10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2012

OR

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

For the transition period from _______ to ________

Commission File Number: 0-27605

VASCULAR SOLUTIONS, INC.

(Exact name of registrant as specified in its charter)

Minnesota	41-1859679
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

6464 Sycamore Court

Minneapolis, Minnesota 55369

(Address of principal executive offices, including zip code)

 (763) 656-4300

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former

fiscal year, if changed since last report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes   x  No  o

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

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

Large accelerated filer o	Accelerated filer x
Non-accelerated filer   o	Smaller Reporting Company o

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

The registrant had 16,316,369 shares of common stock, $.01 par value per share, outstanding as of October 15, 2012.

VASCULAR SOLUTIONS, INC.

TABLE OF CONTENTS

		Page
PART 1. FINANCIAL INFORMATION		2
Item 1.	Financial Statements	2
	Consolidated Balance Sheets	2
	Consolidated Statements of Earnings	3
	Consolidated Statements of Comprehensive Earnings	4
	Consolidated Statements of Cash Flows	5
	Notes to Unaudited Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	23
Item 4.	Controls and Procedures	24
PART II.  OTHER INFORMATION		23
Item 1.	Legal Proceedings	24
Item 1A.	Risk Factors	24
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	25
Item 3.	Defaults Upon Senior Securities	25
Item 4.	Mine Safety Disclosures	25
Item 5.	Other Information	25
Item 6.	Exhibits	25

Page 1

PART 1. FINANCIAL INFORMATION

Item 1. Financial Statements

VASCULAR SOLUTIONS, INC.

Consolidated Balance Sheets

	September 30, 2012			December 31, 2011
	(unaudited)			(see note)
Assets
Current assets:
Cash and cash equivalents	$	13,913,000		$	13,726,000
Accounts receivable, net of reserves of $155,000 and $150,000 in 2012 and 2011, respectively		13,889,000			11,728,000
Inventories		13,738,000			14,788,000
Prepaid expenses		1,905,000			1,624,000
Current portion of deferred tax assets		5,500,000			5,500,000
Total current assets		48,945,000			47,366,000
Property and equipment, net		6,559,000			5,607,000
Goodwill		10,095,000			8,117,000
Intangible assets, net		12,426,000			7,948,000
Deferred tax assets, net of current portion and liabilities		3,811,000			7,445,000
Total assets	$	81,836,000		$	76,483,000
Liabilities and shareholders’ equity
Current liabilities:
Accounts payable	$	3,461,000		$	2,843,000
Accrued compensation		3,813,000			3,430,000
Accrued expenses		1,832,000			1,406,000
Accrued royalties		274,000			560,000
Current portion of deferred revenue and contingent consideration		307,000			477,000
Total current liabilities		9,687,000			8,716,000
Long-term deferred revenue and contingent consideration, net of current portion		876,000			1,061,000
Shareholders’ equity:
Common stock, $0.01 par value: Authorized shares – 40,000,000 Issued and outstanding shares – 16,316,369 – 2012; 16,378,205 – 2011		163,000			164,000
Additional paid-in capital		81,724,000			83,962,000
Accumulated other comprehensive earnings		(257,000	)		(204,000	)
Accumulated deficit		(10,357,000	)		(17,216,000	)
Total shareholders’ equity		71,273,000			66,706,000
Total liabilities and shareholders’ equity	$	81,836,000		$	76,483,000

See accompanying notes.

Note:  The balance sheet at December 31, 2011 has been derived from the audited financial statements at that date.

Page 2

VASCULAR SOLUTIONS, INC.

Consolidated Statements of Earnings

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2012			2011			2012			2011
	(unaudited)						(unaudited)
Revenue:
Product revenue	$	24,465,000		$	21,450,000		$	72,821,000		$	64,580,000
License revenue		87,000			2,854,000			262,000			3,279,000
Total revenue		24,552,000			24,304,000			73,083,000			67,859,000
Product costs and operating expenses:
Cost of goods sold		8,183,000			7,463,000			24,252,000			22,262,000
Research and development		2,936,000			2,808,000			8,964,000			7,541,000
Clinical and regulatory		1,022,000			1,104,000			3,326,000			3,327,000
Sales and marketing		6,188,000			5,831,000			19,279,000			18,318,000
General and administrative		1,714,000			881,000			5,013,000			3,660,000
Amortization of purchased technology and intangibles		359,000			212,000			1,032,000			621,000
Total product costs and operating expenses		20,402,000			18,299,000			61,866,000			55,729,000
Operating earnings		4,150,000			6,005,000			11,217,000			12,130,000
Other earnings (expenses):
Interest earnings		–			4,000			–			12,000
Interest expense		(3,000	)		(3,000	)		(10,000	)		(10,000	)
Foreign exchange gain (loss)		9,000			(9,000	)		(11,000	)		117,000
Earnings before income taxes		4,156,000			5,997,000			11,196,000			12,249,000
Income tax expense		(1,591,000	)		(2,287,000	)		(4,338,000	)		(4,669,000	)
Net earnings	$	2,565,000		$	3,710,000		$	6,858,000		$	7,580,000
Net earnings per share – basic	$	0.16		$	0.22		$	0.43		$	0.46
Net earnings per share – diluted	$	0.16		$	0.22		$	0.42		$	0.44

See accompanying notes.

Page 3

VASCULAR SOLUTIONS, INC.

Consolidated Statements of Comprehensive Earnings

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2012		2011			2012			2011
	(unaudited)					(unaudited)
Net earnings	$	2,565,000	$	3,710,000		$	6,858,000		$	7,580,000
Other comprehensive earnings (loss), net of tax: Foreign currency translation adjustments		78,000		(221,000	)		(53,000	)		(110,000	)
Comprehensive earnings	$	2,643,000	$	3,489,000		$	6,805,000		$	7,470,000

See accompanying notes.

Page 4

VASCULAR SOLUTIONS, INC.

Consolidated Statements of Cash Flows

	Nine Months Ended
	September 30,
	2012			2011
	(unaudited)
Operating activities
Net earnings	$	6,858,000		$	7,580,000
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation		1,578,000			1,563,000
Amortization		1,032,000			621,000
Stock-based compensation		2,221,000			1,792,000
Deferred taxes, net		3,634,000			4,161,000
Change in fair value of contingent consideration		(96,000	)		(586,000	)
Gain on the sale of property and equipment		(1,000	)		–
Change in allowance for doubtful accounts		5,000			(15,000	)
Changes in operating assets and liabilities:
Accounts receivable		(2,168,000	)		(377,000	)
Inventories		1,062,000			(2,491,000	)
Prepaid expenses		(282,000	)		(28,000	)
Accounts payable		621,000			875,000
Accrued compensation and expenses		(205,000	)		15,000
Amortization of deferred license fees and other deferred revenue		(259,000	)		(3,260,000	)
Net cash provided by operating activities		14,000,000			9,850,000
Investing activities
Purchase of property and equipment		(2,370,000	)		(1,742,000	)
Cash paid for acquisitions and license		(7,000,000	)		(5,721,000	)
Proceeds from the sale of property and equipment		10,000			–
Net cash used in investing activities		(9,360,000	)		(7,463,000	)
Financing activities
Repurchase of common shares		(5,413,000	)		(2,606,000	)
Proceeds from the exercise of stock options and sale of stock, net of expenses		954,000			801,000
Net cash used in financing activities		(4,459,000	)		(1,805,000	)
Increase in cash and cash equivalents		181,000			582,000
Effect of exchange rate changes on cash and cash equivalents		6,000			(95,000	)
Cash and cash equivalents at beginning of period		13,726,000			17,360,000
Cash and cash equivalents at end of period	$	13,913,000		$	17,847,000
Supplemental disclosure of cash flow
Cash paid for interest	$	10,000		$	9,000
Cash paid for taxes	$	751,000		$	462,000

See accompanying notes.

Page 5

VASCULAR SOLUTIONS, INC.

Notes to Unaudited Consolidated Financial Statements

(1) Basis of Presentation

The accompanying unaudited consolidated financial statements of Vascular Solutions, Inc. (the Company) have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.  In the opinion of management, all normal, recurring adjustments considered necessary for a fair presentation have been included.  The consolidated financial statements should be read in conjunction with the audited consolidated financial statements contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011 filed with the Securities and Exchange Commission.  Interim results of operations are not necessarily indicative of the results to be expected for the full year or any other interim periods.

(2) Net Earnings per Share

In accordance with Accounting Standards Codification (“ASC”) 260-10-55, basic net earnings per share for the three and nine months ended September 30, 2012 and 2011 is computed by dividing net earnings by the weighted average common shares outstanding during the periods presented.  Diluted net earnings per weighted average common share is computed by dividing net earnings by the weighted average common shares outstanding during the period, increased to include dilutive potential common shares issuable relating to outstanding restricted stock, and upon the exercise of stock options and awards that were outstanding during the period.

Weighted average common shares outstanding for the three and nine months ended September 30, 2012 and 2011 was as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2011		2012		2011
	(unaudited)				(unaudited)
Weighted average shares outstanding – basic		15,885,000		16,643,000		15,960,000		16,654,000
Weighted average shares outstanding – diluted		16,389,000		17,239,000		16,341,000		17,223,000

(3) Revenue Recognition

In the United States the Company sells its products and services directly to hospitals and clinics.  Revenue is recognized in accordance with generally accepted accounting principles as outlined in ASC 605-10-S99, which requires that four basic criteria be met before revenue can be recognized: (i) persuasive evidence of an arrangement exists; (ii) the price is fixed or determinable; (iii) collectability is reasonably assured; and (iv) product delivery has occurred or services have been rendered.  The Company recognizes revenue as products are shipped based on FOB shipping point terms when title passes to customers.  The Company negotiates credit terms on a customer-by-customer basis and products are shipped at an agreed-upon price.  All product returns must be pre-approved and, if approved, customers are subject to a 20% restocking charge.

Page 6

VASCULAR SOLUTIONS, INC.

Notes to Unaudited Consolidated Financial Statements - Continued

In all international markets, the Company sells its products to international distributors which subsequently resell the products to hospitals and clinics.  The Company has agreements with each of its distributors which provide that title and risk of loss pass to the distributor upon shipment of the products to the distributor.  The Company warrants that its products are free from manufacturing defects at the time of shipment to the distributor.  Revenue is recognized upon shipment of products to distributors following the receipt and acceptance of a distributor’s purchase order.  Allowances are provided for estimated returns and warranty costs at the time of shipment.

The Company also generates revenues from license agreements and recognizes the revenue when earned.  In accordance with ASC 605, for revenues which contain multiple deliverables, the Company separates the deliverables into separate accounting units if they meet the following criteria: (i) the delivered items have a stand-alone value to the customer; (ii) the fair value of any undelivered items can be reliably determined; and (iii) if the arrangement includes a general right of return, delivery of the undelivered items is probable and substantially controlled by the seller.  Deliverables that do not meet these criteria are combined with one or more other deliverables into one accounting unit.  Revenue from each accounting unit is recognized based on the applicable accounting literature, primarily ASC 605-10-S99.

Starting in January 2012, the Company began to generate revenue from selling a reprocessing service for ClosureFast® radiofrequency catheters.  In accordance with ASC 605-45, the Company recognizes this revenue gross, with the amount paid to the supplier of the reprocessing service reflected as cost of sales.

In accordance with ASC 605-45-45, the Company includes shipping and handling revenues in net revenue, and shipping and handling costs in cost of sales.

(4)  Inventories

Inventories are stated at the lower of cost (first-in, first-out method) or market.  Appropriate consideration is given to deterioration, obsolescence and other factors in evaluating net realizable value.  Inventories are comprised of the following:

	September 30, 2012		December 31, 2011
	(unaudited)
Raw materials	$	6,725,000	$	7,107,000
Work-in process		823,000		1,369,000
Finished goods		6,190,000		6,312,000
	$	13,738,000	$	14,788,000

Page 7

VASCULAR SOLUTIONS, INC.

Notes to Unaudited Consolidated Financial Statements - Continued

(5)  Goodwill and Other Intangible Assets

The changes in the carrying amount of goodwill and acquired intangible assets for the nine months ended September 30, 2012 are as follows:

	Goodwill			Acquired Intangibles
	(unaudited)
Balance at December 31, 2011	$	8,117,000		$	7,948,000
Amortization		–			(1,032,000	)
Purchased licenses & acquisitions		2,006,000			5,530,000
Foreign currency translation adjustments		(28,000	)		(20,000	)
Balance at September 30, 2012	$	10,095,000		$	12,426,000

(6)  Credit Risk and Allowance for Doubtful Accounts

The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments.  This allowance is regularly evaluated by the Company for adequacy by taking into consideration factors such as past experience, credit quality of the customer base, age of the receivable balances, both individually and in the aggregate, and current economic conditions that may affect a customer’s ability to pay.  The Company does not accrue interest on past due accounts receivable.  Receivables are written off only after all collection attempts have failed and are based on individual credit evaluation and the specific circumstances of the customer.  At both September 30, 2012 and December 31, 2011, the allowance for doubtful accounts was $120,000.

All product returns must be pre-approved and, if approved, customers are subject to a 20% restocking charge.  The Company analyzes the rate of historical returns when evaluating the adequacy of the allowance for sales returns, which is included with the allowance for doubtful accounts on our balance sheet.  At September 30, 2012 and December 31, 2011, the sales and return allowance was $35,000 and $30,000, respectively.

Accounts receivable are shown net of the combined total of the allowance for doubtful accounts and allowance for sales returns of $155,000 and $150,000 at September 30, 2012 and December 31, 2011, respectively.

(7) Concentrations of Credit and Other Risks

In the United States the Company sells its products and services directly to hospitals and clinics.  In all international markets, the Company sells its products to distributors who, in turn, sell to hospitals and clinics.

With respect to accounts receivable, the Company performs credit evaluations of its customers and does not require collateral.  No single customer represented greater than 10% of gross accounts receivable as of either September 30, 2012 or December 31, 2011.  There have been no material losses on customer receivables.

Page 8

VASCULAR SOLUTIONS, INC.

Notes to Unaudited Consolidated Financial Statements - Continued

Revenue by geographic destination as a percentage of total net revenue for both of the nine month periods ended September 30, 2012 and 2011 was 84% in the United States and 16% in international markets, respectively.  No single customer represented greater than 10% of the total net revenue for the three and nine months ended September 30, 2012 and 2011.

(8) Dependence on Key Suppliers

The Company purchases certain key components from single-source suppliers.  Any significant component delay or interruption could require the Company to qualify new sources of supply, if available, and could have a material adverse effect on the Company’s financial condition and results of operations.

King Pharmaceuticals

The Company purchases its requirements for thrombin (a component in the Hemostat products) under a Thrombin-JMI® Supply Agreement entered into with King Pharmaceuticals, Inc. (“King”) on January 9, 2007.  King was acquired by Pfizer, Inc. on February 28, 2011.  Under the terms of the Thrombin-JMI Supply Agreement, King agrees to manufacture and supply thrombin to the Company on a non-exclusive basis.  The Thrombin-JMI Supply Agreement does not contain any minimum purchase requirements.  King agrees to supply the Company with such quantity of thrombin as the Company may order at a fixed price throughout the term of the Thrombin-JMI Supply Agreement as adjusted for inflation, variations in potency and other factors.  The Thrombin-JMI Supply Agreement has an initial term of 10 years, followed by successive automatic one-year extensions, subject to termination by the parties under certain circumstances, including: (i) termination by King without cause any time after the fifth anniversary of the date of the Thrombin-JMI Supply Agreement upon five years prior written notice to the Company, and (ii) termination by the Company without cause any time after the fifth anniversary of the date of the Thrombin-JMI Supply Agreement upon five years prior written notice to King provided that the Device Supply Agreement, which the Company also entered into with King on January 9, 2007, has expired on its terms or the parties have agreed to terminate it.

(9) Commitments and Contingencies

Governmental Proceedings

On June 28, 2011, the Company received a subpoena from the U.S. Attorney’s Office for the Western District of Texas under the Health Insurance Portability & Accountability Act of 1996 (HIPAA) requesting the production of documents related to the Company’s Vari-Lase products, and in particular the use of the Vari-Lase® Short Kit for the treatment of perforator veins.  The Vari-Lase Short Kit has been sold under a 510(k) clearance for the treatment of incompetence and reflux of superficial veins in the lower extremity since 2007 with total U.S. sales through September 30, 2012 of approximately $432,000 (0.1% of the Company’s total U.S. sales) and has not been the subject of any reported serious adverse clinical event.  On August 14, 2012, the U.S. District Court for the Western District of Texas unsealed a qui tam complaint that had been filed on November 19, 2010 by Desalle Bui, a former sales employee of the Company, which is the basis for the U.S. Attorney’s investigation, to which the federal government, after three extensions of time, has elected to intervene.  The complaint contains allegations of off-label promotion of Vari-Lase products for the treatment of perforator veins, re-use of single-use Vari-Lase products and Company-provided kickbacks to physicians, resulting in alleged damages to the government of approximately $20 million.  The Company believes the allegations are factually inaccurate and without merit, and therefore the Company intends to both fully comply with the U.S. Attorney’s investigation and defend the litigation.

Page 9

VASCULAR SOLUTIONS, INC.

Notes to Unaudited Consolidated Financial Statements - Continued

From time to time, the Company is involved in additional legal proceedings arising in the normal course of business.  As of the date of this report the Company is not a party to any legal proceeding not described in this section in which an adverse outcome would reasonably be expected to have a material adverse effect on the Company’s results of operations or financial condition.

King Agreements

On January 9, 2007, the Company entered into three separate agreements with King: a License Agreement, a Device Supply Agreement and a Thrombin-JMI Supply Agreement (See Note 8).  King was acquired by Pfizer, Inc. on February 28, 2011.  Under the License Agreement, the Company licensed the exclusive rights to the Company’s products Thrombi-Pad®, Thrombi-Gel® and Thrombi-Paste® to King in exchange for a one-time license fee of $6,000,000.  Under the Device Supply Agreement, the Company agreed to manufacture the licensed products for sale to King in exchange for two separate $1,000,000 milestone payments; one upon the first commercial sale of Thrombi-Gel (which was received on May 31, 2007), and one upon the first commercial sale of Thrombi-Paste (which has not been received and is not expected to be received).  The Company was amortizing the $6,000,000 license fee on a straight-line basis over 10 years.  The Company was amortizing the $1,000,000 milestone payment that was received on May 31, 2007 over the remaining 10-year license period.

Under the Device Supply Agreement the Company agreed to pursue on behalf of King a surgical indication for the use of the Thrombi-Gel and Thrombi-Paste products from the FDA.  The Device Supply Agreement requires the Company to make a one-time payment of $2,500,000 to King if the FDA does not approve the surgical indication of Thrombi-Gel and a one-time payment of $2,500,000 to King if the FDA does not approve the surgical indication of Thrombi-Paste after performing a clinical study and submitting the application.  In 2009, King suspended further development of the Thrombi-Paste products.  In 2010, King suspended further work on the pursuit of a surgical indication for the Thrombi-Gel products.

On July 6, 2011, King notified the Company that King was terminating the development of the Thrombi-Paste products and terminating efforts to obtain the surgical indication for the Thrombi-Gel products.  As a result of King making the decision to not proceed, the Company is not required to make either of the $2,500,000 payments to King, and instead the Company recognized revenue of $2,762,000 in the third quarter of 2011 as the remaining deferred license revenue originally allocated to the Thrombi-Paste products and the surgical indication of the Thrombi-Gel products as part of the King agreements.  Amortization of the deferred revenue is $51,000 per quarter for the remainder of the 10-year license period, reflecting the remaining amortization allocated to the topical use indication of the Thrombi-Gel and Thrombi-Pad® products.  The unamortized license fee was $866,000 and $1,019,000 at September 30, 2012 and December 31, 2011, respectively.  The amortization of license fee was $153,000 and $3,171,000 for the nine months ended September 30, 2012 and 2011, respectively.

Nicolai GmbH Agreement

Effective April 1, 2008 the Company entered into a five-year distribution agreement with Nicolai GmbH.  As a result of entering into this distribution agreement, the Company no longer maintains a direct sales force in Germany.  In connection with this distribution agreement, the Company received 500,000 Euros from Nicolai GmbH, which was deferred and is being recognized ratably over the five-year term of the distribution agreement.

Page 10

VASCULAR SOLUTIONS, INC.

Notes to Unaudited Consolidated Financial Statements - Continued

The agreement also includes provisions requiring the Company to pay Nicolai GmbH specific amounts if the Company terminates the distribution agreement prior to the end of the five-year term.  The Company does not intend to terminate the distribution agreement and, as such, has not recorded a liability relating to these potential future payments to Nicolai GmbH.  The unamortized license fee was $73,000 and $182,000 at September 30, 2012 and December 31, 2011, respectively.  The amortization of license fee was $109,000 and $108,000 for the nine months ended September 30, 2012 and 2011, respectively.

Radius Medical Technologies, Inc. Contingent Consideration

On October 20, 2010, the Company acquired the assets related to the snare and retrieval product line business from Radius Medical Technologies, Inc. and Radius Medical, LLC (collectively, “Radius”).  Under the terms of the agreement the Company paid Radius a total of $6,449,000, consisting of $5,000,000 paid in cash at October 20, 2010 and $1,449,000 which was paid on June 9, 2011 upon the successful completion of the transfer of the manufacturing processes from Radius to the Company along with all fixed assets and inventory.  In addition, Radius is entitled to receive an annual cash contingent consideration payment based on 25% of the net sales of the acquired products which exceed $2.0 million, $2.5 million, and $3.0 million for the calendar years ending December 31, 2011, 2012 and 2013, respectively.  The range of possible contingent consideration payments is from $-0- if no sales are made in excess of the thresholds, to an undeterminable amount as the agreement does not contain a cap on the payment amounts.  In accordance with ASC 805, a reduction of $96,000 and $586,000 in the liability amount was recorded at March 31, 2012 and September 30, 2011, respectively, and recognized as a gain in operating expenses within the general and administrative expenses.  At September 30, 2012 and December 31, 2011, the Company has recorded a liability for these contingent consideration payments in the amount of $214,000 and $310,000, respectively.

(10) Lines of Credit

On December 21, 2011 the Company modified and extended its secured asset-based revolving credit agreement with U.S. Bank National Association dated December 21, 2009 (as amended on December 21, 2010).  The revolving credit agreement is a one-year, $10,000,000 facility with availability based primarily on eligible customer receivables, inventory and property and equipment.  The revolving credit agreement bears interest equal to the one-month LIBOR rate plus 1.60% and is secured by a first security interest on all of the Company’s assets.  The revolving credit agreement requires a quarterly payment based on an annual fee of 0.125% of the average unused portion of the committed revolving line as determined by the bank and reviewed by management.

The revolving credit agreement includes one covenant that the Company cannot have a maximum cash flow leverage ratio greater than 2.5 to 1.  The calculation of this covenant is determined by multiplying annual lease expense times six and adding any loans, then dividing this amount by the sum of earnings before interest, taxes, depreciation, amortization and annual operating lease payments.  The covenant is computed quarterly based on a rolling 12-month period.  The Company was in compliance with the covenant as of September 30, 2012.

As of September 30, 2012, the Company had no outstanding balance against the revolving credit agreement.  Based on the Company’s eligible customer receivables, inventory, property and equipment and cash balances, $10,000,000 was available for borrowing as of September 30, 2012.

Page 11

VASCULAR SOLUTIONS, INC.

Notes to Unaudited Consolidated Financial Statements - Continued

(11) Income Taxes

The Company is subject to income tax in numerous jurisdictions and at various rates and the use of estimates is required in determining the provision for income taxes.  For the nine month periods ended September 30, 2012 and 2011, the Company recorded a provision for taxes of $4,338,000 and $4,669,000 on earnings before tax of $11,196,000 and $12,249,000, resulting in an effective income tax rate of 39%, respectively.  The difference between the effective tax rate of 39% and the U.S. federal statutory income tax rate of 34% was due mainly to the impact of state income taxes.

The Company regularly assesses the likelihood that the deferred tax assets will be recovered from future taxable earnings.  The Company considers projected future taxable earnings and ongoing tax planning strategies, then records a valuation allowance to reduce the carrying value of the net deferred taxes to an amount that is more likely than not to be realized.

The Company adopted accounting provisions that now form part of ASC 740, Income Taxes, and which clarify the accounting for uncertainty in tax positions recognized in the financial statements. These provisions create a single model to address uncertainty in tax positions and clarify the accounting for income taxes by prescribing the minimum recognition threshold a tax position is required to meet before being recognized in the financial statements.  ASC 740 also provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition.  The Company has recorded an unrecognized tax benefit of $1,020,000 as of September 30, 2012 and December 31, 2011.  The impact of tax related interest and penalties is recorded as a component of income tax expense.  For the nine months ended September 30, 2012, the Company has recorded $-0- for the payment of tax related interest and there were no tax penalties or interest recognized in the statements of operations.

The Company is subject to income tax examinations in the U.S. Federal jurisdiction, as well as in the Republic of Ireland and various state jurisdictions.  Remaining open tax years at September 30, 2012 are 2009 through 2011.

(12) Business Combinations and Asset Acquisitions

St. Jude Medical, Cardiology Division, Inc.

On August 16, 2012, the Company acquired the assets related to the Venture® Wire Control Catheter business from St. Jude Medical, Cardiology Division, Inc. (“St. Jude”).  Under the terms of the agreement, the Company agreed to pay St. Jude a total of $3,000,000, consisting of $2,250,000 paid in cash at August 16, 2012 and $750,000 payable in cash upon the successful completion of the transfer of the manufacturing processes from St. Jude to the Company.  The Venture Wire Control Catheter is used as a deflectable tip catheter for steering an .014 inch guidewire via the arterial system to the coronary or peripheral vasculature.  This acquisition provides the Company with additional products that are sold directly into the Company’s existing customer base to generate incremental revenue.

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VASCULAR SOLUTIONS, INC.

Notes to Unaudited Consolidated Financial Statements - Continued

The Company accounted for the transaction as a business combination in the third quarter of 2012.   In accordance with ASC 805 the purchase price is being allocated based on estimates of the fair value of assets acquired, as no liabilities were assumed.

The purchase price was allocated as follows:

Inventory and equipment	$	206,000
Purchased technology		850,000
Other intangibles		500,000
Goodwill		1,444,000
	$	3,000,000

The purchased technology and other intangible assets have an estimated useful life of 9 - 10 years.  The Company will start amortizing the intangible assets once the Company starts selling the products, currently estimated to start during the second quarter of 2013.

Accumed Systems, Inc.

On June 11, 2012, the Company acquired the assets related to the AccumedTM wrist positioning splint business from Accumed Systems, Inc. (“Accumed”).  Under the terms of the agreement, the Company paid Accumed a total of $1,500,000 at closing and no additional payments are required to be made.  The Accumed wrist positioning splint product consists of a plastic molded brace that simplifies arterial access by holding the wrist and forearm in an appropriate, comfortable position.  This acquisition provides the Company with an additional product that is sold directly into the Company’s existing customer base to generate incremental revenue.

The Company accounted for the transaction as a business combination in the second quarter of 2012.   In accordance with ASC 805 the purchase price is being allocated based on estimates of the fair value of assets acquired, as no liabilities were assumed.

The purchase price was allocated as follows:

Inventory and equipment	$	8,000
Purchased technology		740,000
Other intangibles		190,000
Goodwill		562,000
	$	1,500,000

The purchased technology and other intangible assets have an estimated useful life of 9 - 10 years.

Dr. Pedro Silva and Affiliates

On January 6, 2012, the Company entered into an agreement with Dr. Pedro Silva and his affiliates, whereby the Company paid $3,250,000 for the rights, patents and intellectual property relating to a two-lumen catheter for distal protection and material extraction used in the Company’s Pronto catheters.  Upon payment, the existing License Agreement between N.G.C. Medical S.p.A.and the Company has been deemed paid-in-full, and no future royalties will be owed on any sale of a Pronto catheter after December 31, 2011.

The Company has accounted for the transaction as a non-business license acquisition in the first quarter of 2012.   In accordance with ASC 805, the purchase price was assigned to a license intangible asset equivalent to the cash amount paid on January 6, 2012, and is being amortized over a period of 10 years.  No goodwill was recognized as part of the transaction.

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VASCULAR SOLUTIONS, INC.

Notes to Unaudited Consolidated Financial Statements - Continued

Northeast Scientific

On December 22, 2011, the Company entered into a license agreement with Northeast Scientific, Inc. (NES), a FDA-registered reprocessor of medical devices, whereby the Company acquired the exclusive rights to NES’ reprocessing services for the ClosureFast radiofrequency catheter in the United States for a term of five years.  The ClosureFast catheter is owned and marketed by VNUS Medical Technologies, Inc., a subsidiary of Covidien, and is used in the treatment of varicose veins.  Under the reprocessing service, the customer sends its used ClosureFast catheters to NES, where they are inspected, cleaned, tested, repackaged, resterilized and shipped back to the customer. In exchange for the exclusive rights, the Company paid a total of $900,000 to NES and a former third party distributor on December 22, 2011.

The Company accounted for the transaction as a non-business asset acquisition in the fourth quarter of 2011.  In accordance with ASC 805 the purchase price was assigned to an intangible asset and no goodwill was recognized.  The Company is amortizing the license intangible asset on a straight-line basis over the five-year term of the agreement.

Zerusa Limited

On January 27, 2011, the Company entered into an asset purchase agreement of substantially all the assets of Zerusa Limited (“Zerusa”), a Galway, Ireland based medical device company engaged in the manufacture and distribution of the Guardian® hemostasis valves.  Under the terms of the agreement the Company paid Zerusa a total of 3,121,000 Euros ($4,272,000), consisting of 2,850,000 Euros ($3,882,000) paid in cash at January 27, 2011 and 271,000 Euros ($390,000) which was paid on September 2, 2011.  The final payment amount was subject to adjustment based upon the value of inventory transferred.  The Guardian hemostasis valves are designed to maintain hemostasis during interventional catheterization procedures through a novel sealing system which allows simple introductions and removal of interventional devices while providing the option to lock guidewires in place.

The Company accounted for the transaction as a business combination in the first quarter of 2011.   In accordance with ASC 805 the purchase price was allocated based on estimates of the fair value of assets acquired, as no liabilities were assumed.

The purchase price was allocated as follows:

Inventory and equipment	$	48,000
Purchased technology		1,000,000
Other intangibles		800,000
Goodwill		2,424,000
	$	4,272,000

The purchased technology and other intangible assets have an estimated useful life of 11 years.

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VASCULAR SOLUTIONS, INC.

Notes to Unaudited Consolidated Financial Statements - Continued

Unaudited Supplemental Pro Forma Financial Information

The following unaudited supplemental pro forma information combines the Company’s results with those of St. Jude, Accumed and Zerusa as if the acquisitions had occurred at the beginning of each of the periods presented.  This unaudited pro forma information is not intended to represent or be indicative of the Company’s consolidated results of operations or financial condition that would have been reported for the periods presented had the acquisition been completed at the beginning of each of the periods presented, and should not be taken as indicative of the Company’s future consolidated results of operations or financial condition:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2011		2012		2011
Revenue	$	24,615,000	$	25,132,000	$	73,710,000	$	70,410,000
Net earnings		2,527,000		3,601,000		6,694,000		7,307,000
Net earnings per share
Basic	$	0.16	$	0.22	$	0.42	$	0.44
Diluted	$	0.15	$	0.21	$	0.41	$	0.42

Certain pro forma adjustments have been made to reflect the impact of the purchase transaction, primarily consisting of amortization of intangible assets with determinable lives and income taxes to reflect the Company’s effective tax rate for the periods presented.

(13) Products and Services

Our broad offering of products is divided into three product categories:

· Catheter products, principally consisting of catheters used in minimally invasive medical procedures for the diagnosis or treatment of vascular conditions, such as the Pronto® extraction catheters used in treating acute myocardial infarction, and also including products used in connection with gaining percutaneous access to the vasculature to perform minimally invasive procedures, such as micro-introducer kits;

· Hemostat (blood clotting) products, principally consisting of the D-Stat® Dry hemostat, a topical thrombin-based pad with a bandage used to control surface bleeding, and the D-Stat Flowable, a thick yet flowable thrombin-based mixture for preventing bleeding in subcutaneous pockets; and

· Vein products and services, principally consisting of the Vari-Lase® endovenous laser, a laser console and procedure kit used for the treatment of varicose veins, and a reprocessing service for radiofrequency vein ablation catheters.

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VASCULAR SOLUTIONS, INC.

Notes to Unaudited Consolidated Financial Statements - Continued

The following tables set forth, for the periods indicated, net revenue by product category along with the percent change from the previous period:

	Nine Months Ended September 30,
	2012					2011
	Net Revenue		Percent Change			Net Revenue		Percent Change
Catheter products	$	45,621,000		16	%	$	39,344,000		31	%
Hemostat products		17,236,000		(2	%)		17,542,000		(6	%)
Vein products		9,964,000		29	%		7,694,000		(5	%)
Total product revenue		72,821,000		13	%		64,580,000		14	%
License and collaboration		262,000		(92	%)		3,279,000		304	%
Total revenue	$	73,083,000		8	%	$	67,859,000		18	%

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

Executive Level Overview

     Vascular Solutions, Inc. (“we”, “us” or “Vascular”) is a medical device company focused on bringing solutions to interventional cardiologists and interventional radiologists.  As a vertically-integrated medical device company, we generate ideas and create new interventional medical devices, and then deliver those products directly to the physician through our direct domestic sales force and international distribution network.  We continue to develop new products and new applications for our existing products.

             We believe the overall worldwide market for endovascular devices will continue to grow as the demand for minimally invasive treatment of vascular diseases and disorders continues to increase.  We have capitalized and intend to continue to capitalize on this market opportunity through the introduction of new products.  We have originated and expect to continue to originate these new products primarily through our internal research and development efforts, while supplementing these development efforts with targeted acquisitions or other external collaborations.  Additionally, our growth has been, and will continue to be, impacted by our expansion and penetration into new geographic markets, the expansion and penetration of our sales organization in existing geographic markets, and our continuing focus on increasing the efficiency of our sales organization.

             Our product portfolio includes a broad spectrum of over 70 products and services consisting of over 600 stock keeping units (SKUs) covering a wide array of devices used in vascular procedures.  Our management, including our chief executive officer who is our chief operating decision maker, report and manage our operations in three product categories – catheter products, hemostat products and vein products – based on similarities in the products.  We have corporate infrastructure and direct sales capabilities in the United States and have established distribution relationships in most major international markets.  In order to drive sales growth, we have invested not only in the expansion of our global distribution system, but also in new product development and additional regulatory approvals.  A significant portion of our net sales growth historically has been, and we expect to continue to be, attributable to new and enhanced products.

The interventional medical device industry is characterized by intense competition, rapidly-evolving technology, and a high degree of government regulation.  To grow our business, we have focused on continually developing and commercializing new products.  Looking ahead, we expect our business may be impacted by the following trends and opportunities:

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· Changing regulatory approval requirements for newly-developed products.  Any new product that we develop must be approved by the Food and Drug Administration (FDA) in the United States and by similar regulatory bodies in other countries before they can be sold.  The requirements for obtaining product approval have undergone change, and in 2011 the FDA proposed additional changes to the product approval process.  We monitor the changing regulatory landscape and modify our regulatory submissions as necessary to obtain product approvals.

· Successfully integrating acquired products into our existing operations.  The acquisition of products and services complementary to our existing product portfolio and customer call point provides an additional business opportunity, but is dependent on the successful integration of the acquired products into our existing business structure.  In August 2012, we acquired the Venture® Wire Control Catheter (Venture) from St. Jude Medical, Cardiology Division, Inc. (“St. Jude”) (see Note 12 to the Unaudited Consolidated Financial Statements in Item 1 of Part I of this Form 10-Q).  In June 2012, we acquired the AccumedTM wrist positioning splint business from Accumed Systems, Inc. (Accumed) (see Note 12 to the Unaudited Consolidated Financial Statements in Item 1 of Part I of this Form 10-Q).  In December 2011, we acquired exclusive 5-year rights to sell reprocessing services for the radiofrequency vein ablation catheters in the United States from Northeast Scientific, Inc. (NES) (see Note 12 to the Unaudited Consolidated Financial Statements in Item 1 of Part I of this Form 10-Q).  In January 2011, we acquired the Guardian® hemostasis valve products from Zerusa Limited (Zerusa) (see Note 12 to the Unaudited Consolidated Financial Statements in Item 1 of Part I of this Form 10-Q) and have established a subsidiary in the Republic of Ireland to continue the manufacturing of the products.  In October 2010, we acquired the snare and retrieval products from Radius Medical Technologies, Inc. (Radius) and integrated those products into our operations.  In April 2010 we acquired the SmartNeedle® and pdACCESS needle access products from Escalon Vascular Access, Inc. (Escalon) and integrated those products into our operations.

· Managing intellectual property.  The interventional medical device industry is characterized by numerous patent filings and litigation claims made to protect new and evolving product ideas.  To maximize the profitability of new product ideas, we seek patent protection for those product design and method concepts which we believe have the potential to provide substantial product revenue.  While we are not currently involved in any material intellectual property litigation, we have been so in the recent past (See “Legal Proceedings” In Item 3 of Part I of our Form 10-K for the year ended December 31, 2011).  Managing intellectual property assets and claims is a significant challenge for our business.

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Results of Operations

The following table sets forth, for the periods indicated, certain items from our statements of earnings expressed as a percentage of net revenue:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Revenue:
Product revenue		100	%		88	%		100	%		95	%
License revenue		-			12	%		-			5	%
Total revenue		100	%		100	%		100	%		100	%
Product costs and operating expenses:
Cost of goods sold		33	%		31	%		33	%		33	%
Research and development		12	%		11	%		12	%		11	%
Clinical and regulatory		4	%		4	%		5	%		5	%
Sales and marketing		25	%		24	%		26	%		27	%
General and administrative		7	%		4	%		7	%		5	%
Amortization of purchased technology and intangibles		2	%		1	%		2	%		1	%
Total product costs and operating expenses		83	%		75	%		85	%		82	%
Operating earnings		17	%		25	%		15	%		18	%
Other earnings and expenses, net		-			-			-			-
Earnings before income taxes.		17	%		25	%		15	%		18	%
Income taxes		7	%		10	%		6	%		7	%
Net earnings		10	%		15	%		9	%		11	%

Three and nine months ended September 30, 2012, compared to three and nine months ended September 30, 2011

Net revenue increased 1% to $24,552,000 for the quarter ended September 30, 2012 from $24,304,000 for the quarter ended September 30, 2011.  This increase in revenue is comprised of the following components:

	% Change
Volume of existing product and service revenue		10	%
New product or service introductions, which consist of any product or service that had no revenue in the comparable period in 2011		6	%
Product and service pricing		(3	%)
Decline in licensing revenue		(12	%)
		1	%

Approximately 84% of our net revenue was earned in the United States and 16% of our net revenue was earned in international markets for each of the three month periods ended September 30, 2012 and September 30, 2011.

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Net revenue increased 8% to $73,038,000 for the nine months ended September 30, 2012 from $67,859,000 for the nine months ended September 30, 2011.  This increase in revenue is comprised of the following components:

	% Change
Volume of existing product and service revenue		11	%
New product or service introductions, which consist of any product or service that had no revenue in the comparable period in 2011		4	%
Product and service pricing		(2	%)
Decline in licensing revenue		(5	%)
		8	%

Approximately 84% of our net revenue was earned in the United States and 16% of our net revenue was earned in international markets for each of the nine month periods ended September 30, 2012 and September 30, 2011.

We recognized $87,000 and $2,854,000 of licensing revenue during the three month periods ending September 30, 2012 and 2011, respectively, and $262,000 and $3,279,000 of licensing revenue during the nine month periods ending September 30, 2012 and 2011, respectively, due to our License and Device Supply Agreements with King and our distribution agreement with Nicolai.  The decline in the amount of licensing revenue recognized in 2012 is due to King terminating the development of the Thrombi-Paste products and terminating efforts to obtain the surgical indication for the Thrombi-Gel products in 2011.  As a result of King making the decision not to proceed, we recognized revenue of $2,762,000 in the third quarter of 2011 which represented the remaining deferred license revenue originally allocated to the Thrombi-Paste products and the surgical indication of the Thrombi-Gel products as part of the King agreements.

Gross margin decreased to 66.7% for the quarter ended September 30, 2012, compared to 69.3% for the quarter ended September 30, 2011.  The decrease in gross margin is the result of the additional license revenue recognized in the third quarter of 2011, as discussed above.  Product only gross margins increased to 66.6% for the quarter ended September 30, 2012, compared to 65.2% for the quarter ended September 30, 2011.  The increase in product only gross margin primarily resulted from our acquisition of the intellectual property related to our Pronto® extraction catheters in January 2012, which eliminated the royalties paid on sales of the product after December 31, 2011 (see Note 12 to the Unaudited Consolidated Financial Statements in Item 1 of Part I of this Form 10-Q).  We expect gross margins to be in the range of 66.5% to 67.0% for the fourth quarter of 2012, subject to variations in our selling mix between U.S. and international markets and between our lower margin products such as the Vari-Lase products and our higher margin products such as the D-Stat Dry.  Gross margin decreased to 66.8% for the nine months ended September 30, 2012, compared to 67.2% for the nine months ended September 30, 2011.  Product only gross margins increased to 66.7% for the nine months ended September 30, 2012, compared to 65.5% for the nine months ended September 30, 2011.

Research and development expense for the third quarter of 2012 totaled $2,936,000, or 12% of revenue, compared to $2,808,000, or 11% of revenue, for the third quarter of 2011.  Research and development expense for the nine month period ending September 30, 2012 totaled $8,964,000, or 12% of revenue, compared to $7,541,000, or 11% of revenue, for the nine month period ending September 30, 2011.  Research and development expenses have increased as we have hired additional employees to improve the through-put of our new product development projects.  We expect our continuing research and development expenses to be approximately 11% to 12% of revenue in the fourth quarter of 2012.

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Clinical and regulatory expense for the third quarter of 2012 totaled $1,022,000, or 4% of revenue, compared to $1,104,000, or 4% of revenue, for the third quarter of 2011.  Clinical and regulatory expense for the nine month period ending September 30, 2012 totaled $3,326,000, or 5% of revenue, compared to $3,327,000, or 5% of revenue, for the nine month period ending September 30, 2011.  Clinical and regulatory expenses have remained relatively constant on a dollar basis and as a percentage of revenue compared to the three and nine month periods ending September 30, 2011.  We expect clinical and regulatory expenses to continue to be approximately 4% of revenue in the fourth quarter of 2012.

Sales and marketing expense for the third quarter of 2012 totaled $6,188,000, or 25% of revenue, compared to $5,831,000, or 24% of revenue, for the third quarter of 2011.  Sales and marketing expense for the nine month period ending September 30, 2012 totaled $19,279,000, or 26% of revenue, compared to $18,318,000, or 27% of revenue, for the nine month period ending September 30, 2011.  The increase in sales and marketing expenses as a percentage of revenue for the third quarter of 2012 was due to the fact no commissions were paid on the additional $2,762,000 of license revenue recognized in the third quarter of 2011.  Sales and marketing expense has decreased as a percentage of revenue for the nine months ended September 30, 2012 primarily as a result of maintaining our direct U.S. sales force at approximately 91 full-time employees while continuing to grow revenue.  We expect to maintain the same relative size of our direct U.S. sales force for the remainder of 2012.  We expect our sales and marketing expenses to continue to be approximately 25% of revenue in the fourth quarter of 2012.

General and administrative expense for the third quarter of 2012 totaled $1,714,000, or 7% of revenue, compared to $881,000, or 4% of revenue, for the third quarter of 2011.  General and administrative expense for the nine month period ending September 30, 2012 totaled $5,013,000, or 7% of revenue, compared to $3,660,000, or 5% of revenue, for the nine month period ending September 30, 2011.  General and administrative expenses have increased in the first nine months of 2012 because in accordance with accounting rules (ASC 805), we recognized an adjustment of $586,000 to the Radius earn-out on September 30, 2011 which reduced general and administrative expenses by a corresponding amount.  The Radius earn-out liability was created as part of the Radius acquisition and we continue to assess the liability balance and make any necessary adjustments as conditions warrant.  In addition, for the nine month period ended September 30, 2012 compared to the nine month period ended September 30, 2011, we have incurred an additional $197,000 of legal expenses responding to the subpoena issued by the U.S. Attorney’s office in June 2011 (See Note 9 to the Unaudited Consolidated Financial Statements in Item 1 of Part I of this Form 10-Q).  We expect our general and administrative expenses to continue to be approximately 6% to 7% of revenue in the fourth quarter of 2012.

Amortization of purchased technology and other intangibles was $359,000 and $212,000 for the three months ended September 30, 2012 and 2011, respectively.  Amortization of purchased technology and other intangibles was $1,032,000 and $621,000 for the nine months ended September 30, 2012 and 2011, respectively.  The amortization resulted from our purchase of the Escalon SMARTNEEDLE and pdACCESS products in April 2010; the Radius snare products in October 2010; the Zerusa Guardian hemostasis valves in January 2011; the reprocessing license in December 2011; the Pronto license in January 2012; and the Accumed wrist positioning splint business in June 2012.  In connection with the purchase of these assets, we allocated a total of $13,300,000 to purchased technology and other intangibles that is being amortized over various periods ranging from 5 – 11 years.  For a complete discussion of the recent acquisitions, see Note 12 to the Unaudited Consolidated Financial Statements in Item 1 of Part I of this Form 10-Q.  We expect amortization expense to be approximately $360,000 in the fourth quarter of 2012.

Income tax expense was $1,591,000 and $4,338,000 for the three and nine month periods ending September 30, 2012, respectively, on earnings before tax of $4,156,000 and $11,196,000, respectively, resulting in an effective income tax rate of 39%.  The difference between the effective tax rate of 39% and the U.S. federal statutory income tax rate of 34% was due mainly to the impact of state income taxes.  For the three and nine month periods ending September 30, 2011, income tax expense was $2,287,000 and $4,669,000, respectively, on earnings before tax of $5,997,000 and $12,249,000, respectively, resulting in an effective income tax rate of 39%.

Page 20

Liquidity and Capital Resources

Our cash and cash equivalents totaled $13,913,000 at September 30, 2012 compared to $13,726,000 in cash and cash equivalents at December 31, 2011, an increase of $187,000.  The majority of our cash is maintained in our operating accounts.  A portion of our cash equivalents are invested in a money market fund invested in high quality, short-term money market instruments denominated in U.S. dollars such as debt instruments guaranteed by the governments of the United States, Western Europe, Australia, Japan and Canada, high quality corporate issuers and bank obligations.  The money market fund’s assets are rated in the highest short-term category by nationally recognized rating agencies, such as Moody’s or Standard & Poor’s.

Cash provided by operations.  We generated $14,000,000 of cash from operations for the nine months ended September 30, 2012, primarily resulting from our earnings before taxes of $11,196,000 because virtually all of our income taxes are offset by our deferred tax assets.  In the nine months ending September 30, 2012 we increased our accounts receivable by $2,168,000, which was in line with our revenue growth projections and expectations.  With continued emphasis on process improvement, we were able to reduce our inventory levels by $1,062,000, while continuing to grow revenue for the nine months ending September 30, 2012.  In addition, we incurred $4,831,000 of non-cash depreciation, amortization and stock compensation; and $259,000 of non-cash charges relating to the amortization of deferred license fees and other deferred revenue.

Cash used for investing activities.  We used $9,360,000 of cash in investing activities for the nine months ended September 30, 2012, consisting of $3,250,000 of cash to purchase the intellectual property relating to our Pronto catheters, $1,500,000 of cash to purchase the assets relating to the Accumed wrist positioning splint business, $2,250,000 of cash used to purchase the Venture catheter business and $2,370,000 of cash for capital expenditures relating to our purchase of additional manufacturing and research and development equipment.

Cash used in financing activities.  We used $4,459,000 of cash in financing activities for the nine months ended September 30, 2012, consisting of $4,762,000 of cash to repurchase 425,135 common shares at an average price of $11.20 per share on the open market under our stock repurchase plan, and $651,000 of cash to repurchase 59,106 shares that vested under outstanding restricted stock awards to satisfy income tax withholding obligations.  These purchases were offset by our receipt of $510,000 in exchange for the sale of common stock pursuant to our Employee Stock Purchase Plan and $444,000 upon the exercise of outstanding stock options.

We have a $10 million revolving line of credit with US Bank, which has a 12-month term, bears interest at the rate of LIBOR plus 1.60% and is secured by a first security interest in all of our assets.  As of September 30, 2012, we were in compliance with the financial covenant under the line of credit and we had no outstanding balance on the revolving line of credit with an availability of $10 million.

We currently anticipate that we will experience positive cash flow from our normal operating activities for the foreseeable future.  We currently believe that our working capital of $39.3 million at September 30, 2012 will be sufficient to meet all of our operating and capital requirements for the foreseeable future.  However, our actual liquidity and capital requirements will depend upon numerous factors, including the amount of revenue from sales of our existing and new products; the cost of maintaining, enforcing and defending patents and other intellectual property rights; competing technological and market developments; developments related to regulatory and third party reimbursement matters; and other factors.

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Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements as of September 30, 2012.

Contractual Obligations

The following table summarizes our contractual cash commitments as of September 30, 2012:

	Payments Due by Period
Contractual Obligations	Total		Less than 1 year		1 - 3 years		3 - 5 years		More than 5 years
Facility operating leases	$	2,679,000	$	975,000	$	1,704,000	$	-	$	-
Total	$	2,679,000	$	975,000	$	1,704,000	$	-	$	-

Not included in the table above are the expected payments for contingent consideration related to our acquisition of the Radius snare products in October 2010.  These contingent consideration payments are in the amount of 25% of the net sales of the snare and retrieval products which exceed $2.5 million and $3.0 million for the calendar years ending December 31, 2012 and 2013, respectively.  In addition, not included in the table above is the $750,000 payable in cash upon the successful completion of the transfer of the manufacturing processes from St. Jude relating to the Venture.  These amounts were not included in the table above due to our inability to predict the amount and timing of the cash portion of the payments (See Note 9 to the Unaudited Consolidated Financial Statements in Item 1 of Part I of this Form 10-Q).

We do not have any other significant cash commitments related to supply agreements, nor do we have any significant commitments for capital expenditures.

Critical Accounting Policies

Management’s Discussion and Analysis of Financial Condition and Results of Operations addresses our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information.  The preparation of our financial statements requires that we make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  On an on-going basis, we evaluate these estimates and judgments.  We base our estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.  Actual results may differ from these estimates under different assumptions or conditions.

The material accounting policies that we believe are most critical to an investor’s understanding of our financial results and condition and which require complex management judgment are discussed in our Annual Report on Form 10-K for the year ended December 31, 2011 under the caption “Critical Accounting Policies.”

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Cautionary Statement Pursuant to the Private Securities Litigation Reform Act of 1995

The Private Securities Litigation Reform Act of 1995 (the Act) provides a “safe harbor” for forward-looking statements to encourage companies to provide prospective information about their business, so long as those statements are identified as forward-looking and are accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those discussed in the statement. We desire to take advantage of the safe harbor provisions with respect to any forward-looking statements we may make in this filing, other filings with the Securities and Exchange Commission and any public oral statements or written releases. The words or phrases “will likely,” “is expected,” “will continue,” “is anticipated,” “believe,” “estimate,” “projected,” “forecast,” or similar expressions are intended to identify forward-looking statements within the meaning of the Act.  Forward-looking statements such as these are based on management’s current expectations as of the date of this report but involve risks, uncertainties and other factors which may cause actual results to differ materially from those contemplated by such forward-looking statements.   We caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made.  In accordance with the Act, we identify the following important general factors which, if altered from the current status, could cause our actual results to differ from those described in any forward-looking statements: risks associated with defense of patent infringement lawsuits, adoption of our new products, limited profitability, exposure to possible product liability claims, the development of new products by others, dependence on third party distributors in international markets, doing business in international markets, the availability of third party reimbursement, actions by the FDA related to our products, the loss of key vendors, and those factors set forth under the heading “Risk Factors” in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2011.  This list is not exhaustive, and we may supplement this list in any future filing with the Securities and Exchange Commission or in connection with the making of any specific forward-looking statement.   We undertake no obligation to and do not intend to revise or update publicly any forward-looking statement for any reason.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivables.  We maintain our accounts for cash and cash equivalents principally at one major bank in the United States and one major bank in Ireland.  We have a formal written investment policy that limits our investments to investments in issuers evaluated as creditworthy.  We have not experienced any losses on our deposits of our cash and cash equivalents.

With respect to accounts receivable, we perform credit evaluations of our customers and do not require collateral. There have been no material losses on accounts receivables.

In the United States we sell our products and services directly to hospitals and clinics.  In international markets, we sell our products to independent distributors who, in turn, sell to hospitals.  Sales to independent distributors are denominated in United States dollars, with the exception of sales to Germany, where sales are denominated in Euros.  Sales to distributors out of our subsidiary in Ireland are denominated in Euros.

We distribute certain products on behalf of certain U.S. and international manufacturers.  We pay for all distributed products in United States dollars.

We do not believe our operations are currently subject to significant market risks for interest rates, foreign currency exchange rates, commodity prices or other relevant market price risks of a material nature.  A change of 0.1 in the Euro exchange rate would result in an increase or decrease of approximately $52,000 in the amount of United States dollars we receive in payment on the accounts receivable denominated in Euros with our subsidiary in Ireland and our German distributor Nicolai GmbH.  Under our current policies, we do not use foreign currency derivative instruments to manage exposure to fluctuations in the Euro exchange rate.

Page 23

We currently have no indebtedness, but if we were to borrow amounts from our revolving credit line, we would be exposed to changes in interest rates.  Advances under our revolving credit line bear interest at an annual rate indexed to LIBOR.  We thus would be exposed to interest rate risk with respect to amounts outstanding under the line of credit to the extent that interest rates rise.  As we had no amounts outstanding on the line of credit at September 30, 2012, we have no exposure to interest rate changes on this credit facility.  Under our current policies, we do not use interest rate derivative instruments to manage exposure to interest rate changes.  Additionally, we will be exposed to declines in the interest rates paid on deposited funds.  A 0.1% decline in the current market interest rates paid on deposits would result in interest earnings being reduced by approximately $14,000 on an annual basis.

Item 4. Controls and Procedures

Evaluation of disclosure controls and procedures.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act).  Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective.

Changes in internal control over financial reporting.

        During the fiscal quarter ended September 30, 2012, there has been no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II.  OTHER INFORMATION

Item 1. Legal Proceedings

        The description of litigation and government proceedings included in Note 9 to the Unaudited Consolidated Financial Statements in Item 1 of Part I of this Form 10-Q is incorporated into this Item 1 of Part II by reference.

 From time to time, we are involved in additional legal proceedings arising in the normal course of business.  As of the date of this report we are not a party to any legal proceeding not described in this section in which an adverse outcome would reasonably be expected to have a material adverse effect on our results of operations or financial condition.

Item 1A. Risk Factors

Item 1A (“Risk Factors”) of our most recently filed Annual Report on Form 10-K for the year ended December 31, 2011 sets forth information relating to important risks and uncertainties that could materially adversely affect our business, financial condition or operating results.  There have been no material changes from the Risk Factors described in Annual Report on Form 10-K for the year ended December 31, 2011; however, those Risk Factors continue to be relevant to an understanding of our business, financial condition and operating results and, accordingly, you should review and consider such Risk Factors in making any investment decision with respect to our securities. An investment in our securities continues to involve a high degree of risk.

Page 24

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Purchase of Equity Securities by the Issuer and Affiliated Purchasers:

Period	Total Number of Shares Purchased			Average Price Paid per Share		Total Number of Shares Purchased as Part of a Publicly Announced Plans or Programs(2)		Maximum Number of Shares that May Yet be Purchased Under the Plans or Programs
July 1 – 31, 2012		793	(1)	$	13.48		-		574,865
August 1 – 31, 2012		-			-		-		574,865
September 1 – 30, 2012		-			-		-		574,865

(1)  At the request of our employees and pursuant to the terms of their Restricted Stock Awards, we purchased 793 shares of common stock in July, all at the fair market value of the common stock on the day the employees’ awards vested, to satisfy income tax withholding obligations for those employees.

(2)  On February 1, 2012, we announced that our Board of Directors had approved a Common Stock Repurchase Plan (the “Repurchase Plan”), whereby we have the option to repurchase up to a maximum of 1,000,000 shares of our common stock on the open market at the current market price.  The Repurchase Plan expires on December 31, 2012.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

 None.

Item 6. Exhibits

Exhibit Number	Description
3.1	Amended and Restated Articles of Incorporation of Vascular Solutions, Inc. (incorporated by reference to Exhibit 3.1 to Vascular Solutions’ Form 10-Q for the quarter ended September 30, 2000).
3.2	Amended and Restated Bylaws of Vascular Solutions, Inc. (incorporated by reference to Exhibit 3.1 of Vascular Solutions’ Form 8-K dated October 19, 2007).
4.1	Specimen of Common Stock certificate (incorporated by reference to Exhibit 4.1 of Vascular Solutions’ Registration Statement on Form S-1 (File No. 333-84089)).
10.1	Asset Purchase Agreement dated August 16, 2012 by and between Vascular Solutions, Inc. and St. Jude Medical, Cardiology Division, Inc.
10.2	Vascular Solutions, Inc. Amended and Restated Stock Option and Stock Award Plan, as amended through July 27, 2012.
10.3	Vascular Solutions, Inc. Restricted Stock Award Program for Non-Employee Directors.

Page 25

10.4	Form of Restricted Stock Award Agreement for Non-Employee Directors.
31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

Page 26

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	VASCULAR SOLUTIONS, INC.
Date:  October 18, 2012	By:	/s/ Howard Root
		Howard Root
		Chief Executive Officer and Director
		(principal executive officer)

By:	/s/ James Hennen
	James Hennen
	Senior Vice President of Finance and Chief Financial Officer
	(principal financial officer)

By:	/s/ Timothy Slayton
	Timothy Slayton
	Controller
	(principal accounting officer)

Page 27

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Howard Root, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Vascular Solutions, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures; or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  October 18, 2012	By:	/s/ Howard Root
		Howard Root
		Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, James Hennen, certify that:

1.  I have reviewed this quarterly report on Form 10-Q of Vascular Solutions, Inc.;

2.  Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a- 15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures; or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)  Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.  The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:  October 18, 2012	By:	/s/ James Hennen
		James Hennen
		Senior Vice President of Finance and Chief Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. §1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Vascular Solutions, Inc. (the “Company”) on Form 10-Q for the quarterly period ended September 30, 2012, as filed with the Securities and Exchange Commission (the “Report”), I, Howard Root, Chief Executive Officer of the Company, certify to my knowledge, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Howard Root

Howard Root

Chief Executive Officer

October 18, 2012

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. §1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Vascular Solutions, Inc. (the “Company”) on Form 10-Q for the quarterly period ended September 30, 2012, as filed with the Securities and Exchange Commission (the “Report”), I, James Hennen, Chief Financial Officer of the Company, certify to my knowledge, pursuant to 18 U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ James Hennen

James Hennen

Senior Vice President of Finance and Chief Financial Officer

October 18, 2012

EX-10.1

EXHIBIT 10.1

ASSET PURCHASE AGREEMENT

by and between

ST. JUDE MEDICAL, CARDIOLOGY DIVISION, INC.,

and

VASCULAR SOLUTIONS, INC.

DATE:  AUGUST 16, 2012

TABLE OF CONTENTS

			Page
ARTICLE I                  DEFINITIONS			1
ARTICLE II                 THE TRANSACTIONS			4
	2.1	Purchase and Sale of Assets	4
	2.2	Retention of Excluded Liabilities and Excluded Assets	4
	2.3	Purchase Price	4
	2.4	Closing	4
	2.5	Deliveries at the Closing	4
	2.6	License Grant; Covenant Not to Sue	5
	2.7	Allocation of Purchase Price	5
	2.8	Investigation; Limitation of Seller Warranties	5
ARTICLE III                REPRESENTATIONS AND WARRANTIES OF SELLER			6
	3.1	Organization; Capitalization	6
	3.2	Due Authorization	6
	3.3	No Breach	6
	3.4	Title to Acquired Assets	7
	3.5	Legal Proceedings	7
	3.6	No Brokers	7
	3.7	Product Sales Records	7
	3.8	Inventory	7
	3.9	Regulatory Compliance	7
	3.10	Product Liability	7
ARTICLE IV                REPRESENTATIONS AND WARRANTIES OF BUYER			8
	4.1	Organization	8
	4.2	Due Authorization	8
	4.3	No Breach	8
	4.4	Legal Proceedings	8
	4.5	No Brokers	8
	4.6	Financing	8

i 

TABLE OF CONTENTS

(continued)

			Page
ARTICLE V                 POST-CLOSING COVENANTS			9
	5.1	Press Releases and Public Announcements; Customer Referrals	9
	5.2	Production Transfer; Milestone Payment	9
	5.3	Indemnification	9
	5.4	Noncompetition	10
	5.5	Nonsolicitation	11
	5.6	Assignment of Biocoat Agreement	11
ARTICLE VI                MISCELLANEOUS			11
	6.1	Confidentiality	11
	6.2	No Third-Party Beneficiaries	11
	6.3	Entire Agreement	11
	6.4	Succession and Assignment	11
	6.5	Counterparts	11
	6.6	Headings	11
	6.7	Notices	12
	6.8	Governing Law; Venue	13
	6.9	Amendments and Waivers	13
	6.10	Severability	13
	6.11	Expenses	13
	6.12	Construction	13
	6.13	Incorporation of Schedule	13
	6.14	Specific Performance	13
SCHEDULE 1 ACQUIRED ASSETS

ii 

ASSET PURCHASE AGREEMENT

THIS ASSET PURCHASE AGREEMENT (this “Agreement”), dated as of August 16, 2012, is made and entered into by and between St. Jude Medical, Cardiology Division, Inc., a Minnesota corporation (“Seller”), and Vascular Solutions, Inc., a Minnesota corporation(“Buyer”).  Seller and Buyer are sometimes referred to herein as the “Parties” and individually as a “Party”.

RECITALS

WHEREAS, Seller is engaged in the business of designing, developing, manufacturing, marketing and selling the Venture® Wire Control Catheter used as a deflectable tip catheter for steering an .014 inch guidewire via the arterial system to the coronary or peripheral vasculature (in the models and lengths set forth on Schedule 1 hereto, the “Product”); and

WHEREAS, Buyer desires to purchase, and Seller desires to sell, transfer, convey, assign and deliver to Buyer, certain intellectual property and other assets of Seller related to the Product.

AGREEMENT

NOW, THEREFORE, in consideration of the mutual covenants, representations, warranties, agreements and conditions set forth in this Agreement, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:

ARTICLE I

DEFINITIONS

For purposes of this Agreement, the following terms have the meanings specified:

“Acquired Assets” means any and all of Seller’s right, title, and interest in and to the assets set forth on Schedule 1 hereto, together with all goodwill related to the same.

“Acquired IP” has the meaning set forth in Schedule 1 hereto.

“Affiliate” means a Person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the Person specified.

“Affiliated Group” means any affiliated group within the meaning set forth in Section 1504(a) of the Code.

“Applicable Laws” means any and all laws, ordinances, constitutions, regulations, statutes, treaties, rules, codes, and Injunctions adopted, enacted, implemented, promulgated, issued, entered or deemed applicable by or under the authority of any Governmental Body having jurisdiction over a specified Person or any of such Person’s properties or assets.

“Buyer Related Documents” has the meaning set forth in Section 4.2.

1

“Closing” has the meaning set forth in Section 2.4.

“Closing Date” means the date hereof.

“Code” means the Internal Revenue Code of 1986, as amended from time to time.

“Constituent Documents” means the organizational and other governing documents of a Party, including the articles of incorporation, bylaws, shareholder agreement, voting agreement, and any other similar agreement.

“Contract” means any agreement, lease agreement, license agreement, contract, consensual obligation, commitment, arrangement, understanding or undertaking (whether written or oral and whether express or implied) of any type, nature or description that is legally binding.  As used herein, the word “Contract” will be limited in scope if modified by an adjective specifying the type of contract to which this Agreement refers.

“Encumbrance” means any security or other property interest or right, claim, lien, pledge, encumbrance, hypothecation, option, charge, security interest, contingent or conditional sale, or other title claim or retention agreement or lease, license or use agreement in the nature thereof, whether voluntarily incurred or arising by operation of law, and including any agreement to grant or submit to any of the foregoing in the future.

“Excluded Assets” means any and all assets, properties and rights of Seller other than the Acquired Assets.

“Excluded Liabilities” means any and all Liabilities of Seller arising prior to the date hereof, and any and all Liabilities of Seller arising after the date hereof that are unrelated to the Acquired Assets.

“Governmental Body” means any:

(a)           nation, state, county, city, town, village, district or other jurisdiction of any nature;

(b)           federal, state, local, municipal, foreign or other government;

(c)           governmental or quasi-governmental authority of any nature (including any governmental agency, branch, board, commission, department, instrumentality, office or other entity, and any court or other tribunal);

(d)           multi-national organization or body; and/or

(e)           body exercising, or entitled or purporting to exercise, any administrative, executive, judicial, legislative, police, regulatory or taxing authority or power of any nature.

“Injunction” means any and all writs, rulings, awards, directives, injunctions (whether temporary, preliminary or permanent), judgments, decrees or orders (whether executive, judicial or otherwise) adopted, enacted, implemented, promulgated, issued, entered or deemed applicable by or under the authority of any Governmental Body.

2

“Knowledge” as it relates to any Person means the actual knowledge of such Person if the Person is an individual, or the knowledge of any officer, director, governor or similar position of such Person if such Person is a corporation, partnership, association, limited liability company, trust, unincorporated organization, other entity or group.

“Liability” or “Liabilities” means any and all debts, liabilities and/or obligations of any type, nature or description (whether known or unknown, asserted or unasserted, secured or unsecured, absolute or contingent, accrued or unaccrued, liquidated or unliquidated and whether due or to become due).

“Permits” means all of the federal, state and local governmental permits (including occupancy permits), licenses, consents and authorizations held by Seller or any of its Affiliates, or required in connection with the use, operation or ownership of the Acquired Assets.

“Person” means any individual, corporation (including any non-profit corporation), general, limited or limited liability partnership, limited liability company, joint venture, estate, trust, association, organization, or other entity or Governmental Body.

“Proceeding” means any claim, suit, litigation, arbitration, hearing, audit, investigation or other action (whether civil, criminal, administrative or investigative) commenced, brought, conducted, or heard by or before, or otherwise involving, any Governmental Body or arbitrator.

“Seller Related Documents” has the meaning set forth in Section 3.2.

“Tax” means all taxes, assessments, charges, duties, fees, levies or other governmental charges, including all federal, state, local, foreign and other income, franchise, profits, capital gains, capital stock, transfer, sales, use, occupation, property, excise, severance, windfall profits, stamp, license, payroll, withholding and other taxes, assessments, charges, duties, fees, levies or other governmental charges of any kind whatsoever (whether payable directly or by withholding and whether or not requiring the filing of a Tax Return), all estimated taxes, deficiency assessments, additions to tax, penalties and interest and any Liability for such amounts as a result either of being a member of a combined, consolidated, unitary or Affiliated Group or of a contractual obligation to indemnify any Person.

“Tax Return” means any return, declaration, report, claim for refund or information return or statement relating to Taxes, including any schedule or attachment thereto, and including any amendment thereof, filed or required to be filed with any Person.

“Threatened” means a demand or statement has been made in writing, or any other notice has been given that would lead a reasonably prudent Person to conclude that a claim, Proceeding, dispute, action, or other matter will, with reasonable likelihood, be asserted, commenced, taken or otherwise pursued in the future.

3

ARTICLE II

THE TRANSACTIONS

2.1           Purchase and Sale of Assets.  On and subject to the terms and conditions of this Agreement, including the license granted under Section 2.6(a), Buyer agrees to purchase from Seller, and Seller agrees to sell, transfer, convey, assign and deliver, as applicable, to Buyer at the Closing, the Acquired Assets, free and clear of any and all Encumbrances, for the consideration specified in this Article II.

2.2           Retention of Excluded Liabilities and Excluded Assets.  Buyer will not assume or have any responsibility or Liability with respect to the Excluded Liabilities, and Seller will retain all of the Excluded Assets.  Notwithstanding the foregoing, Buyer shall be responsible for all Liabilities relating to the Acquired Assets arising on or after the date hereof, and shall indemnify and hold harmless Seller and any of its officers, directors, shareholders, agents or representatives, and defend Seller and any of its officers, directors, shareholders, agents or representatives, against any and all claims, demands, damages, obligations, Liabilities, contractual obligations, and causes of action, of any nature whatsoever, at law or in equity, asserted or unasserted, known or unknown, fixed or contingent, liquidated or unliquidated relating to the Acquired Assets arising on or after the date hereof.

2.3           Purchase Price.  In consideration of the conveyance of the Acquired Assets to Buyer hereunder, Buyer will make the following payments (collectively, the “Purchase Price”), by wire transfer of immediately available funds, to Seller:

(a)           $2,250,000 upon the execution of this Agreement and the delivery of the documents set forth in Section 2.5(a) below; and

(b)           $750,000 upon the successful qualification by Buyer or its Affiliates of the manufacturing processes for the manufacture of the RX and OTW Product models (in any size) for use in humans.

2.4           Closing.  The closing of the transactions contemplated by this Agreement (the “Closing”) will take place simultaneously with the execution hereof (a) at the offices of Briggs and Morgan, P.A., 2200 IDS Center, 80 South 8th Street, Minneapolis, Minnesota 55402, or (b) remotely by electronic exchange of documents and signatures.  The Closing will be effective as of 12:01 a.m. central daylight savings time on the Closing Date.

2.5           Deliveries at the Closing.

(a)           Seller’s Deliverables.  At the Closing, Seller will execute, where necessary or appropriate, and deliver to Buyer each and all of the following:

(i)           a Patent Assignment (the “Patent Assignment”) and a Trademark Assignment (the “Trademark Assignment”), in form and substance mutually acceptable to Buyer and Seller (the “IP Assignments”);

(ii)          a Bill of Sale in form and substance mutually acceptable to Buyer and Seller (the “Bill of Sale”); and

4

(iii)         the inventory, marketing materials, and customer lists described on Schedule 1 hereto.

(b)           Buyer’s Deliverables.  At the Closing, Buyer will execute, where necessary or appropriate, and deliver to Seller each and all of the following:

(i)           the IP Assignments, duly executed by an authorized officer of Buyer; and

(ii)          a copy of the resolutions adopted by Buyer’s board of directors authorizing the execution of this Agreement and the consummation of the transactions contemplated hereby certified by an officer of Buyer.

2.6           License Grant; Covenant Not to Sue.

(a)           Buyer hereby grants to Seller a perpetual, irrevocable, royalty-free, worldwide, nonexclusive, sub-licensable license to the Acquired IP in any field of use except directing, steering, controlling, and supporting a guide wire to access discrete regions of the coronary and peripheral vasculature.

(b)           Buyer, on behalf of itself and its Affiliates and any of their respective successors, assigns, affiliated entities, directors, officers, shareholders, legal representatives, distributors and resellers, hereby covenants not (i) to pursue any claim or cause of action against Seller or its Affiliates, any of their respective successors, assigns, affiliated entities, directors, officers, shareholders, legal representatives, distributors, resellers, customers, or end users alleging that any product manufactured, marketed or sold by Seller or any of its Affiliates as of the date hereof or any future iteration thereof infringes any of the Acquired IP, or (ii) to take any other action, either directly or indirectly, that interferes with Seller’s ability to exercise the license granted to Seller herein.

(c)           Except as set forth above, neither Party grants to the other Party any license to use any of its patents, trademarks, service marks, copyrights or other intellectual property.

2.7           Allocation of Purchase Price.  Buyer and Seller will agree on the allocation of the Purchase Price among the Acquired Assets in accordance with the applicable Treasury Regulations.  All Tax Returns and reports filed by Buyer and Seller (including Internal Revenue Service Form 8594) will be prepared consistently with such allocation.

2.8           Investigation; Limitation of Seller Warranties.  Buyer is an informed and sophisticated participant in the transactions contemplated by this Agreement and has undertaken such investigation, and has been provided with and has evaluated such documents and information, as it deems necessary in connection with the execution, delivery and performance of this Agreement.  Except as otherwise expressly set forth in this Agreement, the Acquired Assets are being sold by Seller “AS IS,” “WHERE IS” AND, SUBJECT TO THE REPRESENTATIONS AND WARRANTIES CONTAINED IN ARTICLE III, WITH ALL FAULTS AND WITHOUT ANY OTHER REPRESENTATION OR WARRANTY OF ANY NATURE WHATSOEVER, EXPRESS OR IMPLIED, ORAL OR WRITTEN, AND IN PARTICULAR, WITHOUT ANY IMPLIED WARRANTY OR REPRESENTATION AS TO CONDITION, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR SUITABILITY.

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ARTICLE III

REPRESENTATIONS AND WARRANTIES OF SELLER

To induce Buyer to enter into this Agreement, Seller hereby represents and warrants to Buyer that each and all of the following statements contained in this Article III are true and correct as of the date hereof.

3.1           Organization; Capitalization.  Seller is duly organized, legally existing and in good standing under the laws of the State of Delaware.

3.2           Due Authorization.  The execution, delivery and performance of this Agreement and the other documents, instruments and agreements to be executed and/or delivered by Seller pursuant to this Agreement (such other documents, instruments and agreements being hereinafter referred to as the “Seller Related Documents”), and the consummation of the transactions contemplated hereby and thereby, have been duly and validly authorized by all necessary action in accordance with Applicable Law and Seller’s Constituent Documents.  This Agreement and the Seller Related Documents have been duly and validly executed and delivered by Seller, and the obligations of Seller hereunder and thereunder are valid, legally binding and enforceable against Seller in accordance with their respective terms.

3.3           No Breach.  Seller has full power and authority to sell, assign, transfer, convey and deliver to Buyer the Acquired Assets.  Seller has full power and authority to otherwise perform its obligations under this Agreement and the Seller Related Documents.  The execution and delivery of this Agreement and the Seller Related Documents and the consummation of the transactions contemplated hereby and thereby, will not: (a) violate any provision of Seller’s Constituent Documents, (b) violate any Applicable Laws or Injunction applicable to Seller, (c)  require any filing with, Permit from, authorization, consent or approval of, or the giving of any notice to, any Person, (d) result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default (or give another party any rights of termination, cancellation or acceleration) under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license, franchise, Permit (including any Permits, approvals or authorizations of any Governmental Body), lease, or other Contract to which Seller is a party, or by which Seller or any of its properties or assets may be bound, or (e) result in the creation or imposition of any Encumbrance on any of the Acquired Assets.

3.4           Title to Acquired Assets.  Seller holds good, valid and marketable title to all of the Acquired Assets, free and clear of any and all Encumbrances of any kind, nature and description whatsoever.  Seller owns, licenses or otherwise has adequate rights to use the Acquired Assets in the manner in which they are presently being used.  None of the Acquired Assets or Seller’s rights thereto is subject to any actual or, to the Knowledge of Seller, Threatened, Proceeding which could reasonably be expected to result in the revocation, termination, supervision, cancellation or adverse modification of any such property or rights thereto.  Upon execution and delivery by Seller of the instruments of conveyance at the Closing, Buyer will become the true and lawful owner of, and will receive good and marketable title to, the Acquired Assets, free and clear of all liens and encumbrances.

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3.5           Legal Proceedings.  There are no Proceedings pending or, to Seller’s Knowledge, Threatened against Seller that would adversely affect Seller’s performance under this Agreement or the consummation of the transactions contemplated herein.

3.6           No Brokers.  No broker, finder or similar agent has been employed by or on behalf of Seller, and no Person with which Seller has had any dealings or communications of any kind is entitled to any brokerage commission, finder’s fee or any similar compensation in connection with this Agreement or the transactions contemplated hereby.

3.7           Product Sales Records.  Attached in Schedule 1 are true, correct and complete copies of Seller’s internally prepared sales records for the Product for the period from January 1, 2010 through June 30, 2012 which are based upon the books and records of Seller and, in all material respect, accurately present the information set forth therein for the respective periods indicated.

3.8           Inventory.  The inventory delivered at the Closing consists of items of a quality which is usable and, with respect to finished goods inventory, salable in each case, in the ordinary course of Seller’s business.  The finished goods inventory is not obsolete, damaged or defective.

3.9           Regulatory Compliance. Seller has no Knowledge of any actual or threatened enforcement action or investigation by the Food and Drug Administration (the “FDA”) or any other Governmental Body that has jurisdiction over Seller’s operations relating to the Acquired Assets or the Product.  Seller does not have any Knowledge that the FDA or any other Governmental Body is considering such action.  Seller’s operation of business relating to the Acquired Assets and the Product is, and at all times has been, in material compliance with all applicable laws relating to the Acquired Assets or the Product.  Seller has not either voluntarily or involuntarily initiated, conducted or issued, or caused to be initiated, conducted or issued, any recall, field notifications, field corrections, market withdrawal or replacement, safety alert, warning, “dear doctor” letter, investigator notice, safety alert or other notice or action relating to an alleged lack of safety, efficacy or regulatory compliance of Seller with respect to any Acquired Asset or the Product.  Seller has no Knowledge of any facts which are reasonably likely to cause (1) the recall, market withdrawal or replacement of the Product; (2) a change in the marketing classification or a material change in the labeling of the Product; or (3) a termination or suspension of the marketing of the Product.

3.10         Product Liability.  Seller has had no liability (and there is no known basis for any present or future action, lawsuit, proceeding, hearing, investigation, charge, complaint, claim, or demand against any of them giving rise to any liability) arising out of any injury to individuals or property as a result of the ownership, possession, or use of the Product.

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ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF BUYER

To induce Seller to enter into this Agreement, Buyer represents and warrants to Seller that each and all of the following statements contained in this Article IV are true and correct as of the date hereof.

4.1           Organization.  Buyer is duly organized, legally existing and in good standing under the laws of the State of Minnesota.

4.2           Due Authorization.  The execution, delivery and performance of this Agreement and the other documents, instruments and agreements to be executed and/or delivered by Buyer pursuant to this Agreement (such other documents, instruments and agreements being hereinafter referred to as the “Buyer Related Documents”), and the consummation of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary action, including approval of Buyer’s board of directors in accordance with Applicable Law and Buyer’s Constituent Documents.  This Agreement and the Buyer Related Documents have been duly and validly executed and delivered by Buyer (or duly and validly adopted by Buyer’s board of directors in the case of the resolutions described in Section 2.5(b)(iii) above) and the obligations of Buyer hereunder and thereunder are valid, legally binding and enforceable against Buyer in accordance with their respective terms.

4.3           No Breach.  Buyer has full power and authority to perform its obligations under this Agreement and the Buyer Related Documents.  The execution and delivery of this Agreement and the Buyer Related Documents and the consummation of the transactions contemplated hereby and thereby will not:  (a) violate any provision of Buyer’s Constituent Documents, (b) violate any Applicable Laws or Injunction applicable to Buyer, (c)  require any filing with, Permit from, authorization, consent or approval of, or the giving of any notice to, any Person, (d) result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default (or give another party any rights of termination, cancellation or acceleration) under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license, franchise, Permit (including any Permits, approvals or authorizations of any Governmental Body), lease, or other Contract to which Buyer is a party, or by which Buyer or any of its properties or assets may be bound.

4.4           Legal Proceedings.  There are no Proceedings pending or, to Buyer’s Knowledge, Threatened against Buyer that would adversely affect Buyer’s performance under this Agreement or the consummation of the transactions contemplated herein.

4.5           No Brokers.  No broker, finder or similar agent has been employed by or on behalf of Buyer, and no Person with which Buyer has had any dealings or communications of any kind is entitled to any brokerage commission, finder’s fee or any similar compensation in connection with this Agreement or the transactions contemplated hereby.

4.6           Financing.  Buyer currently has and will maintain sufficient funds to deliver the Purchase Price and otherwise to perform its obligations hereunder.

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ARTICLE V

POST-CLOSING COVENANTS

5.1           Press Releases and Public Announcements; Customer Referrals.  Neither Party will issue any press release or make any public announcement relating to the subject matter of this Agreement without the prior written approval of the other Party.  Notwithstanding the foregoing, Buyer shall be entitled to issue a press release announcing this Agreement provided that such press release is mutually agreed upon by the Parties.  Concurrently with or promptly following such press release, if any, Seller will notify all customers that have purchased the Product within one year preceding the Closing that commercial rights to the Product have been transferred to Buyer.  Following the Closing Date, Seller will forward all unfulfilled electronic orders, fax orders and phone orders received for the Product to Buyer’s customer service department.

5.2           Production Transfer; Milestone payment.  Within 14 days after the Closing Date, Seller shall deliver to Buyer all of the manufacturing assets included in the Acquired Assets.  For up to 120 days after the Closing Date, or through the earlier successful qualification of all manufacturing processes for the manufacture of human use product (the “Production Transfer Period”), Seller shall designate at least one of Seller’s employees with sufficient experience in manufacturing the Product to provide at no additional charge to Buyer, by telephone and/or in person, the necessary consultation and reasonable training for Buyer’s employees to become proficient in the manufacturing processes, vendors, inspection processes and validations for the Product.  Seller shall not be required to provide such consultation and training outside of its customary business hours or in excess of 20 hours per week.  Following the closing, Buyer and its Affiliates shall use their commercially reasonable best efforts to successfully qualify all manufacturing processes for the manufacture of Products for use in humans.  Buyer shall notify Seller in writing within five (5) business days of such successful qualification and shall pay to Seller the amount referenced in Section 2.3(b) hereof within ten (10) days of such notice.

5.3           Indemnification.

(a)           Following the Closing,

(i)           Seller shall defend, indemnify, and hold harmless Buyer and its Affiliates, and their officers, directors, employees, attorneys, agents, successors and assigns (collectively, the “Buyer Indemnified Parties”), against any and all legal expenses, costs, settlements, judgments, claims, controversies, demands, rights, disputes, grievances, causes of action, damages, enhanced damages, injunctions, attorneys’ fees or prejudgment interest (“Losses”) imposed on or incurred by any of the Buyer Indemnified Parties by reason of the manufacture, marketing or sale of the Product by Seller prior to the Closing.

(ii)          Buyer shall defend, indemnify, and hold harmless Seller and its Affiliates, and their officers, directors, employees, attorneys, agents, successors and assigns (collectively, the “Seller Indemnified Parties”), against any and all Losses imposed on or incurred by any of the Seller Indemnified Parties by reason of the manufacture, marketing or sale of the Product by Buyer after the Closing.

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(b)           Each Party’s obligations under this Section 5.3 are conditioned on (i) the Party to be indemnified (the “Indemnified Party”) notifying the other Party (the “Indemnifying Party”) promptly in writing of such Losses, (ii) the Indemnified Partygiving the Indemnifying Partysole control of the defense of any related Proceeding and any related settlement negotiations; provided, however, that the Indemnified Partywill have the right to approve the terms of any settlement or compromise that restricts its rights granted under this Agreement, subjects it to any ongoing obligations or subjects it to any Losses for which it would not be indemnified hereunder, and (iii) the Indemnified Partycooperating with the Indemnifying Partyin such defense (including, without limitation, by making available to the Indemnifying Partyall documents and information in the Indemnified Party’spossession or control that are relevant to the Proceeding, and by making the Indemnified Party’s personnel available to testify or consult with the Indemnifying Partyor its attorneys in connection with such defense).

(c)           The Losses for which an Indemnified Party is entitled to indemnification pursuant to this Section 5.3 will be reduced by:

(i)           all insurance or other third party indemnification proceeds actually received by the Indemnified Party.  An Indemnified Party shall use commercially reasonable best efforts to claim and recover any Losses suffered by the Indemnified Party under any such insurance policies or other third party indemnities, and shall remit to the Indemnifying Party any such insurance or other third party proceeds which are paid to the Indemnified Party with respect to Losses for which the Indemnified Party have been previously compensated pursuant to this Section 5.3.

(ii)          the net amount of the Tax benefits actually realized by the Indemnified Party by reason of such Loss.  An Indemnified Party shall use commercially reasonable best efforts to claim and realize all such Tax benefits.

(d)           No Indemnified Party will be entitled to indemnification pursuant to this Section 5.3 for diminution in value, multiples of earnings or cash flows, punitive damages, or for lost profits, consequential, exemplary, incidental, indirect or special damages, except to the extent awarded to a third party.

(e)           An Indemnified Party shall use commercially reasonable best efforts to mitigate any and all Losses that would otherwise be indemnifiable hereunder.

(f)           All indemnification payments made pursuant to this Section 5.3 will be treated as an adjustment to the Purchase Price unless otherwise required by law.

5.4           Noncompetition.  Neither Seller nor its Affiliates will sell any product manufactured by Seller and used by interventional cardiologists that directly competes with the Product for a period of three (3) years following the Closing Date; provided, however, that this restriction shall not apply to products and/or technologies acquired by Seller or any of its Affiliates after the date of this Agreement.

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5.5           Nonsolicitation.  Neither Party nor any of its Affiliates will solicit to hire any employee of the other Party who is involved in this transaction or the production transfer contemplated in Section 5.2 for a period of three (3) years following the Closing Date, provided, however, that the foregoing shall not prohibit a general employment solicitation to the public, general advertising, or similar methods of solicitation not specifically directed at employees of the other Party.

5.6           Assignment of Biocoat Agreement.The parties will use their reasonable efforts (understanding that Seller will not be obligated to incur any further cost or expense) following the Closing to contact Biocoat, Incorporated (“Biocoat”) and assign that certain License Agreement, dated as of March 17, 2004, by and between Seller (formerly known as Velocimed, Incorporated) and Biocoat, as amended, from Seller to Buyer.

ARTICLE VI

MISCELLANEOUS

6.1           Confidentiality.  Except as set forth in Section 5.1 above, Buyer and Seller will maintain in confidence, and will cause their officers, employees, agents and advisors to maintain in confidence, the existence and terms of the Parties’ discussions and this Agreement and any written, oral or other information provided by either Party to the other in connection with this Agreement or the transactions contemplated hereby unless (a) such information is already known to such Party or to others not bound by a duty of confidentiality, or such information becomes publicly available, through no fault of such Party, or (b) the furnishing or use of such information is required in connection with any Proceedings.

6.2           No Third-Party Beneficiaries.  This Agreement will not confer any rights or remedies on any Person other than the Parties and their successors and permitted assigns.

6.3           Entire Agreement.  This Agreement (including the documents referred to herein) constitutes the entire agreement among the Parties and supersedes any prior understandings, agreements or representations by or between the Parties, written or oral, to the extent they related in any way to the subject matter hereof.

6.4           Succession and Assignment.  This Agreement will be binding upon and inure to the benefit of the Parties hereto and their respective successors and permitted assigns but nothing in this Agreement is to be construed as an authorization or right of any Party to assign its rights or delegate its duties under this Agreement without the prior written consent of the other Party.

6.5           Counterparts.  This Agreement may be executed in one or two counterparts, including by facsimile, each of which will be deemed an original but both of which together will constitute one and the same instrument.

6.6           Headings.  The section headings contained in this Agreement are inserted for convenience only and will not affect in any way the meaning or interpretation of this Agreement.

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6.7           Notices.  All notices, demands and other communications to be given or delivered under or by reason of the provisions of this Agreement will be in writing and will be deemed to have been given when personally delivered or three business days after being mailed by first class U.S. mail, return receipt requested, or when receipt is acknowledged, if sent by facsimile, telecopy or other electronic transmission device.  Notices, demands and communications to Seller and Buyer will, unless another address is specified in writing, be sent to the address indicated below:

If to Seller:

St. Jude Medical, Cardiology Division, Inc.

177 East County Road B

St. Paul, Minnesota 55117

Attention:        Aron Allen

Facsimile:         (651) 756-4420

E-mail:               aallen@sjm.com

With a copy to (which will not constitute notice):

St. Jude Medical, Inc.

One St. Jude Medical Drive

St. Paul, Minnesota 55117

Attention:        General Counsel

Facsimile:         (651) 756-2156

and

Briggs and Morgan, P.A.

2200 IDS Center

80 South Eighth Street

Minneapolis, MN  55402

Attention:        Steve Kozachok

Facsimile:         (612) 977-8650

E-mail:               skozachok@briggs.com

If to Buyer:

Vascular Solutions, Inc.

6464 Sycamore Court

Minneapolis, Minnesota 55369

Attention:        Chief Executive Officer

Facsimile:         (763) 656-4250

With a copy to (which will not constitute notice):

Vascular Solutions, Inc.

6464 Sycamore Court

Maple Grove, Minnesota 55369

Attention:        General Counsel

Facsimile:         (763) 656-4250

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6.8           Governing Law; Venue.  This Agreement, including the documents, instruments and agreements to be executed and/or delivered by the parties pursuant hereto, will be construed, governed by and enforced in accordance with the internal laws of the State of Minnesota, without giving effect to the principles of comity or conflicts of laws thereof.  The state and federal courts of Hennepin County, Minnesota shall serve as the exclusive forum for any dispute, claim or action arising out of or in connection with this Agreement.  Each Party hereby irrevocably waives any objection which it may have at any time to the venue of any suit, action or proceeding brought in such courts and, specifically, any claim that such suit, action or proceeding is brought in an inconvenient forum and any claim that such courts do not have jurisdiction over such Party.  Notwithstanding the foregoing, either Party may seek equitable relief to enforce the confidentiality provisions or other restrictive covenants in any court of competent jurisdiction.

6.9           Amendments and Waivers.  No amendment of any provision of this Agreement will be valid unless the same will be in writing and signed by Seller and Buyer.  No waiver by either Party of any default, misrepresentation or breach of warranty or covenant hereunder, whether intentional or not, will be deemed to extend to any prior or subsequent default, misrepresentation, or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent such occurrence.

6.10         Severability.  Any term or provision of this Agreement that is invalid or unenforceable in any situation in any jurisdiction will not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction.

6.11         Expenses.  Each of the Parties will be responsible for and bear all of its own costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby.

6.12         Construction.  The Parties have participated jointly in the negotiation and drafting of this Agreement and the Seller Related Documents and the Buyer Related Documents (collectively, the “Related Documents”).  In the event an ambiguity or question of intent or interpretation arises, this Agreement and the Related Documents will be construed as if drafted jointly by the Parties and no presumption or burden of proof will arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement or the Related Documents.  Any reference to any federal, state, local or foreign statute or law will be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise.  The word “including” will mean including, without limitation.

6.13         Incorporation of Schedule.  The Schedule identified in this Agreement is incorporated herein by reference and made a part hereof.

6.14         Specific Performance.  Each of the Parties acknowledges and agrees that the other Parties would be damaged irreparably in the event any of the provisions of this Agreement are not performed in accordance with their specific terms or otherwise are breached.

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Accordingly, each of the Parties acknowledges and agrees that the other Parties will be entitled to an Injunction or Injunctions to prevent breaches of the provisions of this Agreement and to enforce specifically this Agreement and the terms and provisions hereof in any action instituted in any court of the United States or any state thereof having jurisdiction over the Parties and the matter, in addition to any other remedy to which they may be entitled, at law or in equity, without the necessity of posting bond or proving the inadequacy of money damages.

[SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first written above.

SELLER:	BUYER:
St. Jude Medical, Cardiology Division, Inc., a Delaware corporation	Vascular Solutions, Inc., a Minnesota corporation
By:	By:
Name:	Name:
Title:	Title:

[SIGNATURE PAGE TO ASSET PURCHASE AGREEMENT]

SCHEDULE 1

Acquired Assets

(1) Product models and lengths

Model	Length
Venture RX	145 cm
Venture OTW	140 cm
Venture CPS	70 cm

(2) Inventory

All raw material, work-in-process and finished goods inventory of the Product; provided, that, prior to a sale of such inventory, Buyer will add a label alongside the SJM label stating “Now manufactured by Vascular Solutions, Inc. …” and provide additional contact and reorder information of Vascular Solutions on such label.

(3) Marketing materials

All brochures, training materials, photographs, drawings, computer files, advertisements and other materials related solely to marketing the Product, in Seller’s possession, and used by Seller within the last three (3) years.  Notwithstanding the foregoing, Buyer shall not be entitled to distribute any marketing materials that include any trade names or logos not included in the Acquired Assets.

(4) Customer lists

A list of all customers that have purchased the Product from the Seller from January 1, 2010 through June 30, 2012, consisting of the name, address, unit volume and purchase price history for each customer.

(5) Manufacturing assets

Those assets in possession of Seller that are dedicated solely to the manufacture of the Product, listed in the exhibit attached hereto.

(6) Intellectual property

The following patents and trademarks owned by Seller related to the Product (collectively, the “Acquired IP”):

Issued Patents

U.S.

7,763,012 – issued 7/27/10

Foreign

JP 4546250 – granted 7/9/10

JP 4680907 – granted 2/10/11

Pending Patent Applications

U.S.

12/207,391 – pending/published (US-2009-0005755)

Foreign

EP 03783618.6 – pending/published (1562666)

PCT/US03/036783 – nationalized

EP 04781984.2 – withdrawn

EP 07023966.0 – withdrawn

PCT/US04/027405 – nationalized

Venture Trademarks

U.S.

3,700,341

Foreign

China – 4252225

European Community – 3999828

Japan – 4966215

Korea – 714677

Norway - 228276

For purposes of clarity, Seller is not selling to Buyer hereunder any of Seller’s right, title or interest in the mark “CPS”, which the parties agree Seller will continue to own and use in conjunction with its existing business.

(7) Regulatory approvals

The following regulatory approvals related to the Product:

510(k)s: K061843 (RX), K040922 (CPS) and K042910 (OTW)

CE Mark #571847 (covers each of the three Product models)

Exhibit of Manufacturing Assets

EX-10.2

EXHIBIT 10.2

VASCULAR SOLUTIONS, INC.

STOCK OPTION AND STOCK AWARD PLAN

(Amended and Restated July 27, 2012)

1.      Purpose of Plan.  This Plan shall be known as the “Vascular Solutions, Inc. Stock Option and Stock Award Plan” and is hereinafter referred to as the “Plan”.  The Plan shall provide for the issuance of shares of common stock, par value $.01 (the “Common Stock”), of Vascular Solutions, Inc. (the “Corporation”).  The purpose of the Plan is to aid in maintaining and developing a mutually beneficial relationship with employees and non-employees of the Corporation who perform valuable services for or on behalf of the Corporation, to offer such persons additional incentives to put forth maximum efforts for the success of the business, and to afford them an opportunity to acquire a proprietary interest in the Corporation.  It is intended that this purpose be effected through the granting of stock options, the awarding of Common Stock subject to restrictions (the “Restricted Shares”) and the awarding of stock appreciation rights to such persons as hereinafter provided.  Options granted under the Plan may be either incentive stock options (“Incentive Stock Options”) within the meaning of the Internal Revenue Code of 1986, as amended (the “Code”), or options which do not qualify as Incentive Stock Options.

2.      Stock Subject to the Plan.  Subject to the provisions of Section 10 hereof, the stock to be subject to options and which may be awarded as Restricted Shares under the Plan shall be shares of the Corporation’s authorized Common Stock.  Such shares may be either authorized but unissued shares or issued shares which have been reacquired by the Corporation.  Subject to the adjustment as provided in Section 10 hereof, the maximum number of shares on which options may be exercised or which may be awarded as Restricted Shares under this Plan from its inception shall be 5,000,000, plus an automatic annual increase on the first day of each of the Corporation’s fiscal years beginning in 2013 and ending in 2016 equal to the lesser of (i) 500,000 shares, (ii) five percent (5%) of the common-equivalent shares outstanding on the last day of the immediately preceding fiscal year, or (iii) such lesser number of shares as determined by the Board of Directors or the Stock Option Committee.  Notwithstanding the foregoing, the number of shares available for granting Incentive Stock Options under the Plan after January 25, 2006 shall not exceed 3,900,000 shares, subject to adjustment as provided in the Plan and Section 422 or 424 of the Code or any successor provisions.  Any shares subject to an option under the Plan which, for any reason, expires or is terminated unexercised, shall be available for options or awards thereafter granted during the term of the Plan.  If any award of Restricted Shares is forfeited in accordance with the terms and conditions of such award, the Restricted Shares so forfeited shall also become available for further grants or awards under the Plan.

3.      Administration of Plan.

(a)    The Plan shall be administered by the Board of Directors of the Corporation.  The Board of Directors may authorize, at any time, the formation of a Stock Option Committee (the “Committee”), consisting of two or more members who shall be appointed from time to time by the Board of Directors.  The Stock Option Committee will, if formed, have authority to exercise the powers conferred on the Board of Directors under the Plan, other than the power under Section 11 herein to terminate or amend the Plan or to accelerate the exercisability of any option or lift the restrictions on any Restricted Shares granted or awarded under the Plan.

(b)    The Board of Directors shall have plenary authority in its discretion, subject to the express provisions of this Plan, to:  (i) determine the purchase price of the Common Stock covered by each option and the terms of exercise of each such option, (ii) determine the persons to whom and the time or times at which options (a person receiving an option is hereinafter referred to as an “Optionee”) or awards of Restricted Shares (a person receiving an award of Restricted Shares is hereinafter referred to as a “Grantee”) shall be granted or made and the number of shares to be subject to each such option or award (iii) determine the period during which Restricted Shares shall remain subject to restrictions and the nature and type of restrictions that may be imposed on Restricted Shares (iv) interpret the Plan, (v) prescribe, amend and rescind rules and regulations relating to the Plan, (vi) determine the terms and provisions (and amendments thereof) of each option and Restricted Share agreement under this Plan (which agreements need not be identical), including the designation of those options intended to be Incentive Stock Options, (vii) the form of payment to be made upon the exercise of an SAR (as hereinafter defined) as provided in Section 16, which payment may be either cash, common stock of the Corporation or a combination thereof, and (viii) make all other determinations necessary or advisable for the administration of the Plan.

(c)    The Committee shall select one of its members as its Chairman and shall hold its meetings at such times and places as it may determine.  A majority of its members shall constitute a quorum.  All determinations of the Committee shall be made by not less than a majority of its members.  Any decision or determination reduced to writing and signed by a majority of the members of the Committee shall be fully effective as if it had been made by a majority vote at a meeting duly called and held.

(d)    The granting of an option or an award pursuant to the Plan shall be effective only if a written agreement shall have been duly executed and delivered by and on behalf of the Corporation and the Optionee or Grantee to whom such right is granted.

(e)    The Board of Directors or the Committee shall, to the extent necessary or desirable, establish any special rules for Optionees or Grantees located in any particular country other than the United States.  Such rules shall be set forth in Appendices to the Plan, which shall be deemed incorporated into and form part of the Plan.

4.      Eligibility.

(a)    Incentive Stock Options (as determined pursuant to Section 14 herein) may be granted only to employees of the Corporation and its subsidiary corporations.  Options which do not qualify as Incentive Stock Options and awards of Restricted Shares may be granted or made to both employees and to individuals or other entities (including but not limited to consultants) who perform services for the Corporation but who are not employed by the Corporation, when granting an option or award to such person would be of benefit to the Corporation.

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(b)    Notwithstanding any other provision in the Plan, if at the time an option is otherwise to be granted pursuant to the Plan the Optionee owns directly or indirectly (within the meaning of Section 425(d) of the Code (as hereinafter defined) Common Stock of the Corporation possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Corporation or its parent or subsidiary corporations, if any, (within the meaning of Section 422(b)(6) of the Code) then any Incentive Stock Option to be granted to such Optionee pursuant to the Plan shall satisfy the requirements of Section 422A(c)(6) of the Code, and the option price shall not be less than 110% of the fair market value of the Common Stock of the Corporation, determined as described in Section 5, and such option by its terms shall not be exercisable after the expiration of five (5) years from the date such option is granted.

5.      Price.  The option price for all options granted under the Plan shall be determined by the Board of Directors but shall not be less than 100% of the fair market value of the Common Stock at the date of granting of such option, as determined in good faith by such Board.  The option price shall be payable at the time written notice of exercise is given to the Corporation.  An Optionee shall be entitled to pay the exercise price in cash, by tendering to the Corporation shares of Common Stock, previously owned by the Optionee, having a fair market value on the date of exercise equal to the option price, or, with the consent of the Board of Directors, by the issuance of a promissory note to the Corporation.  The fair market value of such shares shall be (i) the closing price of the Common Stock as reported for composite transactions if the Common Stock is then traded on a national securities exchange, (ii) the last sales price if the Common Stock is then traded on the NASDAQ National Market System, or (iii) the average of the closing representative bid and asked prices as reported on NASDAQ if the Common Stock is then traded on NASDAQ.  If the Common Stock is not so traded, the Board of Directors shall determine in good faith the fair market value.

6.      Term.  Each option and each Restricted Share award and all rights and obligations thereunder shall (subject to the provisions of Section 8) expire on the date determined by the Board of Directors and specified in the option agreement or agreement relating to the award of the Restricted Shares.  The Board of Directors shall be under no duty to provide terms of like duration for options or awards granted under the Plan; provided, however, that the term of any Incentive Stock Option shall not extend more than ten (10) years from the date of granting of the option.

7.      Exercise of Options and Awards.

(a)    The Board of Directors shall have full and complete authority (subject to the provisions of Section 8) to determine, at the time of granting or making, whether an option or Restricted Share award will be exercisable in full at any time or from time to time during the term of the option or award, or to provide for the exercise or receipt thereof in such installments and at such times during the term of the option or award as Board may determine.

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(b)    Notwithstanding any provision of the Plan or the terms of any option granted or award of Restricted Shares made under the Plan, the exercise of any option or the transferring of any shares of Common Stock on the books and records of the Corporation pursuant to a Restricted Share award may be made contingent upon receipt from the Optionee or Grantee (or other person rightfully exercising the option or receiving certificates for the shares granted pursuant to a Restricted Share award) of a representation that, at the time of such exercise or receipt, it is their then intention to acquire the shares so received thereunder for investment and not with a view to distribution thereof.  Certificates for shares issued or transferred pursuant to the exercise of any option or the granting of any Restricted Share award may be restricted as to further transfers upon advice of legal counsel that such restriction is appropriate to comply with applicable securities laws.

(c)    Notwithstanding any provision of the Plan or the terms of any option granted or award of Restricted Shares made under the Plan, the Company shall not be required to issue any shares of Common Stock, deliver any certificates for shares of Common Stock or transfer on its books and records any shares of Common Stock if such issuance, delivery or transfer would, in the judgment of the Board of Directors, constitute a violation of any state or Federal law, or of the rules and regulations of any governmental regulatory body or any securities exchange.

(d)    An Optionee electing to exercise an option shall give written notice to the Corporation of such election and of the number of shares subject to such exercise.  The full purchase price of such shares shall be tendered, in accordance with the provisions of Section 5, with such notice of exercise.  Until such person has been issued a certificate or certificates for the shares subject to such exercise, he shall possess no rights as a stockholder with respect to such shares.

(e)    Nothing in the Plan or in any agreement thereunder shall confer on any employee any right to continue in the employ of the Corporation or any of its subsidiaries or affect, in any way, the right of the Corporation or any of its subsidiaries to terminate his or her employment at any time.

8.      Effect of Termination of Employment or Death.  Unless otherwise stated in the option agreement, the following provisions shall govern the treatment of an option upon termination of employment:

(a)    In the event that the Optionee shall cease to be employed by the Corporation or its subsidiaries, if any, for any reason other than such holder’s gross and willful misconduct or death or disability, such Optionee shall have the right to exercise the option at any time within three months after such termination of employment to the extent of the full number of shares such holder was entitled to purchase under the option on the date of termination, subject to the condition that no option shall be exercisable after the expiration of the term of the option.

(b)    In the event that an Optionee shall cease to be employed by the Corporation or its subsidiaries, if any, by reason of such holder’s gross and willful misconduct during the course of employment, including but not limited to wrongful appropriation of funds of the Corporation or the commission of a gross misdemeanor or felony, the option shall be terminated as of the date of the misconduct.

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(c)    If the Optionee shall die while in the employ of the Corporation or any subsidiary, if any, or within three (3) months after termination of employment for any reason other than gross and willful misconduct, or become disabled (within the meaning of Section 105(d)(4) of the Code) while in the employ of the Corporation or a subsidiary, if any, and such Optionee shall not have fully exercised the option, such option may be exercised at any time within twelve months after such holder’s death or such disability by the personal representatives, administrators, or, if applicable, guardian, of the Optionee or by any person or persons to whom the option is transferred by will or the applicable laws of descent and distribution to the extent of the full number of shares such holder was entitled to purchase under the option on the date of death, disability or termination of employment, if earlier, and subject to the condition that no option shall be exercisable after the expiration of the term of the option.

9.      Nontransferability of Options.  No option granted under the Plan shall be transferable by an Optionee, otherwise than by will or the laws of descent or distribution or pursuant to a qualified domestic relations order as defined by the Code.

10.    Dilution or Other Adjustments.  If the number of outstanding shares of the Common Stock of the Corporation shall, at any time, be increased or decreased as a result of a subdivision or consolidation of shares, stock dividend, stock split, spin-off or other distribution of assets to shareholders, recapitalization, merger, consolidation or other corporate reorganization in which the Corporation is the surviving corporation, the number and kind of shares subject to the Plan and to any option, SAR or Restricted Share award previously granted or made, as well as the option price or amount payable upon the exercise of any previously granted option or SAR, shall be appropriately adjusted in order to prevent the dilution or enlargement of rights of holders of outstanding options, SARs or Restricted Share awards.  Any fractional shares resulting from any such adjustment shall be eliminated.

11.    Amendment or Discontinuance of Plan.  The Board of Directors may amend or discontinue the Plan at any time; however, no amendment of the Plan shall, without shareholder approval, amend the Plan in a way which would violate the rules or regulations of the National Association of Securities Dealers, Inc. or any other securities exchange that are applicable to the Corporation.  Except as provided in Section 10, the Board of Directors shall not alter or impair any option, SAR or Restricted Share award thereto granted or made under the Plan without the consent of the holder of the option, SAR or award; provided, however, that the Board of Directors may accelerate the exercisability of options (and any related SARs) or lift any restrictions imposed on Restricted Shares at any time during the term of such options or awards without the consent of the holder thereof.

12.    Time of Granting.  Nothing contained in the Plan or in any resolution adopted or to be adopted by the Board of Directors or by the shareholders of the Corporation, and no action taken by the Board of Directors (other than the execution and delivery of an option or the making of an Award Agreement (as hereinafter defined)), shall constitute the granting of an option or the making of a Restricted Share award hereunder.  The granting of an option or the making of a Restricted Share award pursuant to the Plan shall take place only when a written option or Award Agreement shall have been duly executed and delivered by or on behalf of the Corporation to the Optionee or Grantee to whom such option or award is granted or made.

13.    Termination of Plan.  Unless the Plan shall have been discontinued as provided in Section 11 hereof, the Plan shall terminate on April 18, 2016.  No option or Restricted Share award may be granted or made after such termination, but termination of the Plan shall not, without the consent of the Optionee or Grantee, alter or impair any rights or obligations under any option, SAR or Restricted Share award theretofore granted or made.

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14.    Determination of Incentive Stock Option.  The Board shall determine, upon the granting of each option, whether such option shall be an Incentive Stock Option or an option that does not qualify as an Incentive Stock Option.

15.    Restricted Share Awards.  Each award of Restricted Shares under the Plan shall be evidenced by an instrument (an “Award Agreement”).  Each Award Agreement shall be subject to the terms and conditions of the Plan but may contain additional terms and conditions (which terms and conditions may vary from Grantee to Grantee) that are not inconsistent with the Plan as the Board of Directors may deem necessary and desirable.  Each Award Agreement shall comply with the following terms and conditions:

(a)    The Board of Directors shall determine the number of Restricted Shares to be awarded to a Grantee.

(b)    At the time of the award of Restricted Shares, a certificate representing the appropriate number of shares of Common Stock awarded to a Grantee shall be registered in the name of such Grantee but shall be held by the Corporation or any custodian appointed by the Corporation for the account of the Grantee subject to the terms and conditions of the Plan.  The Grantee shall have all rights of a stockholder as to such shares of Common Stock, including the right to receive dividends and the right to vote such Common Stock, subject to the following restrictions:  (i) the Grantee shall not be entitled to delivery of the stock certificate until the expiration of the Restricted Period (as hereinafter defined); (ii) the Restricted Shares may not be sold, transferred, assigned, pledged, or otherwise encumbered or disposed of during the Restricted Period; and (iii) all or a specified portion of the Restricted Shares shall be forfeited and all rights of the Grantee to any forfeited Restricted Shares shall terminate without further obligation on the part of the Corporation unless the Grantee remains in the continuous employment of the Corporation for the period in relation to which all or such portion of the Restricted Shares were granted ( the “Restricted Period”).  The Board of Directors shall have the power to determine which portion of an award of Restricted Shares shall be forfeited in the event of a Grantee’s failure to remain in the continuous employment of the Corporation during the Restricted Period relating to such award.  In addition, the Board of Directors may specify additional restrictions or events that must occur during the Restricted Period or the Restricted Shares, or a portion thereof, shall be forfeited as stated in the award thereof.  Any shares of Common Stock received as a result of a stock distribution to holders of Restricted Shares shall be subject to the same restrictions as such Restricted Shares.

(c)    At the end of each applicable Restricted Period or at such earlier time as otherwise provided by the Board of Directors, all restrictions contained in an Award Agreement and in the Plan shall lapse as to such portion of the Restricted Shares granted in relation to such Restricted Period, and a stock certificate for the appropriate number of shares of Common Stock, free of restrictions, shall be delivered to the Grantee or the Grantee’s beneficiary or estate, as the case may be.

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(d)    There shall be no limitation on the number of shares of Common Stock which a Grantee may be awarded except that no Grantee may be awarded shares of Common Stock in excess of the number of shares remaining available for option grants and awards of Restricted Shares under the Plan.

16.    Alternative Stock Appreciation Rights.

(a)    Grant.  At the time of grant of an option under the Plan (or at any time thereafter as to options which are not Incentive Stock Options), the Board of Directors, in its discretion, may grant to the holder of such option an alternative Stock Appreciation Right (“SAR”) for all or any part of the number of shares covered by the holder’s option.  Any such SAR may be exercised as an alternative, but not in addition to, an option granted hereunder, and any exercise of an SAR shall reduce an option by the same number of shares as to which the SAR is exercised.  An SAR granted to an Optionee shall provide that such SAR, if exercised, must be exercised within the time period specified therein.  Such specified time period may be less than (but may not be greater than) the time period during which the corresponding option may be exercised.  An SAR may be exercised only when the corresponding option is eligible to be exercised.  The failure of the holder of an SAR to exercise such SAR within the time period specified shall not reduce such holder’s option rights.  If an SAR is granted for a number of shares less than the total number of shares covered by the corresponding option, the Board of Directors may later (as to options which are not Incentive Stock Options) grant to the Optionee an additional SAR covering additional shares; provided, however, that the aggregate amount of all SARs held by any Optionee shall at no time exceed the total number of shares covered by such Optionee’s unexercised options.

(b)    Exercise.  The holder of any option that by its terms is exercisable who also holds an SAR may, in lieu of exercising their option, elect to exercise their SAR, subject, however, to the limitation on time of exercise hereinafter set forth.  Such SAR shall be exercised by the delivery to the Corporation of a written notice which shall state that the Optionee elects to exercise their SAR as to the number of shares specified in the notice and which shall further state what portion, if any, of the SAR exercise amount (hereinafter defined) the holder thereof requests be paid in cash and what portion, if any, such holder requests be paid in Common Stock of the Corporation.  The Board of Directors shall promptly cause to be paid to such holder the SAR exercise amount either in cash, in Common Stock of the Corporation, or any combination of cash and stock as the Board of Directors may determine.  Such determination may be either in accordance with the request made by the holder of the SAR or in the sole and absolute discretion of the Board of Directors.  The SAR exercise amount is the excess of the fair market value of one share of the Corporation’s Common Stock on the date of exercise over the per share option price for the option in respect of which the SAR was granted multiplied by the number of shares as to which the SAR is exercised.  For the purposes hereof, the fair market value of the Corporation’s shares shall be determined as provided in Section 5 herein.  An SAR may be exercised only when the SAR exercise amount is positive.

(c)    Limitation on Date of Exercise.  A cash settlement of an SAR by an officer or director of the Corporation may only be accomplished in compliance with Rule 16b-3(e) of the Securities Exchange Act of 1934 as presently in effect or as subsequently modified by amendment.

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(d)    Other Provisions of Plan Applicable.  All provisions of this Plan applicable to options granted hereunder shall apply with equal effect to an SAR.  No SAR shall be transferable otherwise than by will or the laws of descent and distribution and an SAR may be exercised during the lifetime of the holder thereof, only by such holder.

17.    Tax Indemnification Payments.  The Board shall have the authority, at the time of the grant of an option or the making of a Restricted Share award under the Plan or at any time thereafter, to approve tax indemnification payments to designated Optionees and Grantees to be paid upon their exercise of stock options which do not qualify as incentive stock options or recognition of a taxable gain by reason of their receipt of an award of Restricted Shares, as the case may be.  The amount of any such payments shall not exceed the amount of tax generally payable by an Optionee or Grantee by reason of such exercise or recognition, and shall not, in any case, exceed sixty percent of the amount imputed as taxable income to a particular Optionee or Grantee by reason of either of the above-described events.  The Board of Directors shall have full authority, in its discretion, to determine the amount of any such payment, the terms and conditions affecting the exercise, vesting and payment of any payment, and whether any payment shall be payable in cash or other property.

18.    Income Tax Withholding.

(a)    In order to assist an Optionee or Grantee in paying federal and state income taxes required to be withheld upon the exercise of an option or receipt of a Restricted Share award granted or made hereunder, the Board of Directors, in its discretion and subject to such additional terms and conditions as it may adopt, may permit the Grantee or Optionee to elect to satisfy such income tax withholding obligation by delivering previously owned shares or by having the Corporation withhold a portion of the shares otherwise to be delivered upon exercise of such option or award with a fair market value, determined in accordance with the provisions of Section 5 hereof, in an amount up to the Optionee’s maximum marginal tax rate.  Any such election by an officer or director of the Corporation must comply with the provisions of Rule 16b-3 under the Securities Exchange Act of 1934 or any successor rule.

(b)    Optionees and Grantees are responsible for the payment of all income taxes, employment, social insurance, welfare and other taxes under applicable law relating to any amounts deemed under the laws of the country of their residency or of the organization of the subsidiary which employs them to constitute income arising out of the Plan, the purchase and sale of shares pursuant to the Plan and the distribution of shares or cash to the participant in accordance with the Plan.  Each participant, by participating in the Plan, authorizes the Company or the relevant subsidiary to make appropriate withholding deductions from each participant’s compensation, and to pay such amounts to the appropriate tax authorities in the relevant country or countries in order to satisfy any of the above tax liabilities of the participant under applicable law.

19.    Omitted.

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20.    Award Limitations Under the Plan.  No person eligible to receive an award under the Plan may be granted any award or awards under the Plan, the value of which awards is based solely on an increase in the value of the shares after the date of grant of such awards, for more than 500,000 shares (subject to adjustment as provided for in Section 10), in the aggregate in any calendar year.  The foregoing annual limitation specifically includes the grant of any awards representing “qualified performance-based compensation” within the meaning of Section 162(m) of the Code.

21.    Miscellaneous.  Nothing in this Plan shall confer on any Optionee or Grantee any express or implied right of continued employment by the Company or any subsidiary, whether for the duration of the Plan or otherwise.  Nothing in this Plan shall confer on any person any legal or equitable right against the Company or any of its affiliates, directly or indirectly, or give rise to any cause of action at law or in equity against the Company or any of its affiliates.  None of the options granted hereunder, the shares purchased hereunder or any other benefits conferred hereby shall form any part of the wages or salary of any employee for purposes of severance pay or termination indemnities, irrespective of the reason for termination of employment.  Under no circumstances shall any person ceasing to be an employee of the Company or any of its affiliates be entitled to any compensation for any loss or any right or benefit under this Plan which such employee might otherwise have enjoyed but for termination of employment, whether such compensation is claimed by way of damages for wrongful or unfair dismissal, breach of contract or otherwise.

22.    Acceptance of Terms.  By participating in the Plan, each Optionee and Grantee shall be deemed to have accepted all the conditions of the Plan and the terms and conditions of any rules and regulations adopted by the Board of Directors or the Committee and shall be fully bound thereby.

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EX-10.3

EXHIBIT 10.3

Vascular Solutions, Inc.

Restricted Share Award Program

for

Non-Employee Directors

WHEREAS, the Board of Directors believes that it is in the best interests of the Company and its shareholders to adopt a program providing for an annual award of restricted shares to the Company’s non-employee directors under the Company’s Stock Option and Stock Award Plan (the “Plan”).

NOW, THEREFORE, BE IT RESOLVED, that each year each non-employee director of the Company shall be granted a restricted share award (an “Award”) under the Plan at the time of and contingent upon his or her election or re-election, as the case may be, as a director of the Company at the Company’s annual meeting of shareholders (the “Annual Meeting”).

FURTHER RESOLVED, that the number of shares subject to each Award shall be determined by dividing $75,000 by the closing price for the Company’s common stock, $.01 par value (the “Common Stock”) on the date of the Annual Meeting, and rounding the result down to the nearest whole share.

FURTHER RESOLVED, that each Award shall vest fully on the first anniversary of the date of the grant, with accelerated vesting upon a change of control of the Company (as defined in the restricted share award agreement described below).

FURTHER RESOLVED, that, in connection with each such Award, the officers of the Company are hereby authorized and directed to execute a restricted share award agreement with the non-employee director substantially in the form attached to these minutes as Exhibit C which shall be the form for use in connection with restricted share awards made under this “Restricted Share Award Program for Non-Employee Directors.”

FURTHER RESOLVED, that annual grants of Awards to the non-employee directors under this Program shall continue without further action by the Board of Directors, subject only to the continued effectiveness of the Plan, the continued availability of adequate shares under the Plan and the power of the Board of Directors to amend or terminate the Program at any time.

EX-10.4

EXHIBIT 10.4

No. R______

VASCULAR SOLUTIONS, INC.

NON-EMPLOYEE DIRECTOR

RESTRICTED STOCK AWARD

This RESTRICTED STOCK AWARD is made this _____day of _______, 20__ by and between Vascular Solutions, Inc., a Minnesota corporation (the “Company”) and ______________, an individual resident of ___________ (“Director”).

1.              Award. The Company hereby grants to Director a restricted stock award of ___________ shares (the “Shares”) of Common Stock, par value $.01 per share, of the Company according to the terms and conditions set forth herein and in the Vascular Solutions Stock Option and Stock Award Plan (the “Plan”).  The Shares are Restricted Shares granted under Section 15 of the Plan.  A copy of the Plan will be furnished upon request of Director.  With respect to the Shares, Director shall be entitled at all times on and after the date of issuance of the Shares to exercise the rights of a stockholder of Common Stock of the Company, including the right to vote the Shares and the right to receive dividends on the Shares.

2.              Vesting. Except as otherwise provided in this Agreement, the Shares shall vest in accordance with the following schedule:

Anniversary of the Date of Grant	Percentage of Shares Vested
First	100%

Notwithstanding the vesting schedule above, all of the Shares shall vest upon a Change in Control (as defined below) of the Company. The Company shall notify the Director in writing of this vesting within 10 days of the Change in Control.

(a)           A "Change in Control" shall mean:

(i)           A change in control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), whether or not the Company is then subject to such reporting requirement;

(ii)          Any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) (other than any employee benefit plan of the Company or any entity which reports beneficial ownership of the Company's outstanding securities on Schedule 13G pursuant to Rule 13d-1 under the Exchange Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act) directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the combined voting power of the Company's then outstanding securities;

(iii)         The Continuing Directors (as defined below) cease to constitute a majority of the Company's Board of Directors; provided that such change is the direct or indirect result of a proxy fight and contested election or elections for positions on the Board of Directors;

(iv)        The shareholders of the Company approve: (1) any consolidation or merger of the Company in which the Company is not the continuing or surviving corporation or pursuant to which shares of Company stock would be converted into cash, securities, or other property, other than a merger of the Company in which shareholders immediately prior to the merger have the same proportionate ownership of stock of the surviving corporation immediately after the merger; (2) any sale, lease, exchange, or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of the Company; or (3) any plan of liquidation or dissolution of the Company; or

(v)         The majority of the Continuing Directors (as defined below) determine in their sole and absolute discretion that there has been a Change in Control of the Company.

(b)           "Continuing Director" shall mean any person who is a member of the Board of Directors of the Company, while such person is a member of the Board of Directors, who is not an Acquiring Person (as defined herein) or an Affiliate or Associate (as defined herein) of an Acquiring Person, or a representative of an Acquiring Person or any such Affiliate or Associate, and who:

(i)           was a member of the Board of Directors on the date of this Agreement as first written above; or

(ii)          subsequently becomes a member of the Board of Directors, if such person's initial nomination for election or initial election to the Board of Directors is recommended or approved by a majority of the Continuing Directors.  For purposes of this Section, "Acquiring Person" shall mean any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) who or which, together with all Affiliates and Associates of such person, is the "beneficial owner" (as defined in Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the combined voting power of the Company's then outstanding securities, but shall not include the Company, any subsidiary of the Company, or any employee benefit plan of the Company, or of any subsidiary of the Company, or any entity holding shares of common stock organized, appointed, or established for, or pursuant to the terms of, any such plan; and "Affiliate" and "Associate" shall have the respective meanings described to such terms in Rule 12b-2 promulgated under the Exchange Act.

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3.              Restrictions on Transfer.  Until the Shares vest pursuant to Section 2 hereof, none of the Shares may be pledged, alienated, attached or otherwise encumbered, and any purported pledge, alienation, attachment or encumbrance shall be void and unenforceable against the Company, and no attempt to transfer the Shares, whether voluntary or involuntary, by operation of law or otherwise, shall vest the purported transferee with any interest or right in or with respect to the Shares.

4.              Forfeiture.  If Director ceases to be a member of the Board of Directors of the Company for any reason, including termination, death or disability, prior to vesting of the Shares pursuant to Section 2 hereof, all of Director’s rights to all of the unvested Shares shall be immediately and irrevocably forfeited.  Upon forfeiture, Director will no longer have any rights relating to the unvested Shares, including the right to vote the Shares and the right to receive dividends declared on the Shares.

5.             Distributions and Adjustments.  If any Shares vest subsequent to any change in the number or character of the Common Stock of the Company (through any stock dividend or other distribution, recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of shares, or otherwise), Director shall receive upon such vesting the number and type of securities or other consideration which Director would have received if such Shares had vested prior to the event changing the number or character of the outstanding Common Stock.

(b)           Any additional shares of Common Stock of the Company, any other securities of the Company and any other property (except for regular cash dividends or other cash distributions) distributed with respect to the Shares prior to the date or dates the Shares vest shall be subject to the same restrictions, terms and conditions as the Shares to which they relate and shall be promptly deposited with the Secretary of the Company or a custodian designated by the Secretary.

6.             Miscellaneous Issuance of Shares.  The Company shall cause the Shares to be issued in the name of Director, either by book-entry registration, if available, or issuance of a stock certificate or certificates evidencing the Shares, which certificate or certificates shall be held by the Secretary of the Company or the stock transfer agent or brokerage service selected by the Secretary of the Company to provide such services for the Plan.  The Shares shall be restricted from transfer and shall be subject to an appropriate stop-transfer order.  If any certificate is used, the certificate may bear an appropriate legend referring to the restrictions applicable to the Shares.  Director hereby agrees to the retention by the Company of the Shares and, if a stock certificate is used, agrees to execute and deliver to the Company a blank stock power with respect to the Shares as a condition to the receipt of this award of Shares.  After any Shares vest pursuant to Section 2 hereof, and following payment of the applicable withholding taxes pursuant to Section 6(b) of this Agreement, the Company shall promptly cause to be issued a certificate or certificates, registered in the name of Director or in the name of Director’s legal representatives, beneficiaries or heirs, as the case may be, evidencing such vested whole Shares (less any shares withheld to pay withholding taxes) and shall cause such certificate or certificates to be delivered to Director or Director’s legal representatives, beneficiaries or heirs, as the case may be, free of the legend or the stop-transfer order referenced above.  The value of any fractional Shares shall be paid in cash at the time certificates evidencing the Shares are delivered to Director.

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(b)           Income Tax Matters.

(i)           In order to comply with all applicable federal or state income tax laws or regulations, the Company may take such action as it deems appropriate to ensure that all applicable federal or state payroll, withholding, income or other taxes, which are the sole and absolute responsibility of Director, are withheld or collected from Director.

(ii)          In accordance with the terms of the Plan, and such rules as may be adopted by the Board or any Committee of the Board under the Plan, Director may elect to satisfy Director’s federal and state income tax withholding obligations arising from the receipt of, or the lapse of restrictions relating to, the Shares, by (i) delivering cash, check (bank check, certified check or personal check) or money order payable to the Company, (ii) having the Company withhold a portion of the Shares otherwise to be delivered having a fair market value (as determined under Section 5 of the Plan) equal to the amount of such taxes, or (iii) delivering to the Company shares of Common Stock already owned by Director having a fair market value (as determined under Section 5 of the Plan) equal to the amount of such taxes; provided that the alternatives in clauses (ii) and (iii) above shall be subject to the discretion of the Board or any Committee of the Board, as the case may be.  The Company will not deliver any fractional Shares but will pay, in lieu thereof, the fair market value (as determined under Section 5 of the Plan) of such fractional Shares.  Director’s election must be made on or before the date that the amount of tax to be withheld is determined.

(c)           Plan Provisions Control.  In the event that any provision of the Agreement conflicts with or is inconsistent in any respect with the terms of the Plan, the terms of the Plan shall control.

(d)           No Right to Service as a Director.  The issuance of the Shares shall not be construed as giving Director the right to continue as a director, of the Company or any subsidiary, nor will it affect in any way the right of the Company or its subsidiaries to terminate such position at any time, with or without cause.  Nothing in the Agreement shall confer on any person any legal or equitable right against the Company or any subsidiary, directly or indirectly, or give rise to any cause of action at law or in equity against the Company or any subsidiary.  By participating in the Plan, Director shall be deemed to have accepted all the conditions of the Plan and the Agreement and the terms and conditions of any rules and regulations adopted by the Board or any Committee of the Board, as the case may be, and shall be fully bound thereby.

(e)           Governing Law.  The validity, construction and effect of the Plan and the Agreement, and any rules and regulations relating to the Plan and the Agreement, shall be determined in accordance with the internal laws, and not the law of conflicts, of the State of Minnesota.

(f)           Securities Matters.  The Company shall not be required to deliver Shares until the requirements of any federal or state securities or other laws, rules or regulations (including the rules of any securities exchange) as may be determined by the Company to be applicable are satisfied.

4

(g)           Severability.  If any provision of the Agreement is or becomes or is deemed to be invalid, illegal or unenforceable in any jurisdiction or would disqualify the Agreement under any law deemed applicable by the Board or any Committee of the Board, as the case may be, such provision shall be construed or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the determination of the Board or such Committee, materially altering the purpose or intent of the Plan or the Agreement, such provision shall be stricken as to such jurisdiction or the Agreement, and the remainder of the Agreement shall remain in full force and effect.

(h)           No Trust or Fund Created.  Neither the Plan nor the Agreement shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company or its subsidiaries and Director or any other person.

(i)           Headings.  Headings are given to the Sections and subsections of the Agreement solely as a convenience to facilitate reference.  Such headings shall not be deemed in any way material or relevant to the construction or interpretation of the Agreement or any provision thereof.

VASCULAR SOLUTIONS, INC.

By:

Name: Howard Root

Title:  Chief Executive Officer

5

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Lines of Credit (Details) (Lines of Credit [Member], USD $)	9 Months Ended
	Sep. 30, 2012
Lines of Credit [Member]
Short-term Debt [Line Items]
Credit agreement period	1 year
Maximum credit limit	$ 10,000,000
Debt instrument, description of variable rate basis	one-month LIBOR rate plus 1.60%
Debt instrument, basis spread on variable rate (in hundredths)	1.60%
Quarterly loan repayment (in hundredths)	0.125%
Line of credit facility, number of covenants	1
Numerator cash flow leverage ratio, maximum	2.5
Denominator cash flow leverage ratio, maximum	1
Multiple of annual lease expense for covenant calculation	6
Rolling period for computation of covenant	12 months
Line of credit facility, amount outstanding	0
Maximum borrowing capacity	$ 10,000,000

XML

Net Earnings per Share (Details)	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Net Earnings per Share [Abstract]
Weighted average number of shares outstanding - basic (in shares)	15,885,000	16,643,000	15,960,000	16,654,000
Weighted average number of shares outstanding - diluted (in shares)	16,389,000	17,239,000	16,341,000	17,223,000

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Revenue Recognition

9 Months Ended

Sep. 30, 2012

Revenue Recognition [Abstract]

Revenue Recognition

 (3)           Revenue Recognition

In the United States the Company sells its products and services directly to hospitals and clinics.  Revenue is recognized in accordance with generally accepted accounting principles as outlined in ASC 605-10-S99, which requires that four basic criteria be met before revenue can be recognized: (i) persuasive evidence of an arrangement exists; (ii) the price is fixed or determinable; (iii) collectability is reasonably assured; and (iv) product delivery has occurred or services have been rendered.  The Company recognizes revenue as products are shipped based on FOB shipping point terms when title passes to customers.  The Company negotiates credit terms on a customer-by-customer basis and products are shipped at an agreed-upon price.  All product returns must be pre-approved and, if approved, customers are subject to a 20% restocking charge.

In all international markets, the Company sells its products to international distributors which subsequently resell the products to hospitals and clinics.  The Company has agreements with each of its distributors which provide that title and risk of loss pass to the distributor upon shipment of the products to the distributor.  The Company warrants that its products are free from manufacturing defects at the time of shipment to the distributor.  Revenue is recognized upon shipment of products to distributors following the receipt and acceptance of a distributor's purchase order.  Allowances are provided for estimated returns and warranty costs at the time of shipment.

The Company also generates revenues from license agreements and recognizes the revenue when earned.  In accordance with ASC 605, for revenues which contain multiple deliverables, the Company separates the deliverables into separate accounting units if they meet the following criteria: (i) the delivered items have a stand-alone value to the customer; (ii) the fair value of any undelivered items can be reliably determined; and (iii) if the arrangement includes a general right of return, delivery of the undelivered items is probable and substantially controlled by the seller.  Deliverables that do not meet these criteria are combined with one or more other deliverables into one accounting unit.  Revenue from each accounting unit is recognized based on the applicable accounting literature, primarily ASC 605-10-S99.

Starting in January 2012, the Company began to generate revenue from selling a reprocessing service for ClosureFast® radiofrequency catheters.  In accordance with ASC 605-45, the Company recognizes this revenue gross, with the amount paid to the supplier of the reprocessing service reflected as cost of sales.

In accordance with ASC 605-45-45, the Company includes shipping and handling revenues in net revenue, and shipping and handling costs in cost of sales.

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Credit Risk and Allowance for Doubtful Accounts (Details) (USD $)	9 Months Ended
	Sep. 30, 2012	Dec. 31, 2011
Valuation and Qualifying Accounts Disclosure [Line Items]
Reserves for accounts receivable, net	$ 155,000	$ 150,000
Restocking charge (in hundredths)	20.00%
Allowance for Doubtful Accounts [Member]
Valuation and Qualifying Accounts Disclosure [Line Items]
Reserves for accounts receivable, net	120,000	120,000
Allowance for Sales Returns [Member]
Valuation and Qualifying Accounts Disclosure [Line Items]
Reserves for accounts receivable, net	$ 35,000	$ 30,000

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Goodwill and Other Intangible Assets (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Goodwill [Abstract]
Beginning balance			$ 8,117,000
Purchased licenses & acquisitions			2,006,000
Foreign currency translation adjustments			(28,000)
Ending balance	10,095,000		10,095,000
Acquired Intangibles [Abstract]
Beginning balance			7,948,000
Amortization	(359,000)	(212,000)	(1,032,000)	(621,000)
Purchased licenses & acquisitions			5,530,000
Foreign currency translation adjustments			(20,000)
Ending balance	$ 12,426,000		$ 12,426,000

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Concentrations of Credit and Other Risks (Details)	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Revenues from External Customers and Long-Lived Assets [Line Items]
Concentration of share of accounts receivable, maximum (in hundredths)	10.00%	10.00%
Concentration of revenue share, maximum (in hundredths)	10.00%	10.00%
United States [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Concentration risk, percentage (in hundredths)	84.00%	84.00%
International Markets [Member]
Revenues from External Customers and Long-Lived Assets [Line Items]
Concentration risk, percentage (in hundredths)	16.00%	16.00%

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Dependence on Key Suppliers (Details)	9 Months Ended
	Sep. 30, 2012
Kings Pharmaceuticals [Abstract]
Initial agreement period	10 years
Contract extension period	1 year
Period of written notice to supplier	5 years

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Net Earnings per Share

9 Months Ended

Sep. 30, 2012

Net Earnings per Share [Abstract]

Net Earnings per Share

(2) Net Earnings per Share

In accordance with Accounting Standards Codification ("ASC") 260-10-55, basic net earnings per share for the three and nine months ended September 30, 2012 and 2011 is computed by dividing net earnings by the weighted average common shares outstanding during the periods presented.  Diluted net earnings per weighted average common share is computed by dividing net earnings by the weighted average common shares outstanding during the period, increased to include dilutive potential common shares issuable relating to outstanding restricted stock, and upon the exercise of stock options and awards that were outstanding during the period.

Weighted average common shares outstanding for the three and nine months ended September 30, 2012 and 2011 was as follows:

	Three Months Ended September 30,		Nine Months Ended September 30,
	2012	2011	2012	2011
	(unaudited)		(unaudited)
Weighted average shares outstanding – basic	15,885,000	16,643,000	15,960,000	16,654,000
Weighted average shares outstanding – diluted	16,389,000	17,239,000	16,341,000	17,223,000

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Commitments and Contingencies (Details)	9 Months Ended			3 Months Ended	9 Months Ended					9 Months Ended				9 Months Ended				3 Months Ended		9 Months Ended
	Sep. 30, 2012 USD ($)	Sep. 30, 2011 USD ($)	Sep. 30, 2012 Governmental Proceedings [Member] Vari-Lase [Member] USD ($)	Sep. 30, 2011 King Agreements [Member] USD ($)	Sep. 30, 2012 King Agreements [Member] USD ($)	Sep. 30, 2011 King Agreements [Member] USD ($)	Dec. 31, 2011 King Agreements [Member] USD ($)	May 31, 2007 King Agreements [Member]	Jan. 09, 2007 King Agreements [Member]	Sep. 30, 2012 King Agreements [Member] Thrombi-Paste [Member] USD ($)	Jan. 09, 2007 King Agreements [Member] Thrombi-Paste [Member] USD ($)	May 31, 2007 King Agreements [Member] Thrombi-Gel [Member] USD ($)	Jan. 09, 2007 King Agreements [Member] Thrombi-Gel [Member] USD ($)	Sep. 30, 2012 Nicolai GmbH Agreement [Member] USD ($)	Sep. 30, 2011 Nicolai GmbH Agreement [Member] USD ($)	Dec. 31, 2011 Nicolai GmbH Agreement [Member] USD ($)	Apr. 01, 2008 Nicolai GmbH Agreement [Member] EUR (€)	Mar. 31, 2012 Radius Medical Technologies, Inc. [Member] USD ($)	Sep. 30, 2011 Radius Medical Technologies, Inc. [Member] USD ($)	Sep. 30, 2012 Radius Medical Technologies, Inc. [Member] USD ($)	Dec. 31, 2011 Radius Medical Technologies, Inc. [Member] USD ($)	Jun. 09, 2011 Radius Medical Technologies, Inc. [Member] USD ($)	Oct. 20, 2010 Radius Medical Technologies, Inc. [Member] USD ($)
Governmental Proceedings [Abstract]
Total U.S. sales, maximum			$ 432,000
Total U.S. sales, percentage (in hundredths)			0.10%
Alleged amount of damages			20,000,000
Number of agreements entered									3
License fee received					6,000,000
Number of separate milestone payments									2
Individual milestone payment										1,000,000		1,000,000
Milestone payment to be received upon first commercial sale of product										1
Amortization period for license fee									10 years
Remaining amortization period for milestone payment								10 years
One time payment if product is not approved by FDA											2,500,000		2,500,000
Amortization of license fee				2,762,000	153,000	3,171,000								109,000	108,000
Future amortization of deferred revenue					51,000
Unamortized license fee					866,000		1,019,000							73,000		182,000	500,000
Distribution agreement term														5 years
Radius Medical Technologies, Inc. Contingent Consideration [Abstract]
Business acquisition, cost of acquired entity, purchase price, total																							6,449,000
Business acquisition, cost of acquired entity, cash paid																						1,449,000	5,000,000
Percentage of the net sales company is entitled to receive (in hundredths)																				25.00%
Annual sales base to compute contingent consideration potential cash payment year one																				2,000,000
Annual sales base to compute contingent consideration potential cash payment year two																				2,500,000
Annual sales base to compute contingent consideration potential cash payment year three																				3,000,000
Range of possible contingent consideration payments value, low																				0
Reduction in liability recorded as contingent consideration, recognized	96,000	586,000																96,000	586,000
Business acquisition, contingent consideration recorded																				$ 214,000	$ 310,000

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Consolidated Balance Sheets (unaudited) (USD $)	Sep. 30, 2012	Dec. 31, 2011
Current assets:
Cash and cash equivalents	$ 13,913,000	$ 13,726,000
Accounts receivable, net of reserves of $155,000 and $150,000 in 2012 and 2011, respectively	13,889,000	11,728,000
Inventories	13,738,000	14,788,000
Prepaid expenses	1,905,000	1,624,000
Current portion of deferred tax assets	5,500,000	5,500,000
Total current assets	48,945,000	47,366,000
Property and equipment, net	6,559,000	5,607,000
Goodwill	10,095,000	8,117,000
Intangible assets, net	12,426,000	7,948,000
Deferred tax assets, net of current portion and liabilities	3,811,000	7,445,000
Total assets	81,836,000	76,483,000
Current liabilities:
Accounts payable	3,461,000	2,843,000
Accrued compensation	3,813,000	3,430,000
Accrued expenses	1,832,000	1,406,000
Accrued royalties	274,000	560,000
Current portion of deferred revenue and contingent consideration	307,000	477,000
Total current liabilities	9,687,000	8,716,000
Long-term deferred revenue and contingent consideration, net of current portion	876,000	1,061,000
Shareholders' equity:
Common stock, $0.01 par value: Authorized shares - 40,000,000 Issued and outstanding shares - 16,316,369 - 2012; 16,378,205 - 2011	163,000	164,000
Additional paid-in capital	81,724,000	83,962,000
Accumulated other comprehensive earnings	(257,000)	(204,000)
Accumulated deficit	(10,357,000)	(17,216,000)
Total shareholders' equity	71,273,000	66,706,000
Total liabilities and shareholders' equity	$ 81,836,000	$ 76,483,000

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Consolidated Statements of Cash Flows (unaudited) (USD $)	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Operating activities
Net earnings	$ 6,858,000	$ 7,580,000
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation	1,578,000	1,563,000
Amortization	1,032,000	621,000
Stock-based compensation	2,221,000	1,792,000
Deferred taxes, net	3,634,000	4,161,000
Change in fair value of contingent consideration	(96,000)	(586,000)
Gain on the sale of property and equipment	(1,000)	0
Change in allowance for doubtful accounts	5,000	(15,000)
Changes in operating assets and liabilities:
Accounts receivable	(2,168,000)	(377,000)
Inventories	1,062,000	(2,491,000)
Prepaid expenses	(282,000)	(28,000)
Accounts payable	621,000	875,000
Accrued compensation and expenses	(205,000)	15,000
Amortization of deferred license fees and other deferred revenue	(259,000)	(3,260,000)
Net cash provided by operating activities	14,000,000	9,850,000
Investing activities
Purchase of property and equipment	(2,370,000)	(1,742,000)
Cash paid for acquisitions and license	(7,000,000)	(5,721,000)
Proceeds from the sale of property and equipment	10,000	0
Net cash used in investing activities	(9,360,000)	(7,463,000)
Financing activities
Repurchase of common shares	(5,413,000)	(2,606,000)
Proceeds from the exercise of stock options and sale of stock, net of expenses	954,000	801,000
Net cash used in financing activities	(4,459,000)	(1,805,000)
Increase in cash and cash equivalents	181,000	582,000
Effect of exchange rate changes on cash and cash equivalents	6,000	(95,000)
Cash and cash equivalents at beginning of period	13,726,000	17,360,000
Cash and cash equivalents at end of period	13,913,000	17,847,000
Supplemental disclosure of cash flow
Cash paid for interest	10,000	9,000
Cash paid for taxes	$ 751,000	$ 462,000

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Business Combinations and Asset Acquisitions (Details)	3 Months Ended		9 Months Ended				9 Months Ended		9 Months Ended		9 Months Ended		9 Months Ended
	Sep. 30, 2012 USD ($)	Sep. 30, 2011 USD ($)	Sep. 30, 2012 USD ($)	Sep. 30, 2011 USD ($)	Sep. 30, 2012 St. Jude Medical, Cardiology Division, Inc. USD ($)	Aug. 16, 2012 St. Jude Medical, Cardiology Division, Inc. USD ($)	Sep. 30, 2012 Accumed Systems, Inc. [Member] USD ($)	Jun. 11, 2012 Accumed Systems, Inc. [Member] USD ($)	Sep. 30, 2012 Dr. Pedro Silva and Affiliates [Member]	Jan. 06, 2012 Dr. Pedro Silva and Affiliates [Member] USD ($)	Sep. 30, 2011 Northeast Scientific [Member]	Dec. 22, 2011 Northeast Scientific [Member] USD ($)	Sep. 30, 2011 Zerusa Limited [Member]	Sep. 30, 2012 Zerusa Limited [Member] USD ($)	Sep. 02, 2011 Zerusa Limited [Member] USD ($)	Sep. 02, 2011 Zerusa Limited [Member] EUR (€)	Jan. 27, 2011 Zerusa Limited [Member] USD ($)	Jan. 27, 2011 Zerusa Limited [Member] EUR (€)
Purchase price allocation [Abstract]
Business acquisition, cost of acquired entity, purchase price, total						$ 3,000,000		$ 1,500,000									$ 4,272,000	€ 3,121,000
Business acquisition, cost of acquired entity, cash paid						2,250,000		1,500,000							390,000	271,000	3,882,000	2,850,000
Business acquisition, cost of acquired entity, liabilities incurred						750,000
Business acquisition, purchase price allocation, liabilities assumed						0		0									0
Acquired indefinite-lived intangible asset, amount										3,250,000
Amount paid for exclusive rights												900,000
Purchase price asset allocation [Abstract]
Inventory and equipment					206,000		8,000							48,000
Purchased technology					850,000		740,000							1,000,000
Other intangibles					500,000		190,000							800,000
Goodwill					1,444,000		562,000							2,424,000
Total asset purchase price allocation					3,000,000		1,500,000							4,272,000
Estimated useful life of purchased technology and other intangible assets, minimum					9 years		9 years
Estimated useful life of purchased technology and other intangible assets, maximum					10 years		10 years
Estimated useful life of purchased technology and other intangible assets									10 years		5 years		11 years
Business acquisition, pro forma information [Abstract]
Revenue	24,615,000	25,132,000	73,710,000	70,410,000
Net earnings	$ 2,527,000	$ 3,601,000	$ 6,694,000	$ 7,307,000
Net earnings per share [Abstract]
Basic (in dollar per share)	$ 0.16	$ 0.22	$ 0.42	$ 0.44
Diluted (in dollar per share)	$ 0.15	$ 0.21	$ 0.41	$ 0.42

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Goodwill and Other Intangible Assets (Tables)

9 Months Ended

Sep. 30, 2012

Goodwill and Other Intangible Assets [Abstract]

Goodwill and acquired intangible assets

The changes in the carrying amount of goodwill and acquired intangible assets for the nine months ended September 30, 2012 are as follows:

	Goodwill			Acquired Intangibles
	(unaudited)
Balance at December 31, 2011	$	8,117,000		$	7,948,000
Amortization		–			(1,032,000	)
Purchased licenses & acquisitions		2,006,000			5,530,000
Foreign currency translation adjustments		(28,000	)		(20,000	)
Balance at September 30, 2012	$	10,095,000		$	12,426,000

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Products and Services (Details) (USD $)	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Product Information [Line Items]
Total revenue	$ 73,083,000	$ 67,859,000
Total revenue percentage change (in hundredths)	8.00%	18.00%
Catheter Products [Member]
Product Information [Line Items]
Total revenue	45,621,000	39,344,000
Total revenue percentage change (in hundredths)	16.00%	31.00%
Hemostat Products [Member]
Product Information [Line Items]
Total revenue	17,236,000	17,542,000
Total revenue percentage change (in hundredths)	(2.00%)	(6.00%)
Vein Products [Member]
Product Information [Line Items]
Total revenue	9,964,000	7,694,000
Total revenue percentage change (in hundredths)	29.00%	(5.00%)
Total Product Revenue [Member]
Product Information [Line Items]
Total revenue	72,821,000	64,580,000
Total revenue percentage change (in hundredths)	13.00%	14.00%
License and Collaboration [Member]
Product Information [Line Items]
Total revenue	$ 262,000	$ 3,279,000
Total revenue percentage change (in hundredths)	(92.00%)	304.00%

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Products and Services (Tables)

9 Months Ended

Sep. 30, 2012

Products and Services [Abstract]

Revenue by product category

The following tables set forth, for the periods indicated, net revenue by product category along with the percent change from the previous period:

	Nine Months Ended September 30,
	2012					2011
	Net Revenue		Percent Change			Net Revenue		Percent Change
Catheter products	$	45,621,000		16	%	$	39,344,000		31	%
Hemostat products		17,236,000		(2	%)		17,542,000		(6	%)
Vein products		9,964,000		29	%		7,694,000		(5	%)
Total product revenue		72,821,000		13	%		64,580,000		14	%
License and collaboration		262,000		(92	%)		3,279,000		304	%
Total revenue	$	73,083,000		8	%	$	67,859,000		18	%

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Basis of Presentation

9 Months Ended

Sep. 30, 2012

Basis of Presentation [Abstract]

Basis of Presentation

(1)           Basis of Presentation

The accompanying unaudited consolidated financial statements of Vascular Solutions, Inc. (the Company) have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.  In the opinion of management, all normal, recurring adjustments considered necessary for a fair presentation have been included.  The consolidated financial statements should be read in conjunction with the audited consolidated financial statements contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2011 filed with the Securities and Exchange Commission.  Interim results of operations are not necessarily indicative of the results to be expected for the full year or any other interim periods.

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Consolidated Balance Sheets (unaudited) (Parenthetical) (USD $)	Sep. 30, 2012	Dec. 31, 2011
Current assets:
Reserves for accounts receivable	$ 155,000	$ 150,000
Shareholders' equity:
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, authorized shares (in shares)	40,000,000	40,000,000
Common stock, shares issued (in shares)	16,316,369	16,378,205
Common stock, shares outstanding (in shares)	16,316,369	16,378,205

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Income Taxes

9 Months Ended

Sep. 30, 2012

Income Taxes [Abstract]

Income Taxes

(11)           Income Taxes

The Company is subject to income tax in numerous jurisdictions and at various rates and the use of estimates is required in determining the provision for income taxes.  For the nine month periods ended September 30, 2012 and 2011, the Company recorded a provision for taxes of $4,338,000 and $4,669,000 on earnings before tax of $11,196,000 and $12,249,000, resulting in an effective income tax rate of 39%, respectively.  The difference between the effective tax rate of 39% and the U.S. federal statutory income tax rate of 34% was due mainly to the impact of state income taxes.

The Company regularly assesses the likelihood that the deferred tax assets will be recovered from future taxable earnings.  The Company considers projected future taxable earnings and ongoing tax planning strategies, then records a valuation allowance to reduce the carrying value of the net deferred taxes to an amount that is more likely than not to be realized.

The Company adopted accounting provisions that now form part of ASC 740, Income Taxes, and which clarify the accounting for uncertainty in tax positions recognized in the financial statements. These provisions create a single model to address uncertainty in tax positions and clarify the accounting for income taxes by prescribing the minimum recognition threshold a tax position is required to meet before being recognized in the financial statements.  ASC 740 also provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition.  The Company has recorded an unrecognized tax benefit of $1,020,000 as of September 30, 2012 and December 31, 2011.  The impact of tax related interest and penalties is recorded as a component of income tax expense.  For the nine months ended September 30, 2012, the Company has recorded $-0- for the payment of tax related interest and there were no tax penalties or interest recognized in the statements of operations.

The Company is subject to income tax examinations in the U.S. Federal jurisdiction, as well as in the Republic of Ireland and various state jurisdictions.  Remaining open tax years at September 30, 2012 are 2009 through 2011.

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Document and Entity Information	9 Months Ended
	Sep. 30, 2012	Oct. 15, 2012
Document and Entity Information [Abstract]
Entity Registrant Name	VASCULAR SOLUTIONS INC
Entity Central Index Key	0001030206
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		16,316,369
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q3
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2012

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Business Combinations and Asset Acquisitions

9 Months Ended

Sep. 30, 2012

Business Combinations and Asset Acquisitions [Abstract]

Business Combinations and Asset Acquisitions

(12)           Business Combinations and Asset Acquisitions

St. Jude Medical, Cardiology Division, Inc.

On August 16, 2012, the Company acquired the assets related to the Venture® Wire Control Catheter business from St. Jude Medical, Cardiology Division, Inc. ("St. Jude").  Under the terms of the agreement, the Company agreed to pay St. Jude a total of $3,000,000, consisting of $2,250,000 paid in cash at August 16, 2012 and $750,000 payable in cash upon the successful completion of the transfer of the manufacturing processes from St. Jude to the Company.  The Venture Wire Control Catheter is used as a deflectable tip catheter for steering an .014 inch guidewire via the arterial system to the coronary or peripheral vasculature.  This acquisition provides the Company with additional products that are sold directly into the Company's existing customer base to generate incremental revenue.

The Company accounted for the transaction as a business combination in the third quarter of 2012.   In accordance with ASC 805 the purchase price is being allocated based on estimates of the fair value of assets acquired, as no liabilities were assumed.

The purchase price was allocated as follows:

Inventory and equipment	$	206,000
Purchased technology		850,000
Other intangibles		500,000
Goodwill		1,444,000
	$	3,000,000

The purchased technology and other intangible assets have an estimated useful life of 9 - 10 years.  The Company will start amortizing the intangible assets once the Company starts selling the products, currently estimated to start during the second quarter of 2013.

Accumed Systems, Inc.

On June 11, 2012, the Company acquired the assets related to the AccumedTM wrist positioning splint business from Accumed Systems, Inc. ("Accumed").  Under the terms of the agreement, the Company paid Accumed a total of $1,500,000 at closing and no additional payments are required to be made.  The Accumed wrist positioning splint product consists of a plastic molded brace that simplifies arterial access by holding the wrist and forearm in an appropriate, comfortable position.  This acquisition provides the Company with an additional product that is sold directly into the Company's existing customer base to generate incremental revenue.

The Company accounted for the transaction as a business combination in the second quarter of 2012.   In accordance with ASC 805 the purchase price is being allocated based on estimates of the fair value of assets acquired, as no liabilities were assumed.

The purchase price was allocated as follows:

Inventory and equipment	$	8,000
Purchased technology		740,000
Other intangibles		190,000
Goodwill		562,000
	$	1,500,000

The purchased technology and other intangible assets have an estimated useful life of 9 - 10 years.

Dr. Pedro Silva and Affiliates

On January 6, 2012, the Company entered into an agreement with Dr. Pedro Silva and his affiliates, whereby the Company paid $3,250,000 for the rights, patents and intellectual property relating to a two-lumen catheter for distal protection and material extraction used in the Company's Pronto catheters.  Upon payment, the existing License Agreement between N.G.C. Medical S.p.A.and the Company has been deemed paid-in-full, and no future royalties will be owed on any sale of a Pronto catheter after December 31, 2011.

The Company has accounted for the transaction as a non-business license acquisition in the first quarter of 2012.   In accordance with ASC 805, the purchase price was assigned to a license intangible asset equivalent to the cash amount paid on January 6, 2012, and is being amortized over a period of 10 years.  No goodwill was recognized as part of the transaction.

Northeast Scientific

On December 22, 2011, the Company entered into a license agreement with Northeast Scientific, Inc. (NES), a FDA-registered reprocessor of medical devices, whereby the Company acquired the exclusive rights to NES' reprocessing services for the ClosureFast radiofrequency catheter in the United States for a term of five years.  The ClosureFast catheter is owned and marketed by VNUS Medical Technologies, Inc., a subsidiary of Covidien, and is used in the treatment of varicose veins.  Under the reprocessing service, the customer sends its used ClosureFast catheters to NES, where they are inspected, cleaned, tested, repackaged, resterilized and shipped back to the customer. In exchange for the exclusive rights, the Company paid a total of $900,000 to NES and a former third party distributor on December 22, 2011.

The Company accounted for the transaction as a non-business asset acquisition in the fourth quarter of 2011.  In accordance with ASC 805 the purchase price was assigned to an intangible asset and no goodwill was recognized.  The Company is amortizing the license intangible asset on a straight-line basis over the five-year term of the agreement.

Zerusa Limited

On January 27, 2011, the Company entered into an asset purchase agreement of substantially all the assets of Zerusa Limited ("Zerusa"), a Galway, Ireland based medical device company engaged in the manufacture and distribution of the Guardian® hemostasis valves.  Under the terms of the agreement the Company paid Zerusa a total of 3,121,000 Euros ($4,272,000), consisting of 2,850,000 Euros ($3,882,000) paid in cash at January 27, 2011 and 271,000 Euros ($390,000) which was paid on September 2, 2011.  The final payment amount was subject to adjustment based upon the value of inventory transferred.  The Guardian hemostasis valves are designed to maintain hemostasis during interventional catheterization procedures through a novel sealing system which allows simple introductions and removal of interventional devices while providing the option to lock guidewires in place.

The Company accounted for the transaction as a business combination in the first quarter of 2011.   In accordance with ASC 805 the purchase price was allocated based on estimates of the fair value of assets acquired, as no liabilities were assumed.

The purchase price was allocated as follows:

Inventory and equipment	$	48,000
Purchased technology		1,000,000
Other intangibles		800,000
Goodwill		2,424,000
	$	4,272,000

The purchased technology and other intangible assets have an estimated useful life of 11 years.

Unaudited Supplemental Pro Forma Financial Information

The following unaudited supplemental pro forma information combines the Company's results with those of St. Jude, Accumed and Zerusa as if the acquisitions had occurred at the beginning of each of the periods presented.  This unaudited pro forma information is not intended to represent or be indicative of the Company's consolidated results of operations or financial condition that would have been reported for the periods presented had the acquisition been completed at the beginning of each of the periods presented, and should not be taken as indicative of the Company's future consolidated results of operations or financial condition:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2011		2012		2011
Revenue	$	24,615,000	$	25,132,000	$	73,710,000	$	70,410,000
Net earnings		2,527,000		3,601,000		6,694,000		7,307,000
Net earnings per share
Basic	$	0.16	$	0.22	$	0.42	$	0.44
Diluted	$	0.15	$	0.21	$	0.41	$	0.42

Certain pro forma adjustments have been made to reflect the impact of the purchase transaction, primarily consisting of amortization of intangible assets with determinable lives and income taxes to reflect the Company's effective tax rate for the periods presented.

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Consolidated Statements of Earnings (unaudited) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Revenue:
Product revenue	$ 24,465,000	$ 21,450,000	$ 72,821,000	$ 64,580,000
License revenue	87,000	2,854,000	262,000	3,279,000
Total revenue	24,552,000	24,304,000	73,083,000	67,859,000
Product costs and operating expenses:
Cost of goods sold	8,183,000	7,463,000	24,252,000	22,262,000
Research and development	2,936,000	2,808,000	8,964,000	7,541,000
Clinical and regulatory	1,022,000	1,104,000	3,326,000	3,327,000
Sales and marketing	6,188,000	5,831,000	19,279,000	18,318,000
General and administrative	1,714,000	881,000	5,013,000	3,660,000
Amortization of purchased technology and intangibles	359,000	212,000	1,032,000	621,000
Total product costs and operating expenses	20,402,000	18,299,000	61,866,000	55,729,000
Operating earnings	4,150,000	6,005,000	11,217,000	12,130,000
Other earnings (expenses):
Interest earnings	0	4,000	0	12,000
Interest expense	(3,000)	(3,000)	(10,000)	(10,000)
Foreign exchange gain (loss)	9,000	(9,000)	(11,000)	117,000
Earnings before income taxes	4,156,000	5,997,000	11,196,000	12,249,000
Income tax expense	(1,591,000)	(2,287,000)	(4,338,000)	(4,669,000)
Net earnings	$ 2,565,000	$ 3,710,000	$ 6,858,000	$ 7,580,000
Net earnings per share - basic (in dollars per share)	$ 0.16	$ 0.22	$ 0.43	$ 0.46
Net earnings per share - diluted (in dollars per share)	$ 0.16	$ 0.22	$ 0.42	$ 0.44

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Credit Risk and Allowance for Doubtful Accounts

9 Months Ended

Sep. 30, 2012

Credit Risk and Allowance for Doubtful Accounts [Abstract]

Credit Risk and Allowance for Doubtful Accounts

(6)           Credit Risk and Allowance for Doubtful Accounts

The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments.  This allowance is regularly evaluated by the Company for adequacy by taking into consideration factors such as past experience, credit quality of the customer base, age of the receivable balances, both individually and in the aggregate, and current economic conditions that may affect a customer's ability to pay.  The Company does not accrue interest on past due accounts receivable.  Receivables are written off only after all collection attempts have failed and are based on individual credit evaluation and the specific circumstances of the customer.  At both September 30, 2012 and December 31, 2011, the allowance for doubtful accounts was $120,000.

All product returns must be pre-approved and, if approved, customers are subject to a 20% restocking charge.  The Company analyzes the rate of historical returns when evaluating the adequacy of the allowance for sales returns, which is included with the allowance for doubtful accounts on our balance sheet.  At September 30, 2012 and December 31, 2011, the sales and return allowance was $35,000 and $30,000, respectively.

Accounts receivable are shown net of the combined total of the allowance for doubtful accounts and allowance for sales returns of $155,000 and $150,000 at September 30, 2012 and December 31, 2011, respectively.

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Goodwill and Other Intangible Assets

9 Months Ended

Sep. 30, 2012

Goodwill and Other Intangible Assets [Abstract]

Goodwill and Other Intangible Assets

5)           Goodwill and Other Intangible Assets

The changes in the carrying amount of goodwill and acquired intangible assets for the nine months ended September 30, 2012 are as follows:

	Goodwill			Acquired Intangibles
	(unaudited)
Balance at December 31, 2011	$	8,117,000		$	7,948,000
Amortization		–			(1,032,000	)
Purchased licenses & acquisitions		2,006,000			5,530,000
Foreign currency translation adjustments		(28,000	)		(20,000	)
Balance at September 30, 2012	$	10,095,000		$	12,426,000

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Business Combinations and Asset Acquisitions (Tables)

9 Months Ended

Sep. 30, 2012

Business Acquisition [Line Items]

Consolidated results of operation or financial condition

The following unaudited supplemental pro forma information combines the Company's results with those of St. Jude, Accumed and Zerusa as if the acquisitions had occurred at the beginning of each of the periods presented.  This unaudited pro forma information is not intended to represent or be indicative of the Company's consolidated results of operations or financial condition that would have been reported for the periods presented had the acquisition been completed at the beginning of each of the periods presented, and should not be taken as indicative of the Company's future consolidated results of operations or financial condition:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2012		2011		2012		2011
Revenue	$	24,615,000	$	25,132,000	$	73,710,000	$	70,410,000
Net earnings		2,527,000		3,601,000		6,694,000		7,307,000
Net earnings per share
Basic	$	0.16	$	0.22	$	0.42	$	0.44
Diluted	$	0.15	$	0.21	$	0.41	$	0.42

St. Jude Medical, Cardiology Division, Inc. [Member]

Business Acquisition [Line Items]

Purchase price allocation

The purchase price was allocated as follows:

Inventory and equipment	$	206,000
Purchased technology		850,000
Other intangibles		500,000
Goodwill		1,444,000
	$	3,000,000

Accumed Systems, Inc. [Member]

Business Acquisition [Line Items]

Purchase price allocation

The purchase price was allocated as follows:

Inventory and equipment	$	8,000
Purchased technology		740,000
Other intangibles		190,000
Goodwill		562,000
	$	1,500,000

Zerusa Limited [Member]

Business Acquisition [Line Items]

Purchase price allocation

The purchase price was allocated as follows:

Inventory and equipment	$	48,000
Purchased technology		1,000,000
Other intangibles		800,000
Goodwill		2,424,000
	$	4,272,000

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Products and Services

9 Months Ended

Sep. 30, 2012

Products and Services [Abstract]

Products and Services

(13)           Products and Services

Our broad offering of products is divided into three product categories:

·   Catheter products, principally consisting of catheters used in minimally invasive medical procedures for the diagnosis or treatment of vascular conditions, such as the Pronto® extraction catheters used in treating acute myocardial infarction, and also including products used in connection with gaining percutaneous access to the vasculature to perform minimally invasive procedures, such as micro-introducer kits;

·   Hemostat (blood clotting) products, principally consisting of the D-Stat® Dry hemostat, a topical thrombin-based pad with a bandage used to control surface bleeding, and the D-Stat Flowable, a thick yet flowable thrombin-based mixture for preventing bleeding in subcutaneous pockets; and

·   Vein products and services, principally consisting of the Vari-Lase® endovenous laser, a laser console and procedure kit used for the treatment of varicose veins, and a reprocessing service for radiofrequency vein ablation catheters.

The following tables set forth, for the periods indicated, net revenue by product category along with the percent change from the previous period:

	Nine Months Ended September 30,
	2012					2011
	Net Revenue		Percent Change			Net Revenue		Percent Change
Catheter products	$	45,621,000		16	%	$	39,344,000		31	%
Hemostat products		17,236,000		(2	%)		17,542,000		(6	%)
Vein products		9,964,000		29	%		7,694,000		(5	%)
Total product revenue		72,821,000		13	%		64,580,000		14	%
License and collaboration		262,000		(92	%)		3,279,000		304	%
Total revenue	$	73,083,000		8	%	$	67,859,000		18	%

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2012

Commitments and Contingencies [Abstract]

Commitments and Contingencies

(9)           Commitments and Contingencies

Governmental Proceedings

On June 28, 2011, the Company received a subpoena from the U.S. Attorney's Office for the Western District of Texas under the Health Insurance Portability & Accountability Act of 1996 (HIPAA) requesting the production of documents related to the Company's Vari-Lase products, and in particular the use of the Vari-Lase® Short Kit for the treatment of perforator veins.  The Vari-Lase Short Kit has been sold under a 510(k) clearance for the treatment of incompetence and reflux of superficial veins in the lower extremity since 2007 with total U.S. sales through September 30, 2012 of approximately $432,000 (0.1% of the Company's total U.S. sales) and has not been the subject of any reported serious adverse clinical event.  On August 14, 2012, the U.S. District Court for the Western District of Texas unsealed a qui tam complaint that had been filed on November 19, 2010 by Desalle Bui, a former sales employee of the Company, which is the basis for the U.S. Attorney's investigation, to which the federal government, after three extensions of time, has elected to intervene.  The complaint contains allegations of off-label promotion of Vari-Lase products for the treatment of perforator veins, re-use of single-use Vari-Lase products and Company-provided kickbacks to physicians, resulting in alleged damages to the government of approximately $20 million.  The Company believes the allegations are factually inaccurate and without merit, and therefore the Company intends to both fully comply with the U.S. Attorney's investigation and defend the litigation.

From time to time, the Company is involved in additional legal proceedings arising in the normal course of business.  As of the date of this report the Company is not a party to any legal proceeding not described in this section in which an adverse outcome would reasonably be expected to have a material adverse effect on the Company's results of operations or financial condition. 

King Agreements

On January 9, 2007, the Company entered into three separate agreements with King: a License Agreement, a Device Supply Agreement and a Thrombin-JMI Supply Agreement (See Note 8).  King was acquired by Pfizer, Inc. on February 28, 2011.  Under the License Agreement, the Company licensed the exclusive rights to the Company's products Thrombi-Pad®, Thrombi-Gel® and Thrombi-Paste® to King in exchange for a one-time license fee of $6,000,000.  Under the Device Supply Agreement, the Company agreed to manufacture the licensed products for sale to King in exchange for two separate $1,000,000 milestone payments; one upon the first commercial sale of Thrombi-Gel (which was received on May 31, 2007), and one upon the first commercial sale of Thrombi-Paste (which has not been received and is not expected to be received).  The Company was amortizing the $6,000,000 license fee on a straight-line basis over 10 years.  The Company was amortizing the $1,000,000 milestone payment that was received on May 31, 2007 over the remaining 10-year license period.

Under the Device Supply Agreement the Company agreed to pursue on behalf of King a surgical indication for the use of the Thrombi-Gel and Thrombi-Paste products from the FDA.  The Device Supply Agreement requires the Company to make a one-time payment of $2,500,000 to King if the FDA does not approve the surgical indication of Thrombi-Gel and a one-time payment of $2,500,000 to King if the FDA does not approve the surgical indication of Thrombi-Paste after performing a clinical study and submitting the application.  In 2009, King suspended further development of the Thrombi-Paste products.  In 2010, King suspended further work on the pursuit of a surgical indication for the Thrombi-Gel products.

On July 6, 2011, King notified the Company that King was terminating the development of the Thrombi-Paste products and terminating efforts to obtain the surgical indication for the Thrombi-Gel products.  As a result of King making the decision to not proceed, the Company is not required to make either of the $2,500,000 payments to King, and instead the Company recognized revenue of $2,762,000 in the third quarter of 2011 as the remaining deferred license revenue originally allocated to the Thrombi-Paste products and the surgical indication of the Thrombi-Gel products as part of the King agreements.  Amortization of the deferred revenue is $51,000 per quarter for the remainder of the 10-year license period, reflecting the remaining amortization allocated to the topical use indication of the Thrombi-Gel and Thrombi-Pad® products.  The unamortized license fee was $866,000 and $1,019,000 at September 30, 2012 and December 31, 2011, respectively.  The amortization of license fee was $153,000 and $3,171,000 for the nine months ended September 30, 2012 and 2011, respectively.

Nicolai GmbH Agreement

Effective April 1, 2008 the Company entered into a five-year distribution agreement with Nicolai GmbH.  As a result of entering into this distribution agreement, the Company no longer maintains a direct sales force in Germany.  In connection with this distribution agreement, the Company received 500,000 Euros from Nicolai GmbH, which was deferred and is being recognized ratably over the five-year term of the distribution agreement.

The agreement also includes provisions requiring the Company to pay Nicolai GmbH specific amounts if the Company terminates the distribution agreement prior to the end of the five-year term.  The Company does not intend to terminate the distribution agreement and, as such, has not recorded a liability relating to these potential future payments to Nicolai GmbH.  The unamortized license fee was $73,000 and $182,000 at September 30, 2012 and December 31, 2011, respectively.  The amortization of license fee was $109,000 and $108,000 for the nine months ended September 30, 2012 and 2011, respectively.

Radius Medical Technologies, Inc. Contingent Consideration

On October 20, 2010, the Company acquired the assets related to the snare and retrieval product line business from Radius Medical Technologies, Inc. and Radius Medical, LLC (collectively, "Radius").  Under the terms of the agreement the Company paid Radius a total of $6,449,000, consisting of $5,000,000 paid in cash at October 20, 2010 and $1,449,000 which was paid on June 9, 2011 upon the successful completion of the transfer of the manufacturing processes from Radius to the Company along with all fixed assets and inventory.  In addition, Radius is entitled to receive an annual cash contingent consideration payment based on 25% of the net sales of the acquired products which exceed $2.0 million, $2.5 million, and $3.0 million for the calendar years ending December 31, 2011, 2012 and 2013, respectively.  The range of possible contingent consideration payments is from $-0- if no sales are made in excess of the thresholds, to an undeterminable amount as the agreement does not contain a cap on the payment amounts.  In accordance with ASC 805, a reduction of $96,000 and $586,000 in the liability amount was recorded at March 31, 2012 and September 30, 2011, respectively, and recognized as a gain in operating expenses within the general and administrative expenses.  At September 30, 2012 and December 31, 2011, the Company has recorded a liability for these contingent consideration payments in the amount of $214,000 and $310,000, respectively.

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Concentrations of Credit and Other Risks

9 Months Ended

Sep. 30, 2012

Concentrations of Credit and Other Risks [Abstract]

Concentrations of Credit and Other Risks

(7)           Concentrations of Credit and Other Risks

In the United States the Company sells its products and services directly to hospitals and clinics.  In all international markets, the Company sells its products to distributors who, in turn, sell to hospitals and clinics.

With respect to accounts receivable, the Company performs credit evaluations of its customers and does not require collateral.  No single customer represented greater than 10% of gross accounts receivable as of either September 30, 2012 or December 31, 2011.  There have been no material losses on customer receivables.

Revenue by geographic destination as a percentage of total net revenue for both of the nine month periods ended September 30, 2012 and 2011 was 84% in the United States and 16% in international markets, respectively.  No single customer represented greater than 10% of the total net revenue for the three and nine months ended September 30, 2012 and 2011.

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Dependence on Key Suppliers

9 Months Ended

Sep. 30, 2012

Dependence on Key Suppliers [Abstract]

Dependence on Key Suppliers

(8)           Dependence on Key Suppliers

The Company purchases certain key components from single-source suppliers.  Any significant component delay or interruption could require the Company to qualify new sources of supply, if available, and could have a material adverse effect on the Company's financial condition and results of operations.

King Pharmaceuticals

The Company purchases its requirements for thrombin (a component in the Hemostat products) under a Thrombin-JMI® Supply Agreement entered into with King Pharmaceuticals, Inc. ("King") on January 9, 2007.  King was acquired by Pfizer, Inc. on February 28, 2011.  Under the terms of the Thrombin-JMI Supply Agreement, King agrees to manufacture and supply thrombin to the Company on a non-exclusive basis.  The Thrombin-JMI Supply Agreement does not contain any minimum purchase requirements.  King agrees to supply the Company with such quantity of thrombin as the Company may order at a fixed price throughout the term of the Thrombin-JMI Supply Agreement as adjusted for inflation, variations in potency and other factors.  The Thrombin-JMI Supply Agreement has an initial term of 10 years, followed by successive automatic one-year extensions, subject to termination by the parties under certain circumstances, including: (i) termination by King without cause any time after the fifth anniversary of the date of the Thrombin-JMI Supply Agreement upon five years prior written notice to the Company, and (ii) termination by the Company without cause any time after the fifth anniversary of the date of the Thrombin-JMI Supply Agreement upon five years prior written notice to King provided that the Device Supply Agreement, which the Company also entered into with King on January 9, 2007, has expired on its terms or the parties have agreed to terminate it.

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Lines of Credit

9 Months Ended

Sep. 30, 2012

Lines of Credit [Abstract]

Lines of Credit

(10)           Lines of Credit

On December 21, 2011 the Company modified and extended its secured asset-based revolving credit agreement with U.S. Bank National Association dated December 21, 2009 (as amended on December 21, 2010).  The revolving credit agreement is a one-year, $10,000,000 facility with availability based primarily on eligible customer receivables, inventory and property and equipment.  The revolving credit agreement bears interest equal to the one-month LIBOR rate plus 1.60% and is secured by a first security interest on all of the Company's assets.  The revolving credit agreement requires a quarterly payment based on an annual fee of 0.125% of the average unused portion of the committed revolving line as determined by the bank and reviewed by management.

The revolving credit agreement includes one covenant that the Company cannot have a maximum cash flow leverage ratio greater than 2.5 to 1.  The calculation of this covenant is determined by multiplying annual lease expense times six and adding any loans, then dividing this amount by the sum of earnings before interest, taxes, depreciation, amortization and annual operating lease payments.  The covenant is computed quarterly based on a rolling 12-month period.  The Company was in compliance with the covenant as of September 30, 2012.

As of September 30, 2012, the Company had no outstanding balance against the revolving credit agreement.  Based on the Company's eligible customer receivables, inventory, property and equipment and cash balances, $10,000,000 was available for borrowing as of September 30, 2012.

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Income Taxes (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011	Dec. 31, 2011
Income Taxes [Abstract]
Income tax expense (benefit)	$ 1,591,000	$ 2,287,000	$ 4,338,000	$ 4,669,000
Earnings before income tax	4,156,000	5,997,000	11,196,000	12,249,000
Effective income tax rate (in hundredths)			39.00%
Federal statutory income tax rate (in hundredths)			34.00%
Unrecognized income tax benefits	1,020,000		1,020,000		1,020,000
Tax related interest expense			0
Tax related penalties expense			$ 0

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Inventories (Tables)

9 Months Ended

Sep. 30, 2012

Inventories [Abstract]

Inventories

Inventories are stated at the lower of cost (first-in, first-out method) or market.  Appropriate consideration is given to deterioration, obsolescence and other factors in evaluating net realizable value.  Inventories are comprised of the following:

	September 30, 2012		December 31, 2011
	(unaudited)
Raw materials	$	6,725,000	$	7,107,000
Work-in process		823,000		1,369,000
Finished goods		6,190,000		6,312,000
	$	13,738,000	$	14,788,000

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Revenue Recognition (Details)	9 Months Ended
	Sep. 30, 2012
Revenue Recognition [Abstract]
Restocking charge (in hundredths)	20.00%

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Consolidated Statements of Comprehensive Earnings (unaudited) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Consolidated Statements of Comprehensive Earnings (unaudited) [Abstract]
Net earnings	$ 2,565,000	$ 3,710,000	$ 6,858,000	$ 7,580,000
Other comprehensive earnings (loss), net of tax:
Foreign currency translation adjustments	78,000	(221,000)	(53,000)	(110,000)
Comprehensive earnings	$ 2,643,000	$ 3,489,000	$ 6,805,000	$ 7,470,000

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Inventories

9 Months Ended

Sep. 30, 2012

Inventories [Abstract]

Inventories

(4)           Inventories

Inventories are stated at the lower of cost (first-in, first-out method) or market.  Appropriate consideration is given to deterioration, obsolescence and other factors in evaluating net realizable value.  Inventories are comprised of the following:

	September 30, 2012		December 31, 2011
	(unaudited)
Raw materials	$	6,725,000	$	7,107,000
Work-in process		823,000		1,369,000
Finished goods		6,190,000		6,312,000
	$	13,738,000	$	14,788,000

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Inventories (Details) (USD $)	Sep. 30, 2012	Dec. 31, 2011
Inventories [Abstract]
Raw materials	$ 6,725,000	$ 7,107,000
Work-in process	823,000	1,369,000
Finished goods	6,190,000	6,312,000
Inventory, Total	$ 13,738,000	$ 14,788,000

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Net Earnings per Share (Tables)

9 Months Ended

Sep. 30, 2012

Net Earnings per Share [Abstract]

Weighted average number of shares

Weighted average common shares outstanding for the three and nine months ended September 30, 2012 and 2011 was as follows:

	Three Months Ended September 30,		Nine Months Ended September 30,
	2012	2011	2012	2011
	(unaudited)		(unaudited)
Weighted average shares outstanding – basic	15,885,000	16,643,000	15,960,000	16,654,000
Weighted average shares outstanding – diluted	16,389,000	17,239,000	16,341,000	17,223,000