Cardiovascular Systems

Technology. Science. Results.

2011 Annual Report

New System Offers Physicians, PAD Patients Key Benefits

The Stealth 360™ PAD System is an atherectomy system designed to treat PAD quickly, effectively 

and safely. CSI began a limited market release of this third-generation system in March 2011 and 

plans a broader, accelerated commercial launch later in fiscal 2012. The Stealth 360° electric-powered 

device has simple and convenient speed adjustments on the handle, giving physicians precise control 

and greater tactile feel during the procedure. CSI’s system provides clear patient benefits: 

 ° Differential sanding mechanism for removal of plaque while preserving healthy vessel tissue
 ° Removal of fibrotic and calcified plaque — in vessels above and below the knee
 ° Short treatment time, often less than two minutes
 ° The ability to treat multiple vessels with one device
 ° A strong safety profile and durable patient outcomes

Orbital Mechanism of  Action 
CSI’s unique orbital atherectomy systems utilize an eccentrically mounted diamond-

coated “crown” with a sanding mechanism to remove plaque. The system operates 

on the principle of centrifugal force. As the crown rotates and the orbit increases, 

centrifugal force presses the crown against the lesions or plaque, removing a small 

amount of plaque with each orbit. The plaque is sanded into minute particles, which 

minimizes the risk of particulates slowing blood flow to the foot. The orbital motion 

is designed to create a smooth concentric vessel opening to improve blood flow.

50,000

More than 50,000 procedures 
have been performed with 
CSI’s PAD systems

2 minutes

Treatment times of less than 
2 minutes with recent 
product improvements1

99.4%

Freedom from 
perforation2

1 Stealth 360° Limited Market Release. Mar-Jun 2011.  2 CSI data compilation. Oct 2010.  3 CSI data on file.  4 Weinstock, B. OASIS LT. TCT 2009. 64 patients.

Differential Sanding
CSI’s unique mechanism of action sands the hardened plaque while 

the healthy vessel wall flexes away from the crown, reducing the 

potential for vessel injury — a concept known as differential sanding. 

The Stealth 360° is designed to minimize vessel wall damage, 

decreasing the potential for reblockage at the same treatment site.

Solid Crown

i C
Classic Crown
Cl

The Solid Crown has a larger diamond-coated 

The flexible Classic Crown can remove plaque in 

surface area and achieves maximal plaque 

twisting, turning vessels and is especially effective 

removal in the shortest amount of time. 

in treating lesions in small vessels below the knee.

97.6% 

Freedom from
 stenting 2

93%

86.4% 

of particulates were smaller 
than a red blood cell3

Freedom from reintervention 
rate at 24 months4

About Cardiovascular Systems, Inc.

Cardiovascular Systems, Inc. (CSI) (Nasdaq: CSII), based in St. Paul, Minnesota, 

is a medical device company focused on developing and commercializing 

innovative solutions for treating vascular and coronary disease. Our Stealth 

360°™, Diamondback 360® and Predator 360® PAD Systems remove calcified 

and fibrotic plaque in arterial vessels throughout the leg. The procedures have 

been demonstrated to be safe and can be accomplished with short operating 

times. CSI’s unique orbital mechanism of action addresses many limitations 

associated with existing surgical, catheter-based and pharmacological 

alternatives. The FDA granted 510(k) clearance for the Diamondback 360° 

in August 2007, the Predator 360° in March 2009 and the Stealth 360° in 

March 2011. At fiscal 2011 year-end, more than 50,000 procedures had been 

performed using our orbital systems across the United States. 

CSI has also started the ORBIT II Investigational Device Exemption (IDE) 

clinical trial to evaluate the safety and effectiveness of the Diamondback 360° 

in treating coronary arteries. The coronary system is limited by federal law to 

investigational use and currently is not commercially available in the United States.

Peripheral Arterial Disease 

As many as 12 million Americans, most over age 65, suffer from peripheral 

arterial disease (PAD), which is caused by plaque accumulation in peripheral 

arteries (most commonly the pelvis or leg) and results in reduced blood flow. 

Left untreated, PAD can lead to severe pain, immobility, non-healing wounds 

and eventually limb amputation. Associated risk factors, such as diabetes and 

obesity, are on the rise, and the prevalence of PAD is growing at double-digit rates.

Millions of patients with PAD may benefit from treatment with CSI’s minimally 

invasive catheter systems. Our systems use a diamond-coated crown, attached 

to a special wire, which removes plaque while leaving healthy vessel tissue intact 

— a critical factor in preventing the need for retreatment. CSI’s approach offers 

advantages over other treatment options on the market. Stents are prone to 

fractures and high retreatment rates. Balloon angioplasty treatment of hard, 

calcified lesions often leads to vessel damage and recurrence of  the obstruction. 

CSI’s PAD Market 
Opportunity

12 million
potential U.S.
lower extremity
PAD patients

2.5 million
diagnosed
annually

700,000
procedures
in 2011

$2 billion
market opportunity
and growing

David L. Martin
President and 
Chief  Executive Officer

Glen D. Nelson, MD
Chairman of  the Board

To Our Shareholders:
Cardiovascular Systems’ commitment to innovative technology 

and scientifically sound clinical research is leading to the adoption 

of our Diamondback 360®, Predator 360® and Stealth 360°™ PAD 

Systems to treat peripheral arterial disease (PAD). The need is 

profound. As many as 12 million patients in the United States 

suffer from PAD, and there are more than 150,000 related 

amputations annually. Unfortunately, these numbers are growing, 

particularly with the rise of obesity and diabetes. 

Our PAD plaque removal systems are providing clear clinical 

and economic value as safe, effective, easy-to-use devices for 

both routine and complex PAD cases. Physicians are addressing 

previously untreatable disease. Many patients are regaining 

mobility, quality of life and independence. New product features 

to facilitate physician use and patient outcomes are driving 

adoption, and laying a foundation for sustainable growth at 

CSI. We are also excited about our pivotal clinical trial for a 

coronary application — a major new market opportunity.

Fiscal 2011 Financial Highlights
The strength of  our products, coupled with highly favorable 

clinical data, is driving solid revenue growth. Revenue rose to 

$78.8 million in fiscal 2011, up 22 percent over the prior year. 

The percentage of  revenue from reorders rose to 94 percent — 

a testament to our success in building a strong customer base. 

By closely managing expenses, we made progress toward 

profitability and positive cash flow. Fiscal 2011 gross margin 

rose to 79 percent from 77 percent a year ago, through product 

cost reductions and manufacturing efficiencies. Operating 

expenses declined 2 percent, as we enhanced productivity. 

Cardiovascular Systems, Inc.  |  2011 Annual Report

01

A Fierce Commitment to 
Clinical Research 

CSI leads the industry in providing 

physicians with the clinical and scientific 

data they need to support treatment 

decisions for optimal patient outcomes. 

The fiscal 2011 net loss improved 53 percent to $(0.70) per 

common share, including $(0.05) per common share of expense 

related to conversion and valuation changes of convertible debt. 

On an adjusted EBITDA basis, the loss improved by 88 percent1. 

At fiscal 2011 year-end, our 12 clinical 

CSI ended fiscal 2011 with cash and cash equivalents totaling 

trials encompassed more than 3,700 

patients, 5,400 lesions, nearly 500 

physicians and 350 hospitals. 

$21.2 million. We filed a universal shelf registration in June 2011, 

to provide flexibility to raise additional capital, if we believe it is 

prudent to do so. 

New Stealth 360° in Limited Market Release
We received 510(k) marketing clearance from the FDA for 

our third-generation PAD plaque removal system, the Stealth 

360°, in March 2011. This game-changing system propels CSI 

into the forefront of treating PAD. The Stealth 360° combines 

our safe and effective orbital mechanism of action and crown 

designs with an electric-powered handle. This innovative design 

eliminates the separate compressor and speed controller of 

previous systems, moving power and controls directly onto the 

device and into physicians’ hands. As a result, the Stealth 360°:

 ° Reduces set up time
 ° Requires fewer staff to set up and operate
 ° Improves physicians’ ease-of-use
 ° Shortens procedure times
 ° Decreases CSI’s manufacturing costs

Immediately after receiving market clearance for the Stealth 

360°, we initiated a limited market release, expanding to more 

than 100 customers by fiscal year-end. Through this limited 

market introduction, we are gaining valuable physician feedback 

on device performance and best practices for device operation, 

as well as introducing new physicians to our technology. 

Physician feedback has been enthusiastic about our new 

Stealth 360°’s smooth operation and tactile feel, favorable 

outcomes and procedure times (often less than two minutes). 

Further, physicians can treat multiple complex lesions, including 

the most difficult occlusions and lesions throughout the leg, 

with one device.

Our research focuses on: 

 ° Device safety
 ° Procedure efficacy
 ° Long-term durability
 ° Hospital readmission rates
 ° Economic feasibility and cost 

effectiveness

Clinical data to date confirms:

 ° Our systems have a high safety 

profile. For the first time, physicians 

can treat PAD safely from hip to toes, 

including calcified lesions.

 ° We have irrefutable evidence of 

acute and long-term success treating 

PAD. Results from the pivotal IDE 

OASIS study demonstrated very low 

retreatment rates out to 24 months. 

 ° Patients with severe co-morbidities 

can still be treated with our systems. 

CSI’s studies enroll patients excluded 

from other clinical trials due to the 

severity of  their conditions, including 

non-healing wounds, calcified 

plaque and lesions in small arteries. 

Many patients had been previously 

scheduled for amputation.

06

In hospitals that had converted to the Stealth 360° through 

the fiscal 2011 fourth quarter, usage rates were up 

25 percent, and additional physicians are becoming regular 

users. We expect the Stealth 360° to drive substantial 

revenue growth later in fiscal 2012, when we initiate a 

broader commercial release.

Progress in Coronary Pivotal Clinical Trial
Our ORBIT II pivotal clinical trial for a coronary application is 

an opportunity to leverage our technology in an underserved 

market. This new treatment option could give many patients 

a catheter-based alternative to highly invasive, costly surgery. 

In our ORBIT I coronary feasibility study of 50 patients in India, 

the Diamondback 360° was successful in 98 percent of patients, 

with an acute procedural success rate of 94 percent. Each 

year in the United States, more than 1.4 million percutaneous 

coronary procedures are performed, and we estimate that 10 

to 20 percent of lesions in those cases are significantly calcified. 

This represents an estimated market exceeding $700 million.

In May 2011, we received unconditional FDA approval to 

complete ORBIT II enrollment of 429 patients at up to 50 

U.S. sites. We expect to complete enrollment in fiscal 2012. 

Patients will be followed for 30 days post procedure.

PAD Data Presented at Multiple Medical Conferences
CSI is building a wealth of  scientific data demonstrating the 

safety, efficacy and cost-effectiveness of  our orbital mechanism 

of  action. Clinical results were highlighted at several major 

medical conferences in fiscal 2011:

At the American College of Cardiology (ACC) meeting, 

favorable results were presented from our COMPLIANCE 

360° study. This study directly compared the Diamondback 

for fiscal year ended June 30

Revenue (in millions)

2009

2010

2011

$56.5

$64.8

$78.8

Gross Margin

2009

2010

2011

71%

77%

79%

Adjusted EBITDA1 (in millions)

2009

2010

2011

Net Loss (in millions)

2009

2010

2011

$(27.0)

$(13.2)

$(1.6)

$(31.9)

$(23.9)

$(11.1)

360° versus balloon angioplasty in treating above-the-knee 

Number of Devices Sold

PAD. Data from 50 patients at nine U.S. sites showed the 

success rate in the Diamondback 360° arm of the study 

was 360 percent greater than in the balloon arm of the 

study — and required 91 percent less bailout stenting.

2009

2010

2011

17,254

19,178

22,917

1 Adjusted EBITDA = Loss from operations, less depreciation, 
amortization and stock-based compensation of $7.2 million in 
FY 2009, $9.7 million in FY 2010, and $7.2 million in FY 2011.

Saving Limbs, Lives

Patient John Hall, a 77-year-old 

retired teacher in Petoskey, Michigan, 

loves to walk. He also has diabetes 

and nearly lost his leg and life.

When John was on vacation, walking 

Data from our CALCIUM 360° study of below-the-knee 

lesions were presented at the Transcatheter Cardiovascular 

Therapeutics (TCT) and New Cardiovascular Horizons (NCVH) 

meetings. CALCIUM 360° randomized 50 patients with 

critical limb ischemia — too often a precursor to amputation 

— under either orbital treatment with the Diamondback 

360° or balloon angioplasty, the current standard of care.

more than usual, he developed 

Clinical results showed the superior safety and effectiveness 

a small blister on his foot which 

became infected. John was 

hospitalized with life-threatening, 

flu-like symptoms for 11 days, 

before his doctor sent him to a 

nursing home in a wheelchair.

A surgeon recommended amputation 

of  the lower leg, and the family 

began overhauling their home for 

wheelchair accessibility. 

John’s daughter, a pharmaceutical 

sales rep, had heard about CSI’s 

Predator 360° and asked her father’s 

cardiologist, Dr. Duane Schuil of  the 

Cardio & Vascular Research Center 

of  Northern Michigan, about the 

therapy. He thought it could work 

and asked CSI’s sales rep for 

technical assistance.

of plaque modification with the Diamondback 360° 

PAD System versus balloon angioplasty. High-pressure 

balloon angioplasty is associated with a high rate of 

dissection and bailout stenting. Six-month results showed 

orbital treatment outperformed balloon angioplasty and 

demonstrated potential for improved long-term outcomes. 

Focus for Fiscal 2012
As we enter fiscal 2012, several strategies are under 

way to fuel CSI’s growth. We are focused on:

 ° The national launch of the Stealth 360°
 ° Advancing our clinical trial for a coronary application
 ° Expanding our base of scientific data
 ° Enhancing physician awareness of our PAD systems
 ° Making key investments in our business to 

support growth and development

 ° Continuing our progress toward profitability

In fiscal 2011, multiple milestone accomplishments 

set the stage for success in the coming year and 

beyond. The CSI team is committed to technology, 

science and results. We have an exciting future and 

Dr. Schuil performed the procedure 

look forward to updating you on our progress.

with the Predator 360°, and 

restored circulation in the left leg. 

John’s wound began to heal almost 

immediately, and he is walking again.       

Sincerely,

David L. Martin 
President and Chief Executive Officer 

G.D. Nelson, MD
Chairman of  the Board

August 26, 2011

04

Cardiovascular Systems, Inc.  |  2011 Annual Report

 
10-K

Cardiovascular Systems, Inc.
For the fiscal year ended June 30, 2011

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K

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

For the fiscal year ended June 30, 2011

OR

‘ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 000-52082

CARDIOVASCULAR SYSTEMS, INC.

(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)

651 Campus Drive
St. Paul, Minnesota
(Address of principal executive offices)

41-1698056
(I.R.S. Employer
Identification No.)

55112-3495
(Zip Code)

Registrant’s telephone number, including area code:
(651) 259-1600
Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Common Stock, One-tenth of One Cent ($0.001)
Par Value Per Share

Name of each exchange on which registered

The NASDAQ Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act:
None.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities

Act. Yes ‘ No Í

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of

the Exchange Act. Yes ‘ No Í

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained
herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ‘

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

Non-accelerated filer ‘ Smaller reporting company ‘

(Do not check if a 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 Í

As of December 31, 2010, the aggregate market value of the registrant’s common stock held by non-affiliates of

the registrant was $154,270,452 based on the closing sale price as reported on the NASDAQ Global Market.

The number of shares of the registrant’s common stock outstanding as of August 30, 2011 was 17,696,121.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the proxy statement for the registrant’s 2011 Annual Meeting of Stockholders are incorporated by

reference into Items 10, 11, 12, 13 and 14 of Part III of this report.

Table of Contents

Page No.

PART I
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Management’s Discussion and Analysis of Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . .
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in and Disagreements With Accountants on Accounting and Financial
Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 7.

Item 7A.
Item 8.
Item 9.

Item 9A.
Item 9B.

PART III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . .
Item 10.
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 11.
Security Ownership of Certain Beneficial Owners and Management and Related
Item 12.
Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . .
Principal Accounting Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 13.
Item 14.

PART IV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exhibits, Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 15.

1
1
20
37
37
37

40

40

40
54
55

56
56
56

57
57
57

57
57
57

57
57

We make available, free of charge, copies of our annual report on Form 10-K, quarterly reports on
Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act on our web site, http://www.csi360.com, as soon as
reasonably practicable after filing such material electronically or otherwise furnishing it to the Securities and
Exchange Commission (“SEC”). We are not including the information on our web site as a part of, or
incorporating it by reference into, our Form 10-K.

i

Item 1. Business.

Special Note Regarding Forward Looking Statements

PART I

This report contains plans, intentions, objectives, estimates and expectations that constitute forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), which are subject to the “safe harbor”
created by those sections. Forward-looking statements are based on our management’s beliefs and assumptions
and on information currently available to our management. In some cases, you can identify forward-looking
statements by terms such as “may,” “will,” “should,” “could,” “would,” “expect,” “plans,” “anticipates,”
“believes,” “estimates,” “projects,” “predicts,” “potential” and similar expressions intended to identify forward-
looking statements. Examples of these statements include, but are not limited to, any statements regarding our
future financial performance, results of operations or sufficiency of capital resources to fund our operating
requirements, and other statements that are other than statements of historical fact. Our actual results could differ
materially from those discussed in these forward-looking statements due to a number of factors, including the
risks and uncertainties are described more fully by us in Part I, Item 1A and Part II, Item 7 of this report and in
our other filings with the SEC. You should not place undue reliance on these forward-looking statements, which
apply only as of the date of this report. You should read this report completely and with the understanding that
our actual future results may be materially different from what we expect. Except as required by law, we assume
no obligation to update these forward-looking statements publicly, or to update the reasons actual results could
differ materially from those anticipated in these forward-looking statements, even if new information becomes
available in the future.

Corporate Information

We were incorporated as Replidyne, Inc. in Delaware in 2000. On February 25, 2009, Replidyne, Inc.
completed its business combination with Cardiovascular Systems, Inc., a Minnesota corporation (“CSI-MN”), in
accordance with the terms of the Agreement and Plan of Merger and Reorganization, dated as of November 3,
2008, by and among Replidyne, Responder Merger Sub, Inc., a wholly-owned subsidiary of Replidyne (“Merger
Sub”), and CSI-MN (the “Merger Agreement”). Pursuant to the Merger Agreement, Merger Sub merged with
and into CSI-MN, with CSI-MN continuing after the merger as the surviving corporation and a wholly-owned
subsidiary of Replidyne. At the effective time of the merger, Replidyne changed its name to Cardiovascular
Systems, Inc. (“CSI”) and CSI-MN changed its name to CSI Minnesota, Inc. As of immediately following the
effective time of the merger, former CSI-MN stockholders owned approximately 80.2% of the outstanding
common stock of the combined company, and Replidyne stockholders owned approximately 19.8% of the
outstanding common stock of the combined company. Following the merger of Merger Sub with CSI-MN,
CSI-MN merged with and into CSI, with CSI continuing after the merger as the surviving corporation. These
transactions are referred to herein as the “merger.” Unless the context otherwise requires, all references herein to
the “Company,” “CSI,” “we,” “us” and “our” refer to CSI-MN prior to the completion of the merger and to CSI
following the completion of the merger and the name change, and all references to “Replidyne” refer to
Replidyne prior to the completion of the merger and the name change.

Replidyne was a biopharmaceutical company focused on discovering, developing,

in-licensing and

commercializing anti-infective products.

CSI-MN was incorporated in Minnesota in 1989. From 1989 to 1997, we engaged in research and
development on several different product concepts that were later abandoned. Since 1997, we have devoted
substantially all of our resources to the development of the PAD Systems (as hereafter defined) and our Viper
line of ancillary products.

Our principal executive office is located at 651 Campus Drive, St. Paul, Minnesota 55112. Our telephone
number is (651) 259-1600, and our website is www.csi360.com. The information contained in or accessible
through our website is not incorporated by reference into, and should not be considered part of, this Annual
Report on Form 10-K.

1

We have received federal registration in the U.S. Patent and Trademark Office, or USPTO, of certain marks
including “Diamondback 360°”, “CSI”, a first “CSI” logo, a second “CSI” logo, “Lumen Library”, “ViperWire”,
“ViperWire Advance”, “Viperslide”, “ViperTrack”, and “ViperCaddy.” We have applied for
federal
registration with the USPTO of certain marks, including “Predator 360°”, “Stealth 360°”, “Attack the Plaque.
Preserve the Media” and “Change Compliance First.” All other trademarks, trade names and service marks
appearing in this Form 10-K are the property of their respective owners.

Business Overview

We are a medical device company focused on developing and commercializing minimally invasive
treatment solutions for vascular disease. Interventional endovascular treatment of peripheral artery disease, or
PAD, is our initial area of focus. PAD is caused by the accumulation of plaque in peripheral arteries, most
commonly occurring in the pelvis and legs. PAD is a progressive disease, and, if left untreated, can lead to limb
amputation or death.

Our primary products, the Diamondback 360° PAD System (“Diamondback 360°”), Diamondback Predator
360° PAD System (“Predator 360°”) and Stealth 360° PAD System (“Stealth 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 treatment alternatives. We refer to the Diamondback 360°, the Predator
360° and the Stealth 360° collectively in this Annual Report on Form 10-K as the “PAD Systems.” In August
2007, the U.S. Food and Drug Administration, or FDA, granted us 510(k) clearance for the use of the
Diamondback 360° as a therapy in patients with PAD. We commenced a limited commercial introduction of the
Diamondback 360° in the United States in September 2007 and began a full commercial launch during the
quarter ended March 31, 2008. We received 510(k) clearance of the Predator 360° in March 2009 and
commenced commercial launch in April 2009. We received 510(k) clearance of the Stealth 360° in March 2011
and commenced a limited market release that same month. We expect to continue this limited release through the
first quarter of fiscal 2012, ending September 30, 2011, after which we plan to begin a broader commercial
launch. As of June 30, 2011, the PAD Systems had been utilized in more than 50,000 procedures.

We intend to leverage the capabilities of the PAD Systems to expand into the interventional coronary
market though we need to complete certain clinical trials and receive FDA approval to do so. In May 2011, we
received approval from the FDA to complete enrollment of 429 patients in our ORBIT II clinical trial for a
coronary application for the Diamondback 360°, which followed the FDA’s review of data from the first 50 cases
in the ORBIT II trial.

In addition to the PAD Systems, we are expanding our product portfolio through internal product
development and establishment of business relationships with other medical device companies. We now offer
multiple accessory products designed to complement the use of the PAD Systems, and we have entered into a
distribution agreement with Asahi Intecc Co., Ltd. to market its peripheral guidewire line in the United States.

Market Overview

Peripheral Artery Disease

PAD is a circulatory problem in which plaque deposits build up on the walls of the arteries, reducing blood
flow to the limbs. The most common early symptoms of PAD are pain, cramping or fatigue in the leg or hip
muscles while walking. Symptoms may progress to include numbness, tingling or weakness in the leg and, in
severe cases, burning or aching pain in the leg, foot or toes while resting. As PAD progresses, additional signs
and symptoms occur, including cooling or color changes in the skin of the legs or feet, and sores on the legs or
feet that do not heal. If untreated, PAD may lead to critical limb ischemia, a condition in which the amount of
oxygenated blood being delivered to the limb is insufficient to keep the tissue alive. Critical limb ischemia often
leads to large non-healing ulcers, infections, gangrene and, eventually, limb amputation or death.

PAD affects approximately eight to 12 million people in the United States, as cited by the authors of the
PARTNERS study published in the Journal of the American Medical Association in 2001. According to 2007
statistics from the American Heart Association, PAD becomes more common with age and affects approximately

2

12% to 20% of the population over 65 years old. An aging population, coupled with increasing incidence of
diabetes and obesity, is likely to increase the prevalence of PAD. In many older PAD patients, particularly those
with diabetes, PAD is characterized by fibrotic (moderately hard) or calcified (extremely hard) plaque deposits
that have not been successfully treated with existing non-invasive treatment techniques. PAD may involve
arteries throughout the leg. Arteries above the knee are generally long, straight and relatively wide, while arteries
below the knee are shorter and branch into arteries that are progressively smaller in diameter.

Despite the severity of PAD, it remains relatively underdiagnosed. According to an article published in
Podiatry Today in 2006, only approximately 2.5 million of the eight to 12 million people in the United States
with PAD are diagnosed. Although we believe the rate of diagnosis of PAD is increasing, underdiagnosis
continues due to patients failing to display symptoms or physicians misinterpreting symptoms as normal aging.
Recent emphasis on PAD education from medical associations, insurance companies and other groups, coupled
with publications in medical journals, is increasing physician and patient awareness of PAD risk factors,
symptoms and treatment options. The PARTNERS study advocated increased PAD screening by primary care
physicians.

Physicians treat a significant portion of the 2.5 million people in the United States who are diagnosed with
PAD using medical management, which includes lifestyle changes, such as diet and exercise and drug treatment.
For instance, within a reference group of more than 1,000 patients from the PARTNERS study, 54% of the
patients with a prior diagnosis of PAD were receiving antiplatelet medication treatment. While medications, diet
and exercise may improve blood flow, they do not treat the underlying obstruction and many patients have
difficulty maintaining lifestyle changes. Additionally, many prescribed medications are contraindicated, or
inadvisable, for patients with heart disease, which often exists in PAD patients. As a result of these challenges,
many medically managed patients develop more severe symptoms that require procedural intervention.

Coronary Artery Disease

Based on data from the U.S. Agency for Healthcare Research and Quality, or AHRQ, and the U.S. Centers
for Medicare and Medicaid Services, we estimate that approximately 924,000 percutaneous coronary
interventions, or PCI, procedures occurred in the United States in 2009. Based on various studies, we believe that
more than 25% of PCI procedures involve moderate to severe levels of calcified coronary arteries and could
benefit from the use of our device. In addition, based on AHRQ data, we estimate that in 2009 approximately
478,000 coronary artery bypass graft surgeries were performed in the United States. These patients generally
have higher rates of calcification and we believe they could benefit from the use of our device.

Our Product

Components of the PAD Systems

The PAD Systems each use a single-use, low-profile catheter that travels over our proprietary ViperWire
Advance™ Guide Wire and is powered by either an external control unit (Diamondback 360° or Predator 360°)
or a saline infusion pump (Stealth 360°).

Catheter. The catheter consists of:

• a control handle, which allows precise movement of the crown and predictable crown location;

• a flexible drive shaft with a diamond grit coated offset crown, which tracks and orbits over the guidewire;

and

• a sheath, which covers the drive shaft and permits delivery of saline or medications to the treatment area.

ViperWire Advance Guidewire. The ViperWire Advance is the second generation of the ViperWire. The
ViperWire Advance was designed to offer an improved ability to maneuver through tortuous, twisting blood
vessels and cross challenging lesions. The PAD Systems travel over this wire to the lesion and operate on this
wire.

3

ViperSlide Lubricant. ViperSlide is an exclusive lubricant designed to optimize the smooth operation of
the PAD Systems. On April 4, 2011, we entered into a five-year supply agreement with Fresenius Kabi AB
(“Fresenius”), pursuant to which Fresenius will manufacture and serve as a single-source supplier of the
ViperSlide lubricant through March 2016.

Control Unit. Used in conjunction with the Diamondback 360° and Predator 360° PAD Systems, the
control unit incorporates a touch-screen interface on an easily maneuverable, lightweight pole. Using an external
air supply, the control unit regulates air pressure to drive the turbine located in the catheter handle to speeds
ranging up to 200,000 revolutions per minute. Saline, delivered by a pumping mechanism on the control unit,
bathes the device shaft and crown. The constant flow of saline reduces the risk of heat generation.

Saline Infusion Pump. Used exclusively with the Stealth 360°, the saline infusion pump mounts directly to
the intravenous pole and bathes the devices shaft and crown and provides a power supply for the operation of the
catheter.

Technology Overview

The two technologies used in the PAD Systems are plaque modification through differential sanding and

plaque removal.

Plaque Modification through Differential Sanding. The PAD Systems were designed to allow the devices
to differentiate between soft compliant and harder diseased arterial tissue. This property is consistent with
sanding material such as the diamond grit used in the PAD Systems. The diamond preferentially engages and
sands harder material. The PAD Systems also treat soft plaque, which is still harder than a normal vessel wall.
Arterial lesions tend to be harder and stiffer than compliant, undiseased tissue, and they often are fibrotic or
calcified. The PAD Systems sand the lesion but are designed not to damage more compliant parts of the artery.
The mechanism is a function of the centrifugal force generated by the PAD Systems as they rotate. As the crown
moves outward, the centrifugal force is offset by the counterforce exerted by the arterial wall. If the tissue is
compliant, it should flex away, rather than generating an opposing force that would allow the PAD Systems to
engage and sand the wall. Diseased tissue provides resistance and is able to generate an opposing force that
allows the PAD Systems to engage and sand the plaque. The sanded plaque is broken down into particles
generally smaller than circulating red blood cells that are washed away downstream with the patient’s natural
blood flow. Of 36 consecutive experiments that we performed in carbon blocks, animal and cadaver models:

• 93.1% of particles were smaller than a red blood cell, with a 99% confidence interval; and

• 99.3% of particles were smaller than the lumen of the capillaries (which provide the connection between

the arterial and venous system), with a 99% confidence interval.

The small particle size minimizes the risk of vascular bed overload, or a saturation of the peripheral vessels
with large particles, which may cause slow or reduced blood flow to the foot. We believe that the small size of
the particles also allows them to be managed by the body’s natural cleansing of the blood, whereby various types
of white blood cells eliminate worn-out cells and other debris in the bloodstream.

Plaque Removal. The systems operate on the principles of centrifugal force. As the speed of the crown’s
rotation increases, it creates centrifugal force, which increases the crown’s orbit and presses the diamond grit
coated offset crown against the lesion or plaque, removing a small amount of plaque with each orbit. Normal
arteries are compliant; they have the ability to expand and contract as needed to supply blood flow to the legs and
feet. Arteries burdened with fibrotic (moderately hard) and/or calcified (extremely hard) plaque often lose their
compliance, which makes other therapies such as angioplasty, stenting, surgical bypass and atherectomy
problematic. The characteristics of the orbit and the resulting lumen size can be adjusted by modifying three
variables:

• Speed. An increase in speed creates a larger lumen. Our current systems allow the user to choose

between three rotational speeds.

• Crown Characteristics. The crown can be designed with various weights (as determined by different
materials and density) and coated with diamond grit of various width, height and configurations. The

4

Diamondback 360° crown is available in two configurations—classic and solid. Crown sizes and
configurations are selected based on several case criteria, including reference vessel size, length and
degree of stenosis, and anatomy tortuosity. The Predator 360° crown is available in the solid configuration
and is constructed to allow the crown to engage and treat the lesion more efficiently, which can result in
shorter procedure times. Both the classic and Predator 360° crowns are available in multiple sizes,
including 1.25, 1.50, 1.75, 2.00 millimeter. There is also a 2.25 millimeter diameter in the Predator 360°
crown configuration. Currently, the Stealth 360° device is available with a 1.50 millimeter classic crown,
and 1.25 millimeter and 2.00 millimeter Predator 360° crown configuration. For both configurations, the
catheter length is 145 centimeters, which addresses procedural approach and target lesion locations both
above and below the knee.

• Drive Shaft Characteristics. The drive shaft can be designed with various shapes and degrees of rigidity.
The drive shaft on the Stealth 360° device with a Predator 360° crown configuration is newly-developed,
enhancing the ability to advance the device more smoothly and effectively through tortuous anatomy and
challenging lesion morphologies, thereby improving the overall efficiency of the device.

We view the PAD Systems as platforms that can be used to develop additional products by adjusting one or

more of the speed, crown and shaft variables.

Applications

The PAD Systems can be used to treat plaque in multiple anatomic locations.

Below-the-Knee and Behind-the-Knee Peripheral Artery Disease. Arteries below and behind the knee
have small diameters and may be diffusely diseased, calcified or both, limiting the effectiveness of traditional
devices. Behind-the-knee lesions also present challenges if a stent is required because stents frequently fracture
due to the forces exerted on the vessels when the knee bends or flexes. The PAD Systems are effective in both
diffused and calcified vessels. This was demonstrated in the OASIS trial, where 94.5% of lesions treated with the
Diamondback 360° were behind or below the knee.

