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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-K
  þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 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 001-33775
 Nanosphere, Inc.
 (Exact name of registrant as specified in its charter)
 Delaware
    
    36-4339870(State or other jurisdiction of
    
    (I.R.S. Employer Identification No.)incorporation or organization)4088 Commercial Avenue
    
    Northbrook, Illinois 60062(Address of principal executive offices)
    
    (Zip Code)
 (847) 400-9000
   o þ
 o þ
 þ o
 o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE




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##### 



NANOSPHERE, INC.
INDEX
 PagePart I.Item 1.
    
    Business
    
    
    1Item 1A.
    
    Risk Factors
    
    
    12Item 1B.
    
    Unresolved Staff Comments
    
    
    23Item 2.
    
    Properties
    
    
    23Item 3.
    
    Legal Proceedings
    
    
    23Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    23Part II.Item 5.
    
    Market for Registrants Common Equity,
Related Stockholder Matters, and Issuer
Purchases of Equity
Securities
    
    
    25Item 6.
    
    Selected Financial Data
    
    
    27Item 7.
    
    Managements Discussion and Analysis of
Financial Condition and Results of
Operations
    
    
    28Item 7A.
    
    Quantitative and Qualitative Disclosures
About Market Risk
    
    
    36Item 8.
    
    Financial Statements and Supplementary Data
    
    
    37Item 9.
    
    Changes in and Disagreements with
Accountants on Accounting and Financial
Disclosure
    
    
    58Item 9A.
    
    Controls and Procedures
    
    
    58Item 9B.
    
    Other Information
    
    
    59Part III.Item 10.
    
    Directors, Executive Officers and Corporate Governance
    
    
    60Item 11.
    
    Executive Compensation
    
    
    60Item 12.
    
    Security Ownership of Certain Beneficial
Owners and Management and Related
Stockholder Matters
    
    
    60Item 13.
    
    Certain Relationships and Related
Transactions and Director Independence
    
    
    60Item 14.
    
    Principal Accountant Fees and Services
    
    
    60Part IV.Item 15.
    
    Exhibits and Financial Statement Schedules
    
    
    61SignaturesExhibit 23.1Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2




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Forward-Looking Statements
 This Annual Report on Form 10-K contains forward-looking statements about us and our industry
that involve substantial risks and uncertainties. All statements, other than statements of
historical facts, included in this Annual Report on Form 10-K regarding our strategy, future
operations, future financial position, future net sales, projected expenses, prospects and plans
and objectives of management are forward-looking statements. These statements involve known and
unknown risks, uncertainties and other factors that may cause our actual results, levels of
activity, performance or achievement to be materially different from those expressed or implied by
the forward-looking statements.
 In some cases, you can identify forward-looking statements by terms such as anticipate,
believe, estimate, expect, intend, may, might, plan, project, will, would,
should, could, can, predict, potential, continue, objective, or the negative of these
terms, and similar expressions intended to identify forward-looking statements. However, not all
forward-looking statements contain these identifying words. These forward-looking statements
reflect our current views about future events and are based on assumptions and subject to risks and
uncertainties. Given these uncertainties, you should not place undue reliance on these
forward-looking statements. Actual events or results could differ materially from those expressed
or implied by these forward-looking statements as a result of various factors.
 These forward-looking statements represent our estimates and assumptions only as of the date
of this Annual Report on Form 10-K . Unless required by U.S. federal securities laws, we do not
intend to update any of these forward-looking statements to reflect circumstances or events that
occur after the statement is made or to conform these statements to actual results. The following
discussion should be read in conjunction with the consolidated financial statements and notes
thereto appearing elsewhere in this Annual Report on Form 10-K . Our actual results may differ
materially from those anticipated in these forward-looking statements as a result of various
factors, including those set forth under Item 1A  Risk Factors and elsewhere in this Annual
Report on Form 10-K .
 
 PART I.
 
 Item 1. Business
  Overview
    1




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Our Products
     2




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Our Applications
  Assay
    
    Status
    
    ConditionGenomic TestsHyper-coagulation
    
    FDA clearance
received October 2007
    
    Increased risk of blood clots, stroke and pulmonary embolismWarfarin Metabolism
    
    FDA clearance
    
    Initial dosing of leading anticoagulantreceived September 2007Cystic Fibrosis
    
    In development
    
    Cystic fibrosis gene mutation; prenatal carrier screeningHerpes Simplex Virus
    
    In development
    
    Herpes viral infectionHuman Papillomavirus
    
    In development
    
    Cervical cancerRespiratory Virus Panel
    
    In development
    
    Respiratory illnessProtein TestsProstate Specific Antigen
    
    In development
    
    Post-surgical recurrent prostate cancerCardiac Troponin I
    
    In development
    
    Cardiovascular disease; risk stratification; diagnosis of heart attack
  Genomic Assays
 Hyper-coagulation.
 Warfarin Metabolism.
  Cystic Fibrosis.
 Herpes Simplex Virus.
 Human Papillomavirus, or HPV.
  3




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Respiratory Virus Panel.
 Protein Assays
  Prostate Specific Antigen  Recurrent Prostate Cancer.
 Cardiac Troponin I.
   Biomarker Validation.
  4




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Our Technology
  Our Gold Nanoparticle Molecular Probes
   
    
    High Signal-to-Noise Ratio.Our nanoparticle probes deliver significantly stronger
signals than the fluorescent probes, or fluorophores, used in diagnostic platforms today.
Nanoparticles are typically 10-100 nm in diameter and therefore significantly larger than
conventional fluorophores. This size difference enables nanoparticles to produce up to
10,000 times more signal via light scattering than a fluorophore. A single nanoparticle can
be detected with simple optical instrumentation with very high sensitivity, thus eliminating
the need to employ our amplification techniques.
    
    Orders of Magnitude Greater Sensitivity and Lower Detection Limits. The sensitivity and
limits of detection of our technology are further enhanced by a silver-staining step, which
effectively amplifies the signal from each nanoparticle bound to a target molecule. In this
process, silver is coated onto the gold nanoparticle surface, producing larger particles
with enhanced optical properties. Whereas the leading technologies today can detect
molecules at the picomolar range (10-12), our technology is capable of up to a
million times higher sensitivity at the femtomolar (10-15) and attomolar
(10-18) range, enabling the unprecedented analysis of rarely expressed genes or
low abundance proteins for early disease detection and diagnosis.
    
    High Count Multiplexing.Our core technology enables high count multiplexing, or
simultaneous multiple target identification in a single sample using a simple low-density
microarray. A sample and probe mixture is introduced simultaneously into a single
self-contained reaction chamber pre-printed with multiple reaction spots, each containing
capture strand oligonucleotides or proteins that are complementary to a specific target
molecule of interest. By utilizing the sharp melt transition of the nanoparticle probes,
multiple targets can be discretely identified in a single sample. This methodology
eliminates the need for complex and costly means of physically isolating individual target
molecules.
    
    Detection of Genomic and Protein Molecules Simultaneously.We are able to synthesize our
gold nanoparticle probes for the simultaneous multiplexed detection of both protein and
genomic targets in the same assay.
    
    Superior Reaction Kinetics.The sharp melt transition curves in our gold nanoparticles
increase binding affinity thereby leading to improved assay kinetics and efficiency.
    
    Long-Term Stability.The high density of oligonucleotides per nanoparticle, which serve
both as a protective and recognition layer on the nanoparticle surface, ensures the
long-term stability of our nanoparticles. We have patented approaches using localized salt
and buffer concentrations that deliver long-shelf life for our technology and reagent set.
    
    Unparalleled Specificity.A key property of the oligonucleotide-linked gold nanoparticle
is an extremely sharp melting curve. Our nanoparticles exhibit dissociation transitions of
less than one degree, whereas PCR transitions are typically 20-30 degrees in range or more.
These qualities eliminate errors caused by mismatched nucleotide pairs, thereby allowing
genomic targets differing by a single nucleotide (base pair) to be distinguished with
unprecedented selectivity.
  5




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Assay Format
   Research and Development
  
    
    Expanding and Enhancing the Capabilities of Our Instrument Platform.Design elements and
components of our current instrument platform, the Verigene System, will serve as the
foundation for future generation development. We plan to enhance the microfluidics processor
and touchscreen reader in the existing Verigene System in a second generation instrument
which will also add sample preparation for infectious diseases. This feature will further
simplify the processing of clinical samples from swab, cerebrospinal fluid and serum. We are
also developing a fully automated instrument with increased throughput and sample
preparation for both infectious disease and human genetic tests. By basing future
generations of our instrument platform on existing design elements, each new generation of
development will process assays developed for previous generations.
    
    Developing Additional Genomic and Protein Assays.We are in various phases of developing
and commercializing new assays for detecting protein biomarkers, infectious diseases and
human genetic markers. Currently we are developing additional genomic assays including a
cystic fibrosis test, a human papillomavirus test, a respiratory virus panel and a herpes
simplex viral test. In addition, we are working to integrate ultra-sensitive assays for
prostate specific antigen and cardiac troponin I into the current Verigene System instrument
platform.
    
