##### 



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 March 31, 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
 o þ
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
 o þ
  Class
    
    Outstanding Shares at May 1, 2006Common Stock, $.0001 par value per share
    
    32,212,072 shares




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##### 



VISICU, INC.
Quarterly Report on Form 10-Q for the three month period ended March 31, 2006
 INDEX
 PagePART I  
    FINANCIAL INFORMATIONItem 1.
    Financial Statements
    
    
    3Balance Sheetsas of March 31, 2006 (unaudited) and December 31, 2005 (audited)
    
    
    3Statements of OperationsThree Months Ended March 31, 2006 and 2005 (unaudited)
    
    
    4Statements
of Stockholders Deficit
Three Months Ended March 31, 2006 (unaudited)
    
    
    5Statements of Cash FlowsThree Months Ended March 31, 2006 and 2005 (unaudited)
    
    
    6Notes to Financial Statements (unaudited)
    
    
    7Item 2.
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    13Item 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 4.
    Submission of Matters to a Vote of Security Holders
    
    
    37Item 6.
    Exhibits
    
    
    38Signatures
 - 2 -




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##### 



PART I  FINANCIAL INFORMATION
 Item 1. Financial Statements
 VISICU, INC.
BALANCE SHEETS
 December 31,
    
    March 31,2005
    
    2006(Unaudited)AssetsCurrent assets:Cash and cash equivalents
    
    $
    11,379
    
    
    $
    15,194Accounts receivable
    
    
    8,971
    
    
    
    5,139Prepaid expenses and other current assets
    
    
    527
    
    
    
    665Deferred tax assets
    
    
    9,300
    
    
    
    9,300Total current assets
    
    
    30,177
    
    
    
    30,298Property and equipment:Computer equipment and software
    
    
    2,667
    
    
    
    2,777Office furniture and equipment
    
    
    327
    
    
    
    328Leasehold improvements
    
    
    104
    
    
    
    1043,098
    
    
    
    3,209Accumulated depreciation
    
    
    1,318
    
    
    
    1,5221,780
    
    
    
    1,687Deferred contract costs
    
    
    4,538
    
    
    
    4,548Deferred tax assets
    
    
    6,604
    
    
    
    6,604Other assets
    
    
    1,601
    
    
    
    1,682Total assets
    
    $
    44,700
    
    
    $
    44,819Liabilities and stockholders deficitCurrent liabilities:Accounts payable and accrued expenses
    
    $
    1,950
    
    
    $
    1,706Accrued compensation and related costs
    
    
    1,478
    
    
    
    827Deferred revenue
    
    
    23,516
    
    
    
    24,503Other current liabilities
    
    
    25
    
    
    
    26Total current liabilities
    
    
    26,969
    
    
    
    27,062Other long-term liabilities
    
    
    575
    
    
    
    568Deferred revenue
    
    
    24,097
    
    
    
    22,408Total liabilities
    
    
    51,641
    
    
    
    50,038Stockholders deficit:Series A Preferred Stock, $.0001 par value;
3,500,000 shares authorized; 3,375,000 shares
issued and outstanding at December 31, 2005
and March 31, 2006, respectively
    
    
    
    
    
    
    Series B Preferred Stock, $.0001 par value;
11,500,000 shares authorized; 11,016,057
shares issued and outstanding at December 31,
2005 and March 31, 2006, respectively
    
    
    1
    
    
    
    1Series 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 and March 31,
2006, respectively
    
    
    1
    
    
    
    1Common
stock, $.0001 par value, 40,000,000 shares
authorized; 4,537,841 and 5,868,877 issued and
outstanding at December 31, 2005 and March 31,
2006, respectively
    
    
    
    
    
    
    1Additional paid-in capital
    
    
    32,905
    
    
    
    29,363Unearned stock-based compensation
    
    
    (4,949
    )
    
    
    Accumulated deficit
    
    
    (34,899
    )
    
    
    (34,585
    )Total stockholders deficit
    
    
    (6,941
    )
    
    
    (5,219
    )Total liabilities and stockholders deficit
    
    $
    44,700
    
    
    $
    44,819
 See accompanying notes to financial statements.
 - 3 -




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##### 



VISICU, INC.
STATEMENTS OF OPERATIONS
 Three Months Ended March 31,2005
    
    2006Revenues:License revenue
    
    $
    1,499
    
    
    $
    3,018Service revenue
    
    
    1,996
    
    
    
