10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 _____________________________________________________

FORM 10-Q

 _____________________________________________________

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2014

Commission File No. 000-52082

 ____________________________________________________

CARDIOVASCULAR SYSTEMS, INC.

(Exact name of registrant as specified in its charter)

 ____________________________________________________

Delaware	No. 41-1698056
(State or other jurisdiction of	(IRS Employer
incorporation or organization)	Identification No.)

651 Campus Drive

St. Paul, Minnesota 55112-3495

(Address of principal executive offices, including zip code)

Registrant’s telephone number, including area code: (651) 259-1600

____________________________________________________

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

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

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

Large accelerated filer	x	Accelerated filer	¨
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	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  x

The number of shares outstanding of the registrant’s common stock as of January 31, 2015 was: Common Stock, $0.001 par value per share, 31,608,864 shares.

Cardiovascular Systems, Inc.

Consolidated Financial Statements

Table of Contents

	PAGE
PART I. FINANCIAL INFORMATION
ITEM 1. Consolidated Financial Statements (unaudited)	3
Consolidated Balance Sheets as of December 31, 2014 and June 30, 2014	3
Consolidated Statements of Operations for the three and six months ended December 31, 2014 and 2013	4
Consolidated Statements of Cash Flows for the six months ended December 31, 2014 and 2013	5
Notes to 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	21
ITEM 4. Controls and Procedures	21
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings	22
ITEM 1A. Risk Factors	22
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds	22
ITEM 3. Defaults Upon Senior Securities	22
ITEM 4. Mine Safety Disclosures	22
ITEM 5. Other Information	22
ITEM 6. Exhibits	23
Signatures	24
Exhibit Index	25

2

PART I. — FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Cardiovascular Systems, Inc.

Consolidated Balance Sheets

(Dollars in thousands, except per share and share amounts)

(Unaudited)

	December 31, 2014			June 30, 2014
ASSETS
Current assets
Cash and cash equivalents	$	101,344		$	126,592
Accounts receivable, net	26,064			21,383
Inventories	13,957			12,890
Prepaid expenses and other current assets	4,084			1,846
Total current assets	145,449			162,711
Property and equipment, net	30,940			15,297
Patents, net	4,150			3,823
Other assets	70			70
Total assets	$	180,609		$	181,901
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Short-term borrowings	$	—		$	2,400
Accounts payable	18,302			12,699
Accrued expenses	12,185			14,630
Total current liabilities	30,487			29,729
Long-term liabilities
Other liabilities	1,967			117
Total liabilities	32,454			29,846
Commitments and contingencies	—			—
Common stock, $0.001 par value; authorized 100,000,000 common shares at December 31, 2014 and June 30, 2014; issued and outstanding 31,572,370 at December 31, 2014 and 31,084,742 at June 30, 2014, respectively	32			31
Additional paid in capital	400,185			390,589
Accumulated deficit	(252,062		)	(238,565		)
Total stockholders’ equity	148,155			152,055
Total liabilities and stockholders’ equity	$	180,609		$	181,901

The accompanying notes are an integral part of these unaudited consolidated financial statements.

3

Cardiovascular Systems, Inc.

Consolidated Statements of Operations

(Dollars in thousands, except per share and share amounts)

(Unaudited)

	Three Months Ended   December 31,						Six Months Ended   December 31,
	2014			2013			2014			2013
Revenues	$	44,732		$	32,337		$	86,086		$	62,103
Cost of goods sold	9,346			7,313			18,231			14,177
Gross profit	35,386			25,024			67,855			47,926
Expenses:
Selling, general and administrative	32,553			27,468			66,060			52,839
Research and development	8,085			5,051			15,237			9,429
Total expenses	40,638			32,519			81,297			62,268
Loss from operations	(5,252		)	(7,495		)	(13,442		)	(14,342		)
Interest and other, net	(21		)	(1,163		)	(55		)	(1,608		)
Net and comprehensive loss	$	(5,273	)	$	(8,658	)	$	(13,497	)	$	(15,950	)
Net and comprehensive loss per common share:
Basic and diluted	$	(0.17	)	$	(0.32	)	$	(0.43	)	$	(0.61	)
Weighted average common shares used in computation:
Basic and diluted	31,487,358			27,177,952			31,399,234			25,964,660

The accompanying notes are an integral part of these unaudited consolidated financial statements.

4

Cardiovascular Systems, Inc.

Consolidated Statements of Cash Flows

(Dollars in thousands)

(Unaudited)

	Six Months Ended   December 31,
	2014			2013
Cash flows from operating activities
Net loss	$	(13,497	)	$	(15,950	)
Adjustments to reconcile net loss to net cash used in operations
Depreciation of property and equipment	751			579
Amortization and write-off of patents	82			102
Provision for doubtful accounts	846			190
Amortization of discount on debt, net	—			137
Debt conversion and valuation of conversion options, net	—			716
Stock-based compensation	7,083			4,855
Changes in assets and liabilities
Accounts receivable	(5,527		)	(1,378		)
Inventories	(1,067		)	(4,040		)
Prepaid expenses and other assets	287			(194		)
Accounts payable	467			1,399
Accrued expenses and other liabilities	(542		)	1,096
Net cash used in operations	(11,117		)	(12,488		)
Cash flows from investing activities
Expenditures for property and equipment	(11,258		)	(717		)
Purchases of marketable securities	(2,084		)	—
Costs incurred in connection with patents	(543		)	(385		)
Net cash used in investing activities	(13,885		)	(1,102		)
Cash flows from financing activities
Proceeds from employee stock purchase plan	1,360			1,291
Exercise of stock options and warrants	794			9,097
Proceeds from the issuance of common stock, net of issuance costs	—			84,369
Proceeds from line of credit	—			4,800
Payments on debt	(2,400		)	(7,200		)
Net cash (used in) provided by financing activities	(246		)	92,357
Net change in cash and cash equivalents	(25,248		)	78,767
Cash and cash equivalents
Beginning of period	126,592			67,897
End of period	$	101,344		$	146,664
Noncash investing activities
Property and equipment included in accounts payable	$	5,136		$	18

The accompanying notes are an integral part of these unaudited consolidated financial statements.

5

CARDIOVASCULAR SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(For the Six Months Ended December 31, 2014 and 2013)

(Dollars in thousands, except per share and share amounts)

(Unaudited)

1. Business Overview

Company Description

Cardiovascular Systems, Inc. (the “Company”) develops and commercializes innovative solutions for treating vascular and coronary diseases. The Company’s peripheral arterial disease products, the Stealth 360°^® PAD System, Diamondback 360^® PAD System, and Predator 360°^® PAD System, are catheter-based platforms capable of treating a broad range of plaque types, including calcified plaque, in leg arteries both above and below the knee and address many of the limitations associated with existing surgical, catheter and pharmacological treatment alternatives. In October 2013, the Company received premarket approval (“PMA”) from the FDA to market the Diamondback 360^® Coronary Orbital Atherectomy System (“OAS”) as a treatment for severely calcified coronary arteries. The Company began a controlled commercial launch of the Diamondback 360^® Coronary OAS following receipt of PMA approval. In March 2014, we received approval for the Diamondback 360^® 60cm Peripheral OAS access device, which allows physicians to treat PAD patients in the small and tortuous vessels located below the knee through alternative access sites in the ankle or foot. In November 2014, the Company received CE Mark for its Stealth 360° PAD System and is currently evaluating the timing and structure of its plans to commercialize products in Europe.

2. Summary of Significant Accounting Policies

Interim Financial Statements

The Company prepared the unaudited interim consolidated financial statements and related unaudited financial information in the footnotes in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements. The year-end consolidated balance sheet was derived from the Company’s audited consolidated financial statements, but does not include all disclosures as required by GAAP. These interim consolidated financial statements reflect all adjustments consisting of normal recurring accruals, which, in the opinion of management, are necessary to state fairly the Company’s consolidated financial position, the results of its operations and its cash flows for the interim periods. These interim consolidated financial statements should be read in conjunction with the consolidated annual financial statements and the notes thereto included in the Form 10-K filed by the Company with the SEC on August 28, 2014. The nature of the Company’s business is such that the results of any interim period may not be indicative of the results to be expected for the entire year.

Use of Estimates

The preparation of the Company’s consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and 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. Actual results could differ from those estimates.

Stock-Based Compensation

The Company recognizes stock-based compensation expense in an amount equal to the fair value of share-based payments computed at the date of grant. The fair value of all restricted stock awards are expensed in the consolidated statements of operations ratably over the related vesting period.

Revenue Recognition

The Company sells the majority of its products via direct shipment to hospitals or clinics. The Company recognizes revenue when all of the following criteria are met: persuasive evidence of an arrangement exists; delivery has occurred; the sales price is fixed or determinable; and collectability is reasonably assured. The Company records estimated sales returns, discounts and rebates as a reduction of net sales.

6

Costs related to products delivered are recognized in the period revenue is recognized. Cost of goods sold consists primarily of raw materials, direct labor, and manufacturing overhead.

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, “Revenue From Contracts with Customers.” The guidance requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which an entity expects to be entitled in exchange for those goods or services. The guidance also requires expanded disclosures relating to the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. Additionally, qualitative and quantitative disclosures are required about customer contracts, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. ASU 2014-09 is effective for annual periods beginning after December 15, 2016, including interim periods within that reporting period, using one of two prescribed retrospective methods. Early adoption is not permitted. The Company is evaluating the impact of the amended revenue recognition guidance on its consolidated financial statements.

In August 2014, the FASB issued ASU No. 2014-15, “Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern.” The guidance requires management to perform interim and annual assessments of an entity's ability to continue as a going concern within one year of the date of issuance of the entity's financial statements. The entity must also provide certain disclosures if there is substantial doubt about the entity's ability to continue as a going concern. ASU 2014-15 is effective for annual periods ending after December 15, 2016, and interim periods thereafter. Early adoption is permitted. The Company does not anticipate a material impact on its financial statements upon adoption.

3. Selected Consolidated Financial Statement Information

Accounts Receivable

Accounts receivable consists of the following:

	December 31,			June 30,
	2014			2014
Accounts receivable	$	27,292		$	21,834
Less: Allowance for doubtful accounts	(1,228		)	(451		)
Total accounts receivable	$	26,064		$	21,383

Inventories

Inventories consist of the following:

	December 31,		June 30,
	2014		2014
Raw materials	$	7,034	$	5,879
Work in process	507		855
Finished goods	6,416		6,156
Total inventories	$	13,957	$	12,890

7

Property and Equipment

Property and equipment consists of the following:

	December 31,			June 30,
	2014			2014
Land	$	500		$	500
Equipment	7,303			6,436
Furniture	626			626
Leasehold improvements	233			233
Construction in progress	27,027			11,499
	35,689			19,294
Less: Accumulated depreciation	(4,749		)	(3,997		)
Total property and equipment, net	$	30,940		$	15,297

In June 2014, the Company announced plans to build a new corporate headquarters in New Brighton, Minnesota. The 125,000-square-foot, two-story building will have space for more than 500 employees and contain dedicated research and development, training and education, and manufacturing facilities. Construction of the new facility is targeted to be completed in March 2015 and will replace the two current St. Paul, Minnesota leased facilities. Construction in progress primarily consists of costs associated with the new headquarters, including $9,128 held in an escrow account that is required to be used to fund the final construction payments.

Accrued Expenses

Accrued expenses consist of the following:

	December 31,		June 30,
	2014		2014
Salaries and bonus	$	3,648	$	5,244
Commissions	4,716		6,069
Accrued vacation	3,226		2,843
Other	595		474
Total accrued expenses	$	12,185	$	14,630

4. Deferred Compensation Plan

The Company offers certain members of management and highly compensated employees the opportunity to defer up to 100% of their base salary (after 401(k), payroll tax and other deductions), performance bonus and discretionary bonus and elect to receive the deferred compensation at a fixed future date of participant’s choosing. Each participant may, at the time of his or her deferral election, choose to allocate the deferred compensation into investment alternatives set by the Compensation Committee at that time. The amount payable to each participant under the plan will change in value based upon the investment selected by that participant and is classified as current or long-term on the Company's balance sheet based on the disbursement elections made by the participants.

In August 2014, the Company acquired $2,084 of available-for-sale marketable securities. These available-for-sale marketable securities are primarily comprised of investments with a fixed income and equity investments. The available-for-sale marketable securities are included with prepaid expenses and other current assets on the consolidated balance sheet at December 31, 2014. Unrealized gains and losses as of December 31, 2014 were not significant. The fair value of the awards as of December 31, 2014 is estimated at $2,165, of which $1,251 and $914 is classified as Level 1 and Level 2 investments, respectively. The Company's marketable securities classified within Level 2 are valued using readily available pricing sources.

8

5. Debt

Loan and Security Agreement with Silicon Valley Bank

On March 29, 2010, the Company entered into an amended and restated loan and security agreement with Silicon Valley Bank. The agreement was amended on December 27, 2011 to increase outstanding borrowings, amended on June 29, 2012 to modify financial covenants and reduce the interest rate and other fees, amended on May 10, 2013 to modify financial covenants, amended on June 26, 2014 to extend the line of credit's maturity date to September 30, 2014 and reduce the interest rate, and amended on September 29, 2014 to extend the line of credit's maturity date to December 31, 2014. The agreement, as amended, included a $15,000 line of credit. On December 31, 2014, the agreement had matured.

The $15,000 line of credit had a floating interest rate equal to the Wall Street Journal’s prime rate. Interest on borrowings were due monthly and the principal balance was due at maturity. Borrowings on the line of credit were based on 85% of eligible accounts. Accounts receivable receipts were deposited into a lockbox account in the name of Silicon Valley Bank. The line of credit was subject to non-use fees, annual fees, and cancellation fees. The balance outstanding on the line of credit at December 31, 2014 and June 30, 2014 was $0 and $2,400, respectively.

Borrowings from Silicon Valley Bank were secured by all of the Company’s assets. The borrowings were subject to prepayment penalties and financial covenants, including maintaining certain liquidity and fixed charge coverage ratios. Any non-compliance by the Company under the terms of debt arrangements would have resulted in an event of default under the Silicon Valley Bank loan, which, if not cured, could have resulted in the acceleration of the debt. The Company was in compliance with all financial covenants during the six months ended December 31, 2014.

Loan and Security Agreement with Partners for Growth

On April 14, 2010, the Company entered into a loan and security agreement with Partners for Growth III, L.P. (“PFG”), as amended on August 23, 2011, December 27, 2011, June 30, 2012, and May 10, 2013. The amended agreement provides that PFG will make loans to the Company up to $5,000. The agreement has a maturity date of April 14, 2015. The loans bear interest at a floating per annum rate equal to 2.75% above Silicon Valley Bank’s prime rate, and such interest is payable monthly. The principal balance of and any accrued and unpaid interest on any notes are due on the maturity date and may not be prepaid by the Company at any time in whole or in part. As of December 31, 2014 and June 30, 2014, there were no loans outstanding.

At any time prior to the maturity date, PFG may, at its option, convert any outstanding loan into shares of the Company’s common stock at the applicable conversion price, which in each case equals the ten-day volume weighted average price per share of the Company’s common stock prior to the issuance date of each note. The Company may also effect at any time a mandatory conversion of amounts, subject to certain terms, conditions and limitations provided in the agreement, including a requirement that the ten-day volume weighted average price of the Company’s common stock prior to the date of conversion is at least 15% greater than the conversion price. The Company may reduce the conversion price to a price that represents a 15% discount to the ten-day volume weighted average price of its common stock to satisfy this condition and effect a mandatory conversion. The Company recorded an expense of $0 and $61 for the six months ended December 31, 2014 and 2013, respectively, related to the change in fair value of the conversion options on all outstanding loans. This amount is a component of interest and other, net on the accompanying statement of operations.

Any loans are secured by certain of the Company’s assets, and the agreement contains customary covenants limiting the Company’s ability to, among other things, incur debt or liens, make certain investments and loans, effect certain redemptions of and declare and pay certain dividends on its stock, permit or suffer certain change of control transactions, dispose of collateral, or change the nature of its business. In addition, the PFG loan and security agreement contains financial covenants requiring the Company to maintain certain liquidity and fixed charge coverage ratios. The Company was in compliance with all financial covenants at December 31, 2014. If the Company does not comply with the various covenants, PFG may, subject to various customary cure rights, decline to provide additional loans, require amortization of any future loan over its remaining term, or require the immediate payment of all amounts outstanding under any future loan and foreclose on any or all collateral, depending on which financial covenants are not maintained.

