##### 



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, 2006
 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
    
    (I.R.S. Employer Identification No.)of incorporation or organization)
 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, 2006Common Stock, $.0001 par value per share
    
    32,246,623 shares




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##### 



VISICU, INC.
Quarterly Report on Form 10-Q for the three and six month period ended June 30, 2006
 INDEX
 PagePART I 
    
    FINANCIAL INFORMATIONItem 1.
    
    Financial Statements
    
    
    3Balance Sheets as of June 30, 2006 (unaudited) and December 31, 2005
    
    
    3Statements of Operations Three and Six Months Ended June 30, 2006 and 2005 (unaudited)
    
    
    4Statements of Stockholders Equity (Deficit) Six Months Ended June 30, 2006 (unaudited)
    
    
    5Statements of Cash Flows Six Months Ended June 30, 2006 and 2005 (unaudited)
    
    
    6Notes to Financial Statements (unaudited)
    
    
    7Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    12Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    20Item 4.
    
    Controls and Procedures
    
    
    20PART II 
    
    OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    21Item 1A.
    
    Risk Factors
    
    
    22Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    36Item 6.
    
    Exhibits
    
    
    37Signatures
 - 2 -




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##### 



PART I  FINANCIAL INFORMATION
 Item 1. Financial Statements
 VISICU, INC.
BALANCE SHEETS
 December 31,
    
    
    June 30,2005
    
    
    2006(Unaudited)AssetsCurrent assets:Cash and cash equivalents
    
    $
    11,379
    
    
    $
    99,114Marketable securities
    
    
    
    
    
    
    19,014Accounts receivable
    
    
    8,971
    
    
    
    7,139Prepaid expenses and other current assets
    
    
    527
    
    
    
    726Deferred tax assets
    
    
    9,300
    
    
    
    8,561Total current assets
    
    
    30,177
    
    
    
    134,554Property and equipment:Computer equipment and software
    
    
    2,667
    
    
    
    2,906Office furniture and equipment
    
    
    327
    
    
    
    328Leasehold improvements
    
    
    104
    
    
    
    1093,098
    
    
    
    3,343Accumulated depreciation
    
    
    1,318
    
    
    
    1,7331,780
    
    
    
    1,610Deferred contract costs
    
    
    4,538
    
    
    
    4,737Deferred tax assets
    
    
    6,604
    
    
    
    6,604Other assets
    
    
    1,601
    
    
    
    538Total assets
    
    $
    44,700
    
    
    $
    148,043Liabilities and stockholders equity (deficit)Current liabilities:Accounts payable and accrued expenses
    
    $
    1,950
    
    
    $
    1,198Accrued compensation and related costs
    
    
    1,478
    
    
    
    1,140Deferred revenue
    
    
    23,516
    
    
    
    26,051Other current liabilities
    
    
    25
    
    
    
    26Total current liabilities
    
    
    26,969
    
    
    
    28,415Other long-term liabilities
    
    
    575
    
    
    
    601Deferred revenue
    
    
    24,097
    
    
    
    21,746Total liabilities
    
    
    51,641
    
    
    
    50,762Stockholders equity (deficit):Series A Preferred Stock, $.0001 par value;
3,500,000 shares authorized; 3,375,000 shares issued
and outstanding at December 31, 2005
    
    
    
    
    
    
    Series B Preferred Stock, $.0001 par value;
11,500,000 shares authorized; 11,016,057 shares
issued and outstanding at December 31, 2005
    
    
    1
    
    
    
    Series C Preferred Stock, $.0001 par value and
related warrants to purchase 43,796 shares of Series
C Preferred Stock; 15,000,000 shares authorized;
4,994,228 shares issued and outstanding at December
31, 2005
    
    
    1
    
    
    
    Common stock, $.0001 par value, 40,000,000 shares
authorized; 4,537,841 and 32,243,130 issued and
outstanding at December 31, 2005 and June 30, 2006,
respectively
    
    
    
    
    
    
    3Additional paid-in capital
    
    
    32,905
    
    
    
    130,620Unearned stock-based compensation
    
    
    (4,949
    )
    
    
    Accumulated deficit
    
    
    (34,899
    )
    
    
    (33,342
    )Total stockholders equity (deficit)
    
    
    (6,941
    )
    
