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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 FORM 10-K
 þ
    
    Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
 for the fiscal year ended December 31, 2005
 or
 o
    
    Transition Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934
 for the transition period from            to                     .
 Commission File Number: 000-51050
 CABG MEDICAL, INC.
  Minnesota
(State or Other Jurisdiction of
Incorporation or Organization)
    
    No. 41-1958628
(IRS Employer
Identification No.)
 14505  21st Avenue North, Suite 212, Minneapolis, MN 55447
   
 o þ
 o þ
 þ o
 þ
  o o þ
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE




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TABLE OF CONTENTS  PART IITEM 1. BUSINESSITEM 2. PROPERTIESITEM 3. LEGAL PROCEEDINGSITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERSPART IIITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF            EQUITY SECURITIESITEM 6. SELECTED FINANCIAL DATAITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSUREITEM 9A. CONTROLS AND PROCEDURESITEM 9B. OTHER INFORMATIONPART IIIITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTITEM 11. EXECUTIVE COMPENSATIONITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER            MATTERSITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONSITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICESPART IVITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULESSIGNATURESEXHIBIT INDEX TO FORM 10-KConsent of KPMG LLPCertification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certification of CEO Pursuant to Section 906Certification of CFO Pursuant to Section 906    Table of Contents  
 PART I
 
 ITEM 1. BUSINESS
 Overview
  Recent Developments
   Review of Alternatives
    1




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Estimated Aggregate Distribution Amount and Timing
     2




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Product Liability and Insurance
  
 Employees
  AVAILABLE INFORMATION
 http://www.cabgmedical.com
 Cautionary Statement for Purposes of the Safe Harbor Provisions of the Private Securities
Litigation Reform Act of 1995.
 There are risks
associated with forward looking statements
  3




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After selling our assets and settling our obligations, there may significantly less cash available
for distribution to shareholders than we currently anticipate.
    The timing of any distributions to our shareholders is difficult to predict.
  4




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The proceeds from any sale of our assets may be less than anticipated.
  If we fail to retain the services of current personnel, the Plan of Liquidation and Dissolution may
not succeed.
  Our stock transfer books will close promptly after the date shareholders approve the Plan, after
which it will not be possible for shareholders to trade our stock.
  
 ITEM 2. PROPERTIES
  5




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ITEM 3. LEGAL PROCEEDINGS
  
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 PART II
 
 ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
EQUITY SECURITIES
 Market Information
  Fiscal Year Ended December 31, 2005:
    
    High
    
    LowFirst Quarter
    
    $
    6.05
    
    
    $
    3.70Second Quarter
    
    
    4.94
    
    
    
    3.04Third Quarter
    
    
    5.00
    
    
    
    2.20Fourth Quarter
    
    
    3.00
    
    
    
    1.03
 Fiscal Year Ended December 31, 2004:
    
    High
    
    LowFourth Quarter
    
    $
    6.98
    
    
    $
    5.79
 Holders
  Dividends
  Sales of Unregistered Securities
  6




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##### Table of Contents



ITEM 6. SELECTED FINANCIAL DATA
  Period fromDecember 3,1999 (date ofinception) toDecember 31,
    
    
    Year Ended December 31,2005
    
    
    2001
    
    
    2002
    
    
    2003
    
    
    2004
    
    
    2005(In thousands)Statements of Operations Data:Revenue
    
    $
    125
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    21
    
    
    $
    104Expenses:Research and development
    
    
    13,976
    
    
    
    659
    
    
    
    559
    
    
    
    1,153
    
    
    
    2,647
    
    
    
    8,822Marketing, general and
administrative
    
    
    3,833
    
    
    
    118
    
    
    
    151
    
    
    
    405
    
    
    
    996
    
    
    
    2,105Loss from operations
    
    
    17,684
    
    
    
    777
    
    
    
    710
    
    
    
    1,558
    
    
    
    3622
    
    
    
    10,823Interest income
    
    
    1,290
    
    
    
    59
    
    
    
    22
    
    
    
    16
    
    
    
    71
    
    
    
    1,099Net loss
    
    $
    (16,394
    )
    
    $
    (718
    )
    
    $
    (688
    )
    
    $
    (1,542
    )
    
    $
    (3,551
    )
    
    $
    (9,724
    )Loss per common share  basic and
diluted
    
    
    
    
    
    $
    (0.09
    )
    
    $
    (0.08
    )
    
    $
    (0.17
    )
    
    $
    (0.34
    )
    
    $
    (0.52
    )Weighted average shares
outstanding  basic and diluted
    
    
    
    
    
    
    8,152,521
    
    
    
    8,490,000
    
    
    
    8,967,308
    
    
    
    10,298,639
    
    
    
    18,624,697
 December 31,2001
    
    2002
    
    2003
    
    2004
    
    2005(In thousands)Balance Sheet Data:Cash and short-term investments
    
    $
    1,614
    
    
    $
    940
    
    
    $
    1,737
    
    
    $
    28,936
    
    
    $
    32,648Total current assets
    
    
    1,622
    
    
    
    950
    
    
    
    1,767
    
    
    
    29,227
    
    
    
    33,263Total assets
    
    
    1,692
    
    
    
    1,007
    
    
    
    1,841
    
    
    
    29,426
    
    
    
    33,333Total current liabilities
    
    
    30
    
    
    
    37
    
    
    
    158
    
    
    
    860
    
    
    
    695Total liabilities
    
    
    33
    
    
    
    37
    
    
    
    158
    
    
    
    860
    
    
    
    695Deficit accumulated during the development stage
    
    
    (889
    )
    
    
    (1,577
    )
    
    
    (3,119
    )
    
    
    (6,670
    )
    
    
    (16,394
    )Total stockholders equity
    
    
    1,658
    
    
    
    970
    
    
    
    1,683
    
    
    
    28,566
    
    
    
    32,638
 7




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ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  OVERVIEW
        8




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RESULTS OF OPERATIONS
 Year ended December 31, 2005 compared to year ended December 31, 2004
 Revenue.
 Research & Development
 Marketing, General and Administrative.
 Interest Income.
 9




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Year ended December 31, 2004 compared to year ended December 31, 2003
 Revenue
 Research and Development.
 Marketing, General and Administrative.
 
