10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2015

OR

☐ 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 North

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   ☒  No   ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, 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   ☒  No  ☐

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

Large accelerated filer  ☐ Accelerated filer  ☒

Non-accelerated filer    ☐ Smaller Reporting Company   ☐  

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

The registrant had 17,264,019 shares of common stock, $.01 par value per share, outstanding as of April 17, 2015.

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	13
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	19
Item 4.	Controls and Procedures	19
PART II.  OTHER INFORMATION		20
Item 1.	Legal Proceedings	20
Item 1A.	Risk Factors	20
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27
Item 3.	Defaults Upon Senior Securities	27
Item 4.	Mine Safety Disclosures	27
Item 5.	Other Information	27
Item 6.	Exhibits	27

Page 1

PART 1. FINANCIAL INFORMATION

Item 1. Financial Statements

VASCULAR SOLUTIONS, INC.

Consolidated Balance Sheets

	March 31, 2015			December 31, 2014
	(unaudited)			(see note)
Assets
Current assets:
Cash and cash equivalents	$	34,167,000		$	36,461,000
Accounts receivable, net of reserves of $355,000 and $300,000 in 2015 and 2014, respectively		18,133,000			17,105,000
Inventories		17,907,000			15,908,000
Prepaid expenses and other		5,148,000			5,231,000
Current portion of deferred tax assets		4,050,000			3,681,000
Total current assets		79,405,000			78,386,000
Property, plant and equipment, net		29,893,000			25,665,000
Goodwill		10,033,000			10,259,000
Intangible assets, net		9,650,000			10,164,000
Deferred tax assets, net of current portion		2,160,000			2,894,000
Total assets	$	131,141,000		$	127,368,000
Liabilities and shareholders’ equity
Current liabilities:
Accounts payable	$	6,253,000		$	4,806,000
Accrued compensation		5,000,000			4,580,000
Accrued expenses		3,575,000			3,016,000
Accrued royalties		193,000			230,000
Current portion of deferred revenue		341,000			391,000
Total current liabilities		15,362,000			13,023,000
Long-term deferred revenue, net of current portion		150,000			202,000
Long-term deferred tax liabilities		824,000			803,000
Total long-term liabilities		974,000			1,005,000
Shareholders’ equity:
Common stock, $0.01 par value: Authorized shares – 40,000,000 Issued and outstanding shares – 17,264,443– 2015; 17,202,365 – 2014		173,000			172,000
Additional paid-in capital		97,293,000			97,324,000
Accumulated other comprehensive earnings (loss)		(1,437,000	)		(725,000	)
Retained earnings		18,776,000			16,569,000
Total shareholders’ equity		114,805,000			113,340,000
Total liabilities and shareholders’ equity	$	131,141,000		$	127,368,000

See accompanying notes.

Note:  The balance sheet at December 31, 2014 has been derived from the audited financial statements at that date.

Page 2

VASCULAR SOLUTIONS, INC.

Consolidated Statements of Earnings

	Three Months Ended
	March 31,
	2015			2014
	(unaudited)
Net revenue:
Product revenue	$	34,441,000		$	29,845,000
License, royalty and collaboration revenue		170,000			62,000
Total revenue		34,611,000			29,907,000
Product costs and operating expenses:
Cost of goods sold		11,296,000			9,583,000
Collaboration expenses		54,000			11,000
Research and development		4,067,000			3,290,000
Clinical and regulatory		1,481,000			1,300,000
Sales and marketing		8,732,000			7,736,000
General and administrative		4,777,000			2,859,000
Medical device excise taxes		376,000			345,000
Amortization of purchased technology and intangibles		405,000			412,000
Total product costs and operating expenses		31,188,000			25,536,000
Operating earnings		3,423,000			4,371,000
Other earnings		28,000			2,000
Earnings before income taxes		3,451,000			4,373,000
Income tax expense		(1,244,000	)		(1,574,000	)
Net earnings	$	2,207,000		$	2,799,000
Net earnings per share – basic	$	0.13		$	0.17
Net earnings per share – diluted	$	0.12		$	0.16

See accompanying notes.

Page 3

VASCULAR SOLUTIONS, INC.

Consolidated Statements of Comprehensive Earnings

	Three Months Ended
	March 31,
	2015			2014
	(unaudited)
Net earnings	$	2,207,000		$	2,799,000
Other comprehensive earnings (losses), net of $0 tax: Foreign currency translation adjustments		(712,000	)		(304,000	)
Comprehensive earnings	$	1,495,000		$	2,495,000

See accompanying notes.

Page 4

VASCULAR SOLUTIONS, INC.

Consolidated Statements of Cash Flows

	Three Months Ended
	March 31,
	2015			2014
	(unaudited)
Operating activities
Net earnings	$	2,207,000		$	2,799,000
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation		1,048,000			772,000
Amortization		405,000			412,000
Stock-based compensation		1,511,000			1,285,000
Deferred taxes, net		638,000			446,000
Tax benefit from stock-based awards		(248,000	)		(397,000	)
Gain on disposal of equipment		–			(5,000	)
Change in accounts receivable allowance		55,000			80,000
Changes in operating assets and liabilities:
Accounts receivable		(1,102,000	)		(1,443,000	)
Inventories		(2,089,000	)		(1,233,000	)
Prepaid expenses and other		128,000			(629,000	)
Accounts payable		1,482,000			1,548,000
Accrued expenses and compensation		967,000			404,000
Amortization of deferred license fees and other deferred revenue		(102,000	)		(77,000	)
Net cash provided by operating activities		4,900,000			3,962,000
Investing activities
Purchase of property and equipment		(2,661,000	)		(1,323,000	)
Purchase of building and land		(2,748,000	)		–
Proceeds from the sale of equipment		–			9,000
Net cash used in investing activities		(5,409,000	)		(1,314,000	)
Financing activities
Repurchase of common shares		(1,951,000	)		(1,805,000	)
Tax benefit from stock-based awards		248,000			397,000
Proceeds from the exercise of stock options and sale of stock, net of expenses		162,000			895,000
Net cash used in financing activities		(1,541,000	)		(513,000	)
Increase (decrease) in cash and cash equivalents		(2,050,000	)		2,135,000
Effect of exchange rate changes on cash and cash equivalents		(244,000	)		(158,000	)
Cash and cash equivalents at beginning of period		36,461,000			30,785,000
Cash and cash equivalents at end of period	$	34,167,000		$	32,762,000
Supplemental disclosure of cash flow
Cash paid for interest	$	–		$	3,000
Cash paid for taxes	$	256,000		$	459,000

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, 2014 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, Earnings Per Share, basic net earnings per share for the three months ended March 31, 2015 and 2014 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 upon the exercise of stock options and restricted stock awards that were outstanding during the period.

Weighted average common shares outstanding for the three months ended March 31, 2015 and 2014 were as follows:

	Three Months Ended March 31,
	2015		2014
	(unaudited)
Weighted average shares outstanding – basic		16,939,000		16,686,000
Weighted average shares outstanding – diluted		17,940,000		17,538,000

(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, Revenue Recognition, 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 and title passes to customers based on FOB shipping point terms.  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 and is reported on a gross basis.  Allowances are provided for estimated returns and costs at the time of shipment.  Sales and use taxes are reported on a net basis, excluding them from revenue.

The Company’s revenues from license agreements and research collaborations are recognized 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.

The Company currently has a license agreement with King Pharmaceuticals, Inc. (King), now a subsidiary of Pfizer, Inc., under which the Company licensed the exclusive rights of Thrombi-Pad^®, Thrombi-Gel^® and Thrombi-Paste^TM products to King in exchange for a license fee.  The Company is amortizing the license fees on a straight-line basis over the projected 10 year economic life of the products.  The Company determines the economic life of the products under its license agreements by evaluating similar products the Company has launched or other similar products in the medical industry.

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 goods sold.

In addition, the Company has reviewed the provisions of ASC 808, Collaborative Arrangements, and the adoption of this ASC has had no impact on the amounts recorded under these agreements.

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 goods sold.

In May 2014, the Financial Accounting Standards Board (FASB) issued guidance creating ASC 606, “Revenue from Contracts with Customers.”  The new section will replace ASC 605, “Revenue Recognition” and creates modifications to various other revenue accounting standards for specialized transactions and industries.  The new ASC is intended to conform United States revenue accounting principles with concurrently issued International Financial Reporting Standards.  Prior to the guidance, revenue recognition differed between United States practice and those of much of the rest of the world.  The guidance also is intended to enhance disclosures related to disaggregated revenue information.  The updated guidance is effective for annual reporting periods beginning on or after December 15, 2016, and interim periods within those annual periods.  The Company will adopt the new provisions of this accounting standard at the beginning of fiscal year 2017, given that early adoption is not an option.  The Company does not expect adoption will have an impact on the consolidated financial statements.

Page 7

VASCULAR SOLUTIONS, INC.

Notes to Unaudited Consolidated Financial Statements - Continued

(4) Inventories

Inventories are stated at the lower of cost (weighted average 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:

	March 31, 2015		December 31, 2014
	(unaudited)
Raw materials	$	8,796,000	$	8,251,000
Work-in-process		1,828,000		1,139,000
Finished goods		7,283,000		6,518,000
	$	17,907,000	$	15,908,000

(5) Goodwill and Other Intangible Assets

The changes in the carrying amount of goodwill and acquired intangible assets for the three months ended March 31, 2015 are as follows:

	Goodwill			Acquired Intangibles
	(unaudited)
Balance at December 31, 2014	$	10,259,000		$	10,164,000
Amortization		–			(405,000	)
Foreign currency translation adjustments		(226,000	)		(109,000	)
Balance at March 31, 2015	$	10,033,000		$	9,650,000

(6) Credit Risk and Allowance for Doubtful Accounts

The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its 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.  Accounts receivable over 60 days past due are considered past due.  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 March 31, 2015 and December 31, 2014, the allowance for doubtful accounts was $280,000 and $220,000, respectively.