    3,651Total revenues
    
    
    3,495
    
    
    
    6,669Direct cost of revenues:Cost of licenses
    
    
    61
    
    
    
    171Cost of services (1)
    
    
    694
    
    
    
    1,232Total direct cost of revenue
    
    
    755
    
    
    
    1,403Gross profit
    
    
    2,740
    
    
    
    5,266Operating expenses:Sales and marketing (1)
    
    
    1,006
    
    
    
    1,305Research and development (1)
    
    
    1,285
    
    
    
    1,397General and administrative (1)
    
    
    1,507
    
    
    
    2,112Total operating expenses
    
    
    3,798
    
    
    
    4,814Income (loss) from operations
    
    
    (1,058
    )
    
    
    452Other income (expense):Interest income
    
    
    43
    
    
    
    140Interest expense
    
    
    (4
    )
    
    
    (2
    )39
    
    
    
    138Income (loss) before income taxes
    
    
    (1,019
    )
    
    
    590Income tax expense
    
    
    1
    
    
    
    276Net income (loss)
    
    
    (1,020
    )
    
    
    314Accretion of preferred stock
    
    
    (354
    )
    
    
    Net income (loss) attributable to
common stockholders
    
    $
    (1,374
    )
    
    $
    314Net income (loss) loss attributable to common
stockholders per share:Basic
    
    $
    (0.40
    )
    
    $
    0.06Diluted
    
    $
    (0.40
    )
    
    $
    0.01Weighted average shares
outstanding used in computing
per share amounts:Basic
    
    
    3,429
    
    
    
    5,276Diluted
    
    
    3,429
    
    
    
    27,500(1) Amounts include non-cash stock-based
compensation expense as follows:Cost of services
    
    $
    3
    
    
    $
    35Sales and marketing expense
    
    
    41
    
    
    
    127Research and development expense
    
    
    52
    
    
    
    118General and administrative expense
    
    
    27
    
    
    
    291Total non-cash stock-based compensation expense
    
    $
    123
    
    
    $
    571
 See accompanying notes to financial statements.
 - 4 -




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##### 



STATEMENT OF STOCKHOLDERS DEFICIT
 Additional
    
    Unearned
    
    
    
    
    
    TotalPreferred Stock
    
    Common Stock
    
    Paid-In
    
    Stock-Based
    
    Accumulated
    
    StockholdersShares
    
    Amount
    
    Shares
    
    Amount
    
    Capital
    
    Compensation
    
    Deficit
    
    DeficitBalance at January 1, 2006
    
    
    19,385
    
    
    $
    2
    
    
    
    4,538
    
    
    $
    
    
    
    $
    32,905
    
    
    $
    (4,949
    )
    
    $
    (34,899
    )
    
    $
    (6,941
    )Non-employee
stock-based
compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    90
    
    
    
    
    
    
    
    
    
    
    
    90Vesting of employee stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    481
    
    
    
    
    
    
    
    
    
    
    
    481Exercise of options for common
stock
    
    
    
    
    
    
    
    
    
    
    1,331
    
    
    
    1
    
    
    
    763
    
    
    
    
    
    
    
    
    
    
    
    764Excess tax benefit from exercise
of options for common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    73
    
    
    
    
    
    
    
    
    
    
    
    73Elimination of unearned
stock-based compensation expense against
additional paid-in capital upon
adoption of SFAS No. 123(R)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,949
    )
    
    
    4,949
    
    
    
    
    
    
    
    Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    314
    
    
    
    314Balance at March 31, 2006
    
    
    19,385
    
    
    $
    2
    
    
    
    5,869
    
    
    $
    1
    
    
    $
    29,363
    
    
    $
    
    
    
    $
    (34,585
    )
    
    $
    (5,219
    )
 See accompanying notes to
financial statements.
 - 5 -




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##### 



VISICU, INC.
STATEMENTS OF CASH FLOWS
 Three Months Ended March 31,2005
    
    2006Operating activitiesNet income (loss)
    
    $
    (1,020
    )
    
    $
    314Adjustments to reconcile net income (loss) to net cash
provided by operating activities:Depreciation
    
    
    151
    
    
    
    204Amortization
    
    
    25
    
    
    
