Table of Contents





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

|                                                    |   |                                                                                          
|--------------------------------------------------- | - | -----------------------------------------------------------------------------------------
|(Mark
 One)                                         |  
|                                                    |   |                                                                                          
|                                                    | x | QUARTERLY REPORT
 PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|For the quarterly period ended September
 30, 2010 
|                                                   
|OR                                                 
|                                                   
|                                                    | o | TRANSITION REPORT
 PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|For the transition period from _______ to
 ________

|                                                       
|-------------------------------------------------------
|Commission File Number: 0-27605                        
|                                                       
|                                                       
|                                                       
|VASCULAR SOLUTIONS, INC.                               
|(Exact name of registrant as specified in
 its charter)

|                                                                |                                  
|--------------------------------------------------------------- | ---------------------------------
|Minnesota                                                       | 41-1859679                       
|(State or other jurisdiction of
 incorporation or organization) | (IRS Employer Identification No.)
|                                                                |                                  
|6464
 Sycamore Court                                           
|Minneapolis,
 Minnesota 55369                                  
|(Address of principal executive offices,
 including zip code)  
|                                                                |                                  
|(763)
 656-4300                                                
|(Registrants telephone number, including
 area code)          
|                                                                |                                  
|Not Applicable                                                 
|(Former name, former address and former                        
|fiscal year, if changed since last report)                     
|                                                               
|                                                               

Indicate by
check mark whether the registrant: (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

Yes x
No o

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

|                                                                                                                                                                                                                                                                                                       |                            
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ---------------------------
|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 o                                                                                                                                                                                                                                                                              | Accelerated filer x        
|Non-accelerated filer o                                                                                                                                                                                                                                                                                | Smaller Reporting Company o

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

The registrant had 16,824,751 shares of common stock, $.01 par value
per share, outstanding as of October 15, 2010.







VASCULAR
SOLUTIONS, INC.

TABLE OF CONTENTS

|                               |          |                                                                                        |  |     
|------------------------------ | -------- | -------------------------------------------------------------------------------------- |  | ----
|                               |          |                                                                                        |  | Page
|                               |          |                                                                                       
|PART I.
 FINANCIAL INFORMATION |          |                                                                                       
|                               |          |                                                                                        |  |     
|                               | Item 1.  | Financial Statements (Unaudited)                                                       |  | 2   
|                               |          |                                                                                        |  |     
|                               |          | Consolidated Balance Sheets                                                            |  | 2   
|                               |          |                                                                                        |  |     
|                               |          | Consolidated Statements of Operations                                                  |  | 3   
|                               |          |                                                                                        |  |     
|                               |          | Consolidated Statements of Cash Flows                                                  |  | 4   
|                               |          |                                                                                        |  |     
|                               |          | Notes to Unaudited Consolidated Financial Statements                                   |  | 5   
|                               |          |                                                                                        |  |     
|                               | Item 2.  | Managements Discussion and Analysis of Financial Condition and
 Results of Operations |  | 15  
|                               |          |                                                                                        |  |     
|                               | Item 3.  | Quantitative and Qualitative Disclosures about Market Risk                             |  | 21  
|                               |          |                                                                                        |  |     
|                               | Item 4.  | Controls and Procedures                                                                |  | 22  
|                               |          |                                                                                        |  |     
|PART II. OTHER
 INFORMATION    |          |                                                                                       
|                               |          |                                                                                        |  |     
|                               | Item 1.  | Legal Proceedings                                                                      |  | 22  
|                               |          |                                                                                        |  |     
|                               | Item 1A. | Risk Factors                                                                           |  | 22  
|                               |          |                                                                                        |  |     
|                               | Item 2.  | Unregistered Sales of Equity Securities and Use of Proceeds                            |  | 22  
|                               |          |                                                                                        |  |     
|                               | Item 3.  | Defaults upon Senior Securities                                                        |  | 23  
|                               |          |                                                                                        |  |     
|                               | Item 4.  | (Removed and Reserved)                                                                 |  | 23  
|                               |          |                                                                                        |  |     
|                               | Item 5.  | Other Information                                                                      |  | 23  
|                               |          |                                                                                        |  |     
|                               | Item 6.  | Exhibits                                                                               |  | 23  

Page 1

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Table of Contents

PART 1. FINANCIAL INFORMATION

|        |                     
|------- | --------------------
|Item 1. | Financial Statements

VASCULAR
SOLUTIONS, INC.

Consolidated Balance Sheets

|                                                                                                    |  |                     |             |                    |   |             |  
|--------------------------------------------------------------------------------------------------- |  | ------------------- | ----------- | ------------------ | - | ----------- | -
|                                                                                                    |  | September
 30, 2010 |             | December
 31, 2009 |  
|                                                                                                    |  | (unaudited)         |             | (see
 note)        |  
|Assets                                                                                              |  |                     |             |                    |   |             |  
|Current assets:                                                                                     |  |                     |             |                    |   |             |  
|Cash and cash equivalents                                                                           |  | $                   | 19,219,000  |                    | $ | 17,794,000  |  
|Accounts receivable, net of reserves of
 $120,000 and $150,000 in 2010 and 2009, respectively       |  |                     | 9,951,000   |                    |   | 9,143,000   |  
|Inventories                                                                                         |  |                     | 13,055,000  |                    |   | 8,977,000   |  
|Prepaid expenses                                                                                    |  |                     | 1,534,000   |                    |   | 1,520,000   |  
|Current portion of deferred tax assets                                                              |  |                     | 4,500,000   |                    |   | 4,500,000   |  
|Total current assets                                                                                |  |                     | 48,259,000  |                    |   | 41,934,000  |  
|                                                                                                    |  |                     |             |                    |   |             |  
|Property and equipment, net                                                                         |  |                     | 5,084,000   |                    |   | 3,793,000   |  
|Intangible assets, net                                                                              |  |                     | 5,045,000   |                    |   | 193,000     |  
|Deferred tax assets, net of current portion
 and liabilities                                        |  |                     | 2,477,000   |                    |   | 5,835,000   |  
|Total assets                                                                                        |  | $                   | 60,865,000  |                    | $ | 51,755,000  |  
|                                                                                                    |  |                     |             |                    |   |             |  
|Liabilities and shareholders equity                                                                |  |                     |             |                    |   |             |  
|Current liabilities:                                                                                |  |                     |             |                    |   |             |  
|Accounts payable                                                                                    |  | $                   | 3,011,000   |                    | $ | 1,396,000   |  
|Accrued compensation                                                                                |  |                     | 3,200,000   |                    |   | 2,978,000   |  
|Accrued expenses                                                                                    |  |                     | 1,153,000   |                    |   | 865,000     |  
|Accrued royalties                                                                                   |  |                     | 567,000     |                    |   | 621,000     |  
|Current portion of deferred revenue                                                                 |  |                     | 861,000     |                    |   | 929,000     |  
|Total current liabilities                                                                           |  |                     | 8,792,000   |                    |   | 6,789,000   |  
|                                                                                                    |  |                     |             |                    |   |             |  
|Long-term deferred revenue, net of current
 portion                                                 |  |                     | 3,930,000   |                    |   | 4,567,000   |  
|                                                                                                    |  |                     |             |                    |   |             |  
|Shareholders equity:                                                                               |  |                     |             |                    |   |             |  
|Common stock, $0.01 par value:                                                                      |  |                     |             |                    |   |             |  
|Authorized shares  40,000,000Issued and
 outstanding shares  16,824,751  2010; 16,557,669  2009 |  |                     | 168,000     |                    |   | 166,000     |  
|Additional paid-in capital                                                                          |  |                     | 89,817,000  |                    |   | 88,481,000  |  
|Other                                                                                               |  |                     | 84,000      |                    |   | 84,000      |  
|Accumulated deficit                                                                                 |  |                     | (41,926,000 | )                  |   | (48,332,000 | )
|Total shareholders equity                                                                          |  |                     | 48,143,000  |                    |   | 40,399,000  |  
|Total liabilities and shareholders equity                                                          |  | $                   | 60,865,000  |                    | $ | 51,755,000  |  

See accompanying notes.

Note: The balance sheet at
December 31, 2009 has been derived from the audited financial statements at
that date.

Page 2

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Table of Contents

VASCULAR
SOLUTIONS, INC.