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 its balance sheet.  At March 31, 2015 and December 31, 2014, the sales and return allowance was $75,000 and $80,000, respectively.

Page 8

VASCULAR SOLUTIONS, INC.

Notes to Unaudited Consolidated Financial Statements - Continued

Accounts receivable are shown net of the combined total of the allowance for doubtful accounts and allowance for sales returns of $355,000 and $300,000 at March 31, 2015 and December 31, 2014, respectively.

 (7) Concentrations of Credit and Other Risks

In the United States, the Company sells its products directly to hospitals and clinics.  In all international markets, the Company sells its products to distributors who, in turn, sell to hospitals and clinics.  Loss or termination of distributors, or their inability to effectively promote the Company’s products, could have a material adverse effect on the Company’s financial condition and results of operations.

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 March 31, 2015 or December 31, 2014.  There have been no material losses on customer receivables.

Revenue by geographic destination as a percentage of total net revenue for the three month periods ended March 31, 2015 and 2014 was 78% and 84% in the United States and 22% and 16% in international markets, respectively.  Revenues are attributable to countries based on location of the customer.  No single customer represented greater than 10% of the total net revenue for the three months ended March 31, 2015 or 2014.

(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 on January 9, 2007.  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.

Page 9

VASCULAR SOLUTIONS, INC.

Notes to Unaudited Consolidated Financial Statements - Continued

(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 Vari-Lase products, and in particular the use of the Vari-Lase Short Kit for the treatment of perforator veins.  Subsequently, the Company learned that the U.S. Attorney’s Office also had commenced a criminal investigation of the same matter.  The Vari-Lase Short Kit was sold under a 510(k) clearance for the treatment of incompetence and reflux of superficial veins in the lower extremity from 2007 until it was voluntarily withdrawn from the market in July 2014 with total U.S. sales of approximately $534,000 (0.1% of the Company’s total U.S. sales for such period) and has not been the subject of any reported serious adverse clinical event.  On August 14, 2012, the United States 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 was the basis for the U.S. Attorney’s civil investigation, to which the federal government, after three extensions of time, elected to intervene.  The complaint contained allegations of off-label promotion of Vari-Lase products for the treatment of perforator veins, re-use of single-use Vari-Lase products and kickbacks to physicians, resulting in alleged damages to the government of approximately $20 million.  An amended complaint limited to allegations of off-label promotion of the Vari-Lase Short Kit resulting in an unspecified amount of damages and penalties was filed by the U.S. Attorney’s Office in December 2012.  On January 22, 2014, the Company agreed with the U.S. Attorney’s Office to settle the civil lawsuit, and the settlement agreement was executed on July 28, 2014.  Under the terms of the settlement agreement, the Company made a payment of $520,000, the Company made no admission of fault or liability, and the U.S. Attorney’s Office dismissed the civil lawsuit with prejudice and released all civil claims brought against the Company in the civil lawsuit.  Settlement of the civil lawsuit had no effect upon the criminal investigation.

On November 13, 2014, a criminal indictment was issued in the United States District Court for the Western District of Texas related to the Vari-Lase Short Kit investigation.  The indictment alleges that the Company and its Chief Executive Officer introduced adulterated and misbranded medical devices into interstate commerce and conspired to introduce adulterated and misbranded medical devices into interstate commerce through the alleged off-label promotion of the Vari-Lase Short Kit.  The Company believes the allegations are false and intends to contest them vigorously.  Defending the Company against the indictment will entail costs that are expected to be material and will require significant attention from the Company’s management.  If the Company were to be convicted of the crimes alleged in the indictment, remedies could include fines, penalties, forfeitures and compliance conditions.  Given the early stage of this proceeding, the Company cannot estimate the amount or range of loss if the Company were to be convicted; however, it would likely be material.  If the Company were to be convicted of a crime related to the delivery of an item or service under Title XVIII of the Social Security Act, or a felony related to health care fraud, it would become automatically excluded by the Department of Health and Human Services (“HHS”) from participation in U.S. government health care programs, including Medicare and Medicaid.  If the Company were to be convicted of a misdemeanor related to health care fraud, it could be excluded by HHS from participation in U.S. government health care programs, including Medicare and Medicaid.  Exclusion from participation in U.S. government health care programs would substantially adversely affect the Company’s ability to continue to conduct its business.  Conviction of the Company’s chief executive officer of a crime under statutes related to misbranding and health care fraud could require the termination of his employment with the Company.

Page 10

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.

(10) 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 three month periods ended March 31, 2015 and 2014, the Company recorded a provision for taxes of $1,244,000 and $1,574,000 on earnings before tax of $3,451,000 and $4,373,000 resulting in an effective income tax rate of 36% for both periods.  The effective tax rate of 36% for the three months ended March 31, 2015 and 2014 consists of a graduated federal rate slightly higher than 34% and state 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, and 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.  If the Company’s actual results and updated projections vary significantly from the projections used as a basis for determining its valuation allowance, the Company may need to increase or decrease the valuation allowance against the gross deferred tax assets.  The Company will adjust earnings for the deferred tax in the period in which any such determination is made.

The Company applies ASC 740, Income Taxes, which clarifies 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 had an unrecognized tax asset of $1,262,000 as of both March 31, 2015 and December 31, 2014.  The impact of tax related interest and penalties is recorded as a component of income tax expense.  As of March 31, 2015, 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 earnings.

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.  At March 31, 2015, the Company’s 2013 U.S. Federal 1120 tax filing was under exam by the U.S. Internal Revenue Service.  To date no finding or adjustments have been proposed to the Company.  At March 31, 2015, tax years 2011 through 2014 remain open to examination.

(11) Products and Services

Historically, the Company has described its business in terms of three product categories as follows:

Page 11

VASCULAR SOLUTIONS, INC.

Notes to Unaudited Consolidated Financial Statements - Continued

· Catheter products consist principally of catheters used in minimally invasive medical procedures for the diagnosis or treatment of vascular conditions, such as the GuideLiner^® catheter used to access discrete regions of the coronary anatomy and the Pronto^® extraction catheters used in treating acute myocardial infarction.  This category also includes products used in connection with gaining percutaneous access to the vasculature to perform minimally invasive procedures, such as micro-introducer kits.

· Hemostat products consist principally of blood clotting products, such as 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.  This category also includes products used in radial artery access catheterizations, such as the Accumed^™ wrist positioning splints and Vasc^™ Band inflatable compression bands.

· Vein products and services consist principally of the Vari-Lase^® endovenous laser products consisting of laser consoles and procedure kits used for the treatment of varicose veins, and a reprocessing service for a competitor’s radiofrequency vein ablation catheter.

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

	Three Months Ended March 31,
	2015					2014
	Net Revenue		Percent Change			Net Revenue		Percent  Change
Catheter products	$	23,857,000		24	%	$	19,164,000		15	%
Hemostat products		6,177,000		3	%		5,997,000		4	%
Vein products and services		4,407,000		(6	%)		4,684,000		31	%
Total product revenue		34,441,000		15	%		29,845,000		15	%
License		170,000		173	%		62,000		(29	%)
Total revenue	$	34,611,000		16	%	$	29,907,000		15	%

Due to the growth in the number of the company’s  product offerings and in order to present a more detailed product-specific revenue analysis, beginning in the first quarter of 2015 the Company commenced reporting net revenue for each of its top product lines in each of its primary markets.  Beginning in the second quarter of 2015, the Company will no longer report its revenue according to the three product categories outlined above.  The following tables set forth, for the periods indicated, net revenue by product line along with the percent change from the previous period for each of the Company’s top seven products by net revenue:

		Three months ended March 31,
		2015					2014
Product Line	Primary Market	Net Revenue		Percent Change			Net Revenue
GuideLiner catheters	Interventional cardiology	$	10,340,000		54	%	$	6,703,000
Pronto catheters	Interventional cardiology		4,382,000		(6	%)		4,676,000
Hemostatic patches	Interventional cardiology		3,022,000		(4	%)		3,164,000
Micro-introducer kits	Interventional radiology		2,854,000		22	%		2,333,000
Vein catheter reprocessing	Phlebology		2,712,000		1	%		2,680,000
Radial access products	Interventional cardiology		1,638,000		23	%		1,333,000
D-Stat Flowable hemostat	Electrophysiology		1,371,000		1	%		1,352,000

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VASCULAR SOLUTIONS, INC.

Notes to Unaudited Consolidated Financial Statements - Continued

The Company sells its products into four primary clinical markets:  interventional cardiology, interventional radiology, electrophysiology, and phlebology (vein treatment).   The Company estimates the percentage of its revenue that is generated in each market by estimating the percentage of sales of each product that is made to customers for use in that market.  During the first quarter of 2015, the Company estimates that 73% of its product sales by revenue were generated from the interventional cardiology market, 13% from the phlebology market, 10% from the interventional radiology market and 4% from the electrophysiology market.

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 focused on bringing clinically advanced solutions to interventional cardiologists, interventional radiologists, electrophysiologists, and vein practices worldwide.   As a vertically-integrated medical device company, we generate ideas, create new minimally invasive medical devices, and then deliver these products and related services to physicians through our direct domestic sales force and our international distribution network.