    
    97,281Total liabilities and stockholders equity (deficit)
    
    $
    44,700
    
    
    $
    148,043
 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 30,2005
    
    2006
    
    2005
    
    2006Revenues:License revenue
    
    $
    1,860
    
    
    $
    3,384
    
    
    $
    3,359
    
    
    $
    6,402Service revenue
    
    
    2,333
    
    
    
    4,145
    
    
    
    4,329
    
    
    
    7,796Total revenues
    
    
    4,193
    
    
    
    7,529
    
    
    
    7,688
    
    
    
    14,198Direct cost of revenues:Cost of licenses
    
    
    81
    
    
    
    228
    
    
    
    142
    
    
    
    399Cost of services (1)
    
    
    796
    
    
    
    1,210
    
    
    
    1,490
    
    
    
    2,442Total direct cost of revenues
    
    
    877
    
    
    
    1,438
    
    
    
    1,632
    
    
    
    2,841Gross profit
    
    
    3,316
    
    
    
    6,091
    
    
    
    6,056
    
    
    
    11,357Operating expenses:Sales and marketing (1)
    
    
    966
    
    
    
    1,143
    
    
    
    1,972
    
    
    
    2,448Research and development (1)
    
    
    1,362
    
    
    
    1,442
    
    
    
    2,647
    
    
    
    2,839General and administrative (1)
    
    
    1,562
    
    
    
    2,390
    
    
    
    3,069
    
    
    
    4,502Total operating expenses
    
    
    3,890
    
    
    
    4,975
    
    
    
    7,688
    
    
    
    9,789Income (loss) from operations
    
    
    (574
    )
    
    
    1,116
    
    
    
    (1,632
    )
    
    
    1,568Other income (expense):Interest income
    
    
    75
    
    
    
    1,185
    
    
    
    118
    
    
    
    1,325Interest expense
    
    
    (4
    )
    
    
    (2
    )
    
    
    (8
    )
    
    
    (4
    )71
    
    
    
    1,183
    
    
    
    110
    
    
    
    1,321Income (loss) before income taxes
    
    
    (503
    )
    
    
    2,299
    
    
    
    (1,522
    )
    
    
    2,889Income tax expense
    
    
    1
    
    
    
    1,056
    
    
    
    2
    
    
    
    1,332Net income (loss)
    
    
    (504
    )
    
    
    1,243
    
    
    
    (1,524
    )
    
    
    1,557Accretion of preferred stock
    
    
    
    
    
    
    
    
    
    
    (354
    )
    
    
    Net income (loss) attributable to common stockholders
    
    $
    (504
    )
    
    $
    1,243
    
    
    $
    (1,878
    )
    
    $
    1,557Net income (loss) loss attributable to common stockholders per share:Basic
    
    $
    (0.15
    )
    
    $
    0.04
    
    
    $
    (0.54
    )
    
    $
    0.09Diluted
    
    $
    (0.15
    )
    
    $
    0.04
    
    
    $
    (0.54
    )
    
    $
    0.05Weighted-average shares outstanding used in computing per share amounts:Basic
    
    
    3,474
    
    
    
    29,080
    
    
    
    3,452
    
    
    
    17,305Diluted
    
    
    3,474
    
    
    
    33,844
    
    
    
    3,452
    
    
    
    30,799(1)  Amounts include non-cash stock-based compensation expense as follows:Cost of services
    
    $
    11
    
    
    $
    45
    
    
    $
    14
    
    
    $
    80Sales and marketing expense
    
    
    62
    
    
    
    143
    
    
    
    103
    
    
    
    270Research and development expense
    
    
    39
    
    
    
    136
    
    
    
    91
    
    
    
    254General and administrative expense
    
    
    66
    
    
    
    334
    
    
    
    93
    
    
    
    625Total non-cash stock-based compensation expense
    
    $
    178
    
    
    $
    658
    
    
    $
    301
    
    
    $
    1,229
 See accompanying notes to financial statements.
 - 4 -




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##### 



STATEMENT OF STOCKHOLDERS EQUITY (DEFICIT)
 Additional
    
    Unearned
    
    
    
    
    
