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As filed with the Securities and Exchange Commission on February 13, 2013

Registration Number 333-177972

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Amendment No. 5

to

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

APPLIED MEDICAL CORPORATION

(Exact name of Registrant as specified in its charter)

22872 Avenida Empresa

Rancho Santa Margarita, California 92688

(949) 713-8000

(Address, including zip code, and telephone number, including area code, of registrant’s of principal executive offices)

Said S. Hilal

President and Chief Executive Officer

Applied Medical Corporation

22872 Avenida Empresa

Rancho Santa Margarita, California 92688

(949) 713-8000

(Name, address and telephone number, including area code, of agent for service)

Copies to:

As soon as practicable after the effective date of this Registration Statement.

(Approximate date of commencement of proposed sale to the public)

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.  ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

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

Large accelerated filer  ¨            Accelerated filer  ¨                   Non-accelerated filer  x             Smaller reporting company  ¨

(Do not check if a smaller reporting company)

CALCULATION OF REGISTRATION FEE

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.

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The information in this prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

PROSPECTUS (Subject to Completion) Dated February 13, 2013.

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You should rely only on the information contained in this prospectus and any free-writing prospectus that we authorize to be distributed to you. We have not authorized anyone to provide you with information different from or in addition to that contained in this prospectus or any related free-writing prospectus. If anyone, including the underwriter, provides you with different or inconsistent information, you should not rely on it. In particular, you should not rely on any research reports provided by the underwriter, either through its website or by other means. We specifically disavow any such research reports. We believe that one such research report posted on the underwriter’s website contains false or misleading information about our business and prospects. The selling stockholders are offering to sell and are seeking offers to buy shares of our Class B common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus and any free-writing prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or any free-writing prospectus or of any sale of the Class B common stock. Our business, financial condition, results of operations and prospects may have changed since that date.

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RISK FACTORS

You should carefully consider the risks described below before making a decision to buy our Class B common stock. If any of the following risks actually occur, our business, financial condition and results of operations could be harmed. In that case, the trading price of our Class B common stock could decline and you might lose all or part of your investment. You should also refer to the other information set forth in this prospectus, including our consolidated financial statements and related notes.

Special Risks Related to this Offering

Institutional Venture Partners IV, L.P. and the other selling stockholders are compelling us to register the shares of Class B common stock offered hereby by exercising demand registration rights and selecting an underwriter of its own choosing. While we intend to comply with our obligations under the Master Rights Agreement, our board of directors and executive officers believe that filing the registration statement of which this prospectus is a part and effecting a compulsory initial public offering of our Class B common stock are not in the best interests of Applied.

Institutional Venture Partners IV, L.P., or IVP, Bank of America Ventures, Pantheon International Participations PLC, Landmark Equity Partners, other stockholders affiliated with IVP and the other selling stockholders identified herein are compelling us to register shares of Applied Class B common stock held by the selling stockholders for sale by means of an initial public offering. IVP and the selling stockholders initiated this offering under the terms of an Amended and Restated Master Rights Agreement, dated as of November 8, 1991, or the Master Rights Agreement. Applied and its board of directors believe a compulsory initial public offering, initiated by IVP, and conducted in the manner demanded by IVP and the selling stockholders, is not in the best interests of Applied.

Under the demand registration rights provisions of the Master Rights Agreement, holders of at least 50% of the shares having registration rights may request that we file a registration statement for the resale of their shares under the Securities Act. On August 25, 2011, IVP notified us of its original request for registration of our Class A common stock. IVP has determined not to offer any shares or convert any of its preferred stock into common stock. IVP and the participating selling stockholders have informed us that they will not approve certain amendments to our certificate of incorporation which were expected to be made on the basis of IVP’s initial request for registration of shares of Class A common stock. For more information about this offering, including information about IVP’s role in initiating and structuring this offering, see “Background of the Demand Registration and this Offering.”

We did not select WR Hambrecht + Co as the underwriter for this offering. IVP selected WR Hambrecht + Co as the lead underwriter in connection with its initial demand for registration under the Master Rights Agreement in August 2011. WR Hambrecht + Co has not completed an initial public offering of shares of any company as a lead underwriter since 2007, and has not committed to us to provide any support for our Class B common stock following this offering. WR Hambrecht + Co has not communicated or cooperated with us to the extent that we would have expected from an underwriter in an initial public offering. In addition, we believe that WR Hambrecht + Co may be taking actions that are not in the best interests of us, our stockholders and potential investors. For example, WR Hambrecht + Co posted on its “OpenIPO” website a research report about Applied prepared by DBK Consulting under a consulting arrangement with WR Hambrecht + Co. We believe several statements in the research report, as posted, were directly contradictory to information included in this prospectus, and other statements in the research report reflected opinions about our industry that are contrary to our management’s view. We believe WR Hambrecht + Co made the initial DBK Consulting research report available without determining whether or not the content of the report contained any untrue

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statements of material fact or was otherwise false or misleading. We informed WR Hambrecht + Co of certain statements in the DBK Consulting report which are false or misleading, in response to which WR Hambrecht + Co removed the report from its website pending its review of the contents of the report. WR Hambrecht + Co then posted a revised DBK Consulting research report on its “OpenIPO” website. While DBK Consulting appears to have removed certain statements we identified to WR Hambrecht + Co as false, many other statements in the DBK consulting report similarly identified as false or misleading remain in the revised report. We have demanded that WR Hambrecht + Co inform potential investors that they should not rely on any such report. WR Hambrecht + Co also posted a “Selling Stockholder Message” on its “OpenIPO” website on October 29, 2012. The Selling Stockholder Message is a video featuring Reid Dennis, founder of Institutional Venture Partners. IVP is not selling shares in this offering. See “Background of the Demand Registration and this Offering.” We specifically disavow the content of the DBK Consulting research report and the Selling Stockholder Message. You should not take any such materials into account when making a decision whether or not to buy our Class B common stock.

As a result of the registration of shares of our Class B common stock for sale under the Securities Act, we will be required to incur the time and costs associated with the preparation of filings with the U.S. Securities Exchange Commission, or the SEC, including reports required by the Exchange Act. As a consequence of making these filings with the SEC, detailed information regarding Applied and our stockholders will be fully available for review by any member of the public. In addition, the costs associated with these reports and other filing obligations will constitute significant additional overhead expense. These costs include professional fees for our independent registered public accounting firm and corporate/securities counsel, printing and mailing costs and internal compliance costs. Because we will be a public company, we may be required to publicly disclose information that we consider sensitive, including product development activities, margin and significant customer and project information, which information will be available to our competitors. We will also incur substantial costs as a result of, among other things, management’s time expended in preparing and reviewing such filings.

At the same time, our board of directors believes that we will derive little benefit from the registration of our Class B common stock, as we do not currently propose or intend to use our common stock to raise capital in the public markets or as acquisition consideration. As a result, our board of directors believes that we will derive little benefit from being a public company and that the public disclosure of sensitive financial and other information to our competitors may competitively disadvantage us. If our concerns about becoming a public company are realized, we may in the future take steps to cease our status as a public company.

Our stock price could decline significantly and rapidly following this offering.

The initial public offering price for the shares of Class B common stock to be offered and sold by the selling stockholders will be determined by an auction process conducted by the underwriter. The underwriter has informed us that it expects the initial public offering price to be between $30.00 and $34.00 per share. Unlike a typical underwritten public offering, the underwriter did not consult with our management team or board of directors prior to estimating the initial public offering price range. Accordingly, the underwriter’s estimate of the initial public offering price range may not have taken into account the risks and challenges that we expect to affect our business or the risks associated with this offering and the auction process described in this section of the prospectus. For example, we believe the estimated price range was primarily influenced by historical operating results and was determined without regard to our ability to sustain the same levels of revenue growth, operating margins, operating income, net income and net income per share in future periods. We believe we are more likely than not to be unable to sustain profitability levels experienced in 2011 or prior periods. For example, our operating income, net income and net income per share (basic) for the nine months ended September 30, 2012 declined 33.8%, 42.3% and 45.9%, respectively, as compared to the nine months ended September 30, 2011. While the underwriter expects the auction process to provide information about market demand for

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our Class B common stock at the time of this initial public offering, this information will be based upon an offering of a number of shares representing only 4% of our outstanding shares. We also believe the underwriter’s estimate of the initial offering price range does not take into account the likelihood that the offering price may not reflect the possibility of inadequate demand for the shares in the trading market. The underwriter has informed us that it expects the bidding process to reveal a clearing price for shares of our Class B common stock offered in the auction. However, this clearing price may not bear any relation to future prices for our shares following completion of this offering. Unlike a typical initial public offering, where holders of substantial numbers of outstanding shares are subject to “lock-up” agreements or “market stand-off” provisions, a significant number of shares of our Class B common stock held by the selling stockholders and other stockholders will be eligible for sale immediately following completion of this offering. As discussed below under “Substantial future sales of our Class B common stock in the public market could cause our stock price to fall,” holders of approximately 10,492,381 shares of our Class B common stock (including shares issuable upon conversion of preferred stock and all of the shares of Class B common stock sold in this offering) will not be subject to any agreement to refrain from trading for any period of time (contrary to the case in most typical initial public offerings), and those shares will be immediately eligible for sale following the completion of this offering. Because only a very small number of our outstanding shares will be sold in this offering and approximately fourteen times that number will be immediately eligible for sale following the completion of this offering, we believe it is likely that the initial public offering price will have only a limited relationship to the market demand for the total number of shares of our Class B common stock that will be eligible for sale by the selling stockholders and other stockholders once trading begins. If there is little or no demand for our shares of Class B common stock at or above the initial public offering price following the completion of this offering, or if the number of shares that become available for trading subsequent to the completion of this offering exceeds the demand for our shares, the price of our shares will decline. Any significant decline in our stock price following the completion of this offering could lead to securities class-action litigation that would be expensive, time-consuming and distracting to our management team. If your objective is to make a short-term profit by selling the shares you purchase in the offering shortly after trading begins, you should not submit a bid in the auction.

As a result of the unique circumstances surrounding this offering, we expect that the liquidity of our Class B common stock may be limited.

A number of factors particular to this offering may significantly limit the liquidity and trading volume of our Class B common stock. Our Class B common stock will not be listed on a national securities exchange in connection with this offering. After the consummation of this offering, our Class B common stock may be traded in the over-the-counter market and may be quoted on the OTC Bulletin Board quotation system, or the OTCBB, which is a FINRA-sponsored and operated inter-dealer automated quotation system for equity securities. We do not intend to seek to have our Class B common stock quoted on the OTCBB; however, the underwriter intends to arrange for our Class B common stock to be quoted on the OTCBB. Quotation of our Class B common stock on the OTCBB may limit the liquidity, trading volume and price of our Class B common stock more than if our Class B common stock were quoted or listed on the Nasdaq or another national securities exchange. Additionally, over-the-counter bulletin board stocks may not be purchased on margin and may not be used as collateral for margin loans under the rules of the Federal Reserve Board. Investors’ inability to acquire the Class B common stock on margin or use their shares of Class B common stock as collateral for margin loans may further limit the trading volume of our shares. If our Class B common stock becomes ineligible for quotation on the OTCBB, we expect the liquidity, trading volume and price of our Class B common stock may be further impaired.

We currently have no intention of registering our Class B common stock under the Exchange Act, unless at the end of 2012 our Class B common stock is held by more than 300 holders of record or we are otherwise contractually required to register our Class B common stock under the Exchange Act. While we

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will file periodic reports as required by the Exchange Act, if we do not have a class of securities registered under the Exchange Act, we will not be required to file, and have no current intention of voluntarily filing, proxy statements and certain other disclosures required by the Exchange Act. If we do not file proxy statements and such other disclosures because we are not required to do so, we expect the liquidity, trading volume and price of our Class B common stock to be further impaired.

In addition, we currently have no intention to raise capital in the future by selling shares of our Class B common stock in the public markets. As a result, the public trading volume of our Class B common stock will be largely limited to the shares being offered by this prospectus. Furthermore, we may in the future repurchase shares of our Class B common stock in the public markets, which would further reduce the trading volume of our Class B common stock. Also, our management does not intend to hold quarterly earnings calls or otherwise engage in conversations with stock market analysts. Any limitation on the amount of information available to analysts or other investors about Applied is likely to limit the interest of public investors in owning or trading Applied’s securities. Lack of liquidity in our Class B common stock may limit the price at which you may be able to sell our securities.

T. Peter Thomas, an affiliate of IVP and one of our former directors, has questioned our determination of the fair market value of our Class B common stock in connection with our repurchase of certain of his shares of Class B common stock. Resolving this potential claim may require costly and time-consuming litigation, which could have a material adverse impact on our financial condition and results of operations.

T. Peter Thomas, an affiliate of IVP and a member of our compensation committee from January 1989 until February 2011, was removed from our board of directors by action of our stockholders in January 2012. Following his removal from the board of directors, Mr. Thomas exercised vested stock options to purchase 37,950 shares of our Class B common stock and paid the aggregate exercise price of $277,650 for such shares. On February 16, 2012, we exercised our right to repurchase all of such shares pursuant to the applicable stock option agreements between Applied and Mr. Thomas. In connection with the repurchase of these shares, we provided Mr. Thomas with a check in the amount of $495,247.50, which reflects a repurchase price of $13.05 per share. The repurchase price reflects our compensation committee’s good faith determination of the fair market value of our Class B common stock most recently preceding the date of Mr. Thomas’ removal as a director. The determination of fair market value was made in accordance with our long-standing equity valuation process for equity transactions under our stock incentive plans, which also considers stock valuations received from a qualified and independent third party. In December 2011, we granted stock options and awarded restricted shares for an aggregate of 25,000 shares of Class B common stock and 10,000 shares of Class A common stock on the basis of the same determination of fair market value. Mr. Thomas has asserted, with the support of IVP, that the fair market value determination used in connection with the repurchase of his shares was not made in good faith, thereby challenging the process we use for establishing stock option values used in our financial statements. Mr. Thomas claims to have received a third-party offer to purchase his shares of Class B common stock at a price of $25.00 per share. In addition, Mr. Thomas has informed us that IVP values its Applied shares at $32.66 per share for purposes of preparing IVP’s own audited financial statements, based on a valuation conducted by a valuation firm engaged by IVP. Until September 10, 2012, Mr. Thomas rejected our compensation committee’s determination of fair market value, requested additional cash consideration from us for the repurchase of his shares and refused to transfer the Class B common stock that he had received upon exercise of his options to us. On August 31, 2012, we initiated litigation against Mr. Thomas and IVP, asserting claims for breach of contract, breach of the implied covenant of good faith and fair dealing, conversion and declaratory relief against Mr. Thomas and claims for conversion and aiding and abetting conversion against IVP. On September 11, 2012, Mr. Thomas delivered to us a stock transfer instrument to complete the transfer of the 37,950 shares of Class B common stock, but reserved the right to continue to challenge our compensation committee’s

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determination of fair market value and to request additional cash consideration from us for the repurchase of his shares. We continue to disagree with Mr. Thomas’ assertions regarding the fair market value of our common stock.