Above-the-Knee Peripheral Artery Disease. Plaque in arteries above the knee may also be diffuse, fibrotic
and calcific; however, these arteries are longer, straighter and wider than below-the-knee vessels. While effective
in difficult-to-treat below-the-knee vessels, and indicated for vessels up to four millimeters in diameter, our
products are also being used to treat lesions above the knee.

Coronary Artery Disease. Given the many similarities between peripheral and coronary artery disease, we
have developed a modified version of the Diamondback 360° to treat coronary arteries. We have conducted
numerous bench studies, pre-clinical animal studies, and our ORBIT I 50-patient human clinical study to
evaluate the Diamondback 360° in coronary artery disease. A coronary application requires us to conduct a
clinical trial and file a premarket application (PMA) and obtain approval from the FDA. We participated in three
pre-investigational device exemption, or IDE, meetings with the FDA and completed the human feasibility
portion of a coronary trial in the summer of 2008 in India, enrolling 50 patients. The FDA agreed to accept the
data from the India trial to support an IDE submission. The FDA granted unconditional approval in April 2010 to
begin the ORBIT II coronary study in the United States. In May 2011, we received approval from the FDA to
complete enrollment of 429 patients in our ORBIT II clinical
trial for a coronary application for the
Diamondback 360°, which followed the FDA’s review of data from the first 50 cases in the ORBIT II trial.

Our Solution

The PAD Systems represent an innovative approach to the treatment of PAD that provides physicians and
patients with a procedure that addresses many of the limitations of traditional treatment alternatives. The PAD
Systems each use single-use catheters that incorporate a flexible drive shaft with an offset diamond grit coated
crown. Physicians position the crown at the site of an arterial plaque-containing lesion and remove the plaque by
positioning the crown to orbit against it, creating a smooth lumen, or channel, in the vessel. The PAD Systems
are designed to differentiate between hard plaque and soft, compliant arterial tissue, a concept that we refer to as
“differential sanding.”

5

Normal arteries are compliant; they have the ability to expand and contract as needed to supply blood flow
to the legs and feet. Arteries burdened with fibrotic (moderately hard) and/or calcified (extremely hard) plaque
due to PAD lose their compliance which makes other therapies such as angioplasty, stenting, surgical bypass and
atherectomy problematic. The PAD Systems sand plaque into small particles and restore both blood flow and
vessel compliance. The particles created by the PAD Systems are generally smaller than red blood cells and are
carried away by the bloodstream. The small size of the particles avoids the need for plaque collection reservoirs.
The PAD Systems can typically treat the diseased arteries with less than two to three minutes of sanding time,
potentially reducing the overall procedure time.

We believe that the PAD Systems offer the following key benefits:

Strong Safety Profile

• Differential Sanding Reduces Risk of Adverse Events. The PAD Systems are designed to differentiate
between hard plaque and soft compliant arterial tissue. Arteries are composed of three tissue layers. The
diamond grit coated offset crown at the working end of the devices engages and removes plaque from the
artery wall with minimal likelihood of penetrating or damaging the fragile, inner layer of the arterial wall
because soft, compliant tissue flexes away from the crown. Furthermore, the PAD Systems have rarely
penetrated even the middle or outer layers of the artery’s wall. The Diamondback 360°’s perforation rate
was 2.4% during our pivotal OASIS trial. Analysis by an independent pathology laboratory of more than
434 consecutive cross sections of porcine arteries treated with the Diamondback 360° revealed there was
minimal to no damage, on average, to the middle layer, which is typically associated with restenosis. In
addition, the safety profile of the Diamondback 360° was found to be non-inferior to that of angioplasty,
which is often considered the safest of interventional methods. This was demonstrated in our OASIS trial,
which had a low 4.8% rate of device-related serious adverse events, or SAEs.

• Reduces the Risk of Distal Embolization. The PAD Systems sand plaque away from artery walls in a
manner that produces particles of such a small size — generally smaller than red blood cells — that they
are carried away by the bloodstream. The small size of the particles avoids the need for plaque collection
reservoirs on the catheter and reduces the need for ancillary distal protection devices, commonly used
with directional cutting atherectomy, and also significantly reduces the risk that larger pieces of removed
plaque will block blood flow downstream.

• Allows Continuous Blood Flow During Procedure. The PAD Systems allow for continuous blood flow
during the procedure, except when used in chronic total occlusions. Other devices may restrict blood flow
due to the size of the catheter required or the use of distal protection devices, which could result in
complications such as excessive heat and tissue damage.

Proven Efficacy

• Efficacy Demonstrated in a 124-Patient Clinical Trial. Our pivotal OASIS clinical

trial was a
prospective 20-center study that involved 124 patients with 201 lesions treated by the Diamondback 360°.
Performance targets were established cooperatively with the FDA before the trial began. Despite 55% of
the lesions consisting of calcified plaque and 48% of the lesions having a length greater than three
centimeters, the performance of the Diamondback 360° in the OASIS trial successfully met the FDA’s
study endpoints. Because the Predator 360° and Stealth 360° mechanism of action is identical to that of
the Diamondback 360°, no additional efficacy trials were required by the FDA for 510(k) clearance of
either PAD System.

• Treats Difficult, Fibrotic and Calcified Lesions. The PAD Systems enable physicians to remove plaque
from long, fibrotic, calcified or bifurcated lesions in peripheral arteries both above and below the knee.
Other PAD devices have demonstrated limited effectiveness in treating these challenging lesions.

• Orbital Motion Improves Device-to-Lumen Ratio. The orbiting action of the PAD Systems can create a
lumen of approximately 2.0 times the diameter of the crown. The variable device-to-lumen ratio allows
the continuous removal of plaque as the opening of the lumen increases during the operation of the

6

devices. Non-orbiting rotational atherectomy catheters remove plaque by abrading the lesion with a
spinning, abrasive burr, which acts in a manner similar to a drill and only creates a lumen the same size or
slightly smaller than the size of the burr.

• Differential Sanding Creates Smooth Lumens. The differential sanding of the PAD Systems creates a
smooth surface inside the lumen. We believe that the smooth lumens created by the devices increase the
velocity of blood flow and decrease the resistance to blood flow, which may decrease potential for
restenosis, or renarrowing of the arteries.

Ease of Use

• Utilizes Familiar Techniques. Physicians using the PAD Systems employ techniques similar to those
used in angioplasty, which are familiar
to interventional cardiologists, vascular surgeons and
interventional radiologists who are trained in endovascular techniques. The devices’ simple user
interfaces require minimal additional training. The devices’ ability to differentiate between diseased and
compliant tissue reduces the risk of complications associated with user error and potentially broadens the
user population.

• Single Insertion to Complete Treatment. The orbital technology and differential sanding process of the
PAD Systems allows for a single insertion to treat lesions, in most cases. Because the particles of plaque
sanded away are of such small sizes, the PAD Systems do not require a collection reservoir that needs to
be repeatedly emptied or cleaned during the procedure. Rather, the PAD Systems allow for multiple
passes of the device over the lesion until plaque is removed and a smooth lumen is created.

• Limited Use of Fluoroscopy. The relative simplicity of our process and predictable crown location

allows physicians to significantly reduce fluoroscopy use, thus limiting radiation exposure.

Treatment Area

• Treats Entire Leg. The PAD Systems have the ability to treat the entire leg, including small vessels

below the knee.

Cost and Time Efficient Procedure

• Short Procedure Time. The PAD Systems have a short treatment time. Treatment with the Diamondback
360° typically ranges from three to four minutes, while treatment time with the Predator 360° and Stealth
360° is typically shorter — ranging from 90 seconds to three minutes.

• Single Crown Can Create Various Lumen Sizes Limiting Hospital Inventory Costs. The orbital
mechanism of action with the PAD Systems allows a single-sized device to create various diameter
lumens inside the artery. Adjusting the rotational speed of the crown changes the orbit to create the
desired lumen diameter, thereby potentially avoiding the need to use multiple catheters of different sizes
to treat multiple lesions. The PAD Systems can create a lumen that is 100% larger than the actual
diameter of the device, for a device-to-lumen ratio of approximately 1.0 to 2.0.

• Single Insertion Reduces Procedural Time. Since the physician does not need to insert and remove
multiple catheters or clean a plaque collection reservoir to complete the procedure, there is a potential for
decreased procedure time.

Our Strategy

Our goal is to be the leading provider of minimally invasive solutions for the treatment of vascular disease.

The key elements of our strategy include:

• Drive Adoption Through Our Direct Sales Organization and Key Physician Leaders. We expect to
continue to drive adoption of the PAD Systems through our direct sales force, which targets interventional
cardiologists, vascular surgeons and interventional radiologists. As a key element of our strategy, we

7

focus on educating and training physicians on the PAD Systems through our direct sales force and during
seminars where physician industry leaders discuss case studies and treatment techniques using the
devices.

• Collect Additional Clinical Evidence on Benefits of the PAD Systems. Physicians are increasingly
requesting clinical study evidence to allow them to make the best treatment decisions to achieve the best
possible short-term and long-term outcomes for their patients. We are focused on collecting and using
clinical evidence to demonstrate the advantages of the PAD Systems and drive physician acceptance.

• Expand Product Portfolio within the Market for Treatment of Peripheral Arteries.

In addition to the
PAD Systems, we are expanding our product portfolio. We now offer multiple accessory devices designed
to complement the use of the PAD Systems. We continue to market the following products:

• ViperSlide® Lubricant — an exclusive lubricant designed to optimize the smooth operation of the PAD

Systems

• ViperTrack® Radiopaque Tape — a radiopaque tape to assist in measuring lesion lengths and marking

lesion locations

• ViperWire Advance® — guidewire offering improved ability to maneuver through tortuous, twisting

blood vessels and cross challenging lesions

We are continuing to evaluate internal product development to further expand our portfolio of PAD
treatment solutions.

• Leverage Technology Platform into Coronary Market. Based on the clinical performance of the PAD
Systems in treating lower extremity PAD, we intend to leverage the devices’ capabilities to expand into
the interventional coronary market. A coronary application would address a large market opportunity,
further leveraging our core technology and expanding its market potential. In 2008, we completed the
ORBIT I trial, a 50-patient study in India that investigated the safety of the Diamondback 360º device in
treating calcified coronary artery lesions. Results successfully met both safety and efficacy endpoints. An
IDE application has been approved by the FDA for ORBIT II, a pivotal 429 patient trial in the United
States to evaluate the safety and effectiveness of the Diamondback 360º in treating severely calcified
coronary lesions. In May 2011, we received approval from the FDA to complete enrolment of the
429 patients in our ORBIT II clinical trial, which followed the FDA’s review of data from the first 50
cases in the ORBIT II trial.

• Pursue Strategic Acquisitions and Partnerships.

In August 2009, we signed an exclusive distribution
agreement with Asahi-Intecc, Ltd. (“Asahi”) to market its peripheral guidewire line in the United States.
We offer two Asahi 0.18 wire platforms: the Astato 30 and Treasure 12. The Astato 30 is a high-
penetration guide wire specially designed to break through fibrous caps and calcium deposits, and treat
long, complex lesions. The Treasure 12 has a one-piece core to provide control, torque performance and
tactile feedback to the physician.

In addition to adding to our product portfolio through internal development efforts, we intend to continue to
explore the acquisition of other product lines, technologies or companies that may leverage our sales force or
licensing
complement our strategic objectives. We plan to continue to evaluate distribution agreements,
transactions, other strategic partnerships, and the financial viability of marketing the PAD Systems
internationally.

Clinical Trials and Studies for Our Products

We are committed to providing relevant clinical evidence to allow physicians to select and utilize the best
treatment options for their patients. We have conducted twelve clinical trials to demonstrate the safety and
efficacy of the PAD Systems in treating PAD, enrolling a total of 3,746 patients in our PAD I and PAD II pilot
trials, OASIS pivotal trial, OASIS LT study demonstrating long term durability of the Diamondback 360º and the
CONFIRM DIAMONDBACK, CONFIRM PREDATOR and CONFIRM OUTFLOW Post-Market Registries. In

8

addition, we have also completed enrollment in the CALCIUM 360° and COMPLIANCE 360° post-market,
randomized feasibility studies that further differentiate the performance of the Diamondback 360° and Predator
360° from conventional balloon angioplasty.

To demonstrate the safety and effectiveness of the Diamondback 360° for use in coronary arteries we also
completed the ORBIT I coronary clinical trial in India in 2009. In 2010, we began the ORBIT II pivotal study in
the United States, evaluating the use of the Diamondback 360° in coronary arteries.

Metrics Used in PAD Trials

The common metrics used to evaluate plaque modification and removal devices for PAD include:

Metric

Change in Compliance

Absolute Plaque Reduction

Target Lesion Revascularization

Ankle Brachial Index

Description

in

orbital

change

defined

stenosis with

Compliance
the
as
COMPLIANCE 360 protocol is to achieve ≤ 30%
atherectomy
residual
followed by a “low-pressure balloon inflation” of
≤ 4 atmospheres pressure (atm).
Absolute plaque reduction is
the difference
between the pre-treatment percent stenosis, or the
narrowing of the vessel and the post-treatment
percent stenosis as measured angiographically.
Target lesion revascularization rate, or TLR rate,
is the percentage of patients at follow-up who
have undergone another peripheral intervention in
the same lesion due to their worsening symptoms.
Treatments such as an angioplasty, stenting or
surgery may be used to reopen the treated lesion
site.
a
The Ankle Brachial
to evaluate the
measurement
adequacy
and
legs
of
improvement or worsening of leg circulation over
time. The ABI is a ratio between the blood
pressure in a patient’s ankle and a patient’s arm,
with a ratio above 0.9 being normal.

is useful
in

Index, or ABI,

circulation

that

the

is

The common metrics used to evaluate atherectomy devices for PAD include:

Metric

Serious Adverse Events

Perforations

Description

SAEs include any experience that is fatal or life-
threatening, is permanently disabling, requires or
prolongs hospitalization, or requires intervention
to prevent permanent
impairment or damage.
SAEs may or may not be related to the device.
Perforations occur when the artery is punctured
during atherectomy treatment. Perforations may
be nonserious or serious (referred to as an SAE)
depending on the treatment required to repair the
perforation.

Inclusion criteria for trials often limit size of lesion and severity of disease, as measured by the Rutherford

Class, which utilizes a scale of I to VI, with I being mild and VI being most severe, and the ABI.

PAD Feasibility Trials

The first clinical trial was a two-site, 17-patient feasibility clinical trial in Europe, referred to as PAD I,
which began in March 2005. Patients enrolled in the trial had lesions that were less than 10 cm in length in

9

arteries between 1.5 mm and 6.0 mm in diameter, with Rutherford Class scores of IV or lower. Patients were
evaluated at the time of the procedure and at 30 days following treatment. The purpose of PAD I was to obtain
the first human clinical experience and evaluate the safety of the Diamondback 360°. This was determined by
estimating the cumulative incidence of patients experiencing one or more SAEs within 30 days post-treatment.

The results of PAD I confirmed that the Diamondback 360° was safe and established that the Diamondback
360° could be used to treat vessels in the range of 1.5 mm to 4.0 mm, which are found primarily below the knee.
PAD I also showed that removal of plaque could be accomplished and the resulting device-to-lumen ratio was
approximately 1.0 to 2.0. The SAE rate in PAD I was 6% (one of 17 patients).

After being granted the CE Mark in May 2005, a 66-patient European clinical trial, PAD II, was initiated at
seven sites, in August 2005. All patients had stenosis in vessels below the femoral artery of between 1.5 mm and
4.0 mm in diameter, with at least 50% blockage. The primary objectives of this study were to evaluate the acute
(30 days or less) risk of experiencing an SAE post procedure and provide evidence of device effectiveness.
Effectiveness was confirmed angiographically and based on the percentage of absolute plaque reduction.

The PAD II results demonstrated safe and effective debulking in vessels with diameters ranging from 1.5
mm to 4.0 mm with a mean absolute plaque reduction of 55%. The SAE rate in PAD II was 9% (six of
66 patients), which did not differ significantly from existing non-invasive treatment options.

OASIS Pivotal Trial

An IDE was approved in September 2005 to begin our pivotal United States trial, OASIS. OASIS was a

124-patient, 20-center, prospective trial that began enrollment in January 2006.

Patients included in the trial had:

• An ABI of less than 0.9;

• A Rutherford Class score of V or lower; and

• Treated arteries of between 1.5 mm and 4.0 mm or less in diameter via angiogram measurement, with a

well-defined lesion of at least 50% diameter stenosis and lesions of no greater than 10.0 cm in length.

The primary efficacy study endpoint was absolute plaque reduction of the target lesions from baseline to

immediately post procedure. The primary safety endpoint was the cumulative incidence of SAEs at 30 days.

In the OASIS trial, 94.5% of lesions treated were behind or below the knee, an area where lesions have
traditionally gone untreated until they require bypass surgery or amputation. Of the lesions treated in OASIS,
55% were comprised of calcified plaque, which presents a challenge to proper expansion and apposition of
balloons and stents, and 48% were diffuse, or greater than 3 cm in length, which typically requires multiple
balloon expansions or stent placements. Competing plaque removal devices are often ineffective with these
difficult to treat lesions.

The average time of treatment in the OASIS trial was three minutes per lesion, which compares favorably to
the treatment time required by other plaque removal devices. The following table is a summary of the OASIS
trial results:

Item

FDA Target

OASIS Result

Absolute Plaque Reduction

SAEs at 30 days
TLR
Perforations
ABI at baseline
ABI at 30 days
ABI at 6 months

* Mean ± Standard Deviation

59.4%
4.8%, device-related; 9.7%,
overall
2.4%
1 serious perforation
0.68 ± 0.2*
0.9 ± 0.18*
0.83 ± 0.23*

55%
8%, with an upper
bound of 16%
20% or less
N/A
N/A
N/A
N/A

10

CLEAR 360° Study

We conducted the CLEAR 360° study to evaluate the incidence of clinically significant hemolysis
associated with orbital atherectomy used to treat severe peripheral arterial disease. This study enrolled 31 patients
at four U.S. medical centers and was completed in 2009. This trial concluded that there was no clinically
significant hemolysis after orbital atherectomy.

OASIS Long-Term Study

In 2009 we completed a retrospective study evaluating the long-term results of 64 patients from the pivotal
OASIS trial. Outcomes were analyzed out to a mean of 29 months and include limb salvage rate, TLR rate and
ABI. TLR, or reintervention in the originally treated lesion, was 13.6%. A 100% limb salvage rate was
maintained. ABI scores remained significantly improved. This 29 month data of OASIS patients adds to our
confidence in the safety and efficacy of the Diamondback 360°.

Post-Market Feasibility Studies

In May 2010, enrollment was completed in the COMPLIANCE 360° clinical trial, the first of two PAD
post-market studies initiated in calendar 2009. This prospective, randomized, multi-center study evaluated the
clinical and economic benefits of modifying plaque to change large vessel compliance above the knee with the
Diamondback 360° or Predator 360°. The study compared the performance of the Diamondback 360° or Predator
360°, plus low-pressure balloon inflation, if desired, with that of high-pressure balloon inflation alone. Fifty
patients were enrolled at nine U.S. medical centers. The results of this trial showed that the Diamondback 360° or
Predator 360° can achieve superior results in treating calcified plaque by improving lesion compliance through
differential sanding, without the need for stent placement. Trial results with a p-value of less than 0.0001
statistically demonstrated the success rate in the Diamondback 360° or Predator 360° arm of the trial had a
procedural success rate of 360% greater than in the balloon arm of the trial and required 91% less bailout
stenting. The six month study results will be presented as an oral presentation at the Transcatheter Cardiovascular
Therapeutics, or TCT, conference in November 2011 in San Francisco, CA. Patients will complete their 12
month follow up by the end of September 2011. Twenty four months of data will continue to be collected.

In April 2010, enrollment was completed in the CALCIUM 360° study, a prospective, randomized, multi-
center study comparing the effectiveness of the Diamondback 360° and Predator 360° to balloon angioplasty in
treating calcified lesions below the knee. Calcified plaque exists in about 75 percent of lesions below the knee.
Fifty patients were enrolled at eight U.S. medical centers. Six-month results showed orbital
treatment
outperformed balloon angioplasty. A key finding was that by modifying calcified lesions first, the Diamondback
360° and Predator 360° allow use of a lower-pressure adjunctive balloon therapy, reducing the need for bailout
stenting with anticipated improved longer-term patient outcomes. Orbital
treatment outperformed balloon
angioplasty on the primary endpoint of device success (less than or equal to 30% restenosis with no dissection
C-F) with 92.6% in the Diamondback 360° and Predator 360° arm of the trial versus 78.8% in the balloon arm of
the trial. These results will be reported as an abstract at the San Francisco TCT conference. Patients will
complete their 12 month follow up by the end of September 2011. Twenty four months of data will continue to
be collected.

CONFIRM Post-Market Clinical Registry Series

We are conducting the CONFIRM Post-Market Clinical Registry Series, which will further evaluate acute
and economic parameters related to the use of the PAD Systems. The CONFIRM Series currently consists of
three registries: CONFIRM I DIAMONDBACK, CONFIRM II PREDATOR, and CONFIRM III OUTFLOW.

Enrollment of 728 patients in the CONFIRM I DIAMONDBACK Post-Market Registry was completed in
March 2010. In this prospective registry, 1,138 lesions were treated by 84 investigators at 57 medical centers
with the Diamondback 360°. Patient characteristics were as follows: 81.6% were smokers, 60.0% were diabetic,
and 89.7% had hypertension. Lesions treated were above the knee (46.5%), behind the knee (17.5%), and below
the knee (36.0%). Lesions were long and calcified. Lesions were treated with the Diamondback 360° followed by

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low pressure balloon angioplasty, if desired. An average residual stenosis of 10.5% was achieved following
treatment, which is consistent with that, achieved in PAD I, PAD II, and OASIS. Bail-out stenting, or stenting
required due to tears in the vessel wall, occurred in 2.2% of lesions, which is also consistent with the 2.5%
reported in OASIS. This is lower than the 35% to 40% bail-out stent rate reported in the literature for patients
treated with high pressure balloon angioplasty alone in this type of challenging patient population.

Enrollment of 1,145 patients in the prospective CONFIRM II PREDATOR Post-Market Registry was
completed December 2010. The CONFIRM II PREDATOR evaluated clinical performance of the Predator 360°.
Data on acute clinical performance and short-term economic parameters were collected during this study. An
abstract will be presented at the San Francisco TCT conference.

Data from CONFIRM DIAMONDBACK and PREDATOR registries were used to design the CONFIRM III
OUTFLOW registry. This is the third study in the CONFIRM series to further evaluate acute procedural
outcomes and economic parameters associated with use of the PAD Systems. Enrollment of 1,275 patients in the
CONFIRM III OUTFLOW Post-Market Registry was completed June 2011. Data will be reported at future
scientific conferences.

ORBIT I Coronary Feasibly Safety Study

The ORBIT I trial, a 50-patient study in India, was completed in 2009. This feasibility trial investigated the
safety of the Diamondback 360° in treating calcified coronary artery lesions. The safety was evaluated by
six-months MACE rate. Study results showed the device success for the study was 100%. Six months MACE rate
was 8%. The ORBIT I trial confirmed that the OAS is safe in treating subjects with de novo calcified coronary
artery disease. The 6 month results will be presented at the TCT conference in 2011.

ORBIT II Coronary IDE Study

To market the Diamondback 360° in the United States for use in the coronary arteries, we are required to
conduct further clinical trials and obtain premarket approval from the FDA. In May 2010, the IDE was FDA
approved and we began the ORBIT II pivotal clinical trial. This trial plans to enroll 429 patients in up to 50 U.S.
investigational centers to evaluate the safety and effectiveness of the Diamondback 360° in treating severely
calcified coronary lesions. In May 2011, we received approval from the FDA to complete enrollment of 429
patients in our ORBIT II clinical trial for a coronary application for the Diamondback 360°, which followed the
FDA’s review of data from the first 50 cases in the ORBIT II trial.

Sales and Marketing

We market and sell the PAD Systems through a direct sales force in the United States. While we sell
directly to hospitals and office based laboratories, we have targeted sales and marketing efforts to interventional
cardiologists, vascular surgeons and interventional radiologists with experience using similar catheter-based
procedures, such as angioplasty, stenting, and cutting or laser atherectomy. Physician referral programs and
peer-to-peer education are other key elements of our sales strategy. Patient referrals come from general
practitioners, podiatrists, nephrologists and endocrinologists.

We target our marketing efforts to practitioners through physician education, medical conferences,

seminars, peer reviewed journals and marketing materials. Our sales and marketing program focuses on:

• educating physicians regarding the proper use and application of the PAD Systems;

• clinical results showing safety and efficacy of products

• developing relationships with key opinion leaders; and

• facilitating regional referral marketing programs.

We are not marketing our products internationally; however, we will continue to evaluate international

opportunities.

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We executed a Purchasing Agreement with HealthTrust Purchasing Group, L.P., or HPG, that became
effective on July 15, 2011. HPG acts as a group purchasing organization for the healthcare providers belonging to
HPG as participants. Under the Purchasing Agreement, all of HPG’s participants located in the United States or
its territories are eligible to purchase the PAD Systems and related products at prices set forth in the Purchasing
Agreement. HPG has agreed not to contract with more than one alternative supplier from which participants may
purchase products comparable to ours under the agreement. During the term of the agreement, we have agreed to
not solicit any HPG participant to enter into a separate agreement for our products.

Research and Development

Our research and development efforts are focused in the development of products to penetrate our three key
target markets: below and behind-the-knee, above-the-knee and coronary vessels. Research and development
projects include the development of electric versions of the PAD Systems, shaft designs, crown designs, and
PAD and coronary clinical trials. Research and development expenses for fiscal 2011, fiscal 2010 and fiscal 2009
were $8.9 million, $10.3 million and $14.7 million, respectively.

Manufacturing

We use internally-manufactured and externally-sourced components to manufacture the PAD Systems. Most
of the externally-sourced components are available from multiple suppliers; however, a few key components,
including the diamond grit coated crown, micro motors, and printed circuit board assemblies, are single
sourced. We assemble the shaft, crown and handle components on-site, and test, pack, seal and label the finished
assembly before sending the packaged product to a contract sterilization facility. Upon return from the sterilizer,
product is held in inventory prior to shipping to our customers.

Our manufacturing facility in Minnesota, including the shaft manufacturing and the controlled-environment
assembly areas, are equipped to accommodate approximately 30,000 devices per shift annually. It also has
storage capacity for approximately 8,000 devices and 50 control units. As the control unit becomes obsolete, we
will convert our storage space for use with the Stealth 360° PAD System.

Our Pearland, Texas facility is 46,000 square feet and includes a custom-built clean room and production
space for future expansion of value-add processes, including machining and electronics assembly. The facility,
when it becomes fully staffed and equipped, will have the capacity to produce approximately 75,000 devices per
shift annually. This facility has finished goods storage capacity for greater than 15,000 devices of the PAD
Systems and other accessory products and over 500 Stealth 360° saline infusion pumps.

We are registered with the FDA as a medical device manufacturer. We have opted to maintain quality
assurance and quality management certifications to enable us to market our products in the member states of the
European Union, the European Free Trade Association and countries that have entered into Mutual Recognition
Agreements with the European Union. We are ISO 13485:2003 certified, and our renewal is due by December
2012. During the time of commercialization, we have had two minor instances of recall, involving one single lot
of Diamondback 360° devices (eight units), and two boxes of ViperWires (ten wires), related to “Use By” date
labeling issues. While these recalls were reported to the FDA, according to regulations, they did not provide a
risk to patient safety. A third recall, initiated in 2009 and completed in 2010, involved the ViperSheath, which is
owned and manufactured by Thomas Medical Products. As the distributor for the ViperSheath, we were required
to recall all unused units from our customers and return them to Thomas Medical Products. All of the unused
ViperSheaths were captured and subsequently destroyed by Thomas Medical Products, with FDA observance.

Third-Party Reimbursement and Pricing

Third-party payors, including private insurers, and government insurance programs, such as Medicare and
Medicaid, pay for a significant portion of patient care provided in the United States. The single largest payor in
the United States is the Medicare program, a federal governmental health insurance program administered by the
Centers for Medicare and Medicaid Services, or CMS. Medicare covers certain medical care expenses for
eligible elderly and disabled individuals, including a large percentage of the population with PAD who could be

13

treated with the PAD Systems. In addition, private insurers often follow the coverage and reimbursement policies
of Medicare. Consequently, Medicare’s coverage and reimbursement policies are important to our operations.

CMS has established Medicare reimbursement codes describing atherectomy products and procedures using
atherectomy products, and many private insurers follow these policies. We believe that physicians and hospitals
that treat PAD with the PAD Systems will generally be eligible to receive reimbursement from Medicare and
private insurers for the cost of the single-use catheter and the physician’s services.

The continued availability of insurance coverage and reimbursement for newly approved medical devices is
uncertain. The commercial success of our products in both domestic and international markets will be dependent
on whether third-party coverage and reimbursement is available for patients that use our products. Medicare,
Medicaid, health maintenance organizations and other third-party payors are increasingly attempting to contain
healthcare costs by limiting both coverage and the level of reimbursement of new medical devices, and, as a
result, they may not continue to provide adequate payment for our products. To position our device for
acceptance by third-party payors, we may have to agree to a lower net sales price than we might otherwise
charge. The continuing efforts of governmental and commercial third-party payors to contain or reduce the costs
of healthcare may limit our revenue.

In some foreign markets, pricing and profitability of medical devices are subject to government control. In
the United States, we expect that there will continue to be federal and state proposals for similar controls. Also,
the trends toward managed healthcare in the United States and legislation intended to reduce the cost of
government insurance programs could significantly influence the purchase of healthcare services and products
and may result in lower prices for our products or the exclusion of our products from reimbursement programs.

Competition

The medical device industry is highly competitive, subject to rapid change and significantly affected by new
product introductions and other activities of industry participants. The PAD Systems compete with a variety of
other products or devices for the treatment of vascular disease, including stents, balloon angioplasty catheters and
atherectomy catheters, as well as products used in vascular surgery. Large competitors in the stent and balloon
angioplasty market segments include Abbott Laboratories, Boston Scientific, Cook Medical, Johnson & Johnson
and Medtronic. We also compete against manufacturers of atherectomy catheters including, among others,
Covidien, Spectranetics, Boston Scientific and Pathway Medical Technologies, as well as other manufacturers
that may enter the market due to the increasing demand for treatment of vascular disease. Other competitors
include pharmaceutical companies that manufacture drugs for the treatment of mild to moderate PAD and
companies that provide products used by surgeons in peripheral bypass procedures. We are not aware of any
competing catheter systems either currently on the market or in development that also use an orbital motion to
create lumens larger than the catheter itself.

Because of the size of the peripheral opportunities, competitors and potential competitors have historically
dedicated significant resources to aggressively promote their products. We believe that the PAD Systems
compete primarily on the basis of:

• safety and efficacy;

• predictable clinical performance;

• ease of use;

• price;

• physician relationships;

• customer service and support; and

• adequate third-party reimbursement.

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Patents and Intellectual Property

We rely on a combination of patent, copyright and other intellectual property laws,

trade secrets,
nondisclosure agreements and other measures to protect our proprietary rights. As of July 31, 2011, we held 21
issued U.S. patents and have 31 U.S. patent applications pending, as well as 63 issued or granted foreign patents
and 98 foreign patent applications, each of which corresponds to aspects of our U.S. patents and applications.
Our issued U.S. patents expire between 2011 and 2027, and our most
important patent, U.S. Patent
No. 6,494,890, is due to expire in 2017. Our issued patents and patent applications relate primarily to the design
and operation of certain interventional atherectomy devices, including the PAD Systems. These patents and
applications include claims covering key aspects of certain rotational atherectomy devices, including the design,
manufacture and therapeutic use of certain atherectomy abrasive heads, drive shafts, control systems, handles and
couplings. As we continue to research and develop our atherectomy technology, we intend to file additional
U.S. and foreign patent applications related to the design, manufacture and therapeutic uses of atherectomy
devices. In addition, we hold ten registered U.S. trademarks, six registered marks in Europe, five registered
marks in Canada, and three U.S. trademark applications pending.