    29Non-cash stock-based compensation charge
    
    
    123
    
    
    
    571Excess tax benefit from stock-based compensation
    
    
    
    
    
    
    (73
    )Changes in operating assets and liabilities:Accounts receivable
    
    
    2,351
    
    
    
    3,835Prepaid expenses and other current assets
    
    
    (10
    )
    
    
    (138
    )Deferred contract costs
    
    
    (149
    )
    
    
    (10
    )Accounts payable and accrued expenses
    
    
    7
    
    
    
    (171
    )Accrued compensation and related costs
    
    
    (674
    )
    
    
    (651
    )Deferred revenue
    
    
    3,793
    
    
    
    (659
    )Net cash provided by operating activities
    
    
    4,597
    
    
    
    3,251Investing activitiesPurchase of property and equipment
    
    
    (246
    )
    
    
    (111
    )Capitalized software additions
    
    
    (40
    )
    
    
    (7
    )Change in other assets
    
    
    6
    
    
    
    12Net cash used in investing activities
    
    
    (280
    )
    
    
    (106
    )Financing activitiesPayment of financing costs for initial public offering
    
    
    
    
    
    
    (162
    )Repayment of obligations under capital lease
    
    
    (6
    )
    
    
    (5
    )Exercise of options to purchase common stock
    
    
    4
    
    
    
    764Excess tax benefit from stock-based compensation
    
    
    
    
    
    
    73Net cash provided by (used in) financing activities
    
    
    (2
    )
    
    
    670Net increase in cash and cash equivalents
    
    
    4,315
    
    
    
    3,815Cash and cash equivalents at beginning of period
    
    
    8,639
    
    
    
    11,379Cash and cash equivalents at end of period
    
    $
    12,954
    
    
    $
    15,194Supplemental cash flow information:Income taxes paid
    
    $
    1
    
    
    $
    35Unpaid financing costs related to initial public offering
    
    $
    
    
    
    $
    628
 See accompanying notes to financial statements.
 - 6 -




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##### 



VISICU, INC.
NOTES TO FINANCIAL STATEMENTS
(unaudited)
 1.
    
    Basis of Presentation
    2.
    
    Stock-Based Compensation
     - 7 -




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##### 



Three Months EndedMarch 31, 2006Risk-free interest rate
    
    
    4.4
    %Estimated option expected lives
    
    
    4 yearsVolatility
    
    
    64
    %Dividend rate
    
    
    0.0
    %
  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
    
    
    431
    
    
    
    5.67Options exercised
    
    
    (1,331
    )
    
    
    0.57Options forfeited
    
    
    (3
    )
    
    
    0.46Options outstanding at March 31, 2006
    
    
    3,560
    
    
    
    1.52
    
    
    
    7.56
    
    
    $
    6,681Vested and expected to vest at March 31, 2006
    
    
    3,453
    
    
    
    1.52
    
    
    
    7.56
    
    
    $
    6,481Exercisable at March 31, 2006
    
    
    1,658
    
    
    
    0.59
    
    
    
    5.88
    
    
    $
    399
  - 8 -




---



##### 



Number of
    
    Weighted-Average RemainingExercise
    
    Number of Options
    
    Options
    
    Contractual Life of OptionsPrice
    
    Outstanding
    
    Exercisable
    
    Outstanding$ .10
    
    
    
    110
    
    
    
    110
    
    
    
    3.07$ .35
    
    
    
    1,251
    
    
    
    976
    
    
    
    6.45$ .90
    
    
    
    842
    
    
    
    518
    
    
    
    6.78$1.80
    
    
    
    822
    
    
    
    37
    
    
    
    9.22$2.82
    
    
    
    106
    
    
    
    3
    
    
    
    9.58$5.67
    
    
    
    429
    
    
    
    14
    
    
    
    9.823,560
    
    
    
    1,658
   Number of
    
    Weighted-shares
    
    Average Grant(in thousands)
    
    Date Fair ValueNonvested at December 31, 2005
    
    
    250
    
    
    $
    5.00Granted
    
    
    100
    
    
    $
    4.87Vested
    
    
    (63
    )
    
    $
    3.74Forfeited
    
    
    
    
    
    $
    Nonvested at March 31, 2006
    
    
    287
    
    
    $
    5.23
  - 9 -




---



##### 



Three Months EndedMarch 31, 2005Net loss as reported
    
    $
    (1,374
    )Add: stock-based employee compensation expense
recorded, net of income taxes
    
    
    41Deduct: pro forma stock-based employee compensation
expense, net of income taxes
    
    
    43Pro forma net loss
    
    $
    (1,376
    )Net loss
attributable to common stockholders per share:Basic  as reported
    
    $
    (0.40
    )Basic  pro forma
    
    $
    (0.40
    )Diluted  as reported
    
    $
    (0.40
    )Diluted  pro forma
    
    $
    (0.40
    )
     - 10 -




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##### 



3.
    