    TotalPreferred Stock
    Common Stock
    
    Paid-In
    
    Stock-Based
    
    Accumulated
    
    StockholdersShares
    
    Amount
    
    Shares
    
    Amount
    
    Capital
    
    Compensation
    
    Deficit
    
    Equity (Deficit)Balance at January 1,
2006
    
    
    19,385
    
    
    $
    2
    
    
    
    4,538
    
    
    $
    
    
    
    $
    32,905
    
    
    $
    (4,949
    )
    
    $
    (34,899
    )
    
    $
    (6,941
    )Non-employee stock-based
compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    198
    
    
    
    
    
    
    
    
    
    
    
    198Vesting of employee stock
options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,031
    
    
    
    
    
    
    
    
    
    
    
    1,031Vesting of restricted stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    141
    
    
    
    
    
    
    
    
    
    
    
    141Exercise of options for
common stock
    
    
    
    
    
    
    
    
    
    
    1,379
    
    
    
    
    
    
    
    612
    
    
    
    
    
    
    
    
    
    
    
    612Exercise of warrant for
common stock
    
    
    
    
    
    
    
    
    
    
    41
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Excess tax benefit from
exercise of options for
common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    113
    
    
    
    
    
    
    
    
    
    
    
    113Elimination of unearned

stock-based compensation
expense
 against additional
paid-in capital Upon
adoption of SFAS No. 123(R)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,949
    )
    
    
    4,949
    
    
    
    
    
    
    
    Issuance of common stock,
net of issuance costs of
$9,830
    
    
    
    
    
    
    
    
    
    
    6,900
    
    
    
    1
    
    
    
    100,569
    
    
    
    
    
    
    
    
    
    
    
    100,570Conversion of preferred
stock to common stock
    
    
    (19,385
    )
    
    
    (2
    )
    
    
    19,385
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,557
    
    
    
    1,557Balance at June 30, 2006
    
    
    
    
    
    $
    
    
    
    
    32,243
    
    
    $
    3
    
    
    $
    130,620
    
    
    $
    
    
    
    $
    (33,342
    )
    
    $
    97,281
 See accompanying notes to financial statements.
 - 5 -




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##### 



VISICU, INC.
STATEMENTS OF CASH FLOWS
 Six Months Ended June 30,2005
    
    2006Operating activitiesNet income (loss)
    
    $
    (1,524
    )
    
    $
    1,557Adjustments to reconcile net income (loss)
to net cash provided by operating activities:Depreciation
    
    
    311
    
    
    
    415Amortization
    
    
    58
    
    
    
    66Non-cash stock-based compensation expense
    
    
    301
    
    
    
    1,229Deferred income taxes
    
    
    
    
    
    
    626Changes in operating assets and liabilities:Accounts receivable
    
    
    1,841
    
    
    
    1,837Prepaid expenses and other current assets
    
    
    94
    
    
    
    (199
    )Deferred contract costs
    
    
    (249
    )
    
    
    (199
    )Accounts payable and accrued expenses
    
    
    (331
    )
    
    
    127Accrued compensation and related costs
    
    
    (467
    )
    
    
    (338
    )Deferred revenue
    
    
    5,566
    
    
    
    267Net cash provided by operating activities
    
    
    5,600
    
    
    
    5,388Investing activitiesPurchase of property and equipment
    
    
    (377
    )
    
    
    (245
    )Purchase of marketable securities
    
    
    
    
    
    
    (19,014
    )Capitalized software additions
    
    
    (51
    )
    
    
    (23
    )Change in other assets
    
    
    18
    
    
    
    16Net cash used in investing activities
    
    
    (410
    )
    
    
    (19,266
    )Financing activitiesProceeds from issuance of common stock, net of
issuance costs of $9,680
    
    
    
    
    
    
    100,720Repayment of obligations under capital lease
    
    
    (12
    )
    
    
    (12
    )Exercise of options to purchase common stock
    
    
    323
    
    
    
    792Excess tax benefit from stock-based compensation
    
    
    
    
    
    
    113Net cash provided by financing activities
    
    
    311
    
    
    
    101,613Net increase in cash and cash equivalents
    
    
    5,501
    
    
    
    87,735Cash and cash equivalents at beginning of period
    
    
    8,639
    
    
    