    
    $257,000 increase due to (i) the addition of our president in August 2003, (ii) an
increase in compensation of our chairman and chief executive officer, (iii) the addition of
a part time administrative employee and (iv) increases in salaries for existing employees;
    
    $57,000 increase related to financial audit fees; and
    
    $158,000 increase in stock-based compensation expense related to the vesting of certain
performance based stock options and the issuance of restricted stock issued to non-employee
members of our board of directors.
 Interest Income.
 LIQUIDITY AND CAPITAL RESOURCES
  Cash Flows from Operating Activities
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Cash Flows from Investing Activities
 Cash Flows from Financing Activities.
  Contractual Obligations and Commitments.
 Payments Due by Period(In thousands)Less Than
    
    
    1-3
    
    
    4-5
    
    
    After 5One Year
    
    
    Years
    
    
    Years
    
    
    Years
    
    
    TotalOperating leases
    
    $
    83
    
    
    $
    21
    
    
    $
    
    
    
    $
    
    
    
    $
    104Purchase obligations (1)
    
    
    76
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    76Employment agreements (2)
    
    
    248
    
    
    
    310
    
    
    
    
    
    
    
    
    
    
    
    558Total
    
    $
    407
    
    
    $
    331
    
    
    $
    
    
    
    $
    
    
    
    $
    738
 Notes to Table:
 (1)
    
    In January 2004, we entered into a supply agreement that requires us to purchase
a minimum of approximately $191,000 of materials from 2004 to 2006. At December 31,
2005, our future contractual obligations under this agreement were $76,000. In February
2006, we notified our supplier that we were terminating the purchase agreement in
accordance with the terms of the supply agreement.(2)
    
    The above table includes obligations of the Company to Manny Villafaña, our
Chairman and Chief Executive Officer under his contract that was in place at December
31, 2005. In the event of a business combination, Mr. Villafaña would be entitled to
the payments as detailed in the table above or if he was terminated he would receive a
severance payment of up to three times his annual salary. In the event of a dissolution
of the Company, Mr. Villafaña would receive no severance benefits.
 Off-Balance Sheet Arrangements
  11




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CRITICAL ACCOUNTING POLICIES AND ESTIMATES
   Stock-Based Compensation
    12




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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  
 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
  
 ITEM 9A. CONTROLS AND PROCEDURES
  
 ITEM 9B. OTHER INFORMATION
  13




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PART III
 
 ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
  Name
    
    Age
    
    Position with CompanyManny Villafaña
    
    
    65
    
    
    Chairman and Chief Executive OfficerJohn L. Babitt
    
    
    36
    
    
    Director, President, Chief
Operating Officer and Chief
Financial OfficerA. Jay Graf (1) (2) (4)
    
    
    58
    
    
    DirectorRobert E. Munzenrider (1) (2) (3) (4)
    
    
    61
    
    
    DirectorArch C. Smith (1) (2) (4)
    
    
    51
    
    
    Director
 
 (1)
    
    Member of the Audit Committee, for which Mr. Munzenrider is the Chairman.(2)
    
    Member of the Compensation Committee, for which Mr. Graf is the Chairman.(3)
    
    The Board of Directors has determined that Mr. Munzenrider qualifies as an audit committee
financial expert under federal securities laws.(4)
    
    Member of the Governance/Nominating Committee, for which Mr. Smith is the Chairman. Manny Villafaña
 John L. Babitt, CPA,
 A. Jay Graf
 14




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Robert E. Munzenrider
 Arch C. Smith
 Code of Ethics and Business Conduct
  SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
   15




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ITEM 11. EXECUTIVE COMPENSATION
 Compensation Committee Report on Executive Compensation
  Compensation Committee Interlocks and Insider Participation
  Compensation Philosophy
  Base Salary
  Incentives
  (i)
    
    focus executives on the achievement of performance objectives that enhance
shareholder value;(ii)
    
    emphasize the importance of balancing present business needs and long-term
goals critical to the future success of CABG Medical; and(iii)attract and retain executive officers of superior ability.
 General
  16




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Other
  Members
    
    of the Compensation Committee:A. Jay Graf, ChairRobert E. MunzenriderArch C. Smith
 Summary Compensation Table
  Long-TermAnnual Compensation
    
    Compensation AwardsOtherAnnual
    
    Restricted
    
    Securities
    
    All OtherFiscal
    
    Salary
    
    
    
    
    
    Compensation
    
    Stock
    
    Underlying
    
    CompensationName and Principal Position
    
    Year
    
    ($)
    
    Bonus ($)(1)
    
    ($)(2)
    
    Awards ($)
    
    Options (#)
    
    ($)Manny Villafaña,
    
    
    2005
    
    
    $
    247,500
    
    
    $
    22,275
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Chairman and Chief
    
    
    2004
    
    
    
    
    
    
    
    
    
    
    $
    218,750
    
    
    
    
    
    
    
    
    
    
    
    Executive Officer
    
    
    2003
    
    
    
    
    
    
    
    
    
    
    
    150,000
    
    
    
    
    
    
    
    
    
    
    
    John L. Babitt
    
    
    2005
    
    
    $
    211,750
    
    
    $
    19,058
    
    
    
    
    
    
    
    
    
    
    
    140,000
    
    
    
    President, Chief Operating
    
    
    2004
    
    
    
    194,500
    
    
    
    10,000
    
    
    
    
    
    
    
    
    
    
    
    5,000
    
    
    
    Officer and Chief Financial
    
    
    2003
    
    
    
    57,200
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    275,000
    
    
    
    Officer
 
 (1)
    
    Represents discretionary bonus based on the achievement of certain financial and operating
goals for the year.(2)
    
    Represents consulting fees paid to Mr. Villafaña as a consultant through December 31, 2004. 17