Consolidated Statements of Operations



|                                                      |  |                                    |            |                                   |   |            |   |      |            |   |   |            |  
|----------------------------------------------------- |  | ---------------------------------- | ---------- | --------------------------------- | - | ---------- | - | ---- | ---------- | - | - | ---------- | -
|                                                      |  | Three
 Months Ended
 September 30, |            | Nine
 Months Ended
 September 30, |  
|                                                      |  | 2010                               |            | 2009                              |   | 2010       |   | 2009 |           
|                                                      |  | (unaudited)                        |            | (unaudited)                       |  
|Revenue:                                              |  |                                    |            |                                   |   |            |   |      |            |   |   |            |  
|Product revenue                                       |  | $                                  | 19,626,000 |                                   | $ | 16,817,000 |   | $    | 56,755,000 |   | $ | 49,014,000 |  
|License and collaboration revenue                     |  |                                    | 235,000    |                                   |   | 411,000    |   |      | 812,000    |   |   | 1,191,000  |  
|Total revenue                                         |  |                                    | 19,861,000 |                                   |   | 17,228,000 |   |      | 57,567,000 |   |   | 50,205,000 |  
|                                                      |  |                                    |            |                                   |   |            |   |      |            |   |   |            |  
|Product costs and operating expenses:                 |  |                                    |            |                                   |   |            |   |      |            |   |   |            |  
|Cost of goods sold                                    |  |                                    | 6,932,000  |                                   |   | 5,718,000  |   |      | 19,389,000 |   |   | 16,698,000 |  
|Collaboration expenses                                |  |                                    | 23,000     |                                   |   | 199,000    |   |      | 175,000    |   |   | 554,000    |  
|Research and development                              |  |                                    | 2,464,000  |                                   |   | 1,988,000  |   |      | 7,194,000  |   |   | 5,707,000  |  
|Clinical and regulatory                               |  |                                    | 966,000    |                                   |   | 713,000    |   |      | 2,561,000  |   |   | 2,092,000  |  
|Sales and marketing                                   |  |                                    | 5,927,000  |                                   |   | 5,280,000  |   |      | 17,441,000 |   |   | 15,840,000 |  
|General and administrative                            |  |                                    | 1,327,000  |                                   |   | 1,152,000  |   |      | 4,039,000  |   |   | 3,375,000  |  
|Litigation                                            |  |                                    |           |                                   |   |           |   |      | (3,529,000 | ) |   |           |  
|Amortization of purchased technology and
 intangibles |  |                                    | 89,000     |                                   |   |           |   |      | 148,000    |   |   |           |  
|Total product costs and operating expenses            |  |                                    | 17,728,000 |                                   |   | 15,050,000 |   |      | 47,418,000 |   |   | 44,266,000 |  
|                                                      |  |                                    |            |                                   |   |            |   |      |            |   |   |            |  
|Operating income                                      |  |                                    | 2,133,000  |                                   |   | 2,178,000  |   |      | 10,149,000 |   |   | 5,939,000  |  
|                                                      |  |                                    |            |                                   |   |            |   |      |            |   |   |            |  
|Other income (expenses):                              |  |                                    |            |                                   |   |            |   |      |            |   |   |            |  
|Interest income                                       |  |                                    | 9,000      |                                   |   | 5,000      |   |      | 30,000     |   |   | 43,000     |  
|Interest expense                                      |  |                                    | (5,000     | )                                 |   | (9,000     | ) |      | (15,000    | ) |   | (30,000    | )
|Foreign exchange gain (loss)                          |  |                                    | 41,000     |                                   |   | 3,000      |   |      | (17,000    | ) |   | (3,000     | )
|                                                      |  |                                    |            |                                   |   |            |   |      |            |   |   |            |  
|Income before income taxes                            |  |                                    | 2,178,000  |                                   |   | 2,177,000  |   |      | 10,147,000 |   |   | 5,949,000  |  
|                                                      |  |                                    |            |                                   |   |            |   |      |            |   |   |            |  
|Income tax expense                                    |  |                                    | (714,000   | )                                 |   | (746,000   | ) |      | (3,741,000 | ) |   | (2,194,000 | )
|Net income                                            |  | $                                  | 1,464,000  |                                   | $ | 1,431,000  |   | $    | 6,406,000  |   | $ | 3,755,000  |  
|                                                      |  |                                    |            |                                   |   |            |   |      |            |   |   |            |  
|                                                      |  |                                    |            |                                   |   |            |   |      |            |   |   |            |  
|Net income per share  basic                          |  | $                                  | 0.09       |                                   | $ | 0.09       |   | $    | 0.39       |   | $ | 0.24       |  
|Net income per share  diluted                        |  | $                                  | 0.09       |                                   | $ | 0.09       |   | $    | 0.38       |   | $ | 0.23       |  

See accompanying notes.

Page 3

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Table of Contents

VASCULAR SOLUTIONS, INC.

Consolidated Statements of Cash Flows

|                                                                                                 |  |                                  |            |      |   |            |  
|------------------------------------------------------------------------------------------------ |  | -------------------------------- | ---------- | ---- | - | ---------- | -
|                                                                                                 |  | Nine Months Ended
 September 30, |           
|                                                                                                 |  | 2010                             |            | 2009 |  
|                                                                                                
|                                                                                                 |  | (unaudited)                      |           
|Operating activities                                                                             |  |                                  |           
|Net income                                                                                       |  | $                                | 6,406,000  |      | $ | 3,755,000  |  
|Adjustments
 to reconcile net income to net cash provided by operating activities:               |  |                                  |            |      |   |            |  
|Depreciation                                                                                     |  |                                  | 1,239,000  |      |   | 1,042,000  |  
|Amortization                                                                                     |  |                                  | 148,000    |      |   |           |  
|Stock-based compensation                                                                         |  |                                  | 1,576,000  |      |   | 1,299,000  |  
|Deferred taxes, net                                                                              |  |                                  | 3,358,000  |      |   | 1,897,000  |  
|Change in allowance for doubtful accounts                                                        |  |                                  | (30,000    | )    |   | (5,000     | )
|Changes in operating assets and
 liabilities:                                                    |  |                                  |            |      |   |            |  
|Accounts receivable                                                                              |  |                                  | (778,000   | )    |   | (102,000   | )
|Inventories                                                                                      |  |                                  | (4,078,000 | )    |   | 284,000    |  
|Prepaid expenses                                                                                 |  |                                  | (14,000    | )    |   | (519,000   | )
|Accounts payable                                                                                 |  |                                  | 1,615,000  |      |   | (524,000   | )
|Accrued compensation and expenses                                                                |  |                                  | 216,000    |      |   | 500,000    |  
|Amortization of deferred license fees and
 other deferred revenue                                |  |                                  | (704,000   | )    |   | (616,000   | )
|Net cash
 provided by operating activities                                                       |  |                                  | 8,954,000  |      |   | 7,011,000  |  
|                                                                                                 |  |                                  |            |      |   |            |  
|Investing activities                                                                             |  |                                  |            |      |   |            |  
|Purchase of
 property and equipment                                                              |  |                                  | (2,291,000 | )    |   | (941,000   | )
|Cash paid
 for acquisition                                                                       |  |                                  | (5,000,000 | )    |   |           |  
|Net cash
 used in investing activities                                                           |  |                                  | (7,291,000 | )    |   | (941,000   | )
|                                                                                                 |  |                                  |            |      |   |            |  
|Financing activities                                                                             |  |                                  |            |      |   |            |  
|Repurchase
 of common shares                                                                     |  |                                  | (1,545,000 | )    |   | (340,000   | )
|Proceeds
 from the exercise of stock options, stock warrants and sale of stock, net of
 expenses |  |                                  | 1,307,000  |      |   | 1,114,000  |  
|Net cash
 provided by (used in) financing activities                                             |  |                                  | (238,000   | )    |   | 774,000    |  
|Increase in
 cash and cash equivalents                                                           |  |                                  | 1,425,000  |      |   | 6,844,000  |  
|Cash and
 cash equivalents at beginning of period                                                |  |                                  | 17,794,000 |      |   | 7,209,000  |  
|Cash and
 cash equivalents at end of period                                                      |  | $                                | 19,219,000 |      | $ | 14,053,000 |  
|                                                                                                 |  |                                  |            |      |   |            |  
|Supplemental disclosure of cash flow                                                             |  |                                  |            |      |   |            |  
|Cash paid
 for interest                                                                          |  | $                                | 12,000     |      | $ | 23,000     |  
|Cash paid
 for taxes                                                                             |  | $                                | 147,000    |      | $ | 158,000    |  

See accompanying notes.

Page 4

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Table of Contents



VASCULAR
SOLUTIONS, INC.Notes to Unaudited Consolidated Financial
Statements-Continued

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Basis of Presentation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | The
 accompanying unaudited financial statements of Vascular Solutions, Inc. (the
 Company) have been prepared in accordance with generally accepted accounting
 principles for interim financial information and with the instructions to
 Form 10-Q and Regulation S-X. Accordingly, they do not include all of the
 information and footnotes required by generally accepted accounting
 principles for complete financial statements. In the opinion of management,
 all normal, recurring adjustments considered necessary for a fair
 presentation have been included. The financial statements should be read in
 conjunction with the audited financial statements for the fiscal year ended
 December 31, 2009 included in the Annual Report on Form 10-K of the Company
 filed with the Securities and Exchange Commission. Interim results of
 operations are not necessarily indicative of the results to be expected for
 the full year or any other interim periods.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|(2) | Net Income per Share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | In
 accordance with Accounting Standards Codification (ASC) 260-10-55, basic
 net income per share for the three and nine months ended September 30, 2010
 and 2009 is computed by dividing net income by the weighted average common
 shares outstanding during the periods presented. Diluted net income per
 weighted average common share is computed by dividing net income by the
 weighted average common shares outstanding during the period, increased to
 include dilutive potential common shares issuable relating to outstanding
 restricted stock, and upon the exercise of stock options and awards that were
 outstanding during the period.                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    | Weighted
 average common shares outstanding for the three and nine months ended
 September 30, 2010 and 2009 was as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

|                                               |  |                                   |            |                                  |  |            |  |      |            |  |  |            | 
|---------------------------------------------- |  | --------------------------------- | ---------- | -------------------------------- |  | ---------- |  | ---- | ---------- |  |  | ---------- | 
|                                               |  | Three Months Ended
 September 30, |            | Nine Months Ended
 September 30, | 
|                                               |  | 2010                              |            | 2009                             |  | 2010       |  | 2009 |           
|                                              
|                                               |  | (unaudited)                       |            | (unaudited)                      | 
|Weighted
 average shares outstanding  basic   |  |                                   | 16,489,000 |                                  |  | 16,055,000 |  |      | 16,418,000 |  |  | 15,955,000 | 
|Weighted
 average shares outstanding  diluted |  |                                   | 17,103,000 |                                  |  | 16,526,000 |  |      | 16,897,000 |  |  | 16,390,000 | 

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(3) | Revenue Recognition                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | In the
 United States the Company sells its products directly to hospitals and
 clinics. Revenue is recognized in accordance with generally accepted
 accounting principles as outlined in ASC 605-10-S99, which requires that four
 basic criteria be met before revenue can be recognized: (i) persuasive
 evidence of an arrangement exists; (ii) the price is fixed or determinable;
 (iii) collectibility is reasonably assured; and (iv) product delivery has
 occurred or services have been rendered. The Company recognizes revenue as
 products are shipped based on FOB shipping point terms when title passes to
 customers. The Company negotiates credit terms on a customer-by-customer
 basis and products are shipped at an agreed-upon price. All product returns
 must be pre-approved and, if approved, customers are subject to a 20%
 restocking charge.