We also rely on trade secrets, technical know-how and continuing innovation to develop and maintain our
competitive position. We seek to protect our proprietary information and other intellectual property by requiring
our employees, consultants, contractors, outside scientific collaborators and other advisors to execute
non-disclosure and assignment of invention agreements on commencement of their employment or engagement.
Agreements with our employees also forbid them from bringing the proprietary rights of third parties to us. We
also require confidentiality or material transfer agreements from third parties that receive our confidential data or
materials.

Government Regulation of Medical Devices

Governmental authorities in the United States at the federal, state and local levels and in other countries
labeling, promotion,

extensively regulate, among other
advertising, distribution, marketing and export and import of medical devices such as the PAD Systems.

testing, manufacture,

the development,

things,

Failure to obtain approval to market our products under development and to meet the ongoing requirements

of these regulatory authorities could prevent us from marketing and continuing to market our products.

United States

The Federal Food, Drug, and Cosmetic Act, or FDCA, and the FDA’s implementing regulations govern
medical device design and development, preclinical and clinical testing, premarket clearance or approval,
registration and listing, manufacturing, labeling, storage, advertising and promotion, sales and distribution,
export and import, and post-market surveillance. Medical devices and their manufacturers are also subject to
inspection by the FDA. The FDCA, supplemented by other federal and state laws, also provides civil and
criminal penalties for violations of its provisions. We manufacture and market medical devices that are regulated
by the FDA, comparable state agencies and regulatory bodies in other countries.

Unless an exemption applies, each medical device we wish to commercially distribute in the United States
will require marketing authorization from the FDA prior to distribution. The two primary types of FDA
marketing authorization are premarket notification (also called 510(k) clearance) and premarket approval (also
called PMA approval). The type of marketing authorization applicable to a device — 510(k) clearance or PMA
approval — is generally linked to classification of the device. The FDA classifies medical devices into one of
three classes (Class I, II or III) based on the degree of risk FDA determines to be associated with a device and the
extent of control deemed necessary to ensure the device’s safety and effectiveness. Devices requiring fewer
controls because they are deemed to pose lower risk are placed in Class I or II. Class I devices are deemed to
pose the least risk and are subject only to general controls applicable to all devices, such as requirements for
device labeling, premarket notification, and adherence to the FDA’s current good manufacturing practice
requirements, as reflected in its Quality System Regulation, or QSR. Class II devices are intermediate risk
devices that are subject to general controls and may also be subject to special controls such as performance
standards, product-specific guidance documents, special labeling requirements, patient registries or postmarket

15

surveillance. Class III devices are those for which insufficient
effectiveness solely through general or special controls, and include life-sustaining,
implantable devices, and devices not “substantially equivalent” to a device that is already legally marketed.

information exists to assure safety and
life-supporting or

Most Class I devices and some Class II devices are exempted by regulation from the 510(k) clearance
requirement and can be marketed without prior authorization from FDA. Class I and Class II devices that have
not been so exempted are eligible for marketing through the 510(k) clearance pathway. By contrast, devices
placed in Class III generally require PMA approval prior to commercial marketing. The PMA approval process is
generally more stringent, time-consuming and expensive than the 510(k) clearance process.

510(k) Clearance. To obtain 510(k) clearance for a medical device, an applicant must submit a premarket
notification to the FDA demonstrating that the device is “substantially equivalent” to a predicate device legally
marketed in the United States. A device is substantially equivalent if, with respect to the predicate device, it has
the same intended use and has either (i) the same technological characteristics or (ii) different technological
characteristics and the information submitted demonstrates that the device is as safe and effective as a legally
marketed device and does not raise different questions of safety or effectiveness. A showing of substantial
equivalence sometimes, but not always, requires clinical data. Generally, the 510(k) clearance process can exceed
90 days and may extend to a year or more.

After a device has received 510(k) clearance for a specific intended use, any modification that could
significantly affect its safety or effectiveness, such as a significant change in the design, materials, method of
manufacture or intended use, will require a new 510(k) clearance or PMA approval (if the device as modified is
not substantially equivalent to a legally marketed predicate device). The determination as to whether new
authorization is needed is initially left to the manufacturer; however, the FDA may review this determination to
evaluate the regulatory status of the modified product at any time and may require the manufacturer to cease
marketing and recall the modified device until 510(k) clearance or PMA approval is obtained. The manufacturer
may also be subject to significant regulatory fines or penalties.

We received 510(k) clearance for use of the Diamondback 360° as a therapy in patients with PAD in the
United States on August 22, 2007. We received additional 510(k) clearances for the control unit used with the
Diamondback 360° on October 25, 2007 and for the solid crown version of the Diamondback 360° on
November 9, 2007. We were granted 510(k) clearance of the Predator 360° in March 2009 and Stealth 360° in
March 2011.

Premarket Approval. A PMA application requires the payment of significant user fees and must be
supported by valid scientific evidence, which typically requires extensive data, including technical, preclinical,
clinical and manufacturing data, to demonstrate to the FDA’s satisfaction the safety and efficacy of the device. A
PMA application must also include a complete description of the device and its components, a detailed
description of the methods, facilities and controls used to manufacture the device, and proposed labeling. After a
PMA application is submitted and found to be sufficiently complete, the FDA begins an in-depth review of the
submitted information. During this review period, the FDA may request additional information or clarification of
information already provided. Also during the review period, an advisory panel of experts from outside the FDA
may be convened to review and evaluate the application and provide recommendations to the FDA as to the
approvability of the device. In addition, the FDA will conduct a pre-approval inspection of the manufacturing
facility to ensure compliance with the FDA’s Quality System Regulations, or QSR, which requires manufacturers
to follow design, testing, control, documentation and other quality assurance procedures.

FDA review of a PMA application is required by statute to take no longer than 180 days, although the
process typically takes significantly longer, and may require several years to complete. The FDA can delay, limit
or deny approval of a PMA application for many reasons, including:

• the systems may not be safe or effective to the FDA’s satisfaction;

• the data from preclinical studies and clinical trials may be insufficient to support approval;

• the manufacturing process or facilities used may not meet applicable requirements; and

• changes in FDA approval policies or adoption of new regulations may require additional data.

16

If the FDA evaluations of both the PMA application and the manufacturing facilities are favorable, the FDA
will either issue an approval letter or an approvable letter, which usually contains a number of conditions that
must be met in order to secure final approval of the PMA. When and if those conditions have been fulfilled to the
satisfaction of the FDA, the agency will issue a PMA approval letter authorizing commercial marketing of the
device for certain indications. If the FDA’s evaluation of the PMA or manufacturing facilities is not favorable,
the FDA will deny approval of the PMA or issue a not approvable letter. The FDA may also determine that
additional clinical trials are necessary, in which case the PMA approval may be delayed for several months or
years while the trials are conducted and then the data submitted in an amendment to the PMA. Even if a PMA
application is approved, the FDA may approve the device with an indication that is narrower or more limited than
originally sought. The agency can also impose restrictions on the sale, distribution or use of the device as a
condition of approval, or impose post approval requirements such as continuing evaluation and periodic reporting
on the safety, efficacy and reliability of the device for its intended use.

New PMA applications or PMA supplements may be required for modifications to the manufacturing
process, labeling, device specifications, materials or design of a device that is approved through the PMA
process. PMA approval supplements often require submission of the same type of information as an initial PMA
application, except that the supplement is limited to information needed to support any changes from the device
covered by the original PMA application and may not require as extensive clinical data or the convening of an
advisory panel.

We are currently enrolling patients in an FDA approved Investigational Device Exemption (IDE) trial to
support a PMA to use the Diamondback 360° as a therapy in treating patients with coronary artery disease. The
in the United
FDA granted unconditional approval
States. This pivotal trial is set up in two phases; Phase I allows us to enroll up to 100 patients at as many as 50
U.S. sites, Phase II allows us to expand the trial to the full complement of 429 patients. The FDA granted us
approval to move to Phase II in May of 2011.

in April 2010 to begin the ORBIT II coronary trial

Clinical Trials. Clinical trials are almost always required to support a PMA application and are sometimes
required for a 510(k) clearance. These trials generally require submission of an application for an IDE to the
FDA. The IDE application must be supported by appropriate data, such as animal and laboratory testing results,
showing that it is safe to test the device in humans and that the testing protocol is scientifically sound. The IDE
application must be approved in advance by the FDA for a specified number of patients, unless the product is
deemed a non-significant risk device and eligible for more abbreviated IDE requirements. Generally, clinical
trials for a significant risk device may begin once the IDE application is approved by the FDA and the study
protocol and informed consent are approved by appropriate institutional review boards at the clinical trial sites.

FDA approval of an IDE allows clinical testing to go forward but does not bind the FDA to accept the
results of the trial as sufficient to prove the product’s safety and efficacy, even if the trial meets its intended
success criteria. With certain exceptions, changes made to an investigational plan after an IDE is approved must
be submitted in an IDE supplement and approved by FDA (and by governing institutional review boards when
appropriate) prior to implementation.

All clinical trials must be conducted in accordance with regulations and requirements collectively known as
good clinical practice. Good clinical practices include the FDA’s IDE regulations, which describe the conduct of
clinical trials with medical devices, including the recordkeeping, reporting and monitoring responsibilities of
sponsors and investigators, and labeling of investigation devices. They also prohibit promotion, test marketing or
commercialization of an investigational device and any representation that such a device is safe or effective for
the purposes being investigated. Good clinical practices also include the FDA’s regulations for institutional
review board approval and for protection of human subjects (such as informed consent), as well as disclosure of
financial interests by clinical investigators.

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Required records and reports are subject to inspection by the FDA. The results of clinical testing may be
unfavorable or, even if the intended safety and efficacy success criteria are achieved, may not be considered
sufficient for the FDA to grant approval or clearance of a product. The commencement or completion of any
clinical trials may be delayed or halted, or be inadequate to support approval of a PMA application or clearance
of a premarket notification for numerous reasons, including, but not limited to, the following:

• the FDA or other regulatory authorities do not approve a clinical trial protocol or a clinical trial (or a
change to a previously approved protocol or trial that requires approval), or place a clinical trial on hold;

• patients do not enroll in clinical trials or follow up at the rate expected;

• patients do not comply with trial protocols or experience greater than expected adverse side effects;

• institutional review boards and third-party clinical investigators may delay or reject the trial protocol or

changes to the trial protocol;

• third-party clinical investigators decline to participate in a trial or do not perform a trial on the anticipated
schedule or consistent with the clinical trial protocol, investigator agreements, good clinical practices or
other FDA requirements;

• third-party organizations do not perform data collection and analysis in a timely or accurate manner;

• regulatory inspections of the clinical trials or manufacturing facilities, which may, among other things,

require corrective action or suspension or termination of the clinical trials;

• changes in governmental regulations or administrative actions;

• the interim or final results of the clinical trial are inconclusive or unfavorable as to safety or efficacy; and

• the FDA concludes that the trial design is inadequate to demonstrate safety and efficacy.

Continuing Regulation. After a device is approved and placed in commercial distribution, numerous

regulatory requirements continue to apply. These include:

• establishment registration and device listing upon the commencement of manufacturing;

• the QSR, which requires manufacturers, including third-party manufacturers, to follow design, testing,
control, documentation and other quality assurance procedures during medical device design and
manufacturing processes;

• labeling regulations, which prohibit the promotion of products for unapproved or “off-label” uses and

impose other restrictions on labeling and promotional activities;

• medical device reporting regulations, which require that manufacturers report to the FDA if a device may
have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause
or contribute to a death or serious injury if malfunctions were to recur;

• corrections and removal reporting regulations, which require that manufacturers report to the FDA field

corrections; and

• product recalls or removals if undertaken to reduce a risk to health posed by the device or to remedy a

violation of the FDCA caused by the device that may present a risk to health.

In addition, the FDA may require a company to conduct postmarket surveillance studies or order it to

establish and maintain a system for tracking its products through the chain of distribution to the patient level.

Failure to comply with applicable regulatory requirements, including those applicable to the conduct of

clinical trials, can result in enforcement action by the FDA, which may lead to any of the following sanctions:

• warning letters or untitled letters;

• fines, injunctions and civil penalties;

• product recall or seizure;

• unanticipated expenditures;

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• delays in clearing or approving or refusal to clear or approve products;

• withdrawal or suspension of FDA approval;

• orders for physician notification or device repair, replacement or refund;

• operating restrictions, partial suspension or total shutdown of production or clinical trials; and

• criminal prosecution.

We and our contract manufacturers, specification developers and suppliers are also required to manufacture
our products in compliance with current Good Manufacturing Practice, or GMP, requirements set forth in the
QSR.

The QSR requires a quality system for the design, manufacture, packaging, labeling, storage, installation
and servicing of marketed devices, and includes extensive requirements with respect to quality management and
organization, device design, buildings, equipment, purchase and handling of components, production and process
controls, packaging and labeling controls, device evaluation, distribution,
installation, complaint handling,
servicing and record keeping. The FDA enforces the QSR through periodic announced and unannounced
inspections that may include the manufacturing facilities of subcontractors. If the FDA believes that we or any of
our contract manufacturers or regulated suppliers is not in compliance with these requirements, it can shut down
our manufacturing operations, require recall of our products, refuse to clear or approve new marketing
applications, institute legal proceedings to detain or seize products, enjoin future violations or assess civil and
criminal penalties against us or our officers or other employees. Any such action by the FDA would have a
material adverse effect on our business.

Fraud and Abuse

Our operations will be directly, or indirectly through our customers, subject to various state and federal
fraud and abuse laws, including, without limitation, the FDCA, federal Anti-Kickback Statute and False Claims
Act. These laws may impact, among other things, our proposed sales, marketing, and education programs. In
addition, these laws require us to screen individuals and other companies, suppliers and vendors in order to
ensure that they are not “debarred” by the federal government and therefore prohibited from doing business in
the healthcare industry.

The federal Anti-Kickback Statute prohibits persons from knowingly and willfully soliciting, offering,
receiving or providing remuneration, directly or indirectly, in exchange for or to induce either the referral of an
individual, or the furnishing or arranging for a good or service, for which payment may be made under a federal
healthcare program such as the Medicare and Medicaid programs. Several courts have interpreted the statute’s
intent requirement to mean that if any one purpose of an arrangement involving remuneration is to induce
referrals of federal healthcare covered business, the statute has been violated. The Anti-Kickback Statute is broad
and prohibits many arrangements and practices that are lawful in businesses outside of the healthcare industry.
Many states have also adopted laws similar to the federal Anti-Kickback Statute, some of which apply to the
referral of patients for healthcare items or services reimbursed by any source, not only the Medicare and
Medicaid programs.

The federal False Claims Act prohibits persons from knowingly filing or causing to be filed a false claim to,
or the knowing use of false statements to obtain payment from, the federal government. Various states have also
enacted laws modeled after the federal False Claims Act.

In addition to the laws described above, the Health Insurance Portability and Accountability Act of 1996
created two new federal crimes: healthcare fraud and false statements relating to healthcare matters. The
healthcare fraud statute prohibits knowingly and willfully executing a scheme to defraud any healthcare benefit
program, including private payors. The false statements statute prohibits knowingly and willfully falsifying,
concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in
connection with the delivery of or payment for healthcare benefits, items or services.

Voluntary industry codes, federal guidance documents and a variety of state laws address the tracking and
reporting of marketing practices relative to gifts given and other expenditures made to doctors and other

19

healthcare professionals. In addition to impacting our marketing and educational programs, internal business
processes will be affected by the numerous legal requirements and regulatory guidance at the state, federal and
industry levels.

International Regulation

International sales of medical devices are subject to foreign government regulations, which may vary
substantially from country to country. The time required to obtain approval in a foreign country may be longer or
shorter than that required for FDA approval and the requirements may differ. For example, the primary
regulatory environment in Europe with respect to medical devices is that of the European Union, which includes
most of the major countries in Europe. Other countries, such as Switzerland, have voluntarily adopted laws and
regulations that mirror those of the European Union with respect to medical devices. The European Union has
adopted numerous directives and standards regulating the design, manufacture, clinical trials, labeling and
adverse event reporting for medical devices. Devices that comply with the requirements of a relevant directive
will be entitled to bear the CE conformity marking, indicating that the device conforms to the essential
requirements of the applicable directives and, accordingly, can be commercially distributed throughout the
European Union, although actual implementation of these directives may vary on a country-by-country basis.
The method of assessing conformity varies depending on the class of the product, but normally involves a
combination of submission of a design dossier, self-assessment by the manufacturer, a third-party assessment
and, review of the design dossier by a “Notified Body.” This third-party assessment generally consists of an audit
of the manufacturer’s quality system and manufacturing site, as well as review of the technical documentation
used to support application of the CE mark to one’s product and possibly specific testing of the manufacturer’s
product. An assessment by a Notified Body of one country within the European Union is required in order for a
manufacturer to commercially distribute the product throughout the European Union. We obtained CE marking
approval for sale of the Diamondback 360° in May 2005.

Environmental Regulation

Our operations are subject to regulatory requirements relating to the environment, waste management and
health and safety matters, including measures relating to the release, use, storage, treatment, transportation,
discharge, disposal and remediation of hazardous substances. We are currently classified and licensed as a Very
Small Quantity Hazardous Waste Generator within Ramsey County, Minnesota. There are no regulated wastes
requiring licensing in our Texas facility.

Employees

As of June 30, 2011, we had 286 employees, including 66 employees in manufacturing, 166 employees in
sales, six employees in marketing, seven employees in clinical, 23 employees in general and administrative, and
18 employees in research and development, all of which are full-time employees. None of our employees are
represented by a labor union or parties to a collective bargaining agreement, and we believe that our employee
relations are good.

Item 1A. Risk Factors.

Risks Relating to Our Business and Operations

We have a history of net losses and may continue to incur losses.

We are not profitable and have incurred net losses in each fiscal year since our formation in 1989. In
particular, we had net losses of $11.1 million in fiscal 2011, $23.9 million in fiscal 2010, and $31.9 million in
fiscal 2009. As of June 30, 2011, we had an accumulated deficit of approximately $162.4 million. We
commenced commercial sales of the Diamondback 360° in September 2007, and our short commercialization
experience makes it difficult for us to predict future performance. We also expect to incur significant additional
expenses for sales and marketing and manufacturing as we continue to commercialize the PAD Systems and
additional expenses as we seek to develop and commercialize future versions of the PAD Systems and other
products. Additionally, we expect that our general and administrative expenses will increase as our business
grows. As a result, our operating losses could continue.

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We may be unable to sustain our revenue growth.

Our revenue has grown in each of the three complete fiscal years since we commenced commercial sales of
the Diamondback 360° in September 2007. Our ability to continue to increase our revenues in future periods will
depend on our ability to increase sales of the PAD Systems and new and improved products we introduce,
including growing our customer base and reorders of the PAD Systems from those customers. We may not be
able to generate, sustain or increase revenues on a quarterly or annual basis. If we cannot achieve or sustain
revenue growth for an extended period, our financial results will be adversely affected and our stock price may
decline.

Economic conditions may adversely affect our business.

Adverse worldwide economic conditions may have adverse implications on our business. For example, our
customers’ ability to borrow money from their existing lenders or to obtain credit from other sources to fund
operations may be impaired resulting in a decrease in sales. Although we review our customers’ financial
condition and ability to pay on an ongoing basis and we maintain allowances for doubtful accounts for estimated
losses resulting from the inability of our customers to make required payments, we cannot guarantee that we will
continue to experience the same loss rates that we have in the past. A significant change in the liquidity or
financial condition of our customers could cause unfavorable trends in our receivable collections and additional
allowances may be required, which could adversely affect our operating results. Adverse worldwide economic
conditions may also adversely impact our suppliers’ ability to provide us with materials and components, which
could adversely affect our business and operating results. In addition, uncertainty about current global economic
conditions could increase the volatility of our stock price.

We have a limited history selling the PAD Systems, which are currently our primary products, and our
inability to market these products successfully would have a material adverse effect on our business and
financial condition.

Although we also sell a variety of ancillary products, the PAD Systems are our primary products and we are
largely dependent on them. We have limited experience in the commercial manufacturing and marketing of these
products. Our ability to generate revenue will depend upon our ability to further successfully commercialize the
PAD Systems and to develop, manufacture and receive required regulatory clearances and approvals and patient
reimbursement for treatment with future versions of the PAD Systems. As we continue to commercialize the
PAD Systems, we may need to expand our sales force to reach our target market. Developing a sales force is
expensive and time consuming and could delay or limit the success of any product launch. Thus, we may not be
able to expand our sales and marketing capabilities on a timely basis or at all. If we are unable to adequately
increase these capabilities, we will need to contract with third parties to market and sell the PAD Systems and
any other products that we may develop. To the extent that we enter into arrangements with third parties to
perform sales, marketing and distribution services on our behalf, our product revenues could be lower than if we
marketed and sold our products on a direct basis. Furthermore, any revenues resulting from co-promotion or
other marketing and sales arrangements with other companies will depend on the skills and efforts of others, and
we do not know whether these efforts will be successful. If we fail to successfully develop, commercialize and
market the PAD Systems or any future versions of these products that we develop, our business will be materially
adversely affected.

The PAD Systems and future products may never achieve broad market acceptance.

The PAD Systems and future products we may develop may never gain broad market acceptance among
physicians, patients and the medical community. The degree of market acceptance of any of our products will
depend on a number of factors, including:

• the actual and perceived effectiveness and reliability of our products;

• the prevalence and severity of any adverse patient events involving our products;

• the results of any clinical trials relating to use of our products;

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• the availability, relative cost and perceived advantages and disadvantages of alternative technologies or

treatment methods for conditions treated by our systems;

• the degree to which treatments using our products are approved for reimbursement by public and private

insurers;

• the strength of our marketing and distribution infrastructure; and

• the level of education and awareness among physicians and hospitals concerning our products.

Failure of the PAD Systems to significantly penetrate current or new markets would negatively impact our

business, financial condition and results of operations.

If longer-term or more extensive clinical trials performed by us or others indicate that procedures using the
PAD Systems or any future products are not safe, effective and long lasting, physicians may choose not to use
our products. Furthermore, unsatisfactory patient outcomes or injuries could cause negative publicity for our
products. Physicians may be slow to adopt our products if they perceive liability risks arising from the use of
these products. It is also possible that as our products become more widely used, latent defects could be
identified, creating negative publicity and liability problems for us, thereby adversely affecting demand for our
products. If the PAD Systems and our future products do not achieve an adequate level of acceptance by
physicians, patients and the medical community, our overall business and profitability would be harmed.

Our future growth depends on physician adoption of the PAD Systems, which requires physicians to change
their screening and referral practices.

We believe that we must educate physicians to change their screening and referral practices. For example,
although there is a significant correlation between PAD and coronary artery disease, many physicians do not
routinely screen for PAD while screening for coronary artery disease. We target our sales efforts to interventional
cardiologists, vascular surgeons and interventional radiologists because they are often the primary care
physicians diagnosing and treating both coronary artery disease and PAD. However, the initial point of contact
for many patients may be general practitioners, podiatrists, nephrologists and endocrinologists, each of whom
commonly treats patients experiencing complications resulting from PAD. If referring physicians are not
educated about PAD in general and the existence of the PAD Systems in particular, they may not refer patients to
interventional cardiologists, vascular surgeons or interventional radiologists for the procedure using the PAD
Systems, and those patients may instead be surgically treated or treated with an alternative interventional
procedure. If we are not successful in educating physicians about screening for PAD or referral opportunities, our
ability to increase our revenue may be impaired.

Our customers may not be able to achieve adequate reimbursement for using the PAD Systems, which could
affect the acceptance of our products and cause our business to suffer.

The availability of insurance coverage and reimbursement for newly approved medical devices and
procedures is uncertain. The commercial success of our products is substantially dependent on whether third-
party insurance coverage and reimbursement for the use of such products and related services are available. We
expect the PAD Systems to generally be purchased by hospitals and other providers who will then seek
reimbursement from various public and private third-party payors, such as Medicare, Medicaid and private
insurers, for the services provided to patients. We can give no assurance that these third-party payors will provide
adequate reimbursement for use of the PAD Systems to permit hospitals and doctors to consider the products
cost-effective for patients requiring PAD treatment, or that current reimbursement levels for the PAD Systems
will continue. In addition, the overall amount of reimbursement available for PAD treatment could decrease in
the future. Failure by hospitals and other users of our products to obtain sufficient reimbursement could cause our
business to suffer.

Medicare, Medicaid, health maintenance organizations and other third-party payors are increasingly
attempting to contain healthcare costs by limiting both coverage and the level of reimbursement, and, as a result,
they may not cover or provide adequate payment for use of the PAD Systems. In order to position the PAD
Systems for acceptance by third-party payors, we may have to agree to lower prices than we might otherwise
charge.

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Governmental and private sector payors have instituted initiatives to limit the growth of healthcare costs
using, for example, price regulation or controls and competitive pricing programs. Some third-party payors also
require demonstrated superiority, on the basis of randomized clinical trials, or pre-approval of coverage, for new
or innovative devices or procedures before they will reimburse healthcare providers who use such devices or
procedures. It is uncertain whether the PAD Systems or any future products we may develop will be viewed as
sufficiently cost-effective to warrant adequate coverage and reimbursement levels.

If third-party coverage and reimbursement for the PAD Systems is limited or not available, the acceptance

of the PAD Systems and, consequently, our business will be substantially harmed.

Healthcare reform legislation could adversely affect our operating results and financial condition.

There have been and continue to be proposals by the federal government, state governments, regulators and
third-party payors to control healthcare costs and, more generally, to reform the U.S. healthcare system. Certain
of these proposals could limit the prices we are able to charge for our products or the amounts of reimbursement
available for our products and could limit the acceptance and availability of our products. The adoption of some
or all of these proposals, including the recent federal legislation, could adversely affect our revenue and financial
condition.

On March 23, 2010, President Obama signed the Patient Protection and Affordable Care Act, or the Patient
Act. The impact on the healthcare industry of the Patient Act is extensive and includes, among other things,
having the federal government assume a larger role in the healthcare system, expanding healthcare coverage of
United States citizens and mandating basic healthcare benefits. Elements of this legislation, such as comparative
effectiveness research, an independent payment advisory board, payment system reforms, including shared
savings programs and other provisions, could meaningfully change the way healthcare is developed and
delivered, and may materially impact numerous aspects of our business. These changes may impact
reimbursement for health care services, including reimbursement to hospitals and physicians. States may also
enact further legislation that impacts Medicaid payments to hospitals and physicians. In addition, the Centers for
Medicare & Medicaid Services, the Federal agency responsible for administering the Medicare program, may
establish new payment levels for hospitals and physicians in line with the new legislation, which could increase
or decrease payment to such entities. The healthcare reform legislation and any future legislative and regulatory
initiatives could adversely affect demand for our products and have a material adverse impact on our operating
results. Any healthcare reforms enacted in the future may, like the Patient Act, be phased in over a number of
years but, if enacted, could reduce our revenues, increase our costs, or require us to revise the ways in which we
conduct business or put us at risk for loss of business. Our results of operations, financial position and cash flows
could be materially adversely affected by changes under the Patient Act and changes under any federal or state
legislation adopted in the future.

The Patient Act also imposes significant new taxes on medical device makers. These taxes will result in a
significant increase in the tax burden on our industry, which could have a material, negative impact on our results
of operations, financial position and cash flows. As rules and regulations are developed under the new law, there
may be exemptions created for certain types or classes of products. We may find, however, that there are no
exemptions applicable to our products. This tax will impact our cost of doing business and may ultimately lower
our profit margins. Additionally, the increased cost of business caused by this tax may hinder our ability to spend
money on research and development of our products. We may be required to increase the prices of our devices to
the additional cost of the tax. Medicaid and health insurance providers may place a cap on the
offset
reimbursement for purchases of our devices that will not allow us to offset the cost of the tax. We may ultimately
lose customers who are unwilling or unable to pay the increased costs, which could adversely affect our business
and operating results.

We have limited data and experience regarding the safety and efficacy of the PAD Systems. Any long-term
data that is generated may not be positive or consistent with our limited short-term data, which would affect
market acceptance of these products.

Our success depends on the acceptance of the PAD Systems by the medical community as safe and
effective. Because our technology is relatively new in the treatment of PAD, we have performed clinical trials

23

only with limited patient populations. The long-term effects of using the PAD Systems in a large number of
patients are not known and the results of short-term clinical use of the PAD Systems do not necessarily predict
long-term clinical benefit or reveal long-term adverse effects. If the results obtained from any future clinical
trials or clinical or commercial experience indicate that the PAD Systems are not as safe or effective as other
treatment options or as current short-term data would suggest, adoption of these products may suffer and our
business would be harmed.

Even if we believe that the data collected from clinical trials or clinical experience indicate positive results,
each physician’s actual experience with our device will vary. Clinical trials conducted with the PAD Systems
have involved procedures performed by physicians who are very technically proficient. Consequently, both short
and long-term results reported in these studies may be significantly more favorable than typical results achieved
by physicians, which could negatively impact market acceptance of the PAD Systems.

We face significant competition and may be unable to sell the PAD Systems at profitable levels.

We compete against very large and well-known stent and balloon angioplasty device manufacturers,
including Abbott Laboratories, Boston Scientific, Cook Medical, Johnson & Johnson and Medtronic. We may
have difficulty competing effectively with these competitors because of their well-established positions in the
resources, established reputations and worldwide
marketplace, significant
distribution channels. We also compete against manufacturers of atherectomy catheters including, among others,
Covidien, Spectranetics, Boston Scientific and Pathway Medical Technologies, as well as other manufacturers
that may enter the market due to the increasing demand for treatment of vascular disease. Several other
companies provide products used by surgeons in peripheral bypass procedures. Other competitors include
pharmaceutical companies that manufacture drugs for the treatment of mild to moderate PAD and companies that
provide products used by surgeons in peripheral bypass procedures.

financial and human capital

Our competitors may:

• develop and patent processes or products earlier than we will;

• obtain regulatory clearances or approvals for competing medical device products more rapidly than we

will;

• market their products more effectively than we will; or

• develop more effective or less expensive products or technologies that render our technology or products

obsolete or non-competitive.

We have encountered and expect to continue to encounter potential customers who, due to existing
relationships with our competitors, are committed to or prefer the products offered by these competitors. If we
are unable to compete successfully, our revenue will suffer. Increased competition might lead to price reductions
and other concessions that might adversely affect our operating results. Competitive pressures may decrease the
demand for our products and could adversely affect our financial results.

Our ability to compete depends on our ability to innovate successfully. If our competitors demonstrate the
increased safety or efficacy of their products as compared to ours, our revenue may decline.

The market for medical devices is highly competitive, dynamic and marked by rapid and substantial
technological development and product innovations. Our ability to compete depends on our ability to innovate
successfully, and there are few barriers that would prevent new entrants or existing competitors from developing
products that compete directly with our products. Demand for the PAD Systems could be diminished by
equivalent or superior products and technologies offered by competitors. Our competitors may produce more
advanced products than ours or demonstrate superior safety and efficacy of their products. If we are unable to
innovate successfully, the PAD Systems could become obsolete and our revenue would decline as our customers
purchase competitor products.

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We have limited commercial manufacturing experience and could experience difficulty in producing the
PAD Systems or will need to depend on third parties to manufacture the products.

We have limited experience in commercially manufacturing the PAD Systems and have no experience
manufacturing these products in the volume that we anticipate will be required if we achieve planned levels of
commercial sales. As a result, we may not be able to develop and implement efficient, low-cost manufacturing
capabilities and processes that will enable us to manufacture the PAD Systems or future products in significant
volumes, while meeting the legal, regulatory, quality, price, durability, engineering, design and production
standards required to market our products successfully. If we fail to develop and implement these manufacturing
capabilities and processes, we may be unable to profitably commercialize the PAD Systems and any future
products we may develop because the per unit cost of our products is highly dependent upon production volumes
and the level of automation in our manufacturing processes. There are technical challenges to increasing
manufacturing capacity,
including equipment design and automation capabilities, material procurement,
problems with production yields and quality control and assurance. Increasing our manufacturing capacity may
require that we invest substantial additional funds and hire and retain additional management and technical
personnel who have the necessary manufacturing experience. We may not successfully complete any required
increase in manufacturing capacity in a timely manner or at all. If we are unable to manufacture a sufficient
supply of our products, maintain control over expenses or otherwise adapt to anticipated growth, or if we
underestimate growth, we may not have the capability to satisfy market demand and our business will suffer.

The forecasts of demand we use to determine order quantities and lead times for components purchased
from outside suppliers may be incorrect. Failure to obtain required components or subassemblies when needed
and at a reasonable cost would adversely affect our business.

