##### Table of Contents



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, 2008
 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 
incorporation or organization)
    
    (I.R.S. Employer Identification No.)4088 Commercial Avenue
    
    Northbrook, Illinois 60062(Address of principal executive offices)
    
    (Zip Code)
 (847) 400-9000
 Common Stock, par value $0.01
 None
 o þ
 o þ
 þ o
 þ
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
    
    Smaller reporting company o
 Yes o No þ
   DOCUMENTS INCORPORATED BY REFERENCE




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##### 



NANOSPHERE, INC.
  
 INDEX
 PagePart I.Item 1. Business
    
    
    3Item 1A. Risk Factors
    
    
    15Item 1B. Unresolved Staff Comments
    
    
    26Item 2. Properties
    
    
    26Item 3. Legal Proceedings
    
    
    26Item 4. Submission of Matters to a Vote of Security Holders
    
    
    26Part II.Item 5. Market for Registrants Common Equity, Related Stockholder Matters,
and Issuer Purchases of Equity Securities
    
    
    27Item 6. Selected Financial Data
    
    
    28Item 7. Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    30Item 7A. Quantitative and Qualitative Disclosures About Market Risk
    
    
    39Item 8. Financial Statements and Supplementary Data
    
    
    40Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
    
    
    59Item 9A. Controls and Procedures
    
    
    59Item 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
    
    
    61Signatures63Exhibit 23.1Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   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
   3




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de novo
      4




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Our Products
     Our Applications
  Assay
    
    Status
    
    Condition DetectedGenomic TestsHyper-coagulation
    
    FDA clearance received October 2007
    
    Genetic mutation that could indicate
increased risk of blood clots, stroke and
pulmonary embolismWarfarin Metabolism
    
    FDA clearance received September 2007
    
    Genetic mutation important in proper
initial dosing of leading anticoagulantCystic Fibrosis
    
    510(k) filed with FDA in November 2008
    
    Cystic fibrosis gene mutation; prenatal
carrier screening & diagnosis confirmationRespiratory Virus Panel
    
    510(k) filed with FDA in October 2008
    
    Respiratory illnessHFE  hemochromatosis
    
    de novo510(k) filed with the FDA in
February 2009
    
    Hemochromatosis, iron overload diseaseBlood Infection Panel
    
    In development
    
    Blood infectionHuman Papillomavirus
    
    Feasibility demonstrated
    
    Strongly associated with cervical cancerProtein TestsCardiac Troponin I
    
    In FDA clinical trials
    
    Cardiovascular disease; risk
stratification; diagnosis of heart attackRF & Ant-CCP
    
    In development
    
    Rheumatoid ArthritisProstate Specific Antigen
    
    In development
    
    Post-surgical recurrence of prostate cancer
  5




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Genomic Assays
 Hyper-coagulation.
 Warfarin Metabolism.
 Cystic Fibrosis.
 Respiratory Virus Panel.
 HFE. de novo
 Blood Infection Screen.
 Human Papillomavirus, or HPV.
  6




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Protein Assays
  Cardiac Troponin I.
    Prostate Specific Antigen  Recurrent Prostate Cancer.
 RF & Anti-CCP  Rheumatoid Arthritis.
 Biomarker Validation.
  7




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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 attomolar (10-18) range, enabling the
unprecedented analysis of rarely expressed genes or low abundance proteins for early disease
detection and diagnosis.
 
    
    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 in Celsius temperature, 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.
 
    
    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, serves both
as a protective and recognition layer on the nanoparticle surface and 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.
  8




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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 have completed development and clinical
trials for the Verigene SP, which incorporates sample preparation into our system. By
adding this step, labs can now process a raw sample material, in most cases whole blood, in
a single step. This feature is critical for analyzing infectious diseases and will further
simplify the processing of clinical samples from swab, cerebrospinal fluid and serum. We are
also developing a scaled down version of the Verigene processor used specifically for
protein analysis. This system, the Verigene POC, lacks the features required for DNA
extraction, which provides cost reduction benefits for systems dedicated to running protein
tests.
  
    
    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 researching additional human genetic, infectious
disease and ultra-sensitive protein assays.
 
    
    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 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. This license covers all
discoveries from the International Institute for Nanotechnology at Northwestern in the field
of biodiagnostics through January 1, 2013. Nanosphere also has the right of first
negotiation for an exclusive license on inventions after such date. 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
   9




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Government Grants and Contracts
    Manufacturing
      Sales and Marketing
    10




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Competition
     Regulation by the United States Food and Drug Administration
   5 10(k) Clearance
   11




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Premarket Approval
     Clinical Investigations
    12




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Obtaining FDA Clearance for Our Products
 de novo
 Regulation After FDA Approval or Clearance
    Export of Our Products
   13




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Clinical Laboratory Improvement Amendments of 1988
  Foreign Government Regulation
   14




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Item 1A. Risk Factors
 We have a history of losses 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.
    15




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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.
   16




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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.
  The adverse capital and credit market conditions could affect our liquidity.
   17




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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.
     18




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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;
  19




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
    
    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.
  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.
   20




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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.
    21




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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.
    22




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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.
   23




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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.
   24




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We will continue to incur 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.
   25




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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
   26




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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
  High
    
    
    LowFiscal year ended December 31, 2008First Quarter
    
    $
    14.61
    
    
    $
    6.78Second Quarter
    
    
    10.32
    
    
    
    6.62Third Quarter
    
    
    12.00
    
    
    
    7.10Fourth Quarter
    
    
    8.50
    
    
    
    3.03Fiscal year ended December 31, 2007Fourth Quarter (from November 1, 2007)
    
    
    22.04
    
    
    
    11.50
 Stockholders
  Dividend Policy
   27




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Stock Performance Graph
  
 Investment Return Analysis(as of the last day of the month)
    
    Oct 07
    
    
    Dec 07
    
    
    Mar 08
    
    
    Jun 08
    
    
    Sep 08
    
    
    Dec 08Nanosphere
    
    $
    100.00
    
    
    $
    99.93
    
    
    $
    61.86
    
    
    $
    56.14
    
    
    $
    60.93
    
    
    $
    34.00NASDAQ Composite
    
    $
    100.00
    
    
    $
    93.55
    
    
    $
    80.39
    
    
    $
    80.88
    
    
    $
    73.79
    
    
    $
    55.63NASDAQ Biotechnology
    
    $
    100.00
    
    
    $
    94.07
    
    
    $
    87.98
    
    
    $
    89.39
    
    
    $
    94.20
    
    
    $
    82.19
  
 Item 6. Selected Financial Data
  As of December 31,2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004(As Adjusted)
    