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Option/SAR Grants During 2005 Fiscal Year
  Number of
    
    Percent of
    
    
    
    
    
    
    
    
    
    Potential Realizable Value atSecurities
    
    Total Options
    
    
    
    
    
    
    
    
    
    Assumed Annual Rates ofUnderlying
    
    Granted to
    
    Exercise or
    
    
    
    
    
    Stock Price Appreciation forOptions
    
    Employees in
    
    Base Price
    
    Expiration
    
    Option TermName
    
    Granted (#)(1)
    
    Fiscal Year (%)
    
    ($/Share)
    
    Date
    
    5%
    
    10%Manny Villafaña,
    
    
    0
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    John L. Babitt (1)
    
    
    100,000
    
    
    
    27.3
    %
    
    $
    4.90
    
    
    
    03/01/15
    
    
    $
    308,000
    
    
    $
    781,000John L. Babitt (2)
    
    
    40,000
    
    
    
    10.9
    %
    
    $
    1.13
    
    
    
    12/15/15
    
    
    
    28,000
    
    
    
    72,000
 
 (1)
    
    Such options were granted on March 1, 2005 and vested on December 15, 2005.(2)
    
    Such options were granted on December 15, 2005 and vest annually as to 25% of the total
number of shares commencing one year after the date of grant. Aggregated Option/SAR Exercises during 2005 and Year End Option/SAR Values
  Shares
    
    
    
    
    
    Number of Unexercised
    
    Value of UnexercisedAcquired
    
    
    
    
    
    Securities Underlying
    
    In-the-Money Options aton
    
    Value
    
    Options at 12/31/05
    
    12/31/05 (1)Name
    
    Exercise
    
    Realized
    
    Exercisable
    
    Unexercisable
    
    Exercisable
    
    UnexercisableManny Villafaña
    
    NA
    
    NA
    
    NA
    
    NA
    
    NA
    
    NAJohn L. Babitt
    
    NA
    
    NA
    
    
    280,000
    
    
    
    140,000
    
    
    
    
    
    
    
    
 
 (1)
    
    Value of exercisable/unexercisable in-the-money options is equal to the difference
between the market price of the Common Stock at fiscal year end and the option exercise price
per share multiplied by the number of shares subject to options. The closing sale price as of
December 31, 2005 on the Nasdaq National Market was $1.14. Employment Agreements
  18




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Stock Performance Chart
  Comparison of Cumulative Total Return Among CABG Medical, Inc.,
the Nasdaq Stock Market (U.S.) and the Nasdaq Medical Industry Index
(Medical Devices, Instruments and Supplies)
 
 December 8, 2004
    
    December 31, 2004
    
    December 31, 2005CABG Medical, Inc.
    
    
    100
    
    
    
    108.91
    
    
    
    20.73Nasdaq US
    
    
    100
    
    
    
    102.36
    
    
    
    104.53Nasdaq Medical
    
    
    100
    
    
    
    102.00
    
    
    
    105.01
 19




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Directors Fees
  
 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATEDSTOCKHOLDER
MATTERS
  Shares
    
    Percentage ofBeneficially
    
    Outstanding SharesName and Address
    
    Owned(1)
    
    Owned(1)Manny Villafaña
    
    
    5,784,000
    
    
    
    31.1
    %Angiotech Pharmaceuticals, Inc. (2)
    
    
    2,366,538
    
    
    
    12.7
    %John L. Babitt (3)
    
    
    530,000
    
    
    
    2.8
    %A. Jay Graf (4)
    
    
    110,000
    
    
    
    *Robert E. Munzenrider (4)
    
    
    50,000
    
    
    
    *Arch C. Smith (4)
    
    
    51,500
    
    
    
    *All officers and directors as a group (5 persons)
    
    
    6,525,500
    
    
    
    34.5
    %
 
 *
    
    Less than 1%.(1)
    
    Beneficial ownership is determined in accordance with rules of the SEC, and includes voting
power and/or investment power with respect to securities. Shares of Common Stock subject to
options or warrants 20




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currently exercisable or exercisable within 60 days of March 30, 2006 are
deemed outstanding for purposes of computing the percentage of the person holding such
options, but are not deemed outstanding for purposes of computing the percentage of any other
person. Except as indicated by footnote, we believe that the persons named in this table,
based on information provided by such persons, have sole voting and investment power with
respect to the shares of common stock indicated.(2)
    
    Includes 1,265,823 warrants to purchase common stock at $0.01 per share held by Angiodevice
International GMBH, a wholly owned subsidiary of Angiotech Pharmaceuticals, Inc.
(Angiotech). Angiotech is located at 1618 Station Street, Vancouver, British Columbia,
Canada, V6A 1B6.(3)
    
    Includes options to purchase 280,000 shares of common stock. Mr. Babitt disclaims beneficial
ownership of such option shares as the weighted average exercise price of such options is
$3.45, which is significantly above the proposed per share proceeds from the plan, if
approved.(4)
    
    Includes 37,500 shares of restricted stock subject to forfeiture; 12,500 of such shares of
restricted stock vest annually on December 13 of each year.  Number of securitiesremaining availablefor future issuanceNumber of Securities
    
    
    
    
    
    (excludingto be issued upon
    
    Weighted average
    
    securitiesexercise of
    
    exercise price of
    
    reflected in columnPlan Category
    
    outstanding options
    
    outstanding options
    
    (a)(a)
    
    
    
    (b)
    
    
    
    (c)Equity compensation
plans approved by
security holders
    
    
    1,030,288
    
    
    $
    2.49
    
    
    
    3,822,500Equity compensation
plans not approved
by security
holders(1)
    
    
    550,000
    
    
    $
    6.875
    
    
    
    Total
    
    
    1,580,288
    
    
    $
    4.016
    
    
    
    3,822,500
 
 (1)
    
    This category consists of 550,000 warrants to purchase common stock at $6.875 per share,
issued to our underwriters in connection with our initial public offering on December 8, 2004,
which expire on December 7, 2009. 
 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
  21




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ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
 Audit Fees
  2004
    
