Exhibit 99.1

CLARIENT, INC. AND SUBSIDIARIES
For the Fiscal Year Ended December 31, 2009

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

		Page
		No.
Reports of Independent Registered Public Accounting Firms			1
Consolidated Balance Sheets as of December 31, 2009 and 2008			3
Consolidated Statements of Operations for the years ended December 31, 2009, 2008 and 2007			4
Consolidated Statements of Stockholders’ Equity (Deficit) and Comprehensive Loss for the years ended December 31, 2009, 2008 and 2007			5
Consolidated Statements of Cash Flows for the years ended December 31, 2009, 2008 and 2007			6
Notes to Consolidated Financial Statements			7

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders
Clarient, Inc.
Aliso Viejo, California

We have audited the accompanying consolidated balance sheet of Clarient Inc. and subsidiaries (the “Company”) as of December 31, 2009, and the related consolidated statements of operations, stockholders’ equity (deficit) and comprehensive loss, and cash flows for the year ended December 31, 2009. Our audit also included the 2009 financial statement schedule listed in the Index at Item 15. We also have audited the Company’s internal control over financial reporting as of December 31, 2009, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The company’s management is responsible for these financial statements and financial statement schedule, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management Report on Internal Control over Financial Reporting in Item 9a. Our responsibility is to express an opinion on these financial statements and financial statement schedule and an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audit of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion such consolidated financial statements referred to above present fairly, in all material respects, the financial position of Clarient Inc. and subsidiaries as of December 31, 2009 and the results of their operations and their cash flows for the year ended December 31, 2009, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein. Also, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

/s/ DELOITTE & TOUCHE LLP
Costa Mesa, California
March 16, 2010

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders
Clarient, Inc.:

We have audited the accompanying consolidated balance sheet of Clarient, Inc. and subsidiaries as of December 31, 2008, and the related consolidated statements of operations, stockholders’ (deficit) equity and comprehensive loss, and cash flows for the years ended December 31, 2008 and 2007. In connection with our audits of the consolidated financial statements, we also have audited the related financial statement schedule. These consolidated financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Clarient, Inc. and subsidiaries as of December 31, 2008, and the results of their operations and their cash flows for the years ended December 31, 2008 and 2007, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the related financial statement schedule for the years ended December 31, 2008 and 2007, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has suffered recurring losses from operations and negative cash flows from operations and has working capital and net capital deficiencies. In addition, it is not probable that the Company can remain in compliance with the restrictive financial covenants in its bank credit facilities. These matters raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for uncertainties in income taxes in 2007.

/s/ KPMG LLP
Irvine, California
March 19, 2009

CLARIENT, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except par values)

		December 31,
		2009				2008
ASSETS
Current assets:
Cash and cash equivalents		$	10,903			$	1,838
Restricted cash			765				—
Accounts receivable, net of allowance for doubtful accounts of $8,747 and $8,045 at December 31, 2009 and 2008, respectively			21,568				20,315
Supplies inventory			1,291				648
Prepaid expenses and other current assets			935				653
Total current assets			35,462				23,454
Restricted cash			1,314				—
Property and equipment, net			14,346				11,911
Intangible assets, net			11,639				—
Goodwill			3,959				—
Other assets			227				144
Total assets		$	66,947			$	35,509
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Revolving lines of credit		$	2,678			$	14,104
Related party line of credit, net of discount			—				11,461
Accounts payable			2,883				3,783
Accrued payroll			3,985				3,760
Accrued expenses and other current liabilities			3,984				2,563
Current maturities of capital lease obligations			645				263
Total current liabilities			14,175				35,934
Long-term capital lease obligations			604				345
Deferred rent and other non-current liabilities			3,055				3,970
Contingently issuable common stock			2,650				—
Commitments and contingencies
Preferred stock subject to redemption requirements outside the control of the issuer:
Series A convertible preferred stock $0.01 par value, authorized 8,000 shares, issued and outstanding 5,263 and -0- shares at December 31, 2009 and December 31, 2008, respectively. Aggregate liquidation preference and redemption value: December 31, 2009 and December 31, 2008—$55,800 and $-0-, respectively			38,586				—
Stockholders’ equity (deficit):
Common stock $0.01 par value, authorized 150,000 shares, issued and outstanding 84,092 and 76,995 shares, at December 31, 2009 and 2008, respectively			841				770
Additional paid-in capital			172,200				149,403
Accumulated deficit			(165,164	)			(154,822	)
Accumulated other comprehensive loss			—				(91	)
Total stockholders’ equity (deficit)			7,877				(4,740	)
Total liabilities and stockholders’ equity (deficit)		$	66,947			$	35,509

See accompanying notes to Consolidated Financial Statements.

CLARIENT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

		For the Years Ended December 31,
		2009				2008				2007
Net revenue		$	91,599			$	73,736			$	42,995
Cost of services			39,107				32,936				26,807
Gross profit			52,492				40,800				16,188
Operating expenses:
Sales and marketing			17,380				10,941				8,630
General and administrative			23,587				18,729				15,278
Bad debt			12,927				12,199				3,558
Research and development			1,719				421				519
Total operating expenses			55,613				42,290				27,985
Loss from operations			(3,121	)			(1,490	)			(11,797	)
Interest expense, net of interest income of $32, $21, and $60 in the years ended December 31, 2009, 2008, and 2007, respectively			874				859				1,209
Interest expense to related parties			3,557				7,290				1,140
Loss from continuing operations before income taxes			(7,552	)			(9,639	)			(14,146	)
Income tax benefit (expense) (see Note 18)			599				(6	)			2,088
Loss from continuing operations, net of income taxes			(6,953	)			(9,645	)			(12,058	)
Income from discontinued operations, net of income tax expense of $599, $0, and $2,088 in the years ended December 31, 2009, 2008, and 2007, respectively (see Notes 4 and 18)			901				—				3,301
Net loss		$	(6,052	)		$	(9,645	)		$	(8,757	)
Series A preferred stock beneficial conversion feature			(4,290	)			—				—
Net loss applicable to common stockholders		$	(10,342	)		$	(9,645	)		$	(8,757	)
Net income (loss) per share applicable to common stockholders — basic and diluted:
Loss from continuing operations		$	(0.14	)		$	(0.13	)		$	(0.17	)
Income from discontinued operations			0.01				—				0.05
Net loss applicable to common stockholders		$	(0.13	)		$	(0.13	)		$	(0.12	)
Weighted-average shares used to compute net loss per common share:
Basic and diluted			77,693				72,918				71,573

See accompanying notes to Consolidated Financial Statements.

