
Exercise price, lower limit	$ 5.06
Exercise price, upper limit	$ 6.34
6.38-9.49 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Stock options outstanding	370,471
Weighted-average remaining contractual life	8 years 9 months 18 days
Options exercisable	186,401
Exercise price, lower limit	$ 6.38
Exercise price, upper limit	$ 9.49
9.55-10.20 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Stock options outstanding	149,122
Weighted-average remaining contractual life	7 years 2 months 12 days
Options exercisable	65,065
Exercise price, lower limit	$ 9.55
Exercise price, upper limit	$ 10.20
11.30-11.30 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Stock options outstanding	54,094
Weighted-average remaining contractual life	4 years 9 months 18 days
Options exercisable	20,834
Exercise price, lower limit	$ 11.30
Exercise price, upper limit	$ 11.30
12.12-12.12 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Stock options outstanding	19,071
Weighted-average remaining contractual life	8 years
Options exercisable	10,414
Exercise price, lower limit	$ 12.12
Exercise price, upper limit	$ 12.12
17.33-17.33 [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Stock options outstanding	50,000
Weighted-average remaining contractual life	10 years
Options exercisable	0
Exercise price, lower limit	$ 17.33
Exercise price, upper limit	$ 17.33

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Stock-Based Compensation Plans - Stock-Based Compensation Expense (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation	$ 6,660,000	$ 4,989,000	$ 2,279,000
Stock-based compensation expense due to modification	700,000	700,000
Total unrecognized compensation costs	13,000,000
Total unrecognized compensation costs, period of recognition	2 years 8 months 12 days
Cost of revenues [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation	248,000	131,000	54,000
Research and development [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation	1,645,000	894,000	542,000
Selling and marketing [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation	1,783,000	827,000	533,000
General and administrative [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation	2,984,000	3,137,000	1,150,000
Performance Based Stock Options and Restricted Stock Units [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation	$ 1,000,000	$ 300,000

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Stock-Based Compensation Plans - Stock Options Plan Activity (Details) (USD $) In Thousands, except Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Share-based Compensation Arrangement by Share-based Payment Award, Shares Available for Grant [Roll Forward]
Balance at beginning of period, Shares	1,103,836	57,437
Additional shares reserved, Shares	1,200,000	3,199,890
Options granted, Shares	(568,987)	(2,989,279)
Options canceled, Shares	307,738	2,096,684
Balance at end of period, Shares	1,086,737	1,103,836
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward]
Balance at beginning of period, Shares	4,128,334	4,847,972
Options granted, Shares	568,987	2,989,279
Options exercised, Shares	(791,198)	(1,612,233)
Options canceled, Shares	(307,738)	(2,096,684)
Balance at end of period, Shares	3,598,385	4,128,334
Vested and expected to vest, end of period, Shares	3,440,249
Exercisable, end of period, Shares	1,795,156
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Roll Forward]
Balance at beginning of period, Weighted-Average Exercise Price, Per Share	$ 4.96	$ 3.00
Options granted, Weighted-Average Exercise Price, Per Share	$ 6.60	$ 5.87
Options exercised, Weighted-Average Exercise Price, Per Share	$ 3.34	$ 1.65
Options canceled, Weighted-Average Exercise Price, Per Share	$ 7.36	$ 4.28
Balance at ending of period, Weighted-Average Exercise Price, Per Share	$ 5.36	$ 4.96
Vested and expected to vest, end of period, Weighted-Average Exercise Price, Per Share	$ 5.34
Exercisable, end of period, Weighted-Average Exercise Price, Per Share	$ 4.94
Share-based Compensation Arrangement by Share-based Payment Award, Options, Additional Disclosures [Abstract]
Balance at end of period, Weighted-Average Remaining Contractual Life	8 years 2 months 12 days
Balance at end of period, Aggregate Intrinsic Value	$ 48,741
Vested and expected to vest, end of period, Weighted-Average Remaining Contractual Life	8 years 2 months 5 days
Vested and expected to vest, end of period, Aggregate Intrinsic Value	46,693
Exercisable, end of period, Weighted-Average Remaining Contractual Life	7 years 10 months 10 days
Exercisable, end of period, Aggregate Intrinsic Value	$ 25,075
Restricted stock awards [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Shares Available for Grant [Roll Forward]
Restricted stock awards/units granted, Shares		(4,083)
Restricted stock awards/units canceled, shares	0	2,342
Restricted stock units [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Shares Available for Grant [Roll Forward]
Restricted stock awards/units granted, Shares	(1,205,200)	(1,540,417)
Restricted stock awards/units canceled, shares	163,689	281,262
Restricted stock units withheld for tax, shares	85,661

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Supplemental Cash Flow Information (Tables)

12 Months Ended

Dec. 31, 2013

Supplemental Cash Flow Information [Abstract]

