Exhibit 99.1
 CLARIENT, INC. AND SUBSIDIARIES
For the Fiscal Year Ended December 31, 2009
 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 PageNo.Report of Independent Registered Public Accounting Firm
    
    
    1Consolidated Balance Sheet as of December 31, 2009
    
    
    2Consolidated Statement of Operations for the year ended December 31, 2009
    
    
    3Consolidated Statement of Stockholders Equity (Deficit) and Comprehensive Loss for the year ended
December 31, 2009
    
    
    4Consolidated Statement of Cash Flows for the year ended December 31, 2009
    
    
    5Notes to Consolidated Financial Statements
    
    
    6




---



##### 



Report of Independent Registered Public Accounting Firm
 
    
  1




---



##### 



CLARIENT, INC. AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEET
 (in thousands, except par values)
 December 31,2009ASSETSCurrent assets:Cash and cash equivalents
    
    $
    10,903Restricted cash
    
    
    765Accounts receivable, net of allowance for doubtful accounts of $8,747
    
    
    21,568Supplies inventory
    
    
    1,291Prepaid expenses and other current assets
    
    
    935Total current assets
    
    
    35,462Restricted cash
    
    
    1,314Property and equipment, net
    
    
    14,346Intangible assets, net
    
    
    11,639Goodwill
    
    
    3,959Other assets
    
    
    227Total assets
    
    $
    66,947LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Revolving lines of credit
    
    $
    2,678Related party line of credit, net of discount
    
    
    Accounts payable
    
    
    2,883Accrued payroll
    
    
    3,985Accrued expenses and other current liabilities
    
    
    3,984Current maturities of capital lease obligations
    
    
    645Total current liabilities
    
    
    14,175Long-term capital lease obligations
    
    
    604Deferred rent and other non-current liabilities
    
    
    3,055Contingently issuable common stock
    
    
    2,650Commitments and contingenciesPreferred stock subject to redemption requirements outside the control of the issuer:Series A convertible preferred stock $0.01 par value, authorized 8,000 shares,
issued and outstanding 5,263 shares. Aggregate liquidation preference and redemption value: $55,800
    
    
    38,586Stockholders equityCommon stock $0.01 par value, authorized 150,000 shares, issued and outstanding
84,092 shares
    
    
    841Additional paid-in capital
    
    
    172,200Accumulated deficit
    
    
    (165,164
    )Accumulated other comprehensive loss
    
    
    Total stockholders equity
    
    
    7,877Total liabilities and stockholders equity
    
    $
    66,947
   2




---



##### 



CLARIENT, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENT OF OPERATIONS
 (in thousands, except per share amounts)
 For the Year Ended December 31,2009Net revenue
    
    $
    91,599Cost of services
    
    
    39,107Gross profit
    
    
    52,492Operating expenses:Sales and marketing
    
    
    17,380General and administrative
    
    
    23,587Bad debt
    
    
    12,927Research and development
    
    
    1,719Total operating expenses
    
    
    55,613Loss from operations
    
    
    (3,121
    )Interest expense, net of interest income of $32
    
    
    874Interest expense to related parties
    
    
    3,557Loss from continuing operations before income taxes
    
    
    (7,552
    )Income tax benefit (see Note 18)
    
    
    599Loss from continuing operations, net of income taxes
    
    
    (6,953
    )Income from discontinued operations, net of income tax expense of
$599, (see Notes 4 and 18)
    
    
    901Net loss
    
    $
    (6,052
    )Series A preferred stock beneficial conversion feature
    
    
    (4,290
    )Net loss applicable to common stockholders
    
    $
    (10,342
    )Net income (loss) per share applicable to common stockholders 
basic and diluted:Loss from continuing operations
    
    $
    (0.14
    )Income from discontinued operations
    
    
    0.01Net loss applicable to common stockholders
    
    $
    (0.13
    )Weighted-average shares used to compute net loss per common share:Basic and diluted
    
    
    77,693
   3




---



##### 



CLARIENT, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY (DEFICIT)AND COMPREHENSIVE LOSS
 (in thousands)
 Common Stock
    
    
    
    
    
    
    
    
    
    
    Accumulated
    
    
    Total$0.01
    
    
    Additional
    
    
    
    
    
    
    Other
    
    
    StockholdersIssued
    
    
    Par
    
    
    Paid-in
    
    
    Accumulated
    
    
    Comprehensive
    
    
    Equity
    
    
    ComprehensiveShares
    
    
    Value
    
    
    Capital
    
    
    Deficit
    
    
    Loss
    
    
    (Deficit)
    