CLARIENT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
AND COMPREHENSIVE LOSS

		Common Stock																Accumulated				Total
						$0.01				Additional								Other				Stockholders’
		Issued				Par				Paid-in				Accumulated				Comprehensive				Equity				Comprehensive
		Shares				Value				Capital				Deficit				Loss				(Deficit)				Loss
Balances at December 31, 2006			71,488			$	715			$	136,670			$	(136,420	)		$	(14	)		$	951
Issuance of warrants			—				—				734				—				—				734
Exercise of warrants			17				—				—				—				—				—
Exercise of stock options			577				6				686				—				—				692
Restricted stock cancelled			(15	)			—				—				—				—				—
Expense related to stock options and restricted stock			—				—				1,668				—				—				1,668
Comprehensive loss:
Net loss			—				—				—				(8,757	)			—				(8,757	)		$	(8,757	)
Foreign currency translation adjustment			—				—				—				—				(77	)			(77	)			(77	)
Comprehensive loss																										$	(8,834	)
Balances at December 31, 2007			72,067			$	721			$	139,758			$	(145,177	)		$	(91	)		$	(4,789	)
Issuance of warrants			—				—				7,020				—				—				7,020
Exercise of warrants			4,164				42				—				—				—				42
Exercise of stock options			675				6				779				—				—				785
Issuance of common stock			89				1				184				—				—				185
Expense related to stock options and restricted stock			—				—				1,662				—				—				1,662
Comprehensive loss:
Net loss			—				—				—				(9,645	)			—				(9,645	)		$	(9,645	)
Comprehensive loss																										$	(9,645	)
Balances at December 31, 2008			76,995			$	770			$	149,403			$	(154,822	)		$	(91	)		$	(4,740	)
Issuance of warrants			—				—				600				—				—				600
Exercise of warrants			1,869				19				2,062				—				—				2,081
Exercise of stock options			382				4				544				—				—				548
Issuance of common stock (excluding common stock issued as consideration for a completed business acquisition)			92				1				216				—				—				217
Issuance of restricted stock			673				6				(6	)			—				—				—
Cancelled restricted stock			(9	)			—				—				—				—				—
Expense related to stock options and restricted stock			—				—				2,181				—				—				2,181
Stock options issued as consideration for a completed business acquisition			—				—				744				—				—				744
Common stock issued as consideration for a completed business acquisition			4,090				41				10,103				—				—				10,144
Stock options expected to be issued as consideration for a completed business acquisition			—				—				424				—				—				424
Common stock expected to be issued as consideration for a completed business acquisition			—				—				1,639				—				—				1,639
Series A preferred stock beneficial conversion feature			—				—				4,290				(4,290	)			—				—
Comprehensive loss:
Net loss			—				—				—				(6,052	)			—				(6,052	)		$	(6,052	)
Foreign currency translation adjustment			—				—				—				—				91				91				91
Comprehensive loss																										$	(5,961	)
Balances at December 31, 2009			84,092			$	841			$	172,200			$	(165,164	)		$	—			$	7,877

See accompanying notes to Consolidated Financial Statements.

CLARIENT, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

		For the Years Ended December 31,
		2009				2008				2007
Cash flows from operating activities:
Net loss		$	(6,052	)		$	(9,645	)		$	(8,757	)
Gain from discontinued operations (see Notes 4 and 18)			(901	)			—				(3,301	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation			3,803				3,275				3,342
Bad debt expense			12,953				12,199				3,558
Amortization of warrants to related party interest expense			2,506				5,378				133
Amortization of deferred financing and offering costs			446				588				470
Amortization of intangible assets			45				—				—
Interest on related party debt			—				1,259				21
Stock-based compensation			2,398				1,711				1,820
Income tax benefit (see Notes 4, 14, and 18)			(599	)			—				(2,088	)
Changes in operating assets and liabilities, net of acquisition of ownership interest:
Interest on restricted cash			(12	)			—				—
Accounts receivable, net			(14,206	)			(20,494	)			(6,413	)
Inventories			(770	)			92				(80	)
Prepaid expenses and other assets			(738	)			80				(636	)
Accounts payable			(1,256	)			922				(1,140	)
Accrued payroll			191				1,844				496
Accrued interest on related party debt			(1,259	)			—				—
Accrued expenses and other current liabilities			1,219				(1,628	)			1,319
Deferred rent and other non-current liabilities			(915	)			(129	)			448
Cash flows from operating activities of discontinued operations			—				—				(751	)
Net cash used in operating activities			(3,147	)			(4,548	)			(11,582	)
Cash flows from investing activities:
Purchases of property and equipment			(4,587	)			(3,502	)			(3,864	)
Proceeds from sale of discontinued operations, net of selling costs			1,500				—				10,329
Increase in restricted cash			(2,067	)			—				—
Acquisition of ownership interest, net of cash acquired			5				—				—
Cash flows from investing activities of discontinued operations			—				—				(132	)
Net cash provided by (used in) investing activities			(5,149	)			(3,502	)			6,333
Cash flows from financing activities:
Proceeds from sale of preferred stock			40,000				—				—
Offering costs from sale of preferred stock			(1,414	)			—				—
Proceeds from exercise of stock options and warrants			2,629				827				606
Repayments on capital lease obligations			(359	)			(2,574	)			(2,011	)
Borrowings on revolving lines of credit			76,425				37,538				33,858
Repayments on revolving lines of credit			(87,851	)			(37,526	)			(27,829	)
Borrowings on related party debt			5,800				15,020				2,000
Repayments on related party debt			(17,908	)			(4,913	)			—
Debt issuance costs			(52	)			—				—
Cash flows from financing activities of discontinued operations			—				—				(230	)
Net cash provided by financing activities			17,270				8,372				6,394
Effect of exchange rate changes on cash and cash equivalents			91				—				(77	)
Net increase in cash and cash equivalents			9,065				322				1,068
Cash and cash equivalents at beginning of year			1,838				1,516				448
Cash and cash equivalents at end of year		$	10,903			$	1,838			$	1,516
Supplemental disclosure of cash flow information:
Cash paid for interest		$	2,887			$	1,112			$	1,605
Cash paid for income taxes			—				6				23
Non cash investing and financing activities:
Property and equipment financed by capital leases			1,127				767				449
Beneficial conversion feature of Series A convertible preferred stock			4,290				—				—
Issuance of warrants in connection with borrowings from related party			600				7,020				396
Issuance of common stock and stock options in connection with acquisition of ownership interest (Note 15)			15,601				—				—
Issuance of common stock in consideration for research and development services			217				49				136

See accompanying notes to Consolidated Financial Statements.

CLARIENT, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(all tabular amounts presented in thousands, except per share amounts)

(1) Description of Business, Basis of Presentation, Operating Segment, and Going Concern

(a) Description of Business

Clarient, Inc. and its wholly-owned subsidiaries (the “Company”) comprise an advanced oncology diagnostic services company, headquartered in Aliso Viejo, California. The Company’s mission is to help improve the lives of those affected by cancer through translating cancer discoveries into better patient care. The Company combines innovative technologies, clinically meaningful diagnostic tests, and world-class pathology expertise to provide advanced diagnostic services that assess and characterize cancer for physicians treating their patients, as well as for biopharmaceutical companies in process of clinically testing various therapies. The Company’s customers are connected to its Internet-based portal, PATHSiTE^®, that delivers high resolution images and interpretative reports resulting from our diagnostic testing services.

California prohibits general corporations from engaging in the practice of medicine pursuant to both statutory and common law principles commonly known as the Corporate Practice of Medicine Doctrine (“CPMD”). In general, the CPMD prohibits non-professional corporations from employing physicians and certain other healthcare professionals who provide professional medical services. All of the Company’s pathology services are provided by, or are under the supervision of, Clarient Pathology Services, Inc. (“CPS”) under a long-term, exclusive professional services agreement by and between the Company and CPS, as amended on September 1, 2009 (the “Professional Services Agreement”). Kenneth J. Bloom, M.D. is the sole stockholder and president of CPS. Dr. Bloom also serves as the Company’s Chief Medical Officer (“CMO”), a senior management function primarily involving the technical oversight of the Company’s diagnostics services laboratory.

