8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): December 7, 2007

VOLCANO CORPORATION

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation)	000-52045 (Commission File Number)	33-0928885 (IRS Employer Identification Number)
2870 Kilgore Road, Rancho Cordova, CA		95670
(Address of principal executive offices)		(Zip Code)

800-228-4728
Registrant’s telephone number, including area code

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01. Entry into a Material Definitive Agreement.

     On December 7, 2007, Volcano Corporation, or Volcano, entered into a merger agreement with CardioSpectra, Inc., a privately-held Texas corporation, whereby a wholly-owned merger subsidiary of Volcano will merge with and into CardioSpectra, with CardioSpectra continuing as the surviving corporation and a wholly-owned subsidiary of Volcano.

     Under the terms of the merger agreement, Volcano will acquire all of the outstanding equity interests in CardioSpectra for consideration totaling $25 million at closing, payable in cash, plus additional payments up to an aggregate of $38 million in the event certain milestones set forth in the merger agreement are achieved. The milestone payments are payable, at the sole discretion of Volcano, in cash, shares of Volcano common stock, or a combination of both. Volcano will only issue shares of its common stock in full or partial payment of any milestone payment to accredited investors, within the meaning of Rule 501 of Regulation D. If Volcano does issue shares of its common stock in full or partial payment of any milestone payment, the shares will be valued using a trailing 10-trading day average closing price over a period ending shortly before Volcano informs the CardioSpectra shareholders of its determination to issue shares. Volcano has also agreed to file, within 60 days after the first date on which Volcano issues any milestone shares, a registration statement with the Securities and Exchange Commission registering those shares for resale.

     Subject to the terms of the merger agreement, the milestone payments are payable as follows:

• $11 million of the milestone payments will be paid upon approval by applicable US, Japanese or European regulators of a Generation 1 OCT system on or before December 31, 2009;

• $10 million of the milestone payments will be paid upon applicable US regulatory approval of a Generation 1a OCT system with advanced features on or before December 31, 2010;

• $10 million of the milestone payments will be paid upon cumulative cash sales totaling $10 million from commercial sales of OCT products, so long as such cumulative cash sales are attained prior to the date that is the earlier of (i) 3 years after the date on which the applicable US regulatory approval described in the second bulletpoint above was obtained or (ii) December 31, 2013; and

• $7 million of the milestone payments will be paid upon cumulative cash sales totaling $25 million from commercial sales of OCT products, so long as such cumulative cash sales are attained prior to the date that is the earlier of (i) 4 years after the date on which the applicable US regulatory approval described in the second bulletpoint above was obtained or (ii) December 31, 2014.

     Volcano will act in good faith and use commercially reasonable efforts to cause the milestones to occur. However, if Volcano reasonably determines that a technical failure or commercial failure has occurred with respect to all or a part of its OCT cardiovascular program, Volcano may, at its sole discretion, terminate all or part of its OCT cardiovascular program.

     At the closing of the merger, $2.5 million of the aggregate merger consideration payable at closing will be contributed to an escrow fund which will be available for 12 months (or, if later, the date of completion of any audit that Volcano may undertake of CardioSpectra’s financial statements) to indemnify Volcano and related indemnitees for certain matters, including breaches of representations and warranties and covenants included in the merger agreement. The escrow fund is subject to a $100,000 deductible in the case of breaches of representations and warranties. Once the escrow fund has been exhausted or released, Volcano has the right to withhold and deduct amounts for any indemnification claims from milestone payments otherwise payable by Volcano.

     Both Volcano and CardioSpectra have agreed to customary representations and warranties, covenants and termination rights in the merger agreement, and both have the right to terminate the merger agreement after January 31, 2008, if the closing has not taken place on or before such date other than as a result of a breach by the party attempting to terminate the merger agreement.

     The merger has been approved by the boards of directors of both Volcano and CardioSpectra. No vote of Volcano stockholders is required in connection with the merger. The shareholders of CardioSpectra must approve the merger. As an inducement to Volcano to enter into the merger agreement, certain CardioSpectra shareholders have entered into a voting agreement with Volcano, pursuant to which each such shareholder has, among other things, agreed to vote the shares of CardioSpectra capital stock owned by such shareholder in favor of the merger and against competing acquisition proposals, in each case subject to and on the conditions set forth in the voting agreements.

     All employees of CardioSpectra will be offered employment with Volcano following closing of the merger. In addition, certain key employees are expected to enter into offer letter or consulting agreements and noncompetition agreements with Volcano.

     Volcano anticipates that the merger will close before year-end.

