##### 



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 September 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
(State or other jurisdiction 
of incorporation or organization)
    
    52-2107238
(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 November 1, 2007Common Stock, $.0001 par value per share
    
    33,153,664 shares




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##### 



VISICU, INC.
 INDEX
 PagePART I 
    
    FINANCIAL INFORMATIONItem 1.
    
    Financial Statements
    
    
    3Balance Sheets  as of September 30, 2007 (unaudited) and December 31, 2006
    
    
    3Statements of Operations  Three and Nine Months Ended September 30, 2007 and 2006 (unaudited)
    
    
    4Statements of Cash Flows  Nine Months Ended September 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
    
    
    17Item 4.
    
    Controls and Procedures
    
    
    17PART II 
    
    OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    17Item 1A.
    
    Risk Factors
    
    
    18Item 4.
    
    Submission of Matters to a Vote of
Security Holders
    
    
    19Item 6.
    
    Exhibits
    
    
    20Signatures
    
    
    21
 2




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##### 



PART I  FINANCIAL INFORMATION
 Item 1. Financial Statements
 VISICU, INC.
BALANCE SHEETS
 December 31,
    
    
    September 30,2006
    
    
    2007(Unaudited)AssetsCurrent assets:Cash and cash equivalents
    
    $
    74,188
    
    
    $
    113,039Marketable securities
    
    
    46,047
    
    
    
    17,972Accounts receivable
    
    
    11,465
    
    
    
    8,659Prepaid expenses and other current assets
    
    
    1,686
    
    
    
    2,414Deferred tax assets
    
    
    7,915
    
    
    
    5,881Total current assets
    
    
    141,301
    
    
    
    147,965Property and equipment:Computer equipment and software
    
    
    2,496
    
    
    
    2,917Office furniture and equipment
    
    
    362
    
    
    
    401Leasehold improvements
    
    
    182
    
    
    
    2073,040
    
    
    
    3,525Accumulated depreciation
    
    
    1,409
    
    
    
    2,0441,631
    
    
    
    1,481Deferred contract costs
    
    
    4,477
    
    
    
    4,167Deferred tax assets
    
    
    6,140
    
    
    
    6,073Marketable securities
    
    
    2,960
    
    
    
    Other assets
    
    
    503
    
    
    
    323Total assets
    
    $
    157,012
    
    
    $
    160,009Liabilities and stockholders equityCurrent liabilities:Accounts payable and accrued expenses
    
    $
    1,244
    
    
    $
    2,856Accrued compensation and related costs
    
    
    1,581
    
    
    
    1,432Deferred revenue
    
    
    30,290
    
    
    
    23,883Other current liabilities
    
    
    27
    
    
    
    28Total current liabilities
    
    
    33,142
    
    
    
    28,199Other long-term liabilities
    
    
    468
    
    
    
    319Deferred revenue
    
    
    19,074
    
    
    
    15,889Total liabilities
    
    
    52,684
    
    
    
    44,407Stockholders equity:Preferred Stock, $.0001 par value;
10,000,000 shares authorized; no shares
issued and outstanding at December 31,
2006 and September 30, 2007
    
    
    
    
    
    
    Common stock, $.0001 par value,
100,000,000 shares authorized;
32,485,185 and 33,113,580 issued and
outstanding at December 31, 2006 and
September 30, 2007, respectively
    
    
    3
    
    
    
    3Additional paid-in capital
    
    
    133,202
    
    
    
    137,575Accumulated deficit
    
    
    (28,877
    )
    
    
    (21,976
    )Total stockholders equity
    
    
    104,328
    
    
    
    115,602Total liabilities and stockholders equity
    
    $
    157,012
    
    
    $
    160,009
 See accompanying notes to financial statements.
 3




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##### 



VISICU, INC.
STATEMENTS OF OPERATIONS
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2007
    
    
    2006
    
    
    2007Revenues:License revenue
    
    $
    3,536
    
    
    $
    4,644
    
    
    $
    9,938
    
    
    $
    12,680Service revenue
    
    
    4,622
    
    
    
    5,406
    
    
    
    12,418
    
    
    
    15,164Total revenues
    
    
    8,158
    
    
    
    10,050
    
    
    
    22,356
    
    
    
    27,844Direct cost of revenues:Cost of licenses
    
    
    231
    
    
    
    317
    
    
    
    630
    
    
    
    895Cost of services (1)
    
    
    1,308
    
    
    
    1,461
    
    
    
    3,750
    
    
    
    4,246Total direct cost of revenues
    
    
    1,539
    
    
    
    1,778
    
    
    
    4,380
    
    
    
    5,141Gross profit
    
    
    6,619
    
    
    
    8,272
    
    
    
    17,976
    
    
    
    22,703Operating expenses:Sales and marketing (1)
    
    
    834
    
    
    
    1,038
    
    
    
    3,282
    
    
    
    3,509Research and development (1)
    
    
    1,325
    
    
    
    1,441
    
    
    
    4,164
    
    
    
    4,554General and administrative (1)
    
    
    2,470
    
    
    
    3,006
    
    
    
    6,972
    
    
    