    
    2005Audit Fees (1)
    
    $
    121,100
    
    
    $
    102,500Audit-Related Fees
    
    
    
    
    
    
    Tax Fees (2)
    
    
    
    
    
    
    2,450All Other Fees (3)
    
    
    213,500
    
    
    
    $
    334,600
    
    
    $
    104,950
 
 (1)
    
    Audit fees incurred during 2004 were for audits of our financial statements from our
inception through December 31, 2004. The portion of audit fees related to the 2004
financial statements was $60,000.(2)
    
    Tax fees are related to the preparation of our 2004 tax return.(3)
    
    All other fees are related to our initial public offering in December 2004.  Pre-Approval of Audit Fees
  Report of Audit Committee
   (1)
    
    reviewed and discussed the audited financial statements with management;(2)
    
    discussed with the independent certified registered public accounting firm the
material required to be discussed by Statement on Auditing Standards No. 61; and(3)
    
    reviewed the written disclosures and the letter from the independent registered
public accounting firm required by the Independence Standards Boards Standard No.1,
and discussed with the independent registered public accounting firm any relationships
that may impact their objectivity and independence.
 22




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Members of the Audit Committee:Robert E. Munzenrider, ChairA. Jay GrafArch C. Smith
 23




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PART IV
 
 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 (a) Financial Statements.
 Report of Independent Registered Public Accounting Firm
    
    F-1Statements of Operations
    
    F-2Balance Sheets
    
    F-3Statements of Stockholders Equity
    
    F-4Statements of Cash Flows
    
    F-5Notes to Financial Statements
    
    F-6
 (b) Exhibits
 24




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Report of Independent Registered Public Accounting Firm
 
     /s/ KPMG LLP
 
 F-1




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CABG MEDICAL, INC.
(A Development Stage Company)
 STATEMENTS OF OPERATIONS
 Period fromDecember 3, 1999(Date ofInception) toDecember 31,
    
    
    Year Ended December 31,2005
    
    
    2003
    
    
    2004
    
    
    2005(In thousands, except share and per share amounts)Revenue
    
    $
    125
    
    
    $
    
    
    
    $
    21
    
    
    $
    104Expenses:Research and development
    
    
    13,976
    
    
    
    1,153
    
    
    
    2,647
    
    
    
    8,822Marketing, general and administrative
    
    
    3,833
    
    
    
    405
    
    
    
    996
    
    
    
    2,105Operating loss
    
    
    17,684
    
    
    
    1,558
    
    
    
    3,622
    
    
    
    10,823Interest income
    
    
    1,290
    
    
    
    16
    
    
    
    71
    
    
    
    1,099Net loss
    
    $
    (16,394
    )
    
    $
    (1,542
    )
    
    $
    (3,551
    )
    
    $
    (9,724
    )Basic and diluted net loss per share
    
    
    
    
    
    $
    (0.17
    )
    
    $
    (0.34
    )
    
    $
    (0.52
    )Weighted average shares outstanding  basic and diluted
    
    
    
    
    
    
    8,967,308
    
    
    
    10,298,639
    
    
    
    18,624,697
  F-2




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CABG MEDICAL, INC.
(A Development Stage Company)
 BALANCE SHEETS
 December 31,2004
    
    
    2005(In thousands, except shareand per share amounts)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    27,746
    
    
    $
    11,609Short-term investments
    
    
    1,190
    
    
    
    21,039Accounts receivable
    
    
    21
    
    
    
    102Prepaid expenses
    
    
    253
    
    
    
    485Other current assets
    
    
    17
    
    
    
    28Total current assets
    
    
    29,227
    
    
    
    33,263Property and equipment, net
    
    
    199
    
    
    
    70Total assets
    
    $
    29,426
    
    
    $
    33,333LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    841
    
    
    $
    647Accrued liabilities
    
    
    19
    
    
    
    48Total current liabilities
    
    
    860
    
    
    
    695Commitments and contingencies (notes 3 and 11)Stockholders equity:Undesignated stock (no par value) 6,000,000 shares authorized, none issued and outstanding
    
    
    
    
    
    
    Common stock (no par value) 54,000,000 shares authorized, 15,972,975 and 18,396,755
shares issued and outstanding as of December 31, 2004 and 2005
    
    
    36,378
    
    
    
    49,685Deferred compensation
    
    
    (1,142
    )
    
    
    (602
    )Accumulated other comprehensive loss
    
    
    
    
    
    
    (51
    )Deficit accumulated during development stage
    
    
    (6,670
    )
    
    
    (16,394
    )Total stockholders equity
    
    
    28,566
    
    
    
    32,638Total liabilities and stockholders equity
    
    $
    29,426
    
    
    $
    33,333
  F-3




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##### Table of Contents



CABG MEDICAL, INC.
(A Development Stage Company)
 STATEMENTS OF STOCKHOLDERS EQUITY AND COMPREHENSIVE LOSS
Period from December 3, 1999 (Date of Inception) to December 31, 2005,
and for the Years Ended December 31, 2003, 2004 and 2005
 DeficitAccumulated
    
    
    AccumulatedOther
    
    
    During theCommon Stock
    
    
    Deferred
    
    
    Comprehensive
    
    
    DevelopmentShares
    
    
    Amount
    
    
    Compensation
    
    
    Loss
    
    
    Stage
    
    
    Total(In thousands except share amounts)Balance at December 3, 1999 (date of inception)
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Common stock issued to founder at incorporation, $0.01 per share, December 3,
1999
    
    
    6,000,000
    
    
    
    50
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50Common stock issued to non-employees for research and development consulting
services, $0.03 per share, May 26, 2000
    
    
    525,000
    
    
    
    17
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17Common stock issued, $1.67 per share, October 16, 2000 (net of issuance costs
Of $11,000)
    
    
    1,425,000
    
    
    
    2,364
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,364Net loss and comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (171
    )
    
    
    (171
    )Balance at December 31, 2000
    
    
    7,950,000
    
    
    
    2,431
    
    
    
    
    
    
    
    
    
    
    