9

6. Interest and Other, Net

Interest and other, net, includes the following:

	Three Months Ended   December 31,						Six Months Ended   December 31,
	2014			2013			2014			2013
Interest expense, net of premium amortization	$	(6	)	$	(564	)	$	(22	)	$	(845	)
Change in fair value of conversion options	—			—			—			(61		)
Net write-offs upon conversion (option and premium amortization)	—			(574		)	—			(655		)
Other	(15		)	(25		)	(33		)	(47		)
Total Interest and other, net	$	(21	)	$	(1,163	)	$	(55	)	$	(1,608	)

7. Stock Options and Restricted Stock Awards

On November 12, 2014, the Company's stockholders approved the 2014 Equity Incentive Plan (the “2014 Plan”), under which restricted stock awards have been granted to employees, directors and consultants. Previously, options to purchase common stock and restricted stock awards were granted under the 2007 Equity Incentive Plan (the “2007 Plan”) and the 2003 Stock Option Plan (the “2003 Plan”). The 2014 Plan, the 2007 Plan and the 2003 Plan are collectively referred to as the “Plans.”

Stock Options

All options granted under the Plans become exercisable over periods established at the date of grant. The option exercise price is generally not less than the estimated fair market value of the Company’s common stock at the date of grant, as determined by the Company’s management and Board of Directors. In addition, the Company has granted nonqualified stock options to a director outside of the Plans. An employee's vested options must be exercised at or within 90 days of termination to avoid forfeiture. As of December 31, 2014, all outstanding options were fully vested.

Stock option activity for the six months ended December 31, 2014 is as follows:

	Number of Options(a)		Weighted Average Exercise Price
Options outstanding at June 30, 2014	922,809		$	10.16
Options exercised	(87,575	)	$	9.07
Options outstanding at December 31, 2014	835,234		$	10.28
(a) Includes the effect of options granted, exercised, forfeited or expired from the 2003 Plan and 2007 Plan, and options granted outside such plans.

Restricted Stock

The fair value of each restricted stock award is equal to the fair market value of the Company’s common stock at the date of grant. Vesting of restricted stock awards generally ranges from one to three years. The estimated fair value of restricted stock awards, including the effect of estimated forfeitures, is recognized on a straight-line basis over the restricted stock’s vesting period.

On August 11, 2014, the Company granted performance based restricted stock awards to certain executives. The performance based awards included grants of a maximum aggregate of 76,112 shares that vest based upon achievement of certain thresholds measuring total shareholder return during periods within fiscal 2015 compared to a pre-determined peer group of companies, and grants of a maximum aggregate of 76,112 shares that vest based upon achievement of certain thresholds measuring annual revenue growth during fiscal 2015 compared to a pre-determined peer group of companies. Management adjusts expense as required based on expected revenue growth performance for those awards.

10

Restricted stock award activity for the six months ended December 31, 2014 is as follows:

	Number of Shares		Weighted Average  Fair Value
Restricted stock awards outstanding at June 30, 2014	1,276,403		$	17.37
Restricted stock awards granted (1)	425,644		$	29.15
Restricted stock awards forfeited	(78,747	)	$	19.84
Restricted stock awards vested	(483,941	)	$	17.00
Restricted stock awards outstanding at December 31, 2014	1,139,359		$	19.89
(1) Includes both time-based and performance-based restricted stock awards.

8. Commitment and Contingencies

Operating Leases

The Company leases manufacturing and office space and equipment under various lease agreements that expire at various dates through March 2020. Rental expenses were $797 and $720 for the six months endedDecember 31, 2014 and 2013, respectively.

Future minimum lease payments under the agreements as of December 31, 2014 are as follows:

Six months ended June 30, 2015	$	563
Fiscal 2016	763
Fiscal 2017	469
Fiscal 2018	462
Fiscal 2019	462
Thereafter	346
	$	3,065

Amounts payable under the Company’s Texas production facility lease are included in the amounts above. A portion of those rent payments may reduce the deferred grant incentive liability rather than being recorded as expense. See Note 9 for additional information.

Construction of New Headquarters

On June 11, 2014, the Company entered into a Redevelopment Agreement, a Design-Build Contract, and a Development Services Agreement, as well as various ancillary agreements related to the acquisition of real property located in New Brighton, Minnesota and the development of such property into the Company’s new corporate headquarters. Pursuant to the Contract for Private Redevelopment by and among the City of New Brighton (the “City”), Ryan Companies US, Inc. (“Ryan”), and the Company, dated June 11, 2014 (the “Redevelopment Agreement”), the Company purchased approximately ten acres of real property from the City for a purchase price of $500. The City also granted the Company the option to purchase an additional 3.6 acres prior to May 31, 2021.

Pursuant to the Design-Build Cost Plus Construction Contract by and between Ryan and the Company, dated June 11, 2014, the Company has contracted with Ryan to furnish all services, labor, materials, equipment, procurement services, project management and other duties and services necessary for construction of the Company’s new headquarters on the land purchased from the City. The Company and Ryan expect to have construction substantially completed by March 1, 2015, and, pursuant to the Redevelopment Agreement discussed above, Ryan and the Company have agreed to complete construction by December 31, 2015. The Company will pay Ryan a fee of 3.85% of the cost of the work.

The Company also entered into a Development Services Agreement with Ryan, dated June 11, 2014, pursuant to which Ryan will perform certain development services to facilitate development of the project, including coordination with the City and overall coordination of development strategy. The Company will pay Ryan a fee for the development services, which includes a sum equal to 3.25% of the adjusted total project costs, payable at certain points in the construction process, and a sum equal to 5% of the adjusted total project costs, payable upon substantial completion of the project, as well as reimbursement of certain expenses incurred by Ryan.

11

In connection with the agreements above, the Company is required to hold approximately $9,128 in an escrow account that will be used to fund the final construction payments. The escrow is classified as construction in progress in property and equipment, net, on the consolidated balance sheet.

9. Texas Production Facility

Effective on September 9, 2009, the Company entered into an agreement with the Pearland Economic Development Corporation (the “PEDC”) for the construction and lease of an approximately 46,000 square foot production facility located in Pearland, Texas. The facility primarily serves as an additional manufacturing location for the Company.

The Company and the PEDC entered into a Corporate Job Creation Agreement dated June 17, 2009, which was subsequently amended July 2, 2012. The Job Creation Agreement, as amended, provided the Company with $2,975 in net cash incentive funds. The Company believes it will be able to comply with the conditions specified in the amended agreement. The PEDC will provide the Company with an additional $425 of net cash incentive funds if: (1) the Company hires 125 full-time employees at the facility before June 30, 2015 and (2) maintains 125 employees at the facility through June 30, 2016. The Company had the opportunity to receive an additional $425 of net cash incentive funds upon hiring the 75^th employee on or before March 31, 2014; however, the Company did not achieve this incentive.

In order to retain all of the cash incentives, the Company must maintain no fewer than 25 jobs at the Texas facility through June 30, 2015. Failure to meet this requirement will result in an obligation to make reimbursement payments to the PEDC as outlined in the amended agreement. The Company will not have any reimbursement requirements after June 30, 2015. As of December 31, 2014, the Company was in compliance with all minimum requirements under the amended agreement. The Company believes it will be able to comply with the conditions specified in the amended agreement.

The Job Creation Agreement, as amended, also provided the Company with a net $1,020 award, of which $510 was received from the PEDC and the remainder is funded through the Texas Enterprise Fund program associated with the State of Texas. As of December 31, 2014, $340 has been received and the remaining $170 will be provided upon the hiring of the 75^th full-time employee at the facility. The grant from the State of Texas is subject to reimbursement if the Company fails to meet certain job creation targets through 2014 and maintain these positions through 2020. The Company reimbursed the State of Texas $46 during fiscal 2014 as it did not meet the target of hiring 75 employees at the facility by December 31, 2013.

The Company has presented the net cash incentive funds as a current and long-term liability on the balance sheet. The liabilities are reduced through the term of the agreement and recorded as an offset to expenditures incurred using a systematic methodology. As of December 31, 2014, the deferred grant incentive liabilities have been reduced by $41 in cumulative expenses, resulting in a remaining current liability of $18.

10. Earnings Per Share

The following table presents a reconciliation of the numerators and denominators used in the basic and diluted earnings per common share computations (in thousands except share and per share amounts):

	Three Months Ended   December 31,						Six Months Ended   December 31,
	2014			2013			2014			2013
Numerator
Net loss	$	(5,273	)	$	(8,658	)	$	(13,497	)	$	(15,950	)
Denominator
Weighted average common shares – basic	31,487,358			27,177,952			31,399,234			25,964,660
Effect of dilutive stock options and warrants(a)(b)	—			—			—			—
Weighted average common shares outstanding – diluted	31,487,358			27,177,952			31,399,234			25,964,660
Net loss per common share — basic and diluted	$	(0.17	)	$	(0.32	)	$	(0.43	)	$	(0.61	)

(a) At December 31, 2014 and 2013, 0 and 984,991 warrants, respectively, were outstanding. The effect of the shares that would be issued upon exercise of these warrants has been excluded from the calculation of diluted loss per share because those shares are anti-dilutive.

(b) At December 31, 2014 and 2013, 835,234 and 1,080,456 stock options, respectively, were outstanding. The effect of the shares that would be issued upon exercise of these options has been excluded from the calculation of diluted loss per share because those shares are anti-dilutive.

12

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes appearing under Item 1 of Part I. Some of the information contained in this discussion and analysis or set forth elsewhere in this quarterly report, including information with respect to our plans and strategy for our business and expected financial results, includes forward-looking statements that involve risks and uncertainties. You should review the “Risk Factors” discussed in our Form 10-K for the year ended June 30, 2014 for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

OVERVIEW

We are a medical device company focused on developing and commercializing innovative solutions for vascular and coronary disease. Our peripheral arterial disease (“PAD”) products, the Stealth 360°^® PAD System (the “Stealth 360”), the Diamondback 360^® PAD System (the “Diamondback 360 Peripheral”), and the Diamondback Predator 360°^® (the “Predator 360”) are catheter-based platforms capable of treating a broad range of plaque types in leg arteries both above and below the knee and address many of the limitations associated with existing surgical, catheter and pharmacological treatment alternatives. In March 2014, we received approval for the Diamondback 360^® 60cm Peripheral Orbital Atherectomy System (“OAS”) access device, which allows physicians to treat PAD patients in the small and tortuous vessels located below the knee through alternative access sites in the ankle or foot. We refer to the Stealth 360, Diamondback 360 Peripheral, Predator 360, and the Diamondback 360 60cm Peripheral OAS collectively in this report as the “PAD Systems.” We have also obtained approval to market our Diamondback 360^® Coronary OAS (“CAD System”) as a treatment for severely calcified coronary arteries.

Since 1997, we have devoted substantially all of our resources to the development of the PAD Systems and, since 2007, to the approval of our CAD System. From 2003 to 2005, we conducted numerous bench and animal tests in preparation for application submissions to the Food and Drug Administration (“FDA”). We initially focused our testing on providing a solution for coronary in-stent restenosis, but later changed the focus to PAD. In 2006, we obtained an investigational device exemption from the FDA to conduct our pivotal OASIS clinical trial, which was completed in January 2007. The OASIS clinical trial was a prospective 20-center study that involved 124 patients with 201 lesions.

In August 2007, the FDA granted us 510(k) clearance for the use of the Diamondback 360 Peripheral as a therapy in patients with PAD. We commenced commercial introduction of the Diamondback 360 Peripheral in the United States in September 2007. We were granted 510(k) clearance of the Predator 360 in March 2009 and Stealth 360 in March 2011. We received 510(k) clearance of the Diamondback 360 60cm Peripheral OAS in March 2014. We market the PAD Systems in the United States through a direct sales force and expend significant capital on our sales and marketing efforts to expand our customer base and utilization per customer. At our facilities, we assemble the saline infusion pump and the single-use catheter used in the PAD Systems with components purchased from third-party suppliers, as well as with components manufactured in-house. We purchase supplemental products from third-party suppliers.

In November 2014, we received CE Mark for our Stealth 360 and are currently evaluating the timing and structure of our plans to commercialize our products in Europe.

We have developed a modified version of our orbital technology to treat coronary arteries. A coronary application required us to conduct a clinical trial and file a premarket approval (“PMA”) application and obtain approval from the FDA. In March 2013, we completed submission of our PMA application to the FDA for our OAS to treat calcified coronary arteries. In October 2013, we received PMA from the FDA to market the CAD System as a treatment for severely calcified coronary arteries. We commenced a controlled commercial launch of the CAD System following the receipt of PMA approval.

As of December 31, 2014, we had an accumulated deficit of $252.1 million. We expect our losses to continue as we invest in sales, marketing, medical education, clinical studies and product research and development for our next phase of growth in the peripheral market and broaden the commercial launch of our CAD System. To date, we have financed our operations primarily from the issuance of stock, convertible promissory notes, and debt.

13

CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT JUDGMENTS AND ESTIMATES

Our management’s discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of our consolidated financial statements requires us to make estimates, assumptions and judgments that affect amounts reported in those statements. Our estimates, assumptions and judgments, including those related to revenue recognition, allowance for doubtful accounts, excess and obsolete inventory, and stock-based compensation, are updated as appropriate at least quarterly. We use authoritative pronouncements, our technical accounting knowledge, cumulative business experience, judgment and other factors in the selection and application of our accounting policies. While we believe that the estimates, assumptions and judgments that we use in preparing our consolidated financial statements are appropriate, these estimates, assumptions and judgments are subject to factors and uncertainties regarding their outcome. Therefore, actual results may materially differ from these estimates.

Some of our significant accounting policies require us to make subjective or complex judgments or estimates. An accounting estimate is considered to be critical if it meets both of the following criteria: (1) the estimate requires assumptions about matters that are highly uncertain at the time the accounting estimate is made, and (2) different estimates that reasonably could have been used, or changes in the estimate that are reasonably likely to occur from period to period, would have a material impact on the presentation of our financial condition, results of operations, or cash flows.

Our critical accounting policies are identified in our Annual Report on Form 10-K for the fiscal year ended June 30, 2014 in Management's Discussion and Analysis of Financial Condition and Results of Operations under the heading "Critical Accounting Policies and Significant Judgments and Estimates." There were no significant changes to our critical accounting policies during the six months ended December 31, 2014.

RESULTS OF OPERATIONS

The following table sets forth our results of operations expressed as dollar amounts (in thousands) and the changes between the specified periods expressed as percent increases or decreases:

	Three Months Ended   December 31,								Six Months Ended   December 31,
	2014			2013			Percent Change		2014			2013			Percent Change
Revenues	$	44,732		$	32,337		38.3	%	$	86,086		$	62,103		38.6	%
Cost of goods sold	9,346			7,313			27.8		18,231			14,177			28.6
Gross profit	35,386			25,024			41.4		67,855			47,926			41.6
Expenses:
Selling, general and administrative	32,553			27,468			18.5		66,060			52,839			25.0
Research and development	8,085			5,051			60.1		15,237			9,429			61.6
Total expenses	40,638			32,519			25.0		81,297			62,268			30.6
Loss from operations	(5,252		)	(7,495		)	(29.9	)	(13,442		)	(14,342		)	(6.3	)
Interest and other, net	(21		)	(1,163		)	(98.2	)	(55		)	(1,608		)	(96.6	)
Net loss	$	(5,273	)	$	(8,658	)	(39.1	)	$	(13,497	)	$	(15,950	)	(15.4	)

Comparison of Three Months Ended December 31, 2014 with Three Months Ended December 31, 2013

Revenues. Revenues increased by $12.4 million, or 38.3%, from $32.3 million for the three months ended December 31, 2013 to $44.7 million for the three months ended December 31, 2014. This increase was primarily attributable to a $5.9 million, or 21.0%, increase in sales of our PAD Systems, which reflects a 21.1% increase in number of devices sold. Additionally, sales of the CAD System increased approximately $5.6 million, due to expanded sales of the CAD System compared to the initial controlled commercial launch in the three months ended December 31, 2013 following our PMA approval in October 2013.

Other product revenue also increased $871,000, or 22.4%, during the three months ended December 31, 2014 as compared to the three months ended December 31, 2013, primarily driven by increased sales of PAD and CAD Systems, which the other products support.

14

Currently, all of our revenues are in the United States; however, we intend to sell internationally in the future and have commenced the process of seeking approval to do so in both Europe and Japan. In November 2014, we received CE Mark for the Stealth 360 and are currently evaluating the timing and structure of our plans to commercialize products in Europe. We expect our revenue to increase as we continue to increase the number of physicians using the devices, increase the usage per physician, introduce new and improved products, generate additional clinical data, continue the controlled commercial launch of our CAD System, and expand into new geographies.

Cost of Goods Sold. Cost of goods sold increased by $2.0 million, or 27.8%, from $7.3 million for the three months ended December 31, 2013 to $9.3 million for the three months ended December 31, 2014. Cost of goods sold represents the cost of materials, labor and overhead for single-use catheters, guidewires, saline pumps, and other ancillary products. The increase was due to an increase in the quantities of products sold, partially offset by lower indirect costs per unit from higher production volumes and manufacturing efficiencies. Cost of goods sold for the three months ended December 31, 2014 and 2013 includes $241,000 and $169,000, respectively, for stock-based compensation. Gross margin increased from 77.4% during the three months ended December 31, 2013 to 79.1% for the three months ended December 31, 2014, which was primarily due to the increase in sales of our CAD System which have higher average selling prices than PAD Systems, and to lower indirect costs per unit. We expect that gross margin in the remainder of fiscal 2015 will be similar to the three months ended December 31, 2014. Quarterly margin fluctuations could occur based on production volumes, timing of new product introductions, sales mix, pricing changes, or other unanticipated circumstances.