Supplemental Cash Flow Information

The supplemental cash flow information consists of the following (in thousands):

	Year Ended
	December 31,
	2013			2012			2011
Cash paid for interest	$	—		$	2		$	69
Cash paid for income taxes	$	188		$	47		$	—
Non-cash investing and financing activities:
Changes in accounts payable and accrued liabilities related to property, plant and equipment purchases	$	(33	)	$	(100	)	$	147
Reclassification of warrant liability to additional paid-in capital upon initial public offering	$	—		$	—		$	921
Conversion of preferred stock into common stock upon initial public offering	$	—		$	—		$	81,164

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License Agreement With Massachusetts General Hospital - Estimated Annual Future Amortization Expense (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2013	Dec. 31, 2012
Goodwill and Intangible Assets Disclosure [Abstract]
2014	$ 701
2015	701
2016	701
2017	701
2018	701
Thereafter	2,976
Intangible asset, net	$ 6,481	$ 7,181

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Net Loss Per Share Of Common Stock

12 Months Ended

Dec. 31, 2013

Earnings Per Share [Abstract]

Net Loss per Share of Common Stock

Net Loss per Share of Common Stock

Basic net loss per share of common stock is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding for the period. Diluted net loss per share of common stock is computed by giving effect to all potentially dilutive securities outstanding during the period, including options, restricted stock units, stock issuable pursuant to the ESPP, warrants, and convertible preferred stock. Basic and diluted net loss per share attributable to common stockholders was the same for all periods presented as the inclusion of all potentially dilutive securities outstanding were anti-dilutive. As such, the numerator and the denominator used in computing both basic and diluted net loss are the same for each period presented.

A reconciliation of the numerator and denominator used in the calculation of the basic and diluted net loss per share is as follows:

	Year Ended
	December 31,
	2013			2012			2011
Historical net loss per share:
Numerator
Net loss attributable to common stockholders (in thousands)	$	(19,305	)	$	(30,143	)	$	(14,702	)
Denominator
Weighted average shares of common stock outstanding used in computing net loss per share attributable to common stockholders - basic and diluted	36,209,051			34,776,380			7,506,282
Basic and diluted net loss per share attributable to common stockholders	$	(0.53	)	$	(0.87	)	$	(1.96	)

The following outstanding shares of potentially dilutive securities were excluded from the computation of diluted net loss per share of common stock for the periods presented, because including them would have been anti-dilutive:

	Year Ended
	December 31,
	2013	2012	2011
Options to purchase common stock	3,598,385	4,128,334	4,847,972
Restricted stock units	1,906,696	119,507	—
Common stock issuable pursuant to the ESPP	86,026	21,586	—
Total	5,591,107	4,269,427	4,847,972

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Summary Of Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2013

Accounting Policies [Abstract]

Schedule of Allowance for Doubtful Accounts

The allowance for doubtful accounts consisted of the following activity for fiscal years ended December 31, 2013, 2012 and 2011 (in thousands):

Description	Balance at Beginning of Year		Additions		Reductions		Balance at End of Year
Year ended December 31, 2011	$	62	$	50	$	72	$	40
Year ended December 31, 2012	40		329		39		330
Year ended December 31, 2013	330		59		389		—

Useful Lives of Property and Equipment

The useful lives of the property and equipment are as follows:

Lab equipment, tooling, and molds	5 years
Computer equipment	3 years
Computer software	3 years
Furniture and fixtures	5 years
Vehicles	5 years
Leasehold improvements	Shorter of lease term or estimated useful life

Property and equipment, net comprised the following (in thousands):

	December 31,
	2013			2012
Lab equipment, tooling and molds	$	2,071		$	1,987
Computer software	1,562			1,243
Computer equipment	801			753
Leasehold improvements	743			636
Furniture and fixtures	334			288
Vehicles	35			35
Total property and equipment	5,546			4,942
Less: Accumulated depreciation and amortization	(3,594		)	(2,610		)
Construction in progress	206			4
Property and equipment, net	$	2,158		$	2,336

Components of accumulated other comprehensive income

Components of accumulated other comprehensive income was as follows (in thousands):

	December 31,
	2013		2012
Cumulative translation adjustments	$	77	$	—
Unrealized gain on marketable securities, net of tax	10		8
Accumulated other comprehensive income	$	87	$	8

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License Agreement With Massachusetts General Hospital (Details) (USD $)	1 Months Ended	12 Months Ended
	May 30, 2005	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Acquired Finite-Lived Intangible Assets [Line Items]
Period that agreement remains in full force after last commercial sale with royalty due	1 year
Period to terminate contract with written notice	90 days
Royalty expense, percent of net sales		7.00%
Payments to Acquire Intangible Assets		$ 0	$ 0	$ 7,000,000	$ 1,100,000
Amortization of intangible assets		700,000	700,000
License Agreement Milestone 1 [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Payments to Acquire Intangible Assets				1,000,000
Cumulative net sales required for milestone payment				70,000,000
License Agreement Milestone 2 [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Payments to Acquire Intangible Assets				6,000,000
Cumulative net sales required for milestone payment				$ 200,000,000