    Validating and Commercializing New Biomarkers.We have a dedicated team of protein
scientists and assay developers who conduct assay development to support feasibility testing
and new protein biomarker validation. This team is collaborating with clinical researchers
in academic and private settings to apply our ultra-sensitive protein detection technology
to the researchers efforts to create diagnostic methods with greater clinical sensitivity
and specificity. We are also applying our ultra-sensitivity methods to the development of
established protein biomarkers that may lead to earlier detection of medical conditions
including cancer, neurodegenerative disorders including Alzheimers disease, sepsis and mad
cow disease, for blood screening and veterinary applications.
    
    Enhancing Performance of Established Product Systems and Developing New Applications.We
have entered into a license agreement with Northwestern University which provides us with an
exclusive license to certain patents and patent applications related to the application of
nanotechnology to biodiagnostics and to biobarcode technology, which involves the analysis
of oligonucleotides as reporter molecules, through January 1, 2013, after which date we have
the right of first negotiation for an exclusive license on future inventions. Our research
team utilizes the research and patents developed at Northwestern to develop diagnostic
applications including additional genomic and protein testing assays for use in the Verigene
System.
 Employees
   6




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Government Grants and Contracts
    Manufacturing
      Sales and Marketing
    7




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Competition
    Government Regulation
  Regulation by the United States Food and Drug Administration
   5 10(k) Clearance
   8




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PMA Approval
     Clinical Investigations
    9




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Obtaining FDA Clearance for Our Products
  Regulation After FDA Approval or Clearance
    Export of Our Products
   10




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Clinical Laboratory Improvement Amendments of 1988
  Foreign Government Regulation
   11




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Item 1A. Risk Factors
 We have a history of losses, our losses are likely to increase significantly, and we may never
achieve or maintain profitability.
  Our financial results depend on commercial acceptance of the Verigene System, its array of tests,
and the development of additional tests.
   The regulatory approval process is expensive, time consuming and uncertain and the failure to
obtain such approvals will prevent us from commercializing our future products.
  We and our customers are subject to various governmental regulations, and we may incur significant
expenses to comply with, and experience delays in our product commercialization as a result of,
these regulations.
   12




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If third-party payors do not reimburse our customers for the use of our clinical diagnostic
products or if they reduce reimbursement levels, our ability to sell our products will be harmed.
    We may fail to receive positive clinical results from the diagnostic tests currently in development
that require clinical trials, and even if we receive positive clinical results, we may still fail
to receive the necessary clearances or approvals to market our products.
   13




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Our operating results may be variable and unpredictable.
  If we do not achieve significant product revenue, we may not be able to meet our cash requirements
without obtaining additional capital from external sources, and if we are unable to do so, we may
have to curtail or cease operations.
  
    
    the level of research and development investment required to maintain and improve our
technology;
    
    the amount and growth rate, if any, of our revenues;
    
    changes in product development plans needed to address any difficulties in manufacturing
or commercializing the Verigene System and enhancements to our system;
    
    the costs of filing, prosecuting, defending and enforcing patent claims and other
intellectual property rights;
    
    competing technological and market developments;
    
    our need or decision to acquire or license complementary technologies or acquire
complementary businesses;
    
    the expansion of our sales force; and
    
    changes in regulatory policies or laws that affect our operations.
   14




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If our products do not perform as expected or the reliability of the technology on which our
products are based is questioned, we could experience lost revenue, delayed or reduced market
acceptance of our products, increased costs and damage to our reputation.
   We rely on third-party license agreements for patents and other technology related to our products,
and the termination of these agreements could delay or prevent us from being able to commercialize
our products.
    If we are unable to obtain, maintain and enforce intellectual property protection covering our
products, others may be able to make, use, or sell our products, which could adversely affect our
ability to compete in the market.
     15




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Our products could infringe patent rights of others, which may require costly litigation and, if we
are not successful, could cause us to pay substantial damages or limit our ability to commercialize
our products.
   We have limited experience in sales and marketing and may be unable to successfully commercialize
our Verigene System, or it may be difficult to build brand loyalty.
  
    
    our ability to attract and retain the skilled support team, marketing staff and sales
force necessary to commercialize and gain market acceptance for our technology and our
products;
    
    the ability of our sales and marketing team to identify and penetrate the potential
customer base including hospitals, research institutions, and independent diagnostic
laboratories;
    
    the time and cost of establishing a support team, marketing staff and sales force; and
    
    the difficulty of establishing brand recognition and loyalty for our products.
  16




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We may be unsuccessful in our long-term goal of expanding our product offerings outside the United
States.
   Manufacturing risks and inefficiencies may adversely affect our ability to produce products.
   We will need to develop manufacturing capacity by ourselves or with third parties.
   17




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Our business and future operating results may be adversely affected by events outside of our
control.
  We face intense competition from established and new companies in the molecular diagnostics field.
  Our success may depend upon how we and our competitors anticipate and adapt to market conditions.
  We may not be able to manage our anticipated growth, and we may experience constraints or
inefficiencies caused by unanticipated acceleration and deceleration of customer demand.
    18




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We use hazardous chemicals, biological materials, and infectious diseases in our business. Any
claims relating to improper handling, storage or disposal of these materials could be time
consuming and costly.
  If we are unable to recruit and retain key executives and scientists, we may be unable to achieve
our goals.
   Healthcare reform and restrictions on reimbursement may adversely affect our profitability.
    19




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Risks Related to Our Common Stock
 The market price of our common stock may be volatile and fluctuate significantly, which could
result in substantial losses for investors and subject us to securities class action litigation.
  
    
    fluctuations in our quarterly operating results or the operating results of our
competitors;
    
    changes in estimates of our financial results or recommendations by securities
analysts;
    
    variance in our financial performance from the expectations of securities analysts;
    
    changes in the estimation of the future size and growth rate of our markets;
    
    changes in accounting principles or changes in interpretations of existing principles,
which could affect our financial results;
    
    failure of our products to achieve or maintain market acceptance or commercial
success;
    
    conditions and trends in the markets we serve;
    
    changes in general economic, industry and market conditions;
    
    success of competitive products and services;
    
    changes in market valuations or earnings of our competitors;
    
    changes in our pricing policies or the pricing policies of our competitors;
    
    announcements of significant new products, contracts, acquisitions or strategic
alliances by us or our competitors;
    
    changes in legislation or regulatory policies, practices, or actions;
    
    the commencement or outcome of litigation involving our company, our general industry
or both;
    
    recruitment or departure of key personnel;
    
    changes in our capital structure, such as future issuances of securities or the
incurrence of additional debt;
    
    actual or expected sales of our common stock by our stockholders; and
    
    the trading volume of our common stock.
   20




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If equity research analysts do not publish research or reports about our business or if they
issue unfavorable commentary or downgrade our common stock, the price of our common stock could
decline.
  Certain provisions of our corporate governing documents could make an acquisition of our
company more difficult.
  
    
    authorize the issuance of preferred stock that can be created and issued by our board
of directors without prior stockholder approval, commonly referred to as blank check
preferred stock, with rights senior to those of our common stock;
    
    limit the persons who can call special stockholder meetings;
    
    provide that a majority vote of our stockholders is required to amend our amended and
restated certificate of incorporation and amended and restated by-laws;
    
    establish advance notice requirements to nominate persons for election to our board
of directors or to propose matters that can be acted on by stockholders at stockholder
meetings;
    
    not provide for cumulative voting in the election of directors; and
    
    provide for the filling of vacancies on our board of directors by action of a
majority of the directors and not by the stockholders.
   We do not currently intend to pay dividends on our capital stock and, consequently, your
ability to achieve a return on your investment will depend on appreciation in the price of our
common stock.
   21




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We will incur increased costs and demands upon management as a result of complying with the
laws and regulations affecting public companies, which may adversely affect our operating results
and failure to achieve and maintain effective internal controls in accordance with Section 404 of
the Sarbanes-Oxley Act could cause investors to lose confidence in our operating results and in the
accuracy of our financial reports and could have a material adverse effect on our business and on
the price of our common stock.
    Concentration of ownership among some of our stockholders, including directors and management
may limit your ability to influence corporate matters.
   22




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Item 1B. Unresolved Staff Comments
  
 Item 2. Properties
   
 Item 3. Legal Proceedings
  
 Item 4. Submission of Matters to a Vote of Security Holders
  Total Shares Outstanding
    
    
    Votes ForSeries C-2, as a single class
    
    
    128,825,044
    
    
    
    122,685,353Series D, as a single class
    
    
    168,392,966
    
    
    
    155,245,631Common Stock and Preferred Stock,
together as a single class
    
    
    330,601,180
    
    
    
    277,930,984Preferred Stock, as a single class
    
    
    307,285,024
    
    
    
    277,930,984
  23




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Total Shares Outstanding
    
    
    Votes ForSeries C-2, as a single class
    
    
    5,152,991
    
    
    
    4,907,412Series D, as a single class
    
    
    6,735,707
    
    
    
    6,209,822Common Stock and Preferred Stock,
together as a single class
    
    
    13,225,007
    
    
    
    11,117,234Preferred Stock, as a single class
    
    
    12,292,361
    
    
    
    11,117,234
  24




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PART II
 
 Item 5. Market for Registrants Common Equity, Related Stockholder Matters, and Issuer Purchases
of Equity Securities
 Market Information
  2007
    