    Net Income (Loss) Attributable to Common Stockholders Per Share
   March 31,2005
    
    
    2006Options to purchase common stock
    
    
    4,560
    
    
    
    3,560Shares of common stock into which
outstanding preferred would be
convertible upon the exercise of
preferred stock warrants
    
    
    120
    
    
    
    44Shares of common stock into which
outstanding preferred stock is
convertible
    
    
    19,335
    
    
    
    19,385Total options, warrants, and
preferred stock exercisable or
convertible into common stock
    
    
    24,015
    
    
    
    22,989
   Weighted-average shares-basic
    
    
    5,276Effect of options to purchase common stock
    
    
    2,839Effect of assumed conversion of preferred stock
    
    
    19,385Weighted-average shares-diluted
    
    
    27,500
 4.
    
    Income Taxes
  - 11 -




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##### 



5.
    
    Concentrations of Credit Risk
   6.
    
    Contingencies
  7.
    
    Subsequent Event
  - 12 -




---



##### 



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
  Overview
     Sources of Revenue
    - 13 -




---



##### 



Direct Cost of Revenue
  
    
    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.
 - 14 -




---



##### 



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
  Allowance for Doubtful Accounts
   - 15 -




---



##### 



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,
  - 16 -




---



##### 



Income Taxes
 Accounting for Income Taxes,
  Results of Operations
  Three Months EndedMarch 31,2005
    
    
    2006Revenues:License revenue
    
    
    43
    %
    
    
    45
    %Service revenue
    
    
    57
    
    
    
    55Total revenues
    
    
    100
    
    
    
    100Direct cost of revenues:Cost of licenses
    
    
    2
    
    
    
    3Cost of services
    
    
    20
    
    
    
    18Total direct cost of revenues
    
    
    22
    
    
    
    21Gross profit
    
    
    78
    
    
    
    79Operating expenses:Sales and marketing
    
    
    29
    
    
    
    20Research and development
    
    
    37
    
    
    
    21General and administrative
    
    
    43
    
    
    
    32Total operating expenses
    
    
    109
    
    
    
    72Income (loss) from operations
    
    
    (30
    )
    
    
    7Other income:Total other income
    
    
    1
    
    
    
    2Income (loss) before income taxes
    
    
    (29
    )
    
    
    9Income tax expense
    
    
    
    
    
    
    4Net income (loss)
    
    
    (29
    )%
    
    
    5
    %
 - 17 -




---



##### 



Three Months Ended March 31, 2006 and 2005
 Revenues.
   Direct Cost of Revenues.
  Gross Profit.
 Sales and Marketing Expense.
 Research and Development Expense.
 - 18 -




---



##### 



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




---



##### 




    
    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 -




---



##### 



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




---



##### 



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 -




---



##### 



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 -




---



##### 



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 -




---



##### 



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 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 -




---



##### 



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 -




---



##### 



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.
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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 do not publish research or reports about our business or if they downgrade
our stock, the price of our stock 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 4. Submission of Matters to a Vote of Security Holders.
  - 37 -




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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 Plan10.1
0***
    
    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 filed on March
13, 2006.**
    
    Incorporated herein by reference to the Registration Statement on Form S-1 filed on November
29, 2005.***
    
    Incorporated herein by reference to the Registration Statement on Form S-1/A filed on January
19, 2006. - 38 -




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SIGNATURES
  VISICU, INC.Date:
May 3, 2006
    
    By:
    
    /s/ Frank T. SampleFrank T. SamplePresident, Chief Executive Officer andChairman of the Board of DirectorsDate:
May 3, 2006
    
    By:
    
    /s/ Vincent E. EstradaVincent E. EstradaSenior Vice President andChief Financial Officer