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Summary Of Significant Accounting Policies - Warranty (Details)	3 Months Ended		12 Months Ended		9 Months Ended		3 Months Ended	12 Months Ended
	Mar. 31, 2013 Control Units [Member]	Mar. 31, 2013 Applicators [Member]	Dec. 31, 2013 Maximum [Member] Control Units [Member]	Dec. 31, 2013 Maximum [Member] Applicators [Member]	Dec. 31, 2013 Direct Customer [Member] Control Units [Member]	Dec. 31, 2013 Direct Customer [Member] Applicators [Member]	Mar. 31, 2013 Europe [Member] Direct Customer [Member] Control Units [Member]	Dec. 31, 2013 International [Member] Indirect Customer [Member] Control Units [Member]	Dec. 31, 2013 International [Member] Indirect Customer [Member] Applicators [Member]
Product Liability Contingency [Line Items]
Product Warranty Accrual, Term	3 years	1 year			1 year	1 year	1 year	3 years	1 year
Product Extended Warranty Accrual, Term			2 years	2 years

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Consolidated Statements of Comprehensive Loss (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Statement of Comprehensive Income [Abstract]
Net loss	$ (19,305)	$ (30,143)	$ (9,603)
Other comprehensive income, net of tax:
Foreign currency translation adjustments	77	0	0
Changes in unrealized gains on available-for-sale securities	2	8	0
Other comprehensive income, net of tax	79	8	0
Comprehensive loss	$ (19,226)	$ (30,135)	$ (9,603)

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Summary Of Significant Accounting Policies

12 Months Ended

Dec. 31, 2013

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America, or GAAP.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. All significant intercompany accounts and transactions have been eliminated.

Based on an evaluation of economic facts and circumstances together with the functional currency analysis prescribed in Accounting Standards Codification Topic 830, Foreign Currency Matters, on October 1, 2013, we changed the functional and reporting currency of our foreign subsidiary from the U.S. Dollar to the Great Britain Pound. Such change did not have a material impact on the consolidated financial statements of the Company.

All assets and liabilities of these foreign operations are translated to U.S. Dollars at current period end exchange rates, and revenues and expenses are translated to U.S. Dollars using average exchange rates in effect during the period. The gains and losses from the foreign currency translation of this subsidiary's financial statements are included as a separate component of stockholders' equity under "Accumulated other comprehensive income". Gains or losses arising from currency exchange rate fluctuations on transactions denominated in a currency other than the local functional currency are included in other income (expense), net.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reported periods. The primary estimates underlying the Company's financial statements include the value of revenue elements, product warranty, inventory valuation, allowance for doubtful accounts receivable, assumptions regarding variables used in calculating the fair value of the Company's equity awards, fair value of investments, useful lives of intangibles, income taxes and contingent liabilities. Actual results could differ from those estimates.

Significant Risks and Uncertainties

The Company's future results of operations involve a number of risks and uncertainties. Factors that could affect the Company's future operating results and cause actual results to vary materially from expectations include, but are not limited to, rapid technological change, continued acceptance of the Company's products, competition from substitute products and larger companies, protection of proprietary technology, strategic relationships and dependence on key individuals. If the Company fails to adhere to ongoing FDA Quality System Regulation, the FDA may withdraw its market clearance or take other action. The Company relies on sole-source suppliers to manufacture some of the components used in its product. The Company's manufacturers and suppliers may encounter supply interruptions or problems during manufacturing due to a variety of reasons, including failure to comply with applicable regulations, including the FDA's Quality System Regulation, equipment malfunction and environmental factors, any of which could delay or impede the Company's ability to meet demand.

Concentration of Credit Risk

Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash equivalents, marketable securities and trade receivables. Our cash equivalents and marketable securities are held in safekeeping by large, credit worthy financial institutions. The Company invests our excess cash primarily in U.S. banks, government and agency bonds, money market funds and corporate obligations. The Company has established guidelines relative to credit ratings, diversification and maturities that seek to maintain safety and liquidity. Deposits in these banks may exceed the amounts of insurance provided on such deposits. To date, the Company has not experienced any losses on our deposits of cash and cash equivalents.

The Company controls credit risk through credit approvals, credit limits, and monitoring procedures. The Company performs periodic credit evaluations of its customers and generally does not require collateral. Accounts receivable are recorded net of an allowance for doubtful accounts. The allowance for doubtful accounts is based on management's assessment of the collectability of specific customer accounts and the aging of the related invoices, and represents our best estimate of probable credit losses in our existing trade accounts receivable. The Company did not have an allowance for doubtful accounts as of December 31, 2013. At December 31, 2012, the Company's allowance for doubtful accounts was $0.3 million.