We have reviewed the valuations commissioned by IVP, and notwithstanding the valuation set forth in IVP’s reports, we and our board of directors continue to believe the valuation process used by our board of directors is appropriate. In contrast to the valuation assertions made by Mr. Thomas and IVP, our compensation committee has determined that the fair market value of our Class B common stock was $8.36 per share as of March 14, 2012, $9.83 per share as of June 15, 2012 and $9.96 per share as of October 19, 2012. Even though Mr. Thomas has delivered the necessary stock transfer instruments, we continue to seek damages against Mr. Thomas and IVP as a result of their actions. Litigation to resolve these matters could be costly and time-consuming and continue to distract our senior management from business operations. See “Business — Legal Proceedings.” Mr. Thomas’ assertions may have additional adverse effects that we are unable to predict or quantify in advance. The consequences of Mr. Thomas’ assertions may have a material adverse impact on our financial condition and results of operations.

Our outstanding shares of preferred stock have rights, preferences and privileges senior to our common stock, and more than a majority of the outstanding shares of preferred stock will remain held by IVP, which may restrict our ability to engage in various transactions.

As of December 31, 2012, we had 6,995,969 shares of redeemable convertible preferred stock issued and outstanding in six different series. The selling stockholders will convert 729,798 shares of preferred stock into 729,798 shares of Class B common stock in connection with this offering, after which 6,266,171 shares of preferred stock will remain issued and outstanding. Our preferred stock has rights, preferences and privileges senior to our common stock, including rights to receive, prior and in preference to the holders of common stock, cash dividends and the proceeds from any liquidation, dissolution or winding up of us, either voluntary or involuntary. The holders of our preferred stock have voting rights and, as of December 31, 2012, accounted for 36% of the total voting power of our capital stock. In addition, the holders of our preferred stock are entitled to certain special voting rights that may prevent us from taking an action or consummating a transaction that our board of directors may determine is in our best interest and the best interests of the holders of our common stock, as long as more than 300,000 shares of preferred stock remain outstanding. IVP, stockholders affiliated with IVP and other selling stockholders will continue holding 5,964,794 shares of preferred stock, of which 3,580,204 shares of preferred stock will be held by IVP. As long as IVP holds more than a majority of the outstanding shares of our preferred stock, IVP will control the vote of all matters requiring the approval of the holders of preferred stock. There can be no assurance that IVP will approve any such matters that our board of directors may consider beneficial to us and our stockholders. Additionally, our certificate of incorporation has authorized 25 million shares of Class A common stock and 25 million shares of Class B common stock. The holders of at least a majority of the outstanding shares of preferred stock must approve any amendment to our certificate of incorporation to increase the authorized number of shares of Class A and Class B common stock. There can be no assurance that IVP would approve any such amendment. As a result, in the future we may not have enough authorized shares to enable us to issue additional shares for acquisitions, financings, incentive compensation or other corporate purposes. All shares of preferred stock will automatically convert into shares of Class B common stock, and therefore the holders of preferred stock would no longer be able to block the type of transactions described above, if we effect a firm commitment registered public offering with an offering price of at least $9.00 per share and at least $10 million in the aggregate; however, there can be no assurance that we may undertake such an offering in the future. For a more detailed discussion of the rights, preferences and privileges of each series of our preferred stock, see “Description of Capital Stock — Preferred Stock.”

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If you are not an institutional investor, you may purchase our Class B common stock in this offering only if you reside within certain states in which we will apply to have the shares registered.

At the request of the underwriter, we will apply to register, or will rely on an exemption from registration for, the offer and sale of our Class B common stock to retail customers only in California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Louisiana, Maine, Maryland, Massachusetts, Minnesota, Mississippi, Missouri, Montana, Nevada, New Hampshire, New York, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Texas, Utah, Virginia, Washington, Wisconsin, and Wyoming. The selling stockholders and the underwriter will not offer or sell the shares to retail customers in any state unless and until registration in the state is effective or we have made any filings in the state necessary to claim an exemption from registration. If you are not an “institutional investor,” you must be a resident of one of these jurisdictions, and this offering must be registered or exempt from registration in such jurisdiction, to purchase our Class B common stock in this offering. The selling stockholders may offer and sell the shares to institutional investors in this offering pursuant to an exemption provided for sales to these investors under the Blue Sky laws of the various states. The definition of an “institutional investor” varies from state to state but generally includes financial institutions, broker-dealers, banks, insurance companies and other qualified entities. Under the National Securities Markets Improvement Act of 1996, states are pre-empted from regulating the registration of transactions in certain categories of securities that are designated as “covered securities.” We will initially be required to file reports under the Exchange Act and our securities will be considered covered securities as long as we continue to file such reports. Therefore, your resale of the Class B common stock will be exempt from state registration requirements until such time that we cease to file reports under the Exchange Act. As described elsewhere in this prospectus, we have no intention of registering our Class B common stock under the Exchange Act, unless at the end of 2012 our Class B common stock is held by more than 300 holders of record or we are otherwise contractually required to register our Class B common stock under the Exchange Act. Once we cease to file reports under the Exchange Act, holders of Class B common stock that are not institutional investors will need to comply with the registration requirements in the jurisdiction in which they reside in order to resell shares of our Class B common stock, which compliance may be onerous and expensive and may negatively impact your ability to sell your shares of Class B common stock at the time and for the price you desire. For a discussion of the Blue Sky state securities laws and registrations affecting this offering, please see the section entitled “Plan of Distribution — State Blue Sky Information” below.

Risks Related to Our Business

The markets in which we operate are highly competitive, and we may not be able to effectively compete against other providers of medical devices, particularly those with greater resources.

In the medical devices market, we face intense competition from companies with dominant market positions such as Ethicon Endo-Surgery, a division of Johnson & Johnson, and Covidien, among others. These competitors have significantly greater financial, technical, marketing and other resources than we have and may be better able to:

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Hospitals, Group Purchasing Organizations, or GPOs, Integrated Healthcare Networks, or IHNs, and Integrated Delivery Networks, or IDNs, make contracting and purchasing decisions based on their desire to secure a broad array of surgical supplies, many of which are unique to our principal competitors. Our principal competitors are able to leverage their broader product portfolios and dominant market positions in some segments by, for example, bundling their products into specially priced packages that create strong financial incentives for their customers to purchase their products. These practices may negate savings customers would gain from buying select products from Applied and may deter such customers from buying Applied’s products.

We expect competition in the markets in which we participate to continue to increase as existing competitors improve or expand their product offerings. As a result of all these factors, our customers could decide to purchase products from our competitors or reduce their purchases from us. Increased product competition may result in reduced market share and declining profitability.

We may not be able to sustain our position in the trocar market.

A substantial portion of our revenues are derived from the sales of trocars and other products, primarily surgical instruments, often used with trocars. We believe a significant contributor to the growth in our market share of trocars and these other products has been the positive effects of implementation of a “carve-out” in contracts between Ethicon Endo-Surgery, a division of Johnson & Johnson, on the one hand, and GPOs, IHNs and hospitals, on the other hand. The carve-out involved an agreement by Ethicon Endo-Surgery, Inc. and Ethicon, Inc. not to count purchases by their customers from non-full line medical device suppliers such as Applied to adversely impact the purchaser’s discounts on its purchases of Ethicon Endo-Surgery and/or Ethicon products. The carve-out benefits us by allowing our customers to purchase trocars and other products, primarily instruments, from Applied without triggering price increases on their purchases of Ethicon Endo-Surgery and/or Ethicon products. We believe the carve-out has significantly contributed to the growth in our market share of trocars and surgical instruments because our product revenue, the majority of which has been derived from the sales of trocars and surgical instruments, grew significantly from $46.9 million in 2003, when the carve-out was first implemented, to $338.5 million in 2011. We are unable to quantify the impact that the expiration of the carve-out may have on our sales of trocars and surgical instruments because the carve-out is only one factor that contributed to the growth in our market share of trocars and surgical instruments. We believe the growth in our sales of trocars and surgical instruments can also be attributed to a number of other factors, including our product innovations, the efforts of our sales team, the economic environment and our competitive pricing policies, the availability of clinical studies supporting the efficacy of our products, and the expansion of our global distribution capabilities.

The carve-out resulted, in part, from action taken by Applied in 2003, including participation in congressional hearings and the filing of an antitrust lawsuit against Johnson & Johnson, Johnson & Johnson Health Care Systems, Inc., Ethicon, Inc., Ethicon Endo-Surgery, Inc. and Novation LLC. In 2009, the U.S. District Court for the Central District of California approved a class action settlement agreement incorporating the carve-out. We believe the carve-out requirement of the class action settlement agreement will expire in October 2015.

We believe that Covidien voluntarily agreed to carve-outs in some additional circumstances for purchases from non-full line medical device suppliers by its customers and that Covidien no longer allows for these carve-outs. We are not aware of any contractual restriction that would prevent Covidien from instituting pricing practices targeted against non-full line medical device suppliers like Applied. If our principal competitors are able to assert their market power, then our sales of trocars and surgical instruments may be negatively impacted.

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If we do not continue to innovate, or if we reduce our research and development spending, we may not remain competitive and our operating results will suffer.

We rely on innovation through research and development activities, devoting a substantial portion of our revenues to research and development expenditures. Although markets for many of our products were — and to a certain extent remain — foreclosed by our competitors, innovation has been our most effective way to overcome the barriers to entry into these markets. Our success depends on providing improved clinical outcomes and value, both of which require heavy investments in research and development at a time when our competitors are also increasing their commitment to research and development. Adverse competitive and economic conditions may negatively impact our ability to continue the necessary level of commitment to our research and development activities.

From 2007 to 2011, we reduced the percentage of our revenues allocated to research and development, and to enhancing our products, processes, and automation, from 19% to 14%. This reduced spending may put us at a disadvantage with respect to the development of new technologies. Our operating results will also suffer if our innovations are not responsive to the needs of our customers or to changes in prevalent surgical techniques, or are not effectively brought to market. If we are unable to predict future customer preferences or modify our products or develop new ones to remain competitive, clinicians or hospitals may reduce their purchases of our products. As relevant technologies continue to develop, our competitors may be able to offer research results that are better than those generated by our research and development efforts.

Because we do not charge a premium for our products, despite our belief that our products provide enhanced clinical performance, our research and development efforts are also critical to reducing our manufacturing costs. Therefore, our recent reductions in research and development expenditures may negatively impact every facet of our business model. If we fail to maintain our ability to innovate, our cost structure may be negatively impacted, and we may be unable to continue to offer value or deliver on the premise of the Applied brand.

Our future performance will depend largely on the success of products we have not developed yet.

Technology is an important component of our business and growth strategy, and our success depends to a significant extent on the development, implementation and acceptance of new product designs. Commitments to develop new products must be made well in advance of any resulting sales, and technologies and standards may change during development, potentially rendering our products outdated or uncompetitive before their introduction. Our ability to develop products to meet evolving industry requirements and at prices acceptable to our customers will be significant factors in determining our competitiveness.

In addition, we will need to develop new products and technologies to replace declining revenues from existing product lines. For example, trocars and surgical instruments are responsible for a significant portion of our revenues, and the trocar market may decline on both a revenue-basis and a unit volume-basis over the near to intermediate-term future. As a result, we will need to develop and market additional products to compensate for the possible decline in trocar revenue, including products in new or adjacent product markets. We may expend considerable funds and other resources on the development of next-generation products without any guarantee that these products will be successful.

If we are not successful in bringing one or more of these potential products to market, whether because we fail to address marketplace demand, fail to develop viable technologies or otherwise, our revenues may decline and our results of operations could be seriously harmed.

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If we fail to maintain relationships with GPOs, sales of our products would decline.

Our ability to sell our products to U.S. hospitals depends in part on our relationships with GPOs. Many of our existing and potential customers become members of GPOs. GPOs negotiate pricing arrangements and contracts, sometimes exclusive, with medical supply manufacturers and distributors, and these negotiated prices are made available to a GPO’s affiliated hospitals and other members. If we are not one of the providers selected by a GPO, affiliated hospitals and other members may be less likely to purchase our products. If a GPO has negotiated a sole sourcing contract or a contract requiring that the GPO satisfy a minimum percentage of its requirements with another manufacturer’s products, we may be precluded from making sales to members of the GPO for the duration of the contractual arrangement. Our failure to renew contracts with GPOs may cause us to lose market share and could have a material adverse effect on our sales, financial condition and results of operations. In 2011 and during the nine months ended September 30, 2012, revenue from the sale of our products to GPO members amounted to approximately $144 million and $107 million, respectively, representing approximately 66% and 65%, respectively, of our total revenue from sales to U.S. hospitals. In the future, if we are unable to maintain existing and develop new relationships with GPOs, our competitive position would likely suffer and our business would be harmed.

If we fail to effectively predict, sustain or manage our growth, our business and operating results could be harmed.

If we do not effectively manage our growth, the quality of our products, effectiveness of our regulatory compliance, responsiveness to our customers, reputation of our brand, and our financial and operational results will be negatively affected. To effectively manage our growth, we will need to continue to improve our operational and managerial skills and our reporting systems and procedures.

Applied’s high degree of vertical integration requires that growth trends be identified, quantified and addressed approximately two to three years in advance. Many of the manufacturing processes we employ are unique, or partially unique, to Applied, which creates obstacles for our supply chain unless we are prepared far in advance. Projected increases in production volume cannot be addressed by sending production to outside vendors. Increasing our production requires considerable capital investments in specialized facilities, power, advanced equipment, specialized tooling and, in certain situations, proprietary and unique materials and raw supplies. By contrast, if we overestimate growth and over-build, our fixed overhead will climb faster than revenues and adversely impact our margins.

Our rate of revenue growth decreased from approximately 32% annually in 2007 to approximately 24% annually in 2011. As a result of the economic recession and market conditions, we lowered our rate of investment in 2009 and 2010. If our rate of growth accelerates in the future, we may have difficulty increasing production to take advantage of the opportunities presented by such growth and our operating results could be harmed.

Our business model demands long-term investments in capital and operating expenses that are likely to cause significant fluctuation in our quarterly results.

To compete effectively, we have to be disproportionately agile, innovative, and strategic, with a willingness to sacrifice short-term results for long-term objectives and strategies. We expect that our quarterly results will continue to lack uniformity, either due to competitive pressures or because of our desire to prioritize the long-term health of our business over our immediate results. In particular, we may make significant expenditures in research and development and manufacturing processes that will not result in material improvements to our results of operations for the foreseeable future. We have no intention to vary our research and development and capital expenditures in response to quarter-to-quarter variations in our results of operations.

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The Applied culture is an integral part of our success. If we cannot maintain our culture at the management level as we grow, the innovation, creativity, initiative and teamwork fostered by our culture will be impaired, and our business may be harmed.