    (171
    )
    
    
    2,260Common stock issued to laboratory facility for research and development
services $1.67 per share, April 1, 2001
    
    
    60,000
    
    
    
    100
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100Common stock issued for employee stock option exercise
    
    
    480,000
    
    
    
    16
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16Net loss and comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (718
    )
    
    
    (718
    )Balance at December 31, 2001
    
    
    8,490,000
    
    
    
    2,547
    
    
    
    
    
    
    
    
    
    
    
    (889
    )
    
    
    1,658Net loss and comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (688
    )
    
    
    (688
    )Balance at December 31, 2002
    
    
    8,490,000
    
    
    
    2,547
    
    
    
    
    
    
    
    
    
    
    
    (1,577
    )
    
    
    970Common stock issued, $2.65 per share, August 18, 2003 (net of issuance costs
of $33,000)
    
    
    862,294
    
    
    
    2,252
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,252Non-employee stock options granted for research and development consulting
services, $2.65 per share, October 1, 2003
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3Net loss and comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,542
    )
    
    
    (1,542
    )Balance at December 31, 2003
    
    
    9,352,294
    
    
    
    4,802
    
    
    
    
    
    
    
    
    
    
    
    (3,119
    )
    
    
    1,683Common stock issued, $3.25 per share, March 31, 2004
    
    
    477,258
    
    
    
    1,551
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,551Common stock issued for employee stock option exercise
    
    
    16,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Non-employee stock options granted for research and development consulting
services, $3.25 per share, March 31, 2004
    
    
    
    
    
    
    195
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    195Common stock issued, $3.25 per share, July 21, 2004
    
    
    476,923
    
    
    
    1,551
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,551Common stock issued, $5.50 per share, December 8, 2004 (net of issuance costs
of $3,271)
    
    
    5,500,000
    
    
    
    26,979
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    26,979Warrants to purchase 550,000 shares of common stock at $6.875 per share,
issued in connection with December 8, 2004 stock offering
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Restricted stock issued to non-employee members of the board of directors at
$5.50 Per share, December 7, 2004
    
    
    150,000
    
    
    
    825
    
    
    
    (825
    )
    
    
    
    
    
    
    
    
    
    
    Increase in intrinsic value of unvested employee stock options
    
    
    
    
    
    
    475
    
    
    
    (475
    )
    
    
    
    
    
    
    
    
    
    
    Amortization of deferred compensation
    
    
    
    
    
    
    
    
    
    
    158
    
    
    
    
    
    
    
    
    
    
    
    158Net loss and comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,551
    )
    
    
    (3,551
    )Balance at December 31, 2004
    
    
    15,972,975
    
    
    
    36,378
    
    
    
    (1,142
    )
    
    
    
    
    
    
    (6,670
    )
    
    
    28,566Unrealized loss on available for sale securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (51
    )
    
    
    
    
    
    
    (51
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,724
    )
    
    
    (9,724
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,775
    )Common stock issued, $5.50 per share, January 14, 2005 (net of issuance costs of $343)
    
    
    825,000
    
    
    
    4,195
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,195Common stock issued, $4.54 per share, March 22, 2005 (net of issuance costs of $15)
    
    
    1,100,715
    
    
    
    4,985
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,985Common stock issued for employee stock option exercises
    
    
    498,065
    
    
    
    112
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    112Warrants to purchase 1,265,823 shares of common stock at $0.01 per share,
issued on connection with license agreement
    
    
    
    
    
    
    4,335
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,335Non-employee stock options granted for research and development consulting
services, $3.95 per share, August 4, 2005
    
    
    
    
    
    
    14
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14Decrease in intrinsic value of unvested employee stock options
    
    
    
    
    
    
    (334
    )
    
    
    334
    
    
    
    
    
    
    
    
    
    
    
    Amortization of deferred compensation
    
    
    
    
    
    
    
    
    
    
    206
    
    
    
    
    
    
    
    
    
    
    
    206Balance at December 31, 2005
    
    
    18,396,755
    
    
    $
    49,685
    
    
    $
    (602
    )
    
    $
    (51
    )
    
    $
    (16,394
    )
    
    $
    32,638
  F-4




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##### Table of Contents



CABG MEDICAL, INC.
(A Development Stage Company)
 STATEMENTS OF CASH FLOWS
 Period fromDecember 3, 1999(Date of Inception)to December 31,
    
    
    Year Ended December 31,2005
    
    
    2003
    
    
    2004
    
    
    2005(In thousands)Cash flows from operating activities:Net loss
    
    $
    (16,394
    )
    
    $
    (1,542
    )
    
    $
    (3,551
    )
    
    $
    (9,724
    )Adjustments to reconcile net loss to net cash used in
operating activities:Depreciation expense
    
    
    140
    
    
    
    15
    
    
    
    23
    
    
    
    77Impairment loss on fixed assets
    
    
    248
    
    
    
    
    
    
    
    
    
    
    
    248Stock-based compensation
    
    
    364
    
    
    
    3
    
    
    
    195
    
    
    
    206Stock-based research and development
    
    
    4,664
    
    
    
    
    
    
    
    158
    
    
    
    4,349Changes in operating assets and liabilities:Accounts receivable
    
    
    (102
    )
    
    
    
    
    
    
    (21
    )
    
    
    (81
    )Prepaid expenses and other current assets
    
    
    (605
    )
    
    
    (19
    )
    
    
    (253
    )
    
    
    (323
    )Accounts payable
    
    
    647
    
    
    
    64
    
    
    
    739
    
    
    
    (194
    )Accrued liabilities
    
    
    48
    
    
    
    59
    
    
    
    (37
    )
    
    
    29Net cash used in operating activities
    
    
    (10,990
    )
    
    
    (1,420
    )
    
    
    (2,747
    )
    
    
    (5,413
    )Cash flows from investing activities:Purchases of property and equipment
    
    
    (459
    )
    
    
    (33
    )
    
    
    (147
    )
    
    
    (197
    )Purchases of short-term investments
    
    
    (26,898
    )
    