During the past few years, the number of catheterization procedures performed worldwide has been relatively flat to declining due to a number of factors – among them, the effects of weak economies on overall health care utilization rates, efforts by third-party payers to lower costs associated with medical procedures, investigations by government agencies into potential over-utilization of procedures, the implementation by hospitals of policies designed to reduce the incidence of unnecessary procedures in the wake of these outside investigations, and new diagnostic imaging and functional assessment modalities that more effectively screen patients to determine the need for treatment.  Although worldwide demographic factors, including the growing incidence of obesity, diabetes, and cardiovascular disease, tend to favor long-term growth in the number of interventional procedures, we believe the recent pressures on utilization rates are likely to result in relatively flat catheterization volumes for the foreseeable future.  We intend to remain competitive in this market through the continued introduction of new products and services.  We expect to originate these new products and services primarily through our internal research and development and clinical efforts, but we also intend to supplement them 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 direct sales organization in existing geographic markets, and our continuing focus on increasing the efficiency of our existing direct sales organization.

Our product portfolio includes a broad spectrum of over 90 products consisting of over 600 stock keeping units (SKUs) covering a wide array of blood clotting devices, extraction catheters, access catheters, guide catheters, micro-introducer kits, guidewires, snare and retrieval devices, reprocessing service for radiofrequency catheters, and endovenous laser and procedure kits for the treatment of varicose veins.  Our management, including our chief executive officer who is our chief operating decision maker, report and manage our operations based on product sales into our four clinical target markets.  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 new product development and clinical trials to obtain regulatory approvals.  A significant portion of our net revenue historically has been, and we expect to continue to be, attributable to new and enhanced products and services.   We expect to continue to further validate the clinical and competitive benefits of our technology platforms to drive utilization of our current products and the development of new and enhanced products and services.

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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:

· The future regulatory approval of 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 the FDA frequently implements 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 and services into our existing operations.  The acquisition of products and services complementary to our existing product portfolio and customer call points provides an additional business opportunity, but is dependent on the successful integration of the acquired products into our existing business structure.

· 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.  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 March 31,
	2015			2014
Net revenue:
Product revenue		99	%		100	%
License and collaboration revenue		1	%		-
Total revenue		100	%		100	%
Product costs and operating expenses:
Cost of goods sold		33	%		32	%
Collaboration expenses		-			-
Research and development		12	%		11	%
Clinical and regulatory		4	%		4	%
Sales and marketing		25	%		26	%
General and administrative		14	%		10	%
Medical device excise taxes		1	%		1	%
Amortization of purchased technology and intangibles		1	%		1	%
Total product costs and operating expenses		90	%		85	%
Operating earnings		10	%		15	%
Other earnings and expenses, net		-			-
Earnings before income taxes .		10	%		15	%
Income taxes		(4	%)		(6	%)
Net earnings		6	%		9	%

Three months ended March 31, 2015, compared to three months ended March 31, 2014

Net revenue increased 16% to $34,611,000 for the quarter ended March 31, 2015 from $29,907,000 for the quarter ended March 31, 2014.  The increase in revenue is comprised of the following components:

	% Change
Volume of existing products and services sold (including sales of new versions of existing products and services)		19	%
Pricing of existing products and services sold		(4	%)
Revenue from new products or services, defined as products and services that had no revenue in the first quarter of 2014		1	%
		16	%

Approximately 78% and 84% of our net revenue was earned in the United States and 22% and 16% of our net revenue was earned in international markets for the three month periods ended March 31, 2015 and March 31, 2014, respectively.

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  We recognized $170,000 and $62,000 of license, royalty and collaboration revenue during the three month periods ended March 31, 2015 and 2014, respectively, due to our license and device supply agreements and our royalty agreement with third parties.  Collaboration expense of $54,000 and $11,000 was recognized during the three months ended March 31, 2015 and 2014, respectively, as a result of an agreement we entered into in April 2013 to develop a new hemostatic device for a third party.  License, royalty and collaboration revenue is expected to be approximately $600,000 to $700,000 for the full year 2015.

Gross margin decreased to 67.4% for the quarter ended March 31, 2015, compared to 68.0% for the quarter ended March 31, 2014.  The decrease in gross margin was primarily the result of sales growth in international markets which carries a lower gross margin (and lower selling expenses) than United States sales due to the use of independent distributors in the international markets.  We expect gross margin to be between 67.5% and 68.0% for the full year 2015, subject to variations in our selling mix between United States 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 and GuideLiner products.

Research and development expense for the first quarter of 2015 totaled $4,067,000, or 12% of revenue, compared to $3,290,000, or 11% of revenue, for the first quarter of 2014.  Research and development expenses have increased compared to the three month period ended March 31, 2014 due to additional research and development employees being hired during the second half of 2014 and the first quarter of 2015.  We expect research and development expenses to be approximately 11.0% to 12.0% of revenue in each quarter for the remainder of 2015.

Clinical and regulatory expense for the first quarter of 2015 totaled $1,481,000, or 4% of revenue, compared to $1,300,000, or 4% of revenue, for the first quarter of 2014.  Clinical and regulatory expenses have increased on a dollar basis compared to the quarter ended March 31, 2014 due to additional regulatory employees being hired to meet additional workload expectations.  We expect clinical and regulatory expenses to continue to be approximately 4.0% to 4.5% of revenue in each quarter for the remainder of 2015.

Sales and marketing expense for the first quarter of 2015 totaled $8,732,000, or 25% of revenue, compared to $7,736,000, or 26% of revenue, for the first quarter of 2014.  The decrease in sales and marketing expense as a percentage of revenue for the first quarter of 2015 was due to our sales increasing faster than our number of field U.S. sales employees as well as our growth in international sales.  We expect to maintain the same relative size of our direct U.S. sales force for the remainder of 2015 and expect our international sales to grow faster than our U.S. sales.  As result, we expect our sales and marketing expenses as a percentage of revenue will continue to decrease with an expected percentage of revenue of approximately 23% for the full year 2015.

General and administrative expense for the first quarter of 2015 totaled $4,777,000, or 14% of revenue, compared to $2,859,000, or 10% of revenue, for the first quarter of 2014.  General and administrative expense increased for the three month period ended March 31, 2015 compared to the three month period ended March 31, 2014 as a result of a $1,600,000 increase in legal expenses, primarily related to the Short Kit litigation (see Note 9 to the Unaudited Consolidated Financial Statements in Item 1 of Part I of this Form 10-Q).  Total legal expenses related to the Short Kit litigation were $2,433,000 in the first quarter of 2015.  While legal expenses are difficult to forecast, we expect legal expenses to remain at this elevated level for the remainder of 2015 due to the expected continuation of the Short Kit litigation throughout 2015.  As a result, we expect general and administrative expense to be approximately 12.0% to 13.0% of revenue for the full year 2015.

Medical device excise taxes for the first quarter of 2015 totaled $376,000, or 1.1% of revenue, compared to $345,000, or 1.2% of revenue, for the first quarter of 2014.  The statutory rate of the medical device excise tax is 2.3% of revenues on initial sales of finished medical products sold in the United States.  The tax does not apply to service revenues or international sales.  The Company’s effective rate for this tax is less than the statutory rate due to international sales, service revenues and sales of purchased finished goods (where the seller is responsible for paying the tax).  We expect our medical device excise taxes to be approximately 1.1% for the full year of 2015.

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Amortization of purchased technology and other intangibles was $405,000 and $412,000 for the three months ended March 31, 2015 and 2014, respectively.   The amortization resulted from our product and license acquisitions.  As part of these asset purchases and licensing agreements, we allocated $16,000,000 to purchased technology and other intangibles that are being amortized over a period of 9 to 11 years.  We expect amortization expense to be approximately $400,000 per quarter for the remainder of 2015.

Income tax expense was $1,244,000 for the three months ended March 31, 2015 on earnings before tax of $3,451,000, resulting in an effective income tax rate of 36%.  The effective tax rate of 36% for the three months ended March 31, 2015 consisted of a graduated federal rate of approximately 34% combined with state taxes.  We expect our effective income tax rate to continue to be approximately 35% to 36% of revenue each quarter for the remainder of 2015.

Liquidity and Capital Resources

Our cash and cash equivalents totaled $34,167,000 at March 31, 2015 compared to $36,461,000 at December 31, 2014, a decrease of $2,294,000.  The majority of our cash is maintained in 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 $4,900,000 of cash from operations during the three months ended March 31, 2015, primarily resulting from our net earnings of $2,207,000, non-cash depreciation and amortization expense of $1,453,000, non-cash stock-based compensation of $1,511,000 and non-cash taxes of $390,000.  Cash from operations increased by $2,577,000 due to a decrease in prepaid expenses and an increase in accounts payable and accrued expenses, and decreased by $3,191,000 due to an increase in accounts receivable and inventory for the three months ended March 31, 2015. Day’s sales outstanding at both March 31, 2015 and March 31, 2014 were 51 days.

Cash used in investing activities.  We used $5,409,000 of cash in investing activities for the three months ended March 31, 2015, consisting of $2,748,000 to purchase an additional manufacturing facility located adjacent to our existing facilities which we expect to utilize to expand our manufacturing capacity, and $2,661,000 for capital expenditures related to building improvements and the purchase of manufacturing, computer and research and development equipment.