    
    LossBalances at December 31,
2008
    
    
    76,995
    
    
    $
    770
    
    
    $
    149,403
    
    
    $
    (154,822
    )
    
    $
    (91
    )
    
    $
    (4,740
    )Issuance of warrants
    
    
    
    
    
    
    
    
    
    
    600
    
    
    
    
    
    
    
    
    
    
    
    600Exercise of warrants
    
    
    1,869
    
    
    
    19
    
    
    
    2,062
    
    
    
    
    
    
    
    
    
    
    
    2,081Exercise of stock options
    
    
    382
    
    
    
    4
    
    
    
    544
    
    
    
    
    
    
    
    
    
    
    
    548Issuance of common stock
(excluding common stock issued
as consideration for a
completed business
acquisition)
    
    
    92
    
    
    
    1
    
    
    
    216
    
    
    
    
    
    
    
    
    
    
    
    217Issuance of restricted stock
    
    
    673
    
    
    
    6
    
    
    
    (6
    )
    
    
    
    
    
    
    
    
    
    
    Cancelled restricted stock
    
    
    (9
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Expense related to stock
options and restricted stock
    
    
    
    
    
    
    
    
    
    
    2,181
    
    
    
    
    
    
    
    
    
    
    
    2,181Stock options issued as
consideration for a completed
business acquisition
    
    
    
    
    
    
    
    
    
    
    744
    
    
    
    
    
    
    
    
    
    
    
    744Common stock issued as
consideration for a completed
business acquisition
    
    
    4,090
    
    
    
    41
    
    
    
    10,103
    
    
    
    
    
    
    
    
    
    
    
    10,144Stock options expected to be
issued as consideration for a
completed business acquisition
    
    
    
    
    
    
    
    
    
    
    424
    
    
    
    
    
    
    
    
    
    
    
    424Common stock expected to be
issued as consideration for a
completed business acquisition
    
    
    
    
    
    
    
    
    
    
    1,639
    
    
    
    
    
    
    
    
    
    
    
    1,639Series A preferred stock
beneficial conversion feature
    
    
    
    
    
    
    
    
    
    
    4,290
    
    
    
    (4,290
    )
    
    
    
    
    
    
    Comprehensive loss:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,052
    )
    
    
    
    
    
    
    (6,052
    )
    
    $
    (6,052
    )Foreign currency translation
adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    91
    
    
    
    91
    
    
    
    91Comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    (5,961
    )Balances at December 31,
2009
    
    
    84,092
    
    
    $
    841
    
    
    $
    172,200
    
    
    $
    (165,164
    )
    
    $
    
    
    
    $
    7,877
   4




---



##### 



CLARIENT, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENT OF CASH FLOWS
 (in thousands)
 For the Year Ended December 31,2009Cash flows from operating activities:Net loss
    
    $
    (6,052
    )Gain from discontinued operations (see Notes 4 and 18)
    
    
    (901
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation
    
    
    3,803Bad debt expense
    
    
    12,953Amortization of warrants to related party interest expense
    
    
    2,506Amortization of deferred financing and offering costs
    
    
    446Amortization of intangible assets
    
    
    45Stock-based compensation
    
    
    2,398Income tax benefit (see Notes 4, 14, and 18)
    
    
    (599
    )Changes in operating assets and liabilities, net of acquisition of ownership interest:Interest on restricted cash
    
    
    (12
    )Accounts receivable, net
    
    
    (14,206
    )Inventories
    
    
    (770
    )Prepaid expenses and other assets
    
    
    (738
    )Accounts payable
    
    
    (1,256
    )Accrued payroll
    
    
    191Accrued interest on related party debt
    
    
    (1,259
    )Accrued expenses and other current liabilities
    
    
    1,219Deferred rent and other non-current liabilities
    
    
    (915
    )Net cash used in operating activities
    
    
    (3,147
    )Cash flows from investing activities:Purchases of property and equipment
    
    
    (4,587
    )Proceeds from sale of discontinued operations, net of selling costs
    
    
    1,500Increase in restricted cash
    
    
    (2,067
    )Acquisition of ownership interest, net of cash acquired
    
    
    5Net cash used in investing activities
    
    
    (5,149
    )Cash flows from financing activities:Proceeds from sale of preferred stock
    
    
    40,000Offering costs from sale of preferred stock
    
    
    (1,414
    )Proceeds from exercise of stock options and warrants
    
    
    2,629Repayments on capital lease obligations
    
    
    (359
    )Borrowings on revolving lines of credit
    
    
    76,425Repayments on revolving lines of credit
    
    
    (87,851
    )Borrowings on related party debt
    
    
    5,800Repayments on related party debt
    
    
    (17,908
    )Debt issuance costs
    
    
    (52
    )Net cash provided by financing activities
    
    
    17,270Effect of exchange rate changes on cash and cash equivalents
    
    
    91Net increase in cash and cash equivalents
    
    
    9,065Cash and cash equivalents at beginning of year
    
    
    1,838Cash and cash equivalents at end of year
    
    $
    10,903Supplemental disclosure of cash flow information:Cash paid for interest
    
    $
    2,887Cash paid for income taxes
    
    
    Non cash investing and financing activities:Property and equipment financed by capital leases
    
    
    1,127Beneficial conversion feature of Series A convertible preferred stock
    
    
    4,290Issuance of warrants in connection with borrowings from related party
    
    
    600Issuance of common stock and stock options in connection with acquisition of
ownership interest (Note 15)
    
    
    15,601Issuance of common stock in consideration for research and development services
    
    
    217
   5




---



##### 



CLARIENT, INC. AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 (all tabular amounts presented in thousands, except per share amounts)
 (1) Description of Business, Basis of Presentation, Operating Segment, and Going Concern
 (a) Description of Business
 ®
   (b) Basis of Presentation
     6




---



##### 



(c) Operating Segment
  (d) Going Concern
   (2) Summary of Significant Accounting Policies
 (a) Revenue Recognition
  (b) Allowance for Doubtful Accounts and Bad Debt Expense
    7




---



##### 



(c) Stock-Based Compensation
  (d) Long-Lived Assets
    (e) Income Taxes
  (f) Cash and Cash Equivalents and Restricted Cash
     8




---



##### 



(g) Supplies Inventory
  (h) Property and Equipment and Depreciation
  Office furniture, computer, software, and laboratory equipment
    
    Three to five yearsLeasehold improvements
    
    Shorter of useful life or remaining term of lease
  (i) Capitalized Internal-Use Software Costs
  (j) Research and Development
  (k) Intangible Assets, net
  (l) Goodwill
   9




---



##### 



(m) Fair Value Measurements
     (3) Balance Sheet Detail
 (a) Allowance for Doubtful Accounts
  Ending balance, December 31, 2008
    
    $
    8,045Bad debt expense
    
    
    12,927Write-offs
    
    
    (12,225
    )Ending balance, December 31, 2009
    
    $
    8,747
 (b) Property and Equipment
  December 31,2009Office furniture, computer hardware and software, and laboratory equipment
    
    $
    21,480Leasehold improvements
    
    
    9,650Total
    
    
    31,130Less: accumulated depreciation and amortization
    
    
    (16,784
    )Property and equipment, net
    
    $
    14,346
   10




---



##### 



(c) Intangible assets
  December 31,2009Biomarkers
    
    $
    11,349In-process research and development
    
    
    76Issued patents
    
    
    26Patent applications
    
    
    123Non-compete agreements
    
    
    110Less: accumulated amortization
    
    
    (45
    )Intangible assets, net
    
    $
    11,639
  EstimatedUseful Life
    
    
    Estimated Annual
    
    
    Consolidated Statement of Operations(years)
    
    
    Amortization
    
    
    ClassificationBiomarkers
    
    
    7
    
    
    $
    1,621
    
    
    Cost of servicesIn-process research and development
    
    
    7
    
    
    
    11
    
    
    Research and developmentIssued patents
    
    
    7
    
    
    
    4
    
    
    Cost of servicesPatent applications
    
    
    7
    
    
    
    18
    
    
    Cost of servicesNon-competition agreements
    
    
    3
    
    
    
    37
    
    
    Research and developmentTotal
    
    
    
    
    
    $
    1,691
 (4) Discontinued Operations
   11




---



##### 



(5) Recent Accounting Pronouncements
 TM
   
    
    Transaction costs are generally expensed as incurred. These costs were previously
treated as costs of the acquisition;
 
    
    Contingent consideration is recorded at fair value as an element of purchase price
with subsequent adjustments recognized in operations. Contingent consideration was
previously accounted for as a subsequent adjustment of purchase price;
 
    
    In-process research and development (IPR&D) is recorded at fair value as an
indefinite-lived intangible asset at the acquisition date;
 
    
    Restructuring costs associated with a business combination are generally expensed
subsequent to the acquisition date; and
 
    
    Subsequent decreases in valuation allowances on acquired deferred tax assets are
recognized in operations after the measurement period. Such changes were previously
considered to be subsequent changes in consideration and were recorded as decreases in
goodwill.
  12




---



##### 



(6) Significant Risks and Uncertainties
    December 31,2009Governmental (Medicare and Medicaid)
    
    
    20
    %Private health insurers
    
    
    43
    %Clients (pathologists, hospitals, clinics, and biopharmaceutical companies)
    
    
    18
    %Patients (indirect bill)
    
    
    10
    %Patients (direct bill)
    
    
    9
    %Total
    
    
    100
    %
  13




---



##### 



As of December 31, 2009 - Total
    
    Gross Amount
    
    
    Percent of TotalTotal
    
    $
    30,315
    
    
    
    100
    %Unbilled
    
    
    4,819
    
    
    
    16
    %Current
    
    
    5,817
    
    
    
    19
    %31-60 days past due
    
    
    4,341
    
    
    
    14
    %61-90 days past due
    
    
    2,799
    
    
    
    9
    %91-120 days past due
    
    
    1,963
    
    
    
    6
    %121-150 days past due
    
    
    1,299
    
    
    
    4
    %Greater than 150 days past due
    
    
    9,277
    
    
    
    32
    %
 Governmental payors (Medicare and Medicaid)
    
    Gross Amount
    
    
    Percent of TotalTotal
    
    $
    5,989
    
    
    
    100
    %Unbilled
    
    
    1,508
    
    
    
    25
    %Current
    
    
    1,332
    
    
    
    22
    %31-60 days past due
    
    
    517
    
    
    
    9
    %61-90 days past due
    
    
    335
    
    
    
    6
    %91-120 days past due
    
    
    228
    
    
    
    4
    %121-150 days past due
    
    
    204
    
    
    
    3
    %Greater than 150 days past due
    
    
    1,864
    
    
    
    31
    %
 Private health insurer payors
    
    Gross Amount
    
    
    Percent of TotalTotal
    
    $
    13,009
    
    
    
    100
    %Unbilled
    
    
    2,391
    
    
    
    18
    %Current
    
    
    1,989
    
    
    
    15
    %31-60 days past due
    
    
    1,395
    
    
    
    11
    %61-90 days past due
    
    
    1,069
    
    
    
    8
    %91-120 days past due
    
    
    728
    
    
    
    6
    %121-150 days past due
    
    
    580
    
    
    
    5
    %Greater than 150 days past due
    
    
    4,857
    
    
    
    37
    %
 Client (pathologists, hospitals, clinics, and biopharmaceutical) payors
    
    Gross Amount
    
    
    Percent of TotalTotal
    
    $
    5,433
    
    
    
    100
    %Unbilled
    
    
    585
    
    
    
    11
    %Current
    
    
    1,791
    
    
    
    33
    %31-60 days past due
    
    
    1,570
    
    
    
    29
    %61-90 days past due
    
    
    530
    
    
    
    10
    %91-120 days past due
    
    
    299
    
    
    
    5
    %121-150 days past due
    
    
    164
    
    
    
    3
    %Greater than 150 days past due
    
    
    494
    
    
    
    9
    %
  14




---



##### 



Patient  payors (indirect bill)
    
    Gross Amount
    
    
    Percent of TotalTotal
    
    $
    2,992
    
    
    
    100
    %Unbilled
    
    
    
    
    
    
    Current
    
    
    137
    
    
    
    5
    %31-60 days past due
    
    
    343
    
    
    
    11
    %61-90 days past due
    
    
    337
    
    
    
    11
    %91-120 days past due
    
    
    302
    
    
    
    10
    %121-150 days past due
    
    
    275
    
    
    
    9
    %Greater than 150 days past due
    
    
    1,598
    
    
    
    54
    %
 Patient  payors (direct bill)
    
    Gross Amount
    
    
    Percent of TotalTotal
    
    $
    2,892
    
    
    
    100
    %Unbilled
    
    
    335
    
    
    
    12
    %Current
    
    
    569
    
    
    
    19
    %31-60 days past due
    
    
    516
    
    
    
    18
    %61-90 days past due
    
    
    528
    
    
    
    18
    %91-120 days past due
    
    
    405
    
    
    
    14
    %121-150 days past due
    
    
    76
    
    
    
    3
    %Greater than 150 days past due
    
    
    463
    
    
    
    16
    %
  15




---



##### 



16




---



##### 



(7) Lines of Credit
  December 31,2009Gemino Facility
    
    $
    2,678Capital lease obligations
    
    
    1,249Safeguard Mezzanine Financing
    
    
    Comerica Facility
    
    
    Subtotal
    
    
    3,927Less: Unamortized discount on Mezzanine Facilities
    
    
    Total debt
    
    
    3,927Less: Short-term debt, including current maturities of capital lease obligations
    
    
    (3,323
    )Long-term capital lease obligations
    
    $
    604
  Gemino Facility
  plus plus
 sum of
  17




---



##### 



divided by multiplied
by
  Comerica Facility
    Safeguard Mezzanine Financing
   18




---



##### 



19




---



##### 



Interest ExpenseWarrant
    
    
    Warrant
    
    
    
    
    
    
    RecognizedNumber of
    
    Exercise
    
    
    Warrant
    
    
    Issuance
    
    
    Expiration
    
    
    
    
    
    
    Year Endedwarrants
    
    Price
    
    
    Term
    
    
    Date

    
    Date

    
    Fair Value
    
    
    2009125,000*
    
    $
    0.01
    
    
    4 years
    
    March 7, 2007
    
    March 7, 2011
    
    $
    204
    
    
    $
    2362,500
    
    
    1.39
    
    
    4 years
    
    March 7, 2007
    
    March 7, 2011
    
    
    69
    
    
    
    831,250*
    
    
    0.01
    
    
    4 years
    
    November 14, 2007
    
    November 14, 2011
    
    
    62
    
    
    
    1131,250*
    
    
    0.01
    
    
    4 years
    
    December 17, 2007
    
    December 17, 2011
    
    
    61
    
    
    
    1331,250*
    
    
    0.01
    
    
    4 years
    
    March 5, 2008
    
    March 5, 2012
    
    
    62
    
    
    
    16Total
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    458
    
    
    $
    71
  Interest ExpenseWarrant
    
    
    
    
    
    
    RecognizedExercise
    
    
    Warrant
    
    
    Warrant
    
    
    Expiration
    
    
    
    
    
    
    Year EndedNumber of warrants
    
    Price
    
    
    Term
    
    
    Issuance Date

    
    Date

    
    Fair Value
    
    
    20091,643,750*
    
    $
    0.01
    
    
    5 years
    
    March 14, 2008
    
    March 14, 2013
    
    $
    2,666
    
    
    $
    703550,000*
    
    
    0.01
    
    
    5 years
    
    June 10, 2008
    
    June 11, 2013
    
    
    1,140
    
    
    
    300550,000*
    
    
    0.01
    
    
    5 years
    
    July 2, 2008
    
    July 2, 2013
    
    
    1,095
    
    
    
    289550,000*
    
    
    0.01
    
    
    5 years
    
    September 2, 2008
    
    September 2, 2013
    
    
    1,167
    
    
    
    308550,000*
    
    
    0.01
    
    
    5 years
    
    November 6, 2008
    
    November 6, 2013
    
    
    890
    
    
    
    235Total
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    6,958
    
    
    $
    1,835
 *
    
    On November 20, 2008 Safeguard exercised the indicated common stock warrants plus an
additional 0.1 million warrants issued in January 2007 in connection with its guarantee of
the Comerica Facility. In December 2009, Safeguard exercised 0.5 million warrants issued in
December 2005 in connection with the Companys closing of a $9.0 million private stock
offering.  Interest ExpenseWarrant
    
    
    
    
    
    
    Recognized for theNumber of
    
    Exercise
    
    
    Warrant
    
    
    Warrant
    
    
    Expiration
    
    
    
    
    
    
    Year EndedWarrants Issued
    
    Price
    
    
    Term
    
    
    Issuance Date

    
    Date

    
    Fair Value
    
    
    2009500,000
    
    $
    1.376
    
    
    5 years
    
    February 27, 2009
    
    February 27, 2014
    
    $
    600
    
    
    $
    600Total
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    600
    
    
    $
    600
 (8) Equipment Financing
   2010
    
    $
    7332011
    
    
    4982012
    
    
    141Subtotal
    
    
    1,372Less: interest
    
    
    (123
    )Total
    
    
    1,249Less: current portion
    
    
    (645
    )Capital lease obligations, long-term portion
    
    $
    604
  20




---



##### 



(9) Net Loss Per Share Information
    Year Ended December 31,2009Basic and diluted EPS numerator:Loss from continuing operations, net of income taxes
    
    $
    (6,953
    )Series A convertible preferred stock beneficial
conversion feature (see Note 12)
    
    
    (4,290
    )Loss from continuing operations applicable to common
stockholders, net of income taxes
    
    $
    (11,243
    )Income from discontinued operations, net of income taxes
    
    
    901Net loss applicable to common stockholders
    
    $
    (10,342
    )Net income (loss) per share  basic and diluted:Loss from continuing operations, net of income taxes
    
    $
    (0.14
    )Income from discontinued operations, net of income taxes
    
    
    0.01Net income (loss) applicable to common stockholders
    
    $
    (0.13
    )
   21




---



##### 



Year Ended December 31,2009Basic and diluted EPS denominator:Weighted-average outstanding common
shares
    
    
    77,693
  Outstanding at December 31,2009Series A convertible preferred stock (as converted  see Note 13)
    
    
    21,053Common stock options
    
    
    8,083Common stock warrants
    
    
    1,413Unvested restricted stock
    
    
    569Total
    
    
    31,118
 (10) Comprehensive Loss
  Year Ended December 31,2009Net loss
    
    $
    (6,052
    )Foreign currency translation adjustment
    
    
    91Comprehensive loss
    
    $
    (5,961
    )
 (11) Stock-Based Compensation
 2007 Incentive Award Plan
    22




---



##### 



Stock-based Compensation Expense
  Year Ended December 31,2009Cost of services
    
    $
    252Operating expenses
    
    
    1,929Total stock-based compensation expense
    
    $
    2,181
  Forfeiture rates2009Executive and senior management group
    
    
    5
    %Staff group
    
    
    8
    %
   Valuation Assumptions
  Year Ended December 31,2009Dividend yield
    
    
    0
    %Volatility (a)
    
    63% to 70%Average expected option life (b)
    
    5.0 yearsRisk-free interest rate (c)
    
    2.1% to 2.8%
 (a)
    
    Measured using weekly price observations for a period equal to the stock options
expected term.(b)
    
    Determined by the historical stock option exercise behavior of the Companys
employees.(c)
    
    Based upon the U.S. Treasury yield curve in effect at the end of the
quarter that the options were granted (for a period equaling the stock options
expected term).  23




---



##### 



multiplied
 Stock Option Activity
  Weighted-Weighted-
    
    
    AverageAverage
    
    
    Remaining
    
    
    AggregateNumber of
    
    
    Exercise
    
    
    Contractual
    
    
    IntrinsicShares
    
    
    Price
    
    
    Term
    
    
    Value*Outstanding at December 31, 2008
    
    
    6,332
    
    
    $
    1.55Options granted**
    
    
    2,575
    
    
    
    2.00Options exercised
    
    
    (382
    )
    
    
    1.43Options forfeited and cancelled
    
    
    (442
    )
    
    
    2.19Outstanding at December 31, 2009
    
    
    8,083
    
    
    $
    1.67
    
    
    6.21 years
    
    $
    8,253Options vested and expected to vest at December 31, 2009
    
    
    7,844
    
    
    $
    1.66
    
    
    6.15 years
    
    $
    8,086Options exercisable (fully vested) at December 31, 2009
    
    
    4,571
    
    
    $
    1.42
    
    
    4.38  years
    
    $
    5,672
 *
    
    Represents the total differencebetween the Companys closing stock price on the last
trading day of 2009 and the stock option exercise price, multipliedby the number of in-the-money options as of
December 31, 2009.
The amount of intrinsic value will change based on the fair market value of the Companys
stock.**
    
    Amount includes 0.6 million stock option grants issued outside of the 2007 Plan in
connection with the acquisition of AGI (see Note 15). As part of the terms of the
acquisition, the Company was obligated to exchange all outstanding AGI stock options to
Company stock options in accordance with a contractual exchange rate and exercise price,
resulting in the issuance of 0.6 million options with an exercise price of $0.40 per share. Year Ended December 31,2009Aggregate grant date fair value of options
    
    $
    2,048Weighted-average grant date fair value
    
    $1.22 per optionThe total intrinsic value of options exercised
(stock price at exercise minusexercise price)
    
    $
    927Cash received by the Company from option
exercises
    
    $
    548Tax benefit to the Company for tax deductions
from options exercised (see Note 14)
    
    $
    486
  24




---



##### 



Restricted Stock Award Activity
  Weighted AverageShares
    
    
    Grant Date Fair ValueUnvested at December 31, 2008
    
    
    218
    
    
    $
    2.36Granted
    
    
    477
    
    
    $
    4.03Released
    
    
    (126
    )
    
    
    Unvested at December 31, 2009
    
    
    569
    
    
    $
    3.73
 (12)
    
    Stock Transactions Acquisition of Applied Genomics, Inc.
  Stock Purchase Agreement with Oak Investment Partners XII, Limited Partnership
   less
  25




---



##### 



Sale by Safeguard Scientifics, Inc.
  Share Registration Obligations of the Company
  Stock Warrant Activity
  Weighted AverageShares
    
    
    Exercise PriceWarrants outstanding, December 31, 2008
    
    
    3,195
    
    
    $
    1.35Granted
    
    
    500
    
    
    $
    1.38Exercised
    
    
    (2,099
    )
    
    $
    1.37Canceled
    
    
    (183
    )
    
    $
    2.00Warrants outstanding, December 31, 2009
    
    
    1,413
    
    
    $
    1.26
   26




---



##### 



(13) Redeemable Preferred Stock
 less
      27




---



##### 



(14) Income Taxes
  Year Ended December 31,2009Provision for income taxes:Continuing operations
(exclusive of gain on sale from
ACIS Business)
    
    $
    Gain on sale from ACIS Business
    
    
    (599
    )Total income
tax benefit
    
    $
    (599
    )
  December 31,2009Deferred tax assets:Current:Accrued vacation
    
    $
    434Contractual allowances
    
    
    953Allowance for doubtful accounts
    
    
    3,485Other
    
    
    54Gross current deferred tax assets
    
    
    4,926Non-current:Net operating loss carryforward
    
    
    52,014Research and development and other tax credits
    
    
    62Depreciation
    
    
    384Intangible assets, net of amortization
    
    
    Deferred rent
    
    
    612Landlord reimbursements
    
    
    780Stock-based compensation
    
    
    1,384Other
    
    
    62Gross non-current deferred tax assets
    
    
    55,298Total gross deferred tax assets
    
    
    60,224Valuation allowance
    
    
    (55,423
    )Deferred tax assets, net of valuation allowance
    
    $
    4,801Deferred tax liability:Intangible assets, net of amortization
    
    $
    (4,801
    )Net deferred tax assets
    
    $
    
    28




---



##### 



Year Ended December 31,2009Loss from continuing operations before income taxes
    
    $
    (7,552
    )Statutory federal income tax rate
    
    
    34
    %Computed expected federal tax income benefit
    
    
    (2,568
    )Increase (decrease) in taxes resulting from:Nondeductible expenses
    
    
    559Change in valuation allowance
    
    
    2,009Benefit due to recognized tax expense on ACIS Sale
    
    
    (599
    )Income tax benefit from continuing
operations
    
    $
    (599
    )
   29




---



##### 



Gross Unrealized TaxBenefitsBalance at December 31, 2008
    
    $
    3,200Additions for tax positions (AGI research and development tax credits)
    
    
    359Decreases for tax positions
    
    
    Balance at December 31, 2009
    
    $
    3,559
   (15) Business Combination
 AGI Acquisition Overview
   30




---



##### 



multiplied less
    Variable Shares valueDecember 31, 2008
    
    $
    Issuance of Variable Shares
    
    
    2,650Realized/unrealized gains or losses
    
    
    December 31, 2009
    
    $
    2,650
 Direct Costs of the AGI Acquisition
   31




---



##### 



AGI Purchase Price Allocation
  Cash
    
    $
    5Prepaid expenses
    
    
    21Identifiable intangible assets
    
    
    11,684Accounts payable and other current liabilities
    
    
    (68
    )Total identifiable net assets
    
    
    11,642Goodwill
    
    
    3,959Total purchase price allocation
    
    $
    15,601
  ConsolidatedEstimated
    
    
    
    
    
    
    Statement ofUseful Life
    
    
    Estimated Annual
    
    
    OperationsIdentified Intangible Assets
    
    Fair Value
    
    
    (years)
    
    
    Amortization Expense
    
    
    ClassificationBiomarkers (a)
    
    $
    11,349
    
    
    
    7
    
    
    $
    1,621
    
    
    Cost of servicesIn-process research and development (a)
    
    
    76
    
    
    
    7
    
    
    
    11
    
    
    Research and developmentIssued patents (b)
    
    
    26
    
    
    
    7
    
    
    
    4
    
    
    Cost of servicesPatent applications(b)
    
    
    123
    
    
    
    7
    
    
    
    18
    
    
    Cost of servicesNon-competition agreements (c)
    
    
    110
    
    
    
    3
    
    
    
    37
    
    
    Research and developmentTotal
    
    $
    11,684
    
    
    
    
    
    
    $
    1,691
 (a)
    
    To estimate fair value of biomarkers, the Company used the income approach which is a
valuation technique that converts the estimated commercialization probability and future
expected net cash flows to be derived from these assets into a single, present-valued
amount.(b)
    
    To estimate fair value of issued patents and patent applications, the Company used the
cost approach which determines the fair value in terms of cost (i.e. current cash
expenditures) required to recreate or develop the underlying intangible assets.(c)
    
    To estimate fair value, the Company determined the cash flows that are protected by
the non-competition agreements using a variant of the income approach, called the
postulated loss of income approach. In applying this approach, the Companys cash flows
were forecasted in two separate scenarios: one with and one without the presence of the
non-competition agreements. The difference in cash flows, at present value, represents the
benefit of the non-competition agreements. Goodwill
 minus
  32




---



##### 



Pro Forma Financial Information
  Year Ended December 31,(unaudited)2009Net revenue
    
    $
    91,599Net loss
    
    
    (7,676
    )Net loss applicable to common stockholders
    
    
    (11,966
    )Net loss per share applicable to common stockholders  basic and diluted
    
    $
    (0.14
    )Weighted average shares  basic and diluted
    
    
    81,671
 (16) Quarterly Financial Results (unaudited)
 Quarterly Results of Operations
(in thousands except for per share information)
 Income (Loss)
    
    
    Income
    
    
    
    
    
    
    
    
    
    
    NetFrom
    
    
    From
    
    
    
    
    
    
    Net Loss
    
    
    Loss per ShareContinuing
    
    
    Discontinued
    
    
    
    
    
    
    Applicable to
    
    
    Applicable toNet
    
    
    Gross
    
    
    Operations,
    
    
    Operations. Net of
    
    
    Net Income
    
    
    Common
    
    
    CommonRevenue
    
    
    Profit
    
    
    Net of Tax
    
    
    Tax
    
    
    (Loss)
    
    
    Stockholders
    
    
    StockholdersThree Months Ended:December 31, 2009
    
    $
    23,252
    
    
    $
    12,820
    
    
    $
    (2,690
    )
    
    $
    
    
    
    $
    (2,690
    )
    
    
    (2,690
    )
    
    $
    (0.03
    )September 30, 2009
    
    
    21,425
    
    
    
    11,629
    
    
    
    (3,235
    )
    
    
    
    
    
    
    (3,235
    )
    
    
    (3,235
    )
    
    
    (0.04
    )June 30, 2009
    
    
    23,730
    
    
    
    13,808
    
    
    
    29
    
    
    
    
    
    
    
    29
    
    
    
    (4,261
    )
    
    
    (0.06
    )March 31, 2009 (a)
    
    
    23,192
    
    
    
    14,235
    
    
    
    (1,057
    )
    
    
    901
    
    
    
    (156
    )
    
    
    (156
    )
    
    
    (0.00
    )
 (a)
    
    Presented amounts are inclusive of certain adjustments, as discussed in Note
18, and summarized in the below table:  33




---



##### 



Three Months EndedMarch 31, 2009Previously
    
    
    AsReported
    
    
    AdjustedCondensed Consolidated Statements of Operations:Income tax benefit
    
    $
    
    
    
    $
    599Loss from continuing operations
    
    
    (2,321
    )
    
    
    (1,057
    )Income from discontinued operations, net of income taxes
    
    
    1,500
    
    
    
    901Net income (loss) per share applicable to common
stockholders  basic and diluted:Loss from continuing operations
    
    $
    (0.03
    )
    
    $
    (0.02
    )Income from discontinued operations
    
    
    0.02
    
    
    
    0.01
 (17)
    
    Commitments and Contingencies Significant Operating Leases
  Corporate Headquarters and Diagnostic Services Laboratory:
  Research and Development and Biopharmaceutical Services Centers:
  2010
    
    $
    1,7842011
    
    
    1,8242012
    
    
    1,8472013
    
    
    1,8032014
    
    
    1,726Thereafter
    
    
    1,542$
    10,526
 Legal Proceedings
   34




---



##### 



(18) Corrections of Immaterial Presentation Error in Prior Period
    Year EndedDecember 31, 2007Previously
    
    
    AsReported
    
    
    AdjustedCondensed Consolidated Statements of Operations:Income tax (expense) benefit
    
    $
    (23
    )
    
    $
    2,088Loss from continuing operations, net of income taxes
    
    
    (14,169
    )
    
    
    (12,058
    )Income from discontinued operations, net of income taxes
    
    
    5,412
    
    
    
    3,301Net income (loss) per share applicable to common
stockholders  basic and diluted:Loss from continuing operations
    
    $
    (0.20
    )
    
    $
    (0.17
    )Income from discontinued operations
    
    
    0.08
    
    
    
    0.05
   35




---



##### 



(19)
    
    Subsequent Event (unaudited)
 Acquisition of the Company by General Electric