    
    (2,288
    )
    
    
    (1,476
    )
    
    
    (22,081
    )Proceeds from short-term investments
    
    
    5,901
    
    
    
    958
    
    
    
    1,789
    
    
    
    2,262Net cash provided by (used in) investing activities
    
    
    (21,456
    )
    
    
    (1,363
    )
    
    
    166
    
    
    
    (20,016
    )Cash flows from financing activities:Capital lease payments
    
    
    
    
    
    
    (2
    )
    
    
    
    
    
    
    Proceeds from issuances of common stock, net of issuance costs
    
    
    43,926
    
    
    
    2,252
    
    
    
    30,081
    
    
    
    9,180Proceeds from exercise of employee stock options
    
    
    129
    
    
    
    
    
    
    
    
    
    
    
    112Net cash provided by financing activities
    
    
    44,055
    
    
    
    2,250
    
    
    
    30,081
    
    
    
    9,292Net increase (decrease) in cash and cash equivalents
    
    
    11,609
    
    
    
    (533
    )
    
    
    27,500
    
    
    
    (16,137
    )Cash and cash equivalents at beginning of period
    
    
    
    
    
    
    779
    
    
    
    246
    
    
    
    27,746Cash and cash equivalents at end of period
    
    $
    11,609
    
    
    $
    246
    
    
    $
    27,746
    
    
    $
    11,609Supplemental non-cash disclosures:Deferred compensation
    
    $
    966
    
    
    $
    
    
    
    $
    1,300
    
    
    $
    334
  F-5




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##### Table of Contents



CABG MEDICAL, INC.
(A Development Stage Company)
 NOTES TO FINANCIAL STATEMENTS
 1. Organization and Summary of Significant Accounting Policies
 Organization and Business
   Cash and Cash Equivalents
  Short-term Investments
  Accounts Receivable
  Property and Equipment
  Long-Lived Assets
  F-6




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##### Table of Contents



Revenue Recognition
  Research and Development Expenses
  Income Taxes
  Stock-Based Compensation
    F-7




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##### Table of Contents



2003
    
    2004
    
    2005Risk free interest rate
    
    
    3.71
    %
    
    
    4.00
    %
    
    
    4.18-4.54
    %Expected dividend rate
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %Volatility (1)
    
    
    0.55
    
    
    
    0.55
    
    
    
    0.55-0.88Expected life of option
    
    7 years
    
    7 years
    
    7 years
 
 (1)
    
    Volatility was calculated based on an analysis of the Companys industry peers prior
to the Companys initial public offering on December 8, 2004.  December 31,2003
    
    
    2004
    
    
    2005(In thousands, except per share amounts)Net loss
    
    $
    (1,542
    )
    
    $
    (3,551
    )
    
    $
    (9,724
    )Add: Stock-based employee compensation expense included in net loss
    
    
    
    
    
    
    158
    
    
    
    206Less: Employee stock compensation expense determined under the
fair value method for all awards
    
    
    (44
    )
    
    
    (260
    )
    
    
    (1,100
    )Pro forma net loss
    
    $
    (1,586
    )
    
    $
    (3,653
    )
    
    $
    (10,618
    )Pro forma net loss per share  basic and diluted
    
    $
    (0.18
    )
    
    $
    (0.35
    )
    
    $
    (0.57
    )
  Net Loss Per Share
  December 31,2003
    
    
    2004
    
    
    2005(In thousands, except per share amounts)Net loss
    
    $
    (1,542
    )
    
    $
    (3,551
    )
    
    $
    (9,724
    )Weighted average common shares and equivalents outstanding
Common shares outstanding
    
    
    8,967,308
    
    
    
    10,298,639
    
    
    
    17,639,783Warrants issued at a nominal exercise price (note 2)
    
    
    
    
    
    
    
    
    
    
    984,914Weighted average shares outstanding  basic and diluted
    
    
    8,967,308
    
    
    
    10,298,639
    
    
    
    18,624,697Pro forma net loss per share  basic and diluted
    
    $
    (0.17
    )
    
    $
    (0.34
    )
    
    $
    (0.52
    )
  F-8




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##### Table of Contents



New Accounting Pronouncements
  Use of Estimates
  2. Development Stage Activities
   F-9




---



##### Table of Contents



3. Commitments and Contingencies
 Leases
   2006
    
    
    832007
    
    
    21Total
    
    $
    104
  Royalty Payments
  Legal Proceedings
  Employment Agreements
  Supply Agreements
  F-10




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##### Table of Contents



4. Property and Equipment
  December 31,2004
    
    
    2005(In thousands)Furniture and office equipment
    
    $
    34
    
    
    $
    39Machinery and production equipment
    
    
    183
    
    
    
    137Computers and technology equipment
    
    
    44
    
    
    
    34261
    
    
    
    210Accumulated depreciation
    
    
    (62
    )
    
    
    (140
    )$
    199
    
    
    $
    70
   5. Accrued Liabilities
  December 31,2004
    
    
    2005(In thousands)Accrued compensation
    
    $
    19
    
    
    $
    42Other expenses
    
    
    
    
    
    
    6$
    19
    
    
    $
    48
 6. Stockholders Equity
 Common Stock Offerings
      F-11




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##### Table of Contents



7. Stock-Based Compensation
   WeightedShares Under
    
    
    Average
    
    
    AvailableOption
    
    
    Exercise Price
    
    
    For GrantOptions outstanding at December 3, 1999 (date of inception)
    
    
    
    
    
    $
    
    
    
    
    6,000,000Granted
    
    
    1,935,000
    
    
    
    0.06
    
    
    
    (1,935,000
    )Options outstanding at December 31, 2000
    
    
    1,935,000
    
    
    
    0.06
    
    
    
    4,065,000Granted
    
    
    30,000
    
    
    
    1.67
    
    
    
    (30,000
    )Exercised
    
    
    (480,000
    )
    
    
    0.03
    
    
    
    Cancelled
    
    
    (720,000
    )
    
    
    0.03
    
    
    