Cash used in financing activities.  We used $1,541,000 of cash in financing activities for the three months ended March 31, 2015.  The cash usage was primarily due to $1,951,000 of cash used to repurchase 70,084 shares of our common stock that vested under outstanding restricted stock awards to satisfy income tax withholding obligations, partially offset by recognition of $248,000 of tax benefits from stock based awards and the receipt of $162,000 upon the exercise of outstanding stock options.

We currently anticipate that we will experience positive cash flow from our normal operating activities for the foreseeable future.  We believe that our working capital of $64.0 million at March 31, 2015 will be sufficient to meet all of our operating and capital requirements for the foreseeable future.

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Off-Balance Sheet Arrangements

 We did not have any off-balance sheet arrangements as of March 31, 2015.

Contractual Obligations

The following table summarizes our contractual cash commitments as of March 31, 2015:

	Payments Due by Period
Contractual Obligations	Total		Less than 1 year		1 - 3 years		3 - 5 years		More than 5 years
Facility operating leases	$	969,000	$	213,000	$	297,000	$	311,000	$	148,000
Product license rights		400,000		400,000		-		-		-
Total	$	1,369,000	$	613,000	$	297,000	$	311,000	$	148,000

We do not have any other significant cash commitments related to supply agreements, nor do we have any other 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, 2014 under the caption “Critical Accounting Policies.”

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 adoption of our new products, defense of criminal litigation, exposure to potential shareholder litigation, exposure to potential patent infringement lawsuits, significant variability in quarterly results, 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, information technology risks and those factors set forth under the heading “Risk Factors” in Item 1A of Part II of this Quarterly Annual Report on Form 10-Q.  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.

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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 of our products manufactured in the United States to independent distributors are denominated in United States dollars, with the exception of sales to Germany, where sales are denominated in Euros.  Sales to independent distributors of products manufactured in 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 $53,000 in the amount of United States dollars we receive in payment on the accounts receivable denominated in Euros by 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.

We are 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 $34,000 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.

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Changes in internal control over financial reporting.

          During the fiscal quarter ended March 31, 2015, 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 the 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

The risks and uncertainties described below are not the only ones facing our company.  Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations. If any of the following risks occur, our business, financial condition or results of operations could be seriously harmed.

We will not be successful if the interventional medical device community does not adopt our new products or services.

We have launched over 90 new products or services since 2003.  Our success will depend on the continued launch of new products and services and the medical community’s acceptance of our new products and services.  We cannot predict how quickly, if at all, the medical community will accept our new products and services, or, if accepted, the continuation or extent of their use.  Our potential customers must:

· believe that our products or services offer benefits compared to the methodologies and/or devices that they are currently using;

· use our products or services and obtain acceptable clinical outcomes;

· believe that our products or services are worth the price that they will be asked to pay; and

· be willing to commit the time and resources required to change their current methodology.

Because we are often selling a new technology, we have limited ability to predict the level of growth or timing of sales of these products or services.  If we encounter difficulties in growing our sales of our new medical devices or services, our business will be seriously harmed.

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We and our Chief Executive Officer are defendants in a criminal indictment that could result in a substantial disruption to our business.

The products and business activities of medical device companies are subject to rigorous regulation by the FDA and other federal, state and international governmental authorities under statutes and regulations governing health care fraud.  The U.S. Attorney’s Offices have increased their scrutiny over the medical device industry in recent years.  The U.S. Congress, Department of Justice, Office of Inspector General of the Department of Health and Human Services, and Department of Defense have all issued subpoenas and other requests for information to conduct investigations of, and commenced civil and criminal litigation against, medical device manufacturers, primarily related to financial arrangements with health care providers, regulatory compliance and product promotional practices.

During 2012, the U.S. Attorney’s Office for the Western District of Texas intervened in a qui tam civil lawsuit initiated against us involving allegations of off-label promotion of our Vari-Lase Short Kit endovenous laser product (see Note 9 to the Unaudited Consolidated Financial Statements in Item 1 of Part I of this Form 10-Q).  Subsequently, we learned that the U.S. Attorney’s Office also had commenced a criminal investigation of the same matter.  On January 22, 2014, we agreed with the U.S. Attorney’s Office to settle the civil lawsuit, and the settlement agreement was executed on July 28, 2014.  Under the terms of the settlement agreement, we made a payment of $520,000, we made no admission of fault or liability, and the U.S. Attorney’s Office dismissed the civil lawsuit with prejudice and released all civil claims brought against us in the civil lawsuit.

Settlement of the civil lawsuit had no effect upon the criminal investigation, and on November 13, 2014, the U.S. Department of Justice filed a criminal indictment in the United States District Court for the Western District of Texas related to the Vari-Lase Short Kit investigation.  The indictment alleges that Vascular Solutions and our Chief Executive Officer introduced adulterated and misbranded medical devices into interstate commerce and conspired to introduce adulterated and misbranded medical devices into interstate commerce through the alleged off-label promotion of the Vari-Lase Short Kit product.  We believe the allegations are false and intend to contest them vigorously.  Defending ourselves against the indictment will entail costs that are expected to be material and will require significant attention from our management.  If we were to be convicted of the crimes alleged in the indictment, remedies could include fines, penalties, forfeitures and compliance conditions.  Given the early stage of this proceeding, we cannot estimate the amount or range of loss if we were to be convicted; however, it would likely be material.  If we were to be convicted of a crime related to the delivery of an item or service under Title XVIII of the Social Security Act, or a felony related to health care fraud, we would become automatically excluded by the Department of Health and Human Services (“HHS”) from participation in U.S. government health care programs, including Medicare and Medicaid.  If we were to be convicted of a misdemeanor related to health care fraud, we could be excluded by HHS from participation in U.S. government health care programs, including Medicare and Medicaid.  Exclusion from participation in U.S. government health care programs would substantially adversely affect our ability to continue to conduct our business.  Conviction of our Chief Executive Officer of a crime under statutes related to misbranding and health care fraud could require the termination of his employment with the Company.  The consequences of the current criminal litigation, as well as consequences of any future governmental investigation or lawsuit of any related or unrelated matter, could have a material adverse effect on our business, results of operations and stock price.

We may become subject to shareholder litigation, which could divert the attention of management from the day-to-day operation of our business or result in us incurring substantial costs and liabilities.

Following the announcement on November 13, 2014 of the criminal indictment of the company and our Chief Executive Officer, several law firms publicly stated that they are conducting investigations of us or our officers and directors for potential securities law and shareholder derivative action lawsuits.  Such investigations often result in litigation.  If litigation were to be commenced, our defense of such litigation could divert the attention of management from the day-to-day operation of our business or result in us incurring substantial costs and liabilities, irrespective of the merits of the litigation.

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We may face intellectual property litigation, which could prevent us from manufacturing and selling our products or services or result in us incurring substantial costs and liabilities.

The interventional medical device industry is characterized by numerous patent filings.  As a result, participants in the industry frequently experience substantial intellectual property litigation.  While we are not currently involved in any intellectual property litigation, in the recent past we have been involved in litigation concerning multiple products.

Some companies in the interventional medical device industry have employed intellectual property litigation in an attempt to gain a competitive advantage.  In addition, non-practicing patent assertion entities have accumulated patent rights related to the medical device industry and are asserting them against operating companies in attempt to collect settlements or licensing fees.  Intellectual property litigation has proven to be very complex, and the outcome of such litigation is difficult to predict.  While we do not believe that any of our products or services infringe any existing patent or other intellectual property right, we previously have been involved in substantial intellectual property litigation and expect to continue to become subject to intellectual property claims with respect to our new or existing products or services.

An adverse determination in any intellectual property litigation or interference proceedings against us could prohibit us from selling a product or service, subject us to significant immediate payments to third parties and require us to seek licenses from third parties.  The costs associated with these license arrangements may be substantial and could include substantial up-front payments and ongoing royalties.  Furthermore, the necessary licenses may not be available to us on satisfactory terms, if at all.  Adverse determinations in a judicial or administrative proceeding or failure to obtain necessary licenses could prevent us from manufacturing and selling a product or service.

Our involvement in any future intellectual property claims, regardless of the merits of any asserted claim against us, could divert the attention of our technical and management personnel away from the development and marketing of our products and services for significant periods of time.  Furthermore, the penalties involved with an adverse outcome may be severe, and the costs incurred related to defending such claims could have a material adverse effect on our results of operations or financial condition, even if we ultimately prevail in them.

Our future operating results are difficult to predict and may vary significantly from quarter to quarter, which may adversely affect the price of our common stock.

The ongoing introduction of new products and services that affect our overall product mix make the prediction of future operating results difficult.  You should not rely on our past revenue growth as any indication of future growth rates or operating results.  The price of our common stock will likely fall in the event that our operating results do not meet the expectations of analysts and investors.  Comparisons of our operating results between quarters are an unreliable indication of our future performance because they are likely to vary significantly based on many factors, including:

· the level of sales of our products and services in our markets;

· our ability to introduce new products or services and enhancements in a timely manner;

· the demand for, and acceptance of, our products and services;

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· the success of our competition and the introduction of alternative products or services;

· our ability to command favorable pricing for our products and services;

· the growth of the market for our products and services;

· the expansion and rate of success of our direct sales force in the United States and our independent distributors internationally;

· actions relating to ongoing FDA compliance;

· the effects of intellectual property disputes;

· the effects of government investigations and litigation;

· the size and timing of orders from independent distributors or customers;

· the attraction and retention of key personnel, particularly in sales and marketing, regulatory, manufacturing and research and development;

· unanticipated delays or an inability to control costs;

· general economic conditions, as well as those specific to our customers and markets; and

· seasonal fluctuations in revenue due to the elective nature of some procedures.