    
    (As Adjusted)
    
    
    (As Adjusted)
    
    
    (As Adjusted)Statements of Operations Data:Total revenue
    
    $
    1,366,732
    
    
    $
    1,167,364
    
    
    $
    1,138,011
    
    
    $
    1,914,517
    
    
    $
    2,768,125Research and development expense (1)
    
    
    23,675,138
    
    
    
    21,445,994
    
    
    
    18,185,564
    
    
    
    13,717,654
    
    
    
    10,744,851Sales, general and administrative expense
    
    
    13,615,322
    
    
    
    13,443,304
    
    
    
    5,415,525
    
    
    
    4,502,970
    
    
    
    3,131,390Net loss (1)
    
    
    (37,041,996
    )
    
    
    (53,199,184
    )
    
    
    (24,269,918
    )
    
    
    (16,408,082
    )
    
    
    (11,280,289
    )Net loss attributable to common stock (1)
    
    
    (37,041,996
    )
    
    
    (59,284,411
    )
    
    
    (46,421,053
    )
    
    
    (19,306,869
    )
    
    
    (21,436,682
    )Net loss per common share:basic and diluted (1)
    
    
    (1.67
    )
    
    
    (14.18
    )
    
    
    (53.63
    )
    
    
    (31.57
    )
    
    
    (35.06
    )Weighted average number of common shares:basic and diluted (2)
    
    
    22,213,164
    
    
    
    4,180,979
    
    
    
    865,559
    
    
    
    611,496
    
    
    
    611,466
  28




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As of December 31,2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004(As Adjusted)
    
    
    (As Adjusted)
    
    
    (As Adjusted)
    
    
    (As Adjusted)Balance Sheet Data:Cash and cash equivalents (2)
    
    $
    75,356,960
    
    
    $
    114,312,573
    
    
    $
    29,112,429
    
    
    $
    3,641,338
    
    
    $
    6,314,008Working capital (2)
    
    
    69,027,249
    
    
    
    107,684,875
    
    
    
    27,332,463
    
    
    
    (2,642,582
    )
    
    
    4,542,299Total assets (1)(2)
    
    
    86,895,910
    
    
    
    125,963,862
    
    
    
    37,968,243
    
    
    
    9,015,260
    
    
    
    10,340,103Long-term debt
    
    
    3,352,137
    
    
    
    7,462,237
    
    
    
    58,802
    
    
    
    
    
    
    
    Convertible preferred stock (2)
    
    
    
    
    
    
    
    
    
    
    108,868,040
    
    
    
    51,143,984
    
    
    
    40,998,231Stockholders equity (deficit) (1)(2)
    
    
    74,541,108
    
    
    
    109,199,722
    
    
    
    (108,307,662
    )
    
    
    (62,292,544
    )
    
    
    (32,913,054
    )
 (1)
    
    In the third quarter of fiscal 2008 and effective July 1, 2008, the Company elected to change
its method of accounting for external patent-related costs. Prior to the change, the Company
expensed as incurred all internal patent-related costs and capitalized external patent-related
costs. Capitalized patent-related costs incurred in connection with approved patents were
previously recorded as intangible assets at cost less accumulated amortization and were amortized
over the patents estimated useful lives beginning upon the patent grant date. Costs capitalized
were written off upon patent abandonment or expiration. Under the new method of accounting, all
patent-related costs are expensed as incurred. All patent-related costs, including amortization
expense for capitalized patent-related costs were, and will continue to be, classified as research
and development expenses in the Companys statements of operations. As required by generally
accepted accounting standards, prior period financial statements have been retrospectively adjusted
to reflect those financial statements in accordance with the Companys revised accounting policy
and accordingly, the financial statements for years prior to 2008 have been labeled As Adjusted.
See Note 1 to the financial statements for a discussion of the impact of this change in accounting
policy.(2)
    
    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.  29




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Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
  Business Overview
      de novo
  30




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Financial Operations Overview
 Change in Method of Accounting for Patent Costs
    31




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Revenue
  Cost of Product Sales
  Research and Development Expenses
  Sales, General and Administrative Expenses
  Interest Income
  Interest Expense
   32




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Fiscal 2008 Compared to 2007
 Revenues
  Cost of Product Sales
  Research and Development Expenses
  Sales, General and Administrative Expenses
  Change in Fair Value of Convertible Derivative Liability
  Interest Expense
   33




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Interest Income
  Fiscal 2007 Compared to 2006
 Revenues
  Cost of Product Sales
  Research and Development Expenses
   Sales, General and Administrative Expenses
   Change in Fair Value of Convertible Derivative Liability
   34




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##### Table of Contents



Change in the Fair Value of the Preferred Stock Warrants
  Interest Expense
  Interest Income
  Liquidity and Capital Resources
       35




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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
   36




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##### Table of Contents



Contractual Obligations and Commitments
  Payments Due by PeriodContractual Obligations
    
    Total
    
    
    Less than 1 Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    More than 5 YearsLong-term debt obligations
    
    $
    8,735,504
    
    
    $
    4,818,211
    
    
    $
    3,917,293
    
    
    $
    
    
    
    $
    Interest on
long-term debt obligations
    
    
    1,001,746
    
    
    
    806,639
    
    
    
    195,107
    
    
    
    
    
    
    
    Capital lease
    
    
    22,108
    
    
    
    22,108
    
    
    
    
    
    
    
    
    
    
    
    Operating lease
    
    
    741,095
    
    
    
    520,197
    
    
    
    220,898
    
    
    
    
    
    
    
    Obligations
under license agreements
    
    
    1,970,500
    
    
    
    201,750
    
    
    
    342,500
    
    
    
    391,250
    
    
    
    1,035,000Total
    
    $
    12,470,953
    
    
    $
    6,368,905
    
    
    $
    4,675,798
    
    
    $
    391,250
    
    
    $
    1,035,000
  License Agreements
   Off-Balance Sheet Arrangements
  Critical Accounting Policies and Significant Judgments and Estimates
   Change in Method of Accounting for Patent Costs
   37




---



##### Table of Contents



Revenue Recognition
   Stock-Based Compensation Expense
  Recent Accounting Pronouncements
     38




---



##### Table of Contents



,
 
 Item 7A. Quantitative and Qualitative Disclosures About Market Risk
   39




---



##### Table of Contents



Item 8. Financial Statements and Supplementary Data
  PageReport of Independent Registered Public Accounting Firm
    
    
    41Balance Sheets as of December 31, 2008 and 2007
    
    
    42Statements of Operations for the years ended December 31, 2008, 2007 and 2006
    
    
    43Statements of Stockholders Equity (Deficit) for the years ended December 31, 2008, 2007 and 2006
    
    
    44Statements of Cash Flows for the years ended December 31, 2008, 2007 and 2006
    
    
    45Notes to Financial Statements
    
    
    46-58
  40




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##### Table of Contents



41




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##### Table of Contents



Nanosphere, Inc.
 