    High
    
    LowNovember 1, 2007 to December 31, 2007
    
    $
    22.04
    
    
    $
    11.50
 Stockholders
  Dividend Policy
  Sales of Unregistered Securities
     25




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Stock Performance Graph
  
 11/1/2007
    
    
    11/30/2007
    
    
    12/31/2007Nanosphere
    
    $
    100.00
    
    
    $
    103.00
    
    
    $
    99.92Nasdaq Composite
    
    $
    100.00
    
    
    $
    93.07
    
    
    $
    92.76Nasdaq Biotechnology
    
    $
    100.00
    
    
    $
    97.14
    
    
    $
    93.62
   26




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Item 6. Selected Financial Data
  Years Ended December 31,Statements of Operations Data:
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003Total revenue
    
    $
    1,167,364
    
    
    $
    1,138,011
    
    
    $
    1,914,517
    
    
    $
    2,768,125
    
    
    $
    1,470,900Research and development expense
    
    
    21,364,767
    
    
    
    17,447,227
    
    
    
    13,244,872
    
    
    
    10,366,473
    
    
    
    8,358,249Sales, general and administrative expense
    
    
    13,443,304
    
    
    
    5,415,525
    
    
    
    4,502,970
    
    
    
    3,131,390
    
    
    
    3,086,823Net loss
    
    
    (53,117,957
    )
    
    
    (23,531,581
    )
    
    
    (15,935,300
    )
    
    
    (10,901,911
    )
    
    
    (9,919,859
    )Net loss attributable to common stock
    
    
    (59,203,184
    )
    
    
    (45,682,716
    )
    
    
    (18,834,087
    )
    
    
    (21,058,304
    )
    
    
    (9,919,859
    )Net loss per common share:basic and diluted
    
    
    (14.16
    )
    
    
    (52.78
    )
    
    
    (30.80
    )
    
    
    (34.44
    )
    
    
    (16.24
    )Weighted average number of common shares:basic and diluted (1)
    
    
    4,180,979
    
    
    
    865,559
    
    
    
    611,496
    
    
    
    611,466
    
    
    
    610,972
 As of December 31,Balance Sheet Data:
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003Cash and cash equivalents (1)
    
    $
    114,312,573
    
    
    $
    29,112,429
    
    
    $
    3,641,338
    
    
    $
    6,314,008
    
    
    $
    1,150,108Working capital (1)
    
    
    107,684,875
    
    
    
    27,332,463
    
    
    
    (2,642,582
    )
    
    
    4,542,299
    
    
    
    125,034Total assets (1)
    
    
    129,114,680
    
    
    
    41,037,834
    
    
    
    11,346,514
    
    
    
    12,198,575
    
    
    
    4,674,142Long-term debt
    
    
    7,462,237
    
    
    
    58,802
    
    
    
    
    
    
    
    
    
    
    
    Convertible preferred stock (1)
    
    
    
    
    
    
    108,868,040
    
    
    
    51,143,984
    
    
    
    40,998,231
    
    
    
    23,793,897Stockholders equity (deficit) (1)
    
    
    112,350,540
    
    
    
    (105,238,071
    )
    
    
    (59,961,290
    )
    
    
    (41,348,431
    )
    
    
    (20,328,435
    )
 (1)
    
    In November 2007, we completed our initial public offering of 8,050,000 shares of common stock
at $14.00 per share. We received approximately $102 million of net proceeds from the offering.
All shares of convertible preferred stock were converted to common stock upon the closing of the
initial public offering.  27




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Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
  Business Overview
     Financial Operations Overview
 Revenue
  Cost of Product Sales
   28




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Research and Development Expenses
  Sales, General and Administrative Expenses
  Interest Income
  Interest Expense
  Fiscal 2007 Compared to 2006
 Revenues
  Cost of Product Sales
  Research and Development Expenses
    29




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Sales, General and Administrative Expenses
   Change in Fair Value of Convertible Derivative Liability
  Change in the Fair Value of the Preferred Stock Warrants
  Interest Expense
  Interest Income
   30




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Fiscal 2006 Compared to 2005
 Revenues
  Cost of Product Sales
  Research and Development Expenses
  Sales, General and Administrative Expenses
  Change in Fair Value of Convertible Derivative Liability
  Change in the Fair Value of the Preferred Stock Warrants
  Interest Expense
   31




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Interest Income
  Liquidity and Capital Resources
        32




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
    
    the level of research and development investment required to maintain and improve our
technology;
    
    the amount and growth rate of our revenues;
    
    changes in product development plans needed to address any difficulties in manufacturing
or commercializing the Verigene System and enhancements to our system;
    
    the costs of filing, prosecuting, defending and enforcing patent claims and other
intellectual property rights;
    
    competing technological and market developments;
    
    our need or decision to acquire or license complementary technologies or acquire
complementary businesses; and
    
    changes in regulatory policies or laws that affect our operations.
  Income Taxes
   33




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Contractual Obligations and Commitments
  Payments Due by PeriodContractual Obligations
    
    Total
    
    
    Less
than1 Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    More than5 YearsLong-term debt obligations
    
    $
    12,333,327
    
    
    $
    3,597,823
    
    
    $
    8,735,504
    
    
    $
    
    
    
    $
    Interest on long-term debt obligations
    
    
    2,351,715
    
    
    
    1,349,969
    
    
    
    1,001,746
    
    
    
    
    
    
    
    Capital lease
    
    
    64,287
    
    
    
    42,180
    
    
    
    22,107
    
    
    
    
    
    
    
    Operating lease
    
    
    1,248,604
    
    
    
    507,509
    
    
    
    741,095
    
    
    
    
    
    
    
    Obligations under license agreements
    
    
    1,342,000
    
    
    
    183,000
    
    
    
    309,000
    
    
    
    255,000
    
    
    
    595,000Total
    
    $
    17,339,933
    
    
    $
    5,680,481
    
    
    $
    10,809,452
    
    
    $
    255,000
    
    
    $
    595,000
  License Agreements
   Off-Balance Sheet Arrangements
  Critical Accounting Policies and Significant Judgments and Estimates
   34




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##### Table of Contents



Revenue Recognition
   Stock-Based Compensation Expense
  Convertible Derivative Liability
    35




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##### Table of Contents



Recent Accounting Pronouncements
     
 Item 7A. Quantitative and Qualitative Disclosures About Market Risk
   36




---



##### Table of Contents



Item 8. Financial Statements and Supplementary Data
  PageReport of Independent Registered Public Accounting Firm
    
    
    38Balance Sheets as of December 31, 2007 and 2006
    
    
    39Statements of Operations for the years ended December 31, 2007, 2006
and 2005, and for the period from Incorporation (December 30,
1999) through December 31, 2007
    
    
    40Statements of Stockholders Equity (Deficit) for the years ended
December 31, 2007, 2006 and 2005, and for the period from
Incorporation (December 30, 1999) through December 31, 2007
    
    
    41Statements of Cash Flows for the years ended December 31, 2007, 2006
and 2005, and for the period from Incorporation (December 30,
1999) through December 31, 2007
    
    
    42Notes to Financial Statements
    
    
    43-57
  37




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
     DELOITTE & TOUCHE LLP
 
  38




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##### Table of Contents



Nanosphere, Inc.
(A Development Stage Company)
 
 Balance Sheets
 As of December 312007
    
    
    2006CURRENT ASSETS:Cash and cash equivalents
    
    $
    114,312,573
    
    
    $
    29,112,429Accounts receivable
    
    
    100,799
    
    
    
    44,816Inventories
    
    
    1,903,004
    
    
    
    884,849Other current assets
    
    
    670,402
    
    
    
    462,858Total current assets
    
    
    116,986,778
    
    
    
    30,504,952PROPERTY AND EQUIPMENT  At cost:Equipment with customers
    
    
    281,060
    
    
    
    Computer equipment and software
    
    
    866,338
    
    
    
    730,144Laboratory equipment
    
    
    3,787,271
    
    
    
    2,788,164Furniture and fixtures
    
    
    269,047
    
    
    
    143,134Leasehold improvements
    
    
    2,257,042
    
    
    
    2,086,977Manufacturing equipment
    
    
    3,172,295
    
    
    
    2,056,830Office equipment
    
    
    67,068
    
    
    
    66,007Tooling
    
    
    1,029,006
    
    
    
    707,018Total property and equipment  at cost
    
    
    11,729,127
    
    
    
    8,578,274Less accumulated depreciation
    
    
    (4,695,530
    )
    
    
    (2,999,802
    )Net property and equipment
    
    
    7,033,597
    
    
    
    5,578,472INTANGIBLE ASSETS  Net of accumulated amortization
    
    
    4,930,752
    
    
    
    4,865,950OTHER ASSETS
    
    
    163,553
    
    
    
    88,460TOTAL
    
    $
    129,114,680
    
    
    $
    41,037,834CURRENT LIABILITIES:Accounts payable
    
    $
    2,221,522
    
    
    $
    1,499,514Accrued compensation
    
    
    1,303,355
    
    
    
    872,508Accrued license fees
    
    
    393,473
    
    
    
    360,000Accrued financing costs
    
    
    778,731
    
    
    
    Other current liabilities
    
    
    969,962
    
    
    