We believe that our success has its foundation in our culture and business model, which we believe fosters the development of our team members and drives our innovation, creativity, initiative and teamwork. One of the key unanswered and important questions about Applied’s future is the scalability of its culture at the management level. As our organization grows, and we are required to implement more stratified and complex management structures, including those necessary to comply with public disclosure and reporting obligations associated with becoming a public company, we may find it increasingly difficult to maintain the positive and beneficial aspects of our organizational culture. For example, the key members of our senior management team, consisting of Said Hilal, our President and Chief Executive Officer, Nabil Hilal, our Group President, Technology, Stephen E. Stanley, our Group President, Distribution, Gary Johnson, our Group President, Surgical, and Samir Tall, our Chief Financial Officer, have over 100 years of combined experience with Applied. Expanding our senior management team by adding individuals from different backgrounds will likely dilute the culture that has made Applied successful. This could negatively impact our business model, ability to implement our business strategies and our future success. This offering may create changes that could alter the Applied culture and its built-in advantages.

Our culture has specific and extensive requirements for staffing, which may hinder our ability to retain or hire qualified personnel needed to grow effectively.

Our performance is largely dependent on the talents and efforts of our highly skilled and exceptional team members. We have maintained a rigorous, highly selective and time-consuming hiring process and have made considerable investments in the training and development of our team members. We believe that our approach to hiring and training has significantly contributed to our culture and success to date. As we continue to grow, our hiring process may prevent us from hiring the personnel we need in a timely manner. If we fail to properly anticipate, prepare or develop candidates for future needs, we may adversely impact our staffing ability, growth, responsiveness, innovation or services.

Personnel retention is important to us because a considerable percentage of our management-level team members have been cultivated internally over a number of years through considerable training, rotation programs, mentoring and development. In many instances, and for a sizeable percentage of our operations, our only source of qualified team members is our internal training program. Failure to identify any external sources of qualified personnel may hinder our future growth.

In addition, our ongoing and future success depends in a large part upon the continued services of key members of our senior management team. Our senior management team has operated cohesively and cooperatively for many years while developing our next layer of leaders and managers. Our culture, strategies, competitive advantages and cultivating, mentoring style of management relies on the presence and cooperation of this senior management team and the teams reporting to every member of senior management.

Should we experience high turnover, our business may be damaged and our operating results may suffer. If we fail to design and maintain appropriate compensation programs, our ability to retain specially trained team members may suffer, which in turn will impair our ability to expand, retain business and deliver operating results in line with our projections.

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Our senior management team has run Applied using a collective, consultative style. This approach may not be suitable for a public company, and may end up limiting our ability to manage our business effectively.

The Applied approach to decision-making is neither committee-based, nor individual-based. Rather, it relies on the collective intelligence of those who are well-informed and versed in our industry and the particulars of our business model. This process tends to be more deliberative and, therefore, slower than individual-based decision making. Disagreement among key individuals contributing to the collective intelligence could prevent key strategic decisions from being made in a timely manner. To date, this process has resulted in, and capitalized on, cohesiveness that is strongly evident within our organization. This managerial cohesiveness is derived largely from the strong relationships among our senior management team. Our collaborative approach may not be scalable, durable or appropriate once Applied grows beyond a certain size or expands our senior management team. If we fail to adapt in a timely manner to pressures on our decision making style, our growth, success, culture and profitability may all suffer.

We may acquire other companies or technologies, which could divert our management’s attention, result in additional dilution to our stockholders and otherwise disrupt our operations and harm our operating results.

Our success will depend, in part, on our ability to expand our product offerings and grow our business in response to changing technologies, end user demands and competitive pressures. In some circumstances, we may determine to do so through the acquisition of businesses or technologies rather than through internal development. We do not have experience acquiring other businesses and technologies. The pursuit of potential acquisitions may divert the attention of management and cause us to incur expenses in identifying, investigating and pursuing suitable acquisitions, whether or not they are consummated. Furthermore, even if we successfully acquire additional businesses or technologies, we may not be able to integrate the acquired personnel, operations and technologies successfully or effectively manage the combined business following the acquisition. We also may not achieve the anticipated benefits from the acquired business or technology. In addition, we may unknowingly inherit liabilities from future acquisitions that arise after the acquisition and are not adequately covered by indemnities. Acquisitions could also result in dilutive issuances of equity securities or the incurrence of debt, which could adversely affect our results of operations. If an acquired business or technology fails to meet our expectations, our business, results of operations and financial condition may suffer.

In response to increased prices and fees charged by certain of our third-party distributors, we are taking steps to improve our own direct distribution capabilities, and such efforts may not provide us with the anticipated benefits.

Certain of our third-party distributors have recently sought to increase the prices and related fees that they charge us to distribute our products to our customers. One key distributor, Owens & Minor, terminated a distribution agreement with us, effective June 30, 2012, after we refused the distributor’s attempt to unilaterally increase service fees. Sales through this distributor accounted for approximately 13% of our total revenues in 2011 and 9.5% during the six months ended June 30, 2012. Our operating results will be negatively impacted if our customers must arrange alternative distribution arrangements for our products. We are taking steps to enhance our own direct distribution capabilities to deliver our products, including the construction or acquisition of warehouse and distribution facilities in geographic areas outside of Southern California. In April 2012, we entered into a lease for a warehouse and distribution facility in New York and began shipping product from this facility in June 2012. In December 2012, we entered into an additional lease for a warehouse and distribution facility in Georgia. We do not have experience in logistics or distribution and the pursuit of improving our own direct distribution channels may divert the attention of management and cause us to incur more expenses than relying on third-party distributors, even after accounting for such increases in prices and related fees, especially at first when we will not enjoy any economies of scale in our direct

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distribution activities. If we become reliant on our own distribution channels and such distribution channels fail to meet our expectations, our business, results of operations and financial condition may suffer.

We may seek to gain access to new technologies and markets by developing strategic partnerships with, or making investments in, other medical device manufacturers and these strategic partnerships and investments may not provide us with the anticipated benefits.

Instead of developing new technologies entirely with our own internal resources, we may seek to enter into strategic partnerships with other medical device manufacturers in order to gain access to new technologies and markets. These partnerships may take a number of forms, including joint development or licensing arrangements. We may not be able to enter into these relationships at all, our strategic partners may not devote sufficient resources to developing and implementing the technologies that we seek, and these relationships may not provide us access to commercially viable technology. In addition, these relationships may not be successful in generating additional revenue for us. Any reliance on strategic partnerships for the development of new technology may also slow down our internal research and development efforts, which will put us at a competitive disadvantage if we eventually decided to terminate future strategic relationships.

We have made and may continue to make investments in other companies that we believe provide strategic opportunities for us. In February 2012, we acquired 9% of the outstanding shares of Cardica, Inc., a designer and manufacturer of proprietary stapling and other surgical connection devices for cardiac and laparoscopic surgical procedures, for $5.4 million. We intend that these investments will complement our research and development and/or sales and distribution efforts, potentially provide access to new technologies and markets, and create opportunities for additional sales of our products and services. However, these investments may not have the desired results, and we may lose all or a large portion of these investments. We also may need to make further investments to support the activities of these other companies. On September 28, 2012, Cardica filed its Annual Report on Form 10-K with the SEC, including its audited financial statements as of and for the year ended June 30, 2012. The audit report on Cardica’s financial statements included an explanatory paragraph highlighting substantial doubt about its ability to continue as a going concern. These investments, potential impairment charges or additional costs could negatively affect our results of operations for a given period, cause variability of our operating results or negatively impact our operating results for several future periods.

Our business, financial condition and results of operations could be adversely affected by the political and economic conditions of the countries in which we conduct business and other risks related to our international operations.

In 2011 and during the nine months ended September 30, 2012, approximately 38% and 40%, respectively, of our total revenue was generated from sales of products in countries other than the U.S. Our international distribution system consists of direct sales offices in Amersfoort, Netherlands, and Brisbane, Australia and approximately 70 distributors who sell in approximately 65 countries. Many of these countries are subject to varying degrees of political, economic and social instability. In particular, the ongoing financial uncertainty in Europe (including concerns that certain European countries may default in payments due on their national debt), the resulting economic uncertainty and the fluctuations in the values of the Euro and British pound compared to the U.S. dollar have, from time to time, adversely affected our sales in Europe. Multiple factors relating to our international operations could have a material adverse effect on our business, financial condition and results of operations. These factors include:

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A portion of our international sales are made through distributors. As a result, we are dependent upon the financial health of our distributors. If a distributor were to go out of business, it would take substantial time, cost and resources to find a suitable replacement and the products held by such distributor may not be returned to us or to a subsequent distributor in a timely manner or at all.

Any material decrease in our foreign sales may negatively affect our profitability. We generate our international sales primarily in Europe, where healthcare regulation and reimbursement for medical devices vary significantly from country to country. This changing environment could adversely affect our ability to sell our products in some European countries.

We compete internationally with the same competitors as in the U.S., and also with a number of international competitors. If we fail to deal with the differences between U.S. and international markets, or fail to compete effectively in the international markets, our business will be harmed.

We face different market characteristics and additional competitors outside the U.S. In certain markets, other companies have greater brand recognition, a more established image, or stronger connections and familiarity with the clinical community, hospital procurement practices, and local bidding processes. In some countries, bids are based on current usage and current products which, by

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nature, favor pre-existing suppliers. In many markets, we need to have an established presence in the market in order to be included in the bidding process. If we fail to understand international users and their requirements and preferences, we will fail to penetrate those markets.

We have no current plans to expand into emerging markets, which will limit our global reach, global potential and the size of many of our opportunities.

Many companies that compete with us target emerging markets, including China and India, giving these opportunities heavy emphasis and sizeable investments. Should their efforts succeed, our competitors might gain many advantages over us, including higher worldwide unit volumes. We do not invest in these emerging markets, and we currently have no plans to do so. If we fail to target emerging markets, we may end up conceding some significant competitive advantages to competitors who effectively address such opportunities. This in turn may impact our cost structure, margins and operating results and profitability.

We occasionally become subject to commercial disputes that could harm our business by distracting our management from the operation of our business, by increasing our expenses and, if we do not prevail, by subjecting us to potential monetary damages and other remedies.

From time to time, we are engaged in disputes regarding our commercial transactions. These disputes could result in considerable legal expenses and litigation requirements that require monies, managerial time and attention. As a general approach, we are not inclined to settle those claims we feel are unfair or unwarranted, despite the possibility that such a settlement may be less expensive than pursuing a fair and just outcome. These disputes can, therefore, result in monetary damages or other remedies that could adversely impact our financial position or operations. Even if we prevail in these disputes, they may distract our management from operating our businesses and the cost of defending these disputes would reduce our operating results.

Our business is vulnerable to the availability of raw materials, our ability to forecast customer demand and our ability to manage production capacity.

Our ability to meet customer demand depends, in part, on our production capacity and on obtaining supplies, a number of which may be obtained only from a single supplier or a limited number of suppliers. A reduction or disruption in our production capacity or our supplies could negatively impact our business.

We must accurately predict both the demand for our products and the lead times required to obtain the necessary components and materials. If we overestimate demand, we may experience underutilized capacity and excess inventory levels. If we underestimate demand, we may miss sales opportunities and incur additional costs for labor overtime, equipment overuse and logistical complexities. Additionally, our production capacity could be affected by manufacturing problems. Difficulties in the production process could reduce yields or interrupt production, and, as a result, we may not be able to deliver products on time or in a cost-effective, competitive manner. Our failure to adequately manage our capacity could have a material adverse effect on our business, financial condition and results of operations.

Our ability to meet customer demand also depends on our ability to obtain timely and adequate delivery of materials, parts and components from our suppliers. We generally do not maintain contracts with any of our key suppliers. From time to time, suppliers may extend lead times, limit the amounts supplied to us or increase prices due to capacity constraints or other factors. Supply disruptions may also occur due to shortages in critical materials. In addition, a number of our raw materials are obtained from a single supplier. Many of our suppliers must undertake a time-consuming qualification process before we can incorporate their raw materials into our production process. If we are unable to

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obtain materials from a qualified supplier, it can take up to a year to qualify a new supplier, assuming an alternative source of supply is available. A reduction or interruption in supplies or a significant increase in the price of one or more supplies could have a material adverse effect on our business, financial condition and results of operations.

Our business is vulnerable to inflation.

We are limited in our ability to raise prices as a result of our long-term GPO contracts, and because of our desire to maintain lower ASPs. As a result, increases in our raw materials, production and transportation costs may have a material adverse impact on our results of operations.

We may not be able to protect or enforce our intellectual property rights, which could impair our competitive position.

Our success depends significantly on our ability to protect our rights to the patents, trademarks, trade secrets, copyrights and all the other intellectual property rights used in our products. Protecting our intellectual property rights is costly and time consuming. We rely primarily on patent protection and trade secrets, as well as a combination of copyright and trademark laws and nondisclosure and confidentiality agreements to protect our technology and intellectual property rights. However, these legal means afford only limited protection and may not adequately protect our rights or permit us to gain or maintain any competitive advantage. Despite our intellectual property rights practices, it may be possible for a third party to copy or otherwise obtain and use our technology without authorization, develop similar technology independently or design around our patents.

We cannot be assured that any of our pending patent applications will result in the issuance of a patent to us. The U.S. Patent and Trademark Office, or PTO, may deny or require significant narrowing of claims in our pending patent applications, and patents issued as a result of the pending patent applications, if any, may not provide us with significant commercial protection or be issued in a form that is advantageous to us. We could also incur substantial costs in proceedings before the PTO. Our issued and licensed patents and those that may be issued or licensed in the future may expire or may be challenged, invalidated or circumvented, which could limit our ability to stop competitors from marketing related technologies. Upon expiration of our issued or licensed patents, we may lose some of our rights to exclude others from making, using, selling or importing products using the technology based on the expired patents. There is no assurance that competitors will not be able to design around our patents. We also rely on unpatented proprietary technology. We cannot assure you that we can meaningfully protect all our rights in our unpatented proprietary technology or that others will not independently develop substantially equivalent proprietary products or processes or otherwise gain access to our unpatented proprietary technology.

Further, we may not be able to obtain patent protection or secure other intellectual property rights in all the countries in which we operate, and under the laws of such countries, patents and other intellectual property rights may be unavailable or limited in scope. If any of our patents fail to protect our technology, it would make it easier for our competitors to offer similar products. Our trade secrets may be vulnerable to disclosure or misappropriation by employees, contractors and other persons. Any inability on our part to adequately protect our intellectual property may have a material adverse effect on our business, financial condition and results of operations.

We seek to protect our know-how and other unpatented proprietary technology with confidentiality agreements and intellectual property assignment agreements with our team members, independent distributors and consultants. However, such agreements may not be enforceable or may not provide meaningful protection for our proprietary information in the event of unauthorized use or disclosure or other breaches of the agreements or in the event that our competitors discover or

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independently develop similar or identical designs or other proprietary information. In addition, we rely on the use of registered and common law trademarks with respect to the brand names of some of our products. Common law trademarks provide less protection than registered trademarks. Loss of rights in our trademarks could adversely affect our business, financial condition and results of operations.