 Balance Sheets
 As of December 31,2008
    
    
    2007As Adjusted(Note 1)CURRENT ASSETS:Cash and cash equivalents
    
    $
    75,356,960
    
    
    $
    114,312,573Accounts receivable
    
    
    385,908
    
    
    
    100,799Inventories
    
    
    1,727,518
    
    
    
    1,903,004Other current assets
    
    
    559,528
    
    
    
    670,402Total current assets
    
    
    78,029,914
    
    
    
    116,986,778PROPERTY AND EQUIPMENT  Net
    
    
    7,294,224
    
    
    
    7,033,597INTANGIBLE ASSETS  Net of accumulated amortization
    
    
    1,443,582
    
    
    
    1,779,934OTHER ASSETS
    
    
    128,190
    
    
    
    163,553TOTAL
    
    $
    86,895,910
    
    
    $
    125,963,862CURRENT LIABILITIES:Accounts payable
    
    $
    1,813,777
    
    
    $
    2,221,522Accrued compensation
    
    
    829,292
    
    
    
    1,303,355Accrued financing costs
    
    
    
    
    
    
    778,731Other current liabilities
    
    
    1,541,385
    
    
    
    1,400,472Long-term debt  current portion
    
    
    4,818,211
    
    
    
    3,597,823Total current liabilities
    
    
    9,002,665
    
    
    
    9,301,903LONG-TERM LIABILITIES:Long-term debt  noncurrent portion
    
    
    3,352,137
    
    
    
    7,440,804Other noncurrent liabilities
    
    
    
    
    
    
    21,433Total liabilities
    
    
    12,354,802
    
    
    
    16,764,140COMMITMENTS AND CONTINGENCIESSTOCKHOLDERS EQUITY:Common stock, $0.01 par value; 100,000,000 shares
authorized; 22,228,696 shares and 22,192,005
shares issued and outstanding as of December 31,
2008 and 2007, respectively
    
    
    222,287
    
    
    
    305,174Preferred stock, $0.01 par value; 10,000,000
shares authorized; no shares issued
    
    
    
    
    
    
    Additional paid-in capital
    
    
    274,232,825
    
    
    
    271,765,776Warrants to acquire common stock
    
    
    5,423,771
    
    
    
    5,424,551Accumulated deficit
    
    
    (205,337,775
    )
    
    
    (168,295,779
    )Total stockholders equity
    
    
    74,541,108
    
    
    
    109,199,722TOTAL
    
    $
    86,895,910
    
    
    $
    125,963,862
   42




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##### Table of Contents



Nanosphere, Inc.
 
 Statements of Operations
 Years Ended December 31,2008
    
    
    2007
    
    
    2006As Adjusted
    
    
    As Adjusted(Note 1)
    
    
    (Note 1)REVENUE:Grant and contract revenue
    
    $
    346,070
    
    
    $
    1,056,874
    
    
    $
    1,006,351Product sales
    
    
    1,020,662
    
    
    
    110,490
    
    
    
    131,660Total revenue
    
    
    1,366,732
    
    
    
    1,167,364
    
    
    
    1,138,011COSTS AND EXPENSES:Cost of product sales
    
    
    1,464,066
    
    
    
    86,349
    
    
    
    31,049Research and development
    
    
    23,675,138
    
    
    
    21,445,994
    
    
    
    18,185,564Sales, general, and administrative
    
    
    13,615,322
    
    
    
    13,443,304
    
    
    
    5,415,525Total costs and expenses
    
    
    38,754,526
    
    
    
    34,975,647
    
    
    
    23,632,138Loss from operations
    
    
    (37,387,794
    )
    
    
    (33,808,283
    )
    
    
    (22,494,127
    )OTHER INCOME (EXPENSE):Change in fair value of convertible derivative liability
    
    
    
    
    
    
    (14,860,901
    )
    
    
    (2,916,822
    )Change in fair value of preferred stock warrants
    
    
    
    
    
    
    (4,414,207
    )
    
    
    (119,914
    )Foreign exchange loss
    
    
    (23,691
    )
    
    
    (52,362
    )
    
    
    Interest
expense  related party
    
    
    
    
    
    
    
    
    
    
    (146,550
    )Interest expense
    
    
    (2,080,629
    )
    
    
    (1,977,619
    )
    
    
    (7,506
    )Interest income
    
    
    2,450,118
    
    
    
    1,914,188
    
    
    
    1,415,001Total other income (expense)
    
    
    345,798
    
    
    
    (19,390,901
    )
    
    
    (1,775,791
    )NET LOSS
    
    
    (37,041,996
    )
    
    
    (53,199,184
    )
    
    
    (24,269,918
    )Accumulated convertible preferred stock dividends
    
    
    
    
    
    
    (5,476,287
    )
    
    
    (4,413,591
    )Convertible preferred stock redemption value adjustment
    
    
    
    
    
    
    (608,940
    )
    
    
    (17,737,544
    )NET LOSS ATTRIBUTABLE TO COMMON STOCK
    
    $
    (37,041,996
    )
    
    $
    (59,284,411
    )
    
    $
    (46,421,053
    )Net loss per
common share  basic and diluted
    
    $
    (1.67
    )
    
    $
    (14.18
    )
    
    $
    (53.63
    )Weighted
average number of common shares outstanding 
basic and diluted
    
    
    22,213,164
    
    
    
    4,180,979
    
    
    
    865,559
   43




---



##### Table of Contents



Nanosphere,
Inc.
 