Selling, General and Administrative Expenses. Our selling, general and administrative expenses increased by $5.1 million, or 18.5%, from $27.5 million for the three months ended December 31, 2013 to $32.6 million for the three months ended December 31, 2014. The increase was due primarily to higher coronary expenses from commercial launch, the expansion of our sales and marketing organization and medical and other programs and higher incentive compensation. Selling, general and administrative expenses for the three months ended December 31, 2014 and 2013 include $2.9 million and $2.1 million, respectively, for stock-based compensation. We expect our selling, general and administrative expenses to increase in the future as a result of the costs associated with expanding our sales and marketing organization and medical education and other programs to further commercialize our PAD Systems and expand the commercial launch of our CAD System.

Research and Development Expenses. Research and development expenses increased by $3.0 million, or 60.1%, from $5.1 million for the three months ended December 31, 2013 to $8.1 million for the three months ended December 31, 2014. Research and development expenses relate to specific projects to develop new products or expand into new markets, such as the development of new versions of the PAD and CAD Systems, shaft designs, crown designs, and PAD and CAD clinical trials. The increase related mainly to additional product development projects and clinical studies, and the related increase in headcount. Research and development expenses for the three months ended December 31, 2014 and 2013 include $368,000 and $304,000, respectively, for stock-based compensation. As we continue to expand our product portfolio and clinical studies within the PAD and CAD markets, we generally expect to incur quarterly research and development expenses at or above amounts incurred for the three months ended December 31, 2014. Fluctuations could occur based on the number of projects and studies and the timing of expenditures.

Interest and Other, Net. Interest and other expense, net, was $(21,000) for the three months ended December 31, 2014 compared to $(1.2) million for the three months ended December 31, 2013. The decrease was primarily driven by lower interest expense related to lower outstanding debt balances, as well as the elimination of charges from debt conversions and changes in fair value of the debt conversion option that were associated with the previously outstanding convertible debt.

Comparison of Six Months Ended December 31, 2014 with Six Months Ended December 31, 2013

Revenues. Revenues increased by $24.0 million, or 38.6%, from $62.1 million for the six months endedDecember 31, 2013 to $86.1 million for the six months endedDecember 31, 2014. This increase was primarily attributable to a $11.5 million, or 21.2%, increase in sales of our PAD Systems, which reflects a 20.6% increase in number of devices sold. Additionally, sales of the CAD System contributed approximately $10.7 million in revenues in the six months ended December 31, 2014, compared to $388,000 in the six months ended December 31, 2013 following our PMA approval in October 2013. Other product revenue also increased $2.2 million, or 28.9%, during the six months endedDecember 31, 2014 as compared to the six months endedDecember 31, 2013, primarily driven by increased sales of PAD and CAD Systems, which the other products support.

15

Cost of Goods Sold. Cost of goods sold increased by $4.0 million, or 28.6%, from $14.2 million for the six months endedDecember 31, 2013 to $18.2 million for the six months endedDecember 31, 2014. Cost of goods sold represents the cost of materials, labor and overhead for single-use catheters, guidewires, saline pumps, and other ancillary products. The increase was due to an increase in the quantities of products sold, partially offset by lower indirect costs per unit from higher production volumes and manufacturing efficiencies. Cost of goods sold for the six months endedDecember 31, 2014 and 2013 includes $463,000 and $311,000, respectively, for stock-based compensation. Gross margin increased from 77.2% during the six months endedDecember 31, 2013 to 78.8% for the six months endedDecember 31, 2014, which was primarily due to the increase in sales of our CAD System which have higher average selling prices than PAD Systems, and to lower indirect costs per unit.

Selling, General and Administrative Expenses. Our selling, general and administrative expenses increased by $13.3 million, or 25.0%, from $52.8 million for the six months endedDecember 31, 2013 to $66.1 million for the six months endedDecember 31, 2014. The increase was due primarily to higher coronary expenses from commercial launch, the expansion of our sales and marketing organization and medical and other programs and higher incentive compensation. Selling, general and administrative expenses for the six months endedDecember 31, 2014 and 2013 include $5.9 million and $4.0 million, respectively, for stock-based compensation.

Research and Development Expenses. Research and development expenses increased by $5.8 million, or 61.6%, from $9.4 million for the six months endedDecember 31, 2013 to $15.2 million for the six months endedDecember 31, 2014. Research and development expenses relate to specific projects to develop new products or expand into new markets, such as the development of new versions of the PAD and CAD Systems, shaft designs, crown designs, and PAD and CAD clinical trials. The increase related mainly to additional product development projects and clinical studies, and the related increase in headcount. Research and development expenses for the six months endedDecember 31, 2014 and 2013 include $688,000 and $521,000, respectively, for stock-based compensation.

Interest and Other, Net. Interest and other expense, net, was $(55,000) for the six months endedDecember 31, 2014 compared to $(1.6) million for the six months endedDecember 31, 2013. The decrease was primarily driven by lower interest expense related to lower outstanding debt balances, as well as the elimination of charges from debt conversions and changes in fair value of the debt conversion option that were associated with the previously outstanding convertible debt.

LIQUIDITY AND CAPITAL RESOURCES

We had cash and cash equivalents of $101.3 million and $126.6 million at December 31, 2014 and June 30, 2014, respectively. During the six months endedDecember 31, 2014, net cash used in operations amounted to $11.1 million. As of December 31, 2014, we had an accumulated deficit of $252.1 million. We have historically funded our operating losses primarily from the issuance of stock, convertible promissory notes, and debt.

Loan and Security Agreement with Partners for Growth

On April 14, 2010, we entered into a loan and security agreement with Partners for Growth III, L.P. (“PFG”), as amended on August 23, 2011, December 27, 2011, June 30, 2012, and May 10, 2013. The amended agreement provides that PFG will make loans to us up to $5.0 million. The agreement has a maturity date of April 14, 2015. The loans bear interest at a floating per annum rate equal to 2.75% above Silicon Valley Bank’s prime rate, and such interest is payable monthly. The principal balance of and any accrued and unpaid interest on any notes are due on the maturity date and may not be prepaid by us at any time in whole or in part. As of December 31, 2014 and June 30, 2014, there were no loans outstanding.

At any time prior to the maturity date, PFG may, at its option, convert any outstanding loan into shares of our common stock at the applicable conversion price, which in each case equals the ten-day volume weighted average price per share of our common stock prior to the issuance date of each note. We may also effect at any time a mandatory conversion of amounts, subject to certain terms, conditions and limitations provided in the agreement, including a requirement that the ten-day volume weighted average price of our common stock prior to the date of conversion is at least 15% greater than the conversion price. We may reduce the conversion price to a price that represents a 15% discount to the ten-day volume weighted average price of our common stock to satisfy this condition and effect a mandatory conversion. We recorded an expense of $0 and $61,000 for the six months ended December 31, 2014 and 2013, respectively, related to the change in fair value of the conversion options on all outstanding loans. This amount is a component of interest and other, net on the accompanying statement of operations.

16

Any loans are secured by certain of our assets, and the agreement contains customary covenants limiting our ability to, among other things, incur debt or liens, make certain investments and loans, effect certain redemptions of and declare and pay certain dividends on our stock, permit or suffer certain change of control transactions, dispose of collateral, or change the nature of our business. In addition, the PFG loan and security agreement contains financial covenants requiring us to maintain certain liquidity and fixed charge coverage ratios. We were in compliance with all financial covenants at December 31, 2014. If we do not comply with the various covenants, PFG may, subject to various customary cure rights, decline to provide additional loans, require amortization of any future loan over its remaining term, or require the immediate payment of all amounts outstanding under any future loan and foreclose on any or all collateral, depending on which financial covenants are not maintained.

Changes in Liquidity

Cash and Cash Equivalents. Cash and cash equivalents were $101.3 million at December 31, 2014 and $126.6 million at June 30, 2014. The decrease is primarily attributable to net cash used in operations and investing activities during the six months ended December 31, 2014.

Operating Activities. Net cash used in operations was $11.1 million and $12.5 million for the six months ended December 31, 2014 and 2013, respectively. For the six months ended December 31, 2014 and 2013, we had a net loss of $13.5 million and $16.0 million, respectively. Significant changes in working capital during these periods included:

• Cash used in accounts receivable of $5.5 million and $1.4 million during the six months ended December 31, 2014 and 2013, respectively, was primarily due to the amount and timing of revenue during the six months ended December 31, 2014 and 2013.

• Cash used in inventories was $1.1 million and $4.0 million during the six months ended December 31, 2014 and 2013, respectively. For the six months ended December 31, 2014, the amount of cash used in inventories was primarily due to higher levels of raw materials for the manufacture of products, including the CAD System commercial launch, and finished goods for future sales. For the six months ended December 31, 2013, cash used in inventories was primarily due to higher levels of finished goods for future sales and timing of inventory purchases and sales.

• Cash provided by (used in) prepaid expenses and other current assets was $287,000 and $(194,000) during the six months ended December 31, 2014 and 2013, respectively, primarily due to payment timing of vendor deposits and other expenditures.

• Cash provided by accounts payable of $0.5 million and $1.4 million during the six months ended December 31, 2014 and 2013, respectively, was due to the amount and timing of purchases and vendor payments and overall increased levels of spending.

• Cash (used in) provided by accrued expenses and other liabilities of $(0.5) million and $1.1 million during the six months ended December 31, 2014 and 2013, respectively, was primarily due to the amount and timing of compensation payments.

Investing Activities. Net cash used in investing activities was $13.9 million and $1.1 million for the six months ended December 31, 2014 and 2013, respectively, related to the purchase of property and equipment and patents. In addition, we purchased available-for-sale marketable securities for the deferred compensation plans during the six months ended December 31, 2014 and paid $8.9 million towards the construction of our new corporate headquarters, which is discussed further below.

Financing Activities. Net cash (used in) provided by financing activities was $(246,000) and $92.4 million for the six months ended December 31, 2014 and 2013, respectively. For the six months ended December 31, 2014, cash used in financing activities was due to payments on debt of $2.4 million, partially offset by proceeds from employee stock purchases of $1.4 million and proceeds from the exercise of stock options of $794,000. For the six months ended December 31, 2013, cash provided by financing activities included proceeds from the issuance of common stock, net of issuance costs, of $84.4 million, proceeds from exercise of stock options and warrants of $9.1 million, and proceeds from employee stock purchases of $1.3 million, partially offset by payments on debt of $2.4 million.

Our future liquidity and capital requirements will be influenced by numerous factors, including the extent and duration of future operating losses, the level and timing of future sales and expenditures, the results and scope of ongoing research and product development programs, working capital required to support our sales growth, the receipt of and time required to obtain regulatory clearances and approvals, our sales and marketing programs, the continuing acceptance of our products in the marketplace, competing technologies, market and regulatory developments and ongoing facility requirements. As of December 31, 2014, we believe our current cash and cash equivalents will be sufficient to fund working capital requirements,

17

capital expenditures (including the new corporate headquarters discussed below) and operations for the foreseeable future, including at least the next twelve months. We intend to retain any future earnings to support operations and to finance the growth and development of our business, and we do not anticipate paying any dividends in the foreseeable future. We may raise additional capital in the future, to fund acceleration of our current growth initiatives or additional growth opportunities, if we believe it will significantly enhance our value.

New Corporate Headquarters. On June 11, 2014, we entered into a Redevelopment Agreement, a Design-Build Contract, and a Development Services Agreement, as well as various ancillary agreements, related to the acquisition of real property located in New Brighton, Minnesota and the development of such property into our new corporate headquarters. Pursuant to the Contract for Private Redevelopment by and among the City of New Brighton (the “City”), Ryan Companies US, Inc. (“Ryan”), and us, dated June 11, 2014 (the “Redevelopment Agreement”), we purchased approximately ten acres of real property from the City for a purchase price of $500,000. The City also granted us the option to purchase an additional 3.6 acres prior to May 31, 2021.

Pursuant to the Design-Build Cost Plus Construction Contract by and between Ryan and us, dated June 11, 2014, we have contracted with Ryan to furnish all services, labor, materials, equipment, procurement services, project management and other duties and services necessary for construction of our new headquarters on the land purchased from the City. We expect to have construction substantially completed by March 1, 2015, and, pursuant to the Redevelopment Agreement discussed above, we and Ryan have agreed to complete construction by December 31, 2015.

We anticipate that the total cost for the construction of the headquarters will be approximately $23.0 million, subject to certain increases or decreases if work is completed prior to or after March 1, 2015 or if changes are made to the project plans during construction. We will pay Ryan a fee of 3.85% of the cost of the work. We also anticipate that the additional cost to furnish, equip and open the headquarters will be approximately $7.0 million.

We also entered into a Development Services Agreement with Ryan, dated June 11, 2014, pursuant to which Ryan will perform certain development services to facilitate development of the project, including coordination with the City and overall coordinate of development strategy. We will pay Ryan a fee for the development services, which includes a sum equal to 3.25% of the adjusted total project costs, payable at certain points in the construction process and a sum equal to 5% of the adjusted total project costs, payable upon substantial completion of the project, as well as reimbursement of certain expenses incurred by Ryan.

In connection with the agreements above, we are required to hold approximately $9.1 million in an escrow account that will be used to fund the final construction payments. The escrow is classified as construction in progress in property and equipment, net, on the consolidated balance sheet.

NON-GAAP FINANCIAL INFORMATION

To supplement our consolidated financial statements prepared in accordance with GAAP, our management uses a non-GAAP financial measure referred to as “Adjusted EBITDA.” The following table sets forth, for the periods indicated, a reconciliation of Adjusted EBITDA to the most comparable U.S. GAAP measure expressed as dollar amounts (in thousands):

	Six Months Ended   December 31,
	2014			2013
Loss from operations	$	(13,442	)	$	(14,342	)
Add: Stock-based compensation	7,083			4,855
Add: Depreciation and amortization	833			629
Adjusted EBITDA	$	(5,526	)	$	(8,858	)

Adjusted EBITDA improved as compared to the prior year period due to increased stock-based compensation and the decrease in loss from operations. The loss from operations was impacted by increases in revenues and gross profit, partially offset by increased operating expenses. Stock-based compensation increased $2.2 million, or 45.9%, as a result of increased employee stock awards granted due to our expanded hiring and higher grant date fair values.

18

Use and Economic Substance of Non-GAAP Financial Measures Used and Usefulness of Such Non-GAAP Financial Measures to Investors

We use Adjusted EBITDA as a supplemental measure of performance and believe this measure facilitates operating performance comparisons from period to period and company to company by factoring out potential differences caused by depreciation and amortization expense and non-cash charges such as stock-based compensation. Our management uses Adjusted EBITDA to analyze the underlying trends in our business, assess the performance of our core operations, establish operational goals and forecasts that are used to allocate resources and evaluate our performance period over period and in relation to our competitors’ operating results. Additionally, our management is partially evaluated on the basis of Adjusted EBITDA when determining achievement of their incentive compensation performance targets.

We believe that presenting Adjusted EBITDA provides investors greater transparency to the information used by our management for its financial and operational decision-making and allows investors to see our results “through the eyes” of management. We also believe that providing this information better enables our investors to understand our operating performance and evaluate the methodology used by our management to evaluate and measure such performance.

The following is an explanation of each of the items that management excluded from Adjusted EBITDA and the reasons for excluding each of these individual items:

• Stock-based compensation. We exclude stock-based compensation expense from our non-GAAP financial measures primarily because such expense, while constituting an ongoing and recurring expense, is not an expense that requires cash settlement. Our management also believes that excluding this item from our non-GAAP results is useful to investors to understand the application of stock-based compensation guidance and its impact on our operational performance, liquidity and ability to make additional investments in the Company, and it allows for greater transparency to certain line items in our financial statements.

• Depreciation and amortization expense. We exclude depreciation and amortization expense from our non-GAAP financial measures primarily because such expenses, while constituting ongoing and recurring expenses, are not expenses that require cash settlement and are not used by our management to assess the core profitability of our business operations. Our management also believes that excluding these items from our non-GAAP results is useful to investors to understand our operational performance, liquidity and ability to make additional investments in the company.

Material Limitations Associated with the Use of Non-GAAP Financial Measures and Manner in Which We Compensate for these Limitations

Non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP. Some of the limitations associated with our use of these non-GAAP financial measures are:

• Items such as stock-based compensation do not directly affect our cash flow position; however, such items reflect economic costs to us and are not reflected in our Adjusted EBITDA, and therefore these non-GAAP measures do not reflect the full economic effect of these items.