    8,705Total operating expenses
    
    
    4,629
    
    
    
    5,485
    
    
    
    14,418
    
    
    
    16,768Income from operations
    
    
    1,990
    
    
    
    2,787
    
    
    
    3,558
    
    
    
    5,935Other income (expense):Interest income
    
    
    1,571
    
    
    
    1,645
    
    
    
    2,896
    
    
    
    4,944Interest expense
    
    
    (1
    )
    
    
    (1
    )
    
    
    (5
    )
    
    
    (8
    )1,570
    
    
    
    1,644
    
    
    
    2,891
    
    
    
    4,936Income before income taxes
    
    
    3,560
    
    
    
    4,431
    
    
    
    6,449
    
    
    
    10,871Income tax expense
    
    
    1,060
    
    
    
    1,571
    
    
    
    2,392
    
    
    
    3,907Net income
    
    $
    2,500
    
    
    $
    2,860
    
    
    $
    4,057
    
    
    $
    6,964Net income per share:Basic
    
    $
    0.08
    
    
    $
    0.09
    
    
    $
    0.18
    
    
    $
    0.21Diluted
    
    $
    0.07
    
    
    $
    0.08
    
    
    $
    0.13
    
    
    $
    0.20Weighted-average shares outstanding used in computing
per share amounts:Basic
    
    
    31,987
    
    
    
    32,927
    
    
    
    22,301
    
    
    
    32,645Diluted
    
    
    34,628
    
    
    
    34,606
    
    
    
    32,177
    
    
    
    34,564
 (1)     Amounts include non-cash stock-based compensation
expense as follows:Cost of services
    
    $
    49
    
    
    $
    22
    
    
    $
    129
    
    
    $
    104Sales and marketing expense
    
    
    44
    
    
    
    214
    
    
    
    314
    
    
    
    412Research and development expense
    
    
    41
    
    
    
    143
    
    
    
    295
    
    
    
    425General and administrative expense
    
    
    327
    
    
    
    483
    
    
    
    952
    
    
    
    1,347Total non-cash stock-based compensation expense
    
    $
    461
    
    
    $
    862
    
    
    $
    1,690
    
    
    $
    2,288
 See accompanying notes to financial statements.
 4




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##### 



VISICU, INC.
STATEMENTS OF CASH FLOWS
 Nine Months Ended September 30,2006
    
    
    2007Operating activitiesNet income
    
    $
    4,057
    
    
    $
    6,964Adjustments to reconcile net income to net cash provided by operating activities:Depreciation
    
    
    628
    
    
    
    635Amortization
    
    
    100
    
    
    
    212Deferred income taxes
    
    
    1,624
    
    
    
    2,101Non-cash stock-based compensation expense
    
    
    1,690
    
    
    
    2,288Excess tax benefit from stock-based compensation
    
    
    (113
    )
    
    
    (1,541
    )Changes in operating assets and liabilities:Accounts receivable
    
    
    2,804
    
    
    
    2,815Prepaid expenses and other current assets
    
    
    (1,293
    )
    
    
    (728
    )Deferred contract costs
    
    
    (43
    )
    
    
    310Accounts payable and accrued expenses
    
    
    1,744
    
    
    
    2,892Accrued compensation and related costs
    
    
    (100
    )
    
    
    (149
    )Deferred revenue
    
    
    (1,086
    )
    
    
    (9,452
    )Net cash provided by operating activities
    
    
    10,012
    
    
    
    6,347Investing activitiesPurchases of property and equipment
    
    
    (429
    )
    
    
    (485
    )Purchases of marketable securities
    
    
    (98,908
    )
    
    
    (40,194
    )Maturities of marketable securities
    
    
    65,368
    
    
    
    71,229Capitalized software additions
    
    
    (51
    )
    
    
    (109
    )Other
    
    
    19
    
    
    
    (74
    )Net cash provided by (used in) investing activities
    
    
    (34,001
    )
    
    
    30,367Financing activitiesProceeds from issuance of common stock, net of issuance costs of $9.7 million in 2006
    
    
    100,720
    
    
    
    Repayment of obligations under capital lease
    
    
    (18
    )
    
    
    (18
    )Exercise of options to purchase common stock
    
    
    799
    
    
    
    614Excess tax benefit from stock-based compensation
    
    
    145
    
    
    
    1,541Net cash provided by financing activities
    
    
    101,646
    
    
    
    2,137Net increase in cash and cash equivalents
    
    
    77,657
    
    
    
    38,851Cash and cash equivalents at beginning of period
    
    
    11,379
    
    
    
    74,188Cash and cash equivalents at end of period
    
    $
    89,036
    
    
    $
    113,039
 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
    
    
    1,296
    
    
    
    9.15Options exercised
    
    
    (628
    )
    
    
    0.98Options forfeited
    
    
    (297
    )
    
    
    4.87Options outstanding at September 30, 2007
    
    
    3,809
    
    
    $
    4.61Exercisable at September 30, 2007
    
    
    1,870
    
    
    $
    1.85
  6




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##### 



Summary of Restricted Common Stock
  Number of
    
    Weighted-Averageshares
    
    Grant-Date(in thousands)
    
