NANOSPHERE INC - FORM 10-Q

NANOSPHERE INC - FORM 10-Q - May 7, 2014

Attached files

Attached files

NANOSPHERE INC Reports

Attached files

NANOSPHERE INC Reports

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Table of Contents

file	filename
EXCEL - IDEA: XBRL DOCUMENT - NANOSPHERE INC	Financial_Report.xls
EX-31.2 - EX-31.2 - NANOSPHERE INC	d719508dex312.htm
EX-31.1 - EX-31.1 - NANOSPHERE INC	d719508dex311.htm
EX-32.2 - EX-32.2 - NANOSPHERE INC	d719508dex322.htm
EX-32.1 - EX-32.1 - NANOSPHERE INC	d719508dex321.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2014

¨	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)

Registrant’s telephone number, including area code: (847) 400-9000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

The number of outstanding shares of the registrant’s common stock, par value $0.01 per share, as of May 2, 2014 was 76,919,106.

NANOSPHERE, INC.

INDEX


Part I.	FINANCIAL INFORMATION
	Item 1.	Financial Statements (unaudited)	3
		Balance Sheets	3
		Statements of Operations	4
		Statements of Cash Flows	5
		Notes to Financial Statements	6
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	11
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	17
	Item 4.	Controls and Procedures	17
Part II.	OTHER INFORMATION
	Item 1.	Legal Proceedings	18
	Item 1A.	Risk Factors	18
	Item 5.	Other Information	18
	Item 6.	Exhibits	18

PART I.

FINANCIAL INFORMATION

Item 1. Financial Statements

Nanosphere, Inc.

Balance Sheets

(dollars in thousands)

(Unaudited)


	March 31,			December 31,
	2014			2013
CURRENT ASSETS:
Cash and cash equivalents	$	32,996		$	41,467
Accounts receivable, net		2,393			2,821
Inventories		9,724			8,452
Other current assets		630			248

Total current assets		45,743			52,988
PROPERTY AND EQUIPMENT — Net		4,102			3,673
INTANGIBLE ASSETS — Net of accumulated amortization		2,324			2,406
OTHER ASSETS		257			284

TOTAL	$	52,426		$	59,351

CURRENT LIABILITIES:
Accounts payable	$	2,957		$	1,958
Accrued compensation		914			910
Other current liabilities		2,027			1,534
Long term debt – current portion		2,080			2,081

Total current liabilities		7,978			6,483
LONG-TERM LIABILITIES:
Long term debt		9,758			9,734

Total liabilities		17,736			16,217
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS’ EQUITY:
Common stock, $0.01 par value; 100,000,000 shares authorized; 76,919,106 and 76,222,606 shares issued and outstanding as of March 31, 2014 and December 31, 2013, respectively		769			762
Preferred stock, $0.01 par value; 10,000,000 shares authorized; no shares issued		—			—
Additional paid-in capital		426,480			424,962
Warrants to acquire common stock		246			246
Accumulated deficit		(392,805	)		(382,836	)

Total stockholders’ equity		34,690			43,134

TOTAL	$	52,426		$	59,351

See notes to financial statements.

Nanosphere, Inc.

Statements of Operations

(dollars and shares in thousands except per share data)

(Unaudited)


	Three Month Periods Ended March 31,
	2014			2013
REVENUE:
Product sales	$	3,283		$	2,369

Total revenue		3,283			2,369
COSTS AND EXPENSES:
Cost of sales		2,023			1,537
Research and development		5,221			4,987
Sales, general, and administrative		5,644			4,384

Total costs and expenses		12,888			10,908

Loss from operations		(9,605	)		(8,539	)
OTHER INCOME (EXPENSE):
Foreign exchange gain (loss)		—			(2	)
Interest expense		368			—
Interest income		3			7

Total other income (expense)		(365	)		5

NET LOSS	$	(9,970	)	$	(8,534	)

Net loss per common share — basic and diluted	$	(0.13	)	$	(0.15	)
Weighted average number of common shares outstanding — basic and diluted		76,716			56,090

See notes to financial statements.

Nanosphere, Inc.

Statements of Cash Flows

(dollars in thousands)

(Unaudited)


	Three Month Periods Ended March 31,
	2014			2013
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(9,970	)	$	(8,534	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		741			582
Provision for doubtful accounts		87			—
Share-based compensation		874			399
Changes in operating assets and liabilities:
Accounts receivable		341			(791	)
Inventories		(1,273	)		(936	)
Other current assets		(382	)		(288	)
Accounts payable		684			(68	)
Accrued and other current liabilities		465			1,245

Net cash used in operating activities		(8,433	)		(8,391	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		(690	)		(433	)

Net cash used in investing activities		(690	)		(433	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds for stock options exercise		652			—

Net cash used in financing activities		652			—

NET DECREASE IN CASH AND CASH EQUIVALENTS		(8,471	)		(8,824	)
CASH AND CASH EQUIVALENTS — Beginning of period		41,467			33,139

CASH AND CASH EQUIVALENTS — End of period	$	32,996		$	24,315

NONCASH INVESTING AND FINANCING ACTIVITIES:
Reclassification of inventory to property and equipment	$	78		$	291
Accrued purchase of property and equipment	$	315			—

See notes to financial statements.

Nanosphere, Inc.

Notes to Financial Statements

As of March 31, 2014 and

For the Three Month Periods Ended March 31, 2014 and 2013

(Unaudited)

1. Description of Business

Nanosphere, Inc. (the “Company”) develops, manufactures and markets an advanced molecular diagnostics platform, the Verigene System, that enables simple, low cost, and highly sensitive genomic and protein testing on a single platform.