The Company is responsible to perform a variety of non-medical administrative services for CPS, as required under the Professional Services Agreement. The Company bills and collects for the pathology services provided by CPS. The Company in turn pays CPS a monthly professional services fee equal to the aggregate of all estimated CPS physician salaries and benefits, and all other operating costs of CPS.

(b) Basis of Presentation

The accompanying audited Consolidated Financial Statements of the Company were prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the financial statements rules and regulations of the United States Securities and Exchange Commission (“SEC”). These financial statements include the financial position, results of operations, and cash flows of the Company, and the accounts of CPS, which are consolidated as required by applicable GAAP. All inter-company accounts and transactions have been eliminated in consolidation.

Certain prior period amounts have been reclassified to properly conform to current period financial statement classification and presentation requirements, or to correct prior period financial statement misclassifications (see Note 18).

The preparation of the accompanying audited Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions. Such estimates and assumptions affect the amounts reported in the Consolidated Financial Statements and accompanying notes thereto. The Company’s most significant estimates relate to revenue recognition, allowance for doubtful accounts, and stock-based compensation expense. Actual results could differ from those estimates. As part of the financial statement preparation process, the Company also has evaluated whether any significant events have occurred after the balance sheet date of December 31, 2009 through March 16, 2010, representing the date this Annual Report on Form 10-K was filed with the SEC, and concluded that no additional disclosures or adjustments were required.

(c) Operating Segment

The Company has one reportable operating segment that delivers advanced oncology diagnostic services to community pathologists, oncologists, and biopharmaceutical companies. As of December 31, 2009, all of the Company’s services were provided within the United States, and substantially all of the Company’s assets were located within the United States.

(d) Going Concern

As of December 31, 2008, the Company expressed substantial doubt about its ability to continue as a going concern because it suffered recurring losses from operations, had negative cash flows from operations, and had working capital and net capital deficiencies. In addition, it was not probable that the Company would remain in compliance with the restrictive financial covenants in its bank credit facilities.

The Company took several actions during 2009 to address these matters, including (i) the issuance and sale of an aggregate of 5.3 million shares of Series A preferred stock for aggregate gross consideration of $40.0 million (see Note 12), (ii) the full repayment and retirement of credit facilities with Safeguard and Comerica, utilizing a portion of the proceeds from the Series A preferred stock issuance and sale (see Note 7), and (iii) the realization of general improvements in 2009 cash collections as compared to 2008. Therefore, as of December 31, 2009, the Company no longer believes there is substantial doubt about its ability to continue as a going concern.

(2) Summary of Significant Accounting Policies

(a) Revenue Recognition

Net revenue for the Company’s diagnostic services is recognized on an accrual basis at the time discreet diagnostic tests are completed. Each test performed relates to a specimen encounter derived from a patient, and received by the Company on a specific date (such encounter is commonly referred to as an “accession”). The Company’s services are billed to various payors, including Medicare, private health insurance companies, healthcare institutions, biopharmaceutical companies, and patients. The Company reports net revenue from contracted payors, including certain private health insurance companies, healthcare institutions, and biopharmaceutical companies, based on the contracted rate, or in certain instances, the Company’s estimate of the amount expected to be collected for the services provided. For billing to Medicare, the Company uses the published fee schedules, net of standard discounts (commonly referred to as “contractual allowances”). The Company reports net revenue from non-contracted payors, including certain private health insurance companies, based on the amount expected to be collected for the services provided. Revenue from patient payors is based on a multiple of the Centers for Medicare & Medicaid Services (CMS) reimbursement schedule, or as applicable, patients’ co-pay or deductible obligations.

(b) Allowance for Doubtful Accounts and Bad Debt Expense

An allowance for doubtful accounts is recorded for estimated uncollectible amounts due from the Company’s various payor groups. The process for estimating the allowance for doubtful accounts involves significant assumptions and judgments. Specifically, the allowance for doubtful accounts is adjusted periodically, and is principally based upon an evaluation of historical collection experience of accounts receivable by age for the Company’s various payor classes. After appropriate collection efforts, accounts receivable are written off and deducted from the allowance for doubtful accounts. Additions to the allowance for doubtful accounts are charged to bad debt expense. The payment realization cycle for certain governmental and managed care payors can be lengthy, involving denial, appeal, and adjudication processes, and is subject to periodic adjustments that may be significant.

During the third quarter of 2009, the Company refined its model for estimating an appropriate allowance for doubtful accounts at each period end, utilizing historical payment information by payor class and receivable age, which was not previously available to the Company in sufficient form and content. The Company also further refined its identification of contractual allowances during the third quarter of 2009, which resulted in the recognition of an immaterial amount of additional contractual allowances.

(c) Stock-Based Compensation

The Company records compensation expense related to stock-based awards, including stock options and restricted stock, based on the fair value of the award, which is determined using the Black-Scholes option-pricing model. Stock-based compensation expense recognized during the period is based on the fair value of the portion of the stock-based awards that are ultimately expected to vest, and thus, the gross expense is reduced for estimated forfeitures. The Company recognizes stock-based compensation expense over the vesting period using the straight-line method for employees and ratably as tranches vest for non-employees. The Company classifies compensation expense related to these awards based on the department to which the recipient reports.

(d) Long-Lived Assets

The Company evaluates the possible impairment of its long-lived assets when events or changes in circumstances occur that indicate that the carrying value of its assets may not be recoverable. Recoverability of assets to be held and used is measured by the comparison of the carrying value of such assets to the Company’s pretax cash flows (undiscounted and without interest charges) expected to be generated from their use in Company operations. If such assets are considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the assets exceeds fair value. Assets held for sale, when applicable, are reported at the lower of the carrying amount or fair value, less costs to sell.

One potential impairment indicator is current-period operating and/or cash flow loss, combined with a history of operating and/or cash flow losses. Because this condition applies to the Company, management evaluates the Company’s asset group for impairment at the end of each reporting period. The asset group tested for impairment comprises the Company’s entire laboratory operation, representing the lowest level of its separately identifiable cash flows. The impairment evaluation uses the Company’s operating plan and associated cash flow projection in determining the undiscounted cash flows expected to be generated by its asset group through continuing operations. Such undiscounted cash flows are next compared to the carrying amount of the asset group to determine if an impairment of the asset group is indicated.

The undiscounted net cash flows expected to be generated by the Company’s asset group exceeded the carrying amount of the asset group as of December 31, 2009 and 2008, therefore, the Company’s asset group is not considered to be impaired. Such conclusion is based upon significant management judgments and estimates inherent in the operating plan and associated cash flow projections, including assumptions pertaining to net revenue growth, expense trends, and working capital management. Accordingly, changes in circumstances or assumptions could adversely impact the results of the Company’s long-lived asset impairment test.

(e) Income Taxes

The Company uses the asset and liability method of accounting for income taxes. Under such method, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis, and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Deferred taxes are reduced by a valuation allowance to an amount which is more likely than not to be realized. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period of enactment.

(f) Cash and Cash Equivalents and Restricted Cash

Cash and cash equivalents consist of amounts held as bank deposits and any certificates or notes with an original maturity of three months or less.

Restricted cash is held as bank deposits, and serves as security deposits for the Company’s Aliso Viejo, California facility lease and a certain significant capital lease of computer hardware. Interest accrues to the Company for such accounts. The classification of restricted cash as current or non-current is dependent upon whether the contractual terms for such deposits provide for the complete release of restrictions within one year of the balance sheet date.

The Company has not experienced any significant losses on cash and cash equivalents and does not believe it is exposed to any significant loss risk due to the high-ratings of the institutions in which its balances are deposited. The Company’s unrestricted and restricted cash balances on deposit that exceed the Federal Deposit Insurance Corporation (F.D.I.C.) limits were approximately $11.6 million at December 31, 2009.

(g) Supplies Inventory

Supplies inventory consists of laboratory and research and development supplies and are stated at the lower of cost or market. Supplies inventory is accounted for under the first-in, first-out method (FIFO).

(h) Property and Equipment and Depreciation

Property and equipment are depreciated using the straight-line method over the following estimated useful lives:

Office furniture, computer, software, and laboratory equipment		Three to five years
Leasehold improvements		Shorter of useful life or remaining term of lease

Expenditures for maintenance, repairs, and minor improvements are charged to expense as incurred. Depreciation expense is recognized on the first day of the month subsequent to being placed into service. Leasehold improvements are capitalized and amortized over the shorter of their estimated useful lives or the remaining lease term. All reimbursed leasehold improvements received from the Company’s landlord are recorded to deferred rent and recovered ratably through a reduction of rent expense over the term of the lease.

(i) Capitalized Internal-Use Software Costs

The Company capitalizes eligible internal-use computer software costs. Amortization begins when the internal-use computer software is ready for its intended use, and is amortized over a three to five-year period using the straight-line method.

(j) Research and Development

Research and development costs are expensed as incurred. Research and development expenses consist of compensation and benefits for research and development personnel, license fees, related supplies inventory, certain information technology personnel, arrangements with consultants and other third parties, and allocated facility-related costs.

(k) Intangible Assets, net

Intangible assets, net, primarily consist of intellectual property represented by proprietary biomarkers in development and substantially ready for use within the Company’s diagnostic testing activities (acquired through the AGI Acquisition, discussed in Note 15). These intangible assets have associated patents or patents in process, and are amortized on a straight-line basis over estimated useful lives of seven years. The amortization period commences upon the commercialization of the related biomarker.

(l) Goodwill

Goodwill is recorded when the purchase price paid for an acquisition exceeds the estimated fair value of the net identified tangible and intangible assets acquired. The Company performs a two-step process on an annual basis, or more frequently if necessary, to determine 1) whether the fair value of the relevant reporting unit exceeds carrying value, and 2) to measure the amount of an impairment loss, if any. The “reporting unit” tested for goodwill impairment comprises the Company’s entire laboratory operation, representing its single operating segment. The fair value of the Company’s “reporting unit” is represented by the Company’s total market capitalization on the NASDAQ Capital Market as of the close of the business day on December 1, which represents our annual impairment testing date.

(m) Fair Value Measurements

The Company applies relevant GAAP in measuring the fair value of its Variable Shares (see Note 15). Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. GAAP establishes a fair value hierarchy that distinguishes between (i) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (ii) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:

Level 1 — Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2 — Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g. interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

Level 3 — Inputs that are both significant to the fair value measurement and unobservable.

(3) Balance Sheet Detail

(a) Allowance for Doubtful Accounts

The following is the 2008 and 2009 summary of activity for the allowance for doubtful accounts:

Ending balance, December 31, 2007		$	3,370
Bad debt expense			12,199
Write-offs			(7,524	)
Ending balance, December 31, 2008			8,045
Bad debt expense			12,927
Write-offs			(12,225	)
Ending balance, December 31, 2009		$	8,747

(b) Property and Equipment

The following is a summary of property and equipment:

		December 31,				December 31,
		2009				2008
Office furniture, computer hardware and software, and laboratory equipment		$	21,480			$	16,341
Leasehold improvements			9,650				8,551
Total			31,130				24,892
Less: accumulated depreciation and amortization			(16,784	)			(12,981	)
Property and equipment, net		$	14,346			$	11,911

As of December 31, 2009 and 2008, the Company’s associated capital lease obligations were $1.2 million and $0.6 million, respectively.

(c) Intangible assets

The following is a summary of intangible assets (see Note 15 for further discussion):

		December 31,
		2009
Biomarkers		$	11,349
In-process research and development			76
Issued patents			26
Patent applications			123
Non-compete agreements			110
Less: accumulated amortization			(45	)
Intangible assets, net		$	11,639

The following is a summary of the estimated useful life, estimated annual amortization expense, and expense classification of the Company’s intangible assets:

		Estimated
		Useful Life				Estimated Annual				Consolidated Statement of Operations
		(years)				Amortization				Classification
Biomarkers			7			$	1,621			Cost of services
In-process research and development			7				11			Research and development
Issued patents			7				4			Cost of services
Patent applications			7				18			Cost of services
Non-competition agreements			3				37			Research and development
Total						$	1,691

(4) Discontinued Operations

On March 8, 2007, the Company sold its instrument systems business (the “ACIS Business”), consisting of certain tangible assets, inventory, intellectual property (including the Company’s former patent portfolio and the ACIS and ChromaVision trademarks), contracts, and related assets to Carl Zeiss MicroImaging, Inc. and one of its subsidiaries (collectively, “Zeiss”) for an aggregate purchase price of $12.5 million. The $12.5 million consisted of $11.0 million in cash and an additional $1.5 million in contingent purchase price, subject to the satisfaction of certain post-closing conditions through March 8, 2009 relating to transferred intellectual property (the “ACIS Sale”). As part of the ACIS Sale, the Company entered into a license agreement with Zeiss that granted the Company a non-exclusive, perpetual and royalty-free license to certain of the transferred patents, copyrights, and software code for use in connection with imaging applications (excluding sales of imaging instruments) and the Company’s oncology diagnostic services business.

The ACIS Business is reported in discontinued operations for all periods presented. The Company recognized a gain on sale for the year ended December 31, 2007, which is calculated as follows:

Proceeds from ACIS Business sale						$	11,000
Less: Selling costs							(671	)
Net proceeds from ACIS Business sale							10,329
Inventories			(1,480	)
Property and equipment, net			(473	)
Goodwill and intangibles, net			(4,042	)
Other assets			(518	)
Deferred revenue			692
Debt			1,616
Net assets sold							(4,205	)
Gain on sale of ACIS Business						$	6,124

Results of discontinued operations included within the Consolidated Statements of Operations, as adjusted (see Note 18), were as follows:

		Year Ended
		December 31,
		2007
Net revenue		$	864
Cost of revenue			364
Operating expenses			1,180
Interest expense			32
Net loss from discontinued operations			(712	)
Gain on sale of ACIS Business			6,124
Subtotal		$	5,412
Income tax expense on gain on sale of ACIS Business			(2,111	)
Income from discontinued operations, net of income taxes		$	3,301

In March 2009, Zeiss’ management acknowledged the satisfaction of the post-closing conditions of the ACIS Sale and the associated $1.5 million payment due, which the Company subsequently received on April 8, 2009. The Company recorded the $0.9 million as income from discontinued operations, net of income taxes (see Note 18), within the accompanying Consolidated Statements of Operations for the year ended December 31, 2009.

The Company retains certain indemnification obligations to Zeiss for any third party claims surviving through the applicable statute of limitations. The Company believes the likelihood of a raised claim(s) is remote and, in any case, would be immaterial in value.

(5) Recent Accounting Pronouncements

The Financial Accounting Standards Board (“FASB”) Accounting Standards Codification^TM (“FASB Codification”) became the single source of authoritative nongovernmental GAAP on July 1, 2009. The FASB Codification became effective for financial statements that cover interim and annual periods ending after September 15, 2009. Other than resolving certain minor inconsistencies in current GAAP, the FASB Codification does not affect GAAP, but rather organizes historical accounting pronouncements by approximately 90 accounting topics. Accordingly, the Company describes herein, in general, pertinent GAAP where applicable and/or cites the associated FASB Codification reference, rather than the historical reference for such GAAP guidance.

In September 2006, a common definition for fair value was established and is required to be applied to GAAP as applicable. The guidance also establishes a framework for measuring fair value and expands disclosure about such fair value measurements, and became effective for financial assets and financial liabilities for fiscal years beginning after November 15, 2007. Subsequent GAAP guidance deferred the effective date for all nonfinancial assets and nonfinancial liabilities to fiscal years beginning after November 15, 2008. The adoption of the aforementioned GAAP for financial assets and financial liabilities, effective January 1, 2008, did not have a material impact on the Company’s consolidated financial position and results of operations. The adoption of aforementioned GAAP for nonfinancial assets and nonfinancial liabilities, effective January 1, 2009, had no impact on the Company’s consolidated financial position, results of operations, and cash flows.

In December 2007, developments in GAAP significantly changed the accounting and required financial statement disclosures for business combinations for acquisitions occurring on or after January 1, 2009. See Note 15 for the Company’s business combination accounting disclosure in 2009. Under such guidance, an acquiring entity is required to recognize all the assets acquired and liabilities assumed in a transaction at the acquisition-date at fair value with limited exceptions. Further changes in the accounting treatment for certain specific items include:

•

Transaction costs are generally expensed as incurred. These costs were previously treated as costs of the acquisition;

•

Contingent consideration is recorded at fair value as an element of purchase price with subsequent adjustments recognized in operations. Contingent consideration was previously accounted for as a subsequent adjustment of purchase price;

•

In-process research and development (IPR&D) is recorded at fair value as an indefinite-lived intangible asset at the acquisition date;

•

Restructuring costs associated with a business combination are generally expensed subsequent to the acquisition date; and

•

Subsequent decreases in valuation allowances on acquired deferred tax assets are recognized in operations after the measurement period. Such changes were previously considered to be subsequent changes in consideration and were recorded as decreases in goodwill.

In April 2009, additional GAAP guidance was released that affects the accounting for assets acquired and liabilities assumed in a business combination that arise from contingencies, which amends the accounting for assets and liabilities arising from contingencies in a business combination. Such guidance was effective January 1, 2009, and requires pre-acquisition contingencies to be recognized at fair value, if fair value can be reasonably determined during the measurement period. If fair value cannot be reasonably determined, measurement is required to be based on the recognition and measurement criteria of GAAP applicable for accounting for contingencies. See Note 15 for the impact of Company’s business combination accounting in 2009.

In June 2008, GAAP guidance was released for determining whether instruments granted in share-based payment transactions are participating securities. Under such guidance, unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents, whether they are paid or unpaid, are considered participating securities and should be included in the computation of earnings per share pursuant to the two-class method. As required, the Company adopted such guidance retrospectively effective January 1, 2009, though it did not affect the Company’s consolidated financial position, results of operations, cash flows, or loss per common share in prior periods. Income (loss) per share attributable to common stockholders was affected in the year ended December 31, 2009, as disclosed in Note 9.

(6) Significant Risks and Uncertainties

Credit risk with respect to the Company’s accounts receivable is generally diversified due to the large number of payors that comprise its customer base. The Company has significant receivable balances with government payors, health insurance carriers, health care institutions, biopharmaceutical companies, and patients. The Company’s receivable balances are not supported by collateral.

The laboratory services industry faces challenging billing and collection procedures. The cash realization cycle for certain governmental and managed care payors can be lengthy and may involve denial, appeal, and adjudication processes. Collection of governmental, private health insurer, and client receivables are generally a function of providing complete and accurate billing information to such parties within the various filing deadlines. Receivables due from clients and patients, in particular, are generally subject to increased credit risk as compared to the Company’s other payors, due to the clients’ and patients’ credit worthiness or inability to pay.

The percentage of the Company’s gross accounts receivable of $30.3 million and $28.4 million as of December 31, 2009 and 2008, respectively, by primary payor class is as follows:

		December 31,
		2009				2008
Governmental (Medicare and Medicaid)			20	%			24	%
Private health insurers			43	%			40	%
Clients (pathologists, hospitals, clinics, and biopharmaceutical companies)			18	%			18	%
Patients (indirect bill)			10	%			5	%
Patients (direct bill)			9	%			13	%
Total			100	%			100	%

The Company’s aged gross accounts receivable in total, and by payor class, as of December 31, 2009 and 2008 is as follows:

As of December 31, 2009 - Total		Gross Amount				Percent of Total
Total		$	30,315				100	%
Unbilled			4,819				16	%
Current			5,817				19	%
31-60 days past due			4,341				14	%
61-90 days past due			2,799				9	%
91-120 days past due			1,963				6	%
121-150 days past due			1,299				4	%
Greater than 150 days past due			9,277				32	%

Governmental payors (Medicare and Medicaid)		Gross Amount				Percent of Total
Total		$	5,989				100	%
Unbilled			1,508				25	%
Current			1,332				22	%
31-60 days past due			517				9	%
61-90 days past due			335				6	%
91-120 days past due			228				4	%
121-150 days past due			204				3	%
Greater than 150 days past due			1,864				31	%

Private health insurer payors		Gross Amount				Percent of Total
Total		$	13,009				100	%
Unbilled			2,391				18	%
Current			1,989				15	%
31-60 days past due			1,395				11	%
61-90 days past due			1,069				8	%
91-120 days past due			728				6	%
121-150 days past due			580				5	%
Greater than 150 days past due			4,857				37	%

Client (pathologists, hospitals, clinics, and biopharmaceutical) payors		Gross Amount				Percent of Total
Total		$	5,433				100	%
Unbilled			585				11	%
Current			1,791				33	%
31-60 days past due			1,570				29	%
61-90 days past due			530				10	%
91-120 days past due			299				5	%
121-150 days past due			164				3	%
Greater than 150 days past due			494				9	%

Patient payors (indirect bill)		Gross Amount				Percent of Total
Total		$	2,992				100	%
Unbilled			—				—
Current			137				5	%
31-60 days past due			343				11	%
61-90 days past due			337				11	%
91-120 days past due			302				10	%
121-150 days past due			275				9	%
Greater than 150 days past due			1,598				54	%

Patient payors (direct bill)		Gross Amount				Percent of Total
Total		$	2,892				100	%
Unbilled			335				12	%
Current			569				19	%
31-60 days past due			516				18	%
61-90 days past due			528				18	%
91-120 days past due			405				14	%
121-150 days past due			76				3	%
Greater than 150 days past due			463				16	%

As of December 31, 2008 — Total		Gross Amount				Percent of Total
Total		$	28,360				100	%
Unbilled			4,532				16	%
Current			4,636				16	%
31-60 days past due			4,119				15	%
61-90 days past due			3,403				12	%
91-120 days past due			2,713				9	%
121-150 days past due			2,166				8	%
Greater than 150 days past due			6,791				24	%

Governmental payors (Medicare and Medicaid)		Gross Amount				Percent of Total
Total		$	6,732				100	%
Unbilled			1,124				16	%
Current			1,202				18	%
31-60 days past due			1,156				17	%
61-90 days past due			790				12	%
91-120 days past due			729				11	%
121-150 days past due			584				9	%
Greater than 150 days past due			1,147				17	%

Private health insurer payors		Gross Amount				Percent of Total
Total		$	11,367				100	%
Unbilled			2,384				21	%
Current			1,242				11	%
31-60 days past due			1,529				13	%
61-90 days past due			1,349				12	%
91-120 days past due			992				9	%
121-150 days past due			948				8	%
Greater than 150 days past due			2,923				26	%

Client (pathologists, hospitals, clinics, and biopharmaceutical) payors		Gross Amount				Percent of Total
Total		$	5,213				100	%
Unbilled			703				13	%
Current			1,661				32	%
31-60 days past due			818				16	%
61-90 days past due			588				11	%
91-120 days past due			417				8	%
121-150 days past due			141				3	%
Greater than 150 days past due			885				17	%

Patient payors (indirect bill)		Gross Amount				Percent of Total
Total		$	1,302				100	%
Unbilled			—				—	%
Current			205				16	%
31-60 days past due			241				18	%
61-90 days past due			212				16	%
91-120 days past due			138				11	%
121-150 days past due			166				13	%
Greater than 150 days past due			340				26	%

Patient payors (direct bill)		Gross Amount				Percent of Total
Total		$	3,746				100	%
Unbilled			320				9	%
Current			328				9	%
31-60 days past due			376				10	%
61-90 days past due			464				12	%
91-120 days past due			436				12	%
121-150 days past due			327				9	%
Greater than 150 days past due			1,495				39	%

As of December 31, 2009, the Company maintained an $8.7 million allowance for doubtful accounts in order to carry accounts receivable at the estimated net realizable value of $21.6 million, as presented within the accompanying Consolidated Balance Sheets. The allowance for doubtful accounts is an estimate that involves considerable professional judgment. As such, the Company’s actual collection of its December 31, 2009 accounts receivable may materially differ from management’s estimate for reasons including, but not limited to: customer mix, concentration of customers within the healthcare sector, and the general downturn in the United States economy.

(7) Lines of Credit

The following table summarizes the Company’s outstanding debt at its carrying value at December 31, 2009 and 2008. The Company believes the carrying amount of its outstanding debt approximates fair value based upon its short-term nature and associated interest rate.

		December 31,
		2009				2008
Gemino Facility		$	2,678			$	5,104
Capital lease obligations			1,249				608
Safeguard Mezzanine Financing			—				13,366
Comerica Facility			—				9,000
Subtotal			3,927				28,078
Less: Unamortized discount on Mezzanine Facilities			—				(1,905	)
Total debt			3,927				26,173
Less: Short-term debt, including current maturities of capital lease obligations			(3,323	)			(25,828	)
Long-term capital lease obligations		$	604			$	345

On March 25, 2009, the Company entered into the Oak Purchase Agreement, pursuant to which the Company agreed to sell and issue to Oak, up to an aggregate of 6.6 million shares of convertible preferred stock in two or more tranches for aggregate consideration of up to $50.0 million. The Company closed two tranches with Oak in March and May 2009 for an aggregate 5.3 million shares of convertible preferred stock for aggregate consideration of $40.0 million. After paying investment banking and legal fees, the Company used a portion of the net proceeds to repay in full and terminate its revolving credit agreements with Comerica Bank and Safeguard (defined below) during the first half of 2009.

Gemino Facility

On July 31, 2008, the Company entered into a secured credit agreement (the “Gemino Facility”) with Gemino Healthcare Finance, LLC (“Gemino”), which was amended on February 27, 2009 (the “February 2009 Gemino Amendment”), on November 13, 2009 (the “November 2009 Gemino Amendment”), and December 21, 2009 (the “December 2009 Gemino Amendment”). The Gemino Facility is a revolving facility under which the Company may borrow up to $8.0 million, secured by the Company’s accounts receivable and related assets. The November 2009 Gemino Amendment extended the Gemino Facility’s maturity date to January 31, 2011. The December 2009 Gemino Amendment joined AGI (see Note 15) as a borrower under the Gemino Facility.

Outstanding borrowings under the Gemino Facility were $2.7 million at December 31, 2009. The amount which the Company is entitled to borrow under the Gemino Facility at a particular time is based on the amount of the Company’s qualified accounts receivable and certain liquidity factors ($5.3 million availability as of December 31, 2009). During 2008, borrowings under the Gemino Facility bore interest at an annual rate equal to 30-day LIBOR (subject to a minimum annual rate of 2.50% at all times) plus an applicable margin of 5.25% during 2008. As a result of the February 2009 Gemino Amendment, borrowings under the Gemino Facility bear interest at an annual rate equal to 30-day LIBOR (subject to a minimum annual rate of 2.50% at all times) plus an applicable margin of 6.0% during 2009 and 2010. The Company was also required to pay a commitment fee of 0.75% per year on the daily average of unused credit availability (reduced to 0.50% with the November 2009 Gemino Amendment, as discussed below), and is required to pay a collateral monitoring fee of 0.40% per year on the daily average of outstanding borrowings. Interest expense on the Gemino Facility for the year ended December 31, 2009 and 2008, was $0.5 million and $0.2 million, respectively. Such amounts are included in interest expense within the accompanying Consolidated Statements of Operations

The February 2009 Gemino Amendment eliminated the formerly-existing minimum adjusted EBITDA covenant and replaced it with a covenant that requires the Company to maintain a “fixed charge coverage ratio” on an annualized basis of 1.00 through June 30, 2009, 1.10 through September 30, 2009, and 1.20 through December 31, 2009 (though the November 2009 Gemino Amendment removed the “fixed charge coverage ratio” through December 31, 2009, as discussed below). The “fixed charge coverage ratio” is defined as the ratio of EBITDA (net income plus interest expense, tax expense, depreciation/amortization expense, and stock-based compensation expense), to the sum of (i) interest expense paid in cash on the Gemino Facility, (ii) payments made under capital leases, (iii) unfinanced capital expenditures, and (iv) taxes paid.

The February 2009 Gemino Amendment increased the Company’s capital expenditure limit to $7.5 million in each fiscal year. For the twelve months ending December 31, 2009, the Company’s aggregate capital expenditures were $4.6 million. The February 2009 Gemino Amendment also modified the minimum level of “excess liquidity” covenant, increasing its threshold from $2.0 million to $3.0 million, though such covenant was subsequently eliminated with the November 2009 Gemino Amendment, as discussed below.

The November 2009 Gemino Amendment (i) extended the maturity date of the Gemino Facility from January 31, 2010 to January 31, 2011, (ii) removed the “excess liquidity” covenant, (iii) increased the facility’s “advance rate” from 75% to 85%, (iv) eliminated the minimum “fixed charge coverage ratio” covenant through December 31, 2009, (v) includes a “maximum loan turnover ratio” covenant (defined as the average monthly loan balance divided by average monthly cash collections multiplied by 30 days) of 35 days only for the three months ended December 31, 2009 (for the three months ended December 31, 2009 the Company’s calculated “maximum loan turnover ratio” was 18 days), (vi) requires a minimum annualized “fixed charge coverage ratio” covenant of 1.00 for the three months ending March 31, 2010, 1.10 for six months ending June 30, 2010, 1.20 for the nine months ending September 30, 2010, and 1.20 for the twelve months ending December 31, 2010 and thereafter, and (vii) reduced the commitment fee from 0.75% to 0.50% per year on the daily average of unused credit availability.

The Gemino Facility also contains a “material adverse change” clause (“MAC”) clause. If the Company encountered difficulties that would qualify as a MAC in its (i) operations, (ii) condition (financial or otherwise), or (iii) ability to repay amounts outstanding under the Gemino Facility, it could be cancelled at Gemino’s sole discretion. Gemino could then elect to declare the indebtedness, together with accrued interest and other fees, to be immediately due and payable and proceed against any collateral securing such indebtedness.

Comerica Facility

On March 26, 2009, the Company fully repaid the $9.8 million outstanding balance under its $12.0 million revolving credit agreement with Comerica Bank (the “Comerica Facility”), using a portion of the proceeds from the initial closing of the Oak Private Placement. The Comerica Facility was terminated at such time, as was Safeguard’s guarantee of the Comerica Facility (as described below). The Company maintains a $1.5 million standby letter of credit with Comerica Bank which is fully supported by a restricted cash account for the same amount. The letter of credit is for the benefit of the Company’s landlord of its leased facility in Aliso Viejo, California.

Borrowings under the Comerica Facility bore interest during 2008 and through February 27, 2009, at Comerica’s prime rate minus 0.5%, or at the Company’s option, at a rate equal to 30-day LIBOR plus 2.45%. The Comerica Facility was amended on February 27, 2009, and as a result, until its retirement on March 26, 2009, borrowings under the Comerica Facility bore interest at the Company’s option of: (i) 0.5% plus the greater of Comerica’s prime rate or 1.75%, or (ii) 30-day LIBOR plus 2.40%. The interest expense on the outstanding balance under the Comerica Facility for the years ended December 31, 2009, 2008, and 2007 (excluding the usage and guarantee fees charged by Safeguard as described below), was $0.1 million, $0.4 million, and $0.7 million, respectively. Such amounts are included in interest expense within the accompanying Consolidated Statements of Operations.

Safeguard Delaware, Inc., a wholly-owned subsidiary of Safeguard Scientifics, Inc. (“Safeguard”), the Company’s largest single stockholder, guaranteed the Company’s borrowings under the Comerica Facility in exchange for 0.5% per year of the total amount guaranteed plus 4.5% per year of the daily-weighted average principal balance outstanding. Additionally, the Company was required to pay Safeguard a quarterly usage fee of 0.875% of the amount by which the daily average outstanding principal balance under the Comerica Facility exceeded $5.5 million. The usage and guarantee fees charged by Safeguard for the Comerica Facility for the years ended December 31, 2009, 2008, and 2007 were $0.1 million, $0.7 million, and $0.6 million, respectively. Such amounts are included in interest expense to related parties within the accompanying Consolidated Statements of Operations.

Safeguard Mezzanine Financing

On March 7, 2007, the Company entered into a senior subordinated revolving credit facility with Safeguard (the “Initial Mezzanine Facility”). The Initial Mezzanine Facility provided the Company with up to $12.0 million in working capital funding, but was reduced by $6.0 million as a result of the ACIS Sale discussed in Note 4. The Initial Mezzanine Facility’s annual interest rate was 12.0%. In connection with the Initial Mezzanine Facility, the Company issued Safeguard 0.3 million common stock warrants to satisfy Safeguard’s commitment fees and maintenance and usage fees. The fair value of these common stock warrants was determined using the Black-Scholes option pricing model, and was initially expensed over the term of the Initial Mezzanine Facility, though the term was subsequently extended to coincide with the term of the New Mezzanine Facility (defined below).

On March 14, 2008, the Company entered into an amended and restated senior subordinated revolving credit facility with Safeguard (the “New Mezzanine Facility”) to refinance, renew, and expand the Initial Mezzanine Facility. The New Mezzanine Facility, which had a stated maturity date of April 15, 2009, provided the Company with up to $21.0 million in working capital funding. Borrowings under the New Mezzanine Facility bore interest at an annual rate of 12.0% through September 30, 2008 and 13.0% thereafter. Proceeds from the New Mezzanine Facility were used to refinance indebtedness under the Initial Mezzanine Facility, for working capital purposes, and to repay in full and terminate the Company’s former credit facility with GE Capital, which included certain equipment lease obligations.

In connection with the New Mezzanine Facility, the Company issued Safeguard 1.6 million common stock warrants upon its signing. The Company was also required to issue Safeguard an additional 2.2 million common stock warrants, in four equal tranches of 0.55 million if the balance of the New Mezzanine Facility had not been reduced to $6.0 million or less on or prior to May 1, 2008, July 1, 2008, September 1, 2008, and November 1, 2008, respectively. Such reduction was not accomplished and as a result, 0.55 million common stock warrants were issued on each of June 10, 2008, July 2, 2008, September 2, 2008, and November 6, 2008, respectively.

The fair value of the 1.6 million common stock warrants issued on March 14, 2008 and the 2.2 million common stock warrants issued from June 2008 through December 2008 was measured on March 14, 2008, the date of the New Mezzanine Facility commitment. The fair value of any unissued common stock warrants associated with the New Mezzanine Facility was measured and adjusted at each subsequent quarter end. The fair value of all such common stock warrants has been treated for accounting purposes as a debt discount of the New Mezzanine Facility and additional paid-in-capital. As such, the Company began accreting the debt discount in the first quarter of 2008 (as adjusted for the change in fair value of any contingent warrants at each quarter-end) over the term of the New Mezzanine Facility through recording interest expense to related parties on a straight-line basis.

The fair value of the common stock warrants issued to Safeguard in connection with the Initial Mezzanine Facility and New Mezzanine Facility was determined using the Black-Scholes option pricing model with the following inputs: zero dividends, a risk-free interest rate ranging from 3.4% to 4.5% (equal to the U.S. Treasury yield curve for the warrants’ term on the date of issuance), and expected stock volatility of 66% to 85% (measured using weekly price observations for a period equal to the warrants’ term).

On February 27, 2009, the Company entered into an amended and restated senior subordinated revolving credit facility with Safeguard (the “Third Mezzanine Facility”) to refinance, renew, and expand the New Mezzanine Facility. The Third Mezzanine Facility had a stated maturity date of April 1, 2010 and provided the Company with up to $30.0 million in working capital funding through March 25, 2009. Borrowings under the Third Mezzanine Facility bore interest at an annual rate of 14.0%, capitalized monthly to the principal balance. Upon the signing of the Third Mezzanine Facility, the Company issued Safeguard 0.5 million fully vested common stock warrants with a five year term and an exercise price equal to $1.376.

In connection with the Initial Oak Closing on March 26, 2009, the Company repaid $14.0 million of the outstanding balance under the Third Mezzanine Facility. Also on March 26, 2009, the Company and Safeguard amended the Third Mezzanine Facility, which resulted in the reduction of its total availability from $30.0 million to $10.0 million. The Second Oak Closing occurred on May 14, 2009, and at such time, the Company repaid the remaining outstanding balance (including accrued interest) of the Third Mezzanine Facility of $5.7 million, which was cancelled upon repayment.

In connection with the $20.0 million reduction in availability of the Third Mezzanine Facility on March 26, 2009, the Company assessed the associated unamortized debt issuance costs of $1.7 million as of such date. The 67% reduction in borrowing capacity ($20.0 million divided by $30.0 million) resulted in the expensing of debt issuance costs (which included unamortized warrant expense) in such proportion, totaling $1.1 million, which was recorded to interest expense to related parties in the first quarter of 2009 and included in interest expense within the accompanying Consolidated Statements of Operations for the year ended December 31, 2009. The remaining unamortized debt issuance costs ($0.5 million as of March 31, 2009) was fully amortized through May 14, 2009, and included in interest expense to related parties within the accompanying Consolidated Statements of Operations for the year ended December 31, 2009.

The interest expense on the outstanding balance under the Mezzanine Facilities, including the amortization of the fair value of issued warrants (see tables below), for the years ended December 31, 2009, 2008, and 2007 was $3.6 million, $7.3 million, and $1.1 million respectively. Such amounts are included in interest expense to related parties within the accompanying Consolidated Statements of Operations.

The table below summarizes the common stock warrant activity associated with the Initial Mezzanine Facility:

																						Interest Expense Recognized
										Warrant				Warrant								Year				Year				Year
Number of		Exercise				Warrant				Issuance				Expiration								Ended				Ended				Ended
warrants		Price				Term				Date				Date				Fair Value				2009				2008				2007
125,000*		$	0.01			4 years				March 7, 2007				March 7, 2011				$	204			$	23			$	88			$	93
62,500			1.39			4 years				March 7, 2007				March 7, 2011					69				8				30				31
31,250*			0.01			4 years				November 14, 2007				November 14, 2011					62				11				42				9
31,250*			0.01			4 years				December 17, 2007				December 17, 2011					61				13				49				—
31,250*			0.01			4 years				March 5, 2008				March 5, 2012					62				16				46				—
Total																		$	458			$	71			$	255			$	133

The table below summarizes the common stock warrant activity associated with the New Mezzanine Facility:

																						Interest Expense
																						Recognized
														Warrant								Year				Year
		Exercise				Warrant				Warrant				Expiration								Ended				Ended
Number of warrants		Price				Term				Issuance Date				Date				Fair Value				2009				2008
1,643,750*		$	0.01			5 years				March 14, 2008				March 14, 2013				$	2,666			$	703			$	1,962
550,000*			0.01			5 years				June 10, 2008				June 11, 2013					1,140				300				839
550,000*			0.01			5 years				July 2, 2008				July 2, 2013					1,095				289				806
550,000*			0.01			5 years				September 2, 2008				September 2, 2013					1,167				308				859
550,000*			0.01			5 years				November 6, 2008				November 6, 2013					890				235				657
Total																		$	6,958			$	1,835			$	5,123

The table below summarizes the common stock warrant activity associated with the Third Mezzanine Facility:

Interest Expense

Warrant

Recognized for the

Number of

Exercise

Warrant

Warrant

Expiration

Year Ended

Warrants Issued

Price

Term

Issuance Date

Date

Fair Value

2009

500,000

$

1.376

5 years

February 27, 2009

February 27, 2014

$

600

$

600

Total

$

600

$

600

(8) Equipment Financing

On March 31, 2009, the Company entered into a three-year capital lease with Hitachi Data Systems Credit Corporation for computer equipment and related software with a fair value on such date of $1.2 million, associated with the Company’s initiative to upgrade its information technology infrastructure. The Company also has a number of active laboratory equipment and office equipment leases (capital and operating) with various providers as of December 31, 2009.

The Company’s capital lease obligations as of December 31, 2009 are as follows:

2010		$	733
2011			498
2012			141
Subtotal			1,372
Less: interest			(123	)
Total			1,249
Less: current portion			(645	)
Capital lease obligations, long-term portion		$	604

(9) Net Loss Per Share Information

Effective January 1, 2009, the Company adopted applicable GAAP guidance affecting its earnings per share (“EPS”) presentation, requiring that unvested stock-based compensation awards containing non-forfeitable rights to dividends are participating securities and should be included in the basic EPS calculation using the two-class method. Under the two-class method, all earnings (distributed and undistributed) are allocated to common stock and participating securities (defined below), based on their respective rights to receive dividends.

The Company grants restricted stock awards from time to time under its stock-based compensation plan, which generally entitles recipients to non-forfeitable rights to dividends, if and when declared. The Company’s Series A convertible preferred stockholders (see Note 12) also have non-forfeitable rights to dividends, if and when declared. Accordingly, such unvested restricted stock awards and Series A convertible preferred stock are considered “participating securities.”

Participating securities are included in the computation of EPS under the two-class method in periods of net income, but are not included in the computation of EPS in periods of net loss (or when distributions, or their accounting equivalents — such as an amortized beneficial conversion feature, are in excess of net income), since the contractual terms of the participating securities do not require the holders’ funding of the Company’s losses. Basic and diluted EPS was computed by dividing net loss applicable to common stockholders by the weighted-average outstanding common shares during each period, as summarized in the tables below:

		Years Ended December 31,
		2009				2008				2007
Basic and diluted EPS numerator:
Loss from continuing operations, net of income taxes		$	(6,953	)		$	(9,645	)		$	(12,058	)
Series A convertible preferred stock beneficial conversion feature (see Note 12)			(4,290	)			—				—
Loss from continuing operations applicable to common stockholders, net of income taxes		$	(11,243	)		$	(9,645	)		$	(12,058	)
Income from discontinued operations, net of income taxes			901				—				3,301
Net loss applicable to common stockholders		$	(10,342	)		$	(9,645	)		$	(8,757	)
Net income (loss) per share — basic and diluted:
Loss from continuing operations, net of income taxes		$	(0.14	)		$	(0.13	)		$	(0.17	)
Income from discontinued operations, net of income taxes			0.01				—				0.05
Net income (loss) applicable to common stockholders		$	(0.13	)		$	(0.13	)		$	(0.12	)