    Fair ValueRestricted common stock at beginning of year
    
    
    211
    
    
    $
    5.19Vested
    
    
    (84
    )
    
    $
    4.69Restricted common stock at September 30, 2007
    
    
    127
    
    
    $
    5.53
 4. Net Income Per Share
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2007
    
    
    2006
    
    
    2007NumeratorBasic and diluted:Net income
    
    $
    2,500
    
    
    $
    2,860
    
    
    $
    4,057
    
    
    $
    6,964DenominatorBasic:Weighted-average shares outstanding
    
    
    31,987
    
    
    
    32,927
    
    
    
    22,301
    
    
    
    32,645Diluted:Weighted-average shares outstanding
    
    
    31,987
    
    
    
    32,927
    
    
    
    22,301
    
    
    
    32,645Dilutive effect of:Stock options
    
    
    2,641
    
    
    
    1,679
    
    
    
    2,712
    
    
    
    1,919Assumed conversion of preferred stock
    
    
    
    
    
    
    
    
    
    
    7,164
    
    
    
    Total
    
    
    34,628
    
    
    
    34,606
    
    
    
    32,177
    
    
    
    34,564Net income per shareBasic
    
    $
    0.08
    
    
    $
    0.09
    
    
    $
    0.18
    
    
    $
    0.21Diluted
    
    $
    0.07
    
    
    $
    0.08
    
    
    $
    0.13
    
    
    $
    0.20
 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,
 12




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##### 



Results of Operations
  Three Months Ended
    
    Nine Months EndedSeptember 30,
    
    September 30,2006
    
    2007
    
    2006
    
    2007Revenues:License revenue
    
    
    43
    %
    
    
    46
    %
    
    
    44
    %
    
    
    46
    %Service revenue
    
    
    57
    
    
    
    54
    
    
    
    56
    
    
    
    54Total revenues
    
    
    100
    
    
    
    100
    
    
    
    100
    
    
    
    100Direct cost of revenues:Cost of licenses
    
    
    3
    
    
    
    3
    
    
    
    3
    
    
    
    3Cost of services
    
    
    16
    
    
    
    15
    
    
    
    17
    
    
    
    15Total direct cost of revenues
    
    
    19
    
    
    
    18
    
    
    
    20
    
    
    
    18Gross profit
    
    
    81
    
    
    
    82
    
    
    
    80
    
    
    
    82Operating expenses:Sales and marketing
    
    
    10
    
    
    
    10
    
    
    
    15
    
    
    
    13Research and development
    
    
    16
    
    
    
    14
    
    
    
    19
    
    
    
    16General and administrative
    
    
    30
    
    
    
    30
    
    
    
    31
    
    
    
    31Total operating expenses
    
    
    57
    
    
    
    55
    
    
    
    64
    
    
    
    60Income from operations
    
    
    24
    
    
    
    28
    
    
    
    16
    
    
    
    21Other income:Total other income
    
    
    19
    
    
    
    16
    
    
    
    13
    
    
    
    18Income before income taxes
    
    
    44
    
    
    
    44
    
    
    
    29
    
    
    
    39Income tax expense
    
    
    13
    
    
    
    16
    
    
    
    11
    
    
    
    14Net income
    
    
    31
    %
    
    
    28
    %
    
    
    18
    %
    
    
    25
    %
 Three Months Ended September 30, 2007 and 2006
 Revenues.
      13




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##### 



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




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##### 



Direct Cost of Revenues.
  Gross Profit. Revenues
 Sales and Marketing Expense.
 Research and Development Expense.
 General and Administrative Expense.
 Other Income.
 Income Taxes.
 15




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##### 



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.
  16




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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.
    ex
parte
 17




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##### 



Item 1A. Risk Factors.
 If we are required to change the way in
which we recognize revenue in the future, our financial results could fluctuate significantly,
which may result in volatility in the price of our common stock
 If we are required under generally accepted accounting principles to change the way in which we
recognize revenue in the future, our financial results could fluctuate significantly, which may
result in volatility in the price of our common stock.
    18




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##### 



Item 4. Submission of Matters to a Vote of Security Holders.
  Proposal One
 (1)
    
    29,848,082 votes were cast for the election of Michael G. Bronfein as a Class I
director, and 527,977 votes were withheld;(2)
    
    29,711,505 votes were cast for the election of Van R. Johnson as a Class I
director, and 664,554 votes were withheld; and(3)
    
    26,685,530 votes were cast for the election of Brian A. Rosenfeld as a Class I
director, and 3,690,529 votes were withheld.
 Proposal Two
  Proposal Three
  19




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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.
    
    Indicates a management contract or any compensatory plan, contract or arrangement. 20




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##### 



SIGNATURES
  VISICU, INC.Date: November 13, 2007
    By:
    /s/ Frank T. SampleFrank T. SamplePresident, Chief Executive Officer and
Chairman of the Board of DirectorsDate: November 13, 2007
    By:
    /s/ Vincent E. EstradaVincent E. EstradaSenior Vice President and
Chief Financial Officer 21