    408,023Long term debt  current portion
    
    
    3,597,823
    
    
    
    Lease payable  current portion
    
    
    37,037
    
    
    
    32,444Total current liabilities
    
    
    9,301,903
    
    
    
    3,172,489LONG-TERM LIABILITIES:Accrued license fees  noncurrent
    
    
    
    
    
    
    330,000Lease payable  noncurrent portion
    
    
    21,433
    
    
    
    58,802Long term debt  noncurrent portion
    
    
    7,440,804
    
    
    
    Preferred stock warrants
    
    
    
    
    
    
    1,761,533Convertible derivative liability
    
    
    
    
    
    
    32,085,041Total liabilities
    
    
    16,764,140
    
    
    
    37,407,865CONVERTIBLE PREFERRED STOCK:Series B Convertible Preferred Stock, $0.01 par
value; Liquidation preference of $0 at December
31, 2007
    
    
    
    
    
    
    25,396Series C Convertible Preferred Stock, $0.01 par
value; Liquidation preference of $0 at December
31, 2007
    
    
    
    
    
    
    6,030,003Series C-2 Convertible Preferred Stock, $0.01 par
value; Liquidation preference of $0 at December
31, 2007
    
    
    
    
    
    
    47,037,902Series D Convertible Preferred Stock, $0.01 par
value; Liquidation preference of $0 at December
31, 2007
    
    
    
    
    
    
    55,774,739Total Convertible Preferred Stock
    
    
    
    
    
    
    108,868,040COMMITMENTS AND CONTINGENCIESSTOCKHOLDERS EQUITY (DEFICIT):Common stock, $0.01 par value; 100,000,000 shares
authorized at December 31, 2007 and 450,000,000
shares authorized at December 31, 2006
    
    
    305,174
    
    
    
    92,580Preferred stock, $0.01 par value; 10,000,000
shares authorized; no shares issued
    
    
    
    
    
    
    Additional paid-in capital
    
    
    271,765,776
    
    
    
    2,051,126Warrants to acquire common stock
    
    
    5,424,551
    
    
    
    Note receivable from chief executive officer
    
    
    
    
    
    
    (1,440,000
    )Deficit accumulated during the development stage
    
    
    (165,144,961
    )
    
    
    (105,941,777
    )Total stockholders equity (deficit)
    
    
    112,350,540
    
    
    
    (105,238,071
    )TOTAL
    
    $
    129,114,680
    
    
    $
    41,037,834
   39




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##### Table of Contents



Nanosphere, Inc.
(A Development Stage Company)
 
 Statements of Operations
 Period FromDecember 30, 1999(Date of Incorporation)Years Ended December 31
    
    
    Through2007
    
    
    2006
    
    
    2005
    
    
    December 31, 2007REVENUE:Grant and contract revenue
    
    $
    1,056,874
    
    
    $
    1,006,351
    
    
    $
    1,777,667
    
    
    $
    8,817,628Product sales
    
    
    110,490
    
    
    
    131,660
    
    
    
    136,850
    
    
    
    409,020Total revenue
    
    
    1,167,364
    
    
    
    1,138,011
    
    
    
    1,914,517
    
    
    
    9,226,648COSTS AND EXPENSES:Cost of product sales
    
    
    86,349
    
    
    
    31,049
    
    
    
    125,118
    
    
    
    258,968Research and development
    
    
    21,364,767
    
    
    
    17,447,227
    
    
    
    13,244,872
    
    
    
    78,735,191Sales, general, and administrative
    
    
    13,443,304
    
    
    
    5,415,525
    
    
    
    4,502,970
    
    
    
    32,742,456Total costs and expenses
    
    
    34,894,420
    
    
    
    22,893,801
    
    
    
    17,872,960
    
    
    
    111,736,615Loss from operations
    
    
    (33,727,056
    )
    
    
    (21,755,790
    )
    
    
    (15,958,443
    )
    
    
    (102,509,967
    )OTHER INCOME (EXPENSE):Change in fair value of
convertible derivative liability
    
    
    (14,860,901
    )
    
    
    (2,916,822
    )
    
    
    
    
    
    
    (17,777,723
    )Change in fair value of preferred
stock warrants
    
    
    (4,414,207
    )
    
    
    (119,914
    )
    
    
    (8,314
    )
    
    
    (4,551,236
    )Foreign exchange loss
    
    
    (52,362
    )
    
    
    
    
    
    
    
    
    
    
    (52,362
    )Interest expense  related party
    
    
    
    
    
    
    (146,550
    )
    
    
    (37,919
    )
    
    
    (388,804
    )Interest expense
    
    
    (1,977,619
    )
    
    
    (7,506
    )
    
    
    
    
    
    
    (1,985,125
    )Interest income
    
    
    1,914,188
    
    
    
    1,415,001
    
    
    
    69,376
    
    
    
    3,822,337Total other income (expense)
    
    
    (19,390,901
    )
    
    
    (1,775,791
    )
    
    
    23,143
    
    
    
    (20,932,913
    )NET LOSS
    
    
    (53,117,957
    )
    
    
    (23,531,581
    )
    
    
    (15,935,300
    )
    
    
    (123,442,880
    )Accumulated convertible preferred
stock dividends
    
    
    (5,476,287
    )
    
    
    (4,413,591
    )
    
    
    
    
    
    
    (10,300,417
    )Convertible preferred stock
redemption value adjustment
    
    
    (608,940
    )
    
    
    (17,737,544
    )
    
    
    (2,898,787
    )
    
    
    (31,401,664
    )NET LOSS ATTRIBUTABLE TO COMMON
STOCK
    
    $
    (59,203,184
    )
    
    $
    (45,682,716
    )
    
    $
    (18,834,087
    )
    
    $
    (165,144,961
    )Net loss per common share  basic
and diluted
    
    $
    (14.16
    )
    
    $
    (52.78
    )
    
    $
    (30.80
    )Weighted average number of common
shares outstanding  basic and
diluted
    
    
    4,180,979
    
    
    
    865,559
    
    
    
    611,496
   40




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##### Table of Contents



Nanosphere, Inc.
(A Development Stage Company)
 
 Statements of Stockholders Equity (Deficit)
 Note
    
    
    DeficitWarrants
    
    
    Receivable
    
    
    AccumulatedAdditional
    
    
    To Acquire
    
    
    From Chief
    
    
    During theCommon Stock
    
    
    Paid-In
    
    
    Common
    
    
    Executive
    
    
    DevelopmentShares
    
    
    Par Value
    
    
    Capital
    
    
    Stock
    
    
    Officer
    
    
    Stage
    
    
    TotalBALANCE  December 30, 1999
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Issuance of common stock upon incorporation
    
    
    606,000
    
    
    
    12,036
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,036Issuance of common stock in exchange for a license
    
    
    3,915
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Share-based compensation related to stock options
    
    
    
    
    
    
    
    
    
    
    38,308
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    38,308Exercise of stock options on common stock (since incorporation)
    
    
    1,551
    
    
    
    248
    
    
    
    25,951
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,199Issuance of dividends on Series A Convertible Preferred Stock
(since incorporation)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (410,539
    )
    
    
    (410,539
    )Convertible preferred stock redemption value adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,156,393
    )
    
    
    (10,156,393
    )Net loss (since incorporation)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (30,858,042
    )
    
    
    (30,858,042
    )BALANCE  December 31, 2004
    
    
    611,466
    
    
    
    12,284
    
    
    
    64,259
    
    
    
    
    
    
    
    
    
    
    
    (41,424,974
    )
    
    
    (41,348,431
    )Exercise of stock options on common stock
    
    
    250
    
    
    
    63
    
    
    
    1,812
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,875Share-based compensation related to stock options
    
    
    
    
    
    
    
    
    
    
    219,353
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    219,353Convertible preferred stock redemption value adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,898,787
    )
    
    
    (2,898,787
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15,935,300
    )
    
    
    (15,935,300
    )BALANCE  December 31, 2005
    
    
    611,716
    
    
    
    12,347
    
    
    
    285,424
    
    
    
    
    
    
    
    
    
    
    
    (60,259,061
    )
    
    
    (59,961,290
    )Issuance of common stock on March 16, 2006 at $4.50 per share in
exchange for a note receivable
    
    
    320,000
    
    
    
    80,000
    
    
    
    1,360,000
    
    
    
    
    
    
    
    (1,440,000
    )Exercise of stock options on common stock
    
    
    930
    
    
    
    233
    
    
    
    6,742
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,975Share-based compensation related to stock options
    
    
    
    
    
    
    
    
    
    
    398,960
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    398,960Undeclared and unpaid 6% dividends, earned in 2006 on Series C-2
and Series D Convertible Preferred Stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,413,591
    )
    
    
    (4,413,591
    )Convertible preferred stock redemption value adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,737,544
    )
    
    
    (17,737,544
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (23,531,581
    )
    
    
    (23,531,581
    )BALANCE  December 31, 2006
    
    
    932,646
    
    
    
    92,580
    
    
    
    2,051,126
    
    
    
    
    
    
    
    (1,440,000
    )
    
    
    (105,941,777
    )
    
    
    (105,238,071
    )Share-based compensation related to stock options
    
    
    