The allowance for doubtful accounts consisted of the following activity for fiscal years ended December 31, 2013, 2012 and 2011 (in thousands):

Description	Balance at Beginning of Year		Additions		Reductions		Balance at End of Year
Year ended December 31, 2011	$	62	$	50	$	72	$	40
Year ended December 31, 2012	40		329		39		330
Year ended December 31, 2013	330		59		389		—

As of December 31, 2013 and 2012, no individual customer accounted for 10% or more of the Company's accounts receivable. Furthermore, no individual customer accounted for greater than 10% of total revenue during the years ended December 31, 2013, 2012 and 2011, respectively.

Cash and Cash Equivalents

The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.

Investments

The Company invests its excess cash balances primarily in certificates of deposit, commercial paper, corporate bonds, and U.S. Government agency securities. Investments with original maturities greater than 90 days that mature less than one year from the consolidated balance sheet date are classified as short-term investments. The Company classifies all of its investments as available-for-sale and records such assets at estimated fair value in the consolidated balance sheets, with unrealized gains and losses, if any, reported as a component of accumulated other comprehensive income (loss) in stockholders' equity. Realized gains and losses from maturities of all such securities are reported in earnings and computed using the specific identification cost method.  Realized gains or losses and charges for other-than-temporary declines in value, if any, on available-for-sale securities are reported in other income (expense), net as incurred.  The Company periodically evaluates these investments for other-than-temporary impairment.

Inventory

Inventory is stated at the lower of cost (which approximates actual cost on a first-in, first-out basis) or market, computed on a standard cost basis. Inventory that is obsolete or in excess of forecasted usage is written down to its estimated net realizable value based on assumptions about future demand and market conditions. Inventory write-downs are charged to cost of revenue and establish a new cost basis for the inventory.

Property and Equipment

Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Maintenance and repairs are charged to expense as incurred. Assets not yet placed in use are not depreciated.

The useful lives of the property and equipment are as follows:

Lab equipment, tooling, and molds	5 years
Computer equipment	3 years
Computer software	3 years
Furniture and fixtures	5 years
Vehicles	5 years
Leasehold improvements	Shorter of lease term or estimated useful life

Capitalized Software

The Company capitalizes costs associated with customized internal-use software systems that have reached the application development stage and meet recoverability tests. Such capitalized costs mainly include external direct costs utilized in developing or obtaining the applications. Capitalization of such costs begins when the preliminary project stage is complete and ceases at the point in which the project is substantially complete and is ready for its intended purpose. The capitalized costs associated with internal-use software are depreciated on a straight-line basis over each asset's estimated useful life, which is generally three years.

Restricted Cash

At December 31, 2013 and 2012, cash of $0.3 million and $0.5 million, respectively, was restricted from withdrawal and held by banks in the form of certificates of deposit. At December 31, 2013 and 2012, the certificates of deposit were held as collateral for the facility lease agreement in Pleasanton, California, statutory French VAT requirements and for our United Kingdom banking facilities.

Intangible Asset

The intangible asset consists of an exclusive license agreement for commercializing patents and other technology. All milestone payments subsequent to the date of the FDA approval are capitalized as purchased technology when paid, and are subsequently amortized into cost of revenue using the straight-line method over the estimated remaining useful life of the technology, not to exceed the term of the agreement or the life of the patent.

Impairment of Long-lived Assets

The Company reviews property and equipment and the intangible asset for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability is measured by comparison of the carrying amount to the future undiscounted net cash flows which the assets are expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the assets' fair value determined using the projected discounted future net cash flows arising from the asset. ThroughDecember 31, 2013, there have been no such impairments.

Revenue Recognition

The Company’s revenue is derived from the sales of the CoolSculpting system, consisting of a control unit and applicators, and from the sale of cycles in the form of consumable procedure packs, each of which includes consumable CoolGels and CoolLiners and a disposable computer cartridge that the Company markets as the CoolCard. Embedded software exists in the CoolCard product to permit the Company’s customers to perform a fixed number of CoolSculpting procedures, or cycles. This software is not marketed separately from the CoolSculpting system or from the CoolCard. Rather, the functionality that the software provides is part of the overall CoolCard product. The CoolSculpting system is marketed as a non-invasive aesthetic device for the reduction of fat, not for its embedded software attributes included in the CoolCard that enable its use. The Company does not provide rights to upgrades and enhancements or post-contract customer support for the embedded software. In addition, the Company does not incur significant software development costs or capitalize its software development costs. Based on this assessment, the Company considers the embedded software in the CoolCard incidental to the CoolCard product as a whole and determined that revenue recognition should not be governed by the provisions of Topic 985 of the FASB Accounting Standards Codification, or ASC. The Company earns revenue from the sale of its products to its customers and to distributors. The Company recognizes revenue when persuasive evidence of an arrangement exists, transfer of title to the customer has occurred, the sales price is fixed or determinable, and collectability is probable. Revenue is deferred in the event that any of the revenue recognition criteria is not met.