    11,379Cash and cash equivalents at end of period
    
    $
    14,140
    
    
    $
    99,114
 See accompanying notes to financial statements.
 - 6 -




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##### 



VISICU, INC.
NOTES TO FINANCIAL STATEMENTS
(unaudited)
 1. Basis of Presentation and Summary of Significant Accounting Policies
     2. Marketable Securities
   3. Stock-Based Compensation
      - 7 -




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##### 



Risk-free interest rate
    

    4.4%-5.0%Estimated option expected lives
    
    4 yearsVolatility
    

    64%Dividend rate
    

    0%Weighted-average fair value of grants
    

    $11.33
  Weighted-AverageWeighted-
    
    Remaining
    
    AggregateNumber of
    
    Average
    
    Contractual
    
    IntrinsicOptions
    
    Exercise
    
    Term
    
    Value(in thousands)
    
    Price
    
    (in years)
    
    (in thousands)Options outstanding at December 31, 2005
    
    
    4,463
    
    
    $
    0.84Options granted
    
    
    458
    
    
    
    6.66Options exercised
    
    
    (1,379
    )
    
    
    0.57Options forfeited
    
    
    (22
    )
    
    
    1.64Options outstanding at June 30, 2006
    
    
    3,520
    
    
    $
    1.69
    
    
    
    7.34
    
    
    $
    6,276Vested and expected to vest at June 30, 2006
    
    
    3,379
    
    
    $
    1.69
    
    
    
    7.34
    
    
    $
    6,025Exercisable at June 30, 2006
    
    
    1,817
    
    
    $
    0.72
    
    
    
    5.94
    
    
    $
    892
  - 8 -




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##### 



Number of
    
    Weighted-shares
    
    Average Grant(in thousands)
    
    Date Fair ValueNonvested at December 31, 2005
    
    
    250
    
    
    $
    5.00Granted
    
    
    100
    
    
    $
    4.87Vested
    
    
    (78
    )
    
    $
    3.74Forfeited
    
    
    
    
    
    $
    Nonvested at June 30, 2006
    
    
    272
    
    
    $
    5.31
   Three Months Ended
    
    
    Six Months EndedJune 30, 2005
    
    
    June 30, 2005Net loss attributable to common stockholders, as reported
    
    $
    (504
    )
    
    $
    (1,878
    )Add: Stock-based employee compensation expense included in the determination of
net loss as reported, net of income taxes
    
    
    140
    
    
    
    181Deduct: Pro forma stock-based employee compensation expense, net of income taxes
    
    
    194
    
    
    
    237Pro forma net loss attributable to common stockholders
    
    $
    (558
    )
    
    $
    (1,934
    )Net loss attributable to common stockholders per share:Basic  as reported
    
    $
    (0.15
    )
    
    $
    (0.54
    )Basic  pro forma
    
    $
    (0.16
    )
    
    $
    (0.56
    )Diluted  as reported
    
    $
    (0.15
    )
    
    $
    (0.54
    )Diluted  pro forma
    
    $
    (0.16
    )
    
    $
    (0.56
    )
    - 9 -




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##### 



4.
    
    Net Income (Loss) Attributable to Common Stockholders Per Share
   June 30,2005
    
    
    2006Options to purchase common stock
    
    
    4,694
    
    
    
    3,520Shares of common stock into which outstanding preferred would be convertible upon the
exercise of preferred stock warrants
    
    
    120
    
    
    
    Shares of common stock into which outstanding preferred stock is convertible
    
    
    19,335
    
    
    
    Total options, warrants, and preferred stock exercisable or convertible into common stock
    
    
    24,149
    
    
    
    3,520
   Three months
    
    
    Six monthsended
    
    
    endedJune 30, 2006
    
    
    June 30, 2006Weighted-average shares-basic
    
    
    29,080
    
    
    
    17,305Effect of options to purchase common stock
    
    
    2,657
    
    
    
    2,748Effect of assumed conversion of preferred stock
    
    
    2,107
    
    
    
    10,746Weighted-average shares-diluted
    
    
    33,844
    
    
    
    30,799
 5.
    
    Income Taxes
  6.
    
    Concentrations of Credit Risk
   - 10 -




---



##### 



7.
    