 Statements of Stockholders Equity (Deficit)
 NoteWarrants
    
    
    ReceivableAdditional
    
    
    To Acquire
    
    
    From ChiefCommon Stock
    
    
    Paid-In
    
    
    Common
    
    
    Executive
    
    
    AccumulatedShares
    
    
    Par Value
    
    
    Capital
    
    
    Stock
    
    
    Officer
    
    
    Deficit
    
    
    TotalBALANCE  January 1, 2006, as presented
    
    
    611,716
    
    
    $
    12,347
    
    
    $
    285,424
    
    
    $
    
    
    
    $
    
    
    
    $
    (60,259,061
    )
    
    $
    (59,961,290
    )Cumulative impact  change in accounting principle
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,331,254
    )
    
    
    (2,331,254
    )BALANCE  January 1, 2006 (As adjusted, see Note
1)
    
    
    611,716
    
    
    
    12,347
    
    
    
    285,424
    
    
    
    
    
    
    
    
    
    
    
    (62,590,315
    )
    
    
    (62,292,544
    )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 (As adjusted, see Note 1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (24,269,918
    )
    
    
    (24,269,918
    )BALANCE  December 31, 2006 (As adjusted, see
Note 1)
    
    
    932,646
    
    
    
    92,580
    
    
    
    2,051,126
    
    
    
    
    
    
    
    (1,440,000
    )
    
    
    (109,011,368
    )
    
    
    (108,307,662
    )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 (As adjusted, see Note 1)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (53,199,184
    )
    
    
    (53,199,184
    )BALANCE  December 31, 2007 (As adjusted, see
Note 1)
    
    
    22,192,005
    
    
    
    305,174
    
    
    
    271,765,776
    
    
    
    5,424,551
    
    
    $
    
    
    
    
    (168,295,779
    )
    
    
    109,199,722Share-based compensation related to stock options
    
    
    
    
    
    
    
    
    
    
    2,217,858
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,217,858Exercise of stock options on common stock
    
    
    36,491
    
    
    
    365
    
    
    
    163,845
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    164,210Exercise of warrants
    
    
    200
    
    
    
    2
    
    
    
    2,966
    
    
    
    (780
    )
    
    
    
    
    
    
    
    
    
    
    2,188Other
    
    
    
    
    
    
    (83,254
    )
    
    
    82,380
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (874
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (37,041,996
    )
    
    
    (37,041,996
    )BALANCE  December 31, 2008
    
    
    22,228,696
    
    
    $
    222,287
    
    
    $
    274,232,825
    
    
    $
    5,423,771
    
    
    $
    
    
    
    $
    (205,337,775
    )
    
    $
    74,541,108
   44




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##### Table of Contents



Nanosphere, Inc.
 
 Statements of Cash Flows
 Years Ended December 31,2008
    
    
    2007
    
    
    2006As Adjusted
    
    
    As Adjusted(Note 1)
    
    
    (Note 1)CASH FLOWS FROM OPERATING ACTIVITIES:Net loss
    
    $
    (37,041,996
    )
    
    $
    (53,199,184
    )
    
    $
    (24,269,918
    )Adjustments to reconcile net loss to net cash used in
operating activities:Depreciation and amortization
    
    
    3,170,265
    
    
    
    1,785,972
    
    
    
    1,191,411Amortization of financing costs and accretion of debt discount
    
    
    762,277
    
    
    
    671,480
    
    
    
    Loss from write-off of intangible assets
    
    
    245,134
    
    
    
    
    
    
    
    Loss from disposal of fixed assets
    
    
    326,291
    
    
    
    
    
    
    
    Share-based compensation
    
    
    2,217,858
    
    
    
    1,669,006
    
    
    
    398,960Change in fair value of preferred stock warrants
    
    
    
    
    
    
    4,414,207
    
    
    
    119,914Change in fair value of convertible derivative liability
    
    
    
    
    
    
    14,860,901
    
    
    
    2,916,822Changes in operating assets and liabilities:Accounts receivable
    
    
    (285,109
    )
    
    
    (55,983
    )
    
    
    202,805Inventories
    
    
    (1,078,965
    )
    
    
    (1,018,155
    )
    
    
    (761,084
    )Other current assets
    
    
    110,874
    
    
    
    (207,544
    )
    
    
    (80,533
    )Other assets
    
    
    2,630
    
    
    
    10,830
    
    
    
    (10,000
    )Accounts payable
    
    
    (208,760
    )
    
    
    712,225
    
    
    
    198,967Accrued and other current liabilities
    
    
    (195,047
    )
    
    
    1,038,759
    
    
    
    596,422Net cash used in operating activities
    
    
    (31,974,548
    )
    
    
    (29,317,486
    )
    
    
    (19,496,234
    )CASH FLOWS FROM INVESTING ACTIVITIES:Proceeds from investment maturities
    
    
    
    
    
    
    
    
    
    
    53,894Purchases of property and equipment
    
    
    (2,332,267
    )
    
    
    (3,157,478
    )
    
    
    (2,184,616
    )Investments in intangible assets
    
    
    (400,732
    )
    
    
    (399,911
    )
    
    
    (996,534
    )Net cash used in investing activities
    
    
    (2,732,999
    )
    
    
    (3,557,389
    )
    
    
    (3,127,256
    )CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from related party notes payable
    
    
    
    
    
    
    
    
    
    
    1,320,148Proceeds from issuance of debt
    
    
    
    
    
    
    12,500,000
    
    
    
    Repayment of long-term debt
    
    
    (3,597,823
    )
    
    
    (166,673
    )
    
    
    Payments on capital lease obligation
    
    
    (37,036
    )
    
    
    (32,776
    )
    
    
    (26,439
    )Deferred financing fees
    
    
    
    
    
    
    (114,565
    )
    
    
    Proceeds from principal and interest on CEO note receivable
    
    
    
    
    
    
    1,530,740
    
    
    
    Proceeds from the issuance of common stock, net of offering
expenses
    
    
    (778,731
    )
    
    
    102,951,648
    
    
    
    6,975Proceeds from warrant redemptions
    
    
    2,188
    
    
    
    1,286,620
    
    
    
    Proceeds from stock option exercises
    
    
    164,210
    
    
    
    120,025
    
    
    
    Proceeds from the issuance of Series D Convertible Preferred
Stock
    
    
    
    
    
    
    
    
    
    
    46,793,897Other
    
    
    (874
    )
    
    
    
    
    
    
    Net cash (used in) provided by financing activities
    
    
    (4,248,066
    )
    
    
    118,075,019
    
    
    
    48,094,581NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
    
    (38,955,613
    )
    
    
    85,200,144
    
    
    