In addition, we may in the future need to depend upon third parties to manufacture the PAD Systems and
future products. We also cannot assure you that any third-party contract manufacturers will have the ability to
produce the quantities of our products needed for development or commercial sales or will be willing to do so at
prices that allow the products to compete successfully in the market. Additionally, we can give no assurance that
even if we do contract with third-party manufacturers for production that these manufacturers will not experience
manufacturing difficulties or experience quality or regulatory issues. Any difficulties in locating and hiring third-
party manufacturers, or in the ability of third-party manufacturers to supply quantities of our products at the
times and in the quantities we need, could have a material adverse effect on our business.

We depend upon third-party suppliers, including single source suppliers to us and our customers, making
us vulnerable to supply problems and price fluctuations.

We rely on third-party suppliers to provide us with certain components of our products and to provide key
components or supplies to our customers for use with our products. We rely on single source suppliers for the
components of the PAD Systems. We purchase components from these suppliers on a purchase order basis and
carry only limited levels of inventory for these components. If we underestimate our requirements, we may not
have an adequate supply, which could interrupt manufacturing of our products and result in delays in shipments
and loss of revenue. Conversely, an overestimation of our requirements will reduce our cash available for
operations and may result in excess or obsolete materials.

We depend on our suppliers to provide us and our customers with materials in a timely manner that meet
our and their quality, quantity and cost requirements. These suppliers may encounter problems during
manufacturing for a variety of reasons, any of which could delay or impede their ability to meet our demand and
our customers’ demand. Our reliance on these outside suppliers also subjects us to other risks that could harm our
business, including:

• interruption of supply resulting from modifications to, or discontinuation of, a supplier’s operations;

• delays in product shipments;

• price fluctuations;

• our suppliers may make errors in manufacturing components;

25

• our suppliers may discontinue production of components;

• we and our customers may not be able to obtain adequate supplies in a timely manner or on commercially

acceptable terms;

• we and our customers may have difficulty locating and qualifying alternative suppliers for our and their

sole-source supplies;

• switching components may require product redesign and new regulatory submissions;

• we may experience production delays related to the evaluation and testing of products from alternative

suppliers and corresponding regulatory qualifications;

• our suppliers manufacture products for a range of customers, and fluctuations in demand for the products
these suppliers manufacture for others may affect their ability to deliver components to us or our
customers in a timely manner; and

• our suppliers may encounter financial hardships unrelated to us or our customers’ demand for components

or other products.

Any supply interruption from our suppliers or failure to obtain additional suppliers for any of the
components used in our products would limit our ability to manufacture our products and could have a material
adverse effect on our business, financial condition and results of operations. If we lost one of these suppliers and
were unable to obtain an alternate source on a timely basis or on terms acceptable to us, our production schedules
could be delayed, our margins could be negatively impacted, and we could fail to meet our customers’ demand.
Our customers rely upon our ability to meet committed delivery dates and any disruption in the supply of key
components would adversely affect our ability to meet these dates and could result in legal action by our
customers, cause us to lose customers or harm our ability to attract new customers, any of which could decrease
our revenue and negatively impact our growth. In addition, to the extent that our suppliers use technology or
manufacturing processes that are proprietary, we may be unable to obtain comparable materials or components
from alternative sources.

We may be faced with a supplier’s decision to discontinue manufacturing a component, which may force us
or our customers to make last time purchases, qualify a substitute part, or make a design change which may
divert engineering time away from the development of new products.

Consolidation in the healthcare industry could lead to demands for price concessions or the exclusion of
some suppliers from our market segment, which could have an adverse effect on our business, financial
condition or results of operations.

The cost of healthcare has risen significantly over the past decade and numerous initiatives and reforms by
legislators, regulators and third-party payors to curb these costs have resulted in a consolidation trend in the
healthcare industry. This in turn has resulted in greater pricing pressures and the exclusion of certain suppliers
from important market segments as group purchasing organizations, independent delivery networks and large
single accounts continue to consolidate purchasing decisions for some of our hospital customers. We expect that
market demand, government
contracting
requirements, and societal pressures will continue to change the worldwide healthcare industry, resulting in
further business consolidations and alliances among our customers and competitors, which may reduce
competition, exert downward pressure on the prices of our products and adversely impact our business, financial
condition or results of operations.

third-party reimbursement policies, government

regulation,

We may need to increase the size of our organization and we may experience difficulties managing growth.
If we are unable to manage the anticipated growth of our business, our future revenue and operating
results may be adversely affected.

The growth we may experience in the future may provide challenges to our organization, requiring us to
rapidly expand our sales and marketing personnel and manufacturing operations. Our sales and marketing force

26

has increased from six full-time employees on January 1, 2007 to 172 full-time employees on June 30, 2011, and
we expect to continue to grow our sales and marketing force in the future. We also expect to significantly expand
our manufacturing operations to meet anticipated growth in demand for our products. Rapid expansion in
personnel may result in less experienced people producing and selling our product, which could result in
unanticipated costs and disruptions to our operations. If we cannot scale and manage our business appropriately,
our anticipated growth may be impaired and our financial results will suffer.

We may require additional financing, and our failure to obtain additional financing when needed could
force us to delay, reduce or eliminate our product development programs or commercialization efforts.

We may be dependent on additional financing to execute our business plan. We may require additional
capital in order to continue to conduct the research and development and obtain regulatory clearances and
approvals necessary to bring any future products to market and to establish effective marketing and sales
capabilities for existing and future products. Our operating plan may change, and we may need additional funds
sooner than anticipated to meet our operational needs and capital requirements for product development, clinical
trials and commercialization. Additional funds may not be available when we need them on terms that are
acceptable to us, or at all. If adequate funds are not available on a timely basis, we may terminate or delay the
development of one or more of our products, or delay establishment of sales and marketing capabilities or other
activities necessary to commercialize our products.

Our future capital requirements will depend on many factors, including:

• the costs of expanding our sales and marketing infrastructure and our manufacturing operations;

• the degree of success we experience in commercializing the PAD Systems;

• the number and types of future products we develop and commercialize;

• the costs, timing and outcomes of regulatory reviews associated with our future product candidates;

• the costs of preparing, filing and prosecuting patent applications and maintaining, enforcing and

defending intellectual property-related claims; and

• the extent and scope of our general and administrative expenses.

Disruptions in the global financial markets, including the bankruptcy, failure, collapse or sale of various
financial institutions and an unprecedented level of intervention from the United States and other governments
and the related liquidity crisis, considerably disrupted the credit and capital markets at the end of 2008 and
markets have not fully recovered since then. In the event we need or desire additional financing, we may be
unable to obtain it by borrowing money in the credit markets or raising money in the capital markets.

We face a risk of non-compliance with the financial covenants in our loan and security agreements with
Silicon Valley Bank and Partners for Growth.

We are party to loan and security agreements with Silicon Valley Bank and Partners for Growth. These
agreements require us to maintain, among other things, a monthly specified liquidity ratio and a monthly adjusted
earnings before interest, taxes, depreciation and amortization, or EBITDA, level. The agreements contain
customary events of default, including, among others, the failure to comply with certain covenants or other
agreements. Upon the occurrence and during the continuation of an event of default, amounts due under the
agreements may be accelerated by Silicon Valley Bank or Partners for Growth. We were not in compliance with
some of the financial covenants contained in our prior loan agreement with Silicon Valley Bank during certain
months in the year ended June 30, 2010, which Silicon Valley Bank waived and these covenants were
subsequently changed in our amended and restated loan and security agreement with Silicon Valley Bank. If we
are unable to meet the financial or other covenants under the current loan and security agreements or negotiate
future waivers or amendments of such covenants, events of default could occur under the agreements. Upon the
occurrence and during the continuance of an event of default under the agreements, Silicon Valley Bank and
Partners for Growth have available a range of remedies customary in these circumstances, including declaring all

27

outstanding debt, together with accrued and unpaid interest thereon, to be due and payable, foreclosing on the
assets securing the agreements and/or ceasing to provide additional loans, which could have a material adverse
effect on us.

The restrictive covenants in our loan and security agreements could limit our ability to conduct our business
and respond to changing economic and business conditions and may place us at a competitive disadvantage
relative to other companies that are subject to fewer restrictions.

Our loan and security agreements with Silicon Valley Bank and Partners for Growth limit our ability to,

among other things:

• transfer all or any part of our business or properties;

• permit or suffer a change in control;

• merge or consolidate, or acquire any entity;

• incur additional indebtedness or liens with respect to any of their properties;

• pay dividends or make any other distribution on or purchase of, any of our capital stock;

• make investments in other companies; or

• engage in related party transactions.

The restrictive covenants under these agreements could limit our ability to obtain future financing,
withstand a future downturn in our business or the economy in general or otherwise conduct necessary corporate
activities. The financial and restrictive covenants contained in the agreements could also adversely affect our
ability to respond to changing economic and business conditions and place us at a competitive disadvantage
relative to other companies that may be subject to fewer restrictions. Transactions that we may view as important
opportunities, such as acquisitions, may be subject to the consent of Silicon Valley Bank and Partners for
Growth, which consents may be withheld or granted subject to conditions specified at the time that may affect
the attractiveness or viability of the transaction.

We do not intend to market the PAD Systems internationally in the near future, which will limit our
potential revenue from these products.

While we plan to continue to evaluate the financial viability of marketing the PAD Systems internationally,
we currently do not intend to market the PAD Systems internationally in the near future in order to focus our
resources and efforts on the U.S. market, as international efforts would require substantial additional sales and
marketing, regulatory and personnel expenses. Our decision to market these products only in the United States
will limit our ability to reach all of our potential markets and will limit our potential sources of revenue. In
addition, our competitors will have an opportunity to further penetrate and achieve market share abroad until
such time, if ever, that we market the PAD Systems or other products internationally.

We are dependent on our senior management team and highly skilled personnel, and our business could be
harmed if we are unable to attract and retain personnel necessary for our success.

We are highly dependent on our senior management, especially David L. Martin, our President and Chief
Executive Officer. Our success will depend on our ability to retain senior management and to attract and retain
qualified personnel in the future, including scientists, clinicians, engineers and other highly skilled personnel and
to integrate current and additional personnel in all departments. Competition for senior management personnel,
as well as scientists, clinical and regulatory specialists, engineers and sales personnel, is intense and we may not
be able to retain our personnel. The loss of members of our senior management, scientists, clinical and regulatory
specialists, engineers and sales personnel could prevent us from achieving our objectives of continuing to grow
the company. The loss of a member of our senior management or professional staff would require the remaining
senior executive officers to divert immediate and substantial attention to seeking a replacement. In particular, we
expect to substantially increase the size of our sales force, which will require management’s attention. We do not
carry key person life insurance on any of our employees.

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Risks Related to Government Regulation

Our ability to market the PAD Systems in the United States is limited to use as a therapy in patients with
PAD, and if we want to expand our marketing claims, we will need to file for additional FDA clearances or
approvals and conduct further clinical trials, which would be expensive and time-consuming and may not
be successful.

The PAD Systems received FDA 510(k) clearances in the United States for use as a therapy in patients with
PAD. This general clearance restricts our ability to market or advertise the PAD Systems beyond this use and
could affect our growth. While off-label uses of medical devices are common and the FDA does not regulate
physicians’ choice of treatments, the FDA does restrict a manufacturer’s communications regarding such
off-label use. We are not permitted to promote or advertise the PAD Systems for off-label uses. In addition, we
cannot make comparative claims regarding the use of the PAD Systems against any alternative treatments
without conducting head-to-head comparative clinical trials, which would be expensive and time consuming. If
our promotional activities fail to comply with the FDA’s regulations or guidelines, we may be subject to FDA
warnings or enforcement action.

If we determine to market the PAD Systems in the United States for other uses, for instance, use in the
coronary arteries, we would need to conduct further clinical trials and obtain premarket approval from the FDA.
In 2008, we completed the ORBIT I trial, a 50-patient study in India which investigated the safety of the
Diamondback 360° in treating calcified coronary artery lesions, and results successfully met both safety and
efficacy endpoints. In May 2011, we received approval from the FDA to complete enrollment of 429 patients in
our ORBIT II clinical trial for a coronary application for the Diamondback 360°, which followed the FDA’s
review of data from the first 50 cases in the ORBIT II trial. Clinical trials are complex, expensive, time
consuming, uncertain and subject to substantial and unanticipated delays. Clinical trials generally involve a
substantial number of patients in one or more multi-year studies. We may encounter problems with our clinical
trials, and any of those problems could cause us or the FDA to suspend those trials, or delay the analysis of the
data derived from them.

A number of events or factors, including any of the following, could delay the completion of our clinical
trials in the future and negatively impact our ability to obtain FDA clearance or approval for, and to introduce, a
particular future product:

• delays in obtaining or maintaining required approvals from institutional review boards or other reviewing

entities at clinical sites selected for participation in our clinical trials;

• insufficient supply of our future product candidates or other materials necessary to conduct our clinical

trials;

• difficulties in enrolling patients in our clinical trials;

• negative or inconclusive results from clinical trials, results that are inconsistent with earlier results, or the
likelihood that the part of the human anatomy involved is more prone to serious adverse events,
necessitating additional clinical trials;

• serious or unexpected side effects experienced by patients who use our future product candidates; or

• failure by any of our third-party contractors or investigators to comply with regulatory requirements or

meet other contractual obligations in a timely manner.

Our clinical trials may not begin as planned, may need to be redesigned, and may not be completed on
schedule, if at all. Delays in our clinical trials may result in increased development costs for our future product
candidates, which could limit our ability to obtain additional financing. In addition, if one or more of our clinical
trials is delayed, competitors may be able to bring products to market before we do, and the commercial viability
of our future product candidates could be significantly reduced.

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We may become subject to regulatory actions if we are found to have promoted the PAD Systems for
unapproved uses.

If the FDA determines that our promotional materials, training or other activities constitute promotion of our
products for unapproved uses, it could request that we cease use of or modify our training or promotional
materials or subject us to regulatory enforcement actions, including the issuance of an untitled or warning letter,
injunction, seizure, civil fine and criminal penalties. It is also possible that other federal, state or foreign
enforcement authorities might take action if they consider promotional, training or other materials to constitute
promotion of our products for an unapproved or uncleared use, which could result in significant fines or penalties
under other statutory authorities, such as laws prohibiting false claims for reimbursement.

The PAD Systems may in the future be subject to product recalls that could harm our reputation.

The FDA and similar governmental authorities in other countries have the authority to require the recall of
commercialized products in the event of material regulatory deficiencies or defects in design or manufacture. A
government mandated or voluntary recall by us could occur as a result of component failures, manufacturing
errors or design or labeling defects. During the time of commercialization, we have had two minor instances of
recall, involving a single lot of Diamondback 360° devices (eight units), and two boxes of ViperWires (ten
wires), related to “Use By” date labeling issues. In addition, a third recall, initiated in 2009 and completed in
2010, involved the ViperSheath, which is owned and manufactured by Thomas Medical Products. As the
distributor for the ViperSheath, we were required to recall all unused units from our customers and return them to
Thomas Medical Products. Any additional recalls of our products or products that we distribute would divert
managerial and financial resources, harm our reputation with customers and have an adverse effect on our
financial condition and results of operations.

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

The PAD Systems and related manufacturing processes, clinical data, adverse events, recalls or corrections
and promotional activities, are subject to extensive regulation by the FDA and other regulatory bodies. In
particular, we are required to comply with the FDA’s Quality System Regulation, or QSR, and other regulations,
which cover the methods and documentation of the design, testing, production, control, quality assurance,
labeling, packaging, storage and shipping of any product for which we obtain marketing clearance or approval.
We are also responsible for the quality of components received by our suppliers. Failure to comply with the QSR
requirements or other statutes and regulations administered by the FDA and other regulatory bodies, or failure to
adequately respond to any observations, could result in, among other things:

• warning or other letters from the FDA;

• fines, injunctions and civil penalties;

• product recall or seizure;

• unanticipated expenditures;

• delays in clearing or approving or refusal to clear or approve products;

• withdrawal or suspension of approval or clearance by the FDA or other regulatory bodies;

• orders for physician notification or device repair, replacement or refund;

• operating restrictions, partial suspension or total shutdown of production or clinical trials; and

• criminal prosecution.

If any of these actions were to occur, it would harm our reputation and cause our product sales to suffer.

Furthermore, any modification to a device that has received FDA clearance or approval

that could
significantly affect its safety or efficacy, or that would constitute a major change in its intended use, design or

30

manufacture, requires a new clearance or approval from the FDA. If the FDA disagrees with any determination
by us that new clearance or approval is not required, we may be required to cease marketing or to recall the
modified product until we obtain clearance or approval. In addition, we could be subject to significant regulatory
fines or penalties.

Regulatory clearance or approval of a product may also require costly post-marketing testing or surveillance
to monitor the safety or efficacy of the product. Later discovery of previously unknown problems with our
products, including unanticipated adverse events or adverse events of unanticipated severity or frequency,
manufacturing problems, or failure to comply with regulatory requirements such as the QSR, may result in
restrictions on such products or manufacturing processes, withdrawal of the products from the market, voluntary
or mandatory recalls, fines, suspension of regulatory approvals, product seizures, injunctions or the imposition of
civil or criminal penalties.

The use, misuse or off-label use of the PAD Systems may increase the risk of injury, which could result in
product liability claims and damage to our business.

The use, misuse or off-label use of the PAD Systems may result in injuries that lead to product liability
suits, which could be costly to our business. The PAD Systems are not FDA-cleared or approved for treatment of
the carotid arteries, the coronary arteries, within bypass grafts or stents, of thrombus or where the lesion cannot
be crossed with a guidewire or a significant dissection is present at the lesion site. We cannot prevent a physician
from using the PAD Systems for off-label applications. The off-label use of the PAD Systems may be more
likely to result in complications that have serious consequences, including, in certain circumstances, death.

We may face risks related to product liability claims, which could exceed the limits of available insurance
coverage.

If the PAD Systems are defectively designed, manufactured or labeled, contain defective components or are
misused, we may become subject to costly litigation by our customers or their patients. The medical device
industry is subject to substantial litigation, and we face an inherent risk of exposure to product liability claims in
the event that the use of our products results or is alleged to have resulted in adverse effects to a patient. In most
jurisdictions, producers of medical products are strictly liable for personal injuries caused by medical devices.
We may be subject in the future to claims for personal injuries arising out of the use of our products. Product
liability claims could divert management’s attention from our core business, be expensive to defend and result in
sizable damage awards against us. A product liability claim against us, even if ultimately unsuccessful, could
have a material adverse effect on our financial condition, results of operations, and reputation. While we have
product liability insurance coverage for our products and intend to maintain such insurance coverage in the
future, there can be no assurance that we will be adequately protected from the claims that will be brought
against us.

Compliance with environmental laws and regulations could be expensive. Failure to comply with
environmental laws and regulations could subject us to significant liability.

Our operations are subject to regulatory requirements relating to the environment, waste management and
health and safety matters, including measures relating to the release, use, storage, treatment, transportation,
discharge, disposal and remediation of hazardous substances. Although we are currently classified as a Very
Small Quantity Hazardous Waste Generator within Ramsey County, Minnesota, we cannot ensure that we will
maintain our licensed status as such, nor can we ensure that we will not incur material costs or liability in
connection with our operations, or that our past or future operations will not result in claims or injury by
employees or the public. Environmental laws and regulations could also become more stringent over time,
imposing greater compliance costs and increasing risks and penalties associated with violations.

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We and our distributors must comply with various federal and state anti-kickback, self-referral, false claims
and similar laws, any breach of which could cause a material adverse effect on our business, financial
condition and results of operations.

Our relationships with physicians, hospitals and the marketers of our products are subject to scrutiny under
various federal anti-kickback, self-referral, false claims and similar laws, often referred to collectively as
healthcare fraud and abuse laws.

Healthcare fraud and abuse laws are complex, and even minor, inadvertent violations can give rise to claims
that the relevant law has been violated. If our operations are found to be in violation of these laws, we, as well as
our employees, may be subject to penalties, including monetary fines, civil and criminal penalties, exclusion
from federal and state healthcare programs, including Medicare, Medicaid, Veterans Administration health
programs, workers’ compensation programs and TRICARE (the healthcare system administered by or on behalf
of the U.S. Department of Defense for uniformed services beneficiaries,
including active duty and their
dependents, retirees and their dependents), and forfeiture of amounts collected in violation of such prohibitions.
Individual employees may need to defend such suits on behalf of us or themselves, which could lead to
significant disruption in our present and future operations. Certain states in which we intend to market our
products have similar fraud and abuse laws, imposing substantial penalties for violations. Any government
investigation or a finding of a violation of these laws would likely have a material adverse effect on our business,
financial condition and results of operations.

Anti-kickback laws and regulations prohibit any knowing and willful offer, payment, solicitation or receipt
of any form of remuneration in return for the referral of an individual or the ordering or recommending of the use
of a product or service for which payment may be made by Medicare, Medicaid or other government-sponsored
healthcare programs. In addition, the cost of non-compliance with these laws could be substantial, since we could
be subject to monetary fines and civil or criminal penalties, and we could also be excluded from federally funded
healthcare programs for non-compliance.

We have entered into consulting agreements with physicians, including some who may make referrals to us
or order our products. One of these physicians was one of 20 principal investigators in our OASIS clinical trial at
the same time he was acting as a paid consultant for us. In addition, prior to our merger with Replidyne, some of
these physicians purchased our stock in arm’s-length transactions on terms identical
to those offered to
non-physicians or received stock options from us as consideration for consulting services performed by them. We
believe that these consulting agreements and equity investments by physicians are common practice in our
industry, and while these transactions were structured with the intention of complying with all applicable laws,
including the federal ban on physician self-referrals, commonly known as the “Stark Law,” state anti-referral
laws and other applicable anti-kickback laws, it is possible that regulatory or enforcement agencies or courts may
in the future view these transactions as prohibited arrangements that must be restructured or for which we would
be subject to other significant civil or criminal penalties, or prohibit us from accepting referrals from these
physicians. Because our strategy relies on the involvement of physicians who consult with us on the design of our
product, we could be materially impacted if regulatory or enforcement agencies or courts interpret our financial
relationships with our physician advisors who refer or order our products to be in violation of applicable laws and
determine that we would be unable to achieve compliance with such applicable laws. This could harm our
reputation and the reputations of our clinical advisors.

The scope and enforcement of all of these laws is uncertain and subject to rapid change. There can be no
assurance that federal or state regulatory or enforcement authorities will not investigate or challenge our current
or future activities under these laws. Any investigation or challenge could have a material adverse effect on our
business, financial condition and results of operations. Any state or federal regulatory or enforcement review of
us, regardless of the outcome, would be costly and time consuming. Additionally, we cannot predict the impact
of any changes in these laws, whether these changes are retroactive or will have effect on a going-forward basis
only.

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We incur significant costs as a result of operating as a public company, and our management is required to
devote substantial time to compliance initiatives.

As a public company, we incur significant legal, accounting and other expenses. In addition, the Sarbanes-
Oxley Act, as well as rules subsequently implemented by the SEC and the Nasdaq Global Market, have imposed
various requirements on public companies, including requiring the establishment and maintenance of effective
disclosure and financial controls and changes in corporate governance practices. Our management and other
personnel devote a substantial amount of time to these compliance initiatives. Moreover, these rules and
regulations have increased our legal and compliance costs and made some activities more time consuming and
costly. We cannot ensure that our corporate compliance program is in compliance with or will continue to
comply with all potentially applicable regulations.

The Sarbanes-Oxley Act requires, among other things, that we maintain effective internal controls for
financial reporting and disclosure controls and procedures. In particular, we must perform system and process
evaluation and testing of our internal controls over financial reporting to allow management and our independent
registered public accounting firm to report on the effectiveness of our internal controls over financial reporting.
Our testing, or the subsequent
testing by our independent registered public accounting firm, may reveal
deficiencies in our internal controls over financial reporting that are deemed to be material weaknesses.
Moreover, if we are not able to comply with these requirements in a timely manner, or if we or our independent
registered public accounting firm identifies deficiencies in our internal controls over financial reporting that are
deemed to be material weaknesses, the market price of our stock could decline and we could be subject to
sanctions or investigations by Nasdaq, the SEC or other regulatory authorities, which would require additional
financial and management resources.

These obligations divert management’s time and attention away from our business. Our management may
not be able to effectively and timely implement controls and procedures that adequately respond to the increased
regulatory compliance and reporting requirements that are applicable. If we fail to staff our accounting and
finance function adequately or maintain internal controls adequate to meet the demands that are placed upon us a
public company, including the requirements of the Sarbanes-Oxley Act, we may be unable to report our financial
results accurately or in a timely manner, and our business and stock price may suffer. The costs of being a public
company, as well as diversion of management’s time and attention, may have a material adverse effect on our
business, financial condition and results of operations.

Additionally, these laws and regulations could make it more difficult or more costly for us to obtain certain
types of insurance, including director and officer liability insurance, and we may be forced to accept reduced
policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. The impact
of these events could also make it more difficult for us to attract and retain qualified persons to serve on our
board of directors, board committees or as executive officers.

Risks Relating to Our Intellectual Property

Our inability to adequately protect our intellectual property could allow our competitors and others to
produce products based on our technology, which could substantially impair our ability to compete.

Our success and ability to compete depends, in part, upon our ability to maintain the proprietary nature of
our technologies. We rely on a combination of patents, copyrights and trademarks, as well as trade secrets and
nondisclosure agreements, to protect our intellectual property. As of July 31, 2011, we had a portfolio of 21
issued U.S. patents, 31 pending U.S. patent applications, 63 issued or granted non-U.S. patents, and 98 pending
non-U.S. patent applications covering aspects of our core technology, which expire between 2011 and 2027.
However, our issued patents and related intellectual property may not be adequate to protect us or permit us to
gain or maintain a competitive advantage. The issuance of a patent is not conclusive as to its scope, validity or
enforceability. The scope, validity or enforceability of our issued patents can be challenged in litigation or
proceedings before the U.S. Patent and Trademark Office, or the USPTO. In addition, our pending patent
applications include claims to numerous important aspects of our products under development that are not
currently protected by any of our issued patents. We cannot assure you that any of our pending patent
applications will result in the issuance of patents to us. The USPTO may deny or require significant narrowing of

33

claims in our pending patent applications. Even if any patents are issued as a result of pending patent
applications, they may not provide us with significant commercial protection or be issued in a form that is
advantageous to us. Proceedings before the USPTO could result in adverse decisions as to the priority of our
inventions and the narrowing or invalidation of claims in issued patents. Further, if any patents we obtain or
license are deemed invalid and unenforceable, or have their scope narrowed, it could impact our ability to
commercialize or license our technology.

Changes in either the patent laws or in interpretations of patent laws in the United States and other countries
may diminish the value of our intellectual property. For instance, the U.S. Supreme Court has recently modified
some tests used by the USPTO in granting patents during the past 20 years, which may decrease the likelihood
that we will be able to obtain patents and increase the likelihood of challenge of any patents we obtain or license.
In addition, the U.S. Congress is now considering patent reform legislation that could transition the U.S. to a
“first to file” system and alter the processes for challenging issued patents. These reforms could increase the
uncertainties surrounding the prosecution of our patent applications and the enforcement of our issued patents.
The laws of some foreign countries may not protect our intellectual property rights to the same extent as the laws
of the United States, if at all.

We may, in the future, need to assert claims of infringement against third parties to protect our intellectual
property. The outcome of litigation to enforce our intellectual property rights in patents, copyrights, trade secrets
or trademarks is highly unpredictable, could result in substantial costs and diversion of resources, and could have
a material adverse effect on our financial condition, reputation and results of operations regardless of the final
outcome of such litigation. In the event of an adverse judgment, a court could hold that some or all of our
asserted intellectual property rights are not infringed, invalid or unenforceable, and could order us to pay third-
party attorneys’ fees.

Despite our efforts to safeguard our unpatented and unregistered intellectual property rights, we may not be
successful
in doing so or the steps taken by us in this regard may not be adequate to detect or deter
misappropriation of our technology or to prevent an unauthorized third party from copying or otherwise
obtaining and using our products, technology or other information that we regard as proprietary. In addition, we
may not have sufficient resources to litigate, enforce or defend our intellectual property rights. Additionally, third
parties may be able to design around our patents.

We also rely on trade secrets, technical know-how and continuing innovation to develop and maintain our
competitive position. In this regard, we seek to protect our proprietary information and other intellectual property
by having a policy that our employees, consultants, contractors, outside scientific collaborators and other
advisors execute non-disclosure and assignment of invention agreements on commencement of their employment
or engagement. Agreements with our employees also forbid them from bringing the proprietary rights of third
parties to us. We also require confidentiality or material transfer agreements from third parties that receive our
confidential data or materials. However, trade secrets are difficult to protect. We cannot provide any assurance
that employees and third parties will abide by the confidentiality or assignment terms of these agreements, or that
we will be effective securing necessary assignments from these third parties. Despite measures taken to protect
our intellectual property, unauthorized parties might copy aspects of our products or obtain and use information
that we regard as proprietary. Enforcing a claim that a third party illegally obtained and is using any of our trade
secrets is expensive and time consuming, and the outcome is unpredictable. In addition, courts outside the United
States are sometimes less willing to protect trade secrets. Finally, others may independently discover trade
secrets and proprietary information, and this would prevent us from asserting any such trade secret rights against
these parties.

Claims of infringement or misappropriation of the intellectual property rights of others could prohibit us
from commercializing products, require us to obtain licenses from third parties or require us to develop
non-infringing alternatives, and subject us to substantial monetary damages and injunctive relief.

The medical technology industry is characterized by extensive litigation and administrative proceedings
over patent and other intellectual property rights. The likelihood that patent infringement or misappropriation
claims may be brought against us increases as we achieve more visibility in the marketplace and introduce

34

products to market. All issued patents are entitled to a presumption of validity under the laws of the United
States. Whether a product infringes a patent involves complex legal and factual issues, the determination of
which is often uncertain. Therefore, we cannot be certain that we have not infringed the intellectual property
rights of such third parties or others. Our competitors may assert that our products are covered by U.S. or foreign
patents held by them. We are aware of numerous patents issued to third parties that relate to the manufacture and
use of medical devices for interventional cardiology. The owners of each of these patents could assert that the
manufacture, use or sale of our products infringes one or more claims of their patents. Because patent
applications may take years to issue, there may be applications now pending of which we are unaware that may
later result in issued patents that we infringe. If another party has filed a U.S. patent application on inventions
similar to ours, we may have to participate in an interference proceeding declared by the USPTO to determine
priority of invention in the United States. The costs of these proceedings can be substantial, and it is possible that
such efforts would be unsuccessful if unbeknownst to us, the other party had independently arrived at the same or
similar invention prior to our own invention, resulting in a loss of our U.S. patent position with respect to such
inventions. There could also be existing patents of which we are unaware that one or more aspects of our
technology may inadvertently infringe. In some cases, litigation may be threatened or brought by a patent-
holding company or other adverse patent owner who has no relevant product revenues and against whom our
patents may provide little or no deterrence.

Any infringement or misappropriation claim could cause us to incur significant costs, place significant strain
on our financial resources, divert management’s attention from our business and harm our reputation. Some of
our competitors may be able to sustain the costs of complex patent litigation more effectively than we can
because they have substantially greater resources. In addition, any uncertainties resulting from the initiation and
continuation of any litigation could have a material adverse effect on our ability to raise the funds necessary to
continue our operations. Although patent and intellectual property disputes in the medical device area have often
been settled through licensing or similar arrangements, costs associated with such arrangements may be
substantial and could include ongoing royalties. If the relevant patents were upheld in litigation as valid and
enforceable and we were found to infringe, we could be prohibited from commercializing any infringing products
unless we could obtain licenses to use the technology covered by the patent or are able to design around the
patent. We may be unable to obtain a license on terms acceptable to us, if at all, and we may not be able to
redesign any infringing products to avoid infringement. Further, any redesign may not receive FDA clearance or
approval or may not receive such clearance or approval in a timely manner. Any such license could impair
operating margins on future product revenue. A court could also order us to pay compensatory damages for such
infringement, and potentially treble damages, plus prejudgment interest and third-party attorneys’ fees. These
damages could be substantial and could harm our reputation, business, financial condition and operating results.
A court also could enter orders that temporarily, preliminarily or permanently enjoin us and our customers from
making, using, selling, offering to sell or importing infringing products, or could enter an order mandating that
we undertake certain remedial activities. Depending on the nature of the relief ordered by the court, we could
become liable for additional damages to third parties. Adverse determinations in a judicial or administrative
proceeding or failure to obtain necessary licenses could prevent us from manufacturing and selling our products,
which would have a significant adverse impact on our business.