Persuasive Evidence of an Arrangement. The Company uses contracts or customer purchase orders to determine the existence of an arrangement.

Transfer of title. Our standard terms generally specify that title transfers upon shipment to the customer. The Company uses third party shipping documents to verify that title has transferred.

Sales Price Fixed or Determinable. The Company assesses whether the sales price is fixed or determinable at the time of the transaction. Sales prices are documented in the executed sales contract or purchase order received prior to shipment. The Company’s standard terms do not allow for trial or evaluation periods, rights of return or refund, payments contingent upon the customer obtaining financing or other terms that could impact the customer’s obligation.

Collectability. The Company assesses whether collection is reasonably assured based on a number of factors, including the customer’s past transaction history and credit worthiness.

Multiple-Element Arrangements. Typically, all products sold to a customer are delivered at the same time. If a partial delivery occurs as authorized by the customer, the Company allocates revenue to the various products based on their vendor-specific objective evidence of fair value, or VSOE, if VSOE exists according to ASC 605-25 as the basis of determining the relative selling price of each element. If VSOE does not exist, the Company may use third party evidence of fair value, or TPE, to determine the relative selling price of each element. If neither VSOE nor TPE exists, the Company may use management’s best estimate of the sales price, or ESP, of each element to determine the relative selling price. The relative selling prices for control units, applicators, CoolCards and extended warranty are based on established price lists and separate, stand-alone sales of these elements. The Company establishes best estimates within a range of selling prices considering multiple factors including, but not limited to, factors such as size of transaction, pricing strategies and market conditions. The Company believes the use of the ESP allows revenue recognition in a manner consistent with the underlying economics of the transaction. The Company’s products do not require maintenance or support.

Accruals for Customer Programs

The Company records an accrued liability for cooperative marketing arrangements and customer incentive programs. The estimated cost of these programs is recorded as a reduction of revenue or as an operating expense, if the Company receives a separately identifiable benefit from the customer and can reasonably estimate the fair value of that benefit. Significant management judgment and estimates must be used to determine the cost of these programs in any accounting period.

Cooperative Marketing Arrangements.  The Company offers cooperative marketing programs to its North American customers, allowing the customer to receive partial reimbursement for qualifying advertising expenditures which promote the Company's product and brand. Customer participation, as well as reimbursement amounts, is predicated upon purchase levels of CoolCards. The objective of these arrangements is to encourage advertising and promotional events to increase sales of the Company's products. Accruals for these marketing arrangements are recorded at the time of sale, or time of commitment, based on the related program parameters, review of related advertising and historical experience.

Customer Incentive Programs.  The Company's customer incentive program consists of rebates for our North American customers based on purchase levels of CoolCards. Estimated costs of consumer rebates and similar incentives are recorded at the time the incentive is offered, based on the specific terms and conditions of the program.

Cost of Revenue

Cost of revenue consists primarily of cost of finished and semi-finished products purchased from our third-party suppliers, labor, material, and overhead involved in our internal manufacturing processes, technology amortization and royalty fees and cost of product warranty. In the event that a revenue transaction is deferred, the corresponding cost associated with the transaction will also be deferred.

Shipping and Handling

Shipping and handling costs charged to customers are recorded as revenue. Shipping costs are included in cost of revenue.

Research and Development

Research and development costs primarily consist of salaries, benefits, incentive compensation, stock-based compensation, and allocated facilities costs for employees and contractors engaged in research, clinical studies, regulatory affairs, and development. The Company expenses all research and development costs in the periods in which they are incurred.

Advertising costs

The cost of advertising and media is expensed as incurred. For the years endedDecember 31, 2013, 2012 and 2011, advertising costs totaled $8.9 million, $12.0 million and $1.9 million, respectively.

Product Warranty

Effective in the second quarter of 2013, the Company provides a standard limited warranty on its products of generally one year for both control units and applicators for its direct customers. Prior to this change, the Company provided a standard limited warranty on its products of generally three years for control units and one year for applicators, while for direct customers in Europe, the Company offered a one year standard warranty on control units. For indirect customers in international markets the Company provides a standard limited warranty on its products of generally three years for control units and one year for applicators.