    25,471,091CASH AND CASH EQUIVALENTS  Beginning of year
    
    
    114,312,573
    
    
    
    29,112,429
    
    
    
    3,641,338CASH AND CASH EQUIVALENTS  End of year
    
    $
    75,356,960
    
    
    $
    114,312,573
    
    
    $
    29,112,429NONCASH INVESTING AND FINANCING ACTIVITIES:Equipment acquired under capital lease
    
    $
    
    
    
    $
    
    
    
    $
    117,685Capital expenditures included in accounts payable
    
    
    
    
    
    
    201,441
    
    
    
    208,066License costs capitalized and included in accounts payable
    
    
    
    
    
    
    26,233
    
    
    
    9,825License costs capitalized and included in accrued liabilities
    
    
    225,000
    
    
    
    347,500
    
    
    
    690,000Common stock issued for note payable  related party
    
    
    
    
    
    
    
    
    
    
    1,440,0006% dividends earned on Series C-2 and Series D Convertible
Preferred Stock
    
    
    
    
    
    
    5,476,287
    
    
    
    4,413,591Conversion of Preferred Stock, including accumulated dividends
on Series C-2 and Series D Convertible Preferred Stock into
common stock
    
    
    
    
    
    
    116,281,865
    
    
    
    Conversion of convertible derivative liability to additional
paid-in capital
    
    
    
    
    
    
    47,554,882
    
    
    
    Conversion of preferred stock warrant liability to warrants to
acquire common stock
    
    
    
    
    
    
    5,424,551
    
    
    
    Conversion of related party notes payable and accrued interest
of $177,358 into Series D Convertible Preferred Stock
    
    
    
    
    
    
    
    
    
    
    6,516,568Equity offering transaction costs included in accrued
financing costs
    
    
    
    
    
    
    778,731
    
    
    
    Reclassification of inventory to equipment at customers
    
    
    1,254,451
    
    
    
    
    
    
    
    
   45




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##### Table of Contents



Nanosphere, Inc.
 
 Notes to Financial Statements
As of December 31, 2008 and 2007, and
For the years ended December 31, 2008, 2007 and 2006
 1. Description of Business
  Basis of Presentation
    Change in Method of Accounting for Patent Costs
    46




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##### Table of Contents



Nanosphere, Inc.
 Notes to Financial Statements  (Continued)
  As of December 31, 2007As Originally
    
    
    
    
    
    EffectBalance Sheet
    
    Reported
    
    
    As Adjusted
    
    
    of ChangeIntangible
assets  net of accumulated amortization
    
    $
    4,930,752
    
    
    $
    1,779,934
    
    
    $
    (3,150,818
    )Total assets
    
    $
    129,114,680
    
    
    $
    125,963,862
    
    
    $
    (3,150,818
    )Accumulated deficit
    
    $
    (165,144,961
    )
    
    $
    (168,295,779
    )
    
    $
    (3,150,818
    )Total stockholders equity
    
    $
    112,350,540
    
    
    $
    109,199,722
    
    
    $
    (3,150,818
    )Total liabilities and stockholders equity
    
    $
    129,114,680
    
    
    $
    125,963,862
    
    
    $
    (3,150,818
    )
 Year Ended December 31, 2007As Originally
    
    
    
    
    
    EffectStatement
of Operations
    

Reported
    
    
    As Adjusted
    
    
    of ChangeResearch and development
    
    $
    21,364,767
    
    
    $
    21,445,994
    
    
    $
    81,227Total costs and expenses
    
    $
    34,894,420
    
    
    $
    34,975,647
    
    
    $
    81,227Loss from operations
    
    $
    (33,727,056
    )
    
    $
    (33,808,283
    )
    
    $
    (81,227
    )Net loss
    
    $
    (53,117,957
    )
    
    $
    (53,199,184
    )
    
    $
    (81,227
    )Net loss attributable to common stock
    
    $
    (59,203,184
    )
    
    $
    (59,284,411
    )
    
    $
    (81,227
    )Net loss per
common share  basic and diluted
    
    $
    (14.16
    )
    
    $
    (14.18
    )
    
    $
    (0.02
    )
 Year Ended December 31, 2006As Originally
    
    
    
    
    
    EffectStatement
of Operations
    
    Reported
    
    
    As Adjusted
    
    
    of ChangeResearch and development
    
    $
    17,447,227
    
    
    $
    18,185,564
    
    
    $
    738,337Total costs and expenses
    
    $
    22,893,801
    
    
    $
    23,632,138
    
    
    $
    738,337Loss from operations
    
    $
    (21,755,790
    )
    
    $
    (22,494,127
    )
    
    $
    (738,337
    )Net loss
    
    $
    (23,531,581
    )
    
    $
    (24,269,918
    )
    
    $
    (738,337
    )Net loss attributable to common stock
    
    $
    (45,682,716
    )
    
    $
    (46,421,053
    )
    
    $
    (738,337
    )Net loss per
common share  basic and diluted
    
    $
    (52.78
    )
    
    $
    (53.63
    )
    
    $
    (0.85
    )
 Year Ended December 31, 2007As Originally
    
    
    
    
    
    EffectStatement
of Cash Flows
    
    Reported
    
    
    As Adjusted
    
    
    of ChangeCash Flows From Operating Activities:Net loss
    
    $
    (53,117,957
    )
    
    $
    (53,199,184
    )
    
    $
    (81,227
    )Depreciation and amortization
    
    $
    1,902,733
    
    
    $
    1,785,972
    
    
    $
    (116,761
    )Loss from write-off of intangible assets
    
    $
    477,684
    
    
    $
    
    
    
    $
    (477,684
    )Accounts payable
    
    $
    857,614
    
    
    $
    712,225
    
    
    $
    (145,389
    )Accrued and other current liabilities
    
    $
    1,098,045
    
    
    $
    1,038,759
    
    
    $
    (59,286
    )Net cash used in operating activities
    
    $
    (28,437,139
    )
    
    $
    (29,317,486
    )
    
    $
    (880,347
    )Cash Flows From Investing Activities:Investments in intangible assets
    
    $
    (1,280,258
    )
    
    $
    (399,911
    )
    
    $
    880,347Net cash used in investing activities
    
    $
    (4,437,736
    )
    
    $
    (3,557,389
    )
    
    $
    880,347Noncash Investing and Financing Activities:Patent costs capitalized and included in accounts payable
    
    $
    29,263
    
    
    $
    26,233
    
    
    $
    (3,030
    )Patent and license costs capitalized and included in accrued liabilities
    