Page 5

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Table of Contents

VASCULAR SOLUTIONS, INC.Notes to Unaudited Consolidated Financial
Statements-Continued

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | In all
 international markets, the Company sells its products to international
 distributors which subsequently resell the products to hospitals and clinics.
 The Company has agreements with each of its distributors which provide that
 title and risk of loss pass to the distributor upon shipment of the products
 to the distributor. The Company warrants that its products are free from
 manufacturing defects at the time of shipment to the distributor. Revenue is
 recognized upon shipment of products to distributors following the receipt
 and acceptance of a distributors purchase order. Allowances are provided for
 estimated returns and warranty costs at the time of shipment.                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | The Company
 also generates revenues from license agreements and research collaborations
 and recognizes these revenues when earned. In accordance with ASC
 605-25-25-5, for revenues which contain multiple deliverables, the Company
 separates the deliverables into separate accounting units if they meet the
 following criteria: (i) the delivered items have a stand-alone value to the
 customer; (ii) the fair value of any undelivered items can be reliably
 determined; and (iii) if the arrangement includes a general right of return,
 delivery of the undelivered items is probable and substantially controlled by
 the seller. Deliverables that do not meet these criteria are combined with
 one or more other deliverables into one accounting unit. Revenue from each
 accounting unit is recognized based on the applicable accounting literature,
 primarily ASC 605-10-S99-1.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | In addition,
 the Company has reviewed the provisions of ASC 808-10 for Collaborative
 Arrangements, and has determined this ASC has no impact on the amounts
 recorded under these agreements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | In
 accordance with ASC 605-45-45, the Company includes shipping and handling
 revenues in net revenue, and shipping and handling costs in cost of sales.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(4) | Inventories                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | Inventories
 are stated at the lower of cost (first-in, first-out method) or market.
 Appropriate consideration is given to deterioration, obsolescence and other
 factors in evaluating net realizable value. Inventories are comprised of the
 following:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

|                 |  |                     |            |                    |   |           | 
|---------------- |  | ------------------- | ---------- | ------------------ | - | --------- | 
|                 |  | September 30,
 2010 |            | December 31,
 2009 |  
|                
|                 |  | (unaudited)         |            |                    |   |          
|                
|Raw
 materials   |  | $                   | 6,574,000  |                    | $ | 4,382,000 | 
|Work-in
 process |  |                     | 871,000    |                    |   | 858,000   | 
|Finished
 goods  |  |                     | 5,610,000  |                    |   | 3,737,000 | 
|                 |  | $                   | 13,055,000 |                    | $ | 8,977,000 | 

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(5) | Credit Risk and Allowance for Doubtful Accounts                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    | The Company
 maintains allowances for doubtful accounts for estimated losses resulting
 from the inability of our customers to make required payments. This allowance
 is regularly evaluated by the Company for adequacy by taking into
 consideration factors such as past experience, credit quality of the customer
 base, age of the receivable balances, both individually and in the aggregate,
 and current economic conditions that may affect a customers ability to pay.
 The Company does not accrue interest on past due accounts receivable.
 Receivables are written off only after all collection attempts have failed
 and are based on individual credit evaluation and the specific circumstances
 of the customer. At September 30, 2010 and December 31, 2009, the allowance
 for doubtful accounts was $85,000 and $105,000, respectively.

Page 6

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Table of Contents

VASCULAR SOLUTIONS, INC.Notes to Unaudited Consolidated Financial
Statements-Continued

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | All product
 returns must be pre-approved and, if approved, customers are subject to a 20%
 restocking charge. The Company analyzes the rate of historical returns when
 evaluating the adequacy of
 the allowance for sales returns, which is included with the allowance for
 doubtful accounts on our balance sheet. At September 30, 2010 and December
 31, 2009, the sales and return allowance was $35,000 and $45,000, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | Accounts
 receivable are shown net of the combined total of the allowance for doubtful
 accounts and allowance for sales returns of $120,000 and $150,000 at
 September 30, 2010 and December 31, 2009, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(6) | Concentrations of Credit and Other Risks                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | In the
 United States the Company sells its products directly to hospitals and
 clinics. In all international markets, the Company sells its products to
 distributors who, in turn, sell to hospitals and clinics.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | With respect
 to accounts receivable, the Company performs credit evaluations of its
 customers and does not require collateral. No single customer represented
 greater than 10% of gross accounts receivable as of either September 30, 2010
 or December 31, 2009. There have been no material losses on customer
 receivables.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   
|    | Revenue by
 geographic destination as a percentage of total net revenue for the nine
 month periods ended September 30, 2010 and 2009 was 86% and 87% in the United
 States and 14% and 13% in international markets, respectively. No single
 customer represented greater than 10% of the total net revenue for the nine
 months ended September 30, 2010 or 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(7) | Dependence on Key Suppliers                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | King Pharmaceuticals                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    | The Company
 purchases certain key components from single-source suppliers. Any
 significant component delay or interruption could require the Company to
 qualify new sources of supply, if available, and could have a material
 adverse effect on the Companys financial condition and results of operations.
 The Company purchases its requirements for thrombin (a component in the
 Hemostat products) under a Thrombin-JMI Supply Agreement entered into with
 King Pharmaceuticals, Inc. (King) on January 9, 2007. Under the terms of
 the Thrombin-JMI Supply Agreement, King agrees to manufacture and supply
 thrombin to the Company on a non-exclusive basis. The Thrombin-JMI Supply
 Agreement does not contain any minimum purchase requirements. King agrees to
 supply the Company with such quantity of thrombin as the Company may order at
 a fixed price throughout the term of the Thrombin-JMI Supply Agreement as
 adjusted for inflation, variations in potency and other factors. The
 Thrombin-JMI Supply Agreement has an initial term of 10 years, followed by
 successive automatic one-year extensions, subject to termination by the
 parties under certain circumstances, including: (i) termination by King
 without cause anytime after the fifth anniversary of the date of the
 Thrombin-JMI Supply Agreement upon five years prior written notice to the
 Company, and (ii) termination by the Company without cause anytime after the
 fifth anniversary of the date of the Thrombin-JMI Supply Agreement upon five
 years prior written notice to King provided that the Device Supply Agreement,
 which the Company also entered into with King on January 9, 2007, has expired
 on its terms or the parties have agreed to terminate it.

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Table of Contents

VASCULAR SOLUTIONS, INC.Notes to Unaudited Consolidated Financial
Statements-Continued

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(8) | Commitments and Contingencies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | Marine Polymer Technologies, Inc. Litigation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | On May 11,
 2005 the Company initiated a lawsuit for product disparagement and false
 advertising against Marine Polymer Technologies, Inc., a Delaware corporation
 (Marine Polymer). In the lawsuit, the Company alleged that Marine Polymer
 made defamatory and disparaging statements concerning the Companys D-Stat®
 Dry hemostatic bandage. The Company sought relief in the form of an
 injunction to enjoin Marine Polymer from continuing to defame and disparage
 the Companys products, damages as a result of such statements, and other
 costs, disbursements and attorneys fees. Marine Polymer brought a
 counter-claim against the Company including, among other claims, business
 defamation and product disparagement for statements allegedly made by the
 Company concerning Marine Polymers SyvekPatch®. Marine Polymer
 sought relief in the form of monetary damages, costs, disbursements and
 attorneys fees. The trial commenced on March 24, 2008 in the United States
 District Court for the District of Massachusetts. At the conclusion of the
 trial on April 7, 2008 the jury returned a verdict in favor of the Company
 and against Marine Polymer for product disparagement concerning statements
 made regarding the safety of the Companys D-Stat Dry hemostat product. In
 its verdict, the jury found that Marine Polymers statements were false and
 disparaged the D-Stat Dry product and awarded the Company $4,500,000 in
 monetary damages. The jury rejected Marine Polymers counter-claims in their entirety.
 Following post trial motions, on June 30, 2008, the Court upheld the jury
 verdict, granted the Companys request for a permanent injunction against
 Marine Polymer for the statements that the jury found were false, and added
 prejudgment interest on the jury verdict award in the amount of $592,124.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    | On July 14,
 2008, Marine Polymer filed a Notice of Appeal with the U.S. First Circuit
 Court of Appeals seeking to overturn the monetary damages and injunction
 issued against them. Marine Polymer did not appeal the Courts rejection of
 its counter-claims against the Company. On February 4, 2009, oral arguments
 by both parties on Marine Polymers appeal were heard by the U.S. First
 Circuit Court of Appeals. On December 23, 2009, the U.S. First Circuit Court
 of Appeals affirmed the judgment against Marine Polymer for product
 disparagement. As a result, the permanent injunction issued at the conclusion
 of the trial will remain in effect, prohibiting Marine Polymer and its
 representatives from making, publishing or disseminating certain disparaging
 statements concerning the safety of our D-Stat products. Addressing the
 jurys award of $4.5 million in damages, the Court determined that, due to
 differences in opinion among the judges, the Company could either accept a
 $2.7 million award of damages (plus interest) or insist upon a new trial
 limited to the issue of determining the reasonable amount of damages. The
 Company accepted the $2.7 million award of damages plus interest and on
 January 22, 2010. The Company received $3.56 million as payment in full for
 the judgment. This amount was recorded as a litigation gain in the first
 quarter of 2010.                                                                                                                                                                                                                                                                                                                                                                                                                                                  