Basis of Presentation — The accompanying unaudited condensed financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America and in conformity with Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. However, in the opinion of management, all adjustments, consisting only of normal recurring adjustments, unless otherwise noted herein, necessary to present fairly the results of operations, financial position and cash flows have been made. Therefore, these financial statements should be read in conjunction with the Company’s most recent audited financial statements for the year ended December 31, 2013 and notes thereto included in the Company’s Annual Report on Form 10-K. The results of operations for any interim period are not necessarily indicative of the results of operations expected for the full year.

The accompanying financial statements have been prepared on a going-concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

Use of Estimates — The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the notes thereto. The Company’s significant estimates included in the preparation of the financial statements are related to inventories, property and equipment, intangible assets, current liabilities and share-based compensation. Actual results could differ from those estimates.

Fair Value of Financial Instruments — The carrying amount of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, accounts payable, and debt approximate their fair values.

2. Liquidity and Capital Resources

The Company has incurred net losses attributable to common stock of $392.8 million since inception, and has funded those losses primarily through the sale and issuance of equity securities and secondarily through the issuance of debt. While the Company is currently in the commercialization stage of operations, the Company has not yet achieved profitability and anticipates that it will continue to incur net losses in the foreseeable future.

In May 2013, the Company entered into a $22 million debt facility agreement with Silicon Valley Bank and Oxford Finance LLC secured by all the assets of the Company and bearing an interest rate of 9.25%. Proceeds are to be used for working capital needs and to fund general business requirements. As of March 31, 2014, the Company has drawn $12 million of the loan, and the remaining $10 million is available upon achieving certain financial milestones. The term of the loans is up to four years each, with payments during the initial 12 month period being interest-only and then interest and principal payments monthly for the next 3 years. On February 18, 2014, the Company entered into an amendment of the loan and security agreement with Silicon Valley Bank and Oxford Bank (the “Amendment”). The Amendment extends the period of time during which we may access the second, $10 million tranche of this loan from March 31, 2014 to September 30, 2014. If the Company accesses the second, $10 million tranche of this loan, it must maintain a liquidity reserve equal to six times our average monthly cash burn rate over a rolling three month period, but only to the extent that the Company has aggregate net losses during any such rolling three month period.

Management believes that its cash resources, including availability under its debt facility and common stock purchase agreement, should be sufficient to support currently forecasted operations through at least the next twelve months. However, the Company operates in a market that makes its prospects difficult to evaluate, and the Company may need additional debt or equity financing in the future to execute on its current or future business strategies beyond the next twelve months. Management also believes that, if necessary, it can implement plans in the short term to conserve existing cash should additional financing activities be delayed. Capital outlays and operating expenditures may increase over the next twelve months as the Company expands its infrastructure, commercialization, manufacturing, and research and development activities.

3. Net Loss Per Common Share

Basic and diluted net losses per common share have been calculated in accordance with ASC Topic 260, “Earnings Per Share”, for the three month periods ended March 31, 2014 and 2013. As the Company had a net loss in each of the periods presented, basic and diluted net loss per common share are the same.

The computations of diluted net loss per common share for the three month periods ended March 31, 2014 and 2013 did not include the effects of the following options to acquire common stock and common stock warrants as the inclusion of these securities would have been antidilutive:


	Three month Periods Ended March 31,
	2014		2013
Stock options		5,419,539		5,944,460
Common stock warrants		136,019		164,925

		5,555,558		6,109,385

4. Intangible Assets

Intangible assets, consisting of purchased intellectual property, as of March 31, 2014 and December 31, 2013 comprise the following (in thousands):


	March 31, 2014							December 31, 2013
	Cost		Accumulated Amortization			Net		Cost		Accumulated Amortization			Net
Intellectual property — licenses	$	3,263	$	(1,223	)	$	2,040	$	3,263	$	(1,152	)	$	2,111
Patents		455		(171	)	$	284		455		(160	)	$	295

	$	3,718	$	(1,394	)	$	2,324	$	3,718	$	(1,312	)	$	2,406

Amortization expense for intangible assets was less than $0.1 million in each of the three month periods ended March 31, 2014 and 2013. Estimated future amortization expense is as follows:


Years Ending December 31
2014 (Period from April 1 to December 31)	$	245
2015		322
2016		309
2017		293
2018		211
Thereafter		944

Licenses are amortized from the date of initial use of the licensed technology and such amortization continues over the remaining life of the license. The future amortization expense reflected above is based on licenses for which the licensed technology is being used as of March 31, 2014.

5. Related Party Transactions

Dr. Chad Mirkin, a co-founder of the Company, provided contracted research and development services to the Company. The Company incurred expenses of less than $0.1 million for these services for the three month period ended March 31, 2013. On March 27, 2013, the Company advised Dr. Mirkin that his consulting agreement would not be renewed and would expire pursuant to its terms on May 31, 2013. On April 22, 2013, Dr. Mirkin advised the Company that he would not stand for re-election to the Company’s board of directors at the 2013 annual meeting and retired from the board of directors at the expiration of his 2013 term.

6. Equity Incentive Plan

The Company’s board of directors has adopted and the shareholders have approved the Nanosphere 2000 Equity Incentive Plan (the “2000 Plan”) and the Nanosphere 2007 Long-Term Incentive Plan (the “2007 Plan”). The plans authorize the compensation committee to grant stock options, share appreciation rights, restricted shares, restricted share units, unrestricted shares, incentive stock options, deferred share units and performance awards. Option awards are generally granted with an exercise price equal to or above the fair value of the Company’s common stock at the date of grant with ten year contractual terms. Certain options vest ratably over four years of service, while other options cliff vest after seven years of service but provide for accelerated vesting contingent upon the achievement of various company-wide performance goals, such as decreasing time to market for new products and entering into corporate collaborations (as defined in the option grant agreements). For these “accelerated vesting” options, 20-25% of the granted option shares will vest upon the achievement of each of four or five milestones as defined in the option grant agreements, with any remaining unvested options vesting on the seven year anniversary of the option grant dates. Approximately 18% of the options granted and outstanding contain “accelerated vesting” provisions. The fair values of the Company’s option awards granted during the three month period ended March 31, 2014 were estimated at the dates of grant using the Black-Scholes option pricing model with the following assumptions:


Expected dividend yield		0	%
Expected volatility		85	%
Risk free interest rate		1.93	%
Weighted-average expected option life		6.0 years
Estimated weighted-average fair value on the date of grant based on the above assumptions	$	1.86
Estimated forfeiture rate for unvested options		0	%

The expected volatility for option awards granted during 2013 was based on the Company’s actual historical volatility. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of the grants for periods consistent with the expected life of the option. The expected life of options that vest ratably over four years of service is derived from the average of the vesting period and the term of the option as defined in the Plans, following the guidance in Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin Nos. 107 and 110. The Company estimates the expected life of options with accelerated vesting terms giving consideration to the dates that the Company expects to achieve key milestones under the option agreements and the term of the option.

Total compensation cost recognized for all stock option awards was $0.3 million in the three month periods ended March 31, 2014 and 2013.

As of March 31, 2014, the total compensation cost not yet recognized related to the nonvested stock option awards is approximately $2.5 million, which amount is expected to be recognized over the next three years, with a weighted average term of 1.8 years. Certain milestone events are deemed probable of achievement prior to their seven year vesting term, and the acceleration of vesting resulting from the achievement of such milestone events has been factored into the weighted average vesting term. While the Company does not have a formally established policy, as a practice the Company has delivered newly issued shares of its common stock upon the exercise of stock options.

A summary of option activity under the plans as of March 31, 2014, and for three month period then ended is presented below:


Options	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value of Options
Outstanding — January 1, 2014		5,963,478		$	3.66
Granted		541		$	2.51
Exercised		(467,500	)	$	1.45
Expired		(46,980	)	$	5.44
Forfeited		(30,000	)	$	3.00

Outstanding — March 31, 2014		5,419,539		$	3.85		6.07	$	2,097,947

Exercisable — March 31, 2014		3,251,520		$	4.55		4.71	$	824,065

Vested and Expected to Vest—March 31, 2014		5,319,810		$	3.87		6.03	$	2,039,348

There were 467,500 options exercised for the three month period ended March 31, 2014 and no options exercised in the three month periods ended March 31, 2013.

Included in the number of options outstanding at March 31, 2014 are 972,186 options with a weighted average exercise price of $5.24 per share and accelerated vesting provisions based on the criteria mentioned above. The total fair value of shares vested during the three month periods ended March 31, 2014 and 2013 were $1.4 million and $0.7 million, respectively.

As of January 1, 2014, there were 807,000 shares of restricted stock outstanding under the 2007 Plan and during the three month period ended March 31, 2014, 6,000 shares were forfeited and 235,000 additional shares of restricted stock were granted. The restricted shares vest 50% on August 15, 2014 and 50% on May 15, 2015 and are subject to forfeiture until vested. There were 2,500 shares that vested during the three month period ended March 31, 2014. The Company recognized $0.6 million and $0.1 million in restricted stock compensation expense during the three month periods ended March 31, 2014 and 2013. As of March 31, 2014, the total compensation cost not yet recognized related to the nonvested restricted stock awards was approximately $1.6 million, which amount is expected to be recognized over a weighted average term of less than one year.

7. License Agreements

The Company has entered into several nonexclusive license agreements with various companies covering certain technologies which are embedded in the Company’s diagnostic instruments and diagnostic test products. As of March 31, 2014, the Company has paid aggregate initial license fees of $3.6 million for these licenses, and has agreed to pay a percentage of net sales as royalties, in percentage amounts ranging from less than 1.0% to 12.0%. These initial license fees were capitalized as intangible assets (see Note 4). Certain of the license agreements have minimum annual royalty payments, and such minimum payments are $0.2 million in each of the fiscal years 2014 and 2015 and are less than $0.1 million annually thereafter through the dates the respective licenses terminate. These licenses expire at various times, corresponding to the subject patents expirations, which currently range from 2014 to 2027.

8. Stockholders’ Equity

On March 18, 2014, the Company entered into a Common Stock Purchase Agreement, or the Purchase Agreement, with Aspire Capital Fund, LLC, or Aspire, to purchase, at our option, up to an aggregate of $30.0 million of shares of r common stock over a two-year term, which expires in March 2016. The sales to Aspire will be made subject to market conditions, in light of capital needs and under various limitations contained in the Purchase Agreement. At March 31, 2014 the closing stock price was $2.15 per share and during the prior 12 months the stock has traded between $1.83 and $4.26. If in the future, the closing price of the common stock falls below the $0.75 floor price, the Company would not have access to this facility. The Company has not yet sold any shares under the Purchase Agreement. Over the term of the Purchase Agreement, assuming the common stock is trading above the $0.75 minimum floor price that is required to use the facility, the Company has two ways to elect to sell common stock to Aspire on any business day the Company select: (1) through a regular purchase of up to 50,000 shares at prices based on the market price of our common stock prior to the time of each sale, and (2) through a volume weighted average price, or VWAP, purchase of a number of shares up to 30% of the volume traded on the purchase date at a price equal to the lesser of the closing sale price or 95% of the VWAP for such purchase date. If mutually agreed upon, the regular purchase option can be increased by 1,000,000 shares per business day. The Company also entered into a Registration Rights Agreement with Aspire, which requires, among other things, that the Company maintain the effectiveness of our registration statement that registered the shares issued and issuable to Aspire under the Purchase Agreement. As of May 7, 2014, there have been no sales of common stock to Aspire pursuant to the Purchase agreement.