Risks Relating to Ownership of Our Common Stock

Our stock price is volatile and you may not be able to resell your shares.

The market price of our common stock could be subject to significant fluctuations. Market prices for
securities of early-stage pharmaceutical, medical device, biotechnology and other life sciences companies have
historically been particularly volatile. Our common stock traded as low as $3.75 and as high as $15.72 per share
during the twelve-month period ended June 30, 2011. In addition to the risk factors described in this section,
factors that may cause the market price of our common stock to fluctuate include, but are not limited to:

• announcements of technological or medical innovations for the treatment of vascular disease;

• quarterly variations in our or our competitors’ results of operations;

• failure to meet estimates or recommendations by securities analysts who cover our stock;

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• accusations that we have violated a law or regulation;

• sales of large blocks of our common stock, including sales by our executive officers, directors and

significant stockholders;

• changes in accounting principles; and

• general market conditions and other factors, including factors unrelated to our operating performance or

the operating performance of our competitors.

In addition, if securities class action litigation is initiated against us, we would incur substantial costs and
our management’s attention would be diverted from operations. All of these factors could cause the price of our
stock to decline, and you may lose some or all of your investment.

Moreover, the stock markets in general have experienced substantial volatility that has often been unrelated
to the operating performance of individual companies. These broad market fluctuations may also adversely affect
the trading price of our common stock.

In the past, following periods of volatility in the market price of a company’s securities, stockholders have
often instituted class action securities litigation against such company. Such litigation, if instituted, could result
in substantial costs and diversion of management attention and resources, which could significantly harm our
profitability and reputation.

We do not expect to pay cash dividends for the foreseeable future, and accordingly, stockholders must rely
on stock appreciation for any return on their investment in the company.

We anticipate that we will retain our earnings, if any, for future growth and therefore do not anticipate that
we will pay cash dividends for the foreseeable future. As a result, appreciation of the price of our common stock
is the only potential source of return to stockholders. Investors seeking cash dividends should not invest in our
common stock.

If equity research analysts cease to publish research or reports about our business or if they issue
unfavorable research or downgrade our common stock, the price of our common stock could decline.

Investors look to reports of equity research analysts for additional information regarding our industry and
operations and rely in part on the research and reports that equity research analysts publish about us and our
business. We do not control these analysts. Equity research analysts may elect to cease research coverage of our
common stock, which may adversely affect the market price of our common stock. The price of our common
stock could decline if one or more of these analysts downgrade the common stock or if they issue other
unfavorable commentary about us or our business.

Some provisions of our charter documents and Delaware law may have anti-takeover effects that could
discourage an acquisition of us by others, even if an acquisition would be beneficial to our stockholders.

Provisions in our restated certificate of incorporation and bylaws, as well as provisions of Delaware law,
could make it more difficult for a third party to acquire us, even if doing so would benefit our stockholders.
These provisions include:

• providing that special meetings of stockholders may be called only by the Chairman of the Board, the

Chief Executive Officer, or by a majority of our board of directors;

• requiring a classified board of directors, with three separate classes of directors each serving a three-year

term;

• requiring that only business brought before an annual meeting by our board of directors or by a
stockholder who complies with the procedures set forth in the bylaws may be transacted at an annual
meeting of stockholders;

• requiring advance notice of specified stockholder actions, such as the nomination of directors and

stockholder proposals; and

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• authorizing the issuance of, without stockholder approval, up to 5,000,000 shares of preferred stock that

could adversely affect the rights and powers of the holders of our common stock.

In addition, we are subject to Section 203 of the Delaware General Corporation Law, which generally
prohibits a Delaware corporation from engaging in any of a broad range of business combinations with an
interested stockholder for a period of three years following the date on which the stockholder became an
interested stockholder, unless such transactions are approved by such corporation’s board of directors. This
provision could have the effect of delaying or preventing a change of control, whether or not it is desired by or
beneficial to our stockholders.

Future sales and issuances of our common stock or rights to purchase common stock, including pursuant to
equity incentive plans, could result in additional dilution of the percentage ownership of our stockholders
and could cause our stock price to fall.

Sales of a substantial number of shares of our common stock in the public market or the perception that
these sales might occur, could depress the market price of our common stock and could impair our ability to raise
capital through the sale of additional equity securities. We are unable to predict the effect that sales may have on
the prevailing market price of the common stock.

To the extent we raise additional capital by issuing equity securities, including in a debt financing where we
issue convertible notes or notes with warrants, our stockholders may experience substantial dilution. We may sell
common stock in one or more transactions at prices and in a manner we determine from time to time. If we sell
common stock in more than one transaction, existing stockholders may be materially diluted. In addition, new
investors could gain rights superior to existing stockholders, such as liquidation and other preferences. We have
stock options and warrants outstanding to purchase shares of our capital stock. Our stockholders will incur
dilution upon exercise of any outstanding stock options or warrants.

Item 1B. Unresolved Staff Comments.

Not applicable.

Item 2. Properties.

Our principal executive offices are located in a 47,000 square foot facility located in St. Paul, Minnesota.
We have leased this facility through November 2012 with an option to renew through November 2017. This
facility accommodates our
finance and
administrative activities.

sales, marketing, manufacturing,

research and development,

In September 2009, we entered into an agreement to lease a 46,000 square foot production facility in
Pearland, Texas beginning on April 1, 2010. We have leased this facility through March 2020. This facility
primarily accommodates additional manufacturing activities.

We believe that our current premises are substantially adequate for our current and anticipated future needs

for the foreseeable future.

Item 3. Legal Proceedings.

Dr. Leonid Shturman Claim

On October 27, 2009, Dr. Leonid Shturman, CSI-MN’s founder, filed a complaint (the “First Complaint”) in
the U.S. District Court in Minnesota (the “Court”) against us. The First Complaint asserted that our filing of an
that we and
action in Switzerland against Dr. Shturman violated provisions of a settlement agreement
Dr. Shturman entered into in September 2008. The 2008 settlement resolved a lawsuit we had brought against
Dr. Shturman for breach of his employment agreement with us. Dr. Shturman’s complaint sought an award of
damages and injunctive relief to bar us from litigating the action in Switzerland. Dr. Shturman died subsequent to
the filing of the complaint. Within three months of Dr. Shturman’s death, demands for settlement were made on
behalf of the sole heir of Dr. Shturman’s estate, his wife, Leila Nadirashvili (“Mrs. Shturman”). We declined
Mrs. Shturman’s demands. Thereafter, there was no activity for approximately nine months.

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Earlier this year, the Court issued an order requesting counsel for Dr. Shturman to advise the Court
regarding the status of the First Complaint. Subsequent to the Court’s order, Mrs. Shturman again began making
demands for money in exchange for Dr. Shturman’s alleged patent portfolio. We again declined Mrs. Shturman’s
demands but instead made our own offer of settlement. Counsel for Mrs. Shturman rejected the offer and instead
informed us that they intend to file an amended complaint in the U.S. District Court in Minnesota.

On August 24, 2011, instead of filing an amended complaint, Mrs. Shturman filed a second complaint in
federal court seeking a declaration regarding ownership of the patent portfolio that she claims belongs to
Dr. Shturman, slander by us of title to patent rights, tortious interference with prospective business relations,
breach of settlement contract, and statutory unfair competition. Also, Mrs. Shturman filed a motion to be
substituted in the First Complaint. We intend to file a motion in opposition to Mrs. Shturman’s motion to be
substituted to have the First Complaint dismissed.

In addition, Mrs. Shturman filed a writ to dismiss our Switzerland lawsuit based on res judicata and
collateral estoppel, alleging that the claims in Switzerland are identical to the previously dismissed lawsuit in
Minnesota. Our counsel in Switzerland has filed a response to the motion to dismiss stating that the claims in
Switzerland are not subject to res judicata. In particular, we reserved the rights in the previously dismissed
Minnesota lawsuit to assert claims to an invention included in the patents filed in Switzerland by Dr. Shturman.

Michael Kallok Claim

On July 18, 2011, we received a demand letter from legal counsel for Michael Kallok, a former officer,
director and consultant to us, claiming that Mr. Kallok is entitled to 42,594 shares of our common stock or,
alternatively, the value of those shares as of July 15, 2011, which was $610,798. Mr. Kallok asserts that we
improperly deemed such shares forfeited under a restricted stock agreement with Mr. Kallok. This matter is
proceeding to arbitration.

We are defending this claim vigorously, and believe that an adverse outcome of this dispute would not have
a materially adverse effect on our business, operations, cash flows or financial condition. We have not
recognized any expense related to the settlement of this matter as we believe an adverse outcome of this action is
not probable.

Executive Officers of the Registrant.

The names, ages and positions of our executive officers are as follows:

Name

Age

Position

David L. Martin . . . . . . . . . . . . . . . . . . . .
Laurence L. Betterley . . . . . . . . . . . . . . . .
James E. Flaherty . . . . . . . . . . . . . . . . . . .
Kevin Kenny . . . . . . . . . . . . . . . . . . . . . . .
Paul Koehn . . . . . . . . . . . . . . . . . . . . . . . .
Robert J. Thatcher . . . . . . . . . . . . . . . . . . .

President and Chief Executive Officer

47
57 Chief Financial Officer
57 Chief Administrative Officer and Secretary
46 Executive Vice President of Sales and Marketing
48 Vice President of Quality and Manufacturing
57 Executive Vice President

David L. Martin, President and Chief Executive Officer. Mr. Martin has been our President and Chief
Executive Officer since February 2007, and a director since August 2006. Mr. Martin also served as our Interim
Chief Financial Officer from January 2008 to April 2008. Prior to joining us, Mr. Martin was Chief Operating
Officer of FoxHollow Technologies, Inc. from January 2004 to February 2006, Executive Vice President of Sales
and Marketing of FoxHollow Technologies, Inc. from January 2003 to January 2004, Vice President of Global
Sales and International Operations at CardioVention Inc. from October 2001 to May 2002, Vice President of
Global Sales for RITA Medical Systems, Inc. from March 2000 to October 2001 and Director of U.S. Sales,
Cardiac Surgery for Guidant Corporation from September 1999 to March 2000. Mr. Martin has also held sales
and sales management positions for The Procter & Gamble Company and Boston Scientific Corporation.

Laurence L. Betterley, Chief Financial Officer. Mr. Betterley joined us in April 2008 as our Chief
Financial Officer. Previously, Mr. Betterley was Chief Financial Officer at Cima NanoTech, Inc. from May 2007

38

to April 2008, Senior Vice President and Chief Financial Officer of PLATO Learning, Inc. from June 2004 to
January 2007, Senior Vice President and Chief Financial Officer of Diametrics Medical, Inc. from 1996 to 2003,
and Chief Financial Officer of Cray Research Inc. from 1994 to 1996.

James E. Flaherty, Chief Administrative Officer and Secretary. Mr. Flaherty has been our Chief
Administrative Officer since January 14, 2008. Mr. Flaherty was our Chief Financial Officer from March 2003 to
January 14, 2008. As Chief Administrative Officer, Mr. Flaherty reports directly to our Chief Executive Officer
and has responsibility for information technology, facilities,
legal matters, financial analysis of business
development opportunities and business operations. Prior to joining us, Mr. Flaherty served as an independent
financial consultant from 2001 to 2003 and Chief Financial Officer of Zomax Incorporated from 1997 to 2001
and Racotek, Inc. from 1990 to 1996. On June 9, 2005, the Securities and Exchange Commission filed a civil
injunctive action charging Zomax Incorporated with violations of federal securities law by filing a materially
misstated Form 10-Q for the period ended June 30, 2000. The SEC further charged that in a conference call with
analysts, certain of Zomax’s executive officers, including Mr. Flaherty, misrepresented or omitted to state
material facts regarding Zomax’s prospects of meeting quarterly revenue and earnings targets, in violation of
federal securities law. Without admitting or denying the SEC’s charges, Mr. Flaherty consented to the entry of a
court order enjoining him from any violation of certain provisions of federal securities law. In addition,
Mr. Flaherty agreed to disgorge $16,770 plus prejudgment interest and pay a $75,000 civil penalty.

Kevin Kenny, Executive Vice President of Sales and Marketing. Mr. Kenny joined us 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.

Paul Koehn, Vice President of Quality and Operations. Mr. Koehn joined us in March 2007 as Director of
Manufacturing and was promoted to Vice President of Quality and Manufacturing in October 2007. In August
2011, Mr. Koehn became Vice President of Quality and Operations. Previously, Mr. Koehn was Vice President
of Operations for Sewall Gear Manufacturing from 2000 to March 2007 and before joining Sewall Gear,
Mr. Koehn held various quality and manufacturing management roles with Dana Corporation.

Robert J. Thatcher, Executive Vice President. Mr. Thatcher joined us as Senior Vice President of Sales
and Marketing in October 2005 and became Vice President of Operations in September 2006. Mr. Thatcher
became Executive Vice President in August 2007. Previously, Mr. Thatcher was Senior Vice President of
TriVirix Inc. from October 2003 to October 2005. Mr. Thatcher has more than 29 years of medical device
experience in both large and start-up companies. Mr. Thatcher has held various sales management, marketing
management and general management positions at Medtronic, Inc., Schneider USA, Inc. (a former division of
Pfizer Inc.), Boston Scientific Corporation and several startup companies.

39

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of

Equity Securities.

Price Range of Common Stock and Dividend Policy

Prior to the closing of the merger on February 25, 2009, the stock of Replidyne was traded on the Nasdaq
Global Market under the symbol “RDYN.” On February 26, 2009, the stock of CSI began trading on the Nasdaq
Global Market under the symbol “CSII.” The following table sets forth the high and low sales prices for our
common stock (based upon intra-day trading) as reported by the Nasdaq Global Market:

Fiscal Year Ended June 30, 2011

First quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fourth quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Fiscal Year Ended June 30, 2010

First quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fourth quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Common Stock

High

Low

$ 5.50
12.00
13.40
15.72

$11.15
7.39
5.65
5.60

$ 3.75
5.03
8.75
10.32

$ 6.77
3.78
4.10
4.34

The number of record holders of our common stock on August 30, 2011 was approximately 584. No cash
dividends have been previously paid on our common stock and none are anticipated during fiscal year 2012. We are
restricted from paying dividends under our Loan and Security Agreements with Silicon Valley Bank and Partners
for Growth.

Recent Sales of Unregistered Securities

None.

Issuer Purchases of Equity Securities

None.

Securities Authorized For Issuance Under Equity Compensation Plans

For information on our equity compensation plans, refer to Item 12, “Security Ownership of Certain

Beneficial Owners and Management and Related Stockholder Matters.”

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis of financial condition and results of operations
together with our consolidated financial statements and the related notes included elsewhere in this Form 10-K.
This discussion and analysis contains forward-looking statements about our business and operations, based on
current expectations and related to future events and our future financial performance, that involve risks and
uncertainties. Our actual results may differ materially from those we currently anticipate as a result of many
important factors, including the factors we describe under “Risk Factors” and elsewhere in this Form 10-K.

OVERVIEW

We are a medical device company focused on developing and commercializing interventional treatment
systems for vascular disease. Our primary products, the Diamondback 360° PAD System (“Diamondback 360°”),
Diamondback Predator 360° PAD System (“Predator 360°”) and Stealth 360° PAD System (“Stealth 360°”), are
catheter-based platforms capable of treating a broad range of plaque types in arteries throughout the leg and

40

address many of the limitations associated with existing treatment alternatives. We also intend to pursue approval
of our products for coronary use. We refer to the Diamondback 360°, Predator 360° and Stealth 360° collectively
in this report as the “PAD Systems.”

We were incorporated as Replidyne, Inc. in Delaware in 2000. On February 25, 2009, Replidyne, Inc.
completed its business combination with Cardiovascular Systems, Inc., a Minnesota corporation (“CSI-MN”), in
accordance with the terms of the Agreement and Plan of Merger and Reorganization, dated as of November 3,
2008 (the “Merger Agreement”). Pursuant to the Merger Agreement, CSI-MN continued after the merger as the
surviving corporation and a wholly-owned subsidiary of Replidyne. Replidyne changed its name to
Cardiovascular Systems, Inc. (“CSI”) and CSI-MN merged with and into CSI, with CSI continuing after the
merger as the surviving corporation. These transactions are referred to herein as the “merger.” Unless the context
otherwise requires, all references herein to the “Company,” “CSI,” “we,” “us” and “our” refer to CSI-MN prior
to the completion of the merger and to CSI following the completion of the merger and the name change, and all
references to “Replidyne” refer to Replidyne prior to the completion of the merger and the name change.
in-licensing and
Replidyne was a biopharmaceutical company focused on discovering, developing,
commercializing anti-infective products.

At the closing of the merger, Replidyne’s net assets, as calculated pursuant to the terms of the Merger
Agreement, were approximately $36.6 million as adjusted. As of immediately following the effective time of the
merger, former CSI stockholders owned approximately 80.2% of the outstanding common stock of the combined
company, and Replidyne stockholders owned approximately 19.8% of the outstanding common stock of the
combined company.

CSI was incorporated in Minnesota in 1989. From 1989 to 1997, we engaged in research and development
on several different product concepts that were later abandoned. Since 1997, we have devoted substantially all of
our resources to the development of the PAD Systems.

From 2003 to 2005, we conducted numerous bench and animal

tests in preparation for application
submissions to the 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° as a therapy in
patients with PAD. We commenced commercial introduction of the Diamondback 360° 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 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.
We assemble at our facilities the saline infusion pump used with our Stealth 360° product 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. The control unit and guidewires are purchased from third-party suppliers.

As of June 30, 2011, we had an accumulated deficit of $162.4 million. We expect our losses to continue but
generally decline as revenue grows from continued commercialization activities, development of additional
product enhancements, accumulation of clinical data on our products, and further regulatory submissions. To
date, we have financed our operations primarily from the issuance of common and preferred stock, convertible
promissory notes, and debt.

FINANCIAL OVERVIEW

Revenues. We derive substantially all of our revenues from the sale of PAD Systems and other ancillary
products. The PAD Systems each use a disposable, single-use, low-profile catheter that travels over our
proprietary ViperWire guidewire. The Diamondback 360° and Predator 360° PAD Systems use an external
control unit that powers the system, while the Stealth 360° PAD System uses a saline infusion pump as a power
supply for the operation of the catheter. Our ancillary products include the ViperSlide™ Lubricant and
ViperTrack™ Radiopaque Tape. We also have an exclusive distribution agreement with Asahi-Intecc, Ltd. to
market its peripheral guide wire line in the United States.

41

Cost of Goods Sold. We assemble the single-use catheter with components purchased from third-party
suppliers, as well as with components manufactured in-house. The control unit and guidewires are purchased
from third-party suppliers. Our cost of goods sold consists primarily of raw materials, direct labor, and
manufacturing overhead.

Selling, General and Administrative Expenses. Selling, general and administrative expenses include
compensation for executive,
information technology, human resources and
finance,
administrative personnel, including stock-based compensation. Other significant expenses include travel and
marketing costs and professional fees.

sales, marketing,

Research and Development. Research and development expenses include costs associated with the design,
development, testing, enhancement and regulatory approval of our products. Research and development expenses
include employee compensation including stock-based compensation, supplies and materials, patent expenses,
consulting expenses, travel and facilities overhead. We also incur significant expenses to operate clinical trials,
including trial design, third-party fees, clinical site reimbursement, data management and travel expenses. All
research and development expenses are expensed as incurred.

Interest and Other Income (Expense).

Interest and other income (expense) primarily includes interest
expense (net of premium and discount amortization), interest income, change in the fair value of conversion
option, net write-offs upon conversion (option and unamortized premium), decretion of redeemable convertible
preferred stock warrants, and gain on investments.

• Interest Expense (Including Premium and Discount Amortization).
outstanding debt balances, and debt premium and discount amortization.

Interest expense results from

• Interest Income.

Interest income is attributed to interest earned on deposits in investments that consist of

money market funds.

• Change in Fair Value of Conversion Option. Change in fair value of conversion option represents the
period to period change in fair value of the conversion option associated with outstanding convertible
debt.

• Net Write-offs Upon Conversion (Option and Unamortized Premium or Discount). Net write-offs upon
conversion (option and unamortized premium) is the result of the conversion of convertible debt, and
includes the write-off of the related conversion option and any unamortized debt premium or discount.

• Decretion of Redeemable Convertible Preferred Stock Warrants. Decretion of redeemable convertible
preferred stock warrants reflected the change in the current estimated fair market value of the preferred
stock warrants on a quarterly basis, as determined by management and the board of directors. Decretion
was recorded as a decrease to redeemable convertible preferred stock warrants in the consolidated balance
sheet and a decrease to net loss in the consolidated statement of operations. Concurrent with the merger,
all preferred stock warrants were converted into warrants to purchase common stock and, accordingly, we
stopped recording decretion as of the merger date.

• Gain on Investments. Gain on investments reflects the change in the fair value of investments.

Decretion (Accretion) of Redeemable Convertible Preferred Stock. Decretion (accretion) of redeemable
convertible preferred stock reflected the change in the current estimated fair market value of the redeemable
preferred stock on a quarterly basis, as determined by management and the board of directors. Decretion
(accretion) was recorded as a decrease (increase) to redeemable convertible preferred stock in the consolidated
balance sheet and a decrease (increase) to the loss attributable to common stockholders in the consolidated
statement of operations. The redeemable convertible preferred stock was converted into common stock
immediately prior to the effective time of the merger with Replidyne. As such, the preferred stockholders
forfeited their liquidation preferences and we stopped recording decretion (accretion) as of the merger date.

Net Operating Loss Carryforwards. We have established valuation allowances to fully offset our deferred
tax assets due to the uncertainty about our ability to generate the future taxable income necessary to realize these
deferred assets, particularly in light of our historical losses. The future use of net operating loss carryforwards is
dependent on us attaining profitable operations and will be limited in any one year under Internal Revenue Code

42

Section 382 due to significant ownership changes (as defined in Section 382) resulting from our equity
financings. At June 30, 2011, we had net operating loss carryforwards for federal and state income tax reporting
purposes of approximately $146.2 million, which will expire at various dates through fiscal 2031.

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, debt conversion option, stock-based compensation, and preferred stock warrants 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. We believe that the following are our critical accounting policies and estimates:

Revenue Recognition. We sell the majority of our products via direct shipment to hospitals or clinics. We
recognize 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. These
criteria are generally met at the time of delivery when the risk of loss and title passes to the customer. We record
estimated sales returns, discounts and rebates as a reduction of net sales in the same period revenue is recognized.

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.

Allowance for Doubtful Accounts. We maintain allowances for doubtful accounts. This allowance is an
estimate and is regularly evaluated for adequacy by taking into consideration factors such as past experience,
credit quality of the customer base, age of the receivable balances, both individually and in the aggregate, and
current economic conditions that may affect a customer’s ability to pay. Provisions for the allowance for doubtful
accounts attributed to bad debt are recorded in general and administrative expenses.

Excess and Obsolete Inventory. We have inventories that are principally comprised of capitalized direct
labor and manufacturing overhead, raw materials and components, and finished goods. Due to the technological
nature of our products, there is a risk of obsolescence to changes in our technology and the market, which is
impacted by technological developments and events. Accordingly, we write down our inventories as we become
aware of any situation where the carrying amount exceeds the estimated realizable value based on assumptions
about future demands and market conditions. The evaluation includes analyses of inventory levels, expected
product lives, product at risk of expiration, sales levels by product and projections of future sales demand.

Debt Conversion Option. The fair value of the conversion option is related to the loan and security
agreement with Partners for Growth and has been included as a component of debt conversion option and other
assets on our balance sheet. The Monte Carlo option pricing model used to determine the value of the conversion
option included various inputs including historical volatility, stock price simulations, and the assessed behavior
of us and Partners for Growth based on those simulations.

Stock-Based Compensation. We recognize 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 stock option and restricted
stock awards and units are expensed in the consolidated statements of operations over the related vesting period.
We calculate the fair value on the date of grant using a Black-Scholes model.

43

To determine the inputs for the Black-Scholes option pricing model, we are required to develop several

assumptions, which are highly subjective. These assumptions include:

• our common stock’s volatility;

• the length of our options’ lives, which is based on future exercises and cancellations;

• the number of shares of common stock pursuant to which options will ultimately be forfeited;

• the risk-free rate of return; and

• future dividends.

Prior to the consummation of the merger, we used comparable public company data to determine volatility
for option grants. Expected volatility is now based on the historical volatility of our stock. We use a weighted
average calculation to estimate the time our options will be outstanding. We estimated the number of options that
are expected to be forfeited based on our historical experience. The risk-free rate is based on the U.S. Treasury
yield curve in effect at the time of grant for the estimated life of the option. We use our judgment and
expectations in setting future dividend rates, which is currently expected to be zero.

All options we have granted 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 our common stock at the date of grant,
as determined by management and the board of directors.

The absence of an active market for our common stock prior to the merger required our management and
board of directors to estimate the fair value of our common stock for purposes of granting options and for
determining stock-based compensation expense. In response to these requirements, prior to the merger our
management and board of directors estimated the fair market value of common stock at each date at which
options are granted based upon stock valuations and other qualitative factors. Our management and board of
directors conducted stock valuations using two different valuation methods: the option pricing method and the
probability weighted expected return method. Both of these valuation methods took into consideration the
following factors: financing activity, rights and preferences of our preferred stock, growth of the executive
management team, clinical trial activity, the FDA process, the status of our commercial launch, our mergers and
acquisitions and public offering processes, revenues, the valuations of comparable public companies, our cash
and working capital amounts, and additional objective and subjective factors relating to our business. Our
management and board of directors set the exercise prices for option grants based upon their best estimate of the
fair market value of the common stock at the time they made such grants, taking into account all information
available at those times. In some cases, management and the board of directors made retrospective assessments
of the valuation of the common stock at later dates and determined that the fair market value of the common
stock at the times the grants were made was different than the exercise prices established for those grants. In
cases in which the fair market was higher than the exercise price, we recognized stock-based compensation
expense for the excess of the fair market value of the common stock over the exercise price. Following the
merger, our stock valuations are based upon the market price for our common stock.

Legal Proceedings.

In accordance with FASB guidance, we record a liability in our consolidated financial
statements related to legal proceedings when a loss is known or considered probable and the amount can be
reasonably estimated. If the reasonable estimate of a known or probable loss is a range, and no amount within the
range is a better estimate than any other, the minimum amount of the range is accrued. If a loss is possible, but
not known or probable, and can be reasonably estimated, the estimated loss or range of loss is disclosed in the
notes to the consolidated financial statements. In most cases, significant judgment is required to estimate the
amount and timing of a loss to be recorded. Our significant legal proceedings are discussed in Note 11 to the
consolidated financial statements.

44

RESULTS OF OPERATIONS

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

Year Ended June 30,

Year Ended June 30,

2011

2010

Percent
Change

2010

2009

Percent
Change

Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . .

$ 78,780
16,277

$ 64,829
15,003

21.5% $ 64,829 $ 56,461
16,194
15,003
8.5

14.8%
(7.4)

Gross profit

. . . . . . . . . . . . . . . . . . . . . . . . . . .

62,503

49,826

25.4

49,826

40,267

23.7

Expenses:
Selling, general and administrative . . . . . . . . . . .
. . . . . . . . . . . . . . . . .
Research and development

62,372
8,940

62,447
10,278

(0.1)
(13.0)

62,447
10,278

59,822
14,678

4.4
(30.0)

Total expenses . . . . . . . . . . . . . . . . . . . . . . . . .

71,312

72,725

(1.9)

72,725

74,500

(2.4)

Loss from operations . . . . . . . . . . . . . . . . . . . .
Interest and other income (expense) . . . . . . . . . .

(8,809)
(2,316)

(61.5)
(22,899)
(1,005) 130.4

(22,899)
(1,005)

(34,233)
2,338

(33.1)
(143.0)

Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decretion of redeemable convertible preferred
stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net loss available to common

(11,125)

(23,904)

(53.5)

(23,904)

(31,895)

(25.0)

—

—

—

— 22,781

—

stockholders . . . . . . . . . . . . . . . . . . . . . . .

$(11,125) $(23,904)

(53.5)% $(23,904) $ (9,114)

162.3%

Comparison of Fiscal Year Ended June 30, 2011 with Fiscal Year Ended June 30, 2010

Revenues. Revenues increased by $14.0 million, or 21.5%, from $64.8 million for the year ended June 30,
2010 to $78.8 million for the year ended June 30, 2011. This increase was attributable to an $11.5 million, or 20.1%,
increase in sales of PAD Systems and a $2.4 million, or 32.0%, increase in sales of supplemental and other revenue
during the year ended June 30, 2011 compared to the year ended June 30, 2010. Supplemental products include our
Viper product line and distribution partner products. Currently, all of our revenues are in the United States;
however, we may potentially sell internationally in the future. We expect our revenue to increase as we continue to
increase the number of physicians using the devices, and increase the usage per physician as we continue to focus
on physician education programs, introduce new and improved products, and generate clinical data.

Cost of Goods Sold. Cost of goods sold increased by $1.3 million, or 8.5%, from $15.0 million for the year
ended June 30, 2010 to $16.3 million for the year ended June 30, 2011. These amounts represent the cost of
materials, labor and overhead for single-use catheters, guidewires, control units, pumps, and other supplemental
products. The increase in gross margin from 76.9% during the year ended June 30, 2010 to 79.3% for the year
ended June 30, 2011 was primarily due to operating efficiencies, product cost reductions, and a favorable product
mix resulting in a reduction in shipments of lower margin control units. Cost of goods sold for the years ended
June 30, 2011 and 2010 includes $312,000 and $548,000, respectively, for stock-based compensation. We expect
that gross margin will slightly decline in the first half of fiscal 2012 due to Stealth 360° becoming a higher
percentage of revenue, as the Stealth 360° has higher unit costs compared to the Diamondback 360° or Predator
360° due to lower production volumes. In addition, we expect the ramp-up of our second manufacturing facility
in Texas, with higher future production capacity, will temporarily increase production costs but enhance
efficiencies over time. We expect that gross margin in the second half of fiscal 2012 will be fairly consistent with
fiscal 2011, although quarterly 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. Selling, general, and administrative expense was $62.4
million for the years ended June 30, 2010 and June 30, 2011. Our selling, general and administrative expenses for

45

the year ended June 30, 2011 have increased due to building our sales organization, along with increased
professional fees offset by lower stock-based compensation. Selling, general, and administrative expenses for the
years ended June 30, 2011 and 2010 includes $5.6 million and $7.3 million, respectively, for stock-based
compensation. We expect our selling, general and administrative expenses to increase in the future due primarily
to the costs associated with expanding our sales and marketing organization and programs to further
commercialize our products, but at an annual rate less than revenue growth.

Research and Development Expenses. Research and development expenses decreased by $1.4 million, or
13.0%, from $10.3 million for the year ended June 30, 2010 to $8.9 million for the year ended June 30, 2011.
Research and development expenses relate to specific projects to improve our product or expand into new
markets, such as the development of electric versions of the PAD Systems, shaft designs, crown designs, and
PAD and coronary clinical trials. The reduction in these expenses related to the decreased numbers and sizes of
PAD development projects in fiscal 2011, as well as the timing of those projects. Research and development
expenses for the year ended June 30, 2011 and 2010 includes $587,000 and $1.3 million, respectively, for stock-
based compensation. As we continue to expand our product portfolio within the market for the treatment of
peripheral arteries and leverage our core technology into the coronary market, we generally expect to incur
research and development expenses above amounts incurred for the year ended June 30, 2011; however, we
expect these expenses to remain fairly consistent as a percentage of revenue. Fluctuations could occur based on
the number of projects and studies and the timing of expenditures.

Interest and Other Income (Expense).

Interest and other income (expense) decreased by $1.3 million, or
130.4%, from ($1.0) million for the year ended June 30, 2010 to ($2.3) million for the year ended June 30, 2011.
Significant changes in interest and other income (expense) during these periods included:

• Interest Income.