The Company accrues for the estimated future costs of repair or replacement upon shipment. The warranty accrual is recorded to cost of revenue and is based upon historical and forecasted trends in the volume of product failures during the warranty period and the cost to repair or replace the equipment. The Company bases product warranty costs on related freight, material, technical support labor, and overhead costs. The estimated product warranty costs are assessed by considering historical costs and applying the experienced failure rates to the outstanding warranty period for products sold. The Company exercises judgment in estimating the expected product warranty costs, using data such as the actual and projected product failure rates, and average repair costs, including freight, material, technical support labor, and overhead costs, for products returned under warranty.

The Company offers an extended warranty of up to two years on both our CoolSculpting control units and CoolSculpting applicators. The Company recognizes the revenue from the sale of an extended warranty over the extended warranty coverage period. Our revenue and related obligations from sale of extended warranties to date has not been significant.

Stock-Based Compensation

The Company maintains incentive plans under which incentive and nonqualified stock options are granted primarily to employees and non-employee consultants.

Stock-based compensation cost is measured at the grant date, based on the fair value of the award, and is recognized as expense on a straight-line basis over the requisite service period. The fair value of stock-based awards to employees is estimated using the Black-Scholes option pricing model. The Company estimates its forfeiture rate based on an analysis of its actual forfeitures and will continue to evaluate the adequacy of the forfeiture rate assumption based on actual forfeitures, analysis of employee turnover, and other related factors.

Stock-based compensation expense related to stock options granted to non-employees is recognized as the stock options are earned. The awards generally vest ratably over the time period the Company expects to receive services from the non-employee. The fair values attributable to these options are amortized over the service period and the unvested portion of these options is remeasured at each vesting date.

Income Taxes

The Company utilizes the asset and liability method of accounting for income taxes, under which deferred taxes are determined based on the temporary differences between the financial statement and tax basis of assets and liabilities using tax rates expected to be in effect during the years in which the basis differences reverse and for operating losses and tax credit carryforwards. The Company estimates our provision for income taxes and amounts ultimately payable or recoverable in multiple tax jurisdictions around the world. Estimates involve interpretations of regulations and are inherently complex. Resolution of income tax treatments in individual jurisdictions may not be known for many years after completion of any fiscal year. The Company is required to evaluate the realizability of our deferred tax assets on an ongoing basis to determine whether there is a need for a valuation allowance with respect to such deferred tax assets. A valuation allowance is recorded when it is more likely than not that some or all of the deferred tax assets will not be realized. Significant management judgment is required in determining any valuation allowance recorded against deferred tax assets. In evaluating the ability to recover deferred tax assets, the Company considers all available positive and negative evidence giving greater weight to our recent cumulative losses and our ability to carryback losses against prior taxable income and, commensurate with objective verifiability, the forecast of future taxable income including the reversal of temporary differences and the implementation of feasible and prudent tax planning strategies.

The Company recognizes and measures uncertain tax positions taken or expected to be taken in a tax return if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such positions are then measured based on the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement. The Company reports a liability for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in a tax return. The Company adjusts these reserves in light of changing facts and circumstances, such as the closing of a tax audit or the refinement of an estimate. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will impact the provision for income taxes in the period in which such determination is made. The provision for income taxes includes the impact of reserve provisions and changes to reserves that are considered appropriate, as well as the related net interest. The Company recognizes interest and penalties related to unrecognized tax benefits within the income tax provision. Accrued interest and penalties are included within the related tax liability line in the consolidated balance sheet.

The Company files annual income tax returns in multiple taxing jurisdictions around the world. A number of years may elapse before an uncertain tax position is audited and finally resolved. While it is often difficult to predict the final outcome or the timing of resolution of any particular uncertain tax position, the Company believes that our reserves for income taxes reflect the most likely outcome. The Company adjusts these reserves, as well as the related interest, in light of changing facts and circumstances. Settlement of any particular position could require the use of cash.

Net Loss Per Share

Basic net loss per share of common stock is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding for the period. Diluted net loss per share of common stock is computed by giving effect to all potentially dilutive securities outstanding during the period, including options, restricted stock units, stock issuable pursuant to the employee stock purchase plan, warrants, and convertible preferred stock. Basic and diluted net loss per share attributable to common stockholders was the same for all periods presented as the inclusion of all potentially dilutive securities outstanding were anti-dilutive. As such, the numerator and the denominator used in computing both basic and diluted net loss are the same for each period presented.

Comprehensive Income (Loss)

Accumulated other comprehensive income includes foreign currency translation adjustments and unrealized gains (losses) on available-for-sale securities net of tax, the impact of which has been excluded from earnings and reflected as components of stockholders' equity.

Components of accumulated other comprehensive income was as follows (in thousands):

	December 31,
	2013		2012
Cumulative translation adjustments	$	77	$	—
Unrealized gain on marketable securities, net of tax	10		8
Accumulated other comprehensive income	$	87	$	8

Recent Accounting Pronouncements

On February 5, 2013, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. This guidance is the culmination of the FASB's redeliberation on reporting reclassification adjustments from accumulated other comprehensive income. The Company adopted this guidance effective during the first quarter of 2013 and such adoption did not have a material impact on the Company's consolidated financial statements.