    
    
    
    
    
    
    
    1,669,006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,669,006Exercise of stock options on common stock
    
    
    16,150
    
    
    
    162
    
    
    
    119,863
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    120,025Issuance of common stock from initial public offering, net of
offering expenses
    
    
    8,050,000
    
    
    
    80,500
    
    
    
    102,092,417
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    102,172,917Conversion of preferred stock to common stock
    
    
    13,048,119
    
    
    
    130,481
    
    
    
    116,151,384
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    116,281,865Conversion of convertible derivative liability to additional
paid-in capital
    
    
    
    
    
    
    
    
    
    
    47,554,882
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    47,554,882Conversion of warrant liability to equity
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,424,551
    
    
    
    
    
    
    
    
    
    
    
    5,424,551Exercise of warrants
    
    
    145,090
    
    
    
    1,451
    
    
    
    2,036,358
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,037,809Interest received on note receivable from chief executive officer
    
    
    
    
    
    
    
    
    
    
    90,740
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    90,740Proceeds from note receivable from chief executive officer
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,440,000
    
    
    
    
    
    
    
    1,440,0006% dividends, earned on Series C-2 and Series D Convertible
Preferred Stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,476,287
    )
    
    
    (5,476,287
    )Convertible preferred stock redemption value adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (608,940
    )
    
    
    (608,940
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (53,117,957
    )
    
    
    (53,117,957
    )BALANCE  December 31, 2007
    
    
    22,192,005
    
    
    $
    305,174
    
    
    $
    271,765,776
    
    
    $
    5,424,551
    
    
    $
    
    
    
    $
    (165,144,961
    )
    
    $
    112,350,540
   41




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##### Table of Contents



Nanosphere, Inc.
(A Development Stage Company)
 
 Statements of Cash Flows
 Period FromDecember 30, 1999(Date of Incorporation)Years Ended December 31,
    
    
    Through2007
    
    
    2006
    
    
    2005
    
    
    December 31, 2007CASH FLOWS FROM OPERATING ACTIVITIES:Net loss
    
    $
    (53,117,957
    )
    
    $
    (23,531,581
    )
    
    $
    (15,935,300
    )
    
    $
    (123,442,880
    )Adjustments to reconcile net loss to net cash used in operating
activities:Depreciation and amortization
    
    
    1,902,733
    
    
    
    1,239,855
    
    
    
    854,556
    
    
    
    5,005,853Amortization of financing costs and accretion of debt discount
    
    
    671,480
    
    
    
    
    
    
    
    
    
    
    
    671,480Loss from write-off of intangible assets
    
    
    477,684
    
    
    
    41,659
    
    
    
    89,534
    
    
    
    776,607Share-based compensation
    
    
    1,669,006
    
    
    
    398,960
    
    
    
    219,353
    
    
    
    2,325,627Change in fair value of preferred stock warrants
    
    
    4,414,207
    
    
    
    119,914
    
    
    
    8,314
    
    
    
    4,551,236Change in fair value of convertible derivative liability
    
    
    14,860,901
    
    
    
    2,916,822
    
    
    
    
    
    
    
    17,777,723Changes in operating assets and liabilities:Accounts receivable
    
    
    (55,983
    )
    
    
    202,805
    
    
    
    (93,161
    )
    
    
    (100,799
    )Inventories
    
    
    (1,018,155
    )
    
    
    (761,084
    )
    
    
    (23,067
    )
    
    
    (1,903,004
    )Other current assets
    
    
    (207,544
    )
    
    
    (80,533
    )
    
    
    (66,542
    )
    
    
    (724,296
    )Other assets
    
    
    10,830
    
    
    
    (10,000
    )
    
    
    9,158
    
    
    
    (77,630
    )Accounts payable
    
    
    857,614
    
    
    
    157,868
    
    
    
    185,929
    
    
    
    1,990,717Accrued and other current liabilities
    
    
    1,098,045
    
    
    
    564,563
    
    
    
    (250,290
    )
    
    
    2,488,643Net cash used in operating activities
    
    
    (28,437,139
    )
    
    
    (18,740,752
    )
    
    
    (15,001,516
    )
    
    
    (90,660,723
    )CASH FLOWS FROM INVESTING ACTIVITIES:Proceeds from investment maturities
    
    
    
    
    
    
    53,894
    
    
    
    
    
    
    
    53,894Purchases of property and equipment
    
    
    (3,157,478
    )
    
    
    (2,184,616
    )
    
    
    (2,219,353
    )
    
    
    (11,410,000
    )Investments in intangible assets
    
    
    (1,280,258
    )
    
    
    (1,752,016
    )
    
    
    (618,491
    )
    
    
    (5,632,815
    )Net cash used in investing activities
    
    
    (4,437,736
    )
    
    
    (3,882,738
    )
    
    
    (2,837,844
    )
    
    
    (16,988,921
    )CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from related party notes payable
    
    
    
    
    
    
    1,320,148
    
    
    
    5,019,062
    
    
    
    6,339,210Proceeds from issuance of debt
    
    
    12,500,000
    
    
    
    
    
    
    
    
    
    
    
    12,500,000Repayment of long term debt
    
    
    (166,673
    )
    
    
    
    
    
    
    
    
    
    
    (166,673
    )Payments on capital lease obligation
    
    
    (32,776
    )
    
    
    (26,439
    )
    
    
    
    
    
    
    (59,215
    )Proceeds from principle and interest on CEO note receivable
    
    
    1,530,740
    
    
    
    
    
    
    
    
    
    
    
    1,530,740Deferred financing fees
    
    
    (114,565
    )
    
    
    
    
    
    
    
    
    
    
    (114,565
    )Proceeds from the issuance of common stock, net of offering expenses
    
    
    102,951,648
    
    
    
    6,975
    
    
    
    1,875
    
    
    
    102,998,733Proceeds from warrant redemptions
    
    
    1,286,620
    
    
    
    
    
    
    
    
    
    
    
    1,286,620Proceeds from stock option exercises
    
    
    120,025
    
    
    
    
    
    
    
    
    
    
    
    120,025Proceeds from the issuance of Series A Convertible Preferred Stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,008,357Proceeds from the issuance of Series B Convertible Preferred Stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,375,001Proceeds from the issuance of Series C Convertible Preferred Stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,000,000Proceeds from the issuance of Series C-2 Convertible Preferred Stock
    
    
    
    
    
    
    
    
    
    
    10,145,753
    
    
    
    27,350,087Proceeds from the issuance of Series D Convertible Preferred Stock
    
    
    
    
    
    
    46,793,897
    
    
    
    
    
    
    
    46,793,897Net cash provided by financing activities
    
    
    118,075,019
    
    
    
    48,094,581
    
    
    
    15,166,690
    
    
    
    221,962,217NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
    
    85,200,144
    
    
    
    25,471,091
    
    
    
    (2,672,670
    )
    
    
    114,312,573CASH AND CASH EQUIVALENTS  Beginning of period
    
    
    29,112,429
    
    
    
    3,641,338
    
    
    
    6,314,008
    
    
    
    CASH AND CASH EQUIVALENTS  End of period
    
    $
    114,312,573
    
    
    $
    29,112,429
    
    
    $
    3,641,338
    
    
    $
    114,312,573NONCASH INVESTING AND FINANCING ACTIVITIES:Equipment acquired under capital lease
    
    $
    
    
    
    $
    117,685
    
    
    $
    
    
    
    $
    117,685Capital expenditures included in accounts payable
    
    
    201,441
    
    
    
    208,066
    
    
    
    128,341
    
    
    
    201,441Patent costs capitalized and included in accounts payable
    
    
    29,263
    
    
    
    158,344
    
    
    
    107,420
    
    
    
    29,263Patent and license costs capitalized and included in accrued
liabilities
    
    
    355,504
    
    
    
    757,290
    
    
    
    35,430
    
    
    
    355,504Common stock issued for note payable  related party
    
    
    
    
    
    
    1,440,000
    
    
    
    
    
    
    
    1,440,000Payment of Series A Convertible Preferred Stock dividends in
additional shares of Series A Convertible Preferred Stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    410,5396% dividends earned on Series C-2 and Series D Convertible Preferred
Stock
    
    
    5,476,287
    
    
    
    4,413,591
    
    
    
    
    
    
    
    9,889,878Conversion of Preferred Stock, including accumulated dividends on
Series C-2 and Series D Convertible Preferred Stock into common
stock
    
    
    116,281,865
    
    
    
    
    
    
    
    
    
    
    
    116,281,865Conversion of convertible derivative liability to additional paid-in
capital
    
    
    47,554,882
    
    
    
    
    
    
    
    
    
    
    
    47,554,882Conversion of preferred stock warrant liability to warrants to
acquire common stock
    
    
    5,424,551
    
    
    
    
    
    
    
    
    
    
    
    5,424,551Conversion of related party notes payable and accrued interest of
$204,335, into Series C-2 Convertible Preferred Stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,212,156Conversion of related party notes payable and accrued interest of
$177,358 into Series D Convertible Preferred Stock
    
    
    
    
    
    
    6,516,568
    
    
    
    
    
    
    
    6,516,568Equity offering transaction costs included in accrued financing costs
    
    
    778,731
    
    
    
    
    