9. Commitments and Contingencies

In November 2013, the Company exercised its renewal option and the lease term has been extended to May 2017. On February 13, 2014, we exercised a right of first refusal under our recently revised facilities lease to acquire an additional 8,535 square feet of space in our building as soon as such space becomes available. The current tenant occupying this additional space is expected to vacate the space on or about August 31, 2014.

Rent and operating expenses associated with the office and laboratory space were $0.4 million and $0.2 million for the three month periods ended March 31, 2014 and 2013, respectively.

Annual future minimum obligations for the operating leases as of March 31, 2014, are as follows (in thousands):


Years Ending December 31	Operating Lease
2014 (Period from April 1 to December 31)	$	336
2015		497
2016		509
2017		214
2018		—

Total minimum lease payments	$	1,556

10. Supplemental Financial Information


	March 31, 2014		December 31, 2013
	(in thousands)
Inventories:
Raw materials	$	3,021	$	2,263
Work-in-process		238		—
Finished goods		6,465		6,189

Total	$	9,724	$	8,452


	March 31, 2014			December 31, 2013
	(in thousands)
Accounts Receivable—Net:
Accounts Receivable	$	2,480		$	2,821
Allowance for Doubtful Accounts Receivable		87			—

Accounts Receivable – net	$	2,393		$	2,821


	March 31, 2014			December 31, 2013
	(in thousands)
Property and Equipment – Net:
Total property and equipment — at cost	$	22,746		$	21,820
Less accumulated depreciation		(18,644	)		(18,147	)

Property and equipment — net	$	4,102		$	3,673


	March 31, 2014			December 31, 2013
	(in thousands)
Other Current Liabilities:
Accrued clinical trial expenses	$	1,153		$	320
Accrued license fees		128			84
All other		746			1,130

Total	$	2,027		$	1,534

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Quarterly Report on Form 10-Q contains forward-looking statements about us and our industry that involve substantial risks and uncertainties. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements, other than statements of historical facts, included in this Quarterly Report on Form 10-Q regarding our strategy, future operations, future financial position, future net sales, projected expenses, products’ placements, performance and acceptance, prospects and plans and management’s objectives, as well as the growth of the overall market for our products in general and certain products in particular and the relative performance of other market participants, 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. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including but not limited to:

•

inaccurate estimates of the potential market size for our products (including the hospital lab market in general and the blood stream infection (BSI) market in particular) or failure of the market for these products to grow as anticipated;

•

the past performance of other companies which we believe to have been in a market position analogous to where we believe we are now may not be predictive of our future results in the manner we believe them to be;

•

our analysis of who our competitors have been, who they are now and who they will be in the future (particularly in the infectious disease product markets) and our predictions of relevant future performance may be inaccurate;

•

comparisons of actual financial results for another company to what we predict will be our future financial results may be inapposite;

•

predictions of customer metrics needed to achieve profitability and their relationship to our cash flow position, needs and expenses may prove to be inaccurate;

•

entrance of other competitors or other factors causing us to lose competitive advantage in the sample-to-result MDx market;

•

a lack of commercial acceptance of the Verigene System, its array of tests, and the development of additional tests, which could negatively affect our financial results;

•

failure of third-party payors to reimburse our customers for the use of our clinical diagnostic products or reduction of reimbursement levels, which could harm our ability to sell our products;

•

failure of our products to perform as expected or to obtain certain approvals or the questioning of the reliability of the technology on which our products are based, which could cause lost revenue, delayed or reduced market acceptance of our products, increased costs and damage to our reputation;

•

our inability to manage our anticipated growth, constraints or inefficiencies caused by unanticipated acceleration and deceleration of customer demand; and

•

those set forth under “Risk Factors” in our Annual Report on Form 10-K, as amended from time to time under “Risk Factors” in our Quarterly Reports on Form 10-Q.

These forward-looking statements represent our estimates and assumptions only as of the date of this Quarterly Report on Form 10-Q. 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 Quarterly Report on Form 10-Q. 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” in our Annual Report on Form 10-K for the year ended December 31, 2013, as supplemented or amended from time to time under “Item 1A.—Risk Factors” in our Quarterly Reports on Form 10-Q, and elsewhere in this Quarterly Report on Form 10-Q.

Business Overview

We are dedicated to enhancing medicine by providing targeted molecular diagnostic tests that can lead to earlier disease detection, optimal patient treatment and improved healthcare economics. Our platform, the Verigene^® System, enables clinicians to rapidly identify and treat the bacteria and viruses responsible for some of the most complex, costly and deadly infectious diseases. The Verigene System includes a bench-top molecular diagnostics workstation that is a universal platform for genomic and protein testing.

We believe the Verigene System is differentiated by its ease of use, superior analytical performance and ability to detect many targets on a single test, referred to as “multiplexing.” It provides lower cost for laboratories already performing molecular diagnostic testing and enables smaller laboratories and hospitals without advanced diagnostic capabilities to perform genetic testing. Our ability to detect proteins, which can be as much as 100 times more sensitive than current technologies for certain targets, may enable earlier detection of and intervention in diseases associated with known biomarkers as well as the introduction of tests for new biomarkers that exist in concentrations too low to be detected by current technologies. We are focused on the infectious disease diagnostics market.

Our test menu is designed to provide hospitals with the following potential benefits:

save lives by identifying pathogens and appropriate treatment faster;

reduce medical spending by accelerating appropriate treatment; and

reduce antibiotic resistance prevalence by avoiding unnecessary treatments.