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Commitments And Contingencies - Legal Matters (Details)	0 Months Ended				12 Months Ended
	May 24, 2012 Cases	Apr. 03, 2012 Cases	Mar. 15, 2012 Cases	Mar. 13, 2012 Cases	Dec. 31, 2012 Cases
Commitments and Contingencies Disclosure [Abstract]
Number of lawsuits	1	1	1	1	4

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Selected Quarterly Financial Data (unaudited) (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2013	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Quarterly Financial Information Disclosure [Abstract]
Total revenue	$ 35,841	$ 29,465	$ 26,338	$ 19,982	$ 18,597	$ 17,928	$ 22,265	$ 17,404	$ 111,626	$ 76,194	$ 68,144
Gross profit	25,114	21,229	18,460	12,634	12,186	11,975	15,115	11,411	77,437	50,688	42,043
Net loss	$ (5,405)	$ (2,811)	$ (3,607)	$ (7,482)	$ (6,515)	$ (5,182)	$ (8,101)	$ (10,345)	$ (19,305)	$ (30,143)	$ (9,603)
Net loss per share attributable to common stockholders, basic and diluted (dollars per share)	$ (0.15)	$ (0.08)	$ (0.10)	$ (0.21)	$ (0.18)	$ (0.15)	$ (0.24)	$ (0.30)	$ (0.53)	$ (0.87)	$ (1.96)
Shares used in calculation - basic and diluted	36,686,053	36,206,008	36,045,346	35,890,084	35,764,666	35,068,076	34,253,357	34,010,432	36,209,051	34,776,380	7,506,282

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Employee Benefit Plans (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Defined Benefit Pension Plans and Defined Benefit Postretirement Plans Disclosure [Abstract]
Matching 401(k) contributions	$ 1.1	$ 0.7	$ 0.5

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Fair Value Of Financial Instruments (Tables)

12 Months Ended

Dec. 31, 2013

Fair Value Disclosures [Abstract]

Fair value of financial assets and liabilities by level within fair value hierarchy

The following tables set forth the fair value of the Company’s financial assets and liabilities by level within the fair value hierarchy (in thousands):

	As of December 31, 2013
	Level 1		Level 2		Level 3		Fair Value
Financial Assets
Cash equivalents:
Money market funds	$	12,796	$	—	$	—	$	12,796
Short-term investments:
U.S. Agency securities	—		6,772		—		6,772
U.S. Treasury	—		1,001		—		1,001
Corporate bonds	—		8,870		—		8,870
Commercial paper	—		999		—		999
Certificates of deposit	1,198		—		—		1,198
Long-term investments:
U.S. Agency securities	—		6,956		—		6,956
U.S. Treasury	—		1,014		—		1,014
Corporate bonds	—		2,795		—		2,795
Certificates of deposit	$	677	$	—	$	—	$	677
	$	14,671	$	28,407	$	—	$	43,078

	As of December 31, 2012
	Level 1		Level 2		Level 3		Fair Value
Financial Assets
Cash equivalents:
Money market funds	$	18,274	$	—	$	—	$	18,274
Short-term investments:
U.S. Agency securities	—		11,077		—		11,077
Corporate bonds	—		8,417		—		8,417
Commercial paper	—		1,998		—		1,998
Certificates of deposit	1,071		—		—		1,071
Long-term investments:
U.S. Agency securities	—		7,753		—		7,753
Corporate bonds	—		5,388		—		5,388
	$	19,345	$	34,633	$	—	$	53,978

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Income Taxes - Operating Loss Carryforwards (Details) (USD $) In Millions, unless otherwise specified	Dec. 31, 2013
Operating Loss Carryforwards [Line Items]
Unrecognized deferred tax benefits	$ 7.9
Federal [Member]
Operating Loss Carryforwards [Line Items]
Net operating loss carryforward	121.3
State [Member]
Operating Loss Carryforwards [Line Items]
Net operating loss carryforward	$ 108.2

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Summary Of Significant Accounting Policies (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Accounting Policies [Abstract]
Restricted cash	$ 331,000	$ 469,000
Advertising expense	$ 8,900,000	$ 12,000,000	$ 1,900,000

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Income Taxes

12 Months Ended

Dec. 31, 2013

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The domestic and foreign components of loss before provision for income taxes were as follows (in thousands):

	Year Ended December 31,
	2013			2012			2011
Domestic	$	(19,535	)	$	(30,329	)	$	(9,051	)
Foreign	370			327			(504		)
Loss before provision for income taxes	$	(19,165	)	$	(30,002	)	$	(9,555	)