    
    
    
    
    
    
    778,731
   42




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##### Table of Contents



Nanosphere, Inc.
(A Development Stage Company)
 
 Notes to Financial Statements
 As of December 31, 2007 and 2006, and
 For the years ended December 31, 2007, 2006 and 2005 and
 for the Cumulative Period From December 30, 1999
 (Date of Incorporation) Through December 31, 2007
 1. Description of Business
 Accounting and Reporting by Development
Stage Enterprises
 Basis of Presentation
  2. Summary of Significant Accounting Policies
 Cash and Cash Equivalents
 Receivables
 Inventories
 Property and Equipment
 Equipment with customers
    
    3 yearsComputers and office equipment
    
    3 yearsEngineering and laboratory equipment, including tooling
    
    5 yearsFurniture and fixtures
    
    7 yearsManufacturing equipment
    
    7 yearsLeasehold improvements
    
    7 years
   43




---



##### Table of Contents



Nanosphere, Inc.
(A Development Stage Company)
 Notes to Financial Statements  (Continued)
  Intangible Assets
 Deferred Financing Costs
 Impairment of Long-Lived Assets
 Use of Estimates
 Revenue Recognition
   Research and Development Costs
 Income Taxes Accounting for Income Taxes
  44




---



##### Table of Contents



Nanosphere, Inc.
(A Development Stage Company)
 Notes to Financial Statements  (Continued)
 Accounting for Uncertainty in Income Taxes
 Share-Based Compensation Share-Based
Payment
 Fair Value of Financial Instruments
 Preferred Stock
 New Accounting Standards Issued Not Yet Adopted
   Net Loss Per Common Share  Earnings Per Share,
  45




---



##### Table of Contents



Nanosphere, Inc.
(A Development Stage Company)
 Notes to Financial Statements  (Continued)
 
 Year ended December 31,2007
    
    
    2006
    
    
    2005Stock options
    
    
    3,141,530
    
    
    
    861,128
    
    
    
    850,136Convertible preferred stock
    
    
    
    
    
    
    12,069,968
    
    
    
    5,555,683Convertible preferred stock warrants
    
    
    
    
    
    
    1,445,997
    
    
    
    138,214Common stock warrants
    
    
    1,300,319
    
    
    
    
    
    
    
    4,441,849
    
    
    
    14,377,093
    
    
    
    6,544,033
 3. Intangible Assets
  2007
    
    
    2006Carrying
    
    
    Accumulated
    
    
    Carrying
    
    
    AccumulatedValue
    
    
    Amortization
    
    
    Value
    
    
    AmortizationIntellectual property
 licenses
    
    $
    1,870,178
    
    
    $
    (90,244
    )
    
    $
    1,796,359
    
    
    $
    Patents
    
    
    3,370,323
    
    
    
    (219,505
    )
    
    
    3,172,335
    
    
    
    (102,744
    )Total
    
    $
    5,240,501
    
    
    $
    (309,749
    )
    
    $
    4,968,694
    
    
    $
    (102,744
    )
  Years Ending December 312008
    
    $
    468,1552009
    
    
    325,1632010
    
    
    252,7702011
    
    
    252,7702012
    
    
    252,770Thereafter
    
    
    3,379,124
    46




---



##### Table of Contents



Nanosphere, Inc.
(A Development Stage Company)
 Notes to Financial Statements  (Continued)
 4. Related Party Transactions
      5. Equity Incentive Plan
     47




---



##### Table of Contents



Nanosphere, Inc.
(A Development Stage Company)
 Notes to Financial Statements  (Continued)
  2007
    
    
    2006
    
    
    2005Expected dividend yield
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %Expected volatility
    
    
    77
    %
    
    
    85
    %
    
    
    80
    %Risk free interest rate
    
    
    4.65
    
    
    
    4.82
    
    
    
    4.13Weighted-average expected option life
    
    7.0 years
    
    8.4 years
    
    7.5 yearsEstimated weighted-average fair value
on the date of grant based on the above assumptions
    
    $
    3.38
    
    
    $
    2.56
    
    
    $
    2.28Estimated forfeiture rate for unvested options
    
    
    4.6
    %
    
    
    12.5
    %
    
    
    12.5
    %
    WeightedWeighted
    
    
    AverageAverage
    
    
    Remaining
    
    
    AggregateNumber of
    
    
    Exercise
    
    
    Contractual
    
    
    IntrinsicOptions
    
    Shares
    
    
    Price
    
    
    Term
    
    
    Value of OptionsOutstanding  January 1, 2007
    
    
    860,728
    
    
    $
    6.25Granted
    
    
    2,415,820
    
    
    $
    4.61Exercised
    
    
    (16,150
    )
    
    $
    7.46Expired
    
    
    (13,308
    )
    
    $
    24.88Forfeited
    
    
    (105,560
    )
    
    $
    4.67Outstanding  December 31, 2007
    
    
    3,141,530
    
    
    $
    4.97
    
    
    
    8.76
    
    
    $
    28,321,245Exercisable  December 31, 2007
    
    
    423,291
    
    
    $
    7.35
    
    
    
    7.22
    
    
    $
    2,810,431Vested and Expected to Vest  December 31, 2007
    
    
    3,016,491
    
    
    $
    4.99
    
    
    
    8.75
    
    
    $
    27,162,407
   Weighted AverageNumber of
    
    
    Grant DateNonvested Options
    
    Options
    
    
    Fair ValueNonvested at January 1, 2007
    
    
    618,952
    
    
    $
    2.25Granted
    
    
    2,415,820
    
    
    
    3.38Vested
    
    
    (210,973
    )
    
    
    2.60Forfeited
    
    
    (105,560
    )
    
    
    2.31Nonvested at December 31, 2007
    
    
    2,718,239
    
    
    $
    3.23
  48




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##### Table of Contents



Nanosphere, Inc.
(A Development Stage Company)
 Notes to Financial Statements  (Continued)
 6. Income Taxes
    2007
    
    
    2006Deferred tax assets:Net operating losses
    
    $
    36,579,584
    
    
    $
    25,120,442Research and development credits
    
    
    5,608,329
    
    
    
    4,263,902Stock option compensation
    
    
    365,927
    
    
    
    Amortization of intangible assets
    
    
    41,668
    
    
    
    (1,288
    )Other
    
    
    143,560
    
    
    
    42,739,068
    
    
    
    29,383,056Valuation allowance
    
    
    (42,345,073
    )
    
    
    (28,991,416
    )Net deferred tax assets after valuation allowance
    
    
    393,995
    
    
    
    391,640Deferred tax liabilities:Depreciation on property and equipment
    
    
    (393,995
    )
    
    
    (391,640
    )Deferred tax assets  net
    
    $
    
    
    
    $
    
  Years Ended December 31,2007
    
    
    2006
    
    
    2005Tax provision at the statutory federal rate
    
    
    34.0
    %
    
    
    34.0
    %
    
    
    34.0
    %State income taxes, net of federal income tax benefit
    
    
    4.8
    %
    
    
    4.0
    %
    
    
    4.0
    %Fair value adjustments to convertible derivative liability and preferred stock warrants
    
    
    (14.1
    )%
    
    
    
    
    
    
    Other
    
    
    0.5
    %
    
    
    
    
    
    
    Valuation allowance
    
    
    (25.2
    )%
    
    
    (38.0
    )%
    
    
    (38.0
    )%0
    %
    
    
    0
    %
    
    
    0
    %
    49




---



##### Table of Contents



Nanosphere, Inc.
(A Development Stage Company)
 Notes to Financial Statements  (Continued)
 7. License Agreements
        50




---



##### Table of Contents



Nanosphere, Inc.
(A Development Stage Company)
 Notes to Financial Statements  (Continued)
 8. Stockholders Equity
 Common Stock
      Convertible Preferred Stock
 Series A Convertible Preferred Stock
 Series B Convertible Preferred Stock
  51




---



##### Table of Contents



Nanosphere, Inc.
(A Development Stage Company)
 Notes to Financial Statements  (Continued)
 Series C Convertible Preferred Stock
 Series C-2 Convertible Preferred Stock
 Series D Convertible Preferred Stock
  Rights and Privileges on Convertible Preferred Stock
     52




---



##### Table of Contents



Nanosphere, Inc.
(A Development Stage Company)
 Notes to Financial Statements  (Continued)
 Series B, C, C-2 and D Convertible Preferred Stock
 Voting
 Conversion
  Dividends
  53




---



##### Table of Contents



Nanosphere, Inc.
(A Development Stage Company)
 Notes to Financial Statements  (Continued)
  TotalConvertiblePreferredSeries A
    
    
    Series B
    
    
    Series C
    
    
    Series C-2
    
    
    Series D
    
    
    StockIssuance of 4,328,571 shares of
Series A Convertible Preferred
Stock on January 18, 2000
    
    $
    2,005,571
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    2,005,571Exercise of warrant for
2,164,287 shares of Series A
Convertible Preferred Stock on
March 13, 2001
    
    
    1,002,786
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,002,786Issuance of 886,125 shares of
Series A Convertible Preferred
Stock as dividends on Series A
Convertible Preferred Stock
    
    
    410,539
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    410,539Issuance of 3,486,395 shares of
Series B Convertible Preferred
Stock on March 13, 2001
    