    Contingencies
  - 11 -




---



##### 



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
  Overview
     Sources of Revenues
    - 12 -




---



##### 



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.
  Research and Development.
 - 13 -




---



##### 



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
  - 14 -




---



##### 



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,
  - 15 -




---



##### 



Income Taxes
 Accounting for Income Taxes,
  Results of Operations
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2005
    
    
    2006
    
    
    2005
    
    
    2006Revenues:License revenue
    
    
    44
    %
    
    
    45
    %
    
    
    44
    %
    
    
    45
    %Service revenue
    
    
    56
    
    
    
    55
    
    
    
    56
    
    
    
    55Total revenues
    
    
    100
    
    
    
    100
    
    
    
    100
    
    
    
    100Direct cost of revenues:Cost of licenses
    
    
    2
    
    
    
    3
    
    
    
    2
    
    
    
    3Cost of services
    
    
    19
    
    
    
    16
    
    
    
    19
    
    
    
    17Total direct cost of revenues
    
    
    21
    
    
    
    19
    
    
    
    21
    
    
    
    20Gross profit
    
    
    79
    
    
    
    81
    
    
    
    79
    
    
    
    80Operating expenses:Sales and marketing
    
    
    23
    
    
    
    15
    
    
    
    26
    
    
    
    17Research and development
    
    
    32
    
    
    
    19
    
    
    
    34
    
    
    
    20General and administrative
    
    
    37
    
    
    
    32
    
    
    
    40
    
    
    
    32Total operating expenses
    
    
    93
    
    
    
    66
    
    
    
    100
    
    
    
    69Income (loss) from operations
    
    
    (14
    )
    
    
    15
    
    
    
    (21
    )
    
    
    11Other income:Total other income
    
    
    2
    
    
    
    16
    
    
    
    1
    
    
    
    9Income (loss) before income taxes
    
    
    (12
    )
    
    
    31
    
    
    
    (20
    )
    
    
    20Income tax expense
    
    
    
    
    
    
    14
    
    
    
    
    
    
    
    9Net income (loss)
    
    
    (12
    )%
    
    
    17
    %
    
    
    (20)
    %
    
    
    11
    %
 - 16 -




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Three Months Ended June 30, 2006 and 2005
 Revenues.
     Direct Cost of Revenues.
  Gross Profit.
 Sales and Marketing Expense.
 Research and Development Expense.
 - 17 -




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General and Administrative Expense.
 Other Income (Expense).
 Income Taxes.
 Six Months Ended June 30, 2006 and 2005
 Revenues.
     Direct Cost of Revenues.
  Gross Profit.
 - 18 -




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Sales and Marketing Expense.
 Research and Development Expense.
 General and Administrative Expense.
 Other Income (Expense).
 Income Taxes.
 Liquidity and Capital Resources
       Forward-looking Statements
  - 19 -




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
    
    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.
  Item 3. Quantitative and Qualitative Disclosures About Market Risk.
  Item 4. Controls and Procedures.
    - 20 -




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PART II  OTHER INFORMATION
 Item 1. Legal Proceedings .
    ex parte
     - 21 -




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Item 1A. Risk Factors.
  We have incurred significant operating losses in the past and may incur significant operating
losses in the future. If we fail to increase our revenues, we may never become profitable on an
annual basis.
  If our eICU Program is not widely accepted, we will be unable to generate significant revenue
growth.
   
    
    reluctance by hospitals to reduce their reliance on traditional ICU practices, monitoring systems and on-site personnel;
    
    inability of hospitals to successfully integrate our eICU Program into an ICU due to lack of on-site physician
adoption, including the resulting harm to our reputation;
    
    financial and budget constraints of hospitals; and
    
    the availability, price, performance and reliability of competing products and services;
    
    inability of hospitals to successfully integrate our eICU Program into an ICU due to lack of on-site physician
adoption, including the resulting harm to our reputation;
    
    financial and budget constraints of hospitals; and
    
    the availability, price, performance and reliability of competing products and services.
  The loss of our U.S. patent or any significant limitation in its scope could provide less legal
protection for our business and products by permitting competitors to more easily enter the market
and to utilize methods developed by us.
  - 22 -




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If our products are alleged or found to infringe the intellectual property rights of others,
we could be involved in costly disputes or disruptions and be required to redesign our products or
methods, pay royalties or enter into license agreements with third parties.
   Any failure to protect our intellectual property rights could materially and adversely affect our
business and financial condition.
    - 23 -