The Verigene System is comprised of a microfluidics processor, a touchscreen reader and disposable test cartridges. Certain assays, such as the Warfarin metabolism and hyper-coagulation tests, were cleared by the U.S. Food and Drug Administration (“FDA”) for use with the original Verigene System processor (the “Original Processor”). Subsequently, we developed and launched a second generation Verigene System processor (the “Processor SP”) that handles the same processing steps as the Original Processor and incorporates sample preparation. Some of our current customers continue to use the Original Processor for hyper-coagulation testing and Warfarin metabolism testing. Our development plans are focused on expanding the menu of tests that will run on the Processor SP, and we plan to develop and seek regulatory approval of all future assays on the Processor SP.

Our Applications

The following table summarizes the FDA and CE In-Vitro Diagnostic Mark (“CE IVD Mark”) regulatory status of our near-term genomic and protein assays on the Verigene System:


Assay	FDA Status⁽¹⁾	CE IVD Mark Status⁽²⁾
*Infectious Disease Assays*

Respiratory Virus with Sub-Typing (RV+)	510(k) cleared	CE IVD Marked

Respiratory Pathogens/Expanded Panel (RP)	In development	In development

Blood Stream Infection (BSI) Panels • Blood Culture – Gram Positive (BC-GP) • Blood Culture – Gram Negative (BC-GN) • Blood Culture – Yeast (BC-Y)	510(k) cleared 510(k) cleared⁽⁴⁾ In development	CE IVD Marked CE IVD Marked In development

C. difficile (CDF)	510(k) cleared	CE IVD Marked

Enteric Panel (EP)	Pending FDA clearance⁽⁵⁾	Pending CE IVD Mark

*Human Pharmacogenetic Assays*

Warfarin Metabolism (CYP2C9)	510(k) cleared⁽³⁾	CE IVD Marked

Hyper-Coagulation (FV, FII, MTHFR Panel)	510(k) cleared⁽³⁾	CE IVD Marked

CYP2C19 Genetic Variance	510(k) cleared	CE IVD Marked

*Ultra-Sensitive Protein Assays*

Cardiac Troponin I	In development	In development

Prostate-Specific Antigen (PSA)	Research use only

(1)	For further description of our FDA regulatory requirements, please refer to the section “*Regulation by the United States Food and Drug Administration”* beginning on page 10 of our Annual Report on Form 10-K for the year ended December 31, 2013.

(2)	For further description of our CE IVD Mark regulatory requirements, please refer to the section “*Foreign Government Regulation”* beginning on page 13 of our Annual Report on Form 10-K for the year ended December 31, 2013.

(3)	Currently cleared only for use with the Original Processor.

(4)	510(k) cleared January 2014.

(5)	510(k) submitted January 2014.

Infectious Disease Assays

Infectious disease testing is converting to molecular diagnostic methods driven to the need to improve clinical outcomes and reduce medical spending that results from identifying pathogens and drug resistance markers faster. Microbiology labs need tests that can rapidly detect a wide range of potential infectious agents in an automated system. The Verigene System provides the multiplexing (ability to test for many targets at one time), rapid turnaround and ease-of-use needed by these labs. Our infectious disease menu and the Processor SP provide microbiology labs with a compelling solution for conversion to molecular testing.

We have received 510(k) clearance from the FDA for our respiratory panel that detects the presence of influenza A and B as well as respiratory syncytial virus (“RSV”) A and B. Influenza is commonly known as the seasonal flu and RSV is a respiratory virus that infects the lungs and breathing passages. RSV is the most common cause of bronchitis and pneumonia in children under the age of one year and has become a significant concern for older adults. Our respiratory panel provides physicians with a highly accurate and fast determination of which virus is present. This test result guides the most appropriate treatment therapy.

In the first quarter of 2011, we received 510(k) clearance from the FDA and obtained CE IVD Mark for our respiratory assay that includes subtyping for seasonal H1 virus, seasonal H3 virus, and the 2009 novel H1N1 virus, commonly known as swine flu, as well as the targets on our previously cleared respiratory assay. We believe this is the first sample-to-result molecular respiratory test to include all of these viruses, thus lowering the cost of molecular respiratory testing for hospitals and demonstrating the multiplexing capability of the Verigene System. The demand for this test will be highly dependent upon the seasonality and prevalence of respiratory viruses. We are developing an expanded respiratory panel that includes additional viral and bacterial respiratory pathogens.

We developed a test to detect C. difficile, a bacterium that can cause symptoms ranging from diarrhea to life-threatening inflammation of the colon. For our C. difficile test, we received 510(k) clearance from the FDA in the fourth quarter of 2012 and obtained CE IVD Mark in the first quarter of 2013.

We have developed and are continuing to develop blood stream infection panels for the earlier detection of specific bacteria and resistance markers present in patients with blood stream infections. These panels include gram-positive, gram-negative and yeast pathogens as well as resistance markers. These assays are designed to enable physicians to detect bacterial strains infecting patients and thus prescribe the most appropriate antibiotic regimen within 24 hours rather than after several days, which is typical for current traditional culture assays. Treatment is sometimes initiated before these current traditional assays are complete and we believe that this early detection capability will allow patients to avoid unnecessary treatments that may expose them to serious side effects. The first blood stream infection panel developed was for the detection of gram-positive organisms (BC-GP) that represent approximately 65% of blood stream infections. In June 2012 we received a de novo 510(k) clearance to market the full BC-GP panel. In January 2014 we received 510(k) clearance for our BC-GN assay. The BC-Y panel is in development.

Our development efforts also include an enteric pathogens (EP) test. Our enteric pathogens assay identifies the Enterobacteriaceae species that most often result from food poisoning. The enteric assay tests for a wide spectrum of organisms that are treated with various antibiotics and other drug therapies. This assay was submitted to the FDA for 510(k) clearance in January 2014.

Human Genetic Assays

We have received 510(k) clearance from the FDA for a warfarin metabolism assay performed on our Original Processor. This is a pharmacogenetic test to determine the existence of certain genetic mutations that affect the metabolism of warfarin-based drugs, including Coumadin^®, the most-prescribed oral anticoagulant. CE IVD Mark was obtained for this assay during the first quarter of 2011, and we may submit an FDA application for this assay to allow its use on the Processor SP, although we have no immediate plans to do so.