    $
    355,504
    
    
    $
    347,500
    
    
    $
    (8,004
    )
  47




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##### Table of Contents



Nanosphere, Inc.
 Notes to Financial Statements  (Continued)
 Year Ended December 31, 2006As OriginallyStatement of Cash Flows
    
    Reported
    
    
    As Adjusted
    
    
    Effect of ChangeCash Flows From Operating Activities:Net loss
    
    $
    (23,531,581
    )
    
    $
    (24,269,918
    )
    
    $
    (738,337
    )Depreciation and amortization
    
    $
    1,239,855
    
    
    $
    1,191,411
    
    
    $
    (48,444
    )Loss from write-off of intangible assets
    
    $
    41,659
    
    
    $
    
    
    
    $
    (41,659
    )Accounts payable
    
    $
    157,868
    
    
    $
    198,967
    
    
    $
    41,099Accrued and other current liabilities
    
    $
    564,563
    
    
    $
    596,422
    
    
    $
    31,859Net cash used in operating activities
    
    $
    (18,740,752
    )
    
    $
    (19,496,234
    )
    
    $
    (755,482
    )Cash Flows From Investing Activities:Investments in intangible assets
    
    $
    (1,752,016
    )
    
    $
    (996,534
    )
    
    $
    755,482Net cash used in investing activities
    
    $
    (3,882,738
    )
    
    $
    (3,127,256
    )
    
    $
    755,482Noncash Investing and Financing Activities:Patent costs capitalized and included in accounts payable
    
    $
    158,344
    
    
    $
    9,825
    
    
    $
    (148,519
    )Patent and license costs capitalized and included in accrued liabilities
    
    $
    757,290
    
    
    $
    690,000
    
    
    $
    (67,290
    )
 As of December 31, 2008As Computed under the
    
    
    As Reported under theBalance Sheet
    
    Prior Method
    
    
    New Method
    
    
    Effect of ChangeIntangible
assets  net of accumulated amortization
    
    $
    4,580,359
    
    
    $
    1,443,582
    
    
    $
    (3,136,777
    )Total assets
    
    $
    90,032,687
    
    
    $
    86,895,910
    
    
    $
    (3,136,777
    )Accumulated deficit
    
    $
    (202,200,998
    )
    
    $
    (205,337,775
    )
    
    $
    (3,136,777
    )Total stockholders equity
    
    $
    77,677,885
    
    
    $
    74,541,108
    
    
    $
    (3,136,777
    )Total liabilities and stockholders equity
    
    $
    90,032,687
    
    
    $
    86,895,910
    
    
    $
    (3,136,777
    )
 Year Ended December 31, 2008As Computed under the
    
    
    As Reported under theStatement of Operations
    
    Prior Method
    
    
    New Method
    
    
    Effect of ChangeResearch and development
    
    $
    23,689,179
    
    
    $
    23,675,138
    
    
    $
    (14,041
    )Total costs and expenses
    
    $
    38,768,567
    
    
    $
    38,754,526
    
    
    $
    (14,041
    )Loss from operations
    
    $
    (37,401,835
    )
    
    $
    (37,387,794
    )
    
    $
    14,041Net loss
    
    $
    (37,056,037
    )
    
    $
    (37,041,996
    )
    
    $
    14,041Net loss attributable to common stock
    
    $
    (37,056,037
    )
    
    $
    (37,041,996
    )
    
    $
    14,041Net loss per
common share  basic and diluted
    
    $
    (1.67
    )
    
    $
    (1.67
    )
    
    $
    
 Year Ended December 31, 2008As Computed under the
    
    
    As Reported under theStatement of Cash Flows
    
    Prior Method
    
    
    New Method
    
    
    Effect of ChangeCash Flows From Operating Activities:Net loss
    
    $
    (37,056,037
    )
    
    $
    (37,041,996
    )
    
    $
    14,041Depreciation and amortization
    
    $
    3,274,163
    
    
    $
    3,170,265
    
    
    $
    (103,898
    )Accounts payable
    
    $
    (205,730
    )
    
    $
    (208,760
    )
    
    $
    (3,030
    )Accrued and other current liabilities
    
    $
    (187,043
    )
    
    $
    (195,047
    )
    
    $
    (8,004
    )Net cash used in operating activities
    
    $
    (31,873,657
    )
    
    $
    (31,974,548
    )
    
    $
    (100,891
    )Cash Flows From Investing Activities:Investments in intangible assets
    
    $
    (501,623
    )
    
    $
    (400,732
    )
    
    $
    100,891Net cash used in investing activities
    
    $
    (2,833,890
    )
    
    $
    (2,732,999
    )
    
    $
    100,891
 2. Summary of Significant Accounting Policies
 Cash and Cash Equivalents
 Receivables
  48




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##### Table of Contents



Nanosphere, Inc.
 Notes to Financial Statements  (Continued)
 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
   Intangible Assets
 Deferred Financing Costs
 Impairment of Long-Lived Assets
 Use of Estimates
 Revenue Recognition
   49




---



##### Table of Contents



Nanosphere, Inc.
 Notes to Financial Statements  (Continued)
  Research and Development Costs
 Income Taxes
 Share-Based Compensation
 Preferred Stock
 Fair Value of Financial Instruments
   New Accounting Standards Issued Not Yet Adopted
  50




---



##### Table of Contents



Nanosphere, Inc.
 Notes to Financial Statements  (Continued)
  ,
 Net Loss Per Common Share  ,
 
 Year ended December 31,2008
    
    
    2007
    
    
    2006Stock options
    
    
    3,362,721
    
    
    
    3,141,530
    
    
    
    861,128Convertible preferred stock
    
    
    
    
    
    
    
    
    
    
    12,069,968Convertible preferred stock warrants
    
    
    
    
    
    
    
    
    
    
    1,445,997Common stock warrants
    
    
    1,300,119
    
    
    
    1,300,319
    
    
    
    4,662,840
    
    
    
    4,441,849
    
    
    
    14,377,093
 3. Intangible Assets
  December 31, 2008
    
    
    December 31, 2007Accumulated
    
    
    
    
    
    
    
    
    
    
    AccumulatedCost
    
    
    Amortization
    
    
    Net
    
    
    Cost
    
    
    Amortization
    
    
    NetIntellectual property  licenses
    
    $
    1,877,043
    
    
    $
    (433,461
    )
    