We may be subject to intellectual property infringement claims by third parties which could be costly to defend, divert management’s attention and resources, and may result in liability.

The medical devices field is characterized by vigorous protection and pursuit of intellectual property rights. Companies in the medical device industry have used intellectual property litigation to gain a competitive advantage in the marketplace. From time to time, third parties may and do assert against us their patent, copyright, trademark and other intellectual property rights relating to technologies that are important to our business. Searching for existing intellectual property rights may not reveal important intellectual property and our competitors may also have filed for patent protection, which is not publicly-available information, or claimed trademark rights that have not been revealed through our availability searches. We may be subject to claims that our team members have disclosed, or that we have used, trade secrets or other proprietary information of our team members’ former employers. Our efforts to identify and avoid infringing on third parties’ intellectual property rights may not always be successful. Any claims that our products or processes infringe these rights, regardless of their merit or resolution, could be costly, time consuming and may divert the efforts and attention of our management and technical personnel. In addition, we may not prevail in such proceedings given the complex technical issues and inherent uncertainties in intellectual property litigation.

Any claims of patent or other intellectual property infringement against us, even those without merit, could:

Any of the foregoing could affect our ability to compete or have a material adverse effect on our business, financial condition and results of operations.

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Certain competitors have shown a strong inclination to litigate against us. For years, we avoided settling cases where we believe the claim is unfounded, unfair or extortive in nature. This has proven to be very expensive and demanding. We are highly unlikely to change this disciplined approach, despite its costs.

Competitors may violate our intellectual property rights, and we may bring litigation to protect and enforce our intellectual property rights, which may result in substantial expense and may divert our attention from implementing our business strategy.

We believe that the success of our business depends, in significant part, on obtaining patent protection for our products and technologies, defending our patents and preserving our trade secrets. We continue to be involved in significant litigation to protect our patent position and may be required to engage in further litigation. From 1996 through 2009, we engaged in a series of litigation proceedings against U.S. Surgical Corporation, part of Tyco Healthcare (currently Covidien), in which we claimed that Covidien was infringing certain of our trocar patents. Through these proceedings, Applied obtained two judgments that Covidien’s predecessors, Tyco Healthcare and U.S. Surgical, willfully infringed Applied patents on the Universal^® seal technology.

In May 2011 and September 2011, we filed additional patent infringement lawsuits against Covidien. We may not prevail in these suits or receive any damages or other relief if we do prevail. See “Business — Legal Proceedings.”

Our failure to pursue any potential claim could result in the loss of our proprietary rights and harm our position in the marketplace. Therefore, we may be forced to pursue litigation to enforce our rights. Our ongoing and future litigation could result in significant additional costs and further divert the attention of our management and key personnel from our business operations and the implementation of our business strategy.

Our facilities are vulnerable to natural disasters and other unexpected losses, and we may not have adequate insurance to cover such losses.

We rely on our manufacturing facilities in Orange County, California. Our facilities are susceptible to damage from earthquakes as well as from fire, floods, loss of power or water supply, telecommunications failures and similar events. In particular, our headquarters and manufacturing facilities are located in a known earthquake fault zone near areas that have been affected by wild brush fires. A natural disaster could significantly disrupt our operations.

In the event that one of our facilities was affected by a natural or man-made disaster, we would be forced to rely on third-party manufacturers if we could not shift production to our other manufacturing facility. Our insurance for damage to our property and the disruption of our business from casualties may not be sufficient to cover all of our potential losses and may not continue to be available to us on acceptable terms, or at all. If we are forced to seek alternative facilities, or if we voluntarily expand one or more of our manufacturing operations to new locations, we may incur additional transition costs and we may experience a disruption in the supply of our products until the new facilities are available and operating. In addition, much of the machinery we use in our production process is custom-made. If such machinery is damaged, we may experience a long lead-time before this unique machinery is replaced or rebuilt and we are able to resume production.

Our manufacturing and distribution operations are highly dependant on our information technology systems and we do not currently have a redundant data center. In the event of a failure of our primary data center, our manufacturing and distribution operations will be disrupted which will adversely affect our business.

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In addition, any disruption, delay, transition or expansion of our manufacturing operations could impair our ability to meet the demand of our customers and our customers may cancel orders or purchase products from our competitors, which could adversely affect our business, financial condition and results of operations.

We are subject to environmental, health and safety laws, which could increase our costs and restrict our operations in the future.

Our operations are subject to a variety of environmental, health and safety laws and regulations in each of the jurisdictions in which we operate. These laws and regulations concern, among other things, the generation, handling, transportation and disposal of hazardous substances or wastes, the clean up of hazardous substance releases, and the emission or discharge of materials into the air or water. We have incurred, and may in the future continue to incur, expenditures in connection with environmental health and safety laws and regulations. Any failure by us to comply with the requirements of such laws and regulations could result in the limitation or suspension of production or subject us to monetary fines or civil or criminal sanctions, or other future liabilities.

In addition, if there is any change in environmental, health or safety laws, we could incur substantial additional costs to alter our manufacturing processes and adjust our supply chain management. Such changes could also result in significant inventory obsolescence. Compliance with environmental, health and safety requirements could also restrict our ability to expand our facilities in the future.

We may need substantial additional funding and may be unable to raise capital when needed, which would force us to delay, reduce, eliminate or abandon growth initiatives or product development programs.

Our cash flow from operations may not be sufficient to meet all of our cash requirements. We intend to continue to make investments to support our business growth and may require additional funds to:

Our funding requirements will depend on many factors, including:

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Debt financing, if available, may involve covenants restricting our operations or our ability to incur additional debt. Any debt financing that we raise may contain terms that are not favorable to us or our stockholders. If we do not have, or are not able to obtain, sufficient funds, we may have to delay product development initiatives or license to third parties the rights to commercialize products or technologies that we would otherwise seek to market. We also may have to reduce marketing, customer support or other resources devoted to our products.

Continuing weakness in the global economy and turmoil in the credit markets may adversely affect our business until an economic recovery is underway.

If current economic conditions and turmoil in the credit markets continues or worsens, we could experience a material adverse effect on our sales and results of operations. Increasing levels of unemployment and pressures to contain healthcare costs could adversely affect the global growth rate of procedure volume, which could negatively affect our results. In addition, current economic conditions may have an adverse effect on our customers’ ability to borrow money from their existing lenders or to obtain credit from other sources to purchase our products. The recent economic crisis could also adversely affect our suppliers’ ability to provide us with materials and components, either of which may negatively impact our business.

Our operations may be adversely impacted by our exposure to risks related to foreign currency exchange rates.

We market our products in certain foreign markets through our subsidiaries and other international distributors. The related sales agreements may provide for payments in a foreign currency. A majority of our sales and expenditures are transacted in U.S. dollars, although we transact with foreign customers in currencies other than the U.S. dollar. These foreign currency revenues, when converted into U.S. dollars, can vary depending on average exchange rates during a particular period. In addition, we are exposed to foreign currency gains or losses on outstanding foreign currency denominated receivables. When converted to U.S. dollars, these receivables can vary depending on the monthly exchange rates at the end of the period. Certain of our foreign sales support subsidiaries transact in their respective country’s local currency, which is also their functional currency. As a result, expenses of these foreign subsidiaries when converted into U.S. dollars can vary depending on average monthly exchange rates during a particular period. Certain intercompany transactions may give rise to realized and unrealized foreign currency gains or losses. Accordingly, our operating results are subject to fluctuations in foreign currency exchange rates.

In addition, we hold a large proportion of our cash and cash equivalents in Euros and Australian dollars. As of September 30, 2012, we held approximately 85% of our cash and cash equivalents in Euros and Australian dollars primarily through a U.S. domestic subsidiary. The balance sheets of our foreign subsidiaries whose functional currency is not the U.S. dollar are translated into U.S. dollars at the rate of exchange at the balance sheet date and the statements of comprehensive income and cash flows are translated into U.S. dollars using the average monthly exchange rate during the period. Any foreign exchange gain or loss as a result of translating the balance sheets of our foreign subsidiaries whose functional currency is not the U.S. dollar is included in equity as a component of accumulated other comprehensive income.

We currently do not hedge against our foreign currency exchange rate risks and therefore believe our exposure to these risks may be higher than if we entered into hedging transactions, including forward exchange contracts or similar instruments. If we decide in the future to enter into

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forward foreign exchange contracts to attempt to reduce the risk related to foreign currency exchange rates, these contracts may not mitigate the potential adverse impact on our financial results due to the variability of timing and amount of payments under these contracts. In addition, these types of contracts may themselves cause financial harm to us and have inherent levels of counterparty risk over which we would have no control.

Our operating results could be negatively impacted by future changes in the allocation of income to each of the entities through which we operate and to each of the income tax jurisdictions in which we operate.

We operate through multiple entities and in multiple income tax jurisdictions with different income tax rates both inside and outside the U.S. Accordingly, our management must determine the appropriate allocation of income to each such entity and each of these jurisdictions. Income tax audits associated with the allocation of this income and other complex issues, including inventory transfer pricing and cost sharing and product royalty arrangements, may require an extended period of time to resolve and may result in income tax adjustments if changes to the income allocation are required. Since income tax adjustments in certain jurisdictions can be significant, our future operating results could be negatively impacted by settlement of these matters.

Our outstanding debt agreements contain restrictive covenants that may limit our operating flexibility.

The agreements relating to our outstanding debt contain some financial covenants limiting our ability to transfer or dispose of assets, incur capital expenditures, merge with or acquire other companies, make investments, pay dividends, repurchase shares of capital stock, incur additional indebtedness and liens and conduct transactions with affiliates. We therefore may not be able to engage in any of the foregoing transactions until our current debt obligations are paid in full or we obtain the consent of the lenders. We may be unable to generate sufficient cash flow or revenue to meet the financial covenants or pay the principal and interest on our debt. Furthermore, future working capital, borrowings or equity financing may not be available to repay or refinance any such debt. See “Description of Certain Indebtedness — Covenants and Other.”

Our significant indebtedness could adversely affect our operations, including our ability to perform our obligations, and reduce our cash available for other purposes.

As of September 30, 2012, we had approximately $100.4 million of total outstanding indebtedness. As of September 30, 2012, we had $67.0 million of borrowing availability under our $150.0 million senior secured credit facility, or the senior secured credit facility. We may also be able to incur substantial indebtedness in the future, including additional senior indebtedness, which may or may not be secured. For a description of the senior secured credit facility, see “Description of Certain Indebtedness.”

Our significant indebtedness poses risks to our business, including the risks that:

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If any of these risks occur, our financial condition, results of operations and ability to pay dividends could be adversely affected.

Risks Related to Our Industry

If product liability claims are brought against us, we could face substantial liability and costs.

The manufacture and sale of medical devices exposes us to product liability claims and product recalls, including those that may arise from misuse or malfunction of, or design flaws in our products or the use of our products with incompatible components or systems. Any losses that we may suffer from future liability claims, and the effect that any product liability litigation may have upon the reputation and marketability of our technology and products, together with the corresponding diversion of the attention of our key team members, could adversely affect our business, financial condition and results of operations. Any product liability claims could be time-consuming and require significant cost and management resources and may subject us to significant damages. We currently have product liability insurance that we believe to be adequate, but we cannot be certain that it will be sufficient to cover all damages or claims. Furthermore, we may not be able to obtain or maintain insurance in the future at satisfactory rates or in adequate amounts to protect us against any product liability claims. There can be no assurance that existing insurance coverage will extend to other products in the future. A successful claim may prevent us from obtaining adequate product liability insurance in the future on commercially desirable items, if at all.

Our products may in the future be subject to product recalls that could harm our reputation, business operations and financial results.

The Food and Drug Administration, or FDA, and similar foreign governmental authorities have the authority to require the recall of commercialized products in the event of material deficiencies or defects in design, manufacture or labeling. In the case of the FDA, the authority to require a recall must be based on an FDA finding that there is a reasonable probability that the device would cause serious injury or death. In addition, foreign governmental bodies have the authority to require the recall of our products in the event of material deficiencies or defects in design or manufacture. Manufacturers may, under their own initiative, recall a product if any material deficiency in a device is found. A government-mandated or voluntary recall by us could occur as a result of component failures, manufacturing errors,

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design or labeling defects or other deficiencies and issues. Recalls of any of our products would divert managerial and financial resources and have an adverse effect on our financial condition and results of operations. We may initiate certain voluntary recalls involving our products in the future. Companies are required to maintain certain records of recalls, even if they are not reportable to the FDA. If we determine that certain of those recalls do not require notification of the FDA, the FDA may disagree with our determinations and require us to report those actions as recalls. A future recall announcement could harm our reputation with customers and negatively affect our sales. In addition, the FDA could take enforcement actions against us, which could impair our ability to produce our products in a cost-effective and timely manner in order to meet our customers’ demands. We may also be required to bear other costs or take other actions that may have a negative impact on our future sales and our ability to generate profits.

If our marketed products cause or contribute to a death or a serious injury, or malfunction in certain ways, we will be subject to medical device reporting regulations, which can result in voluntary corrective actions or agency enforcement actions.

Under the FDA’s Medical Device Reporting regulations, or MDR regulations, we are required to report to the FDA any incident in which our product may have caused or contributed to a death or serious injury or in which our product malfunctioned and, if the malfunction were to recur, would likely cause or contribute to death or serious injury. In addition, all manufacturers placing medical devices in European Union markets are legally bound to report any serious or potentially serious incidents involving devices they produce or sell to the relevant authority in whose jurisdiction the incident occurred. In the future, we may experience events that may require reporting to the FDA pursuant to the MDR regulations. Any adverse event involving our products could result in future voluntary corrective actions, such as recalls or customer notifications, or agency action, such as inspection, mandatory recall or other enforcement action. Any corrective action, whether voluntary or involuntary, as well as defending ourselves in a lawsuit, will require the dedication of our time and capital, distract management from operating our business, and may harm our reputation and financial results. In addition, failure to report such adverse events to appropriate government authorities on a timely basis, or at all, could result in an enforcement action against us.

The medical device field is subject to stringent regulation and failure to obtain regulatory approval will prevent commercialization of our products.

Medical devices are subject to extensive and rigorous regulation by the FDA pursuant to the Federal Food, Drug, and Cosmetic Act, or FDCA, by comparable agencies in foreign countries and by other regulatory agencies and governing bodies. Under the FDCA and associated regulations, manufacturers of medical devices must comply with certain regulations that cover the composition, labeling, testing, clinical study, manufacturing, packaging and distribution of medical devices. In addition, medical devices must receive FDA clearance or approval before they can be commercially marketed in the U.S., and the FDA may require testing and surveillance programs to monitor the effects of approved products that have been commercialized and can prevent or limit further marketing of a product based on the results of these post-market evaluation programs. The process of obtaining marketing clearance from the FDA for new products could take a significant period of time, require the expenditure of substantial resources, involve rigorous pre-clinical and clinical testing, require changes to the products and result in limitations on the indicated uses of the product.

Our failure to obtain and maintain FDA clearances or approvals on a timely basis, or at all, would prevent us from commercializing our current or upgraded products in the U.S., which could severely harm our business.

Each medical device that we wish to market in the U.S. generally must first receive clearance from the FDA. Even if regulatory approval of a product is granted, the approval may be subject to limitations on the indicated uses for which the product may be marketed. We cannot assure you that

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the FDA will grant 510(k) clearance on a timely basis, if at all, for new products or uses that we propose for existing products. 510(k) clearance is a process required by the Food, Drug, and Cosmetic Act in which device manufacturers must register, to notify the Food and Drug Administration, or the FDA, of their intent to market a medical device at least 90 days in advance. This is also known as premarket notification, or PMN. The FDA’s 510(k) clearance process usually takes from four to twelve months, although it can take longer.

Modifications to our marketed devices may require new regulatory clearances, or may require us to cease marketing or recall the modified devices until clearances are obtained.

Any modifications to an FDA-cleared device that would significantly affect its safety or effectiveness or that would constitute a major change in its intended use would require a new 510(k) clearance. We may not be able to obtain such clearances in a timely fashion, or at all. Delays in obtaining future clearances would adversely affect our ability to introduce new or enhanced products in a timely manner, which in turn would have an adverse effect on our business, financial condition and results of operations. We have made modifications to our devices in the past and we may make additional modifications in the future, some of which we may determine do not require additional clearances. If the FDA disagrees and requires new clearances for the modifications, we may be required to recall and to stop marketing the modified devices, which could have an adverse effect on our business, financial conditions and results of operations.

Off-label promotion of our products or promotional claims deemed false or misleading could subject us to substantial penalties.

Obtaining 510(k) clearance only permits us to promote our products for the uses cleared by the FDA. Although we may request additional cleared indications for our current products, the FDA may deny those requests, require additional expensive clinical data to support any additional indications or impose limitations on the intended use of any cleared product as a condition of clearance. We must have adequate substantiation for our product performance claims. If the FDA determines that we have promoted our products for off-label use, or have made false or misleading or inadequately substantiated promotional claims, we could be subject to fines, injunctions or other significant penalties or restrictions.

If we or our suppliers fail to comply with ongoing regulatory requirements, or if we experience unanticipated problems with our products, these products could be subject to restrictions or withdrawal from the market.

Our products, along with the manufacturing processes and promotional activities for such products, are subject to continual review and periodic inspections by the FDA and other regulatory bodies. In particular we and our suppliers are required to comply with the quality system regulation, or QSR, which covers the methods and documentation of the design, testing, production, control, quality assurance, labeling, packaging, storage and shipping of our products. The FDA enforces the QSR through unannounced inspections. We are also subject to similar state requirements and licenses. Failure by us or one of our suppliers to comply with statutes and regulations administered by the FDA and other regulatory bodies, discovery of previously unknown problems with our products (including unanticipated adverse events or adverse events of unanticipated severity or frequency), manufacturing problems, or failure to comply with regulatory requirements, or failure to adequately respond to any FDA observations concerning these issues, could result in, among other things, any of the following actions:

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If any of these actions were to occur, it would harm our reputation and adversely affect our business, financial condition and results of operations. Furthermore, our key component suppliers may not currently be, or may not continue to be, in compliance with applicable regulatory requirements.

Pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, the SEC promulgated final rules regarding disclosure of the use of certain minerals, known as conflict minerals, which are mined from the Democratic Republic of the Congo and adjoining countries, as well as procedures regarding a manufacturer’s efforts to prevent the sourcing of such minerals and metals produced from those minerals. These new requirements will require due diligence efforts for the 2013 calendar year, with initial disclosure requirements effective in May 2014. We may incur costs associated with complying with these disclosure requirements, including expenses arising from diligence activity relating to sources of any conflict minerals used in our products and the costs of remediation and other changes to products, processes, or sources of supply required, if any, as a consequence of such activities. The implementation of these rules could adversely affect the sourcing, supply, and pricing of materials used in our products.

Failure to obtain regulatory approval in foreign jurisdictions will prevent us from marketing our products abroad.

We currently market, and intend to continue to market, our products internationally. Outside the U.S., we can market a product only if we receive a marketing authorization and, in some cases, pricing approval, from the appropriate regulatory authorities. The approval procedure varies among countries and can involve additional testing, and the time required to obtain approval may differ from that required to obtain FDA approval. The foreign regulatory approval process may include all of the risks associated with obtaining FDA approval in addition to other risks. We may not obtain foreign regulatory approvals on a timely basis, if at all. Approval by the FDA does not ensure approval by regulatory authorities in other countries, and approval by one foreign regulatory authority does not ensure approval by regulatory authorities in other foreign countries or by the FDA. If we fail to receive necessary approvals to commercialize our products in foreign jurisdictions on a timely basis, or at all, our business, financial condition and results of operations could be adversely affected.

We may be subject to or otherwise affected by federal and state health care laws, including fraud and abuse and health information privacy and security laws, and could face substantial penalties if we are unable to fully comply with such laws.

Although we do not provide health care services, nor receive payments directly from Medicare, Medicaid, or other third-party payors for our products or the procedures in which our products are used, health care regulation by federal and state governments will impact our business. Health care fraud and abuse and health information privacy and security laws potentially applicable to our operations include, but are not limited to:

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If we were found to be in violation of any of such laws or other similar governmental regulations to which we are directly or indirectly subject, and as a result we may be subject to penalties, including civil and criminal penalties, damages, fines, exclusion of our products from reimbursement under Medicare, Medicaid, and other federal health care programs, and the curtailment or restructuring of our operations. Any penalties could adversely affect our ability to operate our business and our financial results. Any action against us for violation of these laws, even if we successfully defend against them, could cause us to incur significant legal expenses and divert our management’s attention from the operation of our business.

Legislative and regulatory changes in the health care industry could have a negative impact on our financial performance. Furthermore, our business, financial condition, results of operations and cash flows could be significantly and adversely affected by recently enacted health care reform legislation in the U.S. or if reform programs are adopted in our key markets.

Changes in the health care industry in the U.S. and elsewhere could adversely affect the demand for our products as well as the way in which we conduct our business. Significantly, President Obama signed health care reform legislation into law that will require most individuals to have health insurance, establish new regulations on health plans, and create insurance pooling mechanisms and other expanded public health care measures. This legislation also will reduce Medicare spending on services provided by hospitals and other providers and, effective January 1, 2013, impose a 2.3% tax on the sale of taxable medical devices by the manufacturer, producer or importer. Based on a preliminary assessment, we believe that our selling, general and administrative expenses will increase in the range of $3 million to $5 million during the year ending December 31, 2013 as a result of implementing this new medical device excise tax.

Many details of the recently enacted health care reform legislation will be addressed in the implementing regulations. We cannot predict the effect any future legislation or regulation will have on us or what health care initiatives, if any, will be implemented at the state level.

In general, an expansion in government’s role in the U.S. health care industry may lower reimbursements for our products, reduce demand for innovative products, reduce medical procedure volumes and adversely affect our business and results of operations, possibly materially.

Furthermore, many private payors look to Medicare’s coverage and reimbursement policies in setting their coverage policies and reimbursement amounts such that federal reforms could influence the private sector as well. Finally, many states also may attempt to reform their Medicaid programs such that either coverage for certain items or services may be narrowed or reimbursement for them could be reduced. These health care reforms may adversely affect our business.

Consistent with or in addition to Congressional or state reforms, the Centers for Medicare and Medicaid Services, or CMS, the federal agency that administers the Medicare and Medicaid programs, could change its current policies that affect coverage and reimbursement for our products. Each year

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however, CMS re-examines the reimbursement rates for hospital inpatient and outpatient and physician office settings and could either increase or decrease the reimbursement rate for procedures utilizing our products. We are unable to predict when legislation or regulation that affects our business may be proposed or enacted in the future or what effect any such legislation or regulation would have on our business. Any such legislation, regulation or policies that affect the coverage and reimbursement of our current or future products, or the procedures utilizing our current or future products, could cause our sales to decrease and our revenue to decline.

In addition, the requirements or restrictions imposed on us or our products may change, either as a result of administratively adopted policies or regulations or as a result of the enactment of new laws. Any new regulations or statutory provisions could result in delays or increased costs during the period of product development, clinical trials, and regulatory review and approval, as well as increased costs to assure compliance.

Further, our success in international markets also depends upon the eligibility of reimbursement for our products through government-sponsored health care payment systems and other third-party payors. Outside of the U.S., reimbursement systems vary by country. These systems are often subject to the same pressures to curb rising health care costs and control health care expenditures as those in the U.S. In addition, as economies of emerging markets develop, these countries may implement changes in their health care delivery and payment systems. If adequate levels of reimbursement from third-party payors outside of the U.S. are not obtained, sales of our products outside of the U.S. may be adversely affected.

Inadequate levels of coverage or reimbursement from governmental or other third-party payors for our products, or for procedures using our products, may cause our revenues to decline.

Sales of our products depend in part on the reimbursement and coverage policies of governmental and private health care payors. The ability of our health care provider customers, including hospitals, to obtain adequate coverage and reimbursement for our products, or for the procedures in which our products are used, may impact our customers’ purchasing decisions and, therefore, could have a material adverse effect on our business.

The U. S. government may consider healthcare policies and proposals intended to curb rising healthcare costs, including those that could significantly affect both private and public reimbursement for healthcare services. For example, we may be affected by the outcome of pending government negotiations which would result from the automatic spending reductions that include cuts to Medicare payments pursuant to the Budget Control Act of 2011. Future significant changes in the healthcare systems in the United States or elsewhere, and current uncertainty about whether and how changes may be implemented, could have a negative impact on the demand for our products. We are unable to predict whether other healthcare legislation or regulations affecting our business may be proposed or enacted in the future, what effect any legislation or regulation would have on our business, or the effect ongoing uncertainty about these matters will have on the purchasing decisions of our customers.

Third-party payors have adopted, and are continuing to adopt, health care policies intended to curb rising health care costs. These policies include:

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These trends could lead to pressure to reduce prices for our current products and product candidates and could cause a decrease in the size of the market or a potential increase in competition that could adversely affect our business, financial condition and results of operations.

Risks Related to the Auction Process for this IPO

The auction process for this public offering may result in a phenomenon known as the “winner’s curse,” and, as a result, investors may experience significant losses.

The auction process for this offering may result in a phenomenon described as the “winner’s curse.” At the conclusion of the auction, bidders that receive allocations of shares in this offering (successful bidders) may infer that there is little incremental demand for our shares above or equal to the initial public offering price. This effect may be exacerbated due to the relatively small number of shares that are being offered by the selling stockholders in this offering, meaning that bidders that offer a higher price in the auction for a small number of shares could have a disproportionate effect on the clearing price established by the underwriter as compared to a larger offering that would include a more typical percentage of the issuer’s outstanding shares. As a result, successful bidders may conclude that they paid too much for our shares and could seek to immediately sell their shares to limit their losses should our stock price decline. In this situation, other investors that did not submit successful bids may wait for this selling to be completed, resulting in reduced demand for our Class B common stock in the public market and a significant decline in our stock price. Therefore, we caution investors that submitting successful bids and receiving allocations may be followed by a significant decline in the value of their investment in our Class B common stock shortly after this offering.

The auction process for this offering may result in a situation in which less price-sensitive investors play a larger role in the determination of the offering price and constitute a larger portion of the investors in this offering, and, therefore, the offering price may not be sustainable once trading of our Class B common stock begins.

In a typical initial public offering, a majority of the shares sold to the public are purchased by professional investors that have significant experience in determining valuations for companies in connection with initial public offerings. These professional investors typically have access to, or conduct their own independent research and analysis regarding, investments in initial public offerings. Other investors typically have less access to this level of research and analysis or may be motivated by other factors in making their investment decisions and, as a result, may be less sensitive to price when participating in the auction process in this offering. Because of the auction process and the other risk factors associated with this offering described in this section of the prospectus, these less price-sensitive investors may have a greater influence in setting the initial public offering price and may have a higher level of participation in this offering than is normal for initial public offerings. This, in turn, could cause the auction process to result in an initial public offering price that is higher than the price professional investors would be willing to pay for our shares. As a result, our stock price may decrease significantly and rapidly once trading of our Class B common stock begins. Also, because professional investors may have a substantial degree of influence on the trading price of our shares over time, the price of our Class B common stock may decline and not recover after this offering is completed. Furthermore, if the initial public offering price is above the level that investors determine is reasonable for our shares, some investors may attempt to short-sell (a transaction in which the investor profits if our stock price declines) our stock after trading begins, which would create additional downward pressure on the trading price of our Class B common stock.

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The initial public offering price may have little or no relationship to the price that would be established using traditional valuation methods, and therefore, the initial public offering price may not be sustainable once trading begins.

The underwriter and the selling stockholders may set the initial public offering price near or equal to the auction clearing price. The offering price of the shares of Class B common stock offered by the selling stockholders may have little or no relationship to, and may be significantly higher than, the price that otherwise would be established using traditional indicators of value, such as:

The underwriter did not consult with our management team or board of directors prior to estimating the initial public offering price range. Accordingly, the underwriter’s estimate of the initial public offering price range may not have taken into account the risks and challenges that we expect to affect our business, the risks associated with this offering and the auction process described in these risk factors. As a result, the initial public offering price of the shares sold by the selling stockholders may not be sustainable once trading begins, and the price of our Class B common stock may decline, significantly and rapidly, following completion of this offering.

Some bids made at or above the initial public offering price may not receive an allocation of shares.

The underwriter may require that bidders confirm their bids before the auction for the initial public offering closes. If a bidder is requested to confirm a bid and fails to do so within a required time frame, that bid may be rejected and may not receive an allocation of shares even if the bid is at or above the initial public offering price. Further, if the auction process leads to a pro rata reduction in allocated shares and a rounding down of share allocations pursuant to the rules of the auction, a bidder may not receive any shares in the offering despite having bid at or above the initial public offering price. Bids that are at or above the initial public offering price that are deemed to be manipulative of or disruptive to the bidding process, not creditworthy, or otherwise not deemed appropriate, may be rejected or reduced. For example, in previous transactions for other issuers in which the auction process was used, WR Hambrecht + Co has rejected or reduced bids when WR Hambrecht + Co, in its sole discretion, deemed the bids not creditworthy or had reason to question the bidder’s intent or means to fund its bid. In the absence of other information, the underwriter or a participating dealer may assess a bidder’s creditworthiness based solely on the bidder’s history with the underwriter or a participating dealer. WR Hambrecht + Co has also rejected or reduced bids that it deemed, in its sole discretion, to be potentially manipulative or disruptive or because the bidder had a history of alleged securities law violations. Other conditions for valid bids, including eligibility and account funding requirements of participating dealers, may vary. As a result of these varying requirements, a bidder may have its bid rejected by the underwriter or a participating dealer while another bidder’s identical bid is accepted.

Potential investors may receive a full allocation of the shares they bid for if their bids are successful and should not bid for more shares than they are prepared to purchase.

The underwriter and IVP may set the initial public offering price near or equal to the auction clearing price. In this event, the number of shares represented by successful bids will likely approximate the number of shares offered by the selling stockholders by this prospectus, and

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successful bidders may be allocated all or nearly all of the shares that they bid for in the auction. Therefore, we caution investors against submitting a bid that does not accurately represent the number of shares of our Class B common stock that they are willing and prepared to purchase.

Risks Related to this Offering

There is no existing market for our Class B common stock, and an active trading market may not develop.

Prior to this offering, there has been no public market for our Class B common stock. We cannot predict the extent to which investor interest in our company will lead to the development of a trading market or how liquid that trading market may become. An active and liquid trading market may not develop or be sustained following the closing of this offering. In addition, the underwriter is not required to sell any specific number or dollar amount of Class B common stock, but has agreed to use its best efforts to procure potential purchasers for the shares of Class B common stock offered pursuant to this prospectus. The initial public offering price for the shares of our Class B common stock sold in this offering will be determined by an auction process, and may not be indicative of the price that will prevail in the market following this offering. The market price for our Class B common stock may decline below the initial public offering price and our stock price is likely to be volatile. The lack of an active market may impair your ability to sell your shares at the time you wish or at a price that you consider reasonable. The lack of an active market may also reduce the value of your shares. The price of our Class B common stock in any market may be lower than the price you pay for our shares in this offering, and the price of our Class B common stock may not appreciate over time.

We expect that the price of our Class B common stock will fluctuate substantially.

The market price of our Class B common stock is likely to be subject to wide fluctuations in response to, among other things, the risk factors described in this section of the prospectus and other factors beyond our control, such as fluctuations in the operating performance or valuations of companies perceived by investors to be comparable to us. The market price of our Class B common stock is also likely to be volatile due to many other factors, including:

In addition, the stock market in general has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of the particular

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companies affected. These broad market factors may materially harm the market price of our Class B common stock, regardless of our operating performance. These broad market and industry fluctuations, as well as general economic, political, and market conditions, such as recessions, interest rate changes or international currency fluctuations, may negatively affect the market price of our Class B common stock. In the past, following periods of volatility in the market price of a company’s securities, securities class-action litigation has often been instituted against that company. This type of litigation, if instituted against us and regardless of whether we prevail on the underlying claim, could result in substantial costs and a diversion of management’s attention and resources, which could materially harm our financial condition and results of operations.

If securities or industry analysts do not publish research or reports about our business, or if they adversely change their recommendations regarding our stock, our stock price and trading volume could decline.

Although the initial public offering price of the shares of Class B common stock offered for sale by the selling stockholder may have little or no relationship to the price that may have been established using traditional valuation methods, research analysts may rely upon these methods to establish target prices for our Class B common stock. If research analysts publish target prices for our Class B common stock that are below the initial public offering price or the then current trading market price of our shares, our stock price may decline. We do not currently have any research coverage by industry or securities analysts. If no or few analysts commence coverage of us, the trading price of our Class B common stock would likely decrease. We also do not expect analysts to have a reason to cover us. Since there is no minimum amount of shares of Class B common stock required to be sold by the selling stockholders in this offering, any reduction in the number of shares actually sold in the offering may also discourage analyst coverage. Even if we do obtain analyst coverage, we do not plan on giving guidance, and if one or more of the analysts who cover us downgrade our stock, our stock price would likely decline. If one or more of these analysts cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.

We do not anticipate paying cash dividends, and accordingly stockholders must rely on stock appreciation for any return on their investment.

We do not anticipate paying cash dividends in the future. Investors seeking cash dividends should not invest in our Class B common stock. See “Dividend Policy and History.”

Substantial future sales of our Class B common stock in the public market could cause our stock price to fall.

Additional sales of our Class B common stock in the public market after the consummation of this offering, or the perception that these sales could occur, could cause the market price of our Class B common stock to decline. The 729,798 shares of our Class B common stock sold in this offering will be freely transferable without restriction or additional registration under the Securities Act. After the consummation of this offering, an additional 90,910 shares of Class A common stock and 9,756,240 shares of Class B common stock (including 6,080,210 shares issuable upon conversion of preferred stock) will be available for immediate sale in the public market without restriction. Further, an additional 7,499,663 shares are held by our affiliates and may be sold in the public market if the sale is registered under the Securities Act or an exemption from registration such as Rule 144 under the Securities Act is available. Beginning 90 days after the offering, 7,297,163 of the shares held by affiliates will be tradable in the public market, subject only to the volume limitations under Rule 144. The remaining 1,717,032 shares of common stock will become freely tradeable over the course of the next six months as lock-up agreements or the applicable holding period under Rule 144 expire.

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As soon as practicable after the closing of this offering, we also intend to file a registration statement covering all of the shares of our common stock issued or reserved for issuance under our equity incentive plans. Registration of the sale of these shares would generally permit their sale into the market immediately, subject to vesting restrictions. In addition, some of our stockholders holding approximately 60% of our outstanding stock after giving effect to this offering have registration rights pursuant to the Master Rights Agreement. See “Shares Eligible for Future Sale” for more information.

If you purchase shares in this offering, you may experience substantial dilution.

While the price you pay for shares of our Class B common stock sold in this offering is substantially higher than our net tangible book value per share, because this is a secondary offering of shares, the sale of shares to new investors will not result in a change to our net tangible book value per share. You will experience dilution in the future upon the exercise of options to purchase our common stock, including those options currently outstanding and those granted in the future, and the issuance of restricted stock or other equity awards under our stock incentive plans. To the extent we raise capital by issuing equity securities, our stockholders may experience substantial additional dilution. See “Dilution.”

If we are unable to assess favorably the effectiveness of our internal control over financial reporting, or if our independent registered public accounting firm is unable to provide an unqualified attestation report on our internal controls, our stock price could be adversely affected.

Section 404 of Sarbanes-Oxley and the related rules adopted by the SEC and the Public Company Accounting Oversight Board, or PCAOB, require annual management assessments of the effectiveness of our internal control over financial reporting, starting with the second annual report that we would expect to file with the SEC, and will likely require in the same report, a report by our independent auditors on the effectiveness of our internal control over financial reporting. However, as an “emerging growth company” as defined by the recently enacted JOBS Act, our independent auditors will not be required to furnish such an assessment until we no longer qualify as an emerging growth company. In connection with the implementation of the necessary procedures and practices related to internal control over financial reporting, we may identify deficiencies. We may not be able to remediate any future deficiencies in time to meet the deadline imposed by Sarbanes-Oxley for compliance with the requirements of Section 404. If we cannot timely and favorably assess the effectiveness of our internal control over financial reporting, or if our independent registered public accounting firm is unable to provide an unqualified attestation report on our internal control over financial reporting, investor confidence and our stock price could decline.

The obligations associated with being a public company will require significant resources and management attention, which may divert from our business operations.

As a result of this offering, we will become subject to the reporting requirements of the Exchange Act and Sarbanes-Oxley. The Exchange Act requires that we file annual, quarterly and current reports with respect to our business and financial condition. Sarbanes-Oxley requires, among other things, that we establish and maintain effective internal controls and procedures for financial reporting. As a result, we will incur significant legal, accounting and other expenses that we did not previously incur. Furthermore, the need to establish the corporate infrastructure demanded of a public company may divert management’s attention from implementing our growth strategy, which could prevent us from improving our business, results of operations and financial condition. We have made, and will continue to make, changes to our internal controls and procedures for financial reporting and accounting systems to meet our reporting obligations as a public company. However, the measures we take may not be sufficient to satisfy our obligations as a public company. In addition, we cannot predict or estimate the amount of additional costs we may incur in order to comply with these requirements. We anticipate that these costs will materially increase our selling, general and administrative expenses.

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We are an emerging growth company within the meaning of the Securities Act, and if we decide to take advantage of certain exemptions from various reporting requirements applicable to emerging growth companies, our Class B common stock could be less attractive to investors.

We are an “emerging growth company” within the meaning of the Securities Act. For so long as we qualify as an emerging growth company, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including, but not limited to, reduced disclosure about our executive compensation and omission of compensation discussion and analysis, and an exemption from the requirement of holding a non-binding advisory vote on executive compensation. In addition, we will not be subject to certain requirements of Section 404(b) of Sarbanes-Oxley, including the additional level of review of our internal control over financial reporting as may occur when outside auditors attest as to our internal control over financial reporting. As a result, our stockholders may not have access to certain information they may deem important. Further, we are eligible to delay adoption of accounting standards newly issued or revised after April 5, 2012 applicable to public companies and we intend to take advantage of the benefits of this extended transition period. To the extent we choose to do so, our financial statements may not be comparable to companies that comply with such new or revised accounting standards. We will remain an emerging growth company for up to five years, though we may cease to be an emerging growth company earlier under certain circumstances. If we take advantage of any of these exemptions, investors may find our Class B common stock less attractive as a result. The result may be a less active trading market for our Class B common stock and our stock price may be more volatile.

Our status as a public company may expose us to competitive disadvantages that could harm our business operations and financial results.

The Exchange Act reports that we will be required to file with the SEC after this offering will contain detailed information regarding our financial condition, including margin and significant customer information, product development activities and executive compensation. We consider much of this information to be highly sensitive and have historically expended great effort maintaining its confidentiality. Our competitors, customers and suppliers may be able to leverage this information to our competitive disadvantage in their future strategic positioning and negotiations with us. For example, our competitors may be able more effectively to bundle their products to deter certain customers from buying our products. Our customers, distributors and suppliers may use publicly available information about our financial condition to demand more favorable contractual terms, both pricing and otherwise. Additionally, our competitors may seek to hire away members of our senior management team or other key employees, using as leverage the detailed compensation information in our Exchange Act filings. Our heightened profile as a public company may have additional, unforeseen adverse consequences to us and our financial condition.

The sale of our Class B common stock in this offering may limit our senior management’s ability to manage our business effectively.

Our Class B common stock, which is the stock being offered and sold by the selling stockholders in this offering, has ten votes per share and our Class A common stock has one vote per share. Immediately after completion of this offering, the public holders of our Class B common stock, in the aggregate, will be entitled to exercise approximately 4% of the voting power of our outstanding shares. Having our Class B common stock voted by members of the public who may have only short-term goals for our business could exert undesirable pressure on the ability of our senior management team to maintain its collective, consultive style and may end up limiting our ability to manage our business effectively in the long term.

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The concentration of ownership of our Class B common stock with our executive officers, directors and their affiliates will limit your ability to influence corporate matters.

As of December 31, 2012, our current executive officers and directors (and their affiliates) together owned approximately 59% of our Class B common stock, representing approximately 38% of the voting power of our outstanding shares. In addition, the holders of 10,150 shares of Class A common stock, 10,323,942 shares of Class B common stock and 185,961 shares of preferred stock have entered into a voting agreement pursuant to which they have granted irrevocable proxies to a voting committee comprised of Said S. Hilal, Nabil Hilal and Stephen E. Stanley, granting them the right to vote all of the stockholders’ shares during the term of the voting agreement. Since February 24, 2011, the number of shares covered by the voting agreement has increased by 10,150 shares of Class A common stock and 1,060,283 shares of Class B common stock. As a result of the voting agreement, as of December 31, 2012, our executive officers and directors controlled approximately 54% of the voting power of our outstanding shares. Following this offering, our executive officers and directors will control approximately 77% of our outstanding Class B common stock, whether through direct or indirect beneficial ownership or their right to direct the voting of such shares in accordance with the voting agreement, representing approximately 53% of the voting power of our outstanding shares. Accordingly, since our executive officers and directors have and will have majority voting control before and after this offering, any reduction of Class B common stock sold by the selling stockholders in this offering would not affect the selling stockholders’ inability to influence corporate matters requiring stockholder approval. Our executive officers will therefore have significant influence over all matters requiring stockholder approval, including the election of directors and significant corporate transactions, such as a merger or other sale of our company or its assets, for the foreseeable future. This concentrated control will limit your ability to influence corporate matters. As a result, we may take actions that you do not view as beneficial, and the market price of our Class B common stock could be adversely affected.

If we were to list on a national securities exchange, it is likely that we would avail ourselves of the “controlled company” exception to the corporate governance rules for NYSE or NASDAQ listed companies, which could make our Class B common stock less attractive to some investors or otherwise harm our stock price.

Our Class B common stock will not be listed on a national securities exchange and we currently have no intention to do so. However, if we decide to list on a national securities exchange in the future, we may qualify as a “controlled company” under the corporate governance rules for NYSE or NASDAQ listed companies. If we elect to take advantage of this exemption, we would not be required to have a majority of our board of directors be independent, nor would we be required to have a compensation committee or an independent nominating function. Accordingly, should the interests of our controlling stockholders differ from those of other stockholders, the other stockholders may not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance rules for NYSE or NASDAQ listed companies. Our status as a controlled company could make our Class B common stock less attractive to some investors or otherwise harm our stock price.

Provisions in our charter documents and under Delaware law and the voting agreement will limit your ability to influence our affairs and could negate a transaction that stockholders may consider favorable.

Provisions in our certificate of incorporation and bylaws, as amended and restated upon the closing of this offering, may have the effect of delaying or preventing a change of control or changes in our management. These provisions include the following:

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As a Delaware corporation, we are also subject to certain Delaware anti-takeover provisions. Under Delaware law, a corporation may not engage in a business combination with any holder of 15% or more of its capital stock unless the holder has held the stock for three years or, among other things, the board of directors has approved the transaction. Our board of directors could rely on Delaware law to prevent or delay an acquisition of us. See “Description of Capital Stock — Provisions of our Certificate of Incorporation and Bylaws and Delaware Law that May Have an Anti-takeover Effect.”

Also, provisions in the voting agreement may delay or prevent a transaction with respect to Applied that you may consider in your best interests. In particular, our stockholders party to the voting agreement can not tender any of their Applied securities into a tender offer with a third-party that may lead to a change of control of Applied unless the tender offer has been approved by the voting committee under the voting agreement. This limitation on the ability of certain of our stockholders to tender their shares may make it difficult for a third-party acquiror to acquire control of our company by means of a tender offer.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus includes forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends affecting the financial condition of our business. Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on information available at the time those statements are made and management’s good faith belief as of that time with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause such differences include, but are not limited to:

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In addition, in this prospectus, the words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “predict,” “potential” and similar expressions, as they relate to our company, our business and our management, are intended to identify forward-looking statements. In light of these risks and uncertainties, the forward-looking events and circumstances discussed in this prospectus may not occur and actual results could differ materially from those anticipated or implied in the forward-looking statements.

Forward-looking statements speak only as of the date of this prospectus. You should not place undue reliance on any forward-looking statements. We assume no obligation to update forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information, except to the extent required by applicable laws. If we update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.

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BACKGROUND OF THE DEMAND REGISTRATION AND THIS OFFERING

Introduction

Throughout our history, we have confronted larger and more established competitors in a continuing series of market challenges. We have sought to level the playing field by providing innovative and improved clinical outcomes while concurrently reducing the cost of our products to offer them at prices significantly below our competitors’ prices, and we manufacture all of our products here, in the U.S.A. We refer to this combination of characteristics as the Applied business model. To accomplish our objectives, we must invest heavily in our team members and their training, research and development, process and clinical development, automation and robotics, vertical integration and end-user education. We also often must defend our intellectual property and confront unfair competition through legal proceedings.

Our earliest products were vascular and urological devices that were positioned against similar devices offered by strong competitors. Our early revenue growth came slowly and at a great cost and effort. In 1990, we achieved a technical breakthrough in trocar seals that provided us with an opportunity to enter the general surgery market. Unfortunately, both of the major competitors in the trocar market used our patented technology without license and challenged the validity of our patents. We initiated expensive and time-consuming intellectual property litigation to stop the unlawful infringement of our intellectual property. By 1998, we prevailed in the initial legal battles over our trocar seal patents. Covidien, then known as U.S. Surgical, was ordered to pay damages and was enjoined from using our intellectual property. The other competitor, Johnson & Johnson’s Ethicon Endo-Surgery, agreed to license our patents.

Despite offering products at a lower price than our competitors, we were foreclosed from the trocar market and prevented from achieving any significant market penetration because of our competitors’ market practices. For nearly ten years, we continued to innovate and reduce our prices, without achieving more than a nominal market share. As a result of our efforts, dedication to our business model, and the combined effect of Senate hearings, antitrust legal action and national news coverage of contracting practices of dominant competitors and GPOs, starting in 2003, we started to get better access to customers. We also began to respond to our stockholders’ requests for liquidity by repurchasing some or all of their Applied shares, and in so doing, we increased the percentage ownership of all other stockholders, including IVP.

From 2008 to 2010, with economic conditions deteriorating and competition intensifying, we scaled back certain critical operational and capital investments to protect our cash position. Because we rely on significant levels of investment in our business to sustain our business model, we did not plan to sustain these reductions in investments and expenses for the long term. Reducing the levels of our operating and capital investments threatened to reduce our growth and restrict our capacity to manufacture enough products to meet demand. We therefore predicted the need, once the economic outlook became more positive and we strengthened our financial position by establishing a new banking relationship, not only to return to our prior investment levels but to accelerate our spending further to make up for lost time.

By 2010, our operating results and financial position had improved, primarily as a result of temporary reductions in operating expenses and capital expenditures. Our net income increased, from $9.0 million in 2008 to $20.9 million in 2010, and our cash balances improved from $20.9 million as of December 31, 2007 to $52.8 million as of December 31, 2010. We believe that IVP was aware of our operational decisions and cash position. Given that our revenue growth, earnings and cash flow during the period from 2009 to 2010 was not sustainable, we believe that IVP may have been motivated to force us to register the selling stockholders’ shares for this offering before our operating results return to more typical levels. IVP’s general partners, including Mr. Reid Dennis, appear to believe that IVP’s

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$5.6 million investment in our business made over 20 years ago was the driving force behind our growth and ability to successfully overcome tremendous obstacles. We believe IVP wrongly and unfairly claims credit for Applied’s success.

Background of Our Conflict with IVP

Applied was founded in 1987. In October 1988, we raised $1.8 million from venture capital investors, including $1.5 million invested by IVP and its general partner, Institutional Venture Management IV, or IVM. T. Peter Thomas, a general partner of IVM, joined our board of directors in October 1988 in connection with the financing. IVM and entities affiliated with IVM’s general partners (Mr. Dennis, Samuel D. Colella, Mr. Thomas, Mary Jane Elmore, Norman A. Fogelsong and Geoffrey Y. Yang) are selling stockholders in this offering. IVP has determined not to sell shares in this offering.

In subsequent venture financing transactions through December 1990, IVP invested an additional $4.2 million in Applied, bringing its total direct capital investment to $5.6 million for 4,531,903 shares of our preferred stock, or an average purchase price of $1.25 per share. Our last venture capital financing was completed in March 1992, in a transaction in which IVP did not participate. In connection with our last round of venture capital financing, we entered into an Amended and Restated Master Rights Agreement, dated as of November 8, 1991, or the Master Rights Agreement. Under the demand registration rights provisions of the Master Rights Agreement, holders of at least 50% of the shares having registration rights may request that we file a registration statement for the resale of their shares under the Securities Act.

IVP’s ownership position has been significantly enhanced indirectly by our repurchases of shares from other stockholders. In November 2009, IVP sought directly to increase its ownership in Applied by acquiring additional shares outright. Mr. Dennis, on behalf of IVP, proposed that another investment fund affiliated with IVP acquire shares of our preferred stock from other investors “on the cheap.” In an attempt to secure Applied’s agreement to permit IVP’s affiliate to acquire shares from our existing stockholders, Mr. Dennis indicated that IVP was willing to wait another three to five years before a potential Applied initial public offering if we cooperated. Following extensive discussions among our Senior Management team, we ultimately declined Mr. Dennis’ proposal.

In December 2009, IVP demanded a pro rata distribution of all of the shares of our preferred stock and common stock owned by IVP to its partners. While IVP asserted that the proposed distribution would eliminate the need to seek approval from its limited partners to further extend the life of the limited partnership, and the related expenses of maintaining the fund, including annual auditing fees, and that IVP sought to retain voting power over the shares to be distributed to its limited partners, Mr. Thomas informed us that the primary reason for the proposed distribution was to avoid the potential consequences to IVM’s general partners of the then-proposed change in federal income tax laws to impose federal income tax on general partners’ carried interest in investment funds at ordinary income tax rates rather than at capital gains rates. Following two weeks of pressure put on us by IVP’s representatives to accomodate IVP’s directive, which we considered to be designed solely for the benefit of IVM’s general partners rather than all of IVP’s partners, and complicated by IVP’s reluctance to seek its limited partners’ agreement to the proposed retention by IVM of voting rights to shares proposed to be distributed to IVP’s limited partners, IVP transferred 21% of its Applied shares to IVM, followed by IVM’s transfer of those shares to seven trusts affiliated with IVM’s general partners. On December 30, 2009, IVP transferred 951,699 shares of our preferred stock and 56,308 shares of our common stock to IVM, which in turn transferred all of those shares to trusts affiliated with Messrs. Dennis, Colella, Thomas, Fogelsong and Yang and Ms. Elmore (each of which trusts is a selling stockholder in this offering). As a result of these transactions, the aggregate number of our shares owned by IVP and IVM was reduced to 3,865,132 shares from 4,873,139 shares.

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In April 2010, and in light of market conditions and the desire of some of our stockholders to obtain liquidity for their investment in Applied, we elected to make an offer to our existing stockholders to repurchase their shares in a stock repurchase program. We allowed eligible stockholders to tender their Applied shares to us for repurchase at a price to be determined by an auction process within a specified range. This repurchase program was supported by Mr. Thomas, who was on our board of directors. Our proposed price range of $5.25 per share to $7.25 per share was based upon our determination that the fair market value of Applied shares as of December 31, 2009 was $6.30 per share. In the course of planning for the repurchase program, we learned from Mr. Dennis that a third-party valuation obtained by IVP in December 2009 indicated values of $17.01 per share for our common stock and up to $19.91 per share for one series of our preferred stock.

Other than having been advised of the existence of IVP’s valuations, none of the members of our board of directors (other than perhaps Mr. Thomas) or our management had any information regarding the valuation information provided by IVP, including the adequacy or accuracy of any of the assumptions underlying the valuation. We do not know the extent, if any, to which developments in our business, our financial data or projections, or our third-party valuation information was considered by IVM or its general partners in connection with their December 2009 valuation of our shares.

We offered to purchase up to 1,500,000 shares of common stock in the repurchase program. Upon closing of the auction, we repurchased 363,732 shares of common stock and 15,000 shares of preferred stock from stockholders at a repurchase price of $7.25 per share.

Events Leading to the Demands for Registration

In September 2010, our board of directors, including Mr. Thomas, discussed the possibility of initiating an initial public offering of Applied’s shares to effect the disposition of IVP’s investment in Applied, as well as the disposition of shares held by other investors. Mr. Thomas indicated that many or most of IVP’s limited partners desired liquidity for their investment in IVP, and he shared IVP’s view that a fair market value for Applied’s shares could be obtained only by means of an initial public offering, ruling out any other potential means to achieve liquidity for IVP’s limited partners.

While we had undertaken a series of steps to prepare for an initial public offering, we communicated to IVP and its representatives that Applied would not be in a position to make a final decision regarding an initial public offering until the completion of the second phase of our patent litigation with Covidien then pending in the U.S. District Court for the Eastern District of Texas, with a trial then scheduled for May 2011. Certain of our products had been found to infringe Covidien’s patents in the first phase of this litigation. Pending before the Court during the second phase of the litigation was a request by Covidien to enjoin us from making or selling portions of our key trocar product line. Considering the potential impact a negative trial outcome could have on our business, we determined that conducting an initial public offering under the cloud of this litigation was undesirable. We told IVP that if market conditions were acceptable, the patent litigation was resolved favorably, and Applied was otherwise prepared to move forward, then we would be willing to take further steps to prepare for and consider undertaking an initial public offering.

In June 2011, the U.S. District Court for the Eastern District of Texas postponed the patent trial with Covidien until October 2011. We affirmed to IVP our intent to consider an initial public offering following completion of the trial and subject to market conditions and other appropriate factors.

In early July 2011, we received an ultimatum from IVP and the general partners of IVM in a letter threatening to demand registration under the Master Rights Agreement. IVP’s letter proposed an arrangement whereby IVP would agree not to exercise its demand registration rights until October 24, 2011 (after completion of the pending patent trial), but only if we agreed to waive our right under the

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Master Rights Agreement to defer registration for up to 90 days. IVP demanded each of the members of our board of directors sign a document agreeing to IVP’s proposal and waiving the 90-day deferral provision of the Master Rights Agreement. The document was signed by Mr. Thomas in his capacity as a director of Applied before he discussed the matter with the other members of our board of directors.

In a separate letter purporting to explain IVP’s position and acknowledging his conflict of interest, Mr. Thomas noted that IVP sought to send messages to its own limited partner investors to give them “some comfort beyond [the general partners’] personal words that [IVP] was taking steps to deliver liquidity of the [Applied] holding” and “that the general partners of [IVP]… are performing their fiduciary requirement to assure liquidity with a quality IPO in the Q2 2012 time frame.”

On August 15, 2011, and following extensive discussions among our board of directors that necessarily excluded Mr. Thomas, we informed IVP of our board’s unanimous determination not to accept IVP’s ultimatum on the basis that doing so would not be in the best interests of Applied and our stockholders. We also communicated to IVP our board’s belief that delivery of a demand registration request would not be in anyone’s best interest or conducive to a successful liquidity event. We proposed engaging in discussions with IVP, its representatives and select limited partners to explore liquidity alternatives in a manner that is fair, expeditious and mutually agreeable.

Despite our offer to engage in discussions, on August 25, 2011, IVP notified us of its first demand for registration of our common stock for sale in an initial public offering and its selection of WR Hambrecht + Co as the lead underwriter for the offering. We provided notice to all stockholders with registration rights under the Master Rights Agreement of IVP’s demand and requesting their indication of the number of registrable securities they request to be included in the offering. IVP, IVM and its general partners requested to include 4,417,456 shares of common stock in the offering and other stockholders requested to include an additional 1,988,291 shares of common stock in the offering.

In September 2011, we encouraged representatives of the underwriter and Morrison & Foerster LLP, counsel for the underwriter, to meet with us and representatives of Skadden, Arps, Slate, Meagher & Flom LLP, our counsel, to discuss terms and features of the demand registration and related organizational matters. Representatives of the underwriter advised us on October 3, 2011 that they and their counsel would participate in the meeting, scheduled to be held on October 5, 2011, by conference call. During this conference call, we informed the underwriter and its representatives of our intention to comply with the requirements of the Master Rights Agreement and our position that listing our shares on a national securities exchange was not required by the terms of the Master Rights Agreement.

On October 20, 2011, we provided a draft of the registration statement for IVP’s demand registration to Morrison & Foerster. The offering described in the draft registration statement included certain key features. First, the selling stockholders would offer shares of Class A common stock. Second, a total of 6,405,747 shares would be offered, representing the number of shares which holders of shares party to the Master Rights Agreement requested to be included in the offering. The number of shares to be sold in the offering pursuant to the initial demand included 6,084,080 shares issuable upon conversion of shares of preferred stock, representing more than 50% of our outstanding shares of preferred stock, thereby triggering the automatic conversion of all shares of preferred stock into common stock pursuant to the provisions of our certificate of incorporation. As a result of the proposed structure of the offering, we would no longer have any shares of preferred stock outstanding. Third, prior to the closing of the offering we would amend our certificate of incorporation to provide that shares of Class B common stock would automatically convert into Class A common stock upon sale or transfer to any person or entity other than certain permitted transferees. We filed the registration statement with the SEC on November 14, 2011, and filed amendments to the registration statement on December 30, 2011 and February 14, 2012. Each of these filings included the structural features of this offering described above.

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On February 24, 2012, we received a letter from Morrison & Foerster. Morrison & Foerster indicated that it had been authorized by the selling stockholders to inform us of the following significant changes to the qualitative and quantitative aspects of the offering:

In the following weeks, we received numerous additional communications from IVP and other selling stockholders relating to the changes to the offering initiated by IVP. As a consequence of these changes, we will have 6,266,171 shares of preferred stock outstanding after completion of this offering, of which 4,294,794 shares, or 68.5%, will remain held by IVP, IVM and affiliates of its general partners. The proposed amendments to our certificate of incorporation would have required the approval of the holders of a majority of our outstanding preferred stock voting as a separate class. The changes to the structure of the offering have resulted in significant changes to the capital structure and distribution of voting power that will remain in place following completion of this offering. In response to the correspondence received from Morrison & Foerster and certain of our stockholders, we sent a letter to each stockholder party to the Master Rights Agreement asking such stockholder to confirm whether the correspondence that we had received from Morrison & Foerster and IVP accurately described the stockholder’s intention and proposed participation with respect to the offering.

Upon confirming that the correspondence with Morrison & Foerster, IVP and the other selling stockholders reflected the election of the participants, we determined that the cumulative effect of the changes to the offering required by IVP and the selling stockholders represented a separate and independent demand for registration under the Master Rights Agreement with respect to our Class B common stock. Bank of America Ventures, Pantheon International Participations PLC, Landmark Equity Partners, IVM and other affiliates of IVP and the other selling stockholders identified herein have elected to participate in this new offering pursuant to the registration rights provisions of the Master Rights Agreement. IVP has determined not to offer any shares or convert any of its preferred stock into common stock in connection with this offering.

After having incurred significant expense and dedicated management time and energy to comply with IVP’s initial demand for registration, we believe we were close to completion of the offering in late February 2012. IVP’s determination shortly thereafter to restructure the demand registration, and Mr. Thomas’ challenge to our determination of the fair market value of our shares, as described in more detail below, have resulted in significant delays to the registration process as well as substantial additional legal and accounting expense for Applied.

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Our Views Relating to IVP’s Course of Conduct and the Timing of Its Demands for Registration

In 2009 and 2010, Applied responded to the global economic challenges by applying fiscally cautious budgeting and spending and accumulating cash from operations for use in case of any further deterioration of economic conditions. We believe IVP’s leadership has been and is aware of the intensive capital investments and operating expenses, as well as considerable time and effort, necessary to sustain the Applied model and build a sustainable presence in highly competitive markets. We also believe that IVP developed a plan to force us to complete an initial public offering, and to establish a marketable security, at this time, to leverage our unusual and unsustainable condition of growth, earnings and cash flow, and to portray our operating performance at optimum levels.

Applied’s management and board of directors have agreed that the conditions and operating performance experienced in 2009 and 2010 cannot be sustained without a return to our historic investment levels, and without making additional expenditures to compensate for lost time. IVP and the underwriter seem determined to present our unsustainable historical performance to investors in this offering. We have therefore attempted to emphasize for potential investors the risks and challenges we continue to confront and their anticipated impacts on our future operating results and financial condition.

As more particularly described in “Risk Factors” above, we believe:

During 2012, lower hospital census, declining average selling prices, weakening foreign exchange and austerity measures in Europe have had a negative effect on our addressable market size. Our own growth rates for revenues and operating income have dropped dramatically from 2010 to 2012, as competitive conditions have intensified. Our growth rate for product revenues dropped from 24.5% between 2010 and 2011 to 10.0% for the first nine months of 2012 as compared to the first nine months of 2011. While our net income increased 112.5% between 2010 and 2011, it declined 42.3% in

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the first nine months of 2012 as compared to the same period in 2011. We remain committed to long-term sustainability and have begun to resume increased levels of investments in research and development, adding sales and administrative personnel, and making additional capital expenditures for facilities and equipment to prepare for future growth opportunities. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

We believe IVP has over-valued our shares and communicated its inflated valuation information to its limited partners, potentially for several years. We believe that instead of engaging with our management or board of directors to explore other approaches to liquidity, IVP has restructured this offering to minimize the number of shares to be sold and to impair our capital structure without offering any way to improve the market for our shares following this offering or otherwise mitigating the negative impact of this demand registration.

IVP’s History of Disregarding Information Relevant to Valuation; Litigation

Since 2009, IVP has disputed or disregarded our good faith determinations of the value of our shares when our valuations have conflicted with IVP’s own views. To our knowledge, IVP has not considered our internal valuations or the underlying assumptions on which our valuations are based in guiding any of its actions in connection with this offering. We have not received any of the reports that IVP provides to its limited partners or other interested parties, and we do not know the extent, if any, to which affiliates of IVP have used IVP’s portfolio valuation information in connection with their operations, communications or fund-raising activities. We also believe the underwriter has placed insufficient weight on our internal valuations in setting the initial public offering price range for this offering, as evidenced by the underwriter’s failure to consult with us in connection with setting the price range for this offering.

One instance of IVP’s disregard for our fair market value determinations relates to our repurchase of stock from T. Peter Thomas, an affiliate of IVP and general partner of IVM, and a member of our compensation committee from January 1989 until February 2011. Mr. Thomas was removed from our board of directors by action of our stockholders in January 2012. Following his removal from our board of directors, Mr. Thomas exercised vested stock options to purchase 37,950 shares of our Class B common stock and paid the aggregate exercise price of $277,650 for such shares. On February 16, 2012, we exercised our right to repurchase all of such shares pursuant to the applicable stock option agreements between Applied and Mr. Thomas. In connection with the repurchase of these shares, we provided Mr. Thomas with a check in the amount of $495,247.50, which reflects a repurchase price of $13.05 per share. The repurchase price reflects our compensation committee’s good faith determination of the fair market value of our Class B common stock most recently preceding the date of Mr. Thomas’ removal as a director.

Mr. Thomas has asserted, with the support of IVP, that the fair market value determination used in connection with the repurchase of his shares was not made in good faith. Mr. Thomas claims to have received an independent third-party offer to purchase his shares of Class B common stock at a price of $25.00 per share. Mr. Thomas also has informed us that IVP values its Applied shares at $32.66 per share for purposes of preparing IVP’s own audited financial statements, based on a valuation conducted by a valuation firm engaged by IVP. We do not know the extent, if any, to which developments in our business, our financial data or projections or our third-party valuation information were considered by IVP in connection with its December 2011 valuation of our shares.

We have reviewed the valuations commissioned by IVP, and our management and board of directors continue to believe the valuation process used by our board of directors is the most appropriate process. In contrast to the valuation assertions made by Mr. Thomas and IVP, our compensation committee determined that the fair market value of our Class B common stock was $8.36 per share as of March 14, 2012 and $9.83 per share as of June 15, 2012.

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On August 31, 2012, Applied filed a lawsuit against Mr. Thomas and IVP in the Superior Court for the State of California, County of Orange, asserting claims against Mr. Thomas and IVP relating to Mr. Thomas’ breach of stock option agreements in connection with the exercise of our repurchase rights. We have asserted claims for breach of contract, breach of the implied covenant of good faith and fair dealing, conversion and declaratory relief against Mr. Thomas and claims for conversion and aiding and abetting conversion against IVP. We seek damages and certain declaratory relief. Upon filing the lawsuit, Mr. Thomas delivered the necessary stock transfer instruments. At the same time, Mr. Thomas reserved the right to continue to dispute our determination of fair market value. We continue to seek damages against Mr. Thomas and IVP as a result of their actions. On January 16, 2013, the Court issued an order transferring the case to the Superior Court for the State of California, County of San Mateo. Litigation to resolve these matters has been, and could remain, costly and time-consuming, and continues to distract our senior management from operating our business. See “Risk Factors” and “Business — Legal Proceedings.”

Our Concerns Regarding the Underwriter’s Estimate of the Range of Initial Public Offering Prices

We do not agree with the underwriter’s estimate of the initial public offering price range. As more particularly described in “Plan of Distribution,” potential investors may submit bids at any price, above or below the estimate range of prices. For the reasons described below and in “Risk Factors,” we believe the underwriter’s estimated price range is not sustainable. Moreover, and regardless of the offering price achieved through the underwriter’s “OpenIPO” process, we believe the public offering price will not be sustainable after this offering. The underwriter did not consult with us about valuation before communicating to us its estimate of the initial public offering price range. Accordingly, we believe the underwriter’s estimate of the initial public offering price range does not take into account the risks and challenges that we expect will affect our business or the risks associated with this offering and the auction process being used by the underwriter.

While we continue to comply with our obligations to effect the registration of shares under the Master Rights Agreement, we are concerned with what we believe is IVP’s and the underwriter’s focus on attempting to sell shares at a price we consider unjustified. We have further concerns stemming from our belief that the underwriter’s estimate of the initial public offering price range was arbitrarily selected to support IVP’s inflated estimates of the valuation of Applied shares held by IVP. We are also concerned that the selling stockholders are only offering a small percentage of our outstanding shares, or “float,” in this offering. This offering is a “micro-float” offering, in which not more than 4% of our outstanding shares are being offered for sale to the public. A “micro” float can help the selling stockholders offload shares at a premium price, while potentially resulting in losses for early investors when additional shares are sold into the market after the closing of the offering. After the completion of this offering, there will be a significant number of shares eligible for sale by all Applied stockholders, which increases the risk of future price declines if stockholders sell additional shares into the market. See “Shares Eligible for Future Sale.”

We are also concerned that potential investors and others aware of this offering will misconstrue the circumstances surrounding this offering and our compliance with the registration requirements of the Master Rights Agreement. The underwriter has published a third party “research” report, prepared by a consultant engaged by the underwriter, which we believe contains false, misleading and overly optimistic information, while giving little, if any, emphasis to the real and significant risks associated with this offering and our business prospects. The underwriter has also chosen to publish on its “OpenIPO” website a “Selling Stockholder Message,” which is a video featuring Mr. Dennis (who is not selling any shares held in his own name in this offering). IVP’s and the underwriter’s communications relating to this offering were not reviewed, approved or authorized by us prior to their publication, and we specifically disavow the content of such communications.

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Conclusion

In determining whether to purchase shares in this offering, you should rely only on the information in this prospectus and any free-writing prospectus that we authorize to be distributed to you. See “Risk Factors” for more information about the special risks associated with this offering and the underwriter’s “OpenIPO” auction process.

We continue to believe that an initial public offering, at this time and in the manner initiated and controlled by IVP, is not in Applied’s best interests. We also caution you to weigh the disclosures in this prospectus about our business model and its advantages against the vulnerabilities and operating challenges applicable to our financial outlook, regardless of any statements made by the selling stockholders and their underwriter in connection with this offering. We are concerned that prospective investors who are given the opportunity to buy our shares from the selling stockholders will receive information from the underwriter or from IVP that does not adequately balance our advantages and opportunities against the significant risks of an investment in our shares.

For example, the underwriter claims on its website that “WRH+Co is the FIRST Underwriter to Publish Pre-IPO Research.” The underwriter engaged DBK Consulting to write a Research Report about us. Deborah B. Kaster prepared the report for DBK Consulting and the underwriter posted it on the underwriter’s OpenIPO website. We are not aware of any research reports prepared and published for any other company by Deborah B. Kaster or DBK Consulting. After we informed the underwriter of false or misleading statements contained in the initial DBK Consulting report, the underwriter removed the report from its website and replaced it with a revised report. While the revised report removed some of the statements we identified as false or misleading, it only modified others to appear as statements of DBK Consulting’s opinion. For the reasons described in “Risk Factors” above, we specifically disavow the content of DBK Consulting’s report and urge prospective investors not to rely on it.

We did not choose to go public. IVP has forced us to do so. We did not choose the underwriter for this offering. IVP did. We understand that the underwriter invited other internationally recognized investment banking firms to participate in this offering. We also understand that none of those firms were willing to do so under the circumstances.

We believe a “micro IPO” initiated at the demand of a venture capitalist, in which:

presents special risks to us and potential investors in this offering.

We cannot give potential investors any assurance that the initial public offering price for the shares to be sold in this offering will be established within or near the estimate of the range of prices communicated to us or the public by the underwriter, or that the price so established by the underwriter’s OpenIPO auction process will be sustained in the market following completion of the offering.

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USE OF PROCEEDS

We will not receive any proceeds from the sale of Class B common stock by the selling stockholders. We expect to incur approximately $             million of expenses in connection with this offering, including those expenses of the selling stockholders that we are obligated to pay under the Master Rights Agreement.

DIVIDEND POLICY AND HISTORY

We have never declared or paid any cash dividends on our Class B common stock, Class A common stock or preferred stock. The holders of our outstanding shares of preferred stock are entitled to certain preferences and priorities with respect to dividends. We are not permitted to pay dividends on any shares of common stock unless and until threshold amounts of dividends are paid on the outstanding shares of preferred stock. In addition, the holders of our outstanding shares of preferred stock would be entitled to participate in any dividends thereafter declared and paid on our common stock, on an as-converted basis as if they were the holders of the number of shares of Class B common stock into which their shares of preferred stock were then convertible.

We do not anticipate paying any cash dividends in the foreseeable future. Instead, we anticipate that all of our earnings, if any, in the foreseeable future will be used for working capital and to support our operations. Any future determination relating to dividend policy will be made at the discretion of our board of directors and will depend on a number of factors, including restrictions and preferences of our outstanding shares of preferred stock, if any, restrictions in our debt instruments, our future earnings, capital requirements, financial condition, future prospects, contractual restrictions, restrictions imposed by applicable law and other factors that the board of directors may deem relevant. For a more detailed description of the restrictions and preferences of our preferred stock with respect to dividends, see “Description of Capital Stock — Preferred Stock — Dividends.” We are also restricted from declaring or paying cash dividends under the senior secured credit facility. See “Description of Certain Indebtedness — Covenants and Other.”

We have an ongoing authorization, since February 2009, from our Board of Directors to repurchase up to 1,000,000 shares of our common stock and preferred stock from stockholders for a price and on such terms and conditions as management may determine appropriate in each case, subject to compliance with legal restrictions and covenants with our secured lenders. We expect to continue stock repurchase activity following completion of this offering in a manner consistent with past practices. Our senior secured credit facility includes provisions allowing us to repurchase shares of capital stock or pay dividends in aggregate amounts of up to $10 million per year and up to $50 million over the five-year term of the credit facility.

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CAPITALIZATION

The following table sets forth our capitalization as of September 30, 2012:

This table should be read together with “Selected Consolidated Financial Data,” “Management’s Discussion and Analysis of Financial Conditions and Results of Operations” and our consolidated financial statements and related notes included elsewhere in this prospectus.

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DILUTION

We calculate net tangible book value per share of our common stock by dividing the net tangible book value (total book value of tangible assets less total liabilities) by the number of shares of our Class A common stock and Class B common stock outstanding as of September 30, 2012 (assuming the conversion of all outstanding shares of our preferred stock).

As of September 30, 2012, we had a net tangible book value of $204.9 million, or approximately $10.53 per share. We will not receive any proceeds from the sale of Class B common stock by the selling stockholders in this offering, and the offering will not result in a change to the number of outstanding shares of our Class A common stock and Class B common stock (assuming conversion of all outstanding shares of our preferred stock). Accordingly, our net tangible book value per share as of September 30, 2012 would have remained $10.53 after giving effect to the sale of Class B common stock by the selling stockholders in this offering. Cash payments made by purchasers of the shares being offered will not result in a change in our net tangible book value per share.

As of September 30, 2012, persons who were officers, directors, promoters or affiliated persons during the five-year period ended September 30, 2012 purchased no shares of Class A common stock and 1,890,350 shares of Class B common stock from us for total consideration of $12.3 million. The average price per share paid by such persons was $6.49 for Class B common stock, as compared to an assumed initial public offering price of $32.00 (the midpoint of the price range set forth on the cover page of this prospectus).

You will experience dilution in the future upon the exercise of options to purchase our common stock, including those options currently outstanding and those granted in the future, and the issuance of restricted stock or other equity awards under our stock incentive plans. To the extent we raise capital by issuing equity securities, our stockholders may experience substantial additional dilution.

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SELECTED CONSOLIDATED FINANCIAL DATA

We derived the selected income statement data for the years ended December 31, 2010 and 2011 and the selected balance sheet data as of December 31, 2010 and 2011 from our audited consolidated financial statements and notes thereto included in this prospectus. We derived the selected income statement data for the nine months ended September 30, 2011 and 2012 and the selected balance sheet data as of September 30, 2012 from our unaudited consolidated financial statements and notes thereto that are included in this prospectus. We have prepared this unaudited information on the same basis as the audited financial statements and have included all adjustments, consisting of normal recurring adjustments, that we consider necessary for a fair statement of our financial position and operating results for such periods. Our historical results are not necessarily indicative of the results that may be expected in the future. The following financial data are only a summary and should be read together with our financial statements and the notes thereto, and the information under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in this prospectus.