    720,000Options outstanding at December 31, 2001
    
    
    765,000
    
    
    
    0.17
    
    
    
    4,755,000Cancelled
    
    
    (30,000
    )
    
    
    0.03
    
    
    
    30,000Options outstanding at December 31, 2002
    
    
    735,000
    
    
    
    0.17
    
    
    
    4,785,000Granted
    
    
    400,000
    
    
    
    2.65
    
    
    
    (400,000
    )Options outstanding at December 31, 2003
    
    
    1,135,000
    
    
    
    1.05
    
    
    
    4,385,000Granted
    
    
    257,000
    
    
    
    3.51
    
    
    
    (257,000
    )Restricted stock grant
    
    
    
    
    
    
    
    
    
    
    (150,000
    )Exercised
    
    
    (16,500
    )
    
    
    0.03
    
    
    
    Cancelled
    
    
    (78,000
    )
    
    
    2.65
    
    
    
    78,000Options outstanding at December 31, 2004
    
    
    1,297,500
    
    
    
    1.45
    
    
    
    4,056,000Granted
    
    
    371,500
    
    
    
    3.67
    
    
    
    (371,500
    )Exercised
    
    
    (500,712
    )
    
    
    0.25
    
    
    
    Cancelled
    
    
    (138,000
    )
    
    
    4.04
    
    
    
    138,000Options outstanding at December 31, 2005
    
    
    1,030,288
    
    
    
    2.49
    
    
    
    3,822,500
 F-12




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##### Table of Contents



Weighted AverageRemainingPer Share
    
    
    
    
    
    Contractual Life
    
    
    Weighted Average
    
    
    OptionsExercise Price
    
    Shares
    
    
    (Years)
    
    
    Exercise Price
    
    
    Exercisable$0.03
    
    
    221,788
    
    
    
    4.41
    
    
    $
    0.03
    
    
    
    221,7881.13
    
    
    86,500
    
    
    
    9.96
    
    
    
    1.13
    
    
    
    2.65  2.87
    
    
    390,000
    
    
    
    7.96
    
    
    
    2.68
    
    
    
    290,0003.25  3.95
    
    
    115,000
    
    
    
    8.33
    
    
    
    3.28
    
    
    
    115,0004.25  4.90
    
    
    217,000
    
    
    
    9.19
    
    
    
    4.80
    
    
    
    217,0001,030,288
    
    
    
    7.67
    
    
    
    2.49
    
    
    
    843,788
   Variable Stock Option Grants
  Restricted Stock Grants
  8. Stock-Based Research and Development
  F-13




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##### Table of Contents



9. Income Taxes
  December 31,2004
    
    
    2005(In thousands)Deferred tax assets:Net operating loss carryforwards
    
    $
    2,591
    
    
    $
    4,854Intangible assets  license agreement
    
    
    
    
    
    
    1,647Stock-based compensation
    
    
    
    
    
    
    153Fixed-asset impairment
    
    
    
    
    
    
    99Charitable contribution carryforwards
    
    
    40
    
    
    
    40Research credit carryforwards
    
    
    175
    
    
    
    309Total deferred tax assets
    
    
    2,806
    
    
    
    7,102Deferred tax liabilities:Depreciation
    
    
    
    
    
    
    (8
    )Total deferred taxes
    
    
    2,806
    
    
    
    7,094Valuation allowance
    
    
    (2,806
    )
    
    
    (7,094
    )Net deferred tax assets
    
    $
    
    
    
    $
    
 F-14




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##### Table of Contents



Period fromDecember 3, 1999(Date of Inception)
    
    
    Year Endedto December 31,
    
    
    December 31,2005
    
    
    2003
    
    
    2004
    
    
    2005Statutory rate
    
    
    (34.0
    )%
    
    
    (34.0
    )%
    
    
    (34.0
    )%
    
    
    (34.0
    )%State and local income taxes (net of federal tax benefit)
    
    
    (6.0
    )
    
    
    (6.0
    )
    
    
    (6.0
    )
    
    
    (6.0
    )Credits and other
    
    
    (1.4
    )
    
    
    
    
    
    
    
    
    
    
    (1.4
    )Change in valuation allowance
    
    
    40.0
    
    
    
    40.0
    
    
    
    40.0
    
    
    
    41.40.0
    %
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %
  Balance, December 31, 2003
    
    
    1,298Additions
    
    
    1,508Deductions
    
    
    Balance, December 31, 2004
    
    
    2,806Additions
    
    
    4,288Deductions
    
    
    Balance, December 31, 2005
    
    $
    7,094
 F-15




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##### Table of Contents



10. Quarterly Data (Unaudited)
  Year Ended December 31, 2004
    
    
    Year Ended December 31, 2005Q1
    
    
    Q2
    
    
    Q3
    
    
    Q4
    
    
    Total
    
    
    Q1
    
    
    Q2
    
    
    Q3
    
    
    Q4
    
    
    Total(In thousands)Revenue
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    21
    
    
    $
    21
    
    
    $
    
    
    
    $
    
    
    
    $
    34
    
    
    $
    70
    
    
    $
    104Expenses:Research and
development
    
    
    519
    
    
    
    473
    
    
    
    648
    
    
    
    1,007
    
    
    
    2,647
    
    
    
    5,323
    
    
    
    1,063
    
    
    
    1,124
    
    
    
    1,312
    
    
    
    8,822Marketing, general and
administrative
    
    
    165
    
    
    
    236
    
    
    
    195
    
    
    
    400
    
    
    
    996
    
    
    
    538
    
    
    
    474
    
    
    
    488
    
    
    
    605
    
    
    
    2,105Operating loss
    
    
    684
    
    
    
    709
    
    
    
    843
    
    
    
    1,386
    
    
    
    3,622
    
    
    
    5,861
    
    
    
    1,537
    
    
    
    1,578
    
    
    
    1,847
    
    
    
    10,823Interest income
    
    
    5
    
    
    
    7
    
    
    
    13
    
    
    
    46
    
    
    
    71
    
    
    
    205
    
    
    
    277
    
    
    