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We have been sued by Cerner Corporation over our U.S. patent. A ruling by the court in favor
of Cerner on one or more of its claims could materially and adversely affect our business and
financial condition.
   Increasing competition for our products and services could make it harder for us to sell our eICU
Program.
   - 24 -




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We have a relatively short operating history and a limited number of customers. We are unable
to predict whether our customers will renew their support agreements after the initial term, and
low renewal rates could adversely affect our revenues and our business.
  A downturn or upturn in our sales may not be immediately reflected in our operating results because
we recognize revenues from license fees and implementation fees ratably over the term of our
agreements.
  Our revenues from existing customers may decrease and we may be required to provide refunds to
existing customers if we offer lower pricing terms for comparable purchases to another customer.
  Defects in or performance problems with our eICU Program could diminish demand for our products and
services and harm our reputation.
  - 25 -




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Product liability claims may require us to pay damages, reduce the demand for our eICU Program
and harm our reputation.
  Our inability to effectively manage our growth could adversely affect our business and our
operating results.
  Our inability to successfully introduce new, enhanced and competitive products that keep pace with
rapidly changing technology, industry standards and customer requirements could adversely affect
our ability to compete effectively.
  - 26 -




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Any loss of the third-party intellectual property and technology licenses on which we rely in
providing our eICU Program could result in additional costs or interruptions in the functionality
of our products and services.
  We are dependent on our senior executive management, and the loss of any member of our senior
executive management may prevent us from managing and growing our business effectively.
  We depend on highly specialized personnel, and the loss or failure to identify, hire, develop,
motivate and retain these personnel could adversely affect our ability to grow our business.
   Any efforts we may make in the future to expand our eICU Program beyond the adult ICU market may
not yield a sufficient return on our investment.
  - 27 -




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We intend to increase sales of our eICU Program to government agencies, which subjects us to
risks inherent in government contracts.
    We intend to expand our international sales efforts, which exposes us to risks inherent in
international operations, and we do not have substantial experience in international markets.
  
    
    localization of our program, including translation into foreign languages and associated expenses;
    
    laws and business practices favoring local competitors;
    
    compliance with multiple, conflicting and changing governmental laws and regulations, including
healthcare, employment, tax, privacy, healthcare information technology and data protection laws
and regulations;
    
    laws regulating exports of technology products from the United States and foreign government
restrictions on acquisitions of U.S.-origin products;
    
    fluctuations in foreign currency exchange rates;
    
    difficulties in staffing and managing foreign operations; and
    
    longer accounts receivable payment cycles and other collection difficulties.
  - 28 -




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The long sales cycles for our eICU Program may cause our operating results to fluctuate
significantly, which may result in volatility in the price of our common stock.
  If we are required to change our revenue recognition policy in the future, our financial results
could fluctuate significantly, which may result in volatility in the price of our common stock.
   Acquisitions and investments could result in integration difficulties, dilution or other adverse
financial consequences.
  The requirements related to being a public company will subject us to increased costs and may
strain our resources and distract our management. If we do not comply with these requirements, we
may be subject to penalties and investors may lose confidence in us.
  - 29 -




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Because our operating results may fluctuate significantly and may be below the expectations of
analysts and investors, the market price for our stock may be volatile.
  
    
    the size, timing, terms and conditions of orders from our customers;
    
    changes in hospitals budgets and procurement policies and priorities, and funding delays;
    
    new competitors and the introduction of enhanced products from new or existing competitors;
    
    expenses incurred in pursuing and closing acquisitions and in follow-up integration efforts;
    
    unforeseen legal expenses, including litigation costs;
    
    unanticipated delays or problems in releasing new products and services; and
    
    the amount and timing of our investments in research and development activities.
   We might require additional capital to support our business growth, and this capital might not be
available.
  - 30 -




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If we fail to obtain and maintain necessary U.S. Food and Drug Administration clearances for
our products and indications or if clearances for future products and indications are delayed or
not issued, our business would be harmed.
   After clearance or approval of our products, we are subject to continuing regulation by the FDA. If
we fail to comply with these FDA regulations, our business could suffer.
   