    $
    1,443,582
    
    
    $
    1,870,178
    
    
    $
    (90,244
    )
    
    $
    1,779,934
  Years Ending December 312009
    
    $
    191,5562010
    
    
    121,5562011
    
    
    121,5562012
    
    
    121,5562013
    
    
    121,556Thereafter
    
    
    476,302
   51




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##### Table of Contents



Nanosphere, Inc.
 Notes to Financial Statements  (Continued)
 4. Related Party Transactions
      5. Equity Incentive Plan
     52




---



##### Table of Contents



Nanosphere, Inc.
 Notes to Financial Statements  (Continued)
  2008
    
    
    2007
    
    
    2006Expected dividend yield
    
    
    0
    %
    
    
    0
    %
    
    
    0
    %Expected volatility
    
    
    68
    %
    
    
    77
    %
    
    
    85
    %Risk free interest rate
    
    
    3.02
    %
    
    
    4.65
    %
    
    
    4.82
    %Weighted-average expected option life
    
    6.4 years
    
    
    7.0 years
    
    
    8.4 yearsEstimated weighted-average fair value on the
date of grant based on the above assumptions
    
    $
    6.97
    
    
    $
    3.38
    
    
    $
    2.56Estimated forfeiture rate for unvested options
    
    
    4.6
    %
    
    
    4.6
    %
    
    
    12.5
    %
    WeightedWeighted
    
    
    AverageAverage
    
    
    Remaining
    
    
    AggregateNumber of
    
    
    Exercise
    
    
    Contractual
    
    
    IntrinsicOptions
    
    Shares
    
    
    Price
    
    
    Term
    
    
    Value of OptionsOutstanding  January 1, 2008
    
    
    3,141,530
    
    
    $
    4.97Granted
    
    
    404,500
    
    
    $
    10.86Exercised
    
    
    (36,491
    )
    
    $
    4.50Expired
    
    
    (10,421
    )
    
    $
    8.42Forfeited
    
    
    (136,397
    )
    
    $
    4.78Outstanding  December 31, 2008
    
    
    3,362,721
    
    
    $
    5.68
    
    
    
    7.95
    
    
    $
    757,082Exercisable  December 31, 2008
    
    
    773,604
    
    
    $
    6.14
    
    
    
    7.19
    
    
    $
    186,037Vested and Expected to Vest  December 31, 2008
    
    
    3,243,622
    
    
    $
    5.69
    
    
    
    7.94
    
    
    $
    730,814
   6. Income Taxes
   53




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##### Table of Contents



Nanosphere, Inc.
 Notes to Financial Statements  (Continued)
   2008
    
    
    2007(As Adjusted)Deferred tax assets:Net operating losses
    
    $
    49,363,621
    
    
    $
    36,579,584Research and development credits
    
    
    6,974,400
    
    
    
    5,608,329Stock option compensation
    
    
    554,748
    
    
    
    365,927Amortization of intangible assets
    
    
    1,233,349
    
    
    
    1,233,168Other
    
    
    308,095
    
    
    
    143,56058,434,213
    
    
    
    43,930,568Valuation allowance
    
    
    (57,995,579
    )
    
    
    (43,536,573
    )Net deferred tax assets after valuation allowance
    
    
    438,634
    
    
    
    393,995Deferred tax liabilities:Depreciation on property and equipment
    
    
    (438,634
    )
    
    
    (393,995
    )Deferred tax assets  net
    
    $
    
    
    
    $
    
   Years Ended December 31,2008
    
    
    2007
    
    
    2006Tax provision at the statutory federal rate
    
    
    34.0
    %
    
    
    34.0
    %
    
    
    34.0
    %State income taxes, net of federal income tax benefit
    
    
    4.8
    %
    
    
    4.8
    %
    
    
    4.0
    %Fair value adjustments to convertible derivative liability and preferred stock warrants
    
    
    
    
    
    
    (14.1
    )%
    
    
    Other
    
    
    (5.8
    %)
    
    
    0.5
    %
    
    
    Valuation allowance
    
    
    (33.0
    )%
    
    
    (25.2
    )%
    
    
    (38.0
    )%0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %
   7. License Agreements
   54




---



##### Table of Contents



Nanosphere, Inc.
 Notes to Financial Statements  (Continued)
      8. Stockholders Equity
 Common Stock
    55




---



##### Table of Contents



Nanosphere, Inc.
 Notes to Financial Statements  (Continued)
    Convertible Preferred Stock
     Series of Stock to
    
    Number of
    
    
    Expirationwhich the Warrant is Exercisable
    
    Warrants
    
    
    DateCommon  exercise price of $13.13 per share
    
    
    1,135,194
    
    
    April 2011Common  exercise price of $8.75 per share
    
    
    164,925
    
    
    April 2013
   November 1,
    
    
    December 31,2007
    
    
    2006Expected dividend yield
    
    
    6
    %
    
    
    6
    %Expected volatility
    
    
    55
    %
    
    
    40
    %Risk free interest rate
    
    
    3.83
    %
    
    
    4.70
    %Weighted-average warrant term
    
    3.4 years
    
    
    4.7 yearsEstimated weighted-average fair value
    
    $
    0.17
    
    
    $
    0.05
  56




---



##### Table of Contents



Nanosphere, Inc.
 Notes to Financial Statements  (Continued)
 9. Leases
   OperatingYears Ending December 31
    
    Leases2009
    
    $
    520,1972010
    
    
    220,898Total minimum lease payments
    
    $
    741,095
 10. Long-Term Debt
     2009
    
    
    4,818,2112010
    
    
    3,917,293$
    8,735,504
 11. Inventory
  2008
    
    
    2007Work-in-process component parts
    
    $
    1,068,840
    
    
    $
    1,361,227Finished goods
    
    
    658,678
    
    
    
    541,777Total
    
    $
    1,727,518
    
    
    $
    1,903,004
  57




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##### Table of Contents



Nanosphere, Inc.
 Notes to Financial Statements  (Continued)
 12. Property and Equipment
  2008
    
    
    2007Property and equipment  at cost:Equipment with customers
    
    $
    1,582,580
    
    
    $
    281,060Computer equipment and software
    
    
    973,376
    
    
    
    866,338Laboratory equipment
    
    
    3,819,860
    
    
    
    3,787,271Furniture and fixtures
    
    
    269,047
    
    
    
    269,047Leasehold improvements
    
    
    2,787,273
    
    
    
    2,257,042Manufacturing equipment
    
    
    3,857,945
    
    
    