Interest income decreased by $390,000, from $402,000 for the year ended June 30,
2010 to $12,000 for the year ended June 30, 2011. The decrease in interest income was a result of all
auction rate securities being redeemed by the issuers at par value or repurchased by UBS at par value
during the year ended June 30, 2010.

• Change in Fair Value of Conversion Option. Change in fair value of conversion option was $491,000
for the year ended June 30, 2011, which was primarily driven by an increase in the market value of our
common stock since the convertible debt issuance date. There was no change in fair value of the
conversion option during the year ended June 30, 2010. The change in the fair value of the conversion
option represents the period to period change in fair value of the conversion option associated with
outstanding convertible debt.

• Net Write-offs Upon Conversion (Option and Unamortized Premium or Discount). Net write-offs upon
conversion was $(1.4) million during the year ended June 30, 2011. There were no net write-offs upon
conversion during the year ended June 30, 2010. Net write-offs upon conversion are the result of the
conversion of convertible debt, and include the write-off of the conversion option and any unamortized
debt premium or discount.

Net Loss Available to Common Stockholders. Net loss available to common stockholders for the year
ended June 30, 2011 was ($11.1) million, or ($0.70) per basic and diluted share, compared to ($23.9) million, or
($1.62) per basic and diluted share for the year ended June 30, 2010.

Comparison of Fiscal Year Ended June 30, 2010 with Fiscal Year Ended June 30, 2009

Revenues. Revenues increased by $8.4 million, or 14.8%, from $56.5 million for the year ended June 30,
2009 to $64.8 million for the year ended June 30, 2010. This increase was attributable to a $6.1 million, or
11.8%, increase in sales of PAD Systems and a $2.3 million, or 45.0%, increase in sales of supplemental and
other revenue during the year ended June 30, 2010 compared to the year ended June 30, 2009. Supplemental
products include our Viper product line and distribution partner products, some of which have been introduced
over the last year. All of our revenues were in the United States.

Cost of Goods Sold. Cost of goods sold decreased by $1.2 million, or 7.4%, from $16.2 million for the
year ended June 30, 2009 to $15.0 million for the year ended June 30, 2010. This decrease in cost of goods sold

46

resulted in an increase to gross margin of six percentage points, from 71% for the year ended June 30, 2009 to
77% for the year ended June 30, 2010. These amounts represent the cost of materials, labor and overhead for
single-use catheters, guidewires, control units, and other supplemental products. The increase in gross margin
from the year ended June 30, 2009 to June 30, 2010 was primarily due to manufacturing efficiencies, product
cost reductions, and a favorable product mix resulting in a reduction in shipments of lower margin control units.
Cost of goods sold for the years ended June 30, 2010 and 2009 includes $548,000 and $475,000, respectively, for
stock-based compensation.

Selling, General and Administrative Expenses. Selling, general and administrative expenses increased by
$2.6 million, or 4.4%, from $59.8 million for the year ended June 30, 2009 to $62.4 million for the year ended
June 30, 2010. The primary reasons for the increase included increased sales and marketing expenses of $4.8
million from building our sales organization along with additional education programs, partially offset by
reduced consulting and professional services, primarily from a $1.7 million write-off of previously capitalized
initial public offering costs in fiscal 2009. Selling, general, and administrative expenses for the years ended
June 30, 2010 and 2009 includes $7.3 million and $5.7 million, respectively, for stock-based compensation.

Research and Development Expenses. Research and development expenses decreased by $4.4 million, or
30.0%, from $14.7 million for the year ended June 30, 2009 to $10.3 million for the year ended June 30, 2010.
Research and development expenses relate to specific projects to improve our product or expand into new
markets, such as the development of electric versions of the PAD Systems, shaft designs, crown designs, and
PAD and coronary clinical trials. The reduction in these expenses related to the decreased numbers and sizes of
PAD development projects in fiscal 2010, as well as the timing of those projects. Research and development
expenses for the year ended June 30, 2010 and 2009 includes $1.3 million and $612,000, respectively, for stock-
based compensation.

Interest and Other Income (Expense).

Interest and other income (expense) decreased by $3.3 million, or
143.0%, from income of $2.3 million for the year ended June 30, 2009 to expense of ($1.0) million for the year
ended June 30, 2010. Significant changes in interest and other income (expense) during these periods included:

• Interest Expense.

Interest expense decreased by $1.0 million, from $2.4 million for the year ended
June 30, 2009 to $1.4 million for the year ended June 30, 2010. The decrease was primarily due to
significantly reduced amortization of the debt discount during the year ended June 30, 2010 from the
refinancing of debt in April 2009.

• Interest Income.

Interest income decreased by $3.0 million, from $3.4 million for the year ended
June 30, 2009 to $402,000 for the year ended June 30, 2010. The decrease was due to $2.8 million
recorded during the year ended June 30, 2009 related to accepting the UBS offer to repurchase our auction
rate securities, establishing an auction rate securities put option agreement.

• Decretion of Redeemable Convertible Preferred Stock Warrants. Decretion of redeemable convertible
preferred stock warrants reflects the change in estimated fair value of preferred stock warrants at the
balance sheet dates. Decretion of redeemable convertible preferred stock warrants for the year ended
June 30, 2009 was $3.0 million. There was no decretion of redeemable convertible preferred stock
warrants during the year ended June 30, 2010 because all preferred stock was converted to common stock
in conjunction with the merger.

• Gain (Impairment) on Investments. Gain (impairment) on investments was $150,000 and ($1.7) million
for the years ended June 30, 2010 and 2009, respectively. Gain (impairment) on investments was due to
the change in the fair value of auction rate securities investments in both periods. On June 30, 2010, all
the auction rate securities had been redeemed by the issuers at par value or repurchased by UBS at par
value pursuant to an agreement reached with UBS in 2008. Due to the redemption and repurchase, there is
no gain (impairment) on investments related to these securities in subsequent periods.

Decretion of Redeemable Convertible Preferred Stock. Decretion of redeemable convertible preferred
stock reflected the change in estimated fair value of preferred stock at the balance sheet dates. Decretion of
redeemable convertible preferred stock for the year ended June 30, 2009 was $22.8 million. There was no
decretion of redeemable convertible preferred stock during the year ended June 30, 2010 because all preferred
stock was converted to common stock in conjunction with the merger.

47

Net Loss Available to Common Stockholders. Net loss available to common stockholders for year ended
June 30, 2010 was $(23.9) million, or ($1.62) per basic and diluted share, compared to $(9.1) million, or ($1.13)
per basic and diluted share for the year ended June 30, 2009.

NON-GAAP FINANCIAL INFORMATION

To supplement our consolidated condensed 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):

Year Ended June 30,

2011

2010

Loss from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Add: Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Add: Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(8,809)
6,468
716

$(22,899)
9,094
599

Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(1,625)

$(13,206)

The improvement in Adjusted EBITDA of $11.6 million, or 87.7%, is primarily the result of the $14.1
million, or 61.5%, improvement in the loss from operations. The loss from operations was significantly impacted
by increases in revenue and gross margin, and a decrease in operating expenses, as discussed above.

Adjusted EBITDA was also impacted by a decrease in stock-based compensation and increase in
depreciation and amortization. Stock-based compensation decreased $2.6 million, or 28.9%, from $9.1 million
for the year ended June 30, 2010 to $6.5 million for the year ended June 30, 2011. Stock-based compensation
decreased as a result of prior year charges for extending the terms of certain expired stock options. Depreciation
and amortization increased as a result of additional investment in capital equipment.

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. Adjusted EBITDA is also used to measure performance in our financial covenants as
required by Silicon Valley Bank and Partners for Growth.

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
to investors to understand its impact on our operational
from our non-GAAP results is useful
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.

48

• 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.

LIQUIDITY AND CAPITAL RESOURCES

We had cash and cash equivalents of $21.2 million and $23.7 million at June 30, 2011 and 2010,
respectively. During the year ended June 30, 2011, net cash used in operations amounted to $8.4 million. As of
June 30, 2011, we had an accumulated deficit of $162.4 million. We have historically funded our operating losses
primarily from the issuance of common and preferred stock, convertible promissory notes, debt, and the merger
with Replidyne in February 2009.

Loan and Security Agreement with Silicon Valley Bank

On March 29, 2010, we entered into an amended and restated loan and security agreement with Silicon
Valley Bank. The agreement includes a $10.0 million term loan and a $15.0 million line of credit. The terms of
each of these loans are as follows:

• The $10.0 million term loan has a fixed interest rate of 9.0% and a final payment amount equal to 1.0% of
the loan amount due at maturity. This term loan has a 36 month maturity, with repayment terms that
include interest only payments during the first six months followed by 30 equal principal and interest
payments. This term loan also includes an acceleration provision that requires us to pay the entire
outstanding balance, plus a penalty ranging from 1.0% to 3.0% of the principal amount, upon prepayment
or the occurrence and continuance of an event of default. In connection with entering into the agreement,
we amended a warrant previously granted to Silicon Valley Bank. The warrant provided an option to
purchase 8,493 shares of common stock at an exercise price of $5.48 per share. The warrant was exercised
in June 2011. The balance outstanding on the term loan at June 30, 2011 was $7.3 million, net of the
unamortized discount associated with the warrant.

• The $15.0 million line of credit has a two year maturity and a floating interest rate equal to Silicon Valley
Bank’s prime rate, plus 2.0%, with an interest rate floor of 6.0%. Interest on borrowings is due monthly
and the principal balance is due at maturity. Borrowings on the line of credit are based on (a) 80% of
eligible domestic receivables, plus (b) the lesser of 40% of eligible inventory or 25% of eligible domestic
receivables or $2.5 million, minus (c) to the extent in effect, certain loan reserves as defined in the

49

agreement. Accounts receivable receipts are deposited into a lockbox account in the name of Silicon
Valley Bank. The accounts receivable line of credit
to non-use fees, annual fees, and
cancellation fees. The agreement provides that initially 50% of the outstanding principal balance of the
$10.0 million term loan reduces available borrowings under the line of credit. Upon the achievement of
certain financial covenants, the amount reducing available borrowings will be reduced to zero. There was
not an outstanding balance on the line of credit at June 30, 2011.

is subject

Borrowings from Silicon Valley Bank are secured by all of our assets. The borrowings are subject to
prepayment penalties and financial covenants, including maintaining certain liquidity and fixed charge coverage
ratios and certain three-month EBITDA targets. We were in compliance with all financial covenants as of June 30,
2011. The agreement also includes subjective acceleration clauses which permit Silicon Valley Bank to accelerate
the due date under certain circumstances, including, but not limited to, material adverse effects on our financial
status or otherwise. Any non-compliance by us under the terms of our debt arrangements could result in an event of
default under the Silicon Valley Bank loan, which, if not cured, could result in the acceleration of this 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).
The agreement provides that PFG will make loans to us up to $4.0 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.

Under the agreement, PFG provided us with an initial loan of $1.5 million (the “initial loan”) on April 15,
2010. During the three months ended December 31, 2010, PFG, at its option, converted the entire $1.5 million (at
par) into 276,243 shares of our common stock in accordance with the conversion terms set forth in the note for
the initial loan. On December 3, 2010, and January 26, 2011, we issued PFG additional convertible notes under
the agreement of $3.5 million and $500,000, respectively (“subsequent loans”). During the three months ended
June 30, 2011, PFG, at its option, converted the $3.5 million subsequent loan (at par) into 362,320 shares of our
common stock in accordance with the conversion terms set forth in the note for the subsequent loan. On June 30,
2011, we issued PFG an additional convertible note under the agreement of $3.5 million (the “current loans”). At
any time prior to the maturity date, PFG may at its option convert the remaining $500,000 subsequent loan or the
$3.5 million current loan into shares of our common stock at $12.40 or $13.64 per share, respectively, which
equaled 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 its common stock to satisfy this condition and effect a mandatory conversion. As a
result of the various note issuances and conversions, we have reflected a net expense of $859,000 for the year
ended June 30, 2011 as a component of interest and other, net on the accompanying statement of operations
which represents the net effect of (i) the write-off of the conversion option on the initial loan and subsequent
loan, (ii) the write-off of the unamortized debt premium on the initial and subsequent loan and (iii) the change in
fair value of the conversion options on all loans. The balance outstanding under the loan and security agreement
at June 30, 2011 was $4.6 million, including the net unamortized premium associated with our conversion option
and related beneficial conversion feature. The balance outstanding under the loan and security agreement at
June 30, 2010 was $1.3 million, including the net unamortized discount associated with the warrant and our
conversion option.

On July 26, 2011, PFG at its option converted the remaining subsequent loan of $500,000 (at par) into
40,323 shares of our common stock in accordance with the conversion terms set forth in the note for the
subsequent loan. We then subsequently issued PFG a new convertible note of $500,000. At any time prior to the
maturity date, PFG may at its option convert the $500,000 note into shares of our common stock at $15.30 per
share, which equaled the ten-day volume weighted average price per share of our common stock prior to the
issuance date of the note.

50

On August 23, 2011, the loan and security agreement was amended. The amended agreement provides that
PFG will make loans to us up to $5.0 million. All other terms of the original agreement remain the same. We
then subsequently issued PFG a new convertible note of $1.0 million, which increased the aggregate amount
drawn under the loan and security agreement, as amended, to the full available amount of $5.0 million. At any
time prior to the maturity date, PFG may at its option convert the $1.0 million note into shares of our common
stock at $13.42 per share, which equaled the ten-day volume weighted average price per share of our common
stock prior to the issuance date of the note.

The loans are secured by certain assets, and the agreement contains customary covenants limiting the 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, and
certain three-month EBITDA targets. We were in compliance with all financial covenants at June 30, 2011. 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 the loan over its remaining term, or require the immediate payment of
all amounts outstanding under the loan and foreclose on any or all collateral, depending on which financial
covenants are not maintained.

In connection with the execution of the PFG loan and security agreement, we issued a warrant to PFG on
April 14, 2010, which allows PFG to purchase 147,330 shares of our common stock at a price per share of $5.43,
which price was based on the ten-day volume weighted average price per share of our common stock prior to the
date of the agreement. The warrant was exercised in June 2011.

Cash and Cash Equivalents. Cash and cash equivalents was $21.2 million and $23.7 million at June 30,
2011 and 2010, respectively. This decrease is primarily attributable net cash used in operations during the year
ended June 30, 2011, partially offset by proceeds drawn on our convertible debt agreement.

Operating Activities. Net cash used in operating activities improved 38.4% to $8.4 million from $13.6
million for the years ended June 30, 2011 and 2010, respectively. For the years ended June 30, 2011 and 2010,
we had a net loss of $11.1 million and $23.9 million, respectively. Changes in working capital accounts also
contributed to the net cash used in the years ended June 30, 2011 and 2010. Significant changes in working
capital during these periods included:

• Cash used in accounts receivable of $(3.7) million and $(1.1) million during the years ended June 30,
2011and 2010, respectively. The increase in amount used between periods is due to higher revenue
growth in fiscal year 2011.

• Cash used in inventories of $(1.5) million and ($1.0) million during the years ended June 30, 2011 and
2010, respectively. For the years ended June 30, 2011 and 2010, cash used in inventories was primarily
due to the timing of inventory purchases and sales.

• Cash provided by prepaid expenses and other current assets of $323,000 and $6,000 during the years
ended June 30, 2011 and 2010, respectively. For the year ended June 30, 2011 and 2010, cash provided by
prepaid expenses and other current assets was primarily due to payment timing of vendor deposits and
other expenditures.

• Cash provided by (used in) accounts payable of $1.8 million and $(1.4) million during the years ended
June 30, 2011 and 2010, respectively. For the year ended June 30, 2011 and 2010, cash provided by (used
in) accounts payable was primarily due to timing of purchases and vendor payments.

• Cash (used in) provided by accrued expenses and other liabilities of ($2.4) million and $3.8 million during
the years ended June 30, 2011 and 2010, respectively. For the year ended June 30, 2011, cash used in
accrued expenses and other liabilities was primarily related to the timing and payment of accruals. For the
year ended June 30, 2010, cash provided by accrued expenses and other liabilities was primarily due to
receipt of $3.5 million in net cash incentives under the agreement to establish a manufacturing facility in
Texas.

51

Investing Activities. Net cash (used in) provided by investing activities was ($1.7) million and $21.8
million for the years ended June 30, 2011 and 2010, respectively. For the year ended June 30, 2011, cash (used
in) investing activities resulted from investment in property plant, equipment, and patents. For the year ended
June 30, 2010, cash provided by investing activities primarily resulted from the selling of investments in the
amount of $23.0 million.

Financing Activities. Net cash provided by (used in) financing activities was $7.5 million and ($17.9)
million during the years ended June 30, 2011 and 2010, respectively. Cash provided by financing activities
during these periods included:

• proceeds from long-term debt of $7.5 million and $5.9 million during the years ended June 30, 2011 and

2010, respectively;

• employee stock purchase plan purchases of $1.0 million and $1.2 million during the years ended June 30,

2011 and 2010, respectively;

• exercise of stock options and warrants of $1.5 million and $285,000 during the years ended June 30, 2011

and 2010, respectively.

Cash used in financing activities in these periods included:

• payment of long-term debt of $2.4 million and $25.3 million during the years ended June 30, 2011 and

2010, respectively.

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 and market and
regulatory developments. As of June 30, 2011, we believe our current cash and cash equivalents and available
debt will be sufficient to fund working capital requirements, capital expenditures and operations for at least the
next 12 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.

Contractual Cash Obligations. Our contractual obligations and commercial commitments as of June 30,

2011 are summarized below:

Contractual Obligations

Operating leases(1) . . . . . . . . . . . . . . . . . .
Purchase commitments(2)
. . . . . . . . . . . .
Debt maturities(3) . . . . . . . . . . . . . . . . . . .

Payments Due by Period (in thousands)

Total

$ 4,590
6,149
12,144

Less Than
1 Year

$

920
6,149
3,813

1-3 Years

3-5 Years

$1,059
—
3,725

$ 886
—
4,606

Total . . . . . . . . . . . . . . . . . . . . . . . . . . .

$22,883

$10,882

$4,784

$5,492

More Than
5 Years

$1,725
—
—

$1,725

(1) The amounts reflected in the table above for operating leases represent future minimum payments under a

non-cancellable operating lease for our office and production facility along with equipment.

(2) This amount reflects open purchase orders.

(3) The amounts reflected in the table above represents debt maturities under various debt agreements.

INFLATION

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

periods presented.

52

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 2011, the FASB issued guidance to amend the accounting and disclosure requirements on fair value
measurements. The new guidance limits the highest-and-best-use measure to nonfinancial assets, permits certain
financial assets and liabilities with offsetting positions in market or counterparty credit risks to be measured at a
net basis, and provides guidance on the applicability of premiums and discounts. Additionally, the new guidance
expands the disclosures on Level 3 inputs by requiring quantitative disclosure of the unobservable inputs and
assumptions, as well as description of the valuation processes and the sensitivity of the fair value to changes in
unobservable inputs. The new guidance will be effective for us beginning January 1, 2012. Other than requiring
additional disclosures, we do not anticipate material impacts on our consolidated financial statements upon
adoption.

In June 2011, the FASB issued guidance requiring that all non-owner changes in stockholders’ equity be
presented either in a single continuous statement of comprehensive income or in two separate but consecutive
statements. In the two-statement approach, the first statement should present total net income and its components
followed consecutively by a second statement
that should present total other comprehensive income, the
components of other comprehensive income, and the total of comprehensive income. The new guidance will be
effective for us beginning July 1, 2012. Other than requiring additional disclosures, we do not anticipate material
impacts on our consolidated 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-K and in other materials filed or to
be filed by us with the Securities and Exchange Commission (as well as information included in oral statements
or other written statements made or to be made by us). Forward-looking statements include all statements based
on future expectations. This Form 10-K contains forward-looking statements that involve risks and uncertainties,
including our expectations regarding commercial launch of the Stealth 360°; the adoption of the PAD Systems
through our direct sales force; the use of the PAD Systems to treat coronary lesions and the potential market for
this application in the interventional coronary market; our clinical trials and future presentations of clinical trial
results; our plans to explore the acquisition of other product lines, technologies or companies and to continue to
evaluate distribution agreements, licensing transactions and other strategic partnerships; future reimbursement
for the PAD Systems; the possibility that we may sell internationally in the future; the conversion of and future
capacity of our facilities; an increase in revenues; a temporarily increase in production costs; gross margins in the
second half of fiscal 2012 will be fairly consistent with fiscal 2011; an increase in selling, general and
administrative expenses; research and development expenses being above amounts incurred in fiscal 2011; no
payment of dividends in the foreseeable future; and the sufficiency of our current and anticipated financial
resources to fund operating expenses for at least the next 12 months. 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; the experience of physicians regarding the effectiveness and
reliability of the PAD Systems; the potential for unanticipated delays in enrolling medical centers and patients for

53

clinical trials; actual clinical trial results; dependence on market growth; the reluctance of physicians to accept
new products; the effectiveness of the Stealth 360°; the difficulty of successfully managing operating costs; FDA
clearances and approvals;
the impact of competitive products and pricing; approval of products for
reimbursement and the level of reimbursement; unanticipated developments affecting our estimates regarding
expenses, future revenues and capital requirements; fluctuations in results and expenses based on new product
introductions, sales mix, unanticipated warranty claims, and the timing of project expenditures; our inability to
expand our sales and marketing organization and research and development efforts; our ability to obtain and
maintain intellectual property protection for product candidates; our actual financial resources; general economic
conditions; and those matters identified and discussed in Item 1A of this Form 10-K under “Risk Factors.”

You should read these risk factors and the other cautionary statements made in this Form 10-K as being
applicable to all related forward-looking statements wherever they appear in this Form 10-K. We cannot assure
you that the forward-looking statements in this Form 10-K 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-K 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 7A. 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 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 June 30,
2011 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.

54

Item 8. Financial Statements and Supplementary Data.

Index to Financial Statements

Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Statements of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Statements of Changes in Stockholders’ (Deficiency) Equity and Comprehensive Loss . . . . .

Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Page

F-1

F-2

F-3

F-4

F-5

F-6

55

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of
Cardiovascular Systems, Inc.

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of
operations, of changes in stockholders’ equity (deficiency) and comprehensive loss and of cash flows present
fairly, in all material respects, the financial position of Cardiovascular Systems, Inc. at June 30, 2011 and 2010,
and the results of their operations and cash flows for each of the three years in the period ended June 30, 2011 in
conformity with accounting principles generally accepted in the United States of America. Also in our opinion,
the Company maintained, in all material respects, effective internal control over financial reporting as of June 30,
2011, based on criteria established in Internal Control—Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO). The Company’s management is responsible for
these financial statements, for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying
Management’s Report on Internal Control over Financial Reporting included in item 9A. Our responsibility is to
express opinions on these financial statements and on the Company’s internal control over financial reporting
based on our audits (which was an integrated audit in 2011). We conducted our audits in accordance with the
standards of the Public Company Accounting Oversight Board (United States). Those standards require that we
plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of
material misstatement and whether effective internal control over financial reporting was maintained in all
material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal
control over financial reporting included obtaining an understanding of internal control over financial reporting,
assessing the risk that a material weakness exists, and testing and evaluating the design and operating
effectiveness of internal control based on the assessed risk. Our audits also included performing such other
procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable
basis for our opinions.

A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting
includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with generally accepted accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable
assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP

Minneapolis, MN

September 12, 2011

F-1

Cardiovascular Systems, Inc.

Consolidated Balance Sheets

June 30,
2011

June 30,
2010

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

Current assets

ASSETS

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 21,159
13,254
5,818
797

$ 23,717
9,394
4,319
1,048

Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Patents, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt conversion option and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

41,028
2,383
2,314
1,033

38,478
1,964
1,712
568

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 46,758

$ 42,722

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities

Current maturities of long-term debt
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred grant incentive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

$

3,813
5,181
647
5,545

2,302
3,353
1,181
6,569

Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

15,186

13,405

Long-term liabilities

Long-term debt, net of current maturities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred grant incentive . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8,331
1,497
109

9,937

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

25,123

8,985
2,208
409

11,602

25,007

Commitments and contingencies

Common stock, $0.001 par value at June 30, 2011 and 2010; authorized 100,000,000
common shares at June 30, 2011 and 2010; issued and outstanding 16,987,068 at
June 30, 2011 and 15,148,549 at June 30, 2010, respectively . . . . . . . . . . . . . . . . . .
Additional paid in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common stock warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

17
174,157
9,909
(162,448)

15
157,718
11,305
(151,323)

Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

21,635

17,715

Total liabilities and stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 46,758

$ 42,722

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

F-2

Cardiovascular Systems, Inc.

Consolidated Statements of Operations

Year Ended June 30,

2011

2010

2009

Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

(Dollars in thousands, except per share and
share amounts)
64,829
$
15,003

78,780
16,277

56,461
16,194

$

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

62,503

49,826

40,267

Expenses
Selling, general and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Research and development

Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Loss from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Interest and other, net

Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decretion of redeemable convertible preferred stock . . . . . . . . . . . . . .

Net loss available to common stockholders . . . . . . . . . . . . . . . . . . . . .

Loss per common share Basic and diluted . . . . . . . . . . . . . . . . . . . . . .

62,372
8,940

71,312

(8,809)
(2,316)

(11,125)
—

62,447
10,278

72,725

(22,899)
(1,005)

(23,904)
—

59,822
14,678

74,500

(34,233)
2,338

(31,895)
22,781

$

$

(11,125) $

(23,904) $

(9,114)

(0.70) $

(1.62) $

(1.13)

Weighted average common shares used in computation Basic and

diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

15,915,800

14,748,293

8,068,689

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

F-3

Cardiovascular Systems, Inc.

Consolidated Statements of Changes in Stockholders’ Equity (Deficiency) and
Comprehensive Loss

Common Stock

Additional

Shares

Amount

Paid In Capital Warrants

Accumulated
Deficit

Total

Comprehensive
Loss

Balances at June 30, 2008 . . . . . . . . . . 4,900,984 $ 35,933

(Dollars in thousands, except per share and share amounts)
$(118,305) $(81,692)

— $

680

$

$(39,160)

Stock-based compensation related to

restricted stock awards, net . . . . . . . .

425,359

2,464

2,003

Stock-based compensation related to

stock options . . . . . . . . . . . . . . . . . . .

Exercise of stock options and warrants

at $1.55-$8.83 per share . . . . . . . . . .

100,333

Issuance/expiration of common stock

warrants . . . . . . . . . . . . . . . . . . . . . . .

Conversion of preferred warrants to

common warrants . . . . . . . . . . . . . . .

Decretion of redeemable convertible

preferred stock . . . . . . . . . . . . . . . . . .

Conversion of preferred stock to

756

640

1,548

307

(422)

76

(8,217)

9,955

1,069

common stock . . . . . . . . . . . . . . . . . . 5,954,389

6

75,456

restricted stock awards, net . . . . . . . .

686,509

1

5,014

Merger with Replidyne, net of merger

costs . . . . . . . . . . . . . . . . . . . . . . . . . . 2,732,839

To adjust common stock to par value . .
Net loss and comprehensive loss . . . . . .

Balances at June 30, 2009 . . . . . . . . . . 14,113,904 $
Stock-based compensation related to

Stock-based compensation related to

stock options . . . . . . . . . . . . . . . . . . .

Exercise of stock options and warrants

at $1.55-$8.83 per share . . . . . . . . . .

38,192

Issuance/expiration of common stock

warrants . . . . . . . . . . . . . . . . . . . . . . .

Employee Stock Purchase Plan

Activity . . . . . . . . . . . . . . . . . . . . . . .
Net loss and comprehensive loss . . . . . .

309,944

Balances at June 30, 2010 . . . . . . . . . . 15,148,549 $
Stock-based compensation related to

4,255

288

71

1,635

(3)

26

4,467

2,304

525

1,814

1,069

22,781

22,781

75,462

35,497
—
(31,895)

(31,895)

(31,895)

5,015

4,255

285

97

(23,904)

1,635
(23,904)

(23,904)

3
(39,864)

35,494
39,864

14

$146,455

$11,282

$(127,419) $ 30,332

$(31,895)

15

$157,718

$11,305

$(151,323) $ 17,715

$(23,904)

restricted stock awards, net . . . . . . . .

604,249

1

4,814

Stock-based compensation related to

stock options . . . . . . . . . . . . . . . . . . .

Exercise of stock options and warrants

1,306

at $5.43-$8.83 per share . . . . . . . . . .

435,709

3,234

(1,606)

Issuance/expiration of common stock

warrants . . . . . . . . . . . . . . . . . . . . . . .

Employee Stock Purchase Plan

Activity . . . . . . . . . . . . . . . . . . . . . . .
Conversion of convertible debt . . . . . . .
Beneficial conversion feature on

convertible debt . . . . . . . . . . . . . . . . .
Net loss and comprehensive loss . . . . . .

6

210

160,000
638,561

1

1,313
5,530

236

4,815

1,306

1,628

216

1,313
5,531

(11,125)

236
(11,125)

(11,125)

Balances at June 30, 2011 . . . . . . . . . . 16,987,068 $

17

$174,157

$ 9,909

$(162,448) $ 21,635

$(11,125)

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

F-4

Cardiovascular Systems, Inc.

Consolidated Statements of Cash Flows

Year Ended June 30,

2011

2010

2009

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

Cash flows from operating activities
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(11,125) $(23,904) $(31,895)
Adjustments to reconcile net loss to net cash used in operations

Depreciation and amortization of property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Recoveries of) provision for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of patents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decretion of redeemable convertible preferred stock warrants . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of debt discount
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt conversion and valuation of conversion options, net
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(Gain) impairment on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on auction rate securities put option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Changes in assets and liabilities, net of merger

Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

662
(36)
54
—
(25)
859
6,468
250
—
—

(3,718)
(1,499)
323
1,828
(2,402)

417
548
95
137
51
53
— (2,991)
1,228
—
6,771
—
1,683
— (2,800)

257
—
9,094
—
(150)

(1,057)
(950)
6
(1,398)
3,799

(3,672)
407
2,362
(1,100)
(268)

Net cash used in operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(8,361)

(13,567)

(29,710)

Cash flows from investing activities
Expenditures for property and equipment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales of investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Costs incurred in connection with patents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash acquired in Replidyne merger, net of transaction costs paid . . . . . . . . . . . . . . . . . . . . . . . . .

(1,081)

(793)
— 22,950
(400)

(957)
50
(436)
— 37,369

(656)
—

Net cash (used in) provided by investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(1,737)

21,757

36,026

Cash flows from financing activities
Issuance of common stock under employee stock purchase plan . . . . . . . . . . . . . . . . . . . . . . . . . .
Issuance of convertible preferred stock warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercise of stock options and warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from long-term debt
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments on long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

965
—
1,523
7,500
(2,448)

1,197
—
285
5,911
(25,277)

—
75
525
19,845
(945)

Net cash provided by (used in) financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7,540

(17,884)

19,500

Net change in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2,558)

(9,694)

25,816

Cash and cash equivalents
Beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

23,717

33,411

7,595

End of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 21,159 $ 23,717 $ 33,411

Noncash investing and financing activities
Decretion (accretion) of redeemable convertible preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . $
Conversion of Series A warrants to common warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Issuance of common stock warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Beneficial conversion feature on convertible debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Issuance of common stock warrants prior to merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Conversion of redeemable convertible preferred stock to common stock . . . . . . . . . . . . . . . . . . .
Expiration of common stock warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustment of common stock to par value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amendment of restricted stock units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Conversion of convertible debt
Net exercise of common stock warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Premium on convertible debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Supplemental cash flow information
Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,447 $ 1,161 $ 1,051

— $(22,781)
1,069
—
1,814
97
—
97
8,217
—
— 75,456
76
71
39,864
1
—
517
—
—
—
—
—
—
—
—

— $
—
216
236
—
—
—
2
—
5,531
1,505
1,263
250

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

F-5

CARDIOVASCULAR SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share and share amounts)

1. Summary of Significant Accounting Policies

Company Description

Cardiovascular Systems, Inc. was incorporated as Replidyne, Inc. in Delaware in 2000. On February 25,
2009, Replidyne, Inc. completed its reverse merger with Cardiovascular Systems, Inc., a Minnesota corporation
incorporated in 1989 (“CSI-MN”), in accordance with the terms of the Agreement and Plan of Merger and
Reorganization, dated as of November 3, 2008 (the “Merger Agreement”). Pursuant to the Merger Agreement,
CSI-MN continued after the merger as the surviving corporation and a wholly-owned subsidiary of Replidyne. At
the effective time of the merger, Replidyne, Inc. changed its name to Cardiovascular Systems, Inc. (“CSI”) and
CSI-MN merged with and into CSI, with CSI continuing after the merger as the surviving corporation. These
transactions are referred to herein as the “merger.”