    
    
    
    
    $
    5,125,001
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,125,001Issuance of 113,122 shares of
Series B Convertible Preferred
Stock on February 13, 2002
    
    
    
    
    
    
    250,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    250,000Issuance of 25,000,000 shares of
Series C Convertible Preferred
Stock on November 6, 2002
    
    
    
    
    
    
    
    
    
    $
    15,000,000
    
    
    
    
    
    
    
    
    
    
    
    15,000,000Issuance of 34,891,877 shares of
Series C-2 Convertible Preferred
Stock on September 2, 2004
    
    
    
    
    
    
    
    
    
    
    
    
    
    $
    12,212,156less allocation to convertible
derivative liability
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,489,188
    )
    
    
    
    
    
    
    8,722,968Issuance of 14,263,364 shares of
Series C-2 Convertible Preferred
Stock on September 30, 2004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,992,178less allocation to convertible
derivative liability
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,426,337
    )
    
    
    
    
    
    
    3,565,841Conversion of 7,378,983 shares of
Series A Convertible Preferred
Stock into 9,767,665 shares of
Series C-2 Convertible Preferred
Stock in September 2004
    
    
    (3,418,896
    )
    
    
    
    
    
    
    
    
    
    
    3,418,896less allocation to convertible
derivative liability
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (976,766
    )
    
    
    
    
    
    
    (976,766
    )Conversion of 3,582,510 shares of
Series B Convertible Preferred
Stock into 15,285,714 shares of
Series C-2 Convertible Preferred
Stock in September 2004
    
    
    
    
    
    
    (5,349,605
    )
    
    
    
    
    
    
    5,349,605less allocation to convertible
derivative liability
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,528,571
    )
    
    
    
    
    
    
    (1,528,571
    )Conversion of 14,949,993 shares
of Series C Convertible Preferred
Stock into 25,628,558 shares of
Series C-2 Convertible Preferred
Stock in September 2004
    
    
    
    
    
    
    
    
    
    
    (8,969,997
    )
    
    
    8,969,997less allocation to convertible
derivative liability
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,562,856
    )
    
    
    
    
    
    
    (2,562,856
    )Redemption value adjustment,
September 2004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,983,718
    
    
    
    
    
    
    
    9,983,718Allocation to preferred stock
warrant liability
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (172,675
    )Redemption value adjustment,
December 2004
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    172,675Issuance of 28,987,866 shares of
Series C-2 Convertible Preferred
Stock from June to September 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,145,753less allocation to convertible
derivative liability
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,898,787
    )
    
    
    
    
    
    
    7,246,966Redemption value adjustment,
June  September 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,898,787
    
    
    
    
    
    
    
    2,898,787
  54




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##### Table of Contents



Nanosphere, Inc.
(A Development Stage Company)
 Notes to Financial Statements  (Continued)
 TotalConvertiblePreferredSeries A
    
    
    Series B
    
    
    Series C
    
    
    Series C-2
    
    
    Series D
    
    
    StockAllocation to preferred stock
warrant liability
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,166
    )Redemption value adjustment,
March 2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,166Issuance of 162,857,142 shares of
Series D Convertible Preferred
Stock on April 12, 2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    53,310,465less allocation to convertible
derivative liability
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16,285,714
    )
    
    
    37,024,751Allocation to preferred stock
warrant liability
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,449,664
    )
    
    
    (1,449,664
    )Redemption value adjustment, June
2006
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,735,378
    
    
    
    17,735,378Issuance of 5,535,824 shares of
Series D Convertible Preferred
Stock in connection with debt
borrowings in February 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,937,538less allocation to convertible
derivative liability
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (608,940
    )
    
    
    1,328,598Redemption value adjustment,
February 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    608,940
    
    
    
    608,940Undeclared and unpaid dividends on
Series C-2 and Series D
Convertible Preferred Stock
earned
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,330,325
    
    
    
    5,559,553
    
    
    
    9,889,878Conversion of Convertible
Preferred Stock into shares of
common stock
    
    
    
    
    
    
    (25,396
    )
    
    
    (6,030,003
    )
    
    
    (49,418,910
    )
    
    
    (60,807,556
    )
    
    
    (116,281,865
    )Convertible preferred stock
outstanding at December 31, 2007
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
 Warrants
     55




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##### Table of Contents



Nanosphere, Inc.
(A Development Stage Company)
 Notes to Financial Statements  (Continued)
  Series of Stock to
    
    Number of
    
    
    Expirationwhich the Warrant is Exercisable
    
    Warrants
    
    
    DateCommon  exercise price of $10.94 per share
    
    
    1,135,394
    
    
    April 2011Common  exercise price of $8.75 per share
    
    
    164,925
    
    
    April 2013
   November 1,
    
    
    December 31,
    
    
    December 31,2007
    
    
    2006
    
    
    2005Expected dividend yield
    
    
    6
    %
    
    
    6
    %
    
    
    8
    %Expected volatility
    
    
    55
    %
    
    
    40
    %
    
    
    35
    %Risk free interest rate
    
    
    3.83
    %
    
    
    4.70
    %
    
    
    4.36
    %Weighted-average warrant term
    
    3.4 years
    
    4.7 years
    
    6.5 yearsEstimated weighted-average fair value
    
    $
    0.17
    
    
    $
    0.05
    
    
    $
    0.06
 9. Leases
   Operating
    
    
    CapitalYears Ending December 31
    
    Leases
    
    
    Leases2008
    
    $
    507,509
    
    
    $
    42,1802009
    
    
    520,197
    
    
    
    22,1072010
    
    
    220,898Total minimum lease payments
    
    $
    1,248,604
    
    
    
    64,287Less amounts representing interest
    
    
    
    
    
    
    (5,817
    )Net present value
    
    
    
    
    
    
    58,470Less current portion of net minimum lease payments
    
    
    
    
    
    
    (37,037
    )Long-term portion of net minimum lease payments
    
    
    
    
    
    $
    21,433
 10. Long Term Debt
    56




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##### Table of Contents



Nanosphere, Inc.
(A Development Stage Company)
 Notes to Financial Statements  (Continued)
  2008
    
    $
    3,597,8232009
    
    
    4,818,2112010
    
    
    3,917,293$
    12,333,327
 11. Quarterly Financial Data (Unaudited)
 2007 Quarters1st
    
    
    2nd
    
    
    3rd
    
    
    4th(As PreviouslyPresented)
    
    
    (As Restated)Total revenue
    
    $
    269,903
    
    
    $
    269,903
    
    
    $
    510,270
    
    
    $
    199,005
    
    
    $
    188,186Loss from operations
    
    $
    (6,834,246
    )
    
    $
    (6,863,524
    )
    
    $
    (7,850,300
    )
    
    $
    (9,907,443
    )
    
    $
    (9,105,789
    )Net loss
    
    $
    (6,710,076
    )
    
    $
    (6,636,367
    )
    
    $
    (8,433,154
    )
    
    $
    (26,968,431
    )
    
    $
    (11,080,005
    )Per share data:Net loss per common
share  basic and
diluted
    
    $
    (9.45
    )
    
    $
    (9.37
    )
    
    $
    (10.85
    )
    
    $
    (30.69
    )
    
    $
    (0.84
    )
 2006 Quarters1st
    
    
    2nd
    
    
    3rd
    
    
    4th(As PreviouslyPresented)
    
    
    (As Restated)Total revenue
    
    $
    79,340
    
    
    $
    79,340
    
    
    $
    386,802
    
    
    $
    468,524
    
    
    $
    203,345Loss from operations
    
    $
    (4,961,502
    )
    
    $
    (4,974,486
    )
    
    $
    (5,097,899
    )
    
    $
    (5,140,771
    )
    
    $
    (6,542,634
    )Net loss
    
    $
    (5,072,522
    )
    
    $
    (5,092,189
    )
    
    $
    (7,805,502
    )
    
    $
    (4,630,587
    )
    
    $
    (6,003,303
    )Per share data:Net loss per common
share  basic and
diluted
    
    $
    (7.63
    )
    
    $
    (7.66
    )
    
    $
    (28.86
    )
    
    $
    (6.61
    )
    
    $
    (8.08
    )
    57




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Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
  
 Item 9A. Controls and Procedures
      
    
    sufficient personnel with appropriate financial accounting and reporting expertise;
    
    sufficient segregation of duties due to our limited number of finance and accounting
personnel;
    
    sufficient internal controls for addressing accounting for complex transactions, such
as those related to our equity transactions;
    
    a formal process and related controls to identify and appropriately record and
disclose certain contractual obligations, such as licenses and other agreements;
    
    internal controls related to cutoff, impacting the accounting and reporting of
inventory, prepaid expenses, accounts payable and accrued expenses; and
    
    a perpetual record of our inventory of purchased components that formally tracks
inventory during interim financial periods.
 
  58




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##### Table of Contents




    
    Engaged personnel with a sufficient level of experience in accounting to produce
timely financial reporting and to design internal control procedures. In addition,
we hired a controller with a sufficient level of expertise to account for complex
transactions and to complete SEC reporting requirements. The Company has approved a
staffing plan to continue to build a sufficient accounting department.
    