     The merger agreement will be filed with Volcano’s next annual report filed on Form 10-K and the required historical financial statements for CardioSpectra and related pro forma information will be filed with a subsequent Form 8-K that will be timely filed by Volcano upon completion of the merger. A copy of the press release announcing the execution of the merger agreement is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

Forward-Looking Statements

     This report contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Any statements in this report regarding the proposed

3

acquisition of CardioSpectra and Volcano’s business that are not historical facts may be considered “forward-looking statements,” including statements regarding closing the merger with CardioSpectra, including as to timing for doing so and each party’s ability to satisfy its closing conditions, the milestones that must be attained for milestone consideration to become payable and whether any of those will actually occur, the mix of cash and stock that Volcano will choose to use to pay any milestone consideration, and Volcano’s ability to satisfy any indemnification claims it may have out of the escrow or as a set-off to the milestone payments. Forward-looking statements are based on management’s current preliminary expectations and are subject to risks and uncertainties, which may cause Volcano’s results to differ materially and adversely from the statements contained herein. Some of the potential risks and uncertainties that could cause actual results to differ from the results predicted are detailed in Volcano’s annual report on Form 10-K, quarterly reports on Form 10-Q and other filings made with the Securities and Exchange Commission. Undue reliance should not be placed on forward-looking statements, which speak only as of the date they are made. Volcano undertakes no obligation to update any forward-looking statements to reflect new information, events or circumstances after the date they were made, or to reflect the occurrence of unanticipated events.

Item 9.01. Financial Statements and Exhibits.

     (d) Exhibits.

Exhibit
Number		Description of Exhibit
	99.1	Press Release issued by Volcano on December 10, 2007

4

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 hereunto duly authorized.

	Volcano Corporation
Dated: December 10, 2007	By:	/s/ John T. Dahldorf
		John T. Dahldorf
		Chief Financial Officer

5

EXHIBIT INDEX

Exhibit
Number		Description of Exhibit
	99.1	Press Release issued by Volcano on December 10, 2007

EX-99.1

Exhibit 99.1

VOLCANO ANNOUNCES AGREEMENT TO ACQUIRE CARDIOSPECTRA

CardioSpectra’s ultra-high-resolution OCT offering will enhance Volcano’s
technology leadership position and potential for product pipeline expansion

     SAN DIEGO, CA, December 10, 2007—Volcano Corporation (NASDAQ: VOLC), a provider of intravascular ultrasound (IVUS) and functional measurement (FM) products designed to enhance the diagnosis and treatment of vascular and structural heart disease, said today that it has reached a definitive agreement to acquire CardioSpectra, Inc., a privately-held company developing innovative Optical Coherence Tomography (OCT) technology. CardioSpectra’s unique OCT imaging system is expected to complement Volcano’s existing product offerings and will further enhance Volcano’s position as an imaging technology leader in the field of interventional medicine.

     Under terms of the agreement, Volcano will pay $25 million in cash at closing, which is expected to occur by the end of the year. In addition, Volcano may make additional payments based on the achievement of certain product development, regulatory and revenue milestones. Any future payments may be made in cash or stock or a combination of both at Volcano’s discretion.

     Founded in 2005 and based in San Antonio, Texas, CardioSpectra’s core product line is based on technology licensed from the University of Texas and Dr. Thomas Milner, a co-founder of CardioSpectra.

     “We believe CardioSpectra’s OCT technology and products will be an important addition to Volcano, as we expect that it will allow us to expand our reach into clinical situations where extremely high resolution imaging is paramount. Our long term goal is to integrate this OCT functionality directly into our s5i integrated imaging suite of products — offering hospitals and physicians a complete, multi-functional capability that seamlessly provides IVUS, functional measurement and OCT all in one system,” said Scott Huennekens, president and chief executive officer of Volcano.

     “CardioSpectra’s OCT system allows fast, easy imaging of highly detailed structures in the vasculature, including vessel wall defects, intra-luminal thrombus and stent struts. The ability to visualize stent expansion and apposition is excellent when using OCT. In fact, CardioSpectra’s OCT resolution is such that it is able to visualize even very thin layers of cells covering drug eluting stent struts at follow-up. We expect this capability will be highly valued by other device manufacturers as they design and conduct clinical trials to assess the safety and effectiveness of new implantable devices,” he continued.

     “The resolution from this system is truly remarkable — providing significantly greater resolution in the near field than conventional IVUS. Rather than competing with our IVUS offerings, OCT complements our existing business by opening up clinical indications and research opportunities beyond those available to IVUS.”

1.

     CardioSpectra’s offering consists of a console with advanced custom software, a pull-back device and disposable catheters. The system and accessories are not approved for human use at this time. The company expects to file for appropriate U.S. and international approvals during 2008. CardioSpectra holds a number of issued U.S. patents on its technology with many additional patents pending.

     Chris Banas, chief executive officer of CardioSpectra, stated, “We believe CardioSpectra and Volcano are a very strong fit. Volcano brings a deep knowledge of the field of invasive imaging, an exceptional worldwide distribution organization and the eventual ability to integrate our OCT imaging system into their integrated s5i invasive imaging suite. IVUS and OCT have the potential to be highly complementary, particularly when both systems are integrated directly into the cath lab and ready for use at a moment’s notice. CardioSpectra adds a new dimension in imaging to Volcano and will provide a group of very talented OCT engineers to the team.”

     Steve Bailey, MD, Professor of Medicine and Radiology and Chief of Cardiology at the University of Texas Health Sciences Center, San Antonio, commented, “I have used CardioSpectra’s current system and catheter on many occasions in our animal lab here in San Antonio. This system is fast and very easy to use — and the images are truly extraordinary. With the resolution provided by CardioSpectra’s OCT we are able to see stent malapposition and vessel wall morphologies with a clarity never before achieved. I believe that marrying this technology with the strong clinical and market development team at Volcano will create a powerful combination.”

     Volcano indicated that it will discuss the impact of this transaction on its expected fiscal 2008 results when it provides guidance for fiscal 2008 on its fourth quarter conference call in February. Additional details on the transaction can be found on Volcano’s Current Report on Form 8-K, filed today with the Securities and Exchange Commission.

About Volcano

     Volcano Corporation (NASDAQ: VOLC) offers a broad suite of devices designed to facilitate endovascular procedures, enhance the diagnosis of vascular and structural heart diseases and guide optimal therapies. The company’s intravascular ultrasound (IVUS) product line includes ultrasound consoles that can be integrated directly into virtually any modern cath lab. Volcano IVUS offers unique features, including both single-use phased array and rotational IVUS imaging catheters, and advanced functionality options, such as VH™ IVUS tissue characterization and ChromaFlo^®. Volcano also provides functional measurement (FM) consoles and single-use pressure and flow guide wires. Currently, more than 2,900 Volcano IVUS and FM systems are installed worldwide, with approximately half of its revenues coming from outside the United States. For more information, visit the company’s website at http://www.volcanocorp.com.

2.

About CardioSpectra, Inc.

     Founded in 2005 and headquartered in San Antonio, Texas, CardioSpectra is focused on the development of innovative medical devices based upon an extensive patent portfolio of Optical Coherence Tomography (OCT) systems and ultrasound technologies. OCT images are created by detecting light reflected from tissue, forming optical interference patterns that generate high-resolution 2D and 3D renderings of the tissue structure. Regulatory approval is currently being sought for its Spectral-Domain OCT System, which provides high-level capability to both visualize stent placement and determine the progress of coronary stent healing. The company’s products are based on technology licensed from company co-founder Dr. Thomas Milner, a collaborative research program between the University of Texas at Austin, where Dr. Milner is a Professor of Biomedical Engineering, and the University of Texas Health Science Center in San Antonio (UTHSCSA), where cardiologist and co-founder Dr. Marc Feldman is a Professor of Medicine. UTHSCSA’s Office of Technology Ventures, under the leadership of former Director, Alan H. Dean, spearheaded the multi-institutional license agreement. The company was spun out of the University of Texas system by Dr. Paul Castella (President and CFO) and Christopher E. Banas (Chairman and CEO), who are principals of Targeted Technology Ventures, LLC. Together, they organized the equity financing of CardioSpectra and managed the advancement and commercial development of the OCT technology. The Company received financing primarily from Texan institutional investors, including ATP Partners, LP (San Antonio, TX), Scientific Health Development (Dallas, TX), Barshop Ventures (San Antonio, TX), the State of Texas Emerging Technology Fund, the SCOUT Fund (Birmingham, AL), as well as significant support from prominent local investors such as Charles Martin Wender and Philip J. Romano (who financed the initial development of the Palmaz^® coronary stent developed at UTHSCSA).

Forward-Looking Statements

     This news release contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Any statements in this news release regarding the CardioSpectra acquisition, Volcano’s business and technology, and CardioSpectra’s business and technology that are not historical facts may be considered “forward-looking statements,” including statements regarding the CardioSpectra acquisition, its expected benefits to Volcano and CardioSpectra, the complementary nature of each company’s technology and skill sets to the other, the acquisition’s anticipated timing, Volcano’s long-term goals from the CardioSpectra acquisition, the milestones under the CardioSpectra merger agreement and whether they may be attained and to what extent, the features of CardioSpectra’s technology and its potential, and CardioSpectra’s expected timing for filing for regulatory approvals. Forward-looking statements are based on management’s current preliminary expectations and are subject to risks and uncertainties, which may cause Volcano’s results to differ materially and adversely from the statements contained here. Some of the potential risks and uncertainties that could cause actual result to differ from the results predicted are detailed in the company’s annual report on Form 10-K, quarterly reports on Form 10-Q and other filings made with the Securities and Exchange Commission. Undue reliance should not be placed on forward-looking statements, which speak only as of the date they are made. Volcano undertakes no obligation to update any forward-looking statements to reflect new information, events or circumstances after the date they were made, or to reflect the occurrence of unanticipated events.

Contacts:

John Dahldorf
Chief Financial Officer
Volcano Corporation
(916) 638-8008
or
Neal B. Rosen
Ruder-Finn
(415) 692-3058

3.