    3,172,295Office equipment
    
    
    67,068
    
    
    
    67,068Tooling
    
    
    1,159,222
    
    
    
    1,029,006Total property and equipment  at cost
    
    
    14,516,371
    
    
    
    11,729,127Less accumulated depreciation
    
    
    (7,222,147
    )
    
    
    (4,695,530
    )Net property and equipment
    
    $
    7,294,224
    
    
    $
    7,033,597
 13. Quarterly Financial Data (Unaudited)
 2008 QuartersFirst
    
    
    Second
    
    
    Third
    
    
    Fourth(As Computed
    
    
    (As Reported
    
    
    (As Computed
    
    
    (As Reported(As Originally
    
    
    
    
    
    
    (As Originally
    
    
    
    
    
    
    under the Prior
    
    
    under the New
    
    
    under the Prior
    
    
    under the NewReported)
    
    
    (As Adjusted)
    
    
    Reported)
    
    
    (As Adjusted)
    
    
    Method)
    
    
    Method)
    
    
    Method)
    
    
    Method)Total revenue
    
    $
    576,016
    
    
    $
    576,016
    
    
    $
    194,715
    
    
    $
    194,715
    
    
    $
    283,231
    
    
    $
    283,231
    
    
    $
    312,770
    
    
    $
    312,770Loss from operations
    
    $
    (9,024,506
    )
    
    $
    (9,106,140
    )
    
    $
    (9,837,894
    )
    
    $
    (9,832,796
    )
    
    $
    (9,086,969
    )
    
    $
    (9,023,050
    )
    
    $
    (9,452,466
    )
    
    $
    (9,425,808
    )Net loss
    
    $
    (8,701,734
    )
    
    $
    (8,783,368
    )
    
    $
    (9,837,022
    )
    
    $
    (9,831,924
    )
    
    $
    (9,090,391
    )
    
    $
    (9,026,472
    )
    
    $
    (9,426,890
    )
    
    $
    (9,400,232
    )Per share data:Net loss per common
share  basic and
diluted
    
    $
    (0.39
    )
    
    $
    (0.40
    )
    
    $
    (0.44
    )
    
    $
    (0.44
    )
    
    $
    (0.41
    )
    
    $
    (0.41
    )
    
    $
    (0.42
    )
    
    $
    (0.42
    )2007 QuartersFirst
    
    
    Second
    
    
    Third
    
    
    Fourth(As Originally
    
    
    
    
    
    
    (As Originally
    
    
    
    
    
    
    (As Originally
    
    
    
    
    
    
    (As OriginallyReported)
    
    
    (As Adjusted)
    
    
    Reported)
    
    
    (As Adjusted)
    
    
    Reported)
    
    
    (As Adjusted)
    
    
    Reported)
    
    
    (As Adjusted)Total
revenue
    
    $
    269,903
    
    
    $
    269,903
    
    
    $
    510,270
    
    
    $
    510,270
    
    
    $
    199,005
    
    
    $
    199,005
    
    
    $
    188,186
    
    
    $
    188,186Loss from operations
    
    $
    (6,863,524
    )
    
    $
    (7,146,254
    )
    
    $
    (7,850,300
    )
    
    $
    (7,856,633
    )
    
    $
    (9,907,443
    )
    
    $
    (10,011,999
    )
    
    $
    (9,105,789
    )
    
    $
    (8,793,397
    )Net loss
    
    $
    (6,636,367
    )
    
    $
    (6,919,097
    )
    
    $
    (8,433,154
    )
    
    $
    (8,439,487
    )
    
    $
    (26,968,431
    )
    
    $
    (27,072,987
    )
    
    $
    (11,080,005
    )
    
    $
    (10,767,613
    )Per share data:Net loss per common
share  basic and
diluted
    
    $
    (9.37
    )
    
    $
    (9.67
    )
    
    $
    (10.85
    )
    
    $
    (10.86
    )
    
    $
    (30.69
    )
    
    $
    (30.80
    )
    
    $
    (0.84
    )
    
    $
    (0.82
    )
    58




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##### Table of Contents



Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
  
 Item 9A. Controls and Procedures
    Internal Control  Integrated Framework Internal
Control  Integrated Framework
    
 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)
  61




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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)18
    
    
    Preferability Letter from Deloitte & Touche LLP (5) (Exhibit 18)23.1
    
    
    Consent of Deloitte & Touche LLP*31.1
    
    
    Certification of 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 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 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.(5)
    
    Incorporated by reference from the Companys Quarterly Report on Form 10-Q as filed with the
Securities and Exchange Commission on November 10, 2008. The exhibit reference in parentheses
indicates the corresponding exhibit number in such Quarterly Report.  62




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##### Table of Contents



SIGNATURES
  NANOSPHERE, INC.By:
    /s/ William P. MoffittWilliam P. MoffittPresident and Chief Executive Officer   Signature
    
    Title(s)
    
    Date/s/ William P. Moffitt

William P. Moffitt
    
    President, Chief Executive Officer,
Director (principal executive officer)
    
    February 24, 2009/s/ Roger Moody

Roger Moody
    
    Chief Financial Officer, Treasurer
    
    February 24, 2009/s/ Mark Slezak
    
    Chairman of the board of directors
    
    February 24, 2009Mark Slezak/s/ Jeffrey R. Crisan
    
    Director
    
    February 24, 2009Jeffrey R. Crisan/s/ André de Bruin

André de Bruin
    
    Director
    
    February 24, 2009/s/ Chad A. Mirkin

Chad A. Mirkin
    
    Director
    
    February 24, 2009/s/ James J. Nahirny

James J. Nahirny
    
    Director
    
    February 24, 2009/s/ Sheli Z. Rosenberg

Sheli Z. Rosenberg
    
    Director
    
    February 24, 2009/s/ Lorin J. Randall

Lorin J. Randall
    
    Director
    
    February 24, 2009
  63




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##### Table of Contents



EXHIBIT INDEX
 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)18
    
    
    Preferability Letter from Deloitte & Touche LLP (5) (Exhibit 18)23.1
    
    
    Consent of Deloitte & Touche LLP*31.1
    
    
    Certification of 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 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 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.(5)
    
    Incorporated by reference from the Companys Quarterly Report on Form 10-Q as
filed with the Securities and Exchange Commission on November 10, 2008. The
exhibit reference in parentheses indicates the corresponding exhibit number in
such Quarterly Report.