• Non-GAAP financial measures are not based on any comprehensive set of accounting rules or principles and therefore other companies may calculate similarly titled non-GAAP financial measures differently than we do, limiting the usefulness of those measures for comparative purposes.

• Our management exercises judgment in determining which types of charges or other items should be excluded from the non-GAAP financial measures we use.

We compensate for these limitations by relying primarily upon our GAAP results and using non-GAAP financial measures only supplementally.

INFLATION

We do not believe that inflation had a material impact on our business and operating results during the periods presented.

19

OFF-BALANCE SHEET ARRANGEMENTS

Since inception, we have not engaged in any off-balance sheet activities as defined in Item 303(a)(4) of Regulation S-K.

RECENT ACCOUNTING PRONOUNCEMENTS

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, “Revenue From Contracts with Customers.” The guidance requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which an entity expects to be entitled in exchange for those goods or services. The guidance also requires expanded disclosures relating to the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. Additionally, qualitative and quantitative disclosures are required about customer contracts, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. ASU 2014-09 is effective for annual periods beginning after December 15, 2016, including interim periods within that reporting period, using one of two prescribed retrospective methods. Early adoption is not permitted. We are evaluating the impact of the amended revenue recognition guidance on our consolidated financial statements.

In August 2014, the FASB issued ASU No. 2014-15, “Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern.” The guidance requires management to perform interim and annual assessments of an entity's ability to continue as a going concern within one year of the date of issuance of the entity's financial statements. The entity must also provide certain disclosures if there is substantial doubt about the entity's ability to continue as a going concern. ASU 2014-15 is effective for annual periods ending after December 15, 2016, and interim periods thereafter. Early adoption is permitted. We do not anticipate a material impact on our financial statements upon adoption.

PRIVATE SECURITIES LITIGATION REFORM ACT

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. Such “forward-looking” information is included in this Form 10-Q, including Item 2 of Part I, and in other materials filed or to be filed by the Company with the Securities and Exchange Commission (as well as information included in oral statements or other written statements made or to be made by the Company). Forward-looking statements include all statements based on future expectations. This Form 10-Q contains forward-looking statements that involve risks and uncertainties, including (i) expected compliance with the conditions specified in our Job Creation Agreement; (ii) our expectation that our losses will continue; (iii) the broadening of the commercial launch of the CAD System; (iv) the expectation of selling our products internationally in the future and the timing and structure of our plans to do so; (v) our expectation of increased revenue and increased selling, general and administrative expenses; (vi) our plans to continue to expand our sales and marketing efforts as well as our product portfolio and clinical studies; (vii) our expectation that gross margin in the remainder of fiscal 2015 will be similar to the three months ended December 31, 2014; (viii) our expectation that we will incur research and development expenses in future quarters at amounts at or above the amounts incurred for the three months ended December 31, 2014; (ix) our belief that our current cash and cash equivalents will be sufficient to fund working capital requirements, capital expenditures and operations for the foreseeable future; (x) our intention to retain any future earnings to support operations and to finance the growth and development of our business; (xi) our dividend expectations; (xii) the potential to raise additional capital in the future; and (xiii) our plans regarding construction of a new headquarters, including the expected completion date and costs of construction and furnishing, equipping and opening the headquarters.

In some cases, you can identify forward-looking statements by the following words: “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “ongoing,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would,” or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words. Forward-looking statements are only predictions and are not guarantees of performance. These statements are based on our management’s beliefs and assumptions, which in turn are based on their interpretation of currently available information.

These statements involve known and unknown risks, uncertainties and other factors that may cause our results or our industry’s actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements. These factors include regulatory developments in the U.S. and foreign countries; FDA and similar foreign clearances and approvals; approval of our products for distribution in foreign countries; approval of products for reimbursement and the level of reimbursement; dependence on market growth; agreements with third parties to sell their products; the experience of physicians regarding the effectiveness and reliability of the PAD and CAD Systems; the reluctance of physicians, hospitals and other organizations to accept new products; the potential for unanticipated delays in enrolling medical centers and patients for clinical trials; actual clinical trial and study results; the impact of competitive products and pricing; unanticipated developments affecting our estimates regarding expenses, future revenues and capital requirements; unanticipated delays or costs related to the construction and furnishing of our new headquarters; the difficulty of

20

successfully managing operating costs; our inability to expand our sales and marketing organization; our actual research and development efforts and needs; our ability to obtain and maintain intellectual property protection for product candidates; our actual financial resources and our ability to obtain additional financing; fluctuations in results and expenses based on new product introductions, sales mix, unanticipated warranty claims, and the timing of project expenditures; and general economic conditions. These and additional risks and uncertainties are described more fully in our Form 10-K filed with the SEC on August 28, 2014. Copies of filings made with the SEC are available through the SEC’s electronic data gathering analysis and retrieval system (EDGAR) at www.sec.gov.

You should read these risk factors and the other cautionary statements made in this Form 10-Q as being applicable to all related forward-looking statements wherever they appear in this Form 10-Q. We cannot assure you that the forward-looking statements in this Form 10-Q will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. You should read this Form 10-Q completely. Other than as required by law, we undertake no obligation to update these forward-looking statements, even though our situation may change in the future.

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The primary objective of our investment activities is to preserve our capital for the purpose of funding operations, while at the same time maximizing the income we receive from our investments without significantly increasing risk or decreasing availability. To achieve these objectives, our investment policy allows us to maintain a portfolio of cash equivalents and investments in a variety of marketable securities, including money market funds, U.S. government securities, and certain bank obligations. Our cash and cash equivalents as of December 31, 2014 include liquid money market accounts. Due to the short-term nature of these investments, we believe that there is no material exposure to interest rate risk.

ITEM 4.    CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our Chief Executive Officer and Chief Financial Officer, referred to collectively herein as the Certifying Officers, are responsible for establishing and maintaining our disclosure controls and procedures. The Certifying Officers have reviewed and evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of December 31, 2014. Based on that review and evaluation, which included inquiries made to certain other employees of the Company, the Certifying Officers have concluded that, as of the end of the period covered by this Report, the Company’s disclosure controls and procedures, as designed and implemented, are effective.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the three months ended December 31, 2014 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

21

PART II. — OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

None.

ITEM 1A.    RISK FACTORS

In addition to the other information set forth in this report, including the important information in the section entitled “Private Securities Litigation Reform Act,” you should carefully consider the “Risk Factors” discussed in our Form 10-K for the year ended June 30, 2014 filed with the SEC on August 28, 2014 for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in this report, and materially adversely affect our financial condition or future results. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial might materially adversely affect our actual business, financial condition and/or operating results.

ITEM 2.    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3.    DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.    MINE SAFETY DISCLOSURES

None.

ITEM 5.    OTHER INFORMATION

Effective February 4, 2015, Kevin J. Kenny, the Company's Executive Vice President of Sales and Marketing, has been appointed as the Company’s Chief Operating Officer.

Mr. Kenny, 50, joined the Company in May 2011 as Executive Vice President of Sales and Marketing. From 2002 to 2011, Mr. Kenny served in various positions with Medtronic Inc.’s U.S. Spine and Biologics division, including Vice President of Sales. Previously, Mr. Kenny served as Vice President of U.S. sales for Bausch and Lomb and held various sales and marketing leadership roles with B. Braun/McGaw and Smithkline Beecham.

In connection with Mr. Kenny’s appointment as Chief Operating Officer, his annual base salary has been increased to $430,000, retroactive to January 1, 2015, and his target bonus level for cash incentive compensation has been increased to 75% of base salary, effective for the second half of fiscal 2015. Mr. Kenny will no longer be eligible to receive additional incentive compensation based on sales commissions and achievement of sales-related “management by objective” targets. In addition, the period of base salary continuation in connection with a termination of Mr. Kenny without “cause” or for “good reason” (each as defined in his Employment Agreement with the Company) has been increased to 18 months, and Mr. Kenny will receive severance equal to 1.5 times his base salary and target bonus in the year of termination if he is terminated without “cause” or for “good reason” within two years of a change of control.

In connection with this new position, Mr. Kenny is expected to receive a grant of restricted stock under the Company’s 2014 Equity Incentive Plan worth approximately $142,000, which would vest over a three-year period, to be granted at a future meeting of the Human Resources and Compensation Committee of the Company’s Board of Directors.

In connection with Mr. Kenny’s appointment, the Company and Mr. Kenny entered into Amendment No. 2 to his Employment Agreement with the Company, dated February 4, 2015, reflecting his new title, base salary and severance benefits, as well as the elimination of the sales-related incentive compensation for which he is no longer eligible.

The foregoing description of the material terms of Amendment No. 2 does not purport to be a complete description of the rights and obligations of the parties thereunder and is qualified in its entirety by reference to the full text of Amendment No. 2, which will be filed as an exhibit to the Quarterly Report on Form 10-Q for the quarter ending March 31, 2015.

22

ITEM 6.    EXHIBITS

(a)Exhibits — See Exhibit Index on page following signatures

23

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.

Dated: February 6, 2015		CARDIOVASCULAR SYSTEMS, INC.
	By	/s/ David L. Martin
		David L. Martin
		President and Chief Executive Officer
		(Principal Executive Officer)
	By	/s/ Laurence L. Betterley
		Laurence L. Betterley
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

24

EXHIBIT INDEX

CARDIOVASCULAR SYSTEMS, INC.

FORM 10-Q

Exhibit No.	Description
10.1	Cardiovascular Systems, Inc. 2014 Equity Incentive Plan (previously filed with the SEC as Exhibit 10.1 to and incorporated herein by reference from the Company’s Current Report on Form 8-K filed on November 14, 2014).
10.2*	Form of Restricted Stock Agreement for Time-Based Awards under the 2014 Equity Incentive Plan.
10.3*	Form of Restricted Stock Agreement for Performance-Based Awards under the 2014 Equity Incentive Plan.
31.1*	Certification of President and Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**	Certification of President and 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	Financial statements from the quarterly report on Form 10-Q of the Company for the quarter ended December 31, 2014, formatted in XBRL: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Cash Flows, and (iv) the Notes to Financial Statements.

_______________________

* Filed herewith.

** Furnished herewith.

25

EX-10.2

Exhibit 10.2

RESTRICTED STOCK AGREEMENT

TIME-BASED VESTING

CARDIOVASCULAR SYSTEMS, INC.

2014 EQUITY INCENTIVE PLAN

CARDIOVASCULAR SYSTEMS, INC., a Delaware corporation (the “Company”) has engaged _________________________ to maintain an online system to provide secure account access to participants receiving grants (each, a “Participant”) under the Company’s 2014 Equity Incentive Plan (the “Plan”). Each Participant has an account at _________________________ with an award summary (the “Award Summary”) disclosing the date of the award, the number of shares subject to each award and conditions of the vesting of the award. This Agreement sets forth terms and conditions applicable to those awards set forth in the Award Summary that are subject to time-based vesting.

W I T N E S S E T H:

WHEREAS, the Participant is, on the date of grant set forth in the Award Summary, a key employee, officer or director of, or a consultant or advisor to, the Company or a Subsidiary of the Company; and

WHEREAS, the Company wishes to grant a restricted stock award to the Participant for shares of the Company’s Common Stock pursuant to the Plan; and

WHEREAS, the Administrator of the Plan has authorized the grant of a restricted stock award to the Participant;

NOW, THEREFORE, in consideration of the premises and of the mutual covenants herein contained, the parties hereto agree as follows:

1.    Grant of Restricted Stock Award. The Company hereby grants to the Participant on the date set forth in the Award Summary a restricted stock award (the “Award”) for the number of shares of Common Stock set forth in the Award Summary on the terms and conditions set forth in the Award Summary and this Agreement, which shares are subject to adjustment pursuant to Section 15 of the Plan. The Company shall cause to be issued one or more stock certificates (or, upon request and if permitted in the Administrator’s discretion, an entry to be made in the books of the Company or its designated agent) representing such shares of Common Stock in the Participant’s name, and shall hold each such certificate until such time as the risk of forfeiture and other transfer restrictions set forth in this Agreement have lapsed with respect to the shares represented by the certificate. The Company may also place a legend on such certificates describing the risks of forfeiture and other transfer restrictions set forth in this Agreement providing for the cancellation of such certificates if the shares of Common Stock are forfeited as provided in Section 2 below. Until such risks of forfeiture have lapsed or the shares subject to this Award have been forfeited pursuant to Section 2 below, the Participant shall be entitled to vote the shares represented

- 1 -

Exhibit 10.2

by such stock certificates and shall receive all dividends attributable to such shares, but the Participant shall not have any other rights as a shareholder with respect to such shares.

2.    Vesting of Restricted Stock. The shares of Common Stock subject to this Award shall remain forfeitable until the risks of forfeiture lapse according to the vesting schedule set forth in the Award Summary. Notwithstanding anything in the Plan, the Award Summary or this Agreement to the contrary, the shares of Common Stock subject to this Award will become fully vested upon a Change of Control.

3.    Termination of Employment or Other Relationship. If the Participant’s employment or other relationship with the Company (or a Subsidiary of the Company) ceases at any time for any reason, including the Participant’s voluntary resignation or retirement, the Participant shall immediately forfeit all shares of Common Stock subject to this Award that have not yet vested and for which the risks of forfeiture have not lapsed.

4.    General Provisions.

a.    Employment or Other Relationship. This Agreement shall not confer on the Participant any right with respect to continuation of employment or other relationship by the Company, nor will it interfere in any way with the right of the Company to terminate such employment or relationship. Nothing in this Agreement shall be construed as creating an employment or service contract for any specified term between Participant and the Company.

b.    280G Limitations. Notwithstanding anything in the Plan, this Agreement or in any other agreement, plan, contract or understanding entered into from time to time between Participant and the Company or any of its Subsidiaries to the contrary(except an agreement that expressly modifies or excludes the application of this Paragraph 4(b)),the lapse of the risks of forfeiture of this Awardshall not be accelerated in connection with a Change of Control to the extent that such acceleration, taking into account all other rights, payments and benefits to which Participant is entitled under any other plan or agreement, would constitute a "parachute payment" or an "excess parachute payment" for purposes of Sections 280G and 4999 of the Internal Revenue Code of 1986, as amended, or any successor provisions, and the regulations issued thereunder; provided, however, that the Administrator, in its sole discretion and in accordance with applicable law, may modify or exclude the application of this Paragraph 4(b).

c.    Securities Law Compliance. Participant shall not transfer or otherwise dispose of the shares of Common Stock received pursuant to this Agreement until such time as counsel to the Company shall have determined that such transfer or other disposition will not violate any state or federal securities laws. The Participant may be required by the Company, as a condition of the effectiveness of this restricted stock award, to provide any written assurances that are necessary or desirable in the opinion of the Company and its counsel to ensure the issuance complies with the applicable securities laws, including that all Common Stock subject to this Agreement shall be held, until such time that such Common Stock is registered and freely tradable under applicable state and federal securities laws, for Participant’s own account without a view to any further distribution thereof, that the certificates (or, if permitted book entries) for such shares shall bear an appropriate

- 2 -

Exhibit 10.2

legend or notation to that effect and that such shares will be not transferred or disposed of except in compliance with applicable state and federal securities laws.

d.    Mergers, Recapitalizations, Stock Splits, Etc. Except as otherwise specifically provided in any employment, change of control, severance or similar agreement executed by the Participant and the Company, pursuant and subject to Section 15 of the Plan, certain changes in the number or character of the shares of capital stock of the Company (through sale, merger, consolidation, exchange, reorganization, divestiture (including a spin-off), liquidation, recapitalization, stock split, stock dividend, or otherwise) shall result in an adjustment, reduction, or enlargement, as appropriate, in the number of shares subject to this Award (i.e., Participant shall have such “anti-dilution” rights under the Award with respect to such events, but, subject to the Administrator’s discretion, shall not have any “preemptive” rights). Any additional shares that are credited pursuant to such adjustment shall be subject to the same restrictions as are applicable to the shares with respect to which the adjustment relates.

e.    Shares Reserved. The Company shall at all times during the term of this Award reserve and keep available such number of shares as will be sufficient to satisfy the requirements of this Agreement.

f.    Withholding Taxes. To permit the Company to comply with all applicable federal and state income tax laws or regulations, the Company may take such action as it deems appropriate to ensure that, if necessary, all applicable federal and state payroll, income or other taxes attributable to this Award are withheld from any amounts payable by the Company to the Participant. If the Company is unable to withhold such federal and state taxes, for whatever reason, the Participant hereby agrees to pay to the Company an amount equal to the amount the Company would otherwise be required to withhold under federal or state law prior to the transfer of any certificates for the shares of Common Stock subject to this Award. Subject to such rules as the Administrator may adopt, the Administrator may, in its sole discretion, permit Participant to satisfy such withholding tax obligations, in whole or in part, by delivering shares of Common Stock, including shares of Common Stock received pursuant to this Award having a Fair Market Value, as of the date the amount of tax to be withheld is determined under applicable tax law, equal to the statutory minimum amount required to be withheld for tax purposes. In no event may the Participant deliver shares of Common Stock having a Fair Market Value in excess of such statutory minimum required tax withholding. Participant’s election to deliver shares for purposes of such withholding tax obligations shall be made on or before the date that triggers such obligations or, if later, the date that the amount of tax to be withheld is determined under applicable tax law. Participant’s election to deliver shares for purposes of such withholding tax obligations shall be irrevocable and shall be approved by the Administrator and otherwise comply with such rules as the Administrator may adopt to assure compliance with Rule 16b-3 or any successor provision, as then in effect, of the General Rules and Regulations under the Securities and Exchange Act of 1934, if applicable.

g.    Nontransferability. No portion of this Award for which the risks of forfeiture have not lapsed may be assigned or transferred, in whole or in part, other than by will or by the laws of descent and distribution.