The Company develops, manufactures and markets devices for the treatment of vascular diseases. The
Company’s primary products, the Diamondback 360° PAD System, the Diamondback Predator 360° PAD
System, and the Stealth 360° PAD System, 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 treatment alternatives. Prior to the merger, Replidyne was a biopharmaceutical company focused on
discovering, developing, in-licensing and commercializing innovative anti-infective products.

Principles of Consolidation

The consolidated balance sheets, statements of operations, changes in stockholders’ equity (deficiency) and
comprehensive loss, and cash flows include the accounts of the Company and its wholly-owned inactive
Netherlands subsidiary, SCS B.V., after elimination of all intercompany transactions and accounts. SCS B.V. was
formed for the purpose of conducting human trials and the development of production facilities. Operations of
the subsidiary ceased in fiscal 2002; accordingly, there are no assets or liabilities included in the consolidated
financial statements related to SCS B.V.

Cash and Cash Equivalents

The Company considers all money market funds and other investments purchased with an original maturity

of three months or less to be cash and cash equivalents.

F-6

CARDIOVASCULAR SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Accounts Receivable and Allowance for Doubtful Accounts

Trade accounts receivable are recorded at the invoiced amount and do not bear interest. Customer credit
terms are established prior to shipment with the general standard being net 30 days. Collateral or any other
security to support payment of these receivables generally is not required. The Company maintains allowances
for doubtful accounts. This allowance is an estimate and is regularly evaluated by the Company for adequacy by
taking into consideration factors such as past experience, credit quality of the customer base, age of the
receivable balances, both individually and in the aggregate, and current economic conditions that may affect a
customer’s ability to pay. Provisions for the allowance for doubtful accounts attributed to bad debt are recorded
in general and administrative expenses. The following table shows allowance for doubtful accounts activity for
the fiscal years ended June 30, 2011 and 2010:

Balance at June 30, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Write-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Balance at June 30, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Write-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Amount

$ 253
279
(129)

$ 403
51
(103)

Balance at June 30, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 351

Inventories

Inventories are stated at the lower of cost or market with cost determined on a first-in, first-out (“FIFO”)
method of valuation. The establishment of inventory allowances for excess and obsolete inventories is based on
estimated exposure on specific inventory items.

Property and Equipment

Property and equipment is carried at cost, less accumulated depreciation and amortization. Depreciation is
computed using the straight-line method over estimated useful lives of five years for production equipment and
furniture and fixtures; three years for computer equipment and software; and the shorter of their estimated useful
lives or the lease term for leasehold improvements. Expenditures for maintenance and repairs and minor renewals
and betterments which do not extend or improve the life of the respective assets are expensed as incurred. All
other expenditures for renewals and betterments are capitalized. The assets and related depreciation accounts are
adjusted for property retirements and disposals with the resulting gains or losses included in the consolidated
statement of operations.

Patents

The capitalized costs incurred to obtain patents are amortized using the straight-line method over their
remaining estimated lives. Patent amortization begins at the time of patent application approval, and does not
exceed 20 years. The recoverability of capitalized patent costs is dependent upon the Company’s ability to derive
revenue-producing products from such patents or the ultimate sale or licensing of such patent rights. Patents that
are abandoned are written off at the time of abandonment.

Long-Lived Assets

The Company regularly evaluates the carrying value of long-lived assets for events or changes in
circumstances that indicate that the carrying amount may not be recoverable or that the remaining estimated

F-7

CARDIOVASCULAR SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

useful life should be changed. An impairment loss is recognized when the carrying amount of an asset exceeds
the anticipated future undiscounted cash flows expected to result from the use of the asset and its eventual
disposition. The amount of the impairment loss to be recorded, if any, is calculated by the excess of the asset’s
carrying value over its fair value.

Operating Leases

The Company leases manufacturing and office space under operating lease agreements. The leases contain
rent escalation clauses for which the lease expense is recognized on a straight-line basis over the terms of the
leases. Rent expense that is recognized but not yet paid is included in other liabilities on the consolidated balance
sheets.

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. These
criteria are generally met at the time of delivery when the risk of loss and title passes to the customer. The
Company records estimated sales returns, discounts and rebates as a reduction of net sales in the same period
revenue is recognized.

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.

Warranty Costs

The Company provides its customers with the right to receive a replacement if a product is determined to be
defective at the time of shipment. Warranty reserve provisions are estimated based on Company experience,
volume, and expected warranty claims. Warranty reserve, provisions and claims for the fiscal years ended
June 30, 2011 and 2010 were as follows:

Balance at June 30, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Balance at June 30, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Amount

$ 65
257
(206)

$ 116
159
(205)

Balance at June 30, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 70

Income Taxes

Deferred income taxes are recorded to reflect the tax consequences in future years of differences between
the tax bases of assets and liabilities and their financial reporting amounts based on enacted tax rates applicable
to the periods in which the differences are expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount expected to be realized.

Developing a provision for income taxes, including the effective tax rate and the analysis of potential tax
exposure items, if any, requires significant judgment and expertise in federal and state income tax laws,
regulations and strategies, including the determination of deferred tax assets. The Company’s judgment and tax
strategies are subject to audit by various taxing authorities.

F-8

CARDIOVASCULAR SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Existing accounting guidance requires that accounting for uncertainty in income taxes is recognized in the
financial statements. The guidance provides that a tax benefit from an uncertain tax position may be recognized
when it is more likely than not that the position will be sustained upon examination, including resolutions of any
related appeals or litigation processes, based on the technical merits of the position. Income tax positions must
meet a more-likely-than-not recognition threshold to be recognized. The guidance also provides guidance on
measurement, derecognition, classification, interest and penalties, accounting in interim periods, disclosure and
transition.

Research and Development Expenses

Research and development expenses include costs associated with the design, development,

testing,
enhancement and regulatory approval of the Company’s products. Research and development expenses include
employee compensation, including stock-based compensation, supplies and materials, consulting expenses, travel
and facilities overhead. The Company also incurs significant expenses to operate clinical trials, including trial
design, third-party fees, clinical site reimbursement, data management and travel expenses. Research and
development expenses are expensed as incurred.

Concentration of Credit Risk

Financial instruments that potentially expose the Company to concentration of credit risk consist primarily
of cash and cash equivalents, investments and accounts receivable. The Company maintains its cash and
investment balances primarily with one financial institution. At times, these balances exceed federally insured
limits. The Company has not experienced any losses in such accounts and believes it is not exposed to any
significant credit risk in cash and cash equivalents.

Fair Value of Financial Instruments

Under the authoritative guidance for fair value measurements, fair value is defined as the exit price, or the
amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants as of the measurement date. The authoritative guidance also establishes a hierarchy for inputs
used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable
inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs market
participants would use in valuing the asset or liability developed based on market data obtained from sources
independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the
factors market participants would use in valuing the asset or liability developed based upon the best information
available in the circumstances. The categorization of financial assets and financial liabilities within the valuation
hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The hierarchy
is broken down into three levels defined as follows:

Level 1 Inputs — quoted prices in active markets for identical assets and liabilities

Level 2 Inputs — observable inputs other than quoted prices in active markets for identical assets and

liabilities

Level 3 Inputs — unobservable inputs

F-9

CARDIOVASCULAR SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table sets forth the fair value of the Company’s financial instruments that were measured on a
recurring basis as of June 30, 2011. Assets are measured on a recurring basis if they are remeasured at least
annually:

Balance at June 30, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales of investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Issuance of conversion option . . . . . . . . . . . . . . . . . . . . . . . . . .

Trading
Securities

$ 20,000
(20,150)
150
—

Balance at June 30, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Issuance of convertible notes . . . . . . . . . . . . . . . . . . . . . . . . . . .
Conversion of convertible notes . . . . . . . . . . . . . . . . . . . . . . . . .
Change in conversion option valuation . . . . . . . . . . . . . . . . . . .

$

Balance at June 30, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

—
—
—
—

—

Level 3

Auction Rate
Securities Put
Option

$ 2,800
(2,800)
—
—

$ —
—
—
—

$ —

Conversion
Option

$ —
—
—
388

$

388
1,715
(1,669)
491

$

925

The fair value of the conversion option is related to the loan and security agreement with Partners for
Growth (described in Note 3) and has been included as a component of debt conversion option and other assets
on the accompanying balance sheet. The Monte Carlo option pricing model used to determine the value of the
conversion option included various inputs including historical volatility, stock price simulations, and assessed
behavior of the Company and Partners for Growth based on those simulations. Based upon these inputs, the
Company considers the conversion option to be a Level 3 investment.

As of June 30, 2011, the Company believes that the carrying amounts of its other financial instruments,
including accounts receivable, accounts payable and accrued liabilities, approximate their fair value due to the
short-term maturities of these instruments. The carrying amount of long-term debt approximates fair value based
on interest rates currently available for debt with similar terms and maturities.

Use of Estimates

The preparation of the Company’s consolidated financial statements in conformity with accounting
principles generally accepted in the United States of America 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 stock option and restricted stock awards are
expensed in the consolidated statements of operations ratably over the related vesting period. The Company
calculates the fair value on the date of grant using a Black-Scholes model.

Preferred Stock

Prior to the merger, the Company recorded the current estimated fair value of its convertible preferred stock
on a quarterly basis based on the fair market value of that stock as determined by management and the board of
directors. The determination of fair market value included factors such as recent financing activity, preferred

F-10

CARDIOVASCULAR SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

stock rights and preferences, clinical trials, revenues, and regulatory approval process. The Company recorded
changes in the fair value of its redeemable convertible preferred stock in the consolidated statements of changes
in stockholders’ equity (deficiency) and comprehensive loss and consolidated statements of operations as
accretion of redeemable convertible preferred stock. Concurrent with the merger, all preferred stock was
converted to common stock and, accordingly, was reclassified to stockholders’ equity (deficiency).

Preferred Stock Warrants

The freestanding warrant that was related to the Company’s redeemable convertible preferred stock was
classified as a liability on the balance sheet as of June 30, 2008. The warrant was subject to remeasurement at
each balance sheet date and any change in fair value was recognized as a component of other income (expense).
Fair value was measured using the Black-Scholes option pricing model. Concurrent with the merger, all preferred
stock warrants were converted into warrants to purchase common stock and, accordingly, the liability was
reclassified to stockholders’ equity (deficiency).

Reclassifications

Certain reclassifications have been made to the June 30, 2010 balance sheet to conform to June 30, 2011
presentation. These reclassifications had no effect on previously reported net loss, stockholders’ equity, or cash
flows as previously reported.

Recent Accounting Pronouncements

In May 2011, the Financial Accounting Standards Board (FASB) issued guidance to amend the accounting
and disclosure requirements on fair value measurements. The new guidance limits the highest-and-best-use
measure to nonfinancial assets, permits certain financial assets and liabilities with offsetting positions in market
or counterparty credit risks to be measured at a net basis, and provides guidance on the applicability of premiums
the new guidance expands the disclosures on Level 3 inputs by requiring
and discounts. Additionally,
quantitative disclosure of the unobservable inputs and assumptions, as well as description of the valuation
processes and the sensitivity of the fair value to changes in unobservable inputs. The new guidance will be
effective for the Company beginning January 1, 2012. Other than requiring additional disclosures, the Company
does not anticipate material impacts on its consolidated financial statements upon adoption.

In June 2011, the FASB issued guidance requiring that all non-owner changes in stockholders’ equity be
presented either in a single continuous statement of comprehensive income or in two separate but consecutive
statements. In the two-statement approach, the first statement should present total net income and its components
that should present total other comprehensive income, the
followed consecutively by a second statement
components of other comprehensive income, and the total of comprehensive income. The new guidance will be
effective for the Company beginning July 1, 2012. Other than requiring additional disclosures, the Company does
not anticipate material impacts on its consolidated financial statements upon adoption.

F-11

CARDIOVASCULAR SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

2. Selected Consolidated Financial Statement Information

Accounts Receivable
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Inventories
Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Work in process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Property and equipment
Equipment
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Furniture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Less: Accumulated depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . .

Patents
Patents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Accumulated amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

June 30,

2011

2010

$13,605
(351)

$ 9,797
(403)

$13,254

$ 9,394

$ 2,705
640
2,473

$ 1,256
282
2,781

$ 5,818

$ 4,319

$ 3,968
318
180

$ 3,085
168
131

4,466
(2,083)

3,384
(1,420)

$ 2,383

$ 1,964

$ 2,770
(456)

$ 2,114
(402)

$ 2,314

$ 1,712

As of June 30, 2011, future estimated amortization of patents and patent licenses will be:

2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

53
53
53
53
48
2,054

$2,314

F-12

CARDIOVASCULAR SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

This future amortization expense is an estimate. Actual amounts may vary from these estimated amounts

due to additional intangible asset acquisitions, potential impairment, accelerated amortization or other events.

Accrued expenses
Salaries and bonus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued vacation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Merger related lease obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

June 30,

2011

2010

$ 938
2,111
1,648
293
555

$1,620
1,753
1,624
1,099
473

$5,545

$6,569

3. 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 includes a $10,000 term loan and a $15,000 line of credit. The terms of each
of these loans are as follows:

• The $10,000 term loan has a fixed interest rate of 9.0% and a final payment amount equal to 1.0% of the
loan amount due at maturity. This term loan has a 36 month maturity, with repayment terms that include
interest only payments during the first six months followed by 30 equal principal and interest payments.
This term loan also includes an acceleration provision that requires the Company to pay the entire
outstanding balance, plus a penalty ranging from 1.0% to 3.0% of the principal amount, upon prepayment
or the occurrence and continuance of an event of default. In connection with entering into the agreement,
the Company amended a warrant previously granted to Silicon Valley Bank. The warrant provided an
option to purchase 8,493 shares of common stock at an exercise price of $5.48 per share. The warrant was
exercised in June 2011. The balance outstanding on the term loan at June 30, 2011 and 2010 was $7,286
and $9,588, respectively, net of the unamortized discount associated with the warrant.

• The $15,000 line of credit has a two year maturity and a floating interest rate equal to Silicon Valley
Bank’s prime rate, plus 2.0%, with an interest rate floor of 6.0%. Interest on borrowings is due monthly
and the principal balance is due at maturity. Borrowings on the line of credit are based on (a) 80% of
eligible domestic receivables, plus (b) the lesser of 40% of eligible inventory or 25% of eligible domestic
receivables or $2,500, minus (c) to the extent in effect, certain loan reserves as defined in the agreement.
Accounts receivable receipts are deposited into a lockbox account in the name of Silicon Valley Bank.
The accounts receivable line of credit is subject to non-use fees, annual fees, and cancellation fees. The
agreement provides that initially 50% of the outstanding principal balance of the $10,000 term loan
reduces available borrowings under the line of credit. Upon the achievement of certain financial
covenants, the amount reducing available borrowings will be reduced to zero. There was no outstanding
balance on the line of credit at June 30, 2011 or 2010.

Borrowings from Silicon Valley Bank are secured by all of the Company’s assets. The borrowings are
subject to prepayment penalties and financial covenants, including maintaining certain liquidity and fixed charge
coverage ratios, and certain three-month EBITDA targets. The Company was in compliance with all financial
covenants as of June 30, 2011. The agreement also includes subjective acceleration clauses which permit Silicon
Valley Bank to accelerate the due date under certain circumstances, including, but not limited to, material
adverse effects on the Company’s financial status or otherwise. Any non-compliance by the Company under the
terms of debt arrangements could result in an event of default under the Silicon Valley Bank loan, which, if not
cured, could result in the acceleration of this debt.

F-13

CARDIOVASCULAR SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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). The agreement provides that PFG will make loans to the Company up to $4,000. 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.

Under the agreement, PFG provided the Company with an initial loan of $1,500 (the “initial loan”) on
April 15, 2010. During the three months ended December 31, 2010, PFG, at its option, converted the entire
$1,500 (at par) into 276,243 shares of the Company’s common stock in accordance with the conversion terms set
forth in the note for the initial loan. On December 3, 2010, and January 26, 2011, the Company issued PFG
additional convertible notes under the agreement of $3,500 and $500, respectively (“subsequent loans”). During
the three months ended June 30, 2011, PFG, at its option, converted the $3,500 subsequent loan (at par) into
362,320 shares of the Company’s common stock in accordance with the conversion terms set forth in the note for
the subsequent loan. On June 30, 2011, the Company issued PFG an additional convertible note under the
agreement of $3,500 (the “current loans”). At any time prior to the maturity date, PFG may at its option convert
the remaining $500 subsequent loan or the $3,500 current loan into shares of the Company’s common stock at
$12.40 or $13.64 per share, respectively, which equaled 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. As a result of the various note
issuances and conversions, the Company has reflected a net expense of $859 for the year ended June 30, 2011 as
a component of interest and other, net on the accompanying statement of operations, which represents the net
effect of (i) the write-off of the conversion option on the initial loan and subsequent loan, (ii) the write-off of the
unamortized debt premium on the initial and subsequent loan and (iii) the change in fair value of the conversion
options on all loans. The balance outstanding under the loan and security agreement at June 30, 2011 was $4,607,
including the net unamortized premium associated with Company’s conversion option and related beneficial
conversion feature. The balance outstanding under the loan and security agreement at June 30, 2010 was $1,311,
including the net unamortized discount associated with the warrant and Company’s conversion option.

On July 26, 2011, PFG at its option converted the remaining subsequent loan of $500 (at par) into 40,323
shares of the Company’s common stock in accordance with the conversion terms set forth in the note for the
subsequent loan. The Company then subsequently issued PFG a new convertible note of $500. At any time prior
to the maturity date, PFG may at its option convert the $500 note into shares of the Company’s common stock at
$15.30 per share, which equaled the ten-day volume weighted average price per share of the Company’s common
stock prior to the issuance date of the note.

On August 23, 2011, the loan and security agreement was amended. The amended agreement provides that
PFG will make loans to the Company up to $5,000. All other terms of the original agreement remain the same.
The Company then subsequently issued PFG a new convertible note of $1,000, which increased the aggregate
amount drawn under the loan and security agreement, as amended, to the full available amount of $5,000. At any
time prior to the maturity date, PFG may at its option convert the $1,000 note into shares of the Company’s
common stock at $13.42 per share, which equaled the ten-day volume weighted average price per share of the
Company’s common stock prior to the issuance date of the note.

The 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,

F-14

CARDIOVASCULAR SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

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, and certain three-month EBITDA targets. The Company was in compliance with all
financial covenants at June 30, 2011. 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 the loan over
its remaining term, or require the immediate payment of all amounts outstanding under the loan and foreclose on
any or all collateral, depending on which financial covenants are not maintained.

In connection with the execution of the PFG loan and security agreement, the Company issued a warrant to
PFG on April 14, 2010, which allows PFG to purchase 147,330 shares of the Company’s common stock at a
price per share of $5.43, which price was based on the ten-day volume weighted average price per share of the
Company’s common stock prior to the date of the agreement. The warrant was exercised in June 2011.

As of June 30, 2011, debt maturities (including debt discount and premium) were as follows:

2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 3,962
3,589
250
4,000

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: Current Maturities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$11,801
(3,813)

Long-Term Debt (excluding net unamortized premium) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Add: Net Unamortized Premium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 7,988
343

Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 8,331

4.

Interest and Other, Net

Interest and other, net, includes the following:

Year Ended June 30,

2011

2010

2009

Interest expense, including premium and discount amortization . . . . . .
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in fair value of conversion option . . . . . . . . . . . . . . . . . . . . . . .
Net write-offs upon conversion (option and unamortized premium)
. .
Decretion of redeemable convertible preferred stock warrants . . . . . . .
Gain on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(1,417)
12
491
(1,350)
—
—
(52)

$(1,435)
402
—
—
—
150
(122)

$(2,350)
3,380
—
—
2,991
(1,683)
—

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(2,316)

$(1,005)

$ 2,338

F-15

CARDIOVASCULAR SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

5. Common Stock Warrants

During the year ended June 30, 2010, the Company entered into a loan and security agreement with Partners
for Growth III, L.P. In connection with this agreement the Company issued PFG warrants to purchase 147,330
shares of the Company’s common stock at an exercise price of $5.43 per share. Half of the warrants were
immediately exercisable, and the remaining half became exercisable as additional funds were drawn during the
year ended June 30, 2011. The immediately exercisable warrants were assigned a value of $97 for accounting
purposes, while the warrants that vested during the year ended June 30, 2011 were assigned a value of $216. The
warrants were exercised in June 2011. See Note 3 for additional information.

The following summarizes common stock warrant activity:

Warrants outstanding at June 30, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Warrants issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Warrants converted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Warrants exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Warrants expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Warrants outstanding at June 30, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Warrants issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Warrants exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Warrants expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Warrants outstanding at June 30, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Warrants exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Warrants expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Warrants
Outstanding

Price Range
per Share

158,041
2,566,099
439,317
(33,431)
(8,605)

3,121,421
147,330
(879)
(25,880)

3,241,992
(548,366)
(3,202)

$1.55-12.37
$8.83-61.30
$8.83-14.16
$1.55-7.73
$7.73

$1.55-61.30
$5.43
$1.55
$1.55-14.16

$5.43-61.30
$5.43-8.83
$9.28

Warrants outstanding at June 30, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,690,424

$5.43-61.30

There were no warrants granted during the year ended June 30, 2011. The following assumptions were
utilized in determining the fair value of warrants issued during the year ended June 30, 2010 under the Black-
Scholes model:

Weighted average fair value of warrants granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk-free interest rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected life . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Year Ended
June 30,
2010

$1.95
1.39%
2.5 years
55.9%
None

6. Stock Options and Restricted Stock Awards

The Company has a 2007 Equity Incentive Plan (the “2007 Plan”), which was assumed from CSI-MN,
under which options to purchase common stock and restricted stock awards have been granted to employees,
directors and consultants at exercise prices determined by the board of directors; and also in connection with the
merger the Company assumed options and restricted stock awards granted by CSI-MN under its 1991 Stock
Option Plan (the “1991 Plan”) and 2003 Stock Option Plan (the “2003 Plan”) (the 2007 Plan, the 1991 Plan and
the 2003 Plan collectively, the “Plans”). The 1991 Plan and 2003 Plan permitted the granting of incentive stock
options and nonqualified options. A total of 485,250 shares of common stock were originally reserved for

F-16

CARDIOVASCULAR SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

issuance under the 1991 Plan, but with the approval of the 2003 Plan no additional options were granted under it.
A total of 2,458,600 shares of common stock were originally reserved for issuance under the 2003 Plan, but with
the approval of the 2007 Plan no additional options will be granted under it.

The 2007 Plan originally allowed for the granting of up to 1,941,000 shares of common stock as approved
by the board of directors in the form of nonqualified or incentive stock options, restricted stock awards, restricted
stock unit awards, performance share awards, performance unit awards or stock appreciation rights to officers,
directors, consultants and employees of the Company. The Plan was amended in February 2009 to increase the
number of authorized shares to 2,509,969. Generally, options or shares granted under the 2007 Plan expire ten
years from the date of grant and vest over three years. The amended 2007 Plan includes a renewal provision
whereby the number of shares shall automatically be increased on the first day of each fiscal year ending on
July 1, 2017, by the lesser of (i) 970,500 shares, (ii) 5% of the outstanding common shares on such date, or (iii) a
lesser amount determined by the board of directors. On July 1, 2011, the number of shares available for grant was
increased by 849,353 under the 2007 Plan renewal provision.

The Company also maintains the 2006 Equity Incentive Plan (the “2006 Plan”), relating to Replidyne
activity prior to the merger in February 2009. A total of 794,641 shares were originally reserved under the 2006
Plan, but effective with the merger no additional options will be granted under it. Generally, options granted
under the 2006 Plan expire ten years from the date of grant and vested over four years. Vested options granted to
employees terminated 90 days after termination.

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.

Stock option activity is as follows:

Options outstanding at June 30, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Options granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Options obtained through merger
Options exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Options forfeited or expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Options outstanding at June 30, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Options granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Options exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Options forfeited or expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Options outstanding at June 30, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Options exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Options forfeited or expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Number of
Options(a)

3,803,124
99,314
239,716
(66,903)
(367,369)

3,707,882
58,551
(37,313)
(372,127)

3,356,993
(180,702)
(105,292)

Options outstanding at June 30, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3,070,999

Weighted
Average
Exercise Price

$10.19
$ 9.13
$31.11
$ 7.90
$21.92

$10.43
$ 7.70
$ 8.36
$ 9.34

$10.49
$ 8.60
$12.32

$10.54

(a)

Includes the effect of options granted, exercised, forfeited or expired from the 1991 Plan, 2003 Plan, 2007
Plan, 2006 Replidyne plan and options granted outside the stock option plans described above.

F-17

CARDIOVASCULAR SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Options outstanding and exercisable at June 30, 2011 were as follows:

Exercise Price

$5.01 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$7.90 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$8.75 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$8.83 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$9.28 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$11.38 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$12.15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$12.37 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$13.98 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$14.00 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$16.40 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$18.55 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$18.60 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Options Outstanding

Options Exercisable

Number of
Outstanding
Shares

12,940
439,597
88,962
993,241
32,671
85,143
1,103,932
138,781
74,281
4,000
6,000
31,451
60,000

3,070,999

Remaining
Weighted
Average
Contractual
Life (Years)

8.43
6.09
7.68
5.40
3.41
6.38
3.39
4.30
6.63
1.51
1.51
4.76
0.66

4.73

Number of
Exercisable
Shares

12,940
439,597
88,962
993,241
32,671
85,143
1,103,932
138,781
74,281
4,000
6,000
31,451
60,000

3,070,999

Remaining
Weighted
Average
Contractual
Life (Years)

8.43
6.09
7.68
5.40
3.41
6.38
3.39
4.30
6.63
1.51
1.51
4.76
0.66

4.73

Options issued to employees and directors that are vested at June 30, 2011, were as follows:

Remaining
Weighted
Average
Contractual
Life (Years)

Weighted
Average
Exercise
Price

Aggregate
Intrinsic
Value

Number of
Shares

Options vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,741,788

4.73

$10.54

$11,350

As of June 30, 2011, all options were fully vested. An employee’s unvested options are forfeited when
employment is terminated; vested options must be exercised at or within 90 days of termination to avoid
forfeiture. The Company determines the fair value of options using the Black-Scholes option pricing model. The
estimated fair value of options, including the effect of estimated forfeitures, is recognized as expense on a
straight-line basis over the options’ vesting periods. The following assumptions were used in determining the fair
value of stock options granted under the Black-Scholes model:

Weighted average fair value of options granted . . . . . . . . . . . . . . . . . . . . . . . . .
Risk-free interest rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected life . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected volatility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Year Ended June 30,

2010

$1.23

2009

$4.66

1.32-2.07% 2.82%
2.5-5 years
6 years
46.7-55.9% 55.5%

None

None

The risk-free interest rate for periods within the five and ten year contractual life of the options is based on
the U.S. Treasury yield curve in effect at the grant date and the expected option life of 2.5 to 6 years. Expected
volatility is based on the historical volatility of the Company’s stock.

F-18

CARDIOVASCULAR SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The aggregate intrinsic value of a stock award is the amount by which the market value of the underlying
stock exceeds the exercise price of the award. The aggregate intrinsic value for vested and outstanding options at
June 30, 2011, 2010 and 2009 was $12,712, $0, and $0, respectively. The total aggregate intrinsic value of
options exercised during the years ended June 30, 2011, 2010 and 2009 was $736, $30 and $387, respectively.
Shares supporting option exercises are sourced from new share issuances.

The fair value of each restricted stock award was equal to the fair market value of the Company’s common
stock at the date of grant. Vesting of restricted stock awards range 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. Restricted stock award activity is as follows:

Restricted stock awards outstanding at June 30, 2008 . . . . . . . . . . . . . . . . .
Restricted stock awards granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted stock awards forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted stock awards vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Restricted stock awards outstanding at June 30, 2009 . . . . . . . . . . . . . . . . .
Restricted stock awards granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted stock awards forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted stock awards vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Number of
Shares

525,473
532,124
(106,765)
(206,455)

744,377
877,751
(187,441)
(328,804)

Restricted stock awards outstanding at June 30, 2010 . . . . . . . . . . . . . . . . .
Restricted stock awards granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted stock awards forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted stock awards vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,105,883
804,159
(199,910)
(511,925)

Restricted stock awards outstanding at June 30, 2011 . . . . . . . . . . . . . . . . .

1,198,207

Weighted
Average Grant
Date Fair
Value

$14.68
$ 9.08
$14.06
$14.52

$10.81
$ 6.87
$ 8.48
$ 6.00

$ 7.69
$ 6.08
$ 6.91
$ 7.68

$ 6.39

Estimated pre-vesting forfeitures are considered in determining stock-based compensation expense. As of
June 30, 2011, 2010 and 2009,
the Company estimated its forfeiture rate at 10.7%, 9.4%, and 9.4%,
respectively. As of June 30, 2011, 2010, and 2009 the total compensation cost for non-vested awards not yet
recognized in the consolidated statements of operations was $5,128, $4,226 and $1,033, respectively, net of the
effect of estimated forfeitures. These amounts are expected to be recognized over a weighted-average period of
2.27, 1.02 and 0.51 years, respectively.

F-19

CARDIOVASCULAR SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company grants restricted stock units to members of the Board of Directors. Restricted stock units
represent the right to receive payment in the form of shares of the Company’s common stock or in cash at the
Company’s option. Restricted stock unit payments would occur within 30 days following the six month
anniversary of the date that the director ceases to serve on the Board. The estimated fair value of restricted stock
awards is recognized on a straight-line basis over the vesting period. Restricted stock unit activity is as follows:

Restricted stock units outstanding at June 30, 2008 . . . . . . . . . . . . . . . . . . .
Restricted stock units granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Restricted stock units outstanding at June 30, 2009 . . . . . . . . . . . . . . . . . . .
Restricted stock units granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted stock units forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Restricted stock units outstanding at June 30, 2010 . . . . . . . . . . . . . . . . . . .
Restricted stock units granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted stock units converted to common stock . . . . . . . . . . . . . . . . . . . .
Restricted stock units forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Number of
Shares

—
42,238

42,238
93,024
(5,814)

129,448
158,880
(28,212)
(22,397)

Restricted stock units outstanding at June 30, 2011 . . . . . . . . . . . . . . . . . . .

237,719

Weighted
Average Grant
Date Fair
Value

—
$8.75

$8.75
$8.60
$8.60

$8.65
$4.79
$7.09
$6.70

$6.51

The following amounts were recognized as stock-based compensation expense in the consolidated

statements of operations for the year ended June 30, 2011:

Cost of goods sold . . . . . . . . . . . . . . . . . . .
Selling, general and administrative . . . . . .
. . . . . . . . . . . .
Research and development

Stock
Options

$

97
1,175
34

$ 200
3,384
518

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,306

$4,102

$ 15
298
35

$348

$
0
712
0

$712

Restricted
Stock
Awards

Employee
Stock
Purchase Plan

Restricted
Stock
Units

The following amounts were recognized as stock-based compensation expense in the consolidated

statements of operations for the year ended June 30, 2010:

Restricted
Stock
Awards

Employee
Stock
Purchase Plan

Restricted
Stock
Units

$ 20
378
41

$439

0
$
107
0

$107

Cost of goods sold . . . . . . . . . . . . . . . . . . .
Selling, general and administrative . . . . . .
. . . . . . . . . . . .
Research and development

Stock
Options

$ 323
3,405
527

$ 205
3,382
706

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$4,255

$4,293

F-20

Total

$ 312
5,569
587

$6,468

Total

$ 548
7,272
1,274

$9,094

CARDIOVASCULAR SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following amounts were recognized as stock-based compensation expense in the consolidated

statements of operations for the year ended June 30, 2009:

Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . .
Selling, general and administrative . . . . . . . . . . . . .
Research and development . . . . . . . . . . . . . . . . . . . .

Stock
Options

$ 199
1,786
276

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$2,261

Restricted
Stock Awards

Employee
Stock
Purchase Plan

$ 274
3,862
331

$4,467

$ 2
36
5

$43

Total

$ 475
5,684
612

$6,771

The following summarizes shares available for grant under the Company’s various equity incentive plans:

Shares available for grant at June 30, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares reserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares forfeited, expired or cancelled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Shares available for grant at June 30, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares reserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares forfeited, expired or cancelled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Shares Available
for Grant(a)

19,065
575,444
(631,438)
121,767

84,838
705,695
(936,302)
255,942

Shares available for grant at June 30, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares reserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares forfeited, expired or cancelled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

110,173
757,427
(1,092,500)
275,623

Shares available for grant at June 30, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

50,723

(a) Excludes the effect of shares granted, exercised, forfeited or expired related to activity from shares granted
outside the stock option plans described above. Excludes share forfeitures from grants not under the 2007
plan.

Employee Stock Purchase Plan

The Company maintains an employee stock purchase plan (ESPP). The plan provides eligible employees the
opportunity to acquire common stock in accordance with Section 423 of the Internal Revenue Code of 1986.
Stock can be purchased each six-month period per year (twice per year). The purchase price is equal to 85% of
the lower of the price at the beginning or the end of the respective period. The ESPP allows for an annual
increase in reserved shares on each July 1 equal to the lesser of (i) one percent of the outstanding common shares
outstanding, or (ii) 180,000 shares, provided that the Board of Directors may designate a smaller amount of
shares to be reserved. On July 1, 2011, 169,871 shares were added to the plan. Employees purchased 160,000
shares at an average price of $6.03 per share in the year ended June 30, 2011. Shares reserved under the plan for
the year ended June 30, 2012 totaled 170,709.

F-21

CARDIOVASCULAR SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

7.

Income Taxes

The components of the Company’s overall deferred tax assets and liabilities are as follows:

June 30,

2011

2010

Deferred tax assets

Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Research and development credit carryforwards . . . . . . . . . . . . . . . . . . . . . . .
Net operating loss carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 6,420
933
2,630
3,446
38,944

$ 5,568
749
3,753
3,120
35,990

Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

52,373
(52,373)

49,180
(49,180)

Net deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

— $

—

The Company has established valuation allowances to fully offset its deferred tax assets due to the
uncertainty about the Company’s ability to generate the future taxable income necessary to realize these deferred
assets, particularly in light of the Company’s historical losses. The future use of net operating loss carryforwards
is dependent on the Company attaining profitable operations, and may be limited in any one year under Internal
Revenue Code Section 382 due to significant ownership changes, as defined under such Section, as a result of the
Company’s equity financings. A summary of the valuation allowances are as follows:

Balance at June 30, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$29,353
11,764

Balance at June 30, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$41,117
8,063

Balance at June 30, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$49,180
3,193

Balance at June 30, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$52,373

Amount

As of June 30, 2011 and 2010, the Company had federal tax NOL carryforwards of approximately $110,102
and $102,141, respectively. These NOL carryforwards are available to offset taxable income through 2031 and
have started to expire. As of June 30, 2011 and 2010, the Company also had state NOL carryforwards of
approximately $36,109 and $30,574, respectively, available to offset future state taxable income. These state
NOL carryforwards typically will have the same expirations as our federal tax NOL carryforwards.

As of June 30, 2011 and 2010, the Company had approximately $3,080 and $2,783 of federal research and
development credit carryforwards, respectively. As of June 30, 2011 and 2010, the Company had approximately
$749 and $685 of state research and development credit carryforwards, respectively. The federal and state
research and development credit carryforwards will begin to expire in 2024.

As required by FASB ASC Topic 740, “Income Taxes,” the Company recognizes the financial statement
benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain
the position following an audit. For tax positions meeting the more likely than not threshold, the amount
recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being

F-22

CARDIOVASCULAR SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

realized upon ultimate settlement with the relevant tax authority. The Company has recognized a liability relating
to unrecognized tax benefits of $383 and $347 at June 30, 2011 and 2010, respectively. Due to the Company
having a full valuation allowance, this liability has been netted against the deferred tax asset. The Company
recognizes interest and penalties related to uncertain tax provisions as part of the provision for income taxes. The
Company has not currently reserved for any interest or penalties for such reserves due to the Company being in
an NOL position. The Company does not expect to recognize any benefits from the unrecognized tax benefits
within the next twelve months. A reconciliation of the beginning and ending amount of unrecognized tax benefits
is as follows:

Balance at July 1, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increases related to prior year tax positions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increases related to current year tax positions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Balance at June 30, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increases related to prior year tax positions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Increases related to current year tax positions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Amount

$ —
317
30

$347
22
14

Balance at June 30, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$383

The Company is subject to income taxes in the U.S. federal jurisdiction and various state jurisdictions. Tax
regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and
require significant judgment to apply. The Company is potentially subject to income tax examinations by tax
authorities for the tax years ended June 30, 2011, 2010, and 2009. The Company is not currently under
examination by any taxing jurisdiction.

8. Commitment and Contingencies

Operating Leases

The Company leases manufacturing and office space and equipment under various lease agreements which
expire at various dates through March 2020. Rental expenses were $1,188, $659, and $658 for the years ended
June 30, 2011, 2010, and 2009, respectively.

Future minimum lease payments under the agreements as of June 30, 2011 are as follows:

2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 920
645
414
426
460
1,725

$4,590

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 10 for additional information.

F-23

CARDIOVASCULAR SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

9. Employee Benefits

The Company offers a 401(k) plan to its employees. Eligible employees may authorize up to $16 of their
annual compensation as a contribution to the plan, subject to Internal Revenue Service limitations. The plan also
allows eligible employees over 50 years old to contribute an additional $6 subject to Internal Revenue Service
limitations. All employees must be at least 21 years of age to participate in the plan. The Company did not
provide any employer matching contributions for the years ended June 30, 2011, 2010, and 2009.

10. 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 will primarily serve as an additional manufacturing
location for the Company.

The lease agreement provides that the PEDC will lease the facility and the land immediately surrounding the
facility to the Company for an initial term of ten years, beginning April 1, 2010. Monthly fixed rent payments are
$35 for each of the first five years of the initial term and $38 for each of the last five years of the initial term. The
Company will also be responsible for paying the taxes and operating expenses related to the facility. The lease
has been classified as an operating lease for financial statement purposes. Upon an event of default under the
agreement, the Company will be liable for the difference between the balance of the rent owed for the remainder
of the term and the fair market rental value of the leased premises for such period.

The Company has the option to renew the lease for up to two additional periods of five years each. If the
Company elects to exercise one or both of these options, the rent for such extended terms will be set at the
prevailing market rental rates at such times, as determined in the agreement. After the commencement date and
until shortly before the tenth anniversary of the commencement date, the Company will have the option to
purchase all, but not less than all, of the leased premises at fair market value, as determined in the agreement.
Further, within six years of the commencement date and subject to certain conditions, the Company has options
to cause the PEDC to make two additions or expansions to the facility of a minimum of 34,000 and 45,000
square feet each.

The Company and the PEDC previously entered into a Corporate Job Creation Agreement dated June 17,
2009. The Job Creation Agreement 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 grant agreement. The PEDC will
provide the Company with an additional $1,700 of net cash incentive funds in the following amounts and upon
achievement of the following milestones:

• $1,020, upon the hiring of the 75th full-time employee at the facility; and

• $680, upon the hiring of the 125th full-time employee at the facility.

In order to retain all of the cash incentives, beginning one year and 90 days after the commencement date,
the Company must not have fewer than 25 full-time employees at the facility for more than 120 consecutive
days. Failure to meet this requirement will result in an obligation to make reimbursement payments to the PEDC
as outlined in the agreement. The Company will not have any reimbursement requirements after 60 months from
the effective date of the agreement. As of June 30, 2011, the Company was in compliance with all minimum
requirements under the agreement.

The Job Creation Agreement also provides the Company with a net $1,275 award, of which $510 will be
funded by a grant from the State of Texas for which the Company has applied through the Texas Enterprise Fund
program. As of June 30, 2011, $340 has been received and the remaining $170 will be provided upon the hiring
of the 55th full-time employee at the facility. The PEDC has committed, by resolution, to guarantee the award and

F-24

CARDIOVASCULAR SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

will make payment to the Company for the remaining $765. As of June 30, 2011, $510 has been received. 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 has presented the net cash incentive funds as a current and long-term liability on the balance
sheet. The liabilities will be reduced over a 60 month period and recorded as an offset to expenditures incurred
using a systematic methodology that is intended to reduce the majority of the liabilities in the first 24 months of
the agreement. As of June 30, 2011, $1,936 in cumulative expenses has reduced the deferred grant incentive
liabilities, resulting in a remaining current liability of $647 and long-term liability of $1,497.

11. Legal Matters

ev3 Legal Proceedings

The Company was a party to a legal proceeding with ev3 Inc., ev3 Endovascular, Inc. and FoxHollow
Technologies, Inc., together referred to as the Plaintiffs, which filed a complaint on December 28, 2007 in the
Ramsey County District Court for the State of Minnesota against the Company and former employees of
FoxHollow currently employed by the Company, which complaint was subsequently amended.

On October 27, 2010, the Company entered into a settlement agreement with the Plaintiffs. The agreement
dismisses all claims and counterclaims in the legal proceeding between the two parties, with neither party
admitting any liability or wrongdoing. Pursuant to the agreement, the Company paid ev3 $1,000, in the form of
$750 cash and a $250 promissory note. The promissory note bears interest at 3.5% per annum, with principal and
cumulative interest due and payable on or before January 1, 2014. The Company has received insurance proceeds
of $500 related to the settlement, and has recorded a net expense of $500 in selling, general, and administrative
expenses related to the settlement during the year ended June 30, 2011. In addition, during the year ended
June 30, 2011, the Company received an additional $250 of insurance proceeds related to the reimbursement of
out-of-pocket costs incurred related to this litigation.

Michael Kallok Claim

On July 18, 2011, the Company received a demand letter from legal counsel for Michael Kallok, a former
officer, director and consultant to the Company, claiming that Mr. Kallok is entitled to 42,594 shares of the
Company’s common stock or, alternatively,
the value of those shares as of July 15, 2011, which was
$611. Mr. Kallok asserts that the Company improperly deemed such shares forfeited under a restricted stock
agreement with Mr. Kallok. This matter is proceeding to arbitration.

The Company is defending this claim vigorously, and believes that an adverse outcome of this dispute
would not have a materially adverse effect on the Company’s business, operations, cash flows or financial
condition. The Company has not recognized any expense related to the settlement of this matter as it believes an
adverse outcome of this action is not probable.

F-25

CARDIOVASCULAR SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

12. 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:

Year Ended June 30,

2011

2010

2009

Numerator

Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Decretion of redeemable convertible preferred

stock(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

11,125

$

23,904

$

31,895

—

—

(22,781)

Net loss available to common stock- holders . . . . . . .

$

11,125

$

23,904

$

9,114

Denominator

Weighted average common shares — basic . . . . . . . .
Effect of dilutive stock options and warrants(b)(c) . . .

15,915,800
—

14,748,293
—

8,068,689
—

Weighted average common shares outstanding —

diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

15,915,800

14,748,293

8,068,689

Loss per common share — basic and diluted . . . . . . .

$

(0.70)

$

(1.62)

$

(1.13)

(a) The calculation for accretion of redeemable convertible preferred stock adjusts the redeemable convertible
preferred stock to fair value, which equals or exceeds the amount of any undeclared dividends on the
redeemable convertible preferred stock.

(b) At June 30, 2011, 2010, and 2009, 2,690,424, 3,241,992, and 3,121,421 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.

(c) At June 30, 2011, 2010, and 2009, 3,070,999, 3,356,993 and 3,707,882 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.

F-26

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

None.

Item 9A. 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 240.13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934 (the
“Exchange Act”)) as of June 30, 2011. 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 Annual Report on Form 10-K, the Company’s disclosure controls and procedures, as designed
and implemented, are effective.

Management’s Annual Report on Internal Control Over Financial Reporting

Management

is responsible for establishing and maintaining adequate internal control over financial
reporting (as defined in Rule 13a-15(f) under the Exchange Act) for the Company. Management conducted an
evaluation of the effectiveness of internal control over financial reporting based on the framework in Internal
Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). Based on this evaluation, management concluded that the Company’s internal control over
financial reporting was effective as of June 30, 2011. PricewaterhouseCoopers LLP, the independent registered
public accounting firm that audited the consolidated financial statements included in this Annual Report on
Form 10-K, has also audited our internal control over financial reporting as of June 30, 2011, as stated in their
attestation report included in Part IV, Item 15 of this Annual Report on Form 10-K.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal controls over financial reporting (as defined in Rules 13a-15(f) and
15d-15(f) under the Exchange Act) during the three months ended June 30, 2011 that have materially affected, or
are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information.

None.

56

PART III

Item 10. Directors, Executive Officers and Corporate Governance.

Other than the information included in this Form 10-K under the heading “Executive Officers of the
Registrant,” which is set forth at the end of Part I, the information required by Item 10 is incorporated by
reference to the sections labeled “Election of Directors,” “Information Regarding the Board of Directors and
Corporate Governance” and “Section 16(a) Beneficial Ownership Reporting Compliance,” all of which appear in
our definitive proxy statement for our 2011 Annual Meeting.

Item 11. Executive Compensation.

The information required by Item 11 is incorporated herein by reference to the sections entitled “Executive
Compensation,” “Director Compensation,” and “Compensation Committee,” all of which appear in our definitive
proxy statement for our 2011 Annual Meeting.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder

Matters.

The information required by Item 12 is incorporated herein by reference to the sections entitled “Security
Ownership of Certain Beneficial Owners and Management” and “Equity Compensation Plan Information,” which
appear in our definitive proxy statement for our 2011 Annual Meeting.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

The information required by Item 13 is incorporated herein by reference to the sections entitled
“Information Regarding the Board of Directors and Corporate Governance — Independence of the Board of
Directors” and “Transactions With Related Persons,” which appear in our definitive proxy statement for our 2011
Annual Meeting.

Item 14. Principal Accounting Fees and Services.

The information required by Item 14 is incorporated herein by reference to the section entitled “Principal

Accountant Fees and Services,” which appears in our definitive proxy statement for our 2011 Annual Meeting.

Item 15. Exhibits, Financial Statement Schedules.

(a) Documents filed as part of this report.

PART IV

(1) Financial Statements. The following financial statements are included in Part II, Item 8 of this Annual

Report on Form 10-K:

• Report of Independent Public Registered Accounting Firm

• Consolidated Balance Sheets as of June 30, 2011 and 2010

• Consolidated Statements of Operations for the years ended June 30, 2011, 2010 and 2009

• Consolidated Statements of Stockholders’ Equity (Deficiency) and Comprehensive (Loss) Income for the

years ended June 30, 2011, 2010 and 2009

• Consolidated Statements of Cash Flows for the years ended June 30, 2011, 2010 and 2009

• Notes to Consolidated Financial Statements

(2) Financial Statement Schedules.

• All financial statement schedules have been omitted, because they are not applicable, are not required, or

the information is included in the Financial Statements or Notes thereto

(3) Exhibits. See “Exhibit Index to Form 10-K” immediately following the signature page of this Form 10-K

57

Pursuant to the requirements of Section 13 or 15(d) 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.

SIGNATURES

Date: September 12, 2011

CARDIOVASCULAR SYSTEMS, INC.

By: /s/ David L. Martin
David L. Martin
President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by

the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Each person whose signature appears below constitutes and appoints David L. Martin and Laurence L.
Betterley as the undersigned’s true and lawful attorneys-in fact and agents, each acting alone, with full power of
substitution and resubstitution, for the undersigned and in the undersigned’s name, place and stead, in any and all
amendments to this Annual Report on Form 10-K and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission, granted unto said
attorneys-in-fact and agents, each acting alone, full power and authority to do and perform each and every act
and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as the
undersigned might or could do in person, hereby ratifying and confirming all said attorneys-in-fact and agents,
each acting alone, or his substitute or substitutes, may lawfully do or cause to be done by virtue thereof.

Signature

Title

Date

/s/ David L. Martin

David L. Martin

/s/ Laurence L. Betterley

Laurence L. Betterley

/s/ Edward Brown

Edward Brown

/s/ Brent G. Blackey

Brent G. Blackey

/s/

John H. Friedman
John H. Friedman

/s/ Geoffrey O. Hartzler

Geoffrey O. Hartzler

/s/ Leslie Trigg

Leslie Trigg

/s/ Augustine Lawlor
Augustine Lawlor

/s/ Glen D. Nelson

Glen D. Nelson

President, Chief Executive Officer and
Director (principal executive officer)

September 12, 2011

Chief Financial Officer (principal
financial and accounting officer)

September 12, 2011

Director

September 12, 2011

Director

September 12, 2011

Director

September 12, 2011

Director

September 12, 2011

Director

September 12, 2011

Director

September 12, 2011

Director

September 12, 2011

58

EXHIBIT INDEX

CARDIOVASCULAR SYSTEMS, INC.
FORM 10-K

Description

Exhibit
No.

3.1
3.2
4.1
4.2

4.3

4.4

10.1

10.2

10.3

10.4

10.5

10.6
10.7†

10.8†

10.9†*

issued to former preferred

Inc. common stock warrant

Restated Certificate of Incorporation, as amended.(7)
Amended and Restated Bylaws.(2)
Specimen Common Stock Certificate.(2)
Form of Cardiovascular Systems,
stockholders.(2)
Registration Rights Agreement by and among Cardiovascular Systems, Inc. and certain of its
stockholders, dated as of March 16, 2009.(1)
Termination of Fourth Amended and Restated Stockholders Agreement by and among Cardiovascular
Systems, Inc. and certain of its stockholders, dated as of March 16, 2009.(1)
Lease, dated September 26, 2005, by and between Cardiovascular Systems, Inc., a Minnesota
corporation, and Industrial Equities Group LLC.(3)
First Amendment to the Lease, dated February 20, 2007, by and between Cardiovascular Systems, Inc.,
a Minnesota corporation, and Industrial Equities Group LLC.(3)
Second Amendment to the Lease, dated March 9, 2007, by and between Cardiovascular Systems, Inc.,
a Minnesota corporation, and Industrial Equities Group LLC.(3)
Third Amendment to the Lease, dated September 26, 2007, by and between Cardiovascular Systems,
Inc., a Minnesota corporation, and Industrial Equities Group LLC.(3)
Lease Agreement, dated October 25, 2005, by and between Cardiovascular Systems, Inc., a Minnesota
corporation, and Triumph 1450 LLC.(8)
Assumption of Lease, dated March 23, 2009 by Cardiovascular Systems, Inc.(7)
Employment Agreement, dated December 19, 2006, by and between Cardiovascular Systems, Inc., a
Minnesota corporation, and David L. Martin.(3)
Employment Agreement, dated April 7, 2008, by and between Cardiovascular Systems, Inc., a
Minnesota corporation, and Laurence L. Betterley.(3)
Employment Agreement, dated May 9, 2011, by and between Cardiovascular Systems, Inc. and Kevin
J. Kenny
Form of Standard Employment Agreement.(3)

10.10†
10.11†* Summary of Fiscal Year 2012 Executive Officer Base Salaries.
10.12†* Fiscal Year 2012 Director Compensation Arrangements.
10.13@* Purchasing Agreement between Cardiovascular Systems, Inc. and HealthTrust Purchasing Group, L.P.,
dated effective as of July 15, 2011, and amendment to Purchasing Agreement dated effective as of July
15, 2011.
Form of Director and Officer Indemnification Agreement.(7)
Cardiovascular Systems, Inc. Amended and Restated 2007 Equity Incentive Plan.(5)
Form of Incentive Stock Option Agreement under the Amended and Restated 2007 Equity Incentive
Plan.(7)
Form of Non-Qualified Stock Option Agreement under the Amended and Restated 2007 Equity
Incentive Plan.(7)

10.14†
10.15†
10.16†

10.17†

10.18†* Form of Restricted Stock Agreement under the Amended and Restated 2007 Equity Incentive Plan.
10.19†* Form of Restricted Stock Unit Agreement under the Amended and Restated 2007 Equity Incentive

Plan.
Form of Performance Share Award under the Amended and Restated 2007 Equity Incentive Plan.(7)

10.20†

59

Exhibit
No.

Description

10.21† Form of Performance Unit Award under the Amended and Restated 2007 Equity Incentive Plan.(7)
10.22† Form of Stock Appreciation Rights Agreement under the Amended and Restated 2007 Equity Incentive

Plan.(7)
2003 Stock Option Plan of Cardiovascular Systems, Inc., a Minnesota corporation, as amended.(3)

10.23†
10.24† Form of Incentive Stock Option Agreement under the 2003 Stock Option Plan of Cardiovascular

Systems, Inc., a Minnesota corporation.(3)

10.25† Form of Nonqualified Stock Option Agreement under the 2003 Stock Option Plan of Cardiovascular

Systems, Inc., a Minnesota corporation.(3)
1991 Stock Option Plan of Cardiovascular Systems, Inc., a Minnesota corporation.(3)

10.26†
10.27† Form of Non-Qualified Stock Option Agreement outside the 1991 Stock Option Plan of Cardiovascular

Systems, Inc., a Minnesota corporation.(3)

10.28† Cardiovascular Systems, Inc. Amended and Restated 2006 Employee Stock Purchase Plan.(6)
10.29†* Cardiovascular Systems, Inc. Executive Officer Severance Plan.
10.30

10.31

10.32

10.33

10.34

10.35

10.36

10.37

10.38

10.39

10.40

10.41

Corporate Job Creation Agreement between Pearland Economic Development Corporation and
Cardiovascular Systems, Inc., dated June 17, 2009.(4)
Build-To-Suit Lease Agreement between Pearland Economic Development Corporation and
Cardiovascular Systems, Inc., dated September 9, 2009.(4)
Letter Agreement between Silicon Valley Bank and Cardiovascular Systems, Inc., dated September 9,
2009.(4)
Amended and Restated Loan and Security Agreement, dated March 29, 2010, by and between
Cardiovascular Systems, Inc. and Silicon Valley Bank.(11)
Loan and Security Agreement, dated April 14, 2010, by and between Cardiovascular Systems, Inc. and
Partners for Growth III, L.P.(11)
Intellectual Property Security Agreement, dated April 14, 2010, by and between Cardiovascular
Systems, Inc. and Partners for Growth III, L.P.(11)
Copyright Collateral Agreement and Notice, dated April 14, 2010, by and between Cardiovascular
Systems, Inc. and Partners for Growth III, L.P.(11)
Domain Rights Collateral Agreement and Notice, dated April 14, 2010, by and between Cardiovascular
Systems, Inc. and Partners for Growth III, L.P.(11)
Patent Collateral Agreement and Notice, dated April 14, 2010, by and between Cardiovascular Systems,
Inc. and Partners for Growth III, L.P.(11)
Trademark Collateral Agreement and Notice, dated April 14, 2010, by and between Cardiovascular
Systems, Inc. and Partners for Growth III, L.P.(11)
Letter Agreement, dated April 14, 2010, by and between Cardiovascular Systems, Inc. and Partners for
Growth III, L.P.(11)
Settlement Agreement among ev3, Inc., ev3 Endovascular, Inc., FoxHollow Technologies, Inc., Tyco
Healthcare Group LP d/b/a Covidien, Cardiovascular Systems, Inc., Aaron Lew, Paul Tyska, Sean
Collins, David Gardner, Michael Micheli, Kevin Moore, Steve Pringle, Jason Proffitt, Thadd Taylor and
Rene Treanor-Sarria, dated October 29, 2010.(9)

10.42+ Supply Agreement between Cardiovascular Systems, Inc. and Fresenius Kabi AB, dated April 4,

2011.(10)
Code of Ethics.
Consent of PricewaterhouseCoopers LLP.
Power of Attorney (included on the signature page).
Certification of principal executive officer required by Rule 13a-14(a).
Certification of principal financial officer required by Rule 13a-14(a).

14.1*
23.1*
24.1*
31.1*
31.2*

60

Exhibit
No.

Description

32.1* Section 1350 Certification of principal executive officer.
32.2* Section 1350 Certification of principal financial officer.

* Filed herewith.

† Compensatory plan or agreement.

+ Confidential treatment has been granted for certain portions omitted from this exhibit pursuant to Rule 24b-2

under the Securities Exchange Act of 1934, as amended.

@ Confidential treatment has been requested for certain portions omitted from this exhibit pursuant to Rule

24b-2 under the Securities Exchange Act of 1934, as amended.

(1) Previously filed with the SEC as an Exhibit to and incorporated herein by reference from the Company’s

Current Report on Form 8-K filed on March 18, 2009.

(2) Previously filed with the SEC as an Exhibit to and incorporated herein by reference from the Company’s

Current Report on Form 8-K filed on March 3, 2009.

(3) Previously filed with the SEC as an Exhibit to and incorporated herein by reference from CSI Minnesota,

Inc.’s Registration Statement on Form S-1, File No. 333-148798.

(4) Previously filed with the SEC as an Exhibit to and incorporated herein by reference from the Company’s

Annual Report on Form 10-K filed on September 29, 2009.

(5) Previously filed with the SEC as an Exhibit to and incorporated herein by reference from the Company’s

Registration Statement on Form S-8, File No. 333-158755.

(6) Previously filed with the SEC as an Exhibit to and incorporated herein by reference from the Company’s

Registration Statement on Form S-8, File No. 333-158987.

(7) Previously filed with the SEC as an Exhibit to and incorporated herein by reference from the Company’s

Quarterly Report on Form 10-Q for the quarter ended March 31, 2009.

(8) Previously filed with the SEC as an Exhibit to and incorporated herein by reference from the Company’s

Registration Statement on Form S-1, File No. 333-133021.

(9) Previously filed with the SEC as an Exhibit to and incorporated herein by reference from the Company’s

Quarterly Report on Form 10-Q filed on November 12, 2010.

(10) Previously filed with the SEC as an Exhibit to and incorporated herein by reference from the Company’s

Quarterly Report on Form 10-Q filed on May 13, 2011.

(11) Previously filed with the SEC as an Exhibit to and incorporated herein by reference from the Company’s

Quarterly Report on Form 10-Q filed on May 14, 2010.

(12) Previously filed with the SEC as an Exhibit to and incorporated herein by reference from the Company’s

Annual Report on Form 10-K filed on September 28, 2010.

61

Exhibit 31.1

CERTIFICATION
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT

I, David L. Martin, certify that:

1.

I have reviewed this report on Form 10-K 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 person performing the equivalent functions):

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

(b) Any fraud, whether or not material, that involves management or other employees who have a

significant role in the registrant’s internal control over financial reporting.

Date: September 12, 2011

/s/ David L. Martin

David L. Martin
President and Chief Executive Officer

Exhibit 31.2

CERTIFICATION
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT

I, Laurence L. Betterley, certify that:

1.

I have reviewed this report on Form 10-K 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 person performing the equivalent functions):

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

(b) Any fraud, whether or not material, that involves management or other employees who have a

significant role in the registrant’s internal control over financial reporting.

Date: September 12, 2011

/s/ Laurence L. Betterley

Laurence L. Betterley
Chief Financial Officer

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 Annual Report on Form 10-K for the year ended June 30, 2011 (the
“Report”) by Cardiovascular Systems, Inc. (the “Company”), I, David L. Martin, President and 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 Company.

Date: September 12, 2011

/s/ David L. Martin

David L. Martin
President and Chief Executive Officer

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 Annual Report on Form 10-K for the year ended June 30, 2011 (the
“Report”) by Cardiovascular Systems, Inc. (the “Company”), I, Laurence L. Betterley, 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 Company.

Date: September 12, 2011

/s/ Laurence L. Betterley

Laurence L. Betterley
Chief Financial Officer

Executive Officers and Advisors
David L. Martin
President and Chief  Executive Officer

Laurence L. Betterley
Chief  Financial Officer

James E. Flaherty
Chief  Administrative Officer

Kevin J. Kenny
Executive Vice President, 
Sales and Marketing

Robert J. Thatcher
Executive Vice President

Paul Koehn
Vice President, 
Quality and Operations  

Nabil Dib, MD, MSc, FACC
Medical Advisor

Headquarters
Cardiovascular Systems, Inc.
651 Campus Drive
St. Paul, Minnesota 55112

Board of Directors
Glen D. Nelson, MD
Chairman
Chairman, GDN Holdings
Vice Chairman (retired) Medtronic, Inc.

Brent Blackey
President and Chief  Operating Officer
Holiday Companies

Edward Brown
Senior Advisor
Health Evolution Partners

John H. Friedman
Managing Partner
Easton Capital Investment

Geoffrey O. Hartzler, MD
Consulting Cardiologist

Augustine Lawlor
Managing Partner
HealthCare Ventures

David L. Martin
President and Chief  Executive Officer
Cardiovascular Systems, Inc.

Leslie L. Trigg
Executive Vice President
Marketing and Commercial Strategy
Lutonix

Transfer Agent and Registrar
For change of  name, address, 
or to replace lost stock 
certificates, contact:

American Stock Transfer 
& Trust Company, LLC 
59 Maiden Lane 
New York, New York 10038 
info@amstock.com
www.amstock.com
800.937.5449

Independent Accountants
PricewaterhouseCoopers LLP
Minneapolis, Minnesota 

Corporate Counsel
Fredrikson & Byron, P.A. 
Minneapolis, Minnesota 

Investor Relations 
Padilla Speer Beardsley Inc. 
Minneapolis, Minnesota 

Annual Meeting
The annual meeting of  the 
shareholders of  Cardiovascular 
Systems, Inc., will be held on 
October 25, 2011, at 10 A.M. CT at: 

Cardiovascular Systems, Inc.
651 Campus Drive
St. Paul, Minnesota 55112

Forward-Looking Statements: Certain statements in this annual report are forward-looking statements within the meaning of  
the Private Securities Litigation Reform Act of  1995 and are provided under the protection of  the safe harbor for forward-looking 
statements provided by that Act. For example, statements in this document regarding (i) CSI’s future revenue, profitability and 
growth prospects; (ii) the use of  the Diamondback 360° to treat coronary lesions, the potential market for this application and 
clearance of  the Diamondback 360° for this use; (iii) CSI’s clinical trials; (iv) the timing of  the broader commercial launch of  the 
Stealth 360° and our expectation that the Stealth 360° will drive substantial revenue growth; (v) CSI’s plans for fiscal 2012; and (vi) 
CSI’s future success, are forward-looking statements. These statements involve risks and uncertainties which could cause results to 
differ materially from those projected, including but not limited to the potential for unanticipated delays in enrolling medical centers 
and patients for clinical trials; dependence on market growth; the reluctance of  physicians to accept new products; the effectiveness 
of  the Stealth 360°; actual clinical trial results; the impact of  competitive products and pricing; the difficulty to successfully manage 
operating costs; fluctuations in quarterly results; FDA clearances and approvals; approval of  products for reimbursement and the 
level of  reimbursement; general economic conditions and other factors detailed from time to time in CSI’s SEC reports, including 
its most recent annual report on Form 10-K and subsequent quarterly reports on Form 10-Q. CSI encourages you to consider all of  
these risks, uncertainties and other factors carefully in evaluating the forward-looking statements contained in this annual report. 
As a result of  these matters, changes in facts, assumptions not being realized or other circumstances, CSI’s actual results may differ 
materially from the expected results discussed in the forward-looking statements contained in this annual report. The forward-looking 
statements made in this annual report are made only as of  the date of  this report and CSI undertakes no obligation to update them 
to reflect subsequent events or circumstances.

Cardiovascular Systems, Inc.
651 Campus Drive
St. Paul, Minnesota 55112
www.csi360.com

T:   651.259.1600
877.CS I.0360
F:  651.259.1696

The Diamondback 360®, Predator 360®, and Stealth 360°™ PAD System are percutaneous orbital 
atherectomy systems indicated for use as therapy in patients with occlusive atherosclerotic disease in 
peripheral arteries and stenotic material from artificial arteriovenous dialysis fistulae. The system is 
contraindicated for use in coronary arteries, bypass grafts, stents, or where thrombus or dissections 
are present. Although the incidence of  adverse events is rare, potential events that can occur with 
atherectomy include: pain, hypotension, CVA/TIA, death, dissection, perforation, distal embolization, 
thrombus formation, hematuria, abrupt or acute vessel closure, or arterial spasm. 

CSI, Diamondback 360® and Predator 360® are registered trademarks of  Cardiovascular Systems, Inc.