##### 



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2007
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
 For
the transition period from to
 Commission file number: 000-51865
 Visicu, Inc.
  Delaware
    
    52-2107238(State or other jurisdiction 
of incorporation or organization)
    
    (I.R.S. Employer Identification No.)
 217 East Redwood Street, Suite 1900
Baltimore, Maryland 21202-3315
 (410) 276-1960
  þ o
  o o þ
 o þ
  Class
    
    Outstanding Shares at August 1, 2007Common Stock, $.0001 par value per share
    
    33,070,936 shares




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##### 



VISICU, INC.
 INDEX
 PagePART I 
    
    FINANCIAL INFORMATIONItem 1.
    
    Financial Statements
    
    3Balance Sheets  as of June 30, 2007 (unaudited) and December 31, 2006
    
    3Statements of Operations  Three and Six Months Ended June 30, 2007 and 2006 (unaudited)
    
    4Statements of Cash Flows  Six Months Ended June 30, 2007 and 2006 (unaudited)
    
    5Notes to Financial Statements (unaudited)
    
    6Item 2.
    
    Management's Discussion and Analysis of Financial Condition and Results of Operations
    
    8Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    16Item 4.
    
    Controls and Procedures
    
    16PART II 
    
    OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    16Item 1A.
    
    Risk Factors
    
    17Item 6.
    
    Exhibits
    
    17Signatures
    
    18
 -2-




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##### 



PART I  FINANCIAL INFORMATION
 Item 1. Financial Statements
 VISICU, INC.
BALANCE SHEETS
 December 31,
    
    
    June 30,2006
    
    
    2007(Unaudited)AssetsCurrent assets:Cash and cash equivalents
    
    $
    74,188
    
    
    $
    102,873Marketable securities
    
    
    46,047
    
    
    
    26,900Accounts receivable
    
    
    11,465
    
    
    
    5,789Prepaid expenses and other current assets
    
    
    1,686
    
    
    
    1,182Deferred tax assets
    
    
    7,915
    
    
    
    6,644Total current assets
    
    
    141,301
    
    
    
    143,388Property and equipment:Computer equipment and software
    
    
    2,496
    
    
    
    2,814Office furniture and equipment
    
    
    362
    
    
    
    372Leasehold improvements
    
    
    182
    
    
    
    2083,040
    
    
    
    3,394Accumulated depreciation
    
    
    1,409
    
    
    
    1,8331,631
    
    
    
    1,561Deferred contract costs
    
    
    4,477
    
    
    
    4,406Deferred tax assets
    
    
    6,140
    
    
    
    6,073Marketable securities
    
    
    2,960
    
    
    
    Other assets
    
    
    503
    
    
    
    438Total assets
    
    $
    157,012
    
    
    $
    155,866Liabilities and stockholders equityCurrent liabilities:Accounts payable and accrued expenses
    
    $
    1,244
    
    
    $
    849Accrued compensation and related costs
    
    
    1,581
    
    
    
    1,374Deferred revenue
    
    
    30,290
    
    
    
    26,616Other current liabilities
    
    
    27
    
    
    
    27Total current liabilities
    
    
    33,142
    
    
    
    28,866Other long-term liabilities
    
    
    468
    
    
    
    369Deferred revenue
    
    
    19,074
    
    
    
    14,944Total liabilities
    
    
    52,684
    
    
    
    44,179Stockholders equity:Preferred Stock, $.0001 par value;
10,000,000 shares authorized; no shares
issued and outstanding at December 31,
2006 and June 30, 2007
    
    
    
    
    
    
    Common stock, $.0001 par value,
100,000,000 shares authorized;
32,485,185 and 33,055,677 issued and
outstanding at December 31, 2006 and
June 30, 2007, respectively
    
    
    3
    
    
    
    3Additional paid-in capital
    
    
    133,202
    
    
    
    136,519Accumulated deficit
    
    
    (28,877
    )
    
    
    (24,835
    )Total stockholders equity
    
    
    104,328
    
    
    