- 3 -

Exhibit 10.2

h.    2014 Equity Incentive Plan. The Award evidenced by this Agreement is granted pursuant to the Plan, a copy of which has been made available to the Participant and is hereby incorporated into this Agreement. This Agreement is subject to and in all respects limited and conditioned as provided in the Plan. All capitalized terms in this Agreement not defined herein shall have the meanings ascribed to them in the Plan. The Plan governs this Award and, in the event of any questions as to the construction of this Agreement or in the event of a conflict between the Plan and this Agreement, the Plan shall govern, except as the Plan otherwise provides.

i.    Lockup Period Limitation. Participant agrees that in the event the Company advises Participant that it plans an underwritten public offering of its Common Stock in compliance with the Securities Act of 1933, as amended, Participant will execute any lock-up agreement the Company and the underwriter(s) deem necessary or appropriate, in their sole discretion, with such public offering.

j.    Blue Sky Limitation. Notwithstanding anything in this Agreement to the contrary, in the event the Company makes any public offering of its securities and determines, in its sole discretion, that it is necessary to reduce the number of Restricted Stock Awards so as to comply with any state securities or Blue Sky law limitations with respect thereto, the Board of Directors of the Company shall accelerate the vesting of this Award (in full or in part) provided that the Company gives Participant 15 days’ prior written notice of such acceleration. Notice shall be deemed given when delivered personally or when deposited in the United States mail, first class postage prepaid and addressed to Participant at the address of Participant on file with the Company.

k.    Accounting Compliance. Participant agrees that, if Participant is an “affiliate” of the Company or any Affiliate (as defined in applicable legal and accounting principles) at the time of a Change of Control, Participant will comply with all requirements of Rule 145 of the Securities Act of 1933, as amended, and the requirements of such other legal or accounting principles, and will execute any documents necessary to ensure such compliance.

l.    Stock Legend. The Administrator may require that the certificates for any shares of Common Stock purchased by Participant (or, in the case of death, Participant’s successors) shall bear an appropriate legend to reflect the restrictions of Paragraph 4(c) and Paragraphs 4(i) through 4(k) of this Agreement; provided, however, that failure to so endorse any of such certificates shall not render invalid or inapplicable Paragraph 4(c) or Paragraph 4(i) through 4(k).

m.    Scope of Agreement. This Agreement shall bind and inure to the benefit of the Company and its successors and assigns and of the Participant and any successor or successors of the Participant. This Award is expressly subject to all terms and conditions contained in the Plan and in this Agreement, and Participant’s failure to execute this Agreement shall not relieve Participant from complying with such terms and conditions.

n.    Choice of Law. The law of the state of Minnesota shall govern all questions concerning the construction, validity, and interpretation of this Plan, without regard to that state’s conflict of laws rules.

- 4 -

Exhibit 10.2

o.    Severability. In the event that any provision of this Plan shall be held illegal or invalid for any reason, such illegality or invalidity shall not affect the remaining provisions of this Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included.

p.    Arbitration. Any dispute arising out of or relating to this Agreement or the alleged breach of it, or the making of this Agreement, including claims of fraud in the inducement, shall be discussed between the disputing parties in a good faith effort to arrive at a mutual settlement of any such controversy. If, notwithstanding, such dispute cannot be resolved, such dispute shall be settled by binding arbitration. Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. The arbitrator shall be a retired state or federal judge or an attorney who has practiced securities or business litigation for at least 10 years. If the parties cannot agree on an arbitrator within 20 days, any party may request that the chief judge of the District Court for Hennepin County, Minnesota, select an arbitrator. Arbitration will be conducted pursuant to the provisions of this Agreement, and the commercial arbitration rules of the American Arbitration Association, unless such rules are inconsistent with the provisions of this Agreement. Limited civil discovery shall be permitted for the production of documents and taking of depositions. Unresolved discovery disputes may be brought to the attention of the arbitrator who may dispose of such dispute. The arbitrator shall have the authority to award any remedy or relief that a court of this state could order or grant; provided, however, that punitive or exemplary damages shall not be awarded. The arbitrator may award to the prevailing party, if any, as determined by the arbitrator, all of its costs and fees, including the arbitrator’s fees, administrative fees, travel expenses, out-of-pocket expenses and reasonable attorneys’ fees. Unless otherwise agreed by the parties, the place of any arbitration proceedings shall be Hennepin County, Minnesota.

ACCORDINGLY, by accepting the Award, the Participant acknowledges and agrees to all of the terms and conditions set forth in the Award Summary and this Agreement.

- 5 -

EX-10.3

Exhibit 10.3

RESTRICTED STOCK AGREEMENT

PERFORMANCE BASED VESTING

CARDIOVASCULAR SYSTEMS, INC.

2014 EQUITY INCENTIVE PLAN

CARDIOVASCULAR SYSTEMS, INC., a Delaware corporation (the “Company”) has engaged _________________________ to maintain an online system to provide secure account access to participants receiving grants (each, a “Participant”) under, the Company’s 2014 Equity Incentive Plan (the “Plan”). Each Participant has an account at _________________________ with an award summary (the “Award Summary”) disclosing the date of the award, the number of shares subject to each award and conditions of the vesting of the award. This Agreement sets forth terms and conditions applicable to those awards set forth in the Award Summary that are subject to performance-based vesting.

W I T N E S S E T H:

WHEREAS, the Participant is, on the date of grant set forth in the Award Summary, a key employee, officer or director of, or a consultant or advisor to, the Company or a Subsidiary of the Company; and

WHEREAS, the Company wishes to grant a restricted stock award to the Participant for shares of the Company’s Common Stock pursuant to the Plan; and

WHEREAS, the Administrator of the Plan has authorized the grant of a restricted stock award to the Participant;

NOW, THEREFORE, in consideration of the premises and of the mutual covenants herein contained, the parties hereto agree as follows:

1.    Grant of Restricted Stock Award. The Company hereby grants to the Participant on the date set forth in the Award Summary a restricted stock award (the “Award”) for the number of shares of Common Stock set forth in the Award Summary on the terms and conditions set forth in the Award Summary and this Agreement, which shares are subject to adjustment pursuant to Section 15 of the Plan. The Company shall cause to be issued one or more stock certificates (or, upon request and if permitted in the Administrator’s discretion, an entry to be made in the books of the Company or its designated agent) representing such shares of Common Stock in the Participant’s name, and shall hold each such certificate until such time as the risk of forfeiture and other transfer restrictions set forth in this Agreement have lapsed with respect to the shares represented by the certificate. The Company may also place a legend on such certificates describing the risks of forfeiture and other transfer restrictions set forth in this Agreement providing for the cancellation of such certificates if the shares of Common Stock are forfeited as provided in Section 2 below. Until such risks of forfeiture have lapsed or the shares subject to this Award have been forfeited pursuant to Section 2 below, the Participant shall be entitled to vote the shares represented

Exhibit 10.3

by such stock certificates and shall receive all dividends attributable to such shares, but the Participant shall not have any other rights as a shareholder with respect to such shares.

2.    Vesting of Restricted Stock. For purposes of determining the whether the shares of Common Stock subject to this Award shall be forfeited by the Participant or vested upon the lapse of the risks of forfeiture, the following definitions shall apply:

a. “Peer Group” shall mean that group of companies selected by the Company’s compensation consultant for purposes of comparing compensation or performance of the Peer Group to that of the Company.

b. “Annual Revenue Growth” shall mean, (i) for the Company and any company in the Peer Group with a fiscal year ending on June 30, the percentage increase in revenue reported in the audited financial statements included in such company’s annual report on Form 10-K for the fiscal year ending on the June 30 immediately following the date of the Award, as compared to the revenue reported in the audited financial statements included in such company’s annual report on Form 10-K for the preceding fiscal year, and (ii) for any company in the Peer Group with a fiscal year not ending on June 30, the percentage increase in revenue for the 12 months ending on the June 30, immediately following the date of the Award, as determined by aggregating the revenue reported in such company’s quarterly reports on Form 10-Q and annual report on Form 10-K for the four quarters ending on the June 30 immediately following the date of the Award, as compared to the company’s aggregate revenue reported in such reports for the 12 months ending on June 30 of the preceding year.

c. “90 Day Average Closing Price Beginning of Year” shall mean the average of the closing prices per share of the common stock of the Company or any company in the Peer Group, as applicable, for the 90 consecutive trading days following the June 30 immediately preceding the date of the Award, as reported by NASDAQ, or if such shares are not traded on NASDAQ, as reported by the principal stock market or automated quotation system on which such shares are traded.

d. “90 Day Average Closing Price End of Year” shall mean the average of the closing prices per share of the common stock of the Company or any company in the Peer Group, as applicable, for the 90 consecutive trading days prior to the July 1 immediately following the date of the Award, as reported by NASDAQ, or if such shares are not traded on NASDAQ, as reported by the principal stock market or automated quotation system on which such shares are traded.

e. “Total Shareholder Return” shall mean, for either the Company or any company in the Peer Group, as applicable, the product of (i) a fraction, the numerator of which is equal to the 90 Day Average Closing Price End of Year less the 90 Day Average Closing Price Beginning of Year plus any dividends paid with respect

- 7 -

Exhibit 10.3

to the common stock during the fiscal year, and the denominator of which is the 90 day Average Closing Price Beginning of Year, multiplied by (ii) 100.

f. “Determination Date” shall mean the later of (i) the date the Company’s annual report on Form 10-K for the fiscal year ending on the June 30, immediately following the date of the Award is filed with the Securities and Exchange Commission, and (ii) the date of the last filing of any quarterly report on Form 10-Q or annual report on Form 10-K of any Peer Group company necessary to determine the Annual Revenue Growth of each company in the Peer Group.

Fifty percent of the shares of Common Stock subject to this award (the “Revenue Growth Shares”) shall vest or be forfeited as of the Determination Date based on the Company’s Annual Revenue Growth as compared to the Peer Group. If the Company’s Annual Revenue Growth is less than the 25^th percentile of the range of Annual Revenue Growth for all of the companies in the Peer Group, the Participant shall on the Determination Date forfeit all of the Revenue Growth Shares. If the Company’s Annual Revenue Growth is equal to or greater than the 25^th percentile, but less than or equal to the 50^th percentile, of the range of Annual Revenue Growth for all of the companies in the Peer Group, the risks of forfeiture shall lapse on the Determination Date with respect to 25% of the Revenue Growth Shares, plus a pro rata portion of the remaining Revenue Growth Shares for each percentile point from the 25^th percentile to the 50^th percentile, such that the risks of forfeiture shall lapse with respect to 50% of the Revenue Growth Shares if the Company’s Annual Revenue Growth is equal to the 50^th percentile of the range of Annual Revenue Growth for all the companies in the Peer Group. If the Company’s Annual Revenue Growth is greater than the 50^th percentile of the range of Annual Revenue Growth for all of the companies in the Peer Group, the risks of forfeiture shall lapse on the Determination Date with respect to 50% of the Revenue Growth Shares, plus a pro rata portion of the remaining Revenue Growth Shares for each percentile point from the 50^th percentile to the 85^th percentile, such that the risks of forfeiture shall lapse with respect to 100% of the Revenue Growth Shares if the Company’s Annual Revenue Growth is equal to or greater than the 85^th percentile of the range of Annual Revenue Growth for all the companies in the Peer Group.

Fifty percent of the shares of Common Stock subject to this award (the “TSR Shares”) shall vest or be forfeited as of the Determination Date based on the Company’s Total Shareholder Return as compared to the Peer Group. If the Company’s Total Shareholder Return is less than the 25^th percentile of the range of Total Shareholder Return for all of the companies in the Peer Group, the Participant shall on the Determination Date forfeit all of the TSR Shares. If the Company’s Total Shareholder Return is equal to or greater than the 25^th percentile, but less than or equal to the 50^th percentile, of the range of Total Shareholder Return for all of the companies in the Peer Group, the risks of forfeiture shall lapse on the Determination Date with respect to 25% of the Revenue Growth Shares, plus a pro rata portion of the remaining TSR Shares for each percentile point from the 25^th percentile to the 50^th percentile, such that the risks of forfeiture shall lapse with respect to 50% of the TSR Shares if the Company’s Total Shareholder Return is equal to the 50^th percentile of the range of Total Shareholder Return for all the companies in the Peer Group. If the Company’s Total Shareholder Return is greater than the 50^th percentile of the range of Total Shareholder Return for all of the companies in the Peer Group, the risks of forfeiture shall lapse on the Determination Date with respect to 50% of the TSR Shares, plus a pro rata portion of the remaining TSR Shares for

- 7 -

Exhibit 10.3

each percentile point from the 50^th percentile to the 85^th percentile, such that the risks of forfeiture shall lapse with respect to 100% of the TSR Shares if the Company’s Total Shareholder Return is equal to or greater than the 85^th percentile of the range of Total Shareholder Return for all the companies in the Peer Group.

Notwithstanding anything in the Plan, the Award Summary or this Agreement to the contrary, the shares of Common Stock subject to this Award will become fully vested upon a Change of Control.

3.    Termination of Employment or Other Relationship. If the Participant’s employment or other relationship with the Company (or a Subsidiary of the Company) ceases at any time prior to the Determination Date for any reason, including the Participant’s voluntary resignation or retirement, the Participant shall be entitled to receive a fraction of the shares that Participant would have been entitled to receive pursuant to Section 2 above if such employment or other relationship had not ceased, which fraction shall have a numerator equal to the number of full months in the fiscal year ending on June 30 immediately following the date of the Award that Participant was employed by, or maintained a relationship with, the Company, and a denominator equal to 12. The Participant shall on the Determination Date forfeit all other shares subject to this Award.

4.    General Provisions.

a.    Employment or Other Relationship. This Agreement shall not confer on the Participant any right with respect to continuation of employment or other relationship by the Company, nor will it interfere in any way with the right of the Company to terminate such employment or relationship. Nothing in this Agreement shall be construed as creating an employment or service contract for any specified term between Participant and the Company.

b.    280G Limitations. Notwithstanding anything in the Plan, this Agreement or in any other agreement, plan, contract or understanding entered into from time to time between Participant and the Company or any of its Subsidiaries to the contrary (except an agreement that expressly modifies or excludes the application of this Paragraph 4(b)),the lapse of the risks of forfeiture of this Awardshall not be accelerated in connection with a Change of Control to the extent that such acceleration, taking into account all other rights, payments and benefits to which Participant is entitled under any other plan or agreement, would  constitute a "parachute payment" or an "excess parachute payment" for purposes of Sections 280G and 4999 of the Internal Revenue Code of 1986, as amended, or any successor provisions, and the regulations issued thereunder; provided, however, that the Administrator, in its sole discretion and in accordance with applicable law, may modify or exclude the application of this Paragraph 4(b).

c.    Securities Law Compliance. Participant shall not transfer or otherwise dispose of the shares of Common Stock received pursuant to this Agreement until such time as counsel to the Company shall have determined that such transfer or other disposition will not violate any state or federal securities laws. The Participant may be required by the Company, as a condition of the effectiveness of this restricted stock award, to provide any written assurances that are necessary

- 7 -

Exhibit 10.3

or desirable in the opinion of the Company and its counsel to ensure the issuance complies with the applicable securities laws, including that all Common Stock subject to this Agreement shall be held, until such time that such Common Stock is registered and freely tradable under applicable state and federal securities laws, for Participant’s own account without a view to any further distribution thereof, that the certificates (or, if permitted book entries) for such shares shall bear an appropriate legend or notation to that effect and that such shares will be not transferred or disposed of except in compliance with applicable state and federal securities laws.

d.    Mergers, Recapitalizations, Stock Splits, Etc. Except as otherwise specifically provided in any employment, change of control, severance or similar agreement executed by the Participant and the Company, pursuant and subject to Section 15 of the Plan, certain changes in the number or character of the shares of capital stock of the Company (through sale, merger, consolidation, exchange, reorganization, divestiture (including a spin-off), liquidation, recapitalization, stock split, stock dividend, or otherwise) shall result in an adjustment, reduction, or enlargement, as appropriate, in the number of shares subject to this Award (i.e., Participant shall have such “anti-dilution” rights under the Award with respect to such events, but, subject to the Administrator’s discretion, shall not have any “preemptive” rights). Any additional shares that are credited pursuant to such adjustment shall be subject to the same restrictions as are applicable to the shares with respect to which the adjustment relates.

e.    Shares Reserved. The Company shall at all times during the term of this Award reserve and keep available such number of shares as will be sufficient to satisfy the requirements of this Agreement.

f.    Withholding Taxes. To permit the Company to comply with all applicable federal and state income tax laws or regulations, the Company may take such action as it deems appropriate to ensure that, if necessary, all applicable federal and state payroll, income or other taxes attributable to this Award are withheld from any amounts payable by the Company to the Participant. If the Company is unable to withhold such federal and state taxes, for whatever reason, the Participant hereby agrees to pay to the Company an amount equal to the amount the Company would otherwise be required to withhold under federal or state law prior to the transfer of any certificates for the shares of Common Stock subject to this Award. Subject to such rules as the Administrator may adopt, the Administrator may, in its sole discretion, permit Participant to satisfy such withholding tax obligations, in whole or in part, by delivering shares of Common Stock, including shares of Common Stock received pursuant to this Award having a Fair Market Value, as of the date the amount of tax to be withheld is determined under applicable tax law, equal to the statutory minimum amount required to be withheld for tax purposes. In no event may the Participant deliver shares of Common Stock having a Fair Market Value in excess of such statutory minimum required tax withholding. Participant’s election to deliver shares for purposes of such withholding tax obligations shall be made on or before the date that triggers such obligations or, if later, the date that the amount of tax to be withheld is determined under applicable tax law. Participant’s election to deliver shares for purposes of such withholding tax obligations shall be irrevocable and shall be approved by the Administrator and otherwise comply with such rules as the Administrator may adopt to assure compliance with Rule 16b-3 or any successor provision, as then in effect, of the General Rules and Regulations under the Securities and Exchange Act of 1934, if applicable.

- 7 -

Exhibit 10.3

g.    Nontransferability. No portion of this Award for which the risks of forfeiture have not lapsed may be assigned or transferred, in whole or in part, other than by will or by the laws of descent and distribution.

h.    2014 Equity Incentive Plan. The Award evidenced by this Agreement is granted pursuant to the Plan, a copy of which has been made available to the Participant and is hereby incorporated into this Agreement. This Agreement is subject to and in all respects limited and conditioned as provided in the Plan. All capitalized terms in this Agreement not defined herein shall have the meanings ascribed to them in the Plan. The Plan governs this Award and, in the event of any questions as to the construction of this Agreement or in the event of a conflict between the Plan and this Agreement, the Plan shall govern, except as the Plan otherwise provides.

i.    Lockup Period Limitation. Participant agrees that in the event the Company advises Participant that it plans an underwritten public offering of its Common Stock in compliance with the Securities Act of 1933, as amended, Participant will execute any lock-up agreement the Company and the underwriter(s) deem necessary or appropriate, in their sole discretion, with such public offering.

j.    Blue Sky Limitation. Notwithstanding anything in this Agreement to the contrary, in the event the Company makes any public offering of its securities and determines, in its sole discretion, that it is necessary to reduce the number of Restricted Stock Awards so as to comply with any state securities or Blue Sky law limitations with respect thereto, the Board of Directors of the Company shall accelerate the vesting of this Award (in full or in part) provided that the Company gives Participant 15 days’ prior written notice of such acceleration. Notice shall be deemed given when delivered personally or when deposited in the United States mail, first class postage prepaid and addressed to Participant at the address of Participant on file with the Company.

k.    Accounting Compliance. Participant agrees that, if Participant is an “affiliate” of the Company or any Affiliate (as defined in applicable legal and accounting principles) at the time of a Change of Control, Participant will comply with all requirements of Rule 145 of the Securities Act of 1933, as amended, and the requirements of such other legal or accounting principles, and will execute any documents necessary to ensure such compliance.

l.    Stock Legend. The Administrator may require that the certificates for any shares of Common Stock purchased by Participant (or, in the case of death, Participant’s successors) shall bear an appropriate legend to reflect the restrictions of Paragraph 4(c) and Paragraphs 4(i) through 4(k) of this Agreement; provided, however, that failure to so endorse any of such certificates shall not render invalid or inapplicable Paragraph 4(c) or Paragraph 4(i) through 4(k).

m.    Scope of Agreement. This Agreement shall bind and inure to the benefit of the Company and its successors and assigns and of the Participant and any successor or successors of the Participant. This Award is expressly subject to all terms and conditions contained in the Plan and in this Agreement, and Participant’s failure to execute this Agreement shall not relieve Participant from complying with such terms and conditions.

- 7 -

Exhibit 10.3

n.    Choice of Law. The law of the state of Minnesota shall govern all questions concerning the construction, validity, and interpretation of this Plan, without regard to that state’s conflict of laws rules.

o.    Severability. In the event that any provision of this Plan shall be held illegal or invalid for any reason, such illegality or invalidity shall not affect the remaining provisions of this Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included.

p.    Arbitration. Any dispute arising out of or relating to this Agreement or the alleged breach of it, or the making of this Agreement, including claims of fraud in the inducement, shall be discussed between the disputing parties in a good faith effort to arrive at a mutual settlement of any such controversy. If, notwithstanding, such dispute cannot be resolved, such dispute shall be settled by binding arbitration. Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. The arbitrator shall be a retired state or federal judge or an attorney who has practiced securities or business litigation for at least 10 years. If the parties cannot agree on an arbitrator within 20 days, any party may request that the chief judge of the District Court for Hennepin County, Minnesota, select an arbitrator. Arbitration will be conducted pursuant to the provisions of this Agreement, and the commercial arbitration rules of the American Arbitration Association, unless such rules are inconsistent with the provisions of this Agreement. Limited civil discovery shall be permitted for the production of documents and taking of depositions. Unresolved discovery disputes may be brought to the attention of the arbitrator who may dispose of such dispute. The arbitrator shall have the authority to award any remedy or relief that a court of this state could order or grant; provided, however, that punitive or exemplary damages shall not be awarded. The arbitrator may award to the prevailing party, if any, as determined by the arbitrator, all of its costs and fees, including the arbitrator’s fees, administrative fees, travel expenses, out-of-pocket expenses and reasonable attorneys’ fees. Unless otherwise agreed by the parties, the place of any arbitration proceedings shall be Hennepin County, Minnesota.

ACCORDINGLY, by accepting the Award, the Participant acknowledges and agrees to all of the terms and conditions set forth in the Award Summary and this Agreement.

- 7 -

EX-31.1

Exhibit 31.1

CERTIFICATION UNDER SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, David L. Martin, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Cardiovascular Systems, 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.

	By:	/s/ David L. Martin
Dated: February 6, 2015		David L. Martin
		President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION UNDER SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Laurence L. Betterley, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Cardiovascular Systems, 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.

	By:	/s/ Laurence L. Betterley
Dated: February 6, 2015		Laurence L. Betterley
		Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the filing of the Quarterly Report on Form 10-Q for the quarter ended December 31, 2014 (the “Report”) by Cardiovascular Systems, Inc. (“Registrant”), I, David L. Martin, the Chief Executive Officer of the Company, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that to the best of my knowledge:

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

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

	By:	/s/ David L. Martin
Dated: February 6, 2015		David L. Martin
		President and Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the filing of the Quarterly Report on Form 10-Q for the quarter ended December 31, 2014 (the “Report”) by Cardiovascular Systems, Inc. (“Registrant”), I, Laurence L. Betterley, the Chief Financial Officer of the Company, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that to the best of my knowledge:

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

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

	By:	/s/ Laurence L. Betterley
Dated: February 6, 2015		Laurence L. Betterley
		Chief Financial Officer

XML

Interest and Other, Net (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2014	Dec. 31, 2013
Other Income and Expenses [Abstract]
Interest expense, net of premium amortization	$ (6)	$ (564)	$ (22)	$ (845)
Change in fair value of conversion options	0	0	0	(61)
Net write-offs upon conversion (option and premium amortization)	0	(574)	0	(655)
Other	(15)	(25)	(33)	(47)
Total Interest and other, net	$ (21)	$ (1,163)	$ (55)	$ (1,608)

XML

Deferred Compensation Plan

6 Months Ended

Dec. 31, 2014

Compensation and Retirement Disclosure [Abstract]

Deferred Compensation Plan

Deferred Compensation Plan

The Company offers certain members of management and highly compensated employees the opportunity to defer up to 100% of their base salary (after 401(k), payroll tax and other deductions), performance bonus and discretionary bonus and elect to receive the deferred compensation at a fixed future date of participant’s choosing. Each participant may, at the time of his or her deferral election, choose to allocate the deferred compensation into investment alternatives set by the Compensation Committee at that time. The amount payable to each participant under the plan will change in value based upon the investment selected by that participant and is classified as current or long-term on the Company's balance sheet based on the disbursement elections made by the participants.

In August 2014, the Company acquired $2,084 of available-for-sale marketable securities. These available-for-sale marketable securities are primarily comprised of investments with a fixed income and equity investments. The available-for-sale marketable securities are included with prepaid expenses and other current assets on the consolidated balance sheet at December 31, 2014. Unrealized gains and losses as of December 31, 2014 were not significant. The fair value of the awards as of December 31, 2014 is estimated at $2,165, of which $1,251 and $914 is classified as Level 1 and Level 2 investments, respectively. The Company's marketable securities classified within Level 2 are valued using readily available pricing sources.

XML

Commitment and Contingencies (Details) (USD $) In Thousands, unless otherwise specified	6 Months Ended		0 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Jun. 11, 2014
Commitments and Contingencies Disclosure [Abstract]
Lease expiration date	Mar. 31, 2020
Rental expense	$ 797	$ 720
Future Minimum Lease Payments:
Six months ended June 30, 2015	563
Fiscal 2016	763
Fiscal 2017	469
Fiscal 2018	462
Fiscal 2019	462
Thereafter	346
Future minimum lease payments	3,065
Ryan Companies
Other Commitments [Line Items]
Construction costs paid to third party, percentage of cost of work			3.85%
Ryan Companies | Payable at Certain Point in the Construction Process
Other Commitments [Line Items]
Development costs paid to third party, percentage of adjusted total project costs			3.25%
Ryan Companies | Payable Upon Completion of the Project
Other Commitments [Line Items]
Development costs paid to third party, percentage of adjusted total project costs			5.00%
Land
Other Commitments [Line Items]
Purchase price of real estate property			500
Land | New Brighton, Minnesota
Other Commitments [Line Items]
Area of real estate property (in acres)			10.0
Option to purchase additional property (in acres)			3.6
Construction in Progress
Other Commitments [Line Items]
Amount to be held in escrow			9,128

XML

Stock Options and Restricted Stock Awards - Restricted Stock Award Activity (Details) (Restricted Stock, USD $)	6 Months Ended
	Dec. 31, 2014
Restricted Stock
Number of Shares
Awards outstanding, balance at beginning of period (in shares)	1,276,403
Awards granted (in shares)	425,644	[1]
Awards forfeited (in shares)	(78,747)
Awards vested (in shares)	(483,941)
Awards outstanding, balance at end of period (in shares)	1,139,359
Weighted Average Fair Value
Awards outstanding, balance at beginning of period (in usd per share)	$ 17.37
Awards granted (in usd per share)	$ 29.15
Awards forfeited (in usd per share)	$ 19.84
Awards vested (in usd per share)	$ 17.00
Awards outstanding, balance at end of period (in usd per share)	$ 19.89

[1] Includes both time-based and performance-based restricted stock awards.

XML

Texas Production Facility (Details) (USD $) In Thousands, unless otherwise specified	0 Months Ended		12 Months Ended
	Jul. 02, 2012 Job Employee	Jun. 17, 2009	Jun. 30, 2014	Dec. 31, 2014 Employee	Jul. 02, 2012 Employee	Sep. 09, 2009 sqft
Production Facility [Abstract]
Agreement lease with PEDC, number of square feet						46,000
Corporate job creation agreement date		Jun. 17, 2009
Net cash incentive funds					$ 2,975
Cash incentive funds upon hiring of 125th full time employee at facility	425
Number of employees to be maintained for grant of second cash incentive fund					125
Cash Incentive Funds upon Hiring of Seventy Fifth Full Time Employee at Facility	425
Number of employees to be maintained for grant of first cash incentive fund				75	75
Maximum number of jobs maintained to retain cash incentive	25
Net award related to job creation agreement	1,020
Funded amount grant from state of Texas under Texas enterprise fund program	510
Amount received of Texas enterprise fund program				340
Remaining amount received of Texas enterprise fund program				170
Reimbursement of award related to Job Creation Agreement			46
Cumulative expenses				41
Deferred grant incentive current liability				$ 18

XML

Earnings Per Share - EPS Reconciliation (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended				6 Months Ended
	Dec. 31, 2014		Dec. 31, 2013		Dec. 31, 2014		Dec. 31, 2013
Numerator
Net loss	$ (5,273)		$ (8,658)		$ (13,497)		$ (15,950)
Denominator
Weighted average common shares – basic	31,487,358		27,177,952		31,399,234		25,964,660
Effect of dilutive stock options and warrants (in shares)	0	[1],[2]	0	[1],[2]	0	[1],[2]	0	[1],[2]
Weighted average common shares outstanding – diluted	31,487,358		27,177,952		31,399,234		25,964,660
Net loss per common share — basic and diluted (in usd per share)	$ (0.17)		$ (0.32)		$ (0.43)		$ (0.61)

[1] At December 31, 2014 and 2013, 0 and 984,991 warrants, respectively, were outstanding. The effect of the shares that would be issued upon exercise of these warrants has been excluded from the calculation of diluted loss per share because those shares are anti-dilutive.

[2] At December 31, 2014 and 2013, 835,234 and 1,080,456 stock options, respectively, were outstanding. The effect of the shares that would be issued upon exercise of these options has been excluded from the calculation of diluted loss per share because those shares are anti-dilutive.

XML

Selected Consolidated Financial Statement Information

6 Months Ended

Dec. 31, 2014

Quarterly Financial Information Disclosure [Abstract]

Selected Consolidated Financial Statement Information

Selected Consolidated Financial Statement Information

Accounts Receivable

Accounts receivable consists of the following:

	December 31,			June 30,
	2014			2014
Accounts receivable	$	27,292		$	21,834
Less: Allowance for doubtful accounts	(1,228		)	(451		)
Total accounts receivable	$	26,064		$	21,383

Inventories

Inventories consist of the following:

	December 31,		June 30,
	2014		2014
Raw materials	$	7,034	$	5,879
Work in process	507		855
Finished goods	6,416		6,156
Total inventories	$	13,957	$	12,890

Property and Equipment

Property and equipment consists of the following:

	December 31,			June 30,
	2014			2014
Land	$	500		$	500
Equipment	7,303			6,436
Furniture	626			626
Leasehold improvements	233			233
Construction in progress	27,027			11,499
	35,689			19,294
Less: Accumulated depreciation	(4,749		)	(3,997		)
Total property and equipment, net	$	30,940		$	15,297

In June 2014, the Company announced plans to build a new corporate headquarters in New Brighton, Minnesota. The 125,000-square-foot, two-story building will have space for more than 500 employees and contain dedicated research and development, training and education, and manufacturing facilities. Construction of the new facility is targeted to be completed in March 2015 and will replace the two current St. Paul, Minnesota leased facilities. Construction in progress primarily consists of costs associated with the new headquarters, including $9,128 held in an escrow account that is required to be used to fund the final construction payments.

Accrued Expenses

Accrued expenses consist of the following:

	December 31,		June 30,
	2014		2014
Salaries and bonus	$	3,648	$	5,244
Commissions	4,716		6,069
Accrued vacation	3,226		2,843
Other	595		474
Total accrued expenses	$	12,185	$	14,630

XML

Earnings Per Share - EPS Reconciliation (Additional Information) (Details)	3 Months Ended				6 Months Ended
	Dec. 31, 2014		Dec. 31, 2013		Dec. 31, 2014		Dec. 31, 2013
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive shares excluded from the calculation (in shares)	0	[1],[2]	0	[1],[2]	0	[1],[2]	0	[1],[2]
Warrant
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive shares excluded from the calculation (in shares)					0		984,991
Stock Options
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive shares excluded from the calculation (in shares)					835,234		1,080,456

[1] At December 31, 2014 and 2013, 0 and 984,991 warrants, respectively, were outstanding. The effect of the shares that would be issued upon exercise of these warrants has been excluded from the calculation of diluted loss per share because those shares are anti-dilutive.

[2] At December 31, 2014 and 2013, 835,234 and 1,080,456 stock options, respectively, were outstanding. The effect of the shares that would be issued upon exercise of these options has been excluded from the calculation of diluted loss per share because those shares are anti-dilutive.

XML

Consolidated Balance Sheets (Unaudited) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2014	Jun. 30, 2014
Current assets
Cash and cash equivalents	$ 101,344	$ 126,592
Accounts receivable, net	26,064	21,383
Inventories	13,957	12,890
Prepaid expenses and other current assets	4,084	1,846
Total current assets	145,449	162,711
Property and equipment, net	30,940	15,297
Patents, net	4,150	3,823
Other assets	70	70
Total assets	180,609	181,901
Current liabilities
Short-term borrowings	0	2,400
Accounts payable	18,302	12,699
Accrued expenses	12,185	14,630
Total current liabilities	30,487	29,729
Long-term liabilities
Other liabilities	1,967	117
Total liabilities	32,454	29,846
Commitments and contingencies	0	0
Common stock, $0.001 par value; authorized 100,000,000 common shares at December 31, 2014 and June 30, 2014; issued and outstanding 31,572,370 at December 31, 2014 and 31,084,742 at June 30, 2014, respectively	32	31
Additional paid in capital	400,185	390,589
Accumulated deficit	(252,062)	(238,565)
Total stockholders’ equity	148,155	152,055
Total liabilities and stockholders’ equity	$ 180,609	$ 181,901

XML

Business Overview

6 Months Ended

Dec. 31, 2014

Accounting Policies [Abstract]

Business Overview

Business Overview

Company Description

Cardiovascular Systems, Inc. (the “Company”) develops and commercializes innovative solutions for treating vascular and coronary diseases. The Company’s peripheral arterial disease products, the Stealth 360°^® PAD System, Diamondback 360^® PAD System, and Predator 360°^® PAD System, are catheter-based platforms capable of treating a broad range of plaque types, including calcified plaque, in leg arteries both above and below the knee and address many of the limitations associated with existing surgical, catheter and pharmacological treatment alternatives. In October 2013, the Company received premarket approval (“PMA”) from the FDA to market the Diamondback 360^® Coronary Orbital Atherectomy System (“OAS”) as a treatment for severely calcified coronary arteries. The Company began a controlled commercial launch of the Diamondback 360^® Coronary OAS following receipt of PMA approval. In March 2014, we received approval for the Diamondback 360^® 60cm Peripheral OAS access device, which allows physicians to treat PAD patients in the small and tortuous vessels located below the knee through alternative access sites in the ankle or foot. In November 2014, the Company received CE Mark for its Stealth 360° PAD System and is currently evaluating the timing and structure of its plans to commercialize products in Europe.

XML

Selected Consolidated Financial Statement Information (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2014	Jun. 30, 2014
Accounts Receivable
Accounts receivable	$ 27,292	$ 21,834
Less: Allowance for doubtful accounts	(1,228)	(451)
Total accounts receivable	26,064	21,383
Inventories
Raw materials	7,034	5,879
Work in process	507	855
Finished goods	6,416	6,156
Total inventories	13,957	12,890
Property and Equipment
Land	500	500
Equipment	7,303	6,436
Furniture	626	626
Leasehold improvements	233	233
Construction in progress	27,027	11,499
Property and equipment, gross	35,689	19,294
Less: Accumulated depreciation	(4,749)	(3,997)
Total property and equipment, net	30,940	15,297
Accrued Expenses
Salaries and bonus	3,648	5,244
Commissions	4,716	6,069
Accrued vacation	3,226	2,843
Other	595	474
Total accrued expenses	12,185	14,630
Building
Property, Plant and Equipment [Line Items]
Amount to be held in escrow	$ 9,128
New Brighton, Minnesota | Building
Property, Plant and Equipment [Line Items]
Area of real estate property (in square feet)	125,000.0
Capacity of new building (number of employees)	500

XML

Debt (Details) (USD $)	3 Months Ended		6 Months Ended		0 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2014	Dec. 31, 2013	Sep. 29, 2014	Apr. 14, 2010	Jun. 30, 2014	Mar. 29, 2010	May 10, 2013
Debt Instrument [Line Items]
Change in fair value of conversion option	$ 0	$ 0	$ 0	$ (61,000)
Interest and Other, Net
Debt Instrument [Line Items]
Change in fair value of conversion option	0	61,000
Silicon Valley Bank
Debt Instrument [Line Items]
Line of credit expiration date					Dec. 31, 2014
Silicon Valley Bank | Line of Credit
Debt Instrument [Line Items]
Borrowings line of credit								15,000,000
Borrowings line of credit eligible accounts								85.00%
Line of credit, outstanding balance	0		0				2,400,000
Partners For Growth
Debt Instrument [Line Items]
Floating interest rate									2.75%
PFG Convertible debt	0		0				0
Number of days for determination of price per share						10 days
Reduce in conversion price									15.00%
Partners For Growth | Maximum
Debt Instrument [Line Items]
Loan and security agreement									5,000,000

XML

Summary of Significant Accounting Policies

6 Months Ended

Dec. 31, 2014

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

Interim Financial Statements

The Company prepared the unaudited interim consolidated financial statements and related unaudited financial information in the footnotes in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements. The year-end consolidated balance sheet was derived from the Company’s audited consolidated financial statements, but does not include all disclosures as required by GAAP. These interim consolidated financial statements reflect all adjustments consisting of normal recurring accruals, which, in the opinion of management, are necessary to state fairly the Company’s consolidated financial position, the results of its operations and its cash flows for the interim periods. These interim consolidated financial statements should be read in conjunction with the consolidated annual financial statements and the notes thereto included in the Form 10-K filed by the Company with the SEC on August 28, 2014. The nature of the Company’s business is such that the results of any interim period may not be indicative of the results to be expected for the entire year.

Use of Estimates

The preparation of the Company’s consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and 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. Actual results could differ from those estimates.

Stock-Based Compensation

The Company recognizes stock-based compensation expense in an amount equal to the fair value of share-based payments computed at the date of grant. The fair value of all restricted stock awards are expensed in the consolidated statements of operations ratably over the related vesting period.

Revenue Recognition

The Company sells the majority of its products via direct shipment to hospitals or clinics. The Company recognizes revenue when all of the following criteria are met: persuasive evidence of an arrangement exists; delivery has occurred; the sales price is fixed or determinable; and collectability is reasonably assured. The Company records estimated sales returns, discounts and rebates as a reduction of net sales.

Costs related to products delivered are recognized in the period revenue is recognized. Cost of goods sold consists primarily of raw materials, direct labor, and manufacturing overhead.

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, “Revenue From Contracts with Customers.” The guidance requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which an entity expects to be entitled in exchange for those goods or services. The guidance also requires expanded disclosures relating to the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. Additionally, qualitative and quantitative disclosures are required about customer contracts, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. ASU 2014-09 is effective for annual periods beginning after December 15, 2016, including interim periods within that reporting period, using one of two prescribed retrospective methods. Early adoption is not permitted. The Company is evaluating the impact of the amended revenue recognition guidance on its consolidated financial statements.

In August 2014, the FASB issued ASU No. 2014-15, “Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern.” The guidance requires management to perform interim and annual assessments of an entity's ability to continue as a going concern within one year of the date of issuance of the entity's financial statements. The entity must also provide certain disclosures if there is substantial doubt about the entity's ability to continue as a going concern. ASU 2014-15 is effective for annual periods ending after December 15, 2016, and interim periods thereafter. Early adoption is permitted. The Company does not anticipate a material impact on its financial statements upon adoption.

XML

Consolidated Balance Sheets (Unaudited) (Parenthetical) (USD $)	Dec. 31, 2014	Jun. 30, 2014
Statement of Financial Position [Abstract]
Common stock, par value (in usd per share)	$ 0.001	$ 0.001
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	31,572,370	31,084,742
Common stock, shares outstanding	31,572,370	31,084,742

XML

Selected Consolidated Financial Statement Information (Tables)

6 Months Ended

Dec. 31, 2014

Quarterly Financial Information Disclosure [Abstract]

Schedule of Accounts Receivable

Accounts receivable consists of the following:

	December 31,			June 30,
	2014			2014
Accounts receivable	$	27,292		$	21,834
Less: Allowance for doubtful accounts	(1,228		)	(451		)
Total accounts receivable	$	26,064		$	21,383

Schedule of Inventory

Inventories consist of the following:

	December 31,		June 30,
	2014		2014
Raw materials	$	7,034	$	5,879
Work in process	507		855
Finished goods	6,416		6,156
Total inventories	$	13,957	$	12,890

Schedule of Property and Equipment

Property and equipment consists of the following:

	December 31,			June 30,
	2014			2014
Land	$	500		$	500
Equipment	7,303			6,436
Furniture	626			626
Leasehold improvements	233			233
Construction in progress	27,027			11,499
	35,689			19,294
Less: Accumulated depreciation	(4,749		)	(3,997		)
Total property and equipment, net	$	30,940		$	15,297

Schedule of Accrued Expenses

Accrued expenses consist of the following:

	December 31,		June 30,
	2014		2014
Salaries and bonus	$	3,648	$	5,244
Commissions	4,716		6,069
Accrued vacation	3,226		2,843
Other	595		474
Total accrued expenses	$	12,185	$	14,630

XML

Document and Entity Information	6 Months Ended
	Dec. 31, 2014	Jan. 31, 2015
Document and Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Dec. 31, 2014
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q2
Trading Symbol	CSII
Entity Registrant Name	CARDIOVASCULAR SYSTEMS INC
Entity Central Index Key	0001180145
Current Fiscal Year End Date	--06-30
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		31,608,864

XML

Interest and Other, Net (Tables)

6 Months Ended

Dec. 31, 2014

Other Income and Expenses [Abstract]

Interest and Other, Net

Interest and other, net, includes the following:

	Three Months Ended   December 31,						Six Months Ended   December 31,
	2014			2013			2014			2013
Interest expense, net of premium amortization	$	(6	)	$	(564	)	$	(22	)	$	(845	)
Change in fair value of conversion options	—			—			—			(61		)
Net write-offs upon conversion (option and premium amortization)	—			(574		)	—			(655		)
Other	(15		)	(25		)	(33		)	(47		)
Total Interest and other, net	$	(21	)	$	(1,163	)	$	(55	)	$	(1,608	)

XML

Consolidated Statements of Operations (Unaudited) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2014	Dec. 31, 2013
Revenues	$ 44,732	$ 32,337	$ 86,086	$ 62,103
Cost of goods sold	9,346	7,313	18,231	14,177
Gross profit	35,386	25,024	67,855	47,926
Expenses:
Selling, general and administrative	32,553	27,468	66,060	52,839
Research and development	8,085	5,051	15,237	9,429
Total expenses	40,638	32,519	81,297	62,268
Loss from operations	(5,252)	(7,495)	(13,442)	(14,342)
Interest and other, net	(21)	(1,163)	(55)	(1,608)
Net and comprehensive loss	$ (5,273)	$ (8,658)	$ (13,497)	$ (15,950)
Net and comprehensive loss per common share:
Basic and diluted (in usd per share)	$ (0.17)	$ (0.32)	$ (0.43)	$ (0.61)
Weighted average common shares used in computation:
Basic and diluted (in shares)	31,487,358	27,177,952	31,399,234	25,964,660

XML

Stock Options and Restricted Stock Awards

6 Months Ended

Dec. 31, 2014

Share-based Arrangements with Employees and Nonemployees [Abstract]

Stock Options and Restricted Stock Awards

Stock Options and Restricted Stock Awards

On November 12, 2014, the Company's stockholders approved the 2014 Equity Incentive Plan (the “2014 Plan”), under which restricted stock awards have been granted to employees, directors and consultants. Previously, options to purchase common stock and restricted stock awards were granted under the 2007 Equity Incentive Plan (the “2007 Plan”) and the 2003 Stock Option Plan (the “2003 Plan”). The 2014 Plan, the 2007 Plan and the 2003 Plan are collectively referred to as the “Plans.”

Stock Options

All options granted under the Plans become exercisable over periods established at the date of grant. The option exercise price is generally not less than the estimated fair market value of the Company’s common stock at the date of grant, as determined by the Company’s management and Board of Directors. In addition, the Company has granted nonqualified stock options to a director outside of the Plans. An employee's vested options must be exercised at or within 90 days of termination to avoid forfeiture. As of December 31, 2014, all outstanding options were fully vested.

Stock option activity for the six months ended December 31, 2014 is as follows:

	Number of Options(a)		Weighted Average Exercise Price
Options outstanding at June 30, 2014	922,809		$	10.16
Options exercised	(87,575	)	$	9.07
Options outstanding at December 31, 2014	835,234		$	10.28
(a) Includes the effect of options granted, exercised, forfeited or expired from the 2003 Plan and 2007 Plan, and options granted outside such plans.

Restricted Stock

The fair value of each restricted stock award is equal to the fair market value of the Company’s common stock at the date of grant. Vesting of restricted stock awards generally ranges from one to three years. The estimated fair value of restricted stock awards, including the effect of estimated forfeitures, is recognized on a straight-line basis over the restricted stock’s vesting period.

On August 11, 2014, the Company granted performance based restricted stock awards to certain executives. The performance based awards included grants of a maximum aggregate of 76,112 shares that vest based upon achievement of certain thresholds measuring total shareholder return during periods within fiscal 2015 compared to a pre-determined peer group of companies, and grants of a maximum aggregate of 76,112 shares that vest based upon achievement of certain thresholds measuring annual revenue growth during fiscal 2015 compared to a pre-determined peer group of companies. Management adjusts expense as required based on expected revenue growth performance for those awards.

Restricted stock award activity for the six months ended December 31, 2014 is as follows:

	Number of Shares		Weighted Average  Fair Value
Restricted stock awards outstanding at June 30, 2014	1,276,403		$	17.37
Restricted stock awards granted (1)	425,644		$	29.15
Restricted stock awards forfeited	(78,747	)	$	19.84
Restricted stock awards vested	(483,941	)	$	17.00
Restricted stock awards outstanding at December 31, 2014	1,139,359		$	19.89
(1) Includes both time-based and performance-based restricted stock awards.

XML

Interest and Other, Net

6 Months Ended

Dec. 31, 2014

Other Income and Expenses [Abstract]

Interest and Other, Net

Interest and Other, Net

Interest and other, net, includes the following:

	Three Months Ended   December 31,						Six Months Ended   December 31,
	2014			2013			2014			2013
Interest expense, net of premium amortization	$	(6	)	$	(564	)	$	(22	)	$	(845	)
Change in fair value of conversion options	—			—			—			(61		)
Net write-offs upon conversion (option and premium amortization)	—			(574		)	—			(655		)
Other	(15		)	(25		)	(33		)	(47		)
Total Interest and other, net	$	(21	)	$	(1,163	)	$	(55	)	$	(1,608	)

XML

Deferred Compensation Plan (Details) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Dec. 31, 2014
Available-for-sale Securities [Abstract]
Payments to acquire investments	$ 2,084
Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investments	2,165
Fair Value, Measurements, Recurring [Member] | Equity Funds [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investments	1,251
Fair Value, Measurements, Recurring [Member] | Fixed Income Funds [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Investments	$ 914
Maximum
Deferred Compensation Arrangements [Abstract]
Deferred compensation plan, maximum percentage of employees' base salary	100.00%

XML

Stock Options and Restricted Stock Awards (Tables)

6 Months Ended

Dec. 31, 2014

Share-based Arrangements with Employees and Nonemployees [Abstract]

Stock Option Activity

Stock option activity for the six months ended December 31, 2014 is as follows:

	Number of Options(a)		Weighted Average Exercise Price
Options outstanding at June 30, 2014	922,809		$	10.16
Options exercised	(87,575	)	$	9.07
Options outstanding at December 31, 2014	835,234		$	10.28
(a) Includes the effect of options granted, exercised, forfeited or expired from the 2003 Plan and 2007 Plan, and options granted outside such plans.

Restricted Stock Award Activity

Restricted stock award activity for the six months ended December 31, 2014 is as follows:

	Number of Shares		Weighted Average  Fair Value
Restricted stock awards outstanding at June 30, 2014	1,276,403		$	17.37
Restricted stock awards granted (1)	425,644		$	29.15
Restricted stock awards forfeited	(78,747	)	$	19.84
Restricted stock awards vested	(483,941	)	$	17.00
Restricted stock awards outstanding at December 31, 2014	1,139,359		$	19.89
(1) Includes both time-based and performance-based restricted stock awards.

XML

Earnings Per Share

6 Months Ended

Dec. 31, 2014

Earnings Per Share [Abstract]

Earnings Per Share

Earnings Per Share

The following table presents a reconciliation of the numerators and denominators used in the basic and diluted earnings per common share computations (in thousands except share and per share amounts):

	Three Months Ended   December 31,						Six Months Ended   December 31,
	2014			2013			2014			2013
Numerator
Net loss	$	(5,273	)	$	(8,658	)	$	(13,497	)	$	(15,950	)
Denominator
Weighted average common shares – basic	31,487,358			27,177,952			31,399,234			25,964,660
Effect of dilutive stock options and warrants(a)(b)	—			—			—			—
Weighted average common shares outstanding – diluted	31,487,358			27,177,952			31,399,234			25,964,660
Net loss per common share — basic and diluted	$	(0.17	)	$	(0.32	)	$	(0.43	)	$	(0.61	)

(a) At December 31, 2014 and 2013, 0 and 984,991 warrants, respectively, were outstanding. The effect of the shares that would be issued upon exercise of these warrants has been excluded from the calculation of diluted loss per share because those shares are anti-dilutive.

(b) At December 31, 2014 and 2013, 835,234 and 1,080,456 stock options, respectively, were outstanding. The effect of the shares that would be issued upon exercise of these options has been excluded from the calculation of diluted loss per share because those shares are anti-dilutive.

XML

Commitment and Contingencies

6 Months Ended

Dec. 31, 2014

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitment and Contingencies

Operating Leases

The Company leases manufacturing and office space and equipment under various lease agreements that expire at various dates through March 2020. Rental expenses were $797 and $720 for the six months endedDecember 31, 2014 and 2013, respectively.

Future minimum lease payments under the agreements as of December 31, 2014 are as follows:

Six months ended June 30, 2015	$	563
Fiscal 2016	763
Fiscal 2017	469
Fiscal 2018	462
Fiscal 2019	462
Thereafter	346
	$	3,065

Amounts payable under the Company’s Texas production facility lease are included in the amounts above. A portion of those rent payments may reduce the deferred grant incentive liability rather than being recorded as expense. See Note 9 for additional information.

Construction of New Headquarters

On June 11, 2014, the Company entered into a Redevelopment Agreement, a Design-Build Contract, and a Development Services Agreement, as well as various ancillary agreements related to the acquisition of real property located in New Brighton, Minnesota and the development of such property into the Company’s new corporate headquarters. Pursuant to the Contract for Private Redevelopment by and among the City of New Brighton (the “City”), Ryan Companies US, Inc. (“Ryan”), and the Company, dated June 11, 2014 (the “Redevelopment Agreement”), the Company purchased approximately ten acres of real property from the City for a purchase price of $500. The City also granted the Company the option to purchase an additional 3.6 acres prior to May 31, 2021.

Pursuant to the Design-Build Cost Plus Construction Contract by and between Ryan and the Company, dated June 11, 2014, the Company has contracted with Ryan to furnish all services, labor, materials, equipment, procurement services, project management and other duties and services necessary for construction of the Company’s new headquarters on the land purchased from the City. The Company and Ryan expect to have construction substantially completed by March 1, 2015, and, pursuant to the Redevelopment Agreement discussed above, Ryan and the Company have agreed to complete construction by December 31, 2015. The Company will pay Ryan a fee of 3.85% of the cost of the work.

The Company also entered into a Development Services Agreement with Ryan, dated June 11, 2014, pursuant to which Ryan will perform certain development services to facilitate development of the project, including coordination with the City and overall coordination of development strategy. The Company will pay Ryan a fee for the development services, which includes a sum equal to 3.25% of the adjusted total project costs, payable at certain points in the construction process, and a sum equal to 5% of the adjusted total project costs, payable upon substantial completion of the project, as well as reimbursement of certain expenses incurred by Ryan.

In connection with the agreements above, the Company is required to hold approximately $9,128 in an escrow account that will be used to fund the final construction payments. The escrow is classified as construction in progress in property and equipment, net, on the consolidated balance sheet.

XML

Texas Production Facility

6 Months Ended

Dec. 31, 2014

Production Facility [Abstract]

Texas Production Facility

Texas Production Facility

Effective on September 9, 2009, the Company entered into an agreement with the Pearland Economic Development Corporation (the “PEDC”) for the construction and lease of an approximately 46,000 square foot production facility located in Pearland, Texas. The facility primarily serves as an additional manufacturing location for the Company.

The Company and the PEDC entered into a Corporate Job Creation Agreement dated June 17, 2009, which was subsequently amended July 2, 2012. The Job Creation Agreement, as amended, provided the Company with $2,975 in net cash incentive funds. The Company believes it will be able to comply with the conditions specified in the amended agreement. The PEDC will provide the Company with an additional $425 of net cash incentive funds if: (1) the Company hires 125 full-time employees at the facility before June 30, 2015 and (2) maintains 125 employees at the facility through June 30, 2016. The Company had the opportunity to receive an additional $425 of net cash incentive funds upon hiring the 75^th employee on or before March 31, 2014; however, the Company did not achieve this incentive.

In order to retain all of the cash incentives, the Company must maintain no fewer than 25 jobs at the Texas facility through June 30, 2015. Failure to meet this requirement will result in an obligation to make reimbursement payments to the PEDC as outlined in the amended agreement. The Company will not have any reimbursement requirements after June 30, 2015. As of December 31, 2014, the Company was in compliance with all minimum requirements under the amended agreement. The Company believes it will be able to comply with the conditions specified in the amended agreement.

The Job Creation Agreement, as amended, also provided the Company with a net $1,020 award, of which $510 was received from the PEDC and the remainder is funded through the Texas Enterprise Fund program associated with the State of Texas. As of December 31, 2014, $340 has been received and the remaining $170 will be provided upon the hiring of the 75^th full-time employee at the facility. The grant from the State of Texas is subject to reimbursement if the Company fails to meet certain job creation targets through 2014 and maintain these positions through 2020. The Company reimbursed the State of Texas $46 during fiscal 2014 as it did not meet the target of hiring 75 employees at the facility by December 31, 2013.

The Company has presented the net cash incentive funds as a current and long-term liability on the balance sheet. The liabilities are reduced through the term of the agreement and recorded as an offset to expenditures incurred using a systematic methodology. As of December 31, 2014, the deferred grant incentive liabilities have been reduced by $41 in cumulative expenses, resulting in a remaining current liability of $18.

XML

Summary of Significant Accounting Policies (Policies)

6 Months Ended

Dec. 31, 2014

Accounting Policies [Abstract]

Interim Financial Statements

Interim Financial Statements

The Company prepared the unaudited interim consolidated financial statements and related unaudited financial information in the footnotes in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements. The year-end consolidated balance sheet was derived from the Company’s audited consolidated financial statements, but does not include all disclosures as required by GAAP. These interim consolidated financial statements reflect all adjustments consisting of normal recurring accruals, which, in the opinion of management, are necessary to state fairly the Company’s consolidated financial position, the results of its operations and its cash flows for the interim periods. These interim consolidated financial statements should be read in conjunction with the consolidated annual financial statements and the notes thereto included in the Form 10-K filed by the Company with the SEC on August 28, 2014. The nature of the Company’s business is such that the results of any interim period may not be indicative of the results to be expected for the entire year.

Use of Estimates

Use of Estimates

The preparation of the Company’s consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and 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. Actual results could differ from those estimates.

Stock-Based Compensation

Stock-Based Compensation

The Company recognizes stock-based compensation expense in an amount equal to the fair value of share-based payments computed at the date of grant. The fair value of all restricted stock awards are expensed in the consolidated statements of operations ratably over the related vesting period.

Revenue Recognition

Revenue Recognition

The Company sells the majority of its products via direct shipment to hospitals or clinics. The Company recognizes revenue when all of the following criteria are met: persuasive evidence of an arrangement exists; delivery has occurred; the sales price is fixed or determinable; and collectability is reasonably assured. The Company records estimated sales returns, discounts and rebates as a reduction of net sales.

Costs related to products delivered are recognized in the period revenue is recognized. Cost of goods sold consists primarily of raw materials, direct labor, and manufacturing overhead.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, “Revenue From Contracts with Customers.” The guidance requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which an entity expects to be entitled in exchange for those goods or services. The guidance also requires expanded disclosures relating to the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. Additionally, qualitative and quantitative disclosures are required about customer contracts, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. ASU 2014-09 is effective for annual periods beginning after December 15, 2016, including interim periods within that reporting period, using one of two prescribed retrospective methods. Early adoption is not permitted. The Company is evaluating the impact of the amended revenue recognition guidance on its consolidated financial statements.

In August 2014, the FASB issued ASU No. 2014-15, “Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern.” The guidance requires management to perform interim and annual assessments of an entity's ability to continue as a going concern within one year of the date of issuance of the entity's financial statements. The entity must also provide certain disclosures if there is substantial doubt about the entity's ability to continue as a going concern. ASU 2014-15 is effective for annual periods ending after December 15, 2016, and interim periods thereafter. Early adoption is permitted. The Company does not anticipate a material impact on its financial statements upon adoption.

XML

Earnings Per Share (Tables)

6 Months Ended

Dec. 31, 2014

Earnings Per Share [Abstract]

Reconciliation of Numerators and Denominators Used in Basic and Diluted Earnings Per Common Share Computations

The following table presents a reconciliation of the numerators and denominators used in the basic and diluted earnings per common share computations (in thousands except share and per share amounts):

	Three Months Ended   December 31,						Six Months Ended   December 31,
	2014			2013			2014			2013
Numerator
Net loss	$	(5,273	)	$	(8,658	)	$	(13,497	)	$	(15,950	)
Denominator
Weighted average common shares – basic	31,487,358			27,177,952			31,399,234			25,964,660
Effect of dilutive stock options and warrants(a)(b)	—			—			—			—
Weighted average common shares outstanding – diluted	31,487,358			27,177,952			31,399,234			25,964,660
Net loss per common share — basic and diluted	$	(0.17	)	$	(0.32	)	$	(0.43	)	$	(0.61	)

(a) At December 31, 2014 and 2013, 0 and 984,991 warrants, respectively, were outstanding. The effect of the shares that would be issued upon exercise of these warrants has been excluded from the calculation of diluted loss per share because those shares are anti-dilutive.

(b) At December 31, 2014 and 2013, 835,234 and 1,080,456 stock options, respectively, were outstanding. The effect of the shares that would be issued upon exercise of these options has been excluded from the calculation of diluted loss per share because those shares are anti-dilutive.

XML

Stock Options and Restricted Stock Awards (Details)	6 Months Ended	0 Months Ended
	Dec. 31, 2014	Aug. 11, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Exercise period for employee's vested options	90 days
Restricted Stock | Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period	1 year
Restricted Stock | Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period	3 years
Performance Shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Performance Based Shares - Total Shareholder Return		76,112
Performance Based Shares - Revenue Growth		76,112

XML

Consolidated Statements of Cash Flows (Unaudited) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Cash flows from operating activities
Net loss	$ (13,497)	$ (15,950)
Adjustments to reconcile net loss to net cash used in operations
Depreciation of property and equipment	751	579
Amortization and write-off of patents	82	102
Provision for doubtful accounts	846	190
Amortization of discount on debt, net	0	137
Debt conversion and valuation of conversion options, net	0	716
Stock-based compensation	7,083	4,855
Changes in assets and liabilities
Accounts receivable	(5,527)	(1,378)
Inventories	(1,067)	(4,040)
Prepaid expenses and other assets	287	(194)
Accounts payable	467	1,399
Accrued expenses and other liabilities	(542)	1,096
Net cash used in operations	(11,117)	(12,488)
Cash flows from investing activities
Expenditures for property and equipment	(11,258)	(717)
Purchases of marketable securities	(2,084)	0
Costs incurred in connection with patents	(543)	(385)
Net cash used in investing activities	(13,885)	(1,102)
Cash flows from financing activities
Proceeds from employee stock purchase plan	1,360	1,291
Proceeds from employee stock purchase plan	794	9,097
Proceeds from the issuance of common stock, net of issuance costs	0	84,369
Proceeds from line of credit	0	4,800
Payments on debt	(2,400)	(7,200)
Net cash (used in) provided by financing activities	(246)	92,357
Net change in cash and cash equivalents	(25,248)	78,767
Cash and cash equivalents
Beginning of period	126,592	67,897
End of period	101,344	146,664
Noncash investing activities
Property and equipment included in accounts payable	$ 5,136	$ 18

XML

Debt

6 Months Ended

Dec. 31, 2014

Debt Disclosure [Abstract]

Debt

Debt

Loan and Security Agreement with Silicon Valley Bank

On March 29, 2010, the Company entered into an amended and restated loan and security agreement with Silicon Valley Bank. The agreement was amended on December 27, 2011 to increase outstanding borrowings, amended on June 29, 2012 to modify financial covenants and reduce the interest rate and other fees, amended on May 10, 2013 to modify financial covenants, amended on June 26, 2014 to extend the line of credit's maturity date to September 30, 2014 and reduce the interest rate, and amended on September 29, 2014 to extend the line of credit's maturity date to December 31, 2014. The agreement, as amended, included a $15,000 line of credit. On December 31, 2014, the agreement had matured.

The $15,000 line of credit had a floating interest rate equal to the Wall Street Journal’s prime rate. Interest on borrowings were due monthly and the principal balance was due at maturity. Borrowings on the line of credit were based on 85% of eligible accounts. Accounts receivable receipts were deposited into a lockbox account in the name of Silicon Valley Bank. The line of credit was subject to non-use fees, annual fees, and cancellation fees. The balance outstanding on the line of credit at December 31, 2014 and June 30, 2014 was $0 and $2,400, respectively.

Borrowings from Silicon Valley Bank were secured by all of the Company’s assets. The borrowings were subject to prepayment penalties and financial covenants, including maintaining certain liquidity and fixed charge coverage ratios. Any non-compliance by the Company under the terms of debt arrangements would have resulted in an event of default under the Silicon Valley Bank loan, which, if not cured, could have resulted in the acceleration of the debt. The Company was in compliance with all financial covenants during the six months ended December 31, 2014.

Loan and Security Agreement with Partners for Growth

On April 14, 2010, the Company entered into a loan and security agreement with Partners for Growth III, L.P. (“PFG”), as amended on August 23, 2011, December 27, 2011, June 30, 2012, and May 10, 2013. The amended agreement provides that PFG will make loans to the Company up to $5,000. The agreement has a maturity date of April 14, 2015. The loans bear interest at a floating per annum rate equal to 2.75% above Silicon Valley Bank’s prime rate, and such interest is payable monthly. The principal balance of and any accrued and unpaid interest on any notes are due on the maturity date and may not be prepaid by the Company at any time in whole or in part. As of December 31, 2014 and June 30, 2014, there were no loans outstanding.

At any time prior to the maturity date, PFG may, at its option, convert any outstanding loan into shares of the Company’s common stock at the applicable conversion price, which in each case equals the ten-day volume weighted average price per share of the Company’s common stock prior to the issuance date of each note. The Company may also effect at any time a mandatory conversion of amounts, subject to certain terms, conditions and limitations provided in the agreement, including a requirement that the ten-day volume weighted average price of the Company’s common stock prior to the date of conversion is at least 15% greater than the conversion price. The Company may reduce the conversion price to a price that represents a 15% discount to the ten-day volume weighted average price of its common stock to satisfy this condition and effect a mandatory conversion. The Company recorded an expense of $0 and $61 for the six months ended December 31, 2014 and 2013, respectively, related to the change in fair value of the conversion options on all outstanding loans. This amount is a component of interest and other, net on the accompanying statement of operations.

Any loans are secured by certain of the Company’s assets, and the agreement contains customary covenants limiting the Company’s ability to, among other things, incur debt or liens, make certain investments and loans, effect certain redemptions of and declare and pay certain dividends on its stock, permit or suffer certain change of control transactions, dispose of collateral, or change the nature of its business. In addition, the PFG loan and security agreement contains financial covenants requiring the Company to maintain certain liquidity and fixed charge coverage ratios. The Company was in compliance with all financial covenants at December 31, 2014. If the Company does not comply with the various covenants, PFG may, subject to various customary cure rights, decline to provide additional loans, require amortization of any future loan over its remaining term, or require the immediate payment of all amounts outstanding under any future loan and foreclose on any or all collateral, depending on which financial covenants are not maintained.

XML

Stock Options and Restricted Stock Awards - Stock Option Activity (Details) (USD $)	6 Months Ended
	Dec. 31, 2014
Number of Options
Options outstanding, balance at beginning of period (in shares)	922,809	[1]
Options exercised (in shares)	(87,575)	[1]
Options outstanding, balance at end of period (in shares)	835,234	[1]
Weighted Average Exercise Price
Options outstanding at beginning of period (in usd per share)	$ 10.16
Options exercised (in usd per share)	$ 9.07
Options outstanding at end of period (in usd per share)	$ 10.28

[1] Includes the effect of options granted, exercised, forfeited or expired from the 2003 Plan and 2007 Plan, and options granted outside such plans.Table 2 Footnote:(1) Includes both time-based and performance-based restricted stock awards.

XML

Commitment and Contingencies (Tables)

6 Months Ended

Dec. 31, 2014

Commitments and Contingencies Disclosure [Abstract]

Schedule of Future Minimum Rental Payments for Operating Leases

Future minimum lease payments under the agreements as of December 31, 2014 are as follows:

Six months ended June 30, 2015	$	563
Fiscal 2016	763
Fiscal 2017	469
Fiscal 2018	462
Fiscal 2019	462
Thereafter	346
	$	3,065