The provision for income taxes consisted of the following (in thousands):

	As of December 31,
	2013		2012			2011
Current provision:
Federal	$	—	$	—		$	—
State	60		37			48
Foreign	61		170			—
Total current	121		207			48
Deferred provision (benefit):
Federal	—		—			—
State	—		—			—
Foreign	19		(66		)	—
Total deferred	19		(66		)	—
Total provision	$	140	$	141		$	48

The following is a reconciliation of the statutory federal income tax rate to the Company's effective tax:

	Year Ended December 31,
	2013		2012		2011
Tax at federal statutory rate	35	%	35	%	35	%
State income taxes, net of federal benefit	2		(1	)	(1	)
Non-deductible permanent difference	(1	)	—		(3	)
Change in valuation allowance	(34	)	(34	)	(31	)
Research & development credits	(2	)	1		3
Stock-based compensation	(1	)	(1	)	(5	)
Other	—		—		2
Provision for income taxes	(1	)%	—	%	—	%

Tax effects of temporary differences that give rise to significant portions of the deferred tax assets are presented below (in thousands):

	December 31,
	2013			2012
Net operating loss carryforwards	$	45,401		$	38,385
Research & development credits	2,335			2,703
Depreciation & amortization	583			312
Accruals & reserves	2,731			3,592
Total deferred tax assets	51,050			44,992
Valuation allowance	(51,003		)	(44,926		)
Net deferred tax assets	$	47		$	66

As of December 31, 2013, the Company had federal and state net operating loss carryforwards of $121.3 million and $108.2 million, respectively. Unrecognized deferred tax benefits of approximately $7.9 million resulted from the exercises of employee stock awards will be accounted for as a credit to the additional paid-in capital if and when realized through a reduction in income tax payable. The federal net operating losses begin expiring in 2026 and state net operating losses begin expiring in 2015. As of December 31, 2013, the Company had research and development credit carryforwards of approximately $2.8 million and $3.0 million available to reduce future taxable income, if any, for federal and state income tax purposes, respectively. The federal research and development credit carryforwards expire beginning 2026, and state credits can be carried forward indefinitely.

On January 2, 2013, the President signed into law The American Taxpayer Relief Act of 2012, or ATRA. Under prior law, a taxpayer was entitled to a research tax credit for qualifying amounts incurred through December 31, 2011. The ATRA extends the research credit for two years for qualified research expenditures incurred through the end of 2013. The extension of the research credit is retroactive and includes amounts incurred after 2011. The benefit of the reinstated credit did not impact the income statement in the period of enactment, which was the first quarter of 2013, as the research and development credit carryforwards are offset by a full valuation allowance.

Management believes that, based on a number of factors, which includes the Company’s historical operating performance and accumulated deficit, it is more likely than not that the U.S. deferred tax assets will not be utilized, such that a full valuation allowance has been recorded against our U.S. deferred tax assets. Valuation allowance increased by approximately $6.1 million, and $12.1 million for the years ended December 31, 2013 and 2012, respectively.

The valuation allowance for deferred tax assets consisted of the following activity for the fiscal years ended December 31, 2013, 2012 and 2011 (in thousands):

Description	Balance at Beginning of Year		Additions		Reductions		Balance at End of Year
Year ended December 31, 2011	$	29,231	$	3,605	$	—	$	32,836
Year ended December 31, 2012	32,836		12,090		—		44,926
Year ended December 31, 2013	$	44,926	$	6,077	$	—	$	51,003

Utilization of net operating losses and tax credit carryforwards may be limited by “ownership change” rules, as defined in Section 382 of the Internal Revenue Code. Similar rules may apply under state tax laws. The Company has assessed the application of Internal Revenue Code Section 382, during the fourth quarter of 2013, and concluded no limitation currently applies, and the Company will continue to monitor activities in the future. In the event the Company experiences any subsequent changes in ownership, the amount of net operating losses and research and development credit carryovers available in any taxable year could be limited and may expire unutilized.

During the year ended December 31, 2013, the amount of gross unrecognized tax benefits increased by $2.0 million. The total amount of unrecognized tax benefits was $2.9 million as of December 31, 2013, of which $0.1 million, if recognized, would affect the effective tax rate due to the valuation allowance that currently offsets deferred tax assets. The Company recognizes interest and penalties related to uncertain tax positions as part of the income tax provision. To date, such interest and penalties have not been material.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):

Balance as of January 1, 2011	$	678
Additions based on tax positions related to the current year	146
Balance as of December 31, 2011	824
Additions based on tax positions related to the current year	78
Balance as of December 31, 2012	902
Additions based on tax positions related to the current year	2,023
Balance as of December 31, 2013	$	2,925

The Company files income tax returns in the U.S. federal and state jurisdictions and in the United Kingdom and all returns since inception remain open to examination.