We have also received 510(k) clearance from the FDA for a hypercoagulation assay performed on our Original Processor. This is a human genetic test to determine the existence of certain genetic mutations that are hereditary contributory factors in forming blood clots. This Verigene test detects the F5, F2, and MTHFR genes that are associated with hypercoagulation (i.e., thrombophilia). CE IVD Mark was obtained for this assay on the Processor SP during the fourth quarter of 2011.

In the fourth quarter of 2012 we received 510(k) clearance from the FDA for a CYP2C19 genetic variance test. This assay was CE IVD Marked during the first quarter of 2011. This test detects variances in the cytochrome P-450 2C19 gene. These genetic variances are associated with deficient metabolism of CYP2C19-metabolized therapeutic agents including clopidogrel, more commonly known by the trade name Plavix^TM.

We have a small customer base that uses our human genetic tests, however, our current product development and marketing efforts are focused on our infectious disease menu.

Ultra-Sensitive Protein Assays

Our ability to detect proteins at sensitivity levels that can be 100 times greater than current technologies may enable earlier detection of and intervention in diseases as well as enable the introduction of tests for new biomarkers that exist in concentrations too low to be detected by current technologies. We have developed, are currently developing or plan to develop diagnostic tests for markers that can be used to diagnose a variety of medical conditions including cardiovascular, respiratory, cancer, autoimmune, neurodegenerative and other diseases.

The first ultra-sensitive protein test we plan to commercialize is for cardiac troponin I (“cTnI”), which is the gold standard biomarker for diagnosis of myocardial infarction, or heart attack, and identification of patients with acute coronary syndromes at risk for cardiovascular events. We may submit an assay for 510(k) clearance for use as a diagnostic tool for acute coronary syndromes, although we have no immediate plans to do so. Currently, we are focused on investigating the potential to sell primary functional components of this assay to commercial labs as a marker for cardiac risk. Early studies suggest that our ultra-sensitive cTnI test may also be a useful monitoring tool for chronic heart failure (“CHF”) patients. Larger studies and regulatory hurdles will need to be cleared before we market the assay for CHF monitoring purposes.

In addition to the cardiac troponin I assay, we have developed an ultra-sensitive prostate-specific antigen (“PSA”) test for early diagnosis of recurrent prostate cancer. We also may develop ultra-sensitive protein assays in the areas of immunology, allergy and cancer.

Financial Operations Overview

Since inception we have incurred net losses each year, and we expect to continue to incur losses for the foreseeable future. Our net loss was $10.0 million for the three month period ended March 31, 2014 and $8.5 million for the three month period ended March 31, 2013. As of March 31, 2014, we had an accumulated deficit of approximately $392.8 million. Our operations to date have been funded principally through the sale and issuance of equity securities and secondarily through the issuance of debt. In May 2013, the Company entered into a $22 million debt facility agreement with Silicon Valley Bank and Oxford Finance LLC secured by all the assets and bearing an interest rate of 9.25 %. Proceeds are to be used for working capital needs and to fund general business requirements. As of March 31, 2014, we have drawn $12 million of the facility and the remaining $10 million is available upon achievement of certain financial milestones. The term of the loans is up to four years each, with payments during the initial 12 month period being interest-only and then interest and principal payments monthly for the next 3 years. On February 18, 2014, we entered into an amendment of our loan and security agreement with Silicon Valley Bank and Oxford Bank (the “Amendment”). The Amendment extends the period of time during which we may access the second, $10 million tranche of this loan from March 31, 2014 to September 30, 2014. If we access the second, $10 million tranche of this loan, we must maintain a liquidity reserve equal to six times our average monthly cash burn rate over a rolling three month period, but only to the extent that we have aggregate net losses during any such rolling three month period.

Revenue

Product sales revenue is derived from the sale or rental of the Verigene System, including test instruments and cartridges and related products sold to hospitals and commercial laboratories.

We have observed that customer validation and implementation of our blood-culture—gram positive (BC-GP) assay have averaged approximately nine months. During the first quarter of 2014, our customers began validating our blood culture gram negative (BC-GN) assay.

Cost of Sales

Cost of sales represents the cost of materials, direct labor and other manufacturing overhead costs incurred to produce Verigene cartridges and instruments, as well as royalties on product sales, amortization of purchased intellectual property relevant to products available for sale and depreciation of instruments provided under leases and rentals. Costs associated with custom assay development contracts also include labor associated with assay development, validation and testing.

Research and Development Expenses

Research and development expenses primarily include all costs incurred during the development of the Verigene System instruments and disposable test cartridges, and the expenses associated with developing manufacturing systems and processes. Such expenses include salaries and benefits for research and development personnel, consulting services, materials, patent-related costs and other expenses. We expense all research and development costs in the periods in which they are incurred. We expect research and development expenses to grow modestly as we continue to develop future generations of the Verigene System instruments, and additional genomic and protein tests. The Company has changed its presentation of clinical trial costs to present those costs as Research and development expenses rather than Sales, general and administrative expenses. The prior year costs have been reclassified to conform to the new presentation. For the three months ended March 31, 2013 $0.9 million of pre-regulatory approval clinical trial costs have been reclassified accordingly.

Sales, General and Administrative Expenses

Sales, general and administrative expenses principally include compensation for employees in our sales, customer service, marketing, management and administrative functions. We also include professional services, facilities, technology, communications and administrative expenses in sales, general and administrative. The professional services costs primarily consist of legal and accounting costs. We expect sales and marketing expenses will increase as additional sales and customer support personnel are needed to drive and support customer growth. The Company has changed its presentation of clinical trial costs to present those costs as Research and development expenses rather than Sales, general and administrative expenses. The prior year costs have been reclassified to conform to the new presentation. For the three months ended March 31, 2013 $0.9 million of pre-regulatory approval clinical trial costs have been reclassified accordingly.