    Designed controls to segregate key responsibilities, such as maintaining custody
of assets, recording entries in the books and records and reviewing the books and
records;
    
    Designed formal processes and controls to identify and record contractual
obligations and to address cutoff impacting the accounting and reporting of
inventory, prepaid expenses, accounts payable and accrued expenses; and
    
    Conducted a physical inventory of purchased components and finished goods as of
December 31, 2007 and designed processes to maintain a perpetual inventory listing
on a monthly basis.
   
 Item 9B. Other Information
   59




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##### Table of Contents



PART III.
 
 Item 10. Directors and Executive Officers of the Registrant
  
 Item 11. Executive Compensation
  
 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
  
 Item 13. Certain Relationships and Related Transactions
  
 Item 14. Principal Accountant Fees and Services
   60




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##### Table of Contents



PART IV.
 
 Item 15. Exhibits, Financial Statement Schedules
 Exhibit Number
    
    Exhibit Description3.1
    
    
    Second Amended and Restated Certificate of Incorporation of Nanosphere, Inc. (3)
(Exhibit 3.1)3.2
    
    
    Amended and Restated Bylaws of Nanosphere, Inc. (3) (Exhibit 3.2)4.1
    
    
    Specimen of common stock certificate (4) (Exhibit 4.3)4.2
    
    
    Nanosphere, Inc. Amended and Restated Registration Rights Agreement, dated as of April
12, 2006 (1) (Exhibit 4.2)10.1
    
    
    Nanosphere, Inc. 2000 Equity Incentive Plan (1) (Exhibit 10.1)10.2
    
    
    Form of Nanosphere, Inc. 2000 Equity Incentive Plan Non-Qualified Stock Option Award
Agreement, as amended (1) (Exhibit 10.2)10.3
    
    
    Form of Nanosphere, Inc. 2000 Equity Incentive Plan Option Award Agreement (1) (Exhibit
10.3)10.4
    
    
    Nanosphere, Inc. 2007 Long-Term Incentive Plan, as amended and restated (4) (Exhibit 10.4)10.5
    
    
    Form of Nanosphere, Inc. 2007 Long-Term Incentive Plan Incentive Stock Option Award
Agreement (Time Vested) (1) (Exhibit 10.5)10.6
    
    
    Form of Nanosphere, Inc. 2007 Long-Term Incentive Plan Non-Qualified Stock Option Award
Agreement (Time Vested) (1) (Exhibit 10.6)10.7
    
    
    Form of Nanosphere, Inc. 2007 Long-Term Incentive Plan Option Award Agreement
(Cliff-vested, performance-accelerated) (1) (Exhibit 10.7)10.8
    
    
    Employment Agreement, dated as of July 19, 2004, by and between Nanosphere, Inc. and
William P. Moffitt III, as amended (1) (Exhibit 10.8)10.9
    
    
    Restricted Stock Purchase Agreement, dated as of March 16, 2006, by and between
Nanosphere, Inc. and William P. Moffitt III (3) (Exhibit 10.9)10.10
    
    
    Employment Agreement, dated January 2, 2001, by and between Nanosphere, Inc. and William
Cork (4) (Exhibit 10.10)10.11
    
    
    Employment Agreement, dated May 13, 2005, by and between Nanosphere, Inc. and Gregory
Shipp (1) (Exhibit 10.11)10.12
    
    
    Employment Agreement, dated September 5, 2005, by and between Nanosphere, Inc. and
Michael McGarrity (1) (Exhibit 10.12)10.13
    
    
    Employment Agreement, dated April 25, 2007, by and between Nanosphere, Inc. and J. Roger
Moody, Jr. (1) (Exhibit 10.13)10.14
    
    
    Employment Agreement, dated May 31, 2007, by and between Nanosphere, Inc. and Winton
Gibbons (1) (Exhibit 10.14)10.15
    
    
    Severance Agreement, dated as of June 4, 2007, by and between Nanosphere, Inc. and
Stephen Wasko (1) (Exhibit 10.15)10.16
    
    
    License Agreement, dated as of January 1, 2006, by and between Northwestern University
and Nanosphere, Inc. (2)# (Exhibit 10.16)10.17
    
    
    Non-Exclusive License Agreement, dated as of December 20, 2002, by and between
Nanosphere, Inc. and Abbott Laboratories (2)# (Exhibit 10.17)10.18
    
    
    Lease with Motorola, Inc., dated as of March 24, 2003, as amended (1) (Exhibit 10.18)10.19
    
    
    Loan and Security Agreement, dated as of February 7, 2007, by and between Nanosphere,
Inc. and Venture Lending & Leasing IV, Inc. (1) (Exhibit 10.19)10.20
    
    
    Loan and Security Agreement, dated as of February 21, 2007, by and between Nanosphere,
Inc. and Venture Lending & Leasing V, Inc. (1) (Exhibit 10.20)10.21
    
    
    Consulting and Non-Competition Agreement, dated as of October 31, 2002, by and between
Nanosphere, Inc. and Chad A. Mirkin, as amended (1) (Exhibit 10.21)10.22
    
    
    Bonus Agreement, dated as of March 16, 2006, by and between Nanosphere, Inc. and William
P. Moffitt III, as amended (2) (Exhibit 10.22)10.23
    
    
    Series D Preferred Stock and Warrant Purchase Agreement, dated as of April 12, 2006 (2)
(Exhibit 10.24)10.24
    
    
    Note Purchase Agreement, dated as of March 15, 2006, by and between Nanosphere, Inc. and
Lurie Investment Fund, L.L.C. (2) (Exhibit 10.28)
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##### Table of Contents



Exhibit Number
    
    Exhibit Description10.25
    
    
    Form of Indemnification Agreement (3) (Exhibit 10.29)10.26
    
    
    Non-Exclusive Financial Advisory Services Engagement Letter, dated as of August 8, 2007,
by and between Nanosphere, Inc. and Allen & Company LLC (4) (Exhibit 10.30)23.1
    
    
    Consent of Deloitte & Touche LLP*31.1
    
    
    Certification of William P. Moffitt, President and Chief Executive Officer, pursuant to
Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 *31.2
    
    
    Certification of J. Roger Moody, Jr., Chief Financial Officer, pursuant to Exchange Act
Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 *32.1
    
    
    Certification of President and Chief Executive Officer, pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 *32.2
    
    
    Certification of Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 *
 
 *
    
    Filed herewith#
    
    Confidential treatment has been requested with respect to certain provisions of this
agreement. Omitted portions have been filed separately with the SEC.(1)
    
    Incorporated by reference from the Companys Registration Statement on Form S-1 as filed with
the Securities and Exchange Commission on August 13, 2007. The exhibit reference in
parentheses indicates the corresponding exhibit number in such Registration Statement.(2)
    
    Incorporated by reference from the Companys Amendment No. 1 to Form S-1 as filed with the
Securities and Exchange Commission on September 27, 2007. The exhibit reference in parentheses
indicates the corresponding exhibit number in such Amendment.(3)
    
    Incorporated by reference from the Companys Amendment No. 2 to Form S-1 as filed with the
Securities and Exchange Commission on October 17, 2007. The exhibit reference in parentheses
indicates the corresponding exhibit number in such Amendment.(4)
    
    Incorporated by reference from the Companys Amendment No. 3 to Form S-1 as filed with the
Securities and Exchange Commission on October 29, 2007. The exhibit reference in parentheses
indicates the corresponding exhibit number in such Amendment.  62




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##### Table of Contents



SIGNATURES
  NANOSPHERE, INC.By:
    /s/ William P. Moffitt IIIWilliam P. Moffitt IIIPresident and Chief Executive Officer   Signature
    
    Title(s)
    
    Date/s/ William P. Moffitt III
    
    President, Chief Executive Officer,
    
    March 19, 2008William P. Moffitt III
    
    Director
(principal executive officer)/s/ J. Roger Moody, Jr.
    
    Chief Financial Officer, Vice President
    
    March 19, 2008J. Roger Moody, Jr.
    
    of
Finance & Administration, Treasurer,Secretary (principal financial and
accounting officer)/s/ Mark Slezak
    
    Chairman of the board of directors
    
    March 19, 2008Mark Slezak/s/ Jeffrey R. Crisan
    
    Director
    
    March 19, 2008Jeffrey R. Crisan/s/ André de Bruin
    
    Director
    
    March 19, 2008André de Bruin/s/ Chad A. Mirkin
Chad A. Mirkin
    
    Director
    
    March 19, 2008/s/ James J. Nahirny
    
    Director
    
    March 19, 2008James J. Nahirny/s/ Sheli Z. Rosenberg
    
    Director
    
    March 19, 2008Sheli Z. Rosenberg




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##### Table of Contents



EXHIBIT INDEX
 Exhibit Number
    
    Exhibit Description23.1
    
    
    Consent of Deloitte & Touche LLP*31.1
    
    
    Certification of William P. Moffitt, President and Chief Executive Officer, pursuant to
Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 *31.2
    
    
    Certification of J. Roger Moody, Jr., Chief Financial Officer, pursuant to Exchange Act
Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 *32.1
    
    
    Certification of President and Chief Executive Officer, pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 *32.2
    
    
    Certification of Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 *
 
 *
    
    Filed herewith