    
    untitled letters, warning letters, fines, injunctions, consent decrees and civil penalties;
    
    repair, replacement, refunds, recall, seizure or removal of authority to distribute our products;
    
    operating restrictions, partial suspension or total shutdown of production;
    
    refusing a request for 510(k) clearance of new products;
    
    withdrawing 510(k) clearance or premarket approvals that have already been granted; and
    
    criminal prosecution.
  - 31 -




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The FDA could retroactively determine that modifications that we have made to our eICU Program
following FDA clearance were improper and require us to stop marketing and recall the modified
products.
  Federal regulatory reforms may adversely affect our ability to sell our products profitably.
  If we fail to comply with the FDAs Quality System Regulation, our manufacturing operations could
be halted and our business would suffer.
  We may face additional compliance costs and liability risks under HIPAA.
  
    
    transaction and code set standards that prescribe specific
transaction formats and data code sets for specified
electronic healthcare transactions;
    
    privacy standards that protect individual privacy by
limiting the uses and disclosures of individually
identifiable health information; and
 - 32 -




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
    
    data security standards that require covered entities to
implement administrative, physical and technological
safeguards to ensure the confidentiality, integrity,
availability and security of individually identifiable
health information in electronic form.
   
    
    a description of our permitted uses of individually identifiable health information;
    
    a covenant not to disclose the information other than as permitted under the agreement and to make our subcontractors, if
any, subject to the same restrictions;
    
    assurances that appropriate administrative, physical and technical safeguards are in place to prevent misuse of the
information;
    
    an obligation to report to our customer any use or disclosure of the information not provided for in the agreement;
    
    a prohibition against our use or disclosure of the information if a similar use or disclosure by our customer would violate
the HIPAA standards;
    
    the ability for our customers to terminate the underlying support agreement if we breach a material term of the business
associate agreement and are unable to cure the breach;
    
    the requirement to return or destroy all individually identifiable health information at the end of our support agreement; and
    
    access by the Secretary of the Department of Health and Human Services to our internal practices, books and records to
validate that we are safeguarding individually identifiable health information.
   We may face compliance costs and liability risks under other privacy protection laws and
regulations.
  - 33 -




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If our security measures are breached and unauthorized access is obtained to patient data, we
may face liabilities and our program may be perceived as not being secure, causing customers to
curtail or stop using our program, which may lead to a decline in revenues.
  Our stock price may be volatile, and your investment in our common stock could suffer a decline in
value.
  
    
    regulatory developments and funding priorities;
    
    market conditions for our products and services in general;
    
    announcements of technological innovations or new products by us or our competitors;
    
    adoption of industry standards that our products and services do not satisfy;
    
    the loss of any of our key management or technical personnel;
    
    restatements of our financial results and material weaknesses in our internal controls;
    
    changes in financial estimates or recommendations by securities analysts;
    
    the results of the pending, and any future, intellectual property-related lawsuits, claims or actions involving us;
    
    sales of large blocks of our common stock; and
    
    sales of our common stock by our executive officers, directors and significant stockholders.
  If securities analysts downgrade our stock or discontinue coverage of our company, our stock price
could decline.
  - 34 -




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Our executive officers, directors and principal stockholders own a significant percentage of
our company and could exert significant influence over matters requiring stockholder approval.
  Our management has broad discretion as to the use of proceeds of our initial public offering and
might not apply the proceeds of that offering in ways that increase the value of your investment.
  If a significant number of shares of our common stock are sold into the market following this
offering, the market price of our common stock could drop substantially, even if our business is
doing well.
  Because we do not intend to pay dividends, our stockholders will benefit from their investment in
shares of our common stock only if it appreciates in value.
  - 35 -




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Provisions of our certificate of incorporation, bylaws and Delaware law could make an
acquisition of us, which may be beneficial to our stockholders, more difficult and may prevent
attempts by our stockholders to replace or remove the current members of our board and management.
     Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
  - 36 -




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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. - 37 -




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SIGNATURES
  VISICU, INC.Date: August 7, 2006
    
    By:
    
    /s/ Frank T. Sample

Frank T. SamplePresident, Chief Executive Officer andChairman of the Board of DirectorsDate: August 7, 2006
    
    By:
    
    /s/ Vincent E. Estrada

Vincent E. EstradaSenior Vice President andChief Financial Officer