Interest Income

Interest income principally includes interest earned on our excess cash balances. Such balances are primarily invested in money market and bank checking accounts at major financial institutions. We expect that continued low interest rates will significantly limit our interest income in the near term.

Interest Expense

Interest expense includes the interest charges related to our debt borrowings, including non-cash amortization of debt discount and issuance costs.

Three month Period Ended March 31, 2014 Compared to the Three month Period Ended March 31, 2013

Revenues

Revenues were $3.3 million for the three month period ended March 31, 2014, as compared to $2.4 million for the three month period ended March 31, 2013. This 39% increase in revenue was driven primarily by test cartridge sales to US microbiology customers. There were 48 new customer placements during the first quarter of 2014.

Cost of Sales

Cost of sales increased to $2.0 million for the three month period ended March 31, 2014 from $1.5 million for the three month period ended March 31, 2013. This increase in cost was due to higher volume of cartridge sales during the first quarter of 2014, partially offset by lower per unit cartridge manufacturing expenses.

Research and Development Expenses

Research and development expenses increased slightly to $5.2 million for the three month period ended March 31, 2014 from $5.0 million for the three month period ended March 31, 2013 due to initiation of the design and development of the Verigene SP+ next-generation platform.

Sales, General and Administrative Expenses

Sales, general and administrative expenses increased in the first quarter of 2014 to $5.6 million compared to $4.4 million for the first quarter of 2013. This was due to increased spending for the sales and customer support expansion.

Liquidity and Capital Resources

From our inception in December 1999 through March 31, 2014, we have received net proceeds of $103.9 million from the sale of convertible preferred stock and issuance of notes payable that were exchanged for convertible preferred stock, $102.2 million from our November 2007 initial public offering, $35.4 million from our October 2009 underwritten public offering, $32.2 million from our May 2011 underwritten public offering, $27.0 million from our July 2012 underwritten public offering of common stock, $4.7 million from our May 2013 underwritten public offering, $11.7 million from our May 2013 issuance of debt and warrants, $27.8 million from our September 2013 underwritten public offering of common stock, and $10.3 million from government grants. We also drew down $12 million under our debt facility in May 2013. We have devoted substantially all of these funds to research and development and sales, general and administrative expenses. Since our inception, we have generated minimal revenues from the sale of the Verigene System, including consumables and related products, to our initial clinical customers, research laboratories and government agencies. We also incurred significant losses and, as of March 31, 2014, we had an accumulated deficit of approximately $392.8 million. While we are currently in the commercialization stage of operations, we have not yet achieved profitability and anticipate that we will continue to incur net losses in the foreseeable future.

On March 18, 2014, we entered into a Common Stock Purchase Agreement, or the Purchase Agreement, with Aspire Capital Fund, LLC, or Aspire, to purchase, at our option, up to an aggregate of $30.0 million of shares of our common stock over a two-year term, which expires in March 2016. Our sales to Aspire will be made subject to market conditions, in light of our capital needs and under various limitations contained in the Purchase Agreement. At March 31, 2014 our closing stock price was $2.15 per share and during the prior 12 months our stock has traded between $1.83 and $4.26. If in the future, the closing price of our common stock falls below the $0.75 floor price, we would not have access to this facility. We have not yet sold any shares under the Purchase Agreement, which expires in March 2016. Over the term of the Purchase Agreement, assuming our common stock is trading above the $0.75 minimum floor price that is required to use the facility, we have two ways to elect to sell common stock to Aspire on any business day we select: (1) through a regular purchase of up to 50,000 shares at prices based on the market price of our common stock prior to the time of each sale, and (2) through a volume weighted average price, or VWAP, purchase of a number of shares up to 30% of the volume traded on the purchase date at a price equal to the lesser of the closing sale price or 95% of the VWAP for such purchase date. If mutually agreed upon, the regular purchase option can be increased by 1,000,000 shares per business day. We also entered into a Registration Rights Agreement with Aspire, which requires, among other things, that we maintain the effectiveness of our registration statement that registered the shares issued and issuable to Aspire under the Purchase Agreement. As of May 7, 2014, there have been no sales of our common stock to Aspire pursant to the Purchase Agreement.

We do not anticipate achieving positive operating cash flow in at least the next twelve months. We expect to increase investment in additional manufacturing scale-up, and to add sales, marketing and customer support personnel during the next twelve months. Achievement of positive cash flow from operations will depend upon revenue resulting from adoption of both our current products and future products that depend upon regulatory clearance. Demand for our respiratory products is directly proportional to the size and duration of the annual season for influenza and other respiratory illnesses. Any unanticipated acceleration or deceleration of customer demand for our products relative to projections will have a material effect on our cash flows. Management believes that its cash resources including availability under its debt facility and common stock purchase agreement should be sufficient to support currently forecasted operations through at least the next twelve months. However, the Company operates in a market that makes its prospects difficult to evaluate, and the Company will need additional debt or equity financing in the future to execute its business plans beyond the next twelve months. Management also believes that, if necessary, it can implement plans in the short term to conserve existing cash should additional financing activities be delayed. Capital outlays and operating expenditures may increase over the next twelve months as the Company expands its infrastructure, commercialization, manufacturing capacity and research and development activities.

A customer may purchase the Verigene System instruments, lease them from a third party or enter into a reagent rental agreement. Our reagent rental agreements include customer commitments to purchase a certain minimum volume of cartridges over the term of the agreement. As part of these agreements, a portion of the charge for each cartridge is a rental fee for use of the equipment. We may need to increase our investment in such systems rented to customers in order to support future customer growth. We have established a relationship with a third party financing company to provide our customers with lease financing for Verigene equipment. This arrangement may help mitigate the demand on our capital resources as it allows us to recover the market value of such systems immediately, instead of over three to five years.