Page 8

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Table of Contents

VASCULAR SOLUTIONS, INC.Notes to Unaudited Consolidated Financial
Statements-Continued

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | AngioDynamics, Inc. Litigation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | On July 29,
 2009 AngioDynamics, Inc. (AngioDynamics) filed a lawsuit against the Company
 in the U.S. District Court for the District of Delaware, alleging that the
 Company has infringed U.S. Patent No. 7,273,478 and U.S. Patent No. 7,559,329.
 Specifically, AngioDynamics alleges that doctors using the Companys Bright
 Tip fibers and procedure kits are using the methods claimed in those patents,
 and accuses the Company of inducing and contributing to infringement.
 AngioDynamics has requested injunctive relief and compensatory damages. On
 December 1, 2009 the Company filed its answer, a counterclaim, and a motion
 to transfer the case to the U.S. District Court for the District of
 Minnesota. On July 30, 2010 the U.S. District Court for the District of
 Delaware granted the Companys motion to transfer the lawsuit to the U.S.
 District Court for the District of Minnesota.                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | The Company
 has also filed an inter partes
 request for reexamination of both the 478 and 329 patents with the United States
 Patent Office. The Patent Office granted the inter
 partes requests for reexamination for both the 478 and 329
 patents. The Company expects the reexamination process for each patent will
 take at least three years to conclude. On January 27, 2010, the Company filed
 a motion with the U.S. District Court for the District of Delaware to stay
 all proceedings in the litigation pending the outcome of the inter partes reexaminations. The motion
 to stay has been transferred to the U.S. District Court for the District of
 Minnesota and is under consideration.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | From time to
 time, the Company is involved in additional legal proceedings arising in the
 normal course of business. As of the date of this report the Company is not a
 party to any legal proceeding not described in this section in which an
 adverse outcome would reasonably be expected to have a material adverse
 effect on the Companys results of operations or financial condition.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | King Agreements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | On January
 9, 2007, the Company entered into three separate agreements with King: a
 License Agreement, a Device Supply Agreement and a Thrombin-JMI®
 Supply Agreement (See Note 7). Under the License Agreement, the Company
 licensed the exclusive rights to the Companys products Thrombi-Pad,
 Thrombi-Gel and Thrombi-Paste to King in exchange for a one-time license fee
 of $6,000,000. Under the Device Supply Agreement, the Company agreed to
 manufacture the licensed products for sale to King in exchange for two
 separate $1,000,000 milestone payments; one upon the first commercial sale of
 Thrombi-Gel (which was received on May 31, 2007), and one upon the first
 commercial sale of Thrombi-Paste. The Company is amortizing the $6,000,000
 license fee on a straight-line basis over 10 years. The Company is amortizing
 the $1,000,000 milestone payment that was received on May 31, 2007 over the
 remaining 10-year license period, and will amortize the additional $1,000,000
 milestone payment for the Thrombi-Paste product over the remaining 10-year
 license period if it is received. The unamortized license fee was $4,416,000
 and $4,945,000 at September 30, 2010 and December 31, 2009, respectively. The
 amortization of license fee was $528,000 for the nine months ended September
 30, 2010 and 2009, respectively.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | Under the Device
 Supply Agreement the Company agreed to pursue a surgical indication for the
 use of the Thrombi-Gel and Thrombi-Paste products from the FDA. The Device
 Supply Agreement requires the Company to make a one-time payment of
 $2,500,000 to King if the FDA does not approve the surgical indication of
 Thrombi-Gel and a one-time payment of $2,500,000 to King if the FDA does not
 approve the surgical indication of Thrombi-Paste after performing a clinical
 study and submitting the application. In 2009 King suspended further
 development of the Thrombi-Paste product. In August 2010, King suspended
 further work on the pursuit of a surgical indication for Thrombi-Gel. The
 Company believes the probability of paying these one-time payments to King is
 remote, and therefore has not recorded any provision for these payments.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

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Table of Contents

VASCULAR SOLUTIONS, INC.
Notes to Unaudited Consolidated Financial Statements-Continued

|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     | Nicolai, GmbH Agreement                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|     | Effective
 April 1, 2008 the Company entered into a five-year distribution agreement
 with Nicolai, GmbH. As a result of entering into this distribution agreement,
 the Company no longer maintains a direct sales force in Germany. In
 connection with this distribution agreement, the Company received 500,000
 Euros from Nicolai, GmbH, which was deferred and is being recognized ratably
 over the five-year term of the distribution agreement.                                                                                                                                                                                                                                                         
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|     | The
 agreement also includes provisions requiring the Company to pay Nicolai, GmbH
 specific amounts if the Company terminates the distribution agreement prior
 to the end of the five-year term. The Company does not intend to terminate
 the distribution agreement and, as such, has not recorded a liability
 relating to these potential future payments to Nicolai, GmbH. The unamortized
 license fee was $363,000 and $472,000 at September 30, 2010 and December 31,
 2009, respectively. The amortization of license fee was $109,000 for the nine
 months ended September 30, 2010 and 2009, respectively.                                                                                           
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|(9)  | Lines of Credit                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|     | On December
 21, 2009, the Company entered into a secured asset-based revolving credit
 agreement with U.S. Bank National Association. The revolving credit agreement
 is a one-year, $10,000,000 facility with availability based primarily on
 eligible customer receivables, inventory and property and equipment. The
 revolving credit agreement bears interest equal to the one-month LIBOR rate
 plus 1.60% and is secured by a first security interest on all of the
 Companys assets. The revolving credit agreement requires a quarterly payment
 based on an annual fee of 0.125% of the average unused portion of the committed
 revolving line as determined by the bank and reviewed by management.
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|     | The
 revolving credit agreement includes one covenant that the Company cannot have
 a maximum cash flow leverage ratio greater than 2.5 to 1. The calculation of
 this covenant is determined by multiplying annual lease expense times six and
 adding any loans, then dividing this amount by the sum of earnings before
 interest, taxes, depreciation, amortization and annual operating lease
 payments. The covenant is computed quarterly based on a rolling 12-month
 period. The Company was in compliance with this covenant as of September 30,
 2010.                                                                                                                                                 
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|     | As of
 September 30, 2010, the Company had no outstanding balance against the
 revolving credit agreement. Based on the Companys eligible customer
 receivables, inventory, property and equipment and cash balances, $10,000,000
 was available for borrowing as of September 30, 2010.                                                                                                                                                                                                                                                                                                                                                                                                                         
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|(10) | Income Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|     | The Company
 is subject to income tax in numerous jurisdictions and at various rates and
 the use of estimates is required in determining the provision for income
 taxes. For the nine month periods ended September 30, 2010 and September 30,
 2009, the Company recorded a provision for taxes of $3,741,000 and $2,194,000
 on income before tax of $10,147,000 and $5,949,000, resulting in an effective
 income tax rate of 37% for both periods, respectively. The difference between
 the effective tax rates of 37% and the U.S. federal statutory income tax rate
 of 34% was due mainly to the impact of state income taxes.                                                                          

Page 10

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Table of Contents

VASCULAR SOLUTIONS, INC.
Notes to Unaudited Consolidated Financial Statements-Continued