    111,687Total liabilities and stockholders equity
    
    $
    157,012
    
    
    $
    155,866
 See accompanying notes to financial statements.
 -3-




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##### 



VISICU, INC.
STATEMENTS OF OPERATIONS
 Three Months Ended June 30,
    
    
    Six Months Ended June 30,2006
    
    
    2007
    
    
    2006
    
    
    2007Revenues:License revenue
    
    $
    3,384
    
    
    $
    4,085
    
    
    $
    6,402
    
    
    $
    8,036Service revenue
    
    
    4,145
    
    
    
    4,969
    
    
    
    7,796
    
    
    
    9,758Total revenues
    
    
    7,529
    
    
    
    9,054
    
    
    
    14,198
    
    
    
    17,794Direct cost of revenues:Cost of licenses
    
    
    228
    
    
    
    297
    
    
    
    399
    
    
    
    578Cost of services (1)
    
    
    1,210
    
    
    
    1,420
    
    
    
    2,442
    
    
    
    2,785Total direct cost of revenues
    
    
    1,438
    
    
    
    1,717
    
    
    
    2,841
    
    
    
    3,363Gross profit
    
    
    6,091
    
    
    
    7,337
    
    
    
    11,357
    
    
    
    14,431Operating expenses:Sales and marketing (1)
    
    
    1,143
    
    
    
    1,207
    
    
    
    2,448
    
    
    
    2,471Research and development (1)
    
    
    1,442
    
    
    
    1,578
    
    
    
    2,839
    
    
    
    3,113General and administrative (1)
    
    
    2,390
    
    
    
    2,816
    
    
    
    4,502
    
    
    
    5,699Total operating expenses
    
    
    4,975
    
    
    
    5,601
    
    
    
    9,789
    
    
    
    11,283Income from operations
    
    
    1,116
    
    
    
    1,736
    
    
    
    1,568
    
    
    
    3,148Other income (expense):Interest income
    
    
    1,185
    
    
    
    1,667
    
    
    
    1,325
    
    
    
    3,299Interest expense
    
    
    (2
    )
    
    
    (1
    )
    
    
    (4
    )
    
    
    (7
    )1,183
    
    
    
    1,666
    
    
    
    1,321
    
    
    
    3,292Income before income taxes
    
    
    2,299
    
    
    
    3,402
    
    
    
    2,889
    
    
    
    6,440Income tax expense
    
    
    1,056
    
    
    
    1,271
    
    
    
    1,332
    
    
    
    2,336Net income
    
    $
    1,243
    
    
    $
    2,131
    
    
    $
    1,557
    
    
    $
    4,104Net income per share:Basic
    
    $
    0.04
    
    
    $
    0.07
    
    
    $
    0.09
    
    
    $
    0.13Diluted
    
    $
    0.04
    
    
    $
    0.06
    
    
    $
    0.05
    
    
    $
    0.12Weighted-average shares outstanding used in computing per share amounts:Basic
    
    
    29,080
    
    
    
    32,516
    
    
    
    17,305
    
    
    
    32,502Diluted
    
    
    33,844
    
    
    
    34,391
    
    
    
    30,799
    
    
    
    34,541(1) Amounts include non-cash stock-based compensation expense as follows:Cost of services
    
    $
    45
    
    
    $
    16
    
    
    $
    80
    
    
    $
    82Sales and marketing expense
    
    
    143
    
    
    
    105
    
    
    
    270
    
    
    
    198Research and development expense
    
    
    136
    
    
    
    147
    
    
    
    254
    
    
    
    282General and administrative expense
    
    
    334
    
    
    
    473
    
    
    
    625
    
    
    
    864Total non-cash stock-based compensation expense
    
    $
    658
    
    
    $
    741
    
    
    $
    1,229
    
    
    $
    1,426
 See accompanying notes to financial statements.
 -4-




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##### 



VISICU, INC.
STATEMENTS OF CASH FLOWS
 Six Months Ended June 30,2006
    
    
    2007Operating activitiesNet income
    
    $
    1,557
    
    
    $
    4,104Adjustments to reconcile net income to net cash provided by operating activities:Depreciation
    
    
    415
    
    
    
    424Amortization
    
    
    66
    
    
    
    144Deferred income taxes
    
    
    739
    
    
    
    1,338Non-cash stock-based compensation expense
    
    
    1,229
    
    
    
    1,426Excess tax benefit from stock-based compensation
    
    
    (113
    )
    
    
    (1,453
    )Changes in operating assets and liabilities:Accounts receivable
    
    
    1,837
    
    
    
    5,682Prepaid expenses and other current assets
    
    
    (199
    )
    
    
    504Deferred contract costs
    
    
    (199
    )
    
    
    71Accounts payable and accrued expenses
    
    
    127
    
    
    
    797Accrued compensation and related costs
    
    
    (338
    )
    
    
    (207
    )Deferred revenue
    
    
    267
    
    
    
    (7,711
    )Net cash provided by operating activities
    
    
    5,388
    
    
    
    5,119Investing activitiesPurchases of property and equipment
    
    
    (245
    )
    
    
    (354
    )Purchases of marketable securities
    
    
    (46,308
    )
    
    
    (30,702
    )Maturities of marketable securities
    
    
    27,294
    
    
    
    52,809Capitalized software additions
    
    
    (23
    )
    
    
    (95
    )Change in other assets
    
    
    16
    
    
    
    (84
    )Net cash provided by (used in) investing activities
    
    
    (19,266
    )
    
    
    21,574Financing activitiesProceeds from issuance of common stock, net of issuance costs of $9.7 million in 2006
    
    
    100,720
    
    
    
    Repayment of obligations under capital lease
    
    
    (12
    )
    
    
    (12
    )Exercise of options to purchase common stock
    
    
    792
    
    
    
    551Excess tax benefit from stock-based compensation
    
    
    113
    
    
    
    1,453Net cash provided by financing activities
    
    
    101,613
    
    
    
    1,992Net increase in cash and cash equivalents
    
    
    87,735
    
    
    
    28,685Cash and cash equivalents at beginning of period
    
    
    11,379
    
    
    
    74,188Cash and cash equivalents at end of period
    
    $
    99,114
    
    
    $
    102,873
 See
accompanying notes to financial statements.
 -5-




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##### 



VISICU, INC.
NOTES TO FINANCIAL STATEMENTS
(unaudited)
 1. Basis of Presentation
    2. Marketable Securities
   3. Stock-Based Compensation
 Summary of Stock-Based Compensation Expense
  Summary of Stock Option Activity
  Weighted-Number of
    
    AverageOptions
    
    Exercise(in thousands)
    
    PriceOptions outstanding at beginning of year
    
    
    3,438
    
    
    $
    2.25Options granted
    
    
    1,181
    
    
    
    9.26Options exercised
    
    
    (570
    )
    
    
    0.97Options forfeited
    
    
    (267
    )
    
    
    4.64Options outstanding at June 30, 2007
    
    
    3,782
    
    
    $
    4.46Vested and expected to vest at June 30, 2007
    
    
    3,782
    
    
    $
    4.46Exercisable at June 30, 2007
    
    
    1,763
    
    
    $
    1.58
  -6-




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##### 



Restricted Common Stock
  Number of
    
    Weighted-Averageshares
    
    Grant-Date(in thousands)
    
    Fair ValueRestricted common stock at beginning of year
    
    
    211
    
    
    $
    5.19Vested
    
    
    (43
    )
    
    $
    4.96Restricted common stock at June 30, 2007
    
    
    168
    
    
    $
    5.25
 4. Net Income Per Share
  Three Months Ended June 30,
    
    
    Six Months Ended June 30,2006
    
    
    2007
    
    
    2006
    
    
    2007NumeratorBasic and diluted:Net income
    
    $
    1,243
    
    
    $
    2,131
    
    
    $
    1,557
    
    
    $
    4,104DenominatorBasic:Weighted-average shares outstanding
    
    
    29,080
    
    
    
    32,516
    
    
    
    17,305
    
    
    
    32,502Diluted:Weighted-average shares outstanding
    
    
    29,080
    
    
    
    32,516
    
    
    
    17,305
    
    
    
    32,502Dilutive effect of:Stock options
    
    
    2,657
    
    
    
    1,875
    
    
    
    2,748
    
    
    
    2,039Assumed conversion of preferred stock
    
    
    2,107
    
    
    
    
    
    
    
    10,746
    
    
    
    Total
    
    
    33,844
    
    
    
    34,391
    
    
    
    30,799
    
    
    
    34,541Net income per shareBasic
    
    $
    0.04
    
    
    $
    0.07
    
    
    $
    0.09
    
    
    $
    0.13Diluted
    
    $
    0.04
    
    
    $
    0.06
    
    
    $
    0.05
    
    
    $
    0.12
 5. Income Taxes
 Accounting for Uncertainty in Income Taxes,
   -7-




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##### 



6. Concentrations of Credit Risk
   7. Contingencies
  Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
  Overview
     Sources of Revenue
  -8-




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##### 



Direct Cost of Revenues
  
    
    salaries, benefits and stock-based compensation for personnel to provide professional and support services to customers;
    
    cost of customer-related services provided by subcontractors;
    
    billable and non-billable travel, lodging and other out-of -pocket customer-related expenses; and
    
    license fees for third-party software used to enhance our program.
  Operating Expenses
 Sales and Marketing.
 
    
    salaries, benefits and stock-based compensation related to sales and marketing personnel;
    
    commissions;
    
    travel, lodging and other out-of -pocket expenses; and
    
    marketing programs such as trade shows and advertising campaigns.
 -9-




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##### 



Research and Development.
 General and Administrative.
 
    
    salaries, benefits and stock-based compensation related to general and administrative personnel;
    
    professional fees; and
    
    facilities and other related overhead.
  Legal and Regulatory Proceedings
  Critical Accounting Policies
   Revenue Recognition
 Software Revenue Recognition
  -10-




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##### 



Allowance for Doubtful Accounts
   Deferred Contract Costs
  Software Development Costs
 Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed.
  Stock-Based Compensation
 Accounting for Stock Issued to Employees. Accounting for Stock-Based Compensation, Accounting for Stock-Based Compensation-Transition and Disclosure.
 Share-Based Payment,
  -11-




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##### 



Income Taxes
    Accounting for Uncertainty in Income Taxes,
 Results of Operations
  Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2006
    
    2007
    
    2006
    
    2007Revenues:License revenue
    
    
    45
    %
    
    
    45
    %
    
    
    45
    %
    
    
    45
    %Service revenue
    
    
    55
    
    
    
    55
    
    
    
    55
    
    
    
    55Total revenues
    
    
    100
    
    
    
    100
    
    
    
    100
    
    
    
    100Direct cost of revenues:Cost of licenses
    
    
    3
    
    
    
    3
    
    
    
    3
    
    
    
    3Cost of services
    
    
    16
    
    
    
    16
    
    
    
    17
    
    
    
    16Total direct cost of revenues
    
    
    19
    
    
    
    19
    
    
    
    20
    
    
    
    19Gross profit
    
    
    81
    
    
    
    81
    
    
    
    80
    
    
    
    81Operating expenses:Sales and marketing
    
    
    15
    
    
    
    13
    
    
    
    17
    
    
    
    14Research and development
    
    
    19
    
    
    
    17
    
    
    
    20
    
    
    
    17General and administrative
    
    
    32
    
    
    
    31
    
    
    
    32
    
    
    
    32Total operating expenses
    
    
    66
    
    
    
    62
    
    
    
    69
    
    
    
    63Income from operations
    
    
    15
    
    
    
    19
    
    
    
    11
    
    
    
    18Other income:Total other income
    
    
    16
    
    
    
    18
    
    
    
    9
    
    
    
    19Income before income taxes
    
    
    31
    
    
    
    38
    
    
    
    20
    
    
    
    36Income tax expense
    
    
    14
    
    
    
    14
    
    
    
    9
    
    
    
    13Net income
    
    
    17
    %
    
    
    24
    %
    
    
    11
    %
    
    
    23
    %
 -12-




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##### 



Three Months Ended June 30, 2007 and 2006
 Revenues.
      Direct Cost of Revenues.
  Gross Profit.
 Sales and Marketing Expense.
 Research and Development Expense.
 General and Administrative Expense.
 Other Income.
 -13-




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##### 



Income Taxes.
 Six Months Ended June 30, 2007 and 2006
 Revenues.
      Direct Cost of Revenues.
  Gross Profit.
 Sales and Marketing Expense.
 Research and Development Expense.
 General and Administrative Expense.
 -14-




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##### 



Other Income.
 Income Taxes.
 Liquidity and Capital Resources
      Forward-looking Statements
  
    
    market acceptance of our principal product offering and any new product releases;
    
    the price, performance and reliability of our products and services;
    
    our ability to attract and retain new customers and renewal rates of our existing customers;
    
    unanticipated delays or problems in releasing new products and services;
    
    financial and budget constraints of hospitals, changes in our pricing practices or our
competitors pricing practices and changes in the healthcare industry;
    
    the introduction or availability of competing products or services and other competitive factors;
    
    changes in the government regulation of our products and services;
    
    the loss of intellectual property protection;
    
    the loss of key management personnel; and
    
    the possibility of unfavorable outcomes in regulatory and legal proceedings.
 -15-




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##### 



Item 3. Quantitative and Qualitative Disclosures About Market Risk.
  Item 4. Controls and Procedures.
    PART II  OTHER INFORMATION
 Item 1. Legal Proceedings.
    -16-




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##### 



ex parte
    Item 1A. Risk Factors.
  Item 6. Exhibits.
 ExhibitNo.
    
    Exhibit Title3.1 *
    
    Fourth Amended and Restated Certificate of Incorporation of the Company3.2 *
    
    Amended and Restated Bylaws of the Company4.1 *
    
    Specimen Common Stock Certificate10.1 * 
    
    Visicu, Inc. Equity Incentive Plan10.2 ** 
    
    Form of Incentive Stock Option Agreement under the Visicu, Inc. Equity Incentive Plan10.3 ** 
    
    Form of Nonstatutory Stock Option Grant Agreement under the Visicu, Inc. Equity Incentive Plan10.4 ** 
    
    Employment Agreement between Visicu, Inc. and Frank T. Sample dated as of September 17, 2001, as amended on April 15, 200410.5 ** 
    
    Form of Indemnification Agreement for directors and Section 16 executive officers10.6 **
    
    Lease between Redwood Tower Limited Partnership and Visicu, Inc. dated as of June 22, 200410.7 **
    
    Warrant dated July 17, 2003 to Comerica Bank to purchase 43,796 shares of Series C Preferred Stock10.8 ** 
    
    Offer Letter to Vincent E. Estrada, dated as of August 8, 200510.9 ** 
    
    Management Severance Plan10.10 ***
    
    Assignment Pursuant to 37 CFR §3.56, dated April 14, 2000, executed by Brian A. Rosenfeld, M.D. and Michael Breslow31.1
    
    Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act31.2
    
    Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act32.1
    
    Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 135032.2
    
    Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350
 
 *
    
    Incorporated herein by reference to the Registration Statement on Form S-1/A,
File No. 333-129989, filed on March 13, 2006.**
    
    Incorporated herein by reference to the Registration Statement on Form S-1, File
No. 333-129989, filed on November 29, 2005.***
    
    Incorporated herein by reference to the Registration Statement on Form S-1/A,
File No. 333-129989, filed on January 19, 2006.
    
    Indicates a management contract or any compensatory plan, contract or arrangement. -17-




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##### 



SIGNATURES
  VISICU, INC.Date: August 6, 2007
    By:
    /s/ Frank T. SampleFrank T. SamplePresident, Chief Executive Officer and
Chairman of the Board of DirectorsDate: August 6, 2007
    By:
    /s/ Vincent E. EstradaVincent E. EstradaSenior Vice President and
Chief Financial Officer


-18-