As of March 31, 2014, we had $33.0 million in cash and cash equivalents as compared to $41.5 million at December 31, 2013, a decrease of $8.5 million. The decrease in cash and cash equivalents was principally due to increased use of cash in operating activities. The primary driver was the $10.0 million loss along with $1.3 million in increased inventory to meet increasing sales, offset by $0.4 million reduction in accounts receivable and $0.7 million improvement in our accounts payable due to improved cash management. Net cash used in operating activities remained flat at $8.4 million for the three months ended March 31, 2013 and 2014. Net cash used in investing activities was $0.7 million for the three months ended March 31, 2014, compared to $0.4 million for the three months ended March 31, 2013. This capital spending was for the purchase of certain manufacturing equipment in the first quarter of 2014.

There was $0.7 million of net cash provided by financing activities for the three month period ended March 31, 2014 and $0 provided for the same period in 2013. In May 2013, the Company received approximately $12 million in debt from drawing down the first tranche of the $22 million debt facility. On a pro forma basis, if this transaction occurred by March 31, 2013, the Company’s cash balance at the end of the first quarter 2013 would have been approximately $35 million.

We may need to increase our capital outlays and operating expenditures over the next several years as we expand our product offering, drive product adoption, further scale-up manufacturing and implement product cost saving techniques. The amount and the timing of the additional capital we will need to raise depend on many factors, including:

•

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.

We cannot be certain that additional capital will be available when and as needed or that our actual cash requirements will not be greater than anticipated. If we require additional capital at a time when investment in diagnostics companies or in the marketplace in general is limited due to the then prevailing market or other conditions, we may not be able to raise such funds at the time that we desire or any time thereafter or on terms that are acceptable to us. In addition, if we raise additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our stockholders could be significantly diluted, and these newly-issued securities may have rights, preferences or privileges senior to those of existing stockholders. If we obtain additional debt financing, a substantial portion of our operating cash flow may be dedicated to the payment of principal and interest on such indebtedness, and the terms of the debt securities issued could impose significant restrictions on our operations. If we raise additional funds through collaborations and licensing arrangements, we might be required to relinquish significant rights to our technologies or products, or grant licenses on terms that are not favorable to us.

Contractual Obligations and Commitments

The Company’s contractual obligations and commitments have not changed materially from the disclosures included in the Annual Report on Form 10-K for the year ended December 31, 2013 filed with the SEC on February 18, 2014.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet financing or unconsolidated special-purpose entities.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Our exposure to market risk is currently confined to our cash and cash equivalents. We have not used derivative financial instruments for speculation or trading purposes. The primary objective of our investment activities is to preserve our capital for the purpose of funding operations while at the same time maximizing the income we receive from our investments without significantly increasing risk. To achieve these objectives, our investment policy allows us to maintain a portfolio of cash equivalents and short-term investments through a variety of securities, including commercial paper, money market funds and corporate debt securities. Our cash and cash equivalents through March 31, 2014 included amounts in bank checking and liquid money market accounts. As a result, we believe we have minimal interest rate risk; however, a one percentage point decrease in the average interest rate on our portfolio, if such a decrease were possible, would have reduced interest income to $0 for the three month period ended March 31, 2014.

Item 4. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

Management of the Company, with the participation of the Chief Executive Officer and the Chief Financial Officer, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended) as of March 31, 2014. The Company’s disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported on a timely basis and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding disclosure. Based upon this evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were effective as of March 31, 2014.

(b)	Changes in Internal Control over Financial Reporting

There have been no material changes to the Company’s internal control over financial reporting during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II.

OTHER INFORMATION

Item 1. Legal Proceedings

We are from time to time subject to various claims and legal actions during the ordinary course of our business. We believe that there are currently no claims or legal actions that would, in management’s judgment based on information currently available, have a material adverse effect on our results of operations or financial condition.

Item 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider the factors discussed in “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2013, which could materially affect our business, financial condition or future results. There have been no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2013.

Item 5. Other Information

(a)

Not applicable.

(b)

Not applicable.

Item 6. Exhibits, Financial Statement Schedules


Exhibit Number		Exhibit Description

10.1		First Amendment dated February 18, 2014 to Loan and Security Agreement among Oxford Finance LLC, as collateral agent, and Oxford Finance LLC and Silicon Valley Bank, as Lenders, and Nanosphere, Inc. (Filed as Exhibit 10.27 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2013 and incorporated herein by reference).

10.2		Common Stock Purchase Agreement, dated as of March 18, 2014, by and between Nanosphere, Inc. and Aspire Capital Fund, LLC (Filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K as filed with the SEC on March 18, 2014 and incorporated herein by reference).

10.3		Registration Rights Agreement, dated as of March 18, 2014, by and between Nanosphere, Inc. and Aspire Capital Fund, LLC (Filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K as filed with the SEC on March 18, 2014 and incorporated herein by reference).

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

101.1*		The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014, formatted in XBRL: (i) Balance Sheets (unaudited), (ii) Statements of Operations (unaudited), (iii) Statements of Stockholders’ Equity (unaudited), (iv) Statements of Cash Flows (unaudited), and (v) Notes of Consolidated Financial Statements.

*	Filed herewith

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	NANOSPHERE, INC.

	By:	/s/ Michael K. McGarrity
		Michael K. McGarrity
		President and Chief Executive Officer

Date: May 7, 2014

	By:	/s/ J. Roger Moody, Jr.
		J. Roger Moody, Jr.
		Chief Financial Officer and Treasurer

Date: May 7, 2014

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company