We may face product liability claims that could result in costly litigation and significant liabilities.

The manufacture and sale of medical products entails significant risk of product liability claims.  Any product liability claims, with or without merit, could result in costly litigation, reduced sales, cause us to incur significant liabilities and divert our management’s time, attention and resources.  We cannot be sure that our product liability insurance coverage is adequate or that it will continue to be available to us on acceptable terms, if at all.

The market for interventional medical devices and services is highly competitive and will likely become more competitive, and our competitors may be able to respond more quickly to new or emerging technologies and changes in customer requirements that may render our products or services obsolete.

The existing market for interventional medical devices and services is intensely competitive.  We expect competition to increase further as companies develop new products and services or modify their existing products and services to compete directly with ours.  Each of our products and services encounters competition from several medical device companies, including Medtronic plc., Boston Scientific Corporation, Terumo Corporation, and Cook Medical Inc.  Each of these companies has:

Ÿ better name recognition;

Ÿ broader product lines;

Ÿ greater sales, marketing and distribution capabilities;

Ÿ significantly greater financial resources;

Ÿ larger research and development staffs and facilities; and

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Ÿ existing relationships with some of our potential customers.

We may not be able to effectively compete with these companies.  In addition, broad product lines may allow our competitors to negotiate exclusive, long-term supply contracts and offer comprehensive pricing for their products or services.  Broader product lines may also provide our competitors with a significant advantage in marketing competing products or services to group purchasing organizations and other managed care organizations that are increasingly seeking to reduce costs through centralized purchasing.  Greater financial resources and product development capabilities may allow our competitors to respond more quickly to new or emerging technologies and changes in customer requirements that may render our products or services obsolete.

We rely on continued development and improvement of our products and service, which if not successful, may have an adverse effect on our financial condition and results of operations.

We are continually engaged in developing new products and services and improving our existing products and services.  New or improved products and services represent a significant component of our sales growth.  We dedicate significant financial and managerial resources to product and services development and improvement.  We may not achieve our development objectives within our schedule and budget, or at all, due to technical or operational challenges.  Failure to achieve our development objectives on schedule may increase our development expenses and adversely impact our revenues.  If we do achieve our development objectives, we may not be able to obtain regulatory approval for new or improved products or services, and we may not be successful in marketing and selling such products or services.  Failure to obtain regulatory approval or successfully market and sell new or improved products and services could adversely impact our revenues and results of operations.

Constraints or interruption in production from any of our key suppliers may have a material adverse effect on our business, financial condition and results of operations.

In the interest of operational efficiency and due to quality considerations, we obtain some of the components for the products that we manufacture from a sole source.  If the availability of components from a sole source of supply is constrained or interrupted, there is no assurance that we could find an alternative source of supply quickly and cost effectively, if at all.  In addition, due to the stringent regulations and requirements of the FDA and equivalent regulatory entities regarding the manufacture of our products, we may not be able to quickly establish additional or replacement sources for some components or materials.  Unavailability of components could have a material adverse effect on our ability to manufacture and sell products and our results of operations.

We also distribute finished products that are available only from their manufacturer.  In addition, the reprocessing services that we offer are performed by a single provider.  Operational, quality or regulatory issues of the manufacturers of the products we distribute, or the provider of our reprocessing services, could constrain or interrupt the availability of those products or services.  Any constrain or interruption in supply of finished products that we distribute, or the reprocessing services that we offer, could have a material adverse effect on our ability to sell products and services to customers, our financial condition and our results of operations.

Our international sales are subject to a number of risks that could seriously harm our ability to successfully commercialize our products and services in any international market.

Our international sales are subject to several risks, including:

· the ability of our independent distributors to sell our products and services;

Page 24

· the impact of recessions in economies outside the United States;

· greater difficulty in collecting accounts receivable and longer collection periods;

· unexpected changes in regulatory requirements, tariffs or other trade barriers;

· weaker intellectual property rights protection in some countries;

· potentially adverse tax consequences; and

· political and economic instability.

The occurrence of any of these events could seriously harm our future international sales and our ability to successfully commercialize our products and services in any international market.

We depend on information technology and communications systems to operate our business and unauthorized access to, breaches or other failures of these systems could have a material adverse effect on our business.

We rely on information technology systems to process, transmit and store electronic information in our day-to-day operations and for communication with our direct domestic sales force.  Our information technology systems require an ongoing commitment of significant resources to maintain and protect the integrity and confidentiality of our proprietary data.  Third-party cyber-attacks against public companies are becoming more sophisticated and frequent.  Any successful cyber-attack against us could result in the theft of intellectual property, misappropriation of employee or customer information or our other assets, disrupt our communication with our direct domestic sales force, or otherwise compromise our confidential or proprietary information and disrupt our operations.  If we fail to maintain or protect our information technology systems and data integrity effectively or fail to anticipate, plan for or manage significant disruptions to these systems, we could have increases in operating expenses, incur expenses or lose revenues as a result of a data privacy breach or theft of intellectual property, lose existing customers, have difficulty preventing, detecting, and controlling fraud, be subject to regulatory sanctions or penalties, or suffer other adverse consequences, any of which could have a material adverse effect on our business, results of operations, financial condition and cash flows.

Our business and results of operations may be seriously harmed by changes in third-party reimbursement policies.

We could be seriously harmed by changes in reimbursement policies of governmental or private healthcare payors, particularly to the extent any changes affect reimbursement for catheterization procedures in which our products or services are used.  Failure by physicians, hospitals and other users of our products or services to obtain sufficient reimbursement from healthcare payors for procedures in which our products or services are used, or adverse changes in governmental and private third-party payors’ policies toward reimbursement for such procedures, would seriously harm our business.

In the United States, healthcare providers, including hospitals and clinics that purchase medical devices or services such as our products and services, generally rely on third-party payors, principally federal Medicare, state Medicaid and private health insurance plans, to reimburse all, or part of, the cost of catheterization procedures.  Any changes in this reimbursement system could seriously harm our business.

Page 25

In international markets, acceptance of our products and services is dependent in part upon the availability of reimbursement within prevailing healthcare payment systems.  Reimbursement and healthcare payment systems in international markets vary significantly by country.  Our failure to receive international reimbursement approvals could have a negative impact on market acceptance of our products and services in the markets in which these approvals are sought.

Our products and services and our manufacturing activities are subject to extensive governmental regulation that could prevent us from selling our products or services in the United States or introducing new and improved products or services.

Our products and services and our manufacturing activities are subject to extensive regulation by a number of governmental agencies, including the FDA and comparable international agencies.  We are required to:

· obtain the clearance of the FDA and international agencies before we can market and sell our products and services;

· satisfy these agencies’ content requirements for all of our labeling, sales and promotional materials; and

· undergo rigorous inspections by these agencies.

Compliance with the regulations of these agencies may delay or prevent us from introducing any new model of our existing products or other new products or services.  Furthermore, we may be subject to sanctions, including temporary or permanent suspension of operations, product recalls and marketing restrictions if we fail to comply with the laws and regulations pertaining to our business.

We are also required to demonstrate compliance with the FDA’s quality system regulations.  The FDA enforces its quality system regulations through pre-approval and periodic post-approval inspections.  These regulations relate to product testing, vendor qualification, design control and quality assurance, as well as the maintenance of records and documentation.  If we are unable to conform to these regulations, the FDA may take actions which could seriously harm our business.  In addition, government regulation may be established that could prevent, delay, modify or rescind regulatory clearance or approval of our products or services.

Page 26

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 (1)		Average Price Paid per Share		Total Number of Shares Purchased as Part of a Publicly Announced Plans or Programs		Maximum Value of Shares that May Yet be Purchased Under the Plans or Programs
January 1 – 31, 2015		21,595	$	28.99		-	$	19,181,029
February 1 – 28, 2015		48,489	$	27.32		-	$	19,181,029
March 1 – 31, 2015		-		-		-	$	19,181,029
Total		70,084	$	27.83		-	$	19,181,029

(1)  At the election of employees and pursuant to the terms of their Restricted Stock Awards, we purchased 21,595 shares of common stock in January 2015 and 48,489 shares of common stock in February 2015 at the fair market value of the common stock on the day of vesting to satisfy income tax withholding obligations for the employees.

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 March 31, 2000 (File No. 0-27605)).
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 (File No. 0-27605)).
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	Agreement for Sale and Purchase of Property made as of January 26, 2015 by and between IRET – LEXCOM, LLC and Vascular Solutions, Inc. (incorporated by reference to Exhibit 10.1 of Vascular Solutions’ Form 8-K dated January 26, 2015 (File No. 0-27605)).
10.2*	Form of Restricted Stock and Cash Election Award Agreement (incorporated by reference to Exhibit 10.22 to Vascular Solutions’ Form 10-K for the year ended December 31, 2014 (File No. 0-27605)).
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.

Page 27

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
101.CAL	XBRL Taxonomy Extension Calculation Linkbase
101.DEF	XBRL Taxonomy Extension Definition Linkbase
101.LAB	XBRL Taxonomy Extension Label Linkbase
101.PRE	XBRL Taxonomy Extension Presentation Linkbase

* Management contract or compensatory plan or arrangement required to be filed as an Exhibit to this Form 10-Q.

Page 28

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:  April 21, 2015	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 29

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:  April 21, 2015	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 consolidatez  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:  April 21, 2015	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 March 31, 2015, 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

April 21, 2015

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 March 31, 2015, 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

April 21, 2015

XML

Income Taxes

3 Months Ended

Mar. 31, 2015

Income Taxes [Abstract]

Income Taxes

(10) 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 three month periods ended March 31, 2015 and 2014, the Company recorded a provision for taxes of $1,244,000 and $1,574,000 on earnings before tax of $3,451,000 and $4,373,000 resulting in an effective income tax rate of 36% for both periods.  The effective tax rate of 36% for the three months ended March 31, 2015 and 2014 consists of a graduated federal rate slightly higher than 34% and state 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, and 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.  If the Company’s actual results and updated projections vary significantly from the projections used as a basis for determining its valuation allowance, the Company may need to increase or decrease the valuation allowance against the gross deferred tax assets.  The Company will adjust earnings for the deferred tax in the period in which any such determination is made.

The Company applies ASC 740, Income Taxes, which clarifies 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 had an unrecognized tax asset of $1,262,000 as of both March 31, 2015 and December 31, 2014.  The impact of tax related interest and penalties is recorded as a component of income tax expense.  As of March 31, 2015, 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 earnings.

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.  At March 31, 2015, the Company’s 2013 U.S. Federal 1120 tax filing was under exam by the U.S. Internal Revenue Service.  To date no finding or adjustments have been proposed to the Company.  At March 31, 2015, tax years 2011 through 2014 remain open to examination.

XML

Consolidated Statements of Earnings (unaudited) (USD $)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Net revenue:
Product revenue	$ 34,441,000	$ 29,845,000
License, royalty and collaboration revenue	170,000	62,000
Total revenue	34,611,000	29,907,000
Product costs and operating expenses:
Cost of goods sold	11,296,000	9,583,000
Collaboration expenses	54,000	11,000
Research and development	4,067,000	3,290,000
Clinical and regulatory	1,481,000	1,300,000
Sales and marketing	8,732,000	7,736,000
General and administrative	4,777,000	2,859,000
Medical device excise taxes	376,000	345,000
Amortization of purchased technology and intangibles	405,000	412,000
Total product costs and operating expenses	31,188,000	25,536,000
Operating earnings	3,423,000	4,371,000
Other earnings	28,000	2,000
Earnings before income taxes	3,451,000	4,373,000
Income tax expense	(1,244,000)	(1,574,000)
Net earnings	$ 2,207,000	$ 2,799,000
Net earnings per share - basic (in dollars per share)	$ 0.13	$ 0.17
Net earnings per share - diluted (in dollars per share)	$ 0.12	$ 0.16

XML

Revenue Recognition

3 Months Ended

Mar. 31, 2015

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, Revenue Recognition, 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 and title passes to customers based on FOB shipping point terms.  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 and is reported on a gross basis.  Allowances are provided for estimated returns and costs at the time of shipment.  Sales and use taxes are reported on a net basis, excluding them from revenue.

The Company’s revenues from license agreements and research collaborations are recognized 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.

The Company currently has a license agreement with King Pharmaceuticals, Inc. (King), now a subsidiary of Pfizer, Inc., under which the Company licensed the exclusive rights of Thrombi-Pad^®, Thrombi-Gel^® and Thrombi-Paste^TM products to King in exchange for a license fee.  The Company is amortizing the license fees on a straight-line basis over the projected 10 year economic life of the products.  The Company determines the economic life of the products under its license agreements by evaluating similar products the Company has launched or other similar products in the medical industry.

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 goods sold.

In addition, the Company has reviewed the provisions of ASC 808, Collaborative Arrangements, and the adoption of this ASC has had no impact on the amounts recorded under these agreements.

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 goods sold.

In May 2014, the Financial Accounting Standards Board (FASB) issued guidance creating ASC 606, “Revenue from Contracts with Customers.”  The new section will replace ASC 605, “Revenue Recognition” and creates modifications to various other revenue accounting standards for specialized transactions and industries.  The new ASC is intended to conform United States revenue accounting principles with concurrently issued International Financial Reporting Standards.  Prior to the guidance, revenue recognition differed between United States practice and those of much of the rest of the world.  The guidance also is intended to enhance disclosures related to disaggregated revenue information.  The updated guidance is effective for annual reporting periods beginning on or after December 15, 2016, and interim periods within those annual periods.  The Company will adopt the new provisions of this accounting standard at the beginning of fiscal year 2017, given that early adoption is not an option.  The Company does not expect adoption will have an impact on the consolidated financial statements.

XML

Revenue Recognition (Details)	3 Months Ended
	Mar. 31, 2015
Revenue Recognition [Abstract]
Restocking charge (in hundredths)	20.00%
Thrombi Pad [Member]
Revenue Recognition, Amortization of License Fee [Line Items]
Years to amortize license fees	10 years
Thrombi Gel [Member]
Revenue Recognition, Amortization of License Fee [Line Items]
Years to amortize license fees	10 years
Thrombi Paste [Member]
Revenue Recognition, Amortization of License Fee [Line Items]
Years to amortize license fees	10 years

XML

Products and Services

3 Months Ended

Mar. 31, 2015

Products and Services [Abstract]

Products and Services

(11) Products and Services

Historically, the Company has described its business in terms of three product categories as follows:

· Catheter products consist principally of catheters used in minimally invasive medical procedures for the diagnosis or treatment of vascular conditions, such as the GuideLiner^® catheter used to access discrete regions of the coronary anatomy and the Pronto^® extraction catheters used in treating acute myocardial infarction.  This category also includes products used in connection with gaining percutaneous access to the vasculature to perform minimally invasive procedures, such as micro-introducer kits.

· Hemostat products consist principally of blood clotting products, such as 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.  This category also includes products used in radial artery access catheterizations, such as the Accumed^™ wrist positioning splints and Vasc^™ Band inflatable compression bands.

· Vein products and services consist principally of the Vari-Lase^® endovenous laser products consisting of laser consoles and procedure kits used for the treatment of varicose veins, and a reprocessing service for a competitor’s radiofrequency vein ablation catheter.

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

	Three Months Ended March 31,
	2015					2014
	Net Revenue		Percent Change			Net Revenue		Percent  Change
Catheter products	$	23,857,000		24	%	$	19,164,000		15	%
Hemostat products		6,177,000		3	%		5,997,000		4	%
Vein products and services		4,407,000		(6	%)		4,684,000		31	%
Total product revenue		34,441,000		15	%		29,845,000		15	%
License		170,000		173	%		62,000		(29	%)
Total revenue	$	34,611,000		16	%	$	29,907,000		15	%

Due to the growth in the number of the company’s  product offerings and in order to present a more detailed product-specific revenue analysis, beginning in the first quarter of 2015 the Company commenced reporting net revenue for each of its top product lines in each of its primary markets.  Beginning in the second quarter of 2015, the Company will no longer report its revenue according to the three product categories outlined above.  The following tables set forth, for the periods indicated, net revenue by product line along with the percent change from the previous period for each of the Company’s top seven products by net revenue:

		Three months ended March 31,
		2015					2014
Product Line	Primary Market	Net Revenue		Percent Change			Net Revenue
GuideLiner catheters	Interventional cardiology	$	10,340,000		54	%	$	6,703,000
Pronto catheters	Interventional cardiology		4,382,000		(6	%)		4,676,000
Hemostatic patches	Interventional cardiology		3,022,000		(4	%)		3,164,000
Micro-introducer kits	Interventional radiology		2,854,000		22	%		2,333,000
Vein catheter reprocessing	Phlebology		2,712,000		1	%		2,680,000
Radial access products	Interventional cardiology		1,638,000		23	%		1,333,000
D-Stat Flowable hemostat	Electrophysiology		1,371,000		1	%		1,352,000

The Company sells its products into four primary clinical markets:  interventional cardiology, interventional radiology, electrophysiology, and phlebology (vein treatment).   The Company estimates the percentage of its revenue that is generated in each market by estimating the percentage of sales of each product that is made to customers for use in that market.  During the first quarter of 2015, the Company estimates that 73% of its product sales by revenue were generated from the interventional cardiology market, 13% from the phlebology market, 10% from the interventional radiology market and 4% from the electrophysiology market.

XML

Credit Risk and Allowance for Doubtful Accounts (Details) (USD $)	3 Months Ended
	Mar. 31, 2015	Dec. 31, 2014
Valuation and Qualifying Accounts Disclosure [Line Items]
Number of days before considered past due	60 days
Restocking charge (in hundredths)	20.00%
Reserves for accounts receivable, net	$ 355,000	$ 300,000
Allowance for Doubtful Accounts [Member]
Valuation and Qualifying Accounts Disclosure [Line Items]
Reserves for accounts receivable, net	280,000	220,000
Sales Return Allowances [Member]
Valuation and Qualifying Accounts Disclosure [Line Items]
Reserves for accounts receivable, net	$ 75,000	$ 80,000

XML

Goodwill and Other Intangible Assets (Details) (USD $)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Goodwill [Abstract]
Beginning balance	$ 10,259,000
Foreign currency translation adjustments	(226,000)
Ending balance	10,033,000
Acquired Intangibles [Abstract]
Beginning balance	10,164,000
Amortization	(405,000)	(412,000)
Foreign currency translation adjustments	(109,000)
Ending balance	$ 9,650,000

XML

Income Taxes (Details) (USD $)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Dec. 31, 2014
Income Taxes [Abstract]
Income tax expense (benefit)	$ 1,244,000	$ 1,574,000
Earnings before income tax	3,451,000	4,373,000
Effective income tax rate (in hundredths)	36.00%	36.00%
Federal statutory income tax rate (in hundredths)	34.00%	34.00%
Unrecognized income tax asset	1,262,000		1,262,000
Tax related interest expense	0
Tax related penalties expense	$ 0

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Inventories (Details) (USD $)	Mar. 31, 2015	Dec. 31, 2014
Inventories [Abstract]
Raw materials	$ 8,796,000	$ 8,251,000
Work-in-process	1,828,000	1,139,000
Finished goods	7,283,000	6,518,000
Inventory, Total	$ 17,907,000	$ 15,908,000

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Consolidated Statements of Comprehensive Earnings (unaudited) (Parenthetical) (USD $)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Consolidated Statements of Comprehensive Earnings (unaudited) [Abstract]
Foreign currency translation adjustments, tax	$ 0	$ 0

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Basis of Presentation

3 Months Ended

Mar. 31, 2015

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, 2014 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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Inventories

3 Months Ended

Mar. 31, 2015

Inventories [Abstract]

Inventories

(4) Inventories

Inventories are stated at the lower of cost (weighted average 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:

	March 31, 2015		December 31, 2014
	(unaudited)
Raw materials	$	8,796,000	$	8,251,000
Work-in-process		1,828,000		1,139,000
Finished goods		7,283,000		6,518,000
	$	17,907,000	$	15,908,000

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Net Earnings per Share

3 Months Ended

Mar. 31, 2015

Net Earnings per Share [Abstract]

Net Earnings per Share

(2) Net Earnings per Share

In accordance with Accounting Standards Codification (ASC) 260, Earnings Per Share, basic net earnings per share for the three months ended March 31, 2015 and 2014 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 upon the exercise of stock options and restricted stock awards that were outstanding during the period.

Weighted average common shares outstanding for the three months ended March 31, 2015 and 2014 were as follows:

	Three Months Ended March 31,
	2015		2014
	(unaudited)
Weighted average shares outstanding – basic		16,939,000		16,686,000
Weighted average shares outstanding – diluted		17,940,000		17,538,000

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Concentrations of Credit and Other Risks (Details)	3 Months Ended		12 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Dec. 31, 2013
Concentration Risk [Line Items]
Threshold for reporting customers revenues by customer (in hundredths)	10.00%	10.00%
Threshold for reporting customers gross receivables by customer (in hundredths)	10.00%		10.00%
United States [Member]
Concentration Risk [Line Items]
Concentration risk, percentage (in hundredths)	78.00%	84.00%
International Markets [Member]
Concentration Risk [Line Items]
Concentration risk, percentage (in hundredths)	22.00%	16.00%

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Products and Services (Details) (USD $)	3 Months Ended
	Mar. 31, 2015 Product Category	Mar. 31, 2014
Product Information [Line Items]
Number of product categories	3
Number of products	7
Total revenue	$ 34,611,000	$ 29,907,000
Total revenue percentage change (in hundredths)	16.00%	15.00%
Sales Revenue, Net [Member] | Interventional cardiology [Member]
Product Information [Line Items]
Percentage of sales revenue (in hundredths)	73.00%
Sales Revenue, Net [Member] | Phlebology [Member]
Product Information [Line Items]
Percentage of sales revenue (in hundredths)	13.00%
Sales Revenue, Net [Member] | Interventional radiology [Member]
Product Information [Line Items]
Percentage of sales revenue (in hundredths)	10.00%
Sales Revenue, Net [Member] | Electrophysiology [Member]
Product Information [Line Items]
Percentage of sales revenue (in hundredths)	4.00%
GuideLiner catheter [Member]
Product Information [Line Items]
Class of primary market	Interventional cardiology
Total revenue	10,340,000	6,703,000
Total revenue percentage change (in hundredths)	54.00%
Pronto catheter [Member]
Product Information [Line Items]
Class of primary market	Interventional cardiology
Total revenue	4,382,000	4,676,000
Total revenue percentage change (in hundredths)	(6.00%)
Hemostatic patches [Member]
Product Information [Line Items]
Class of primary market	Interventional cardiology
Total revenue	3,022,000	3,164,000
Total revenue percentage change (in hundredths)	(4.00%)
Micro-introducer kits [Member]
Product Information [Line Items]
Class of primary market	Interventional radiology
Total revenue	2,854,000	2,333,000
Total revenue percentage change (in hundredths)	22.00%
Vein catheter reprocessing [Member]
Product Information [Line Items]
Class of primary market	Phlebology
Total revenue	2,712,000	2,680,000
Total revenue percentage change (in hundredths)	1.00%
Radial access [Member]
Product Information [Line Items]
Class of primary market	Interventional cardiology
Total revenue	1,638,000	1,333,000
Total revenue percentage change (in hundredths)	23.00%
D-Stat Flowable hemostat [Member]
Product Information [Line Items]
Class of primary market	Electrophysiology
Total revenue	1,371,000	1,352,000
Total revenue percentage change (in hundredths)	1.00%
Catheter Products [Member]
Product Information [Line Items]
Total revenue	23,857,000	19,164,000
Total revenue percentage change (in hundredths)	24.00%	15.00%
Hemostat Products [Member]
Product Information [Line Items]
Total revenue	6,177,000	5,997,000
Total revenue percentage change (in hundredths)	3.00%	4.00%
Vein Products and Services [Member]
Product Information [Line Items]
Total revenue	4,407,000	4,684,000
Total revenue percentage change (in hundredths)	(6.00%)	31.00%
Total Product Revenue [Member]
Product Information [Line Items]
Total revenue	34,441,000	29,845,000
Total revenue percentage change (in hundredths)	15.00%	15.00%
License, Royalty and Collaboration [Member]
Product Information [Line Items]
Total revenue	$ 170,000	$ 62,000
Total revenue percentage change (in hundredths)	173.00%	(29.00%)

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Consolidated Balance Sheets (unaudited) (Parenthetical) (USD $)	Mar. 31, 2015	Dec. 31, 2014
Current assets:
Reserves for accounts receivable	$ 355,000	$ 300,000
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)	17,264,443	17,202,365
Common stock, shares outstanding (in shares)	17,264,443	17,202,365

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Concentrations of Credit and Other Risks

3 Months Ended

Mar. 31, 2015

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 directly to hospitals and clinics.  In all international markets, the Company sells its products to distributors who, in turn, sell to hospitals and clinics.  Loss or termination of distributors, or their inability to effectively promote the Company’s products, could have a material adverse effect on the Company’s financial condition and results of operations.

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 March 31, 2015 or December 31, 2014.  There have been no material losses on customer receivables.

Revenue by geographic destination as a percentage of total net revenue for the three month periods ended March 31, 2015 and 2014 was 78% and 84% in the United States and 22% and 16% in international markets, respectively.  Revenues are attributable to countries based on location of the customer.  No single customer represented greater than 10% of the total net revenue for the three months ended March 31, 2015 or 2014.

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Consolidated Statements of Comprehensive Earnings (unaudited) (USD $)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Consolidated Statements of Comprehensive Earnings (unaudited) [Abstract]
Net earnings	$ 2,207,000	$ 2,799,000
Other comprehensive earnings (losses), net of $0 tax: Foreign currency translation adjustments	(712,000)	(304,000)
Comprehensive earnings	$ 1,495,000	$ 2,495,000

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Consolidated Balance Sheets (unaudited) (USD $)	Mar. 31, 2015	Dec. 31, 2014
Current assets:
Cash and cash equivalents	$ 34,167,000	$ 36,461,000
Accounts receivable, net of reserves of $355,000 and $300,000 in 2015 and 2014, respectively	18,133,000	17,105,000
Inventories	17,907,000	15,908,000
Prepaid expenses and other	5,148,000	5,231,000
Current portion of deferred tax assets	4,050,000	3,681,000
Total current assets	79,405,000	78,386,000
Property, plant and equipment, net	29,893,000	25,665,000
Goodwill	10,033,000	10,259,000
Intangible assets, net	9,650,000	10,164,000
Deferred tax assets, net of current portion	2,160,000	2,894,000
Total assets	131,141,000	127,368,000
Current liabilities:
Accounts payable	6,253,000	4,806,000
Accrued compensation	5,000,000	4,580,000
Accrued expenses	3,575,000	3,016,000
Accrued royalties	193,000	230,000
Current portion of deferred revenue	341,000	391,000
Total current liabilities	15,362,000	13,023,000
Long-term deferred revenue, net of current portion	150,000	202,000
Long-term deferred tax liabilities	824,000	803,000
Total long-term liabilities	974,000	1,005,000
Shareholders' equity:
Common stock, $0.01 par value: Authorized shares - 40,000,000 Issued and outstanding shares - 17,264,443 - 2015; 17,202,365 - 2014	173,000	172,000
Additional paid-in capital	97,293,000	97,324,000
Accumulated other comprehensive earnings (loss)	(1,437,000)	(725,000)
Retained earnings	18,776,000	16,569,000
Total shareholders' equity	114,805,000	113,340,000
Total liabilities and shareholders' equity	$ 131,141,000	$ 127,368,000

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Dependence on Key Suppliers (Details)	3 Months Ended
	Mar. 31, 2015
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 (Details)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Net Earnings per Share [Abstract]
Weighted average shares outstanding - basic (in shares)	16,939,000	16,686,000
Weighted average shares outstanding - diluted (in shares)	17,940,000	17,538,000

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Credit Risk and Allowance for Doubtful Accounts

3 Months Ended

Mar. 31, 2015

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 its 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.  Accounts receivable over 60 days past due are considered past due.  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 March 31, 2015 and December 31, 2014, the allowance for doubtful accounts was $280,000 and $220,000, respectively.

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 its balance sheet.  At March 31, 2015 and December 31, 2014, the sales and return allowance was $75,000 and $80,000, respectively.

Accounts receivable are shown net of the combined total of the allowance for doubtful accounts and allowance for sales returns of $355,000 and $300,000 at March 31, 2015 and December 31, 2014, respectively.

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Commitments and Contingencies (Details) (USD $)	3 Months Ended		0 Months Ended	91 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Jul. 28, 2014	Jul. 31, 2014
Governmental Proceedings [Abstract]
Product revenue	$ 34,441,000	$ 29,845,000
Governmental Proceedings [Member]
Governmental Proceedings [Abstract]
Product revenue				534,000
Percentage of sales revenue (in hundredths)				0.10%
Alleged damages from product defects to government				20,000,000
Payment on settlement of litigation			$ 520,000

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Commitments and Contingencies

3 Months Ended

Mar. 31, 2015

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 Vari-Lase products, and in particular the use of the Vari-Lase Short Kit for the treatment of perforator veins.  Subsequently, the Company learned that the U.S. Attorney’s Office also had commenced a criminal investigation of the same matter.  The Vari-Lase Short Kit was sold under a 510(k) clearance for the treatment of incompetence and reflux of superficial veins in the lower extremity from 2007 until it was voluntarily withdrawn from the market in July 2014 with total U.S. sales of approximately $534,000 (0.1% of the Company’s total U.S. sales for such period) and has not been the subject of any reported serious adverse clinical event.  On August 14, 2012, the United States 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 was the basis for the U.S. Attorney’s civil investigation, to which the federal government, after three extensions of time, elected to intervene.  The complaint contained allegations of off-label promotion of Vari-Lase products for the treatment of perforator veins, re-use of single-use Vari-Lase products and kickbacks to physicians, resulting in alleged damages to the government of approximately $20 million.  An amended complaint limited to allegations of off-label promotion of the Vari-Lase Short Kit resulting in an unspecified amount of damages and penalties was filed by the U.S. Attorney’s Office in December 2012.  On January 22, 2014, the Company agreed with the U.S. Attorney’s Office to settle the civil lawsuit, and the settlement agreement was executed on July 28, 2014.  Under the terms of the settlement agreement, the Company made a payment of $520,000, the Company made no admission of fault or liability, and the U.S. Attorney’s Office dismissed the civil lawsuit with prejudice and released all civil claims brought against the Company in the civil lawsuit.  Settlement of the civil lawsuit had no effect upon the criminal investigation.

On November 13, 2014, a criminal indictment was issued in the United States District Court for the Western District of Texas related to the Vari-Lase Short Kit investigation.  The indictment alleges that the Company and its Chief Executive Officer introduced adulterated and misbranded medical devices into interstate commerce and conspired to introduce adulterated and misbranded medical devices into interstate commerce through the alleged off-label promotion of the Vari-Lase Short Kit.  The Company believes the allegations are false and intends to contest them vigorously.  Defending the Company against the indictment will entail costs that are expected to be material and will require significant attention from the Company’s management.  If the Company were to be convicted of the crimes alleged in the indictment, remedies could include fines, penalties, forfeitures and compliance conditions.  Given the early stage of this proceeding, the Company cannot estimate the amount or range of loss if the Company were to be convicted; however, it would likely be material.  If the Company were to be convicted of a crime related to the delivery of an item or service under Title XVIII of the Social Security Act, or a felony related to health care fraud, it would become automatically excluded by the Department of Health and Human Services (“HHS”) from participation in U.S. government health care programs, including Medicare and Medicaid.  If the Company were to be convicted of a misdemeanor related to health care fraud, it could be excluded by HHS from participation in U.S. government health care programs, including Medicare and Medicaid.  Exclusion from participation in U.S. government health care programs would substantially adversely affect the Company’s ability to continue to conduct its business.  Conviction of the Company’s chief executive officer of a crime under statutes related to misbranding and health care fraud could require the termination of his employment with the Company.

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.

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Goodwill and Other Intangible Assets

3 Months Ended

Mar. 31, 2015

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 three months ended March 31, 2015 are as follows:

	Goodwill			Acquired Intangibles
	(unaudited)
Balance at December 31, 2014	$	10,259,000		$	10,164,000
Amortization		–			(405,000	)
Foreign currency translation adjustments		(226,000	)		(109,000	)
Balance at March 31, 2015	$	10,033,000		$	9,650,000

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Consolidated Statements of Cash Flows (unaudited) (USD $)	3 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Operating activities
Net earnings	$ 2,207,000	$ 2,799,000
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation	1,048,000	772,000
Amortization	405,000	412,000
Stock-based compensation	1,511,000	1,285,000
Deferred taxes, net	638,000	446,000
Tax benefit from stock-based awards	(248,000)	(397,000)
Gain on disposal of equipment	0	(5,000)
Change in accounts receivable allowance	55,000	80,000
Changes in operating assets and liabilities:
Accounts receivable	(1,102,000)	(1,443,000)
Inventories	(2,089,000)	(1,233,000)
Prepaid expenses and other	128,000	(629,000)
Accounts payable	1,482,000	1,548,000
Accrued expenses and compensation	967,000	404,000
Amortization of deferred license fees and other deferred revenue	(102,000)	(77,000)
Net cash provided by operating activities	4,900,000	3,962,000
Investing activities
Purchase of property and equipment	(2,661,000)	(1,323,000)
Purchase of building and land	(2,748,000)	0
Proceeds from the sale of equipment	0	9,000
Net cash used in investing activities	(5,409,000)	(1,314,000)
Financing activities
Repurchase of common shares	(1,951,000)	(1,805,000)
Tax benefit from stock-based awards	248,000	397,000
Proceeds from the exercise of stock options and sale of stock, net of expenses	162,000	895,000
Net cash used in financing activities	(1,541,000)	(513,000)
Increase (decrease) in cash and cash equivalents	(2,050,000)	2,135,000
Effect of exchange rate changes on cash and cash equivalents	(244,000)	(158,000)
Cash and cash equivalents at beginning of period	36,461,000	30,785,000
Cash and cash equivalents at end of period	34,167,000	32,762,000
Supplemental disclosure of cash flow
Cash paid for interest	0	3,000
Cash paid for taxes	$ 256,000	$ 459,000

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Net Earnings per Share (Tables)

3 Months Ended

Mar. 31, 2015

Net Earnings per Share [Abstract]

Weighted average common shares outstanding

Weighted average common shares outstanding for the three months ended March 31, 2015 and 2014 were as follows:

	Three Months Ended March 31,
	2015		2014
	(unaudited)
Weighted average shares outstanding – basic		16,939,000		16,686,000
Weighted average shares outstanding – diluted		17,940,000		17,538,000

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Dependence on Key Suppliers

3 Months Ended

Mar. 31, 2015

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 on January 9, 2007.  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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Products and Services (Tables)

3 Months Ended

Mar. 31, 2015

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:

	Three Months Ended March 31,
	2015					2014
	Net Revenue		Percent Change			Net Revenue		Percent  Change
Catheter products	$	23,857,000		24	%	$	19,164,000		15	%
Hemostat products		6,177,000		3	%		5,997,000		4	%
Vein products and services		4,407,000		(6	%)		4,684,000		31	%
Total product revenue		34,441,000		15	%		29,845,000		15	%
License		170,000		173	%		62,000		(29	%)
Total revenue	$	34,611,000		16	%	$	29,907,000		15	%

The following tables set forth, for the periods indicated, net revenue by product line along with the percent change from the previous period for each of the Company’s top seven products by net revenue:

		Three months ended March 31,
		2015					2014
Product Line	Primary Market	Net Revenue		Percent Change			Net Revenue
GuideLiner catheters	Interventional cardiology	$	10,340,000		54	%	$	6,703,000
Pronto catheters	Interventional cardiology		4,382,000		(6	%)		4,676,000
Hemostatic patches	Interventional cardiology		3,022,000		(4	%)		3,164,000
Micro-introducer kits	Interventional radiology		2,854,000		22	%		2,333,000
Vein catheter reprocessing	Phlebology		2,712,000		1	%		2,680,000
Radial access products	Interventional cardiology		1,638,000		23	%		1,333,000
D-Stat Flowable hemostat	Electrophysiology		1,371,000		1	%		1,352,000

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Inventories (Tables)

3 Months Ended

Mar. 31, 2015

Inventories [Abstract]

Inventories

Inventories are comprised of the following:

	March 31, 2015		December 31, 2014
	(unaudited)
Raw materials	$	8,796,000	$	8,251,000
Work-in-process		1,828,000		1,139,000
Finished goods		7,283,000		6,518,000
	$	17,907,000	$	15,908,000

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Document and Entity Information	3 Months Ended
	Mar. 31, 2015	Apr. 17, 2015
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		17,264,019
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q1
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2015

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Goodwill and Other Intangible Assets (Tables)

3 Months Ended

Mar. 31, 2015

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 three months ended March 31, 2015 are as follows:

	Goodwill			Acquired Intangibles
	(unaudited)
Balance at December 31, 2014	$	10,259,000		$	10,164,000
Amortization		–			(405,000	)
Foreign currency translation adjustments		(226,000	)		(109,000	)
Balance at March 31, 2015	$	10,033,000		$	9,650,000