    296
    
    
    
    321
    
    
    
    1,099Net loss
    
    $
    (679
    )
    
    $
    (702
    )
    
    $
    (830
    )
    
    $
    (1,340
    )
    
    $
    (3,551
    )
    
    $
    (5,656
    )
    
    $
    (1,260
    )
    
    $
    (1,282
    )
    
    $
    (1,526
    )
    
    $
    (9,724
    )
 11. Subsequent Event
     F-16




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##### Table of Contents



SIGNATURES
  Date: February 27, 2006
    
    CABG MEDICAL, INC.By
    
    /s/ Manuel A. VillafañaManuel A. VillafañaChairman and Chief Executive Officer
   Name
    
    Title
    
    Date/s/ Manuel A. Villafaña

Manuel A. Villafaña
    
    Chairman and Chief
Executive Officer and
Director (principal
executive officer)
    
    February 24, 2006/s/ John L. Babitt

John L. Babitt
    
    President, Chief
Operating Officer and
Chief Financial Officer
(principal financial and
accounting officer)
    
    February 24, 2006/s/ A. Jay Graf

A. Jay Graf
    
    Director
    
    February 24, 2006/s/ Arch C. Smith

Arch C. Smith
    
    Director
    
    February 24, 2006/s/ Robert E. Munzenrider

Robert E. Munzenrider
    
    Director
    
    February 24, 2006
 41




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##### Table of Contents



CABG MEDICAL, INC.
 
 EXHIBIT INDEX TO FORM 10-K
 For the Fiscal Year Ended:
    
    Commission File No.December 31, 2005
    
    000-51050
 ExhibitNumber
    
    Description3.1
    
    Articles of Incorporation and Articles of Amendment thereto (1)3.2
    
    Amended and Restated Bylaws (1)4.1
    
    Form of specimen certificate representing CABG Medical, Inc.s common stock (1)10.1
    
    2000 Long-Term Incentive Plan and related forms of agreements (1)(2)10.2
    
    CABG Medical, Inc. 2005 Annual Incentive Plan  incorporated by reference to Exhibit 10.1 to the
Companys Quarterly Report on Form 10-Q, for the quarter ended July 2, 2005 (2)10.4
    
    Employment Agreement dated as of August 18, 2003 with John L. Babitt (1)(2)10.6
    
    Letter Agreement dated June 17, 2003 with Manuel A. Villafaña (1)(2)10.9
    
    Letter Agreement dated July 31, 2003 with John L. Babitt (1)(2)10.10
    
    Supply Agreement dated January 1, 2004 with Bard Peripheral Vascular, Inc. (1)10.11
    
    Clinical Coating Agreement dated April 14, 2003 with SurModics, Inc. (1)10.12
    
    Material Transfer Agreement dated March 22, 2004 with Mayne Pharma, Inc. (1)10.13
    
    Technology Transfer Agreement dated June 5, 1996 between ATS Medical, Inc. and Manuel A. Villafaña (1)10.14
    
    Amendment to Technology Transfer Agreement dated June 3, 2004 with ATS Medical, Inc. and Manuel A.
Villafaña (1)10.15
    
    Technology Transfer Agreement dated July 15, 2004 with Manuel A. Villafaña (1)10.16
    
    Master License Agreement dated May 14, 2004 with SurModics, Inc. (1)10.17
    
    Amendment to Clinical Coating Agreement dated June 30, 2004 with SurModics, Inc. (1)10.18
    
    Application for Supply of Materials Terms of Materials Transfer with Novartis Pharma AG dated July 19,
2004 (1)10.19
    
    Amendment to Clinical Coating Agreement dated October 11, 2004 with SurModics, Inc. (1)10.20
    
    Employment agreement dated December 31, 2004 with Manuel A. Vilafaña  incorporated by reference to
Exhibit 10.20 to the Companys Annual Report on Form 10-K, for the fiscal year ended December 31, 2004
(2)10.21
    
    License Agreement dated March 22, 2005 with Angiotech Pharmaceuticals, Inc.  incorporated by reference
to Exhibit 10.1 to the Companys Quarterly Report on Form 10-Q, for the quarter ended March 31, 200510.22
    
    Investment Agreement dated March 22, 2005 and Amendment dated April 7, 2005 with Angiotech
Pharmaceuticals, Inc.  incorporated by reference to Exhibit 10.2 to the Companys Quarterly Report on
Form 10-Q, for the quarter ended March 31, 200510.23
    
    Amendment to Employment Agreement dated February 8, 2006 with Manny Villafaña  incorporated by
reference to Exhibit 10.1 to the Companys Current Report on Form 8-K filed on February 13, 2006 (2)10.24
    
    Discharge and Termination Agreement Regarding Change in Control Letter Agreement dated February 8,
2006 with Manny Villafaña  incorporated by reference to Exhibit 10.2 to the Companys Current Report
on Form 8-K filed on February 13, 2006 (2)10.25
    
    Stay Bonus Agreement dated February 8, 2006 with Manny Villafaña  incorporated by reference to
Exhibit 10.3 to the Companys Current Report on Form 8-K filed on February 13, 2006 (2)10.26
    
    Discharge and Termination Agreement Regarding Change in Control Letter Agreement dated February 8,
2006 with John Babitt  incorporated by reference to Exhibit 10.4 to the Companys Current Report on
Form 8-K filed on February 13, 2006 (2)10.27
    
    Stay Bonus Agreement dated February 8, 2006 with John Babitt  incorporated by reference to Exhibit
10.5 to the Companys Current Report on Form 8-K filed on February 13, 2006 (2)23.1*
    
    Consent of KPMG LLP, Independent Registered Public Accounting Firm24.1*
    
    Power of Attorney (included in signature page)31.1*
    
    Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2*
    
    Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1*
    
    Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2*
    
    Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
 *
    
    Filed herewith.(1)
    
    Incorporated by reference to the corresponding exhibit numbers to our Registration Statement on
Form S-1, Reg. No. 333-117580(2)
    
    Management agreement or compensatory plan or arrangement. 42