|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     | Through the
 third quarter of 2008, the Company maintained a full valuation allowance on
 its deferred tax assets. The Company regularly assesses the likelihood that
 the deferred tax assets will be recovered from future taxable income. The
 Company considers projected future taxable income and ongoing tax planning
 strategies, then records a valuation allowance to reduce the carrying value
 of the net deferred taxes to an amount that is more likely than not to be
 realized.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|     | As of
 December 31, 2008, based upon the Companys assessment of all available
 evidence, including previous three year cumulative income before unusual and
 infrequent expenses (litigation and thrombin qualification expenses),
 estimates of future profitability, and the Companys overall prospects of
 future business, the Company determined that it is more likely than not that
 the Company will be able to realize a portion of the deferred tax assets in
 the future, and as a result recorded a $13,200,000 income tax benefit for the
 year ended December 31, 2008. To determine the amount of the reduction in the
 valuation allowance, the Company used a discounted projection of its revenue
 and income over the next five years, which would approximate the ten-year
 life of the Companys three most significant products as of December 31,
 2008. The amount of the valuation allowance reduction was based on the
 Companys projected discounted taxable income. The Company will evaluate the
 adequacy of the remaining valuation allowance in the fourth quarter of 2010
 and anticipates that this evaluation could result in a change that would
 remove all or part of the remaining valuation allowance. This adjustment to the
 valuation allowance could result in a significant income tax benefit.                                                                                                                                                                                                  
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|     | Effective
 January 1, 2007, the Company adopted ASC 740-10. Upon adoption, the Company
 had $425,000 of unrecognized income tax benefits and the adoption of ASC
 740-10 had no effect on shareholders equity. The Company has recorded an ASC
 740-10 reserve of $727,000 as of September 30, 2010 and December 31, 2009.
 The impact of tax related interest and penalties is recorded as a component
 of income tax expense. For the nine months ended September 30, 2010, the
 Company has recorded $0 for the payment of tax related interest and there
 were no tax penalties or interest recognized in the statements of operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|     | The Company
 is subject to income tax examinations in the U.S. Federal jurisdiction, as
 well as in Germany and various state jurisdictions. At September 30, 2010,
 the Companys 2008 U.S. Federal 1120 tax filing was under exam by the U.S.
 Internal Revenue Service. To date no finding or adjustments have been
 proposed to the Company. Remaining open tax years at September 30, 2010 are
 2007 through 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|(11) | Acquisitions and IPR&D Charges                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|     | During the
 first quarter of fiscal year 2010, the Company adopted ASC 805 related to
 business combinations. The new authoritative guidance establishes principles
 and requirements for how an acquirer recognizes and measures in its financial
 statements the identifiable assets acquired, the liabilities assumed, any
 noncontrolling interests in the acquiree and the goodwill acquired. The underlying
 purchase method of accounting for acquisitions was retained, but the new
 guidance incorporates a number of changes. These changes include the
 capitalization of purchased in-process research and development (IPR&D),
 expensing of acquisition related costs and the recognition of contingent
 purchase price consideration at fair value at the acquisition date. In
 addition, changes in accounting for deferred tax asset valuation allowances
 and acquired income tax uncertainties after the measurement period will be
 recognized in earnings rather than as an adjustment to the cost of the
 acquisition. This accounting treatment for taxes is applicable to
 acquisitions consummated both prior to and subsequent to the adoption of the
 new authoritative guidance. The adoption of the new authoritative guidance
 did not change the requirement to expense IPR&D immediately with respect
 to asset acquisitions. The adoption of the new authoritative guidance did not
 have a material impact on our consolidated financial statements during the
 three and nine months ended September 30, 2010.

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VASCULAR SOLUTIONS, INC.
Notes to Unaudited Consolidated Financial Statements-Continued

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | When the
 Company acquires another company or a group of assets, the purchase price is
 allocated, as applicable, among IPR&D, other identifiable intangible
 assets, net tangible assets and the remainder, if any, gets recognized to
 goodwill, as required by U.S. GAAP. Goodwill represents the excess of the
 aggregate purchase price over the fair value of net assets, including
 IPR&D, of acquired businesses. The values assigned to IPR&D and other
 identifiable intangible assets are based on valuations as determined by
 independent third party appraisers. The techniques used by these appraisers
 include estimating the future cash flows of each project or technology and
 discounting the net cash flows back to their present values utilizing an
 appropriate risk-adjusted rate of return (discount rate). The discount rate
 used is determined at the time of the acquisition in accordance with accepted
 valuation methods. For IPR&D, these methodologies include consideration
 of the risk of the project not achieving commercial feasibility and include a
 factor that takes into account the uncertainty surrounding the successful development
 of the IPR&D.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | At the time
 of acquisition, the Company plans that all acquired IPR&D will reach
 technological feasibility, but there can be no assurance that the commercial
 viability of these products will actually be achieved. The nature of the efforts
 to develop the acquired technologies into commercially viable products
 consists principally of planning, designing and conducting clinical trials
 necessary to obtain regulatory approvals. The risks associated with achieving
 commercialization include, but are not limited to, delay or failure to obtain
 regulatory approvals to conduct clinical trials, delay or failure to obtain
 required market clearances, and patent issuance, validity and litigation, if
 any. If commercial viability were not achieved, the Company would likely look
 to other alternative uses for the same technology.                                                                                                                                                                                                                                                                                                                                     
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | Escalon Vascular Access, Inc.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | On April 30,
 2010, the Company acquired the assets related to the SMARTNEEDLE® and pdACCESS®
 Doppler guided needle access business from Escalon Vascular Access, Inc.,
 (Escalon) a division of Escalon Medical Corporation. Under the terms of the
 agreement the Company agreed to pay Escalon a total of $5,750,000, consisting
 of $5,000,000 paid in cash at April 30, 2010 and $750,000 payable in cash
 upon successful completion of the transfer of the manufacturing processes
 from Escalon to the Company (See Note 13). The SMARTNEEDLE and pdACCESS products consist of a hand-held
 monitor and one-time use needles designed to provide auditory ultrasound guided
 access to arteries and veins during catheterization procedures.                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | In addition
 to the SMARTNEEDLE and pdACCESS
 products, the Company has acquired the assets related to the new VascuView
 TAP visual ultrasound system and will pay Escalon a one-time cash earn-out
 payment in an amount equal to 25% of the net sales of the VascuView TAP
 products sold between July 1, 2010 and June 30, 2011. No amount has been
 recorded related the earn-out at September 30, 2010.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | The Company
 accounted for the transaction as a business combination in the second quarter
 of 2010. In accordance with ASC 805 the purchase price is being allocated
 based on estimates of the fair value of assets acquired, as no liabilities
 were assumed.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      

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VASCULAR SOLUTIONS, INC.
Notes to Unaudited Consolidated Financial Statements-Continued

| |                                                  
| | -------------------------------------------------
| | The purchase
 price will be allocated as follows:

|                        |  |   |           | 
|----------------------- |  | - | --------- | 
|Inventory               |  | $ | 500,000   | 
|Property and
 Equipment |  |   | 250,000   | 
|Purchased technology    |  |   | 2,500,000 | 
|Other
 intangibles      |  |   | 750,000   | 
|Goodwill                |  |   | 1,750,000 | 
|                        |  | $ | 5,750,000 | 

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The
 developed technology and other intangible assets have an estimated useful
 life of 9  10 years. The establishment of goodwill was primarily due to the
 expected revenue growth that is attributable to increased market penetration
 from future customers.                                                                                                                                                                                                                                                                                                                                                               
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | Pro Forma
 Information                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | The
 following unaudited pro forma summary combines the Companys results with
 those of Escalon as if the acquisition had occurred at the beginning of each
 of the periods presented. This unaudited pro forma information is not
 intended to represent or be indicative of the Companys consolidated results
 of operations or financial condition that would have been reported for the
 periods presented had the acquisition been completed at the beginning of each
 of the periods presented, and should not be taken as indicative of the
 Companys future consolidated results of operations or financial condition:

|                     |  |                                   |            |                                  |   |            |  |      |            |  |   |            | 
|-------------------- |  | --------------------------------- | ---------- | -------------------------------- | - | ---------- |  | ---- | ---------- |  | - | ---------- | 
|                     |  | Three Months
 Ended September 30, |            | Nine Months
 Ended September 30, |  
|                     |  | 2010                              |            | 2009                             |   | 2010       |  | 2009 |           
|                    
|Revenue              |  | $                                 | 19,861,000 |                                  | $ | 18,159,000 |  | $    | 58,946,000 |  | $ | 53,108,000 | 
|                     |  |                                   |            |                                  |   |            |  |      |            |  |   |            | 
|Net Income           |  |                                   | 1,519,000  |                                  |   | 1,526,000  |  |      | 6,503,000  |  |   | 3,972,000  | 
|                     |  |                                   |            |                                  |   |            |  |      |            |  |   |            | 
|Net income per share |  |                                   |            |                                  |   |            |  |      |            |  |   |            | 
|                     |  |                                   |            |                                  |   |            |  |      |            |  |   |            | 
|Basic                |  | $                                 | 0.09       |                                  | $ | 0.10       |  | $    | 0.40       |  | $ | 0.25       | 
|Diluted              |  | $                                 | 0.09       |                                  | $ | 0.09       |  | $    | 0.38       |  | $ | 0.24       | 

| |                                                                                                                                                                                                                                                                              
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Certain pro
 forma adjustments have been made to reflect the impact of the purchase
 transaction, primarily consisting of amortization of intangible assets with
 determinable lives and income taxes to reflect the Companys effective tax
 rate for the periods presented.
| |                                                                                                                                                                                                                                                                              
| | As of
 September 30, 2010, the Company has recognized revenue of $1,638,000 relating
 to the SMARTNEEDLE and pdACCESS
 products.                                                                                                                                             

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VASCULAR SOLUTIONS, INC.
Notes to Unaudited Consolidated Financial Statements-Continued

|     |                                                                                                                                                 
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------
|(12) | Products and Services                                                                                                                           
|     |                                                                                                                                                 
|     | The
 following tables set forth, for the periods indicated, net revenue by product
 line along with the percent change from the previous period:

|                          |  |                                 |            |                 |  |              |    |                 |            |  |  |    |  
|------------------------- |  | ------------------------------- | ---------- | --------------- |  | ------------ | -- | --------------- | ---------- |  |  | -- | -
|                          |  | Nine Months Ended September 30, |           
|                          |  | 2010                            |            | 2009            | 
|                          |  | Net
 Revenue                    |            | Percent
 Change |  | Net
 Revenue |    | Percent
 Change |           
|                         
|Catheter products         |  | $                               | 29,954,000 |                 |  | 35           | %  | $               | 22,215,000 |  |  | 19 | %
|Hemostat products         |  |                                 | 18,690,000 |                 |  |             | %  |                 | 18,725,000 |  |  | 5  | %
|Vein products             |  |                                 | 8,111,000  |                 |  |             | %  |                 | 8,074,000  |  |  | 14 | %
|                          |  |                                 |            |                 |  |              |    |                 |            |  |  |    |  
|Total product revenue     |  |                                 | 56,755,000 |                 |  | 16           | %  |                 | 49,014,000 |  |  | 12 | %
|License and collaboration |  |                                 | 812,000    |                 |  | (32          | %) |                 | 1,191,000  |  |  | 6  | %
|                          |  |                                 |            |                 |  |              |    |                 |            |  |  |    |  
|Total revenue             |  | $                               | 57,567,000 |                 |  | 15           | %  | $               | 50,205,000 |  |  | 12 | %

|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(13) | Subsequent Events                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|     | On October
 20, 2010, the Company completed the acquisition from Radius Medical Technologies,
 Inc. and Radius Medical, LLC (collectively, Radius) of the assets related to
 Radiuss snare and retrieval product line. Under the terms of the agreement
 the Company agreed to pay Radius a total of $6,500,000, consisting of
 $5,000,000 paid in cash at October 20, 2010 and $1,500,000 payable in cash
 upon successful completion of the transfer of the manufacturing processes
 from Radius to the Company. In addition, Radius will be entitled to receive
 an annual cash earn-out payment based on 25% of net sales of the acquired
 products which exceed $2.0 million, $2.5 million, and $3.0 million for the
 calendar years 2011, 2012 and 2013, respectively.
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|     | The Company
 will account for the transaction as a business combination in the fourth
 quarter of 2010. In accordance with ASC 805 the purchase price is being
 allocated based on estimates of the fair value of assets acquired, as no
 liabilities were assumed.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

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|        |                                                                                       
|------- | --------------------------------------------------------------------------------------
|Item 2. | Managements Discussion and Analysis of Financial Condition and
 Results of Operations

Executive Level Overview

Vascular
Solutions, Inc. (we, us or Vascular) is focused on bringing clinically advanced
solutions to interventional cardiologists and interventional radiologists
worldwide. As a vertically-integrated medical device company, we generate
ideas, create new interventional medical devices, and then deliver these
products to physicians through our direct domestic sales force and our
international distribution network. We were incorporated in the state of
Minnesota in December 1996, and began operations in February 1997. Our products
are divided into three categories:

|  |                                                                                                                                                                                                                                                                                                                                                                                                                         
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Catheter
 products, principally consisting of a variety of catheters used in specific
 clinical indications such as the Pronto® extraction catheters,
 GuideLiner® catheters, Langston® dual lumen catheters
 and Minnie® support catheters, and also including products used in
 connection with percutaneous access to the vasculature such as
 micro-introudcer kits, guidewires and the Guardian® hemostasis
 valve,
|  |                                                                                                                                                                                                                                                                                                                                                                                                                         
| | Hemostat
 (blood clotting) products, principally consisting of the D-Stat®
 Dry hemostat, a topical thrombin-based pad with a bandage used to control
 surface bleeding, and the D-Stat Flowable, a thick yet flowable
 thrombin-based mixture for preventing bleeding in subcutaneous pockets, and                                                                                                                     
|  |                                                                                                                                                                                                                                                                                                                                                                                                                         
| | Vein
 products, principally consisting of the Vari-Lase® endovenous
 laser, a laser console and procedure kit used for the treatment of varicose
 veins,                                                                                                                                                                                                                                                                

In
2000 we received FDA clearance for our first product, the Duett sealing
device, which is used to seal the puncture site following catheterization procedures.
In 2001, we made the strategic decision to develop additional products. We have
grown from net revenue of $6.2 million in 2000 to net revenue of $68.4 million
in 2009. This increase in revenue represents a compound annual growth rate of
31% and is driven by our commitment to the research and development of multiple
new devices to diagnose and treat existing and new vascular conditions.

The
interventional medical device industry is characterized by intense competition,
rapidly-evolving technology, and a high degree of government regulation. To
grow our business, we have focused on continually developing and
commercializing new products. Looking ahead, we expect our business may be
impacted by the following trends and opportunities:



|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The future
 regulatory approval of newly-developed products. Any new products that we
 develop must be approved by the Food and Drug Administration in the United
 States and by similar regulatory bodies in other countries before they can be
 sold. The requirements for obtaining product approval have undergone change
 and are likely to continue to change. We monitor the changing regulatory
 landscape and modify our regulatory submissions as necessary to obtain
 product approvals.                                                                                                                                                                                                                                                                                                                                                
|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | Successfully
 integrating acquired products into our existing operations. The acquisition
 of products complementary to our existing product portfolio and customer call
 point provides an additional business opportunity, provided that we
 successfully integrate the acquired products into our existing business
 structure. As a first step in this process, in April 2010 we acquired the SMARTNEEDLE and pdACCESS Doppler guided
 needle products from Escalon (see Note 11 to the Unaudited Consolidated
 Financial Statements in Item 1 of Part I) and have recently completed the
 integration of these products into our operations. In October 2010, we
 acquired the snare and retrieval product line from Radius Medical
 Technologies, Inc. (see Note 13 to the Unaudited Consolidated Financial
 Statements in Item 1 of Part I).

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|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Managing
 intellectual property. The interventional medical device industry is
 characterized by numerous patent filings and litigation claims made to
 protect new and evolving product ideas. To maximize the profitability of new
 product ideas, we seek patent protection for those product design and method
 concepts which we believe have the potential to provide substantial product
 revenue. We are involved in litigation with AngioDynamics, Inc., concerning
 our Vari-Lase product line (See Legal Proceedings In Item 1 of Part II of
 this Form 10-Q). Managing intellectual property assets and claims is an
 important challenge for our business.

Results of Operations

The
following table sets forth, for the periods indicated, certain items from our
statements of operations expressed as a percentage of net revenue:

|                                                     |  |                                   |     |                                  |  |      |   |      |     |    |  |     |  
|---------------------------------------------------- |  | --------------------------------- | --- | -------------------------------- |  | ---- | - | ---- | --- | -- |  | --- | -
|                                                     |  | Three Months Ended
 September 30, |     | Nine Months Ended
 September 30, | 
|                                                     |  | 2010                              |     | 2009                             |  | 2010 |   | 2009 |    
|Revenue:                                             |  |                                   |     |                                  |  |      |   |      |     |    |  |     |  
|Product revenue                                      |  |                                   | 99  | %                                |  | 98   | % |      | 99  | %  |  | 98  | %
|License and collaboration revenue                    |  |                                   | 1   | %                                |  | 2    | % |      | 1   | %  |  | 2   | %
|Total revenue                                        |  |                                   | 100 | %                                |  | 100  | % |      | 100 | %  |  | 100 | %
|                                                     |  |                                   |     |                                  |  |      |   |      |     |    |  |     |  
|Product costs and operating expenses:                |  |                                   |     |                                  |  |      |   |      |     |    |  |     |  
|Cost of goods sold                                   |  |                                   | 35  | %                                |  | 33   | % |      | 34  | %  |  | 33  | %
|Collaboration expenses                               |  |                                   |    |                                  |  | 1    | % |      |    |    |  | 1   | %
|Research and development                             |  |                                   | 12  | %                                |  | 11   | % |      | 13  | %  |  | 11  | %
|Clinical and regulatory                              |  |                                   | 5   | %                                |  | 4    | % |      | 4   | %  |  | 4   | %
|Sales and marketing                                  |  |                                   | 30  | %                                |  | 31   | % |      | 30  | %  |  | 32  | %
|General and administrative                           |  |                                   | 7   | %                                |  | 7    | % |      | 7   | %  |  | 7   | %
|Litigation                                           |  |                                   |    |                                  |  |     |   |      | (6  | %) |  |    |  
|Amortization of purchased technology and intangibles |  |                                   |    |                                  |  |     |   |      |    |    |  |    |  
|Total product costs and operating expenses           |  |                                   | 89  | %                                |  | 87   | % |      | 82  | %  |  | 88  | %
|Operating income                                     |  |                                   | 11  | %                                |  | 13   | % |      | 18  | %  |  | 12  | %
|Other income and expenses, net                       |  |                                   |    |                                  |  |     |   |      |    |    |  |    |  
|Income before income taxes                           |  |                                   | 11  | %                                |  | 13   | % |      | 18  | %  |  | 12  | %
|Income taxes                                         |  |                                   | 4   | %                                |  | 4    | % |      | 7   | %  |  | 4   | %
|Net income                                           |  |                                   | 7   | %                                |  | 9    | % |      | 11  | %  |  | 8   | %

Three and nine
months ended September 30, 2010, compared to three and nine months ended
September 30, 2009

Net
revenue increased 15% to $19,861,000 for the quarter ended September 30, 2010
from $17,228,000 for the quarter ended September 30, 2009. Net revenue related
to the SMARTNEEDLE and pdACCESS
products that we acquired from Escalon in April 2010 was $790,000 for the
quarter ended September 30, 2010, accounting for 30% of the overall revenue
increase. New product introductions, which consist of any product that had no
sales in the comparable period in 2009, represented 49% of the overall increase
in revenue for the quarter ended September 30, 2010. An increase in the volume
of existing product sales constituted the remainder of the increase in revenue,
and product pricing did not have a material impact on the revenue increase for
the quarter ended September 30, 2010 from the same quarter in 2009.

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Net
revenue increased 15% to $57,567,000 for the nine months ended September 30,
2010 from $50,205,000 for the nine months ended September 30, 2009. Net revenue
related to the SMARTNEEDLE and
pdACCESS products was $1,638,000 for the nine months ended September 30, 2010,
constituting 22% of the overall revenue increase. New product introductions
represented 39% of the overall increase in revenue for the nine months ended
September 30, 2010, with an increase in the volume of existing product sales
constituting the remainder of the increase. Product pricing did not have a
material impact on the revenue increase for the nine months ended September 30,
2010 from the same period in 2009. Approximately 86% of our net revenue was
earned in the United States and 14% of our net revenue was earned in
international markets for both the three months and nine months ended September
30, 2010, while approximately 87% of our net revenue was earned in the United
States and 13% of our net revenue was earned in international markets for both
the three months and nine months ended September 30, 2009.

We
recognized $212,000 and $637,000 of licensing revenue during the three and nine
month periods ending September 30, 2010 and 2009, respectively, as the result
of our License Agreement and Device Supply Agreement with King and our distribution
agreement with Nicolai. We also recognized $23,000 and $199,000 of
collaboration revenue during the three month periods ending September 30, 2010
and 2009, and $175,000 and $554,000 of collaboration revenue during the nine
month periods ending September 30, 2010 and 2009, respectively, as a result of
performing clinical and development work for King under the Device Supply
Agreement.

Gross
margin across all product lines remained relatively constant at 65% for the
quarter ended September 30, 2010, compared to 66% for the quarter ended
September 30, 2009. We expect product gross margins to be in the range of 65%
to 66% for the fourth quarter of 2010, subject to changes in our selling mix
between our lower margin products such as the Vari-Lase products and our higher
margin products such as the D-Stat Dry. Gross margin across all product lines
remained constant at 66% for the nine months ended September 30, 2010 compared
to 66% for the nine months ended September 30, 2009.

Research
and development expense for the third quarter of 2010 totaled $2,464,000, or
12% of revenue, compared to $1,988,000, or 11% of revenue, for the third
quarter of 2009. Research and development expense for the nine month period
ending September 30, 2010 totaled $7,194,000, or 13% of revenue, compared to
$5,707,000, or 11% of revenue, for the nine month period ending September 30,
2009. We expect our continuing research and development expenses to be
approximately 10% to 12% of revenue in the fourth quarter of 2010 as we
continue to pursue additional new products and to move our longer term
development projects forward.

Clinical
and regulatory expense for the third quarter of 2010 totaled $966,000, or 5% of
revenue, compared to $713,000, or 4% of revenue, for the third quarter of 2009.
Clinical and regulatory expense for the nine month period ending September 30,
2010 totaled $2,561,000, or 4% of revenue, compared to $2,092,000, or 4% of
revenue, for the nine month period ending September 30, 2009. Clinical and
regulatory expenses fluctuate due to the timing of clinical studies and the
number of new products coming through the regulatory system. We expect clinical
and regulatory expenses to be approximately 4% to 5% of revenue in the fourth
quarter of 2010.

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Sales
and marketing expense for the third quarter of 2010 totaled $5,927,000, or 30%
of revenue, compared to $5,280,000, or 31% of revenue, for the third quarter of
2009. Sales and marketing expense for the nine month period ending September
30, 2010 totaled $17,441,000, or 30% of revenue, compared to $15,840,000, or
32% of revenue, for the nine month period ending September 30, 2009. The
decline in sales and marketing expenses as a percentage of revenue primarily
resulted from maintaining our direct sales force at between 85 and 90 full-time
employees while continuing to grow revenue. We expect to maintain the same
relative size of our direct sales force for the remainder of 2010. As a result,
we expect our sales and marketing expenses will continue to decline as a
percentage of revenue to between 27% and 28% of revenue by the end of 2010.

General
and administrative expense for the third quarter of 2010 totaled $1,327,000, or
7% of revenue, compared to $1,152,000, or 7% of revenue, for the third quarter
of 2009. General and administrative expense for the nine month period ending
September 30, 2010 totaled $4,039,000, or 7% of revenue, compared to
$3,375,000, or 7% of revenue, for the nine month period ending September 30,
2009. General and administrative expenses have remained relatively flat as
percent of total revenue. We expect general and administrative expenses to be
approximately 6% to 7% of revenue in the fourth quarter of 2010.

Litigation
income for the nine months ended September 30, 2010 was $3,529,000, or 6% of
revenue. The litigation income resulted from an award of damages the Company
received in the first quarter of 2010 in the Marine Polymer Technologies, Inc.
litigation. For a complete discussion of litigation matters, see Note 8 to the
Unaudited Consolidated Financial Statements in Item 1 of Part I of this Form
10-Q.

Amortization
of purchased technology and other intangibles was $89,000 and $148,000 for the
three and nine months ended September 30, 2010. The amortization resulted from
our purchase of the Escalon SMARTNEEDLE
and pdACCESS products in April 2010. As part of the asset purchase, we
allocated $3,250,000 to purchased technology and other intangibles that are
being amortized over a period of 9  10 years.

Interest
income increased to $9,000 for the three months ending September 30, 2010 from
$5,000 for the three months ending September 30, 2009. Interest income
decreased to $30,000 for the nine months ending September 30, 2010 from $43,000
for the nine months ending September 30, 2009. The increase in interest income
for the three months ending September 30, 2010 is due primarily to maintaining
a higher cash deposit balance at September 30, 2010 compared to September 30,
2009. The decrease in interest income for the nine months ended September 30,
2010 was primarily the result of lower interest rates being paid on our deposit
funds held at the bank.

Interest
expense decreased to $5,000 and $15,000 for the third quarter and nine month
period ending September 30, 2010 compared to $9,000 and $30,000 for the third
quarter and nine month period ending September 30, 2009. The decrease in
interest expense was the result of timing of banking charges as we switched banks
in the first quarter of 2010.

Foreign
exchange gain was $41,000 for the quarter ending September 30, 2010 compared to
a foreign exchange gain of $3,000 for the quarter ending September 30, 2009.
Foreign exchange loss was $17,000 for the nine months ended September 30, 2010
compared to a foreign exchange loss of $3,000 for the nine months ended
September 30, 2009. Sales to one of our distributors are denominated in Euros
and we purchase a small number of inventory items at prices denominated in
Euros. As a result, we are exposed to foreign exchange movements during the
time between the shipment of the product and payment. The increase in foreign
exchange losses was the result of the weakening of the Euro against the U.S.
Dollar.

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Income
tax expense was $714,000 for the three month period ending September 30, 2010
and $3,741,000 for the nine month period ending September 30, 2010 on income
before tax of $2,178,000 and $10,147,000, respectively. The effective income
tax rate was 37% for the nine month period ending September 30, 2010. The difference between the effective tax
rate of 37% and the U.S. federal statutory income tax rate of 34% was due
mainly to the impact of state income taxes. For the three and nine months ended
September 30, 2009, income tax expense was $746,000 and $2,194,000,
respectively, on income before tax of $2,177,000 and $5,939,000. The effective
income tax rate was 37% for the nine month period ending September 30,
2009. We will evaluate the
adequacy of the remaining valuation allowance in the fourth quarter of 2010 and
anticipate that this evaluation could result in a change that would remove all
or part of the remaining valuation allowance. This adjustment to the valuation
allowance could result in a significant income tax benefit.

Liquidity and Capital
Resources

Our
cash and cash equivalents totaled $19,219,000 at September 30, 2010 compared to
$17,794,000 in cash and cash equivalents at December 31, 2009, an increase of $1,425,000. Our
cash equivalents are invested in a money market fund invested in all types of
high quality, short-term money market instruments denominated in U.S. dollars
such as debt instruments guaranteed by the governments of the United
States, Western Europe, Australia, Japan and Canada, high quality corporate
issuers and bank obligations. The money market funds assets are rated in the
highest short-term category by nationally recognized rating agencies, such as
Moodys or Standard & Poors.

Cash
provided by operations. We generated $8,954,000 of
cash from operations for the nine months ended September 30, 2010, resulting
from our income before taxes of $10,147,000 since essentially all of our income
taxes are offset by our deferred tax assets. During the first half of 2010 we
increased the safety stock levels for a number of our products, which increased
our inventory by $3,329,000 from December 31, 2009. At June 30, 2010 we had
reached our desired safety stock levels, and therefore we grew our inventory at
a more normalized rate of $749,000 in the third quarter. We expect our
inventory to increase at the same rate as our sales growth in the fourth
quarter of 2010.

Cash
used for investing activities.We used $7,291,000 of
cash in investing activities for the nine months ended September 30, 2010. We
used $5,000,000 of cash in the purchase of the SMARTNEEDLE and pdACCESS
assets from Escalon. We also incurred capital expenditures of $2,291,000
relating to purchasing additional manufacturing equipment, expanding our clean
room manufacturing area and purchasing additional research and development
equipment.

Cash
used in financing activities.We used $238,000 of cash
in financing activities for the nine months ended September 30, 2010. We used
$1,153,000 of cash to repurchase 123,309 common shares on the open market under
our stock repurchase plan, and we used $392,000 of cash to repurchase 48,620
shares that vested under outstanding restricted stock awards to satisfy income
tax withholding obligations. These purchases were offset by our receipt of
$426,000 for purchases of common stock pursuant to our Employee Stock Purchase
Plan and $881,000 upon the exercise of outstanding stock options.

We
have a $10 million revolving line of credit with US Bank, which has a 12-month
term, bears interest at the rate of LIBOR plus 1.60% and is secured by a first
security interest on all of our assets. As of September 30, 2010, we were in
compliance with the bank covenant and we had no outstanding balance on the
revolving line of credit with an availability of $10 million.

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We
currently anticipate that we will experience positive cash flow from our normal
operating activities for the foreseeable future. We currently believe that our
working capital of $39.5 million at September 30, 2010 will be sufficient to
meet all of our operating and capital requirements for the foreseeable future.
However, our actual liquidity and capital requirements will depend upon
numerous unpredictable factors, including the amount of revenues from sales of
our existing and new products; the cost of maintaining, enforcing and defending
patents and other intellectual property rights; competing technological and
market developments; developments related to regulatory and third party
reimbursement matters; and other factors.

Off-Balance Sheet
Arrangements

We
did not have any off-balance sheet arrangements as of September 30, 2010.

Contractual
Obligations

The
following table summarizes our contractual cash commitments as of September 30,
2010:

|                           |  |                         |           |                    |   |              |  |              |           |                     |   |           |  |   |   | 
|-------------------------- |  | ----------------------- | --------- | ------------------ | - | ------------ |  | ------------ | --------- | ------------------- | - | --------- |  | - | - | 
|                           |  | Payments
 Due by Period |          
|Contractual Obligations    |  | Total                   |           | Less than 
 1 year |   | 1 - 3
 years |  | 3 - 5
 years |           | More than 
 5 years |  
|Facility
 operating leases |  | $                       | 4,119,000 |                    | $ | 797,000      |  | $            | 1,639,000 |                     | $ | 1,683,000 |  | $ |  | 

We
do not have any other significant cash commitments related to supply
agreements, nor do we have any significant commitments for capital
expenditures.

Critical Accounting
Policies

Managements
Discussion and Analysis of Financial Condition and Results of Operations
addresses our financial statements, which have been prepared in accordance with
accounting principles generally accepted in the United States for interim
financial information. The preparation of our financial statements requires
that we make estimates and assumptions that affect the reported amounts of
assets and liabilities and the disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. On an on-going basis, we evaluate
these estimates and judgments. We base our estimates and judgments on
historical experience and on various other factors that are believed to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying value of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.

The
material accounting policies that we believe are most critical to an investors
understanding of our financial results and condition and which require complex
management judgment are discussed in our 2009 Form 10-K under the caption
Critical Accounting Policies.

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Cautionary Statement Pursuant to the Private
Securities Litigation Reform Act of 1995

The
Private Securities Litigation Reform Act of 1995 (the Act) provides a safe
harbor for forward-looking statements to encourage companies to provide
prospective information about their business, so long as those statements are
identified as forward-looking and are accompanied by meaningful cautionary
statements identifying important factors that could cause actual results to
differ materially from those discussed in the statement. We desire to take
advantage of the safe harbor provisions with respect to any forward-looking
statements we may make in this filing, other filings with the Securities and
Exchange Commission and any public oral statements or written releases. The
words or phrases will likely, is expected, will continue, is
anticipated, believe, estimate, projected, forecast, or similar
expressions are intended to identify forward-looking statements within the
meaning of the Act. Forward-looking statements such as these are based on
managements current expectations as of the date of this report but involve
risks, uncertainties and other factors which may cause actual results to differ
materially from those contemplated by such forward-looking statements. We
caution readers not to place undue reliance on any such forward-looking
statements, which speak only as of the date made. In accordance with the Act,
we identify the following important general factors which, if altered from the
current status, could cause our actual results to differ from those described
in any forward-looking statements: risks associated with defense of patent
infringement lawsuits, adoption of our new products, limited profitability,
exposure to possible product liability claims, the development of new products
by others, dependence on third party distributors in international markets,
doing business in international markets, the availability of third party
reimbursement, actions by the FDA related to our products, the loss of key
vendors, and those factors set forth under the heading Risk Factors in Item
1A of Part I of our Annual Report on Form 10-K for the year ended December 31,
2009. This list is not exhaustive, and we may supplement this list in any
future filing with the Securities and Exchange Commission or in connection with
the making of any specific forward-looking statement. We undertake no
obligation to and do not intend to revise or update publicly any forward-looking
statement for any reason.

|        |                                                            
|------- | -----------------------------------------------------------
|Item 3. | Quantitative
 and Qualitative Disclosures about Market Risk

Financial
instruments that potentially subject us to concentrations of credit risk
consist primarily of cash and cash equivalents and accounts receivables. We
maintain our accounts for cash and cash equivalents principally at one major
bank and one investment firm in the United States. We have a formal written
investment policy that limits our investments to investments in issuers
evaluated as creditworthy. We have not experienced any losses on our deposits
of our cash and cash equivalents.

With
respect to accounts receivable, we perform credit evaluations of our customers
and do not require collateral. There have been no material losses on accounts
receivables.

In
the United States we sell our products directly to hospitals and clinics. In
international markets, we sell our products to independent distributors who, in
turn, sell to hospitals. Sales to independent distributors are denominated in
United States dollars, with the exception of Germany, where sales are
denominated in Euros.

We
distribute certain products on behalf of certain U.S. and international
manufacturers. We pay for all distributed products in United States dollars,
with the exception of one distributor located in Europe, where purchases are
denominated in Euros.

We
do not believe our operations are currently subject to significant market risks
for interest rates, foreign currency exchange rates, commodity prices or other
relevant market price risks of a material nature. A change of 0.1 in the Euro
exchange rate would result in an increase or decrease of approximately $16,000
in the amount of United States dollars we receive in payment on accounts
receivable from our German distributor Nicolai, GmbH. In addition, we have made
advances to a European supplier of one of our distributed products, Zerusa
Ltd., for future product deliveries. A change of 0.1 in the Euro exchange rate
would result in an increase or decrease of approximately $19,000 in the amount
of United States dollars we recognize as exchange rate gains or losses from
Zerusa. Under our current policies, we do not use foreign currency derivative
instruments to manage exposure to fluctuations in the Euro exchange rate.

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We
currently have no indebtedness, but if we were to borrow amounts from our
revolving credit line, we would be exposed to changes in interest rates.
Advances under our revolving credit line bear interest at an annual rate
indexed to LIBOR. We will thus be exposed to interest rate risk with respect to
amounts outstanding under the line of credit to the extent that interest rates
rise. As we had no amounts outstanding on the line of credit at September 30,
2010, we have no exposure to interest rate changes on this credit facility.
Under our current policies, we do not use interest rate derivative instruments
to manage exposure to interest rate changes. Additionally, we will be exposed
to declines in the interest rates paid on deposited funds. A 0.1% decline in
the current market interest rates paid on deposits would result in interest
income being reduced by approximately $19,000 on an annual basis.

|         |                        
|-------- | -----------------------
|Item
 4. | Controls and Procedures

Evaluation of disclosure controls and
procedures.

Under
the supervision and with the participation of our management, including our
Chief Executive Officer and Chief Financial Officer, we evaluated the
effectiveness of the design and operation of our disclosure controls and
procedures (as defined in Rule 13a-15(e) under the Exchange Act). Based upon
that evaluation, the Chief Executive Officer and Chief Financial Officer
concluded that, as of the end of the period covered by this report, our
disclosure controls and procedures were effective.

Changes in internal control over financial reporting.

During the fiscal quarter ended September 30, 2010, there has been no change in
our internal control over financial reporting (as defined in Rule 13a-15(f)
under the Exchange Act) that has materially affected, or is reasonably likely
to materially affect, our internal control over financial reporting.

PART II. OTHER
INFORMATION

|        |                   
|------- | ------------------
|Item 1. | Legal
 Proceedings

The
legal proceedings for the Marine Polymer Technologies, Inc. litigation and
AngioDynamics, Inc. litigation as described in Note 9 to the Unaudited
Consolidated Financial Statements in Item 1 of Part I of this Form 10-Q is
incorporated into this Item 1 of Part II by reference.

From time
to time, we are involved in additional legal proceedings arising in the normal
course of business. As of the date of this report we are not a party to any
legal proceeding not described in this section in which an adverse
outcome would reasonably be expected to have a material adverse effect on
our results of operations or financial condition.

|         |              
|-------- | -------------
|Item 1A. | Risk
 Factors

Item 1A,
(Risk Factors) of our most recently filed Form 10-K sets forth information
relating to important risks and uncertainties that could materially adversely
affect our business, financial condition or operating results. There have been
no material changes from the Risk Factors described in our annual report on
Form 10-K; however, those Risk Factors continue to be relevant to an understanding
of our business, financial condition and operating results and, accordingly,
you should review and consider such Risk Factors in making any investment
decision with respect to our securities. An investment in our securities
continues to involve a high degree of risk.

|         |                                                             
|-------- | ------------------------------------------------------------
|Item
 2. | Unregistered Sales of Equity
 Securities and Use of Proceeds

None

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|        |                                 
|------- | --------------------------------
|Item 3. | Defaults
 Upon Senior Securities
|        |                                 
|None.  
|        |                                 
|Item 4. | (Removed
 and Reserved)         
|        |                                 
|Item 5. | Other
 Information              
|        |                                 
|None.  
|        |                                 
|Item 6. | Exhibits                        

|                 |  |                                                                                                                                                                                                     | 
|---------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | 
|Exhibit 
 Number |  | Description                                                                                                                                                                                         | 
|3.1              |  | Amended and
 Restated Articles of Incorporation of Vascular Solutions, Inc. (incorporated
 by reference to Exhibit 3.1 to Vascular Solutions Form 10-Q for the quarter
 ended September 30, 2000).
|3.2              |  | Amended and
 Restated Bylaws of Vascular Solutions, Inc. (incorporated by reference to
 Exhibit 3.1 of Vascular Solutions Form 8-K dated October 19, 2007).                                       
|4.1              |  | Specimen of
 Common Stock certificate (incorporated by reference to Exhibit 4.1 of
 Vascular Solutions Registration Statement on Form S-1 (File No. 333-84089)).                                  
|10.1             |  | Asset
 Purchase Agreement dated October 20, 2010 by and between Vascular
 Solutions, Radius Medical Technologies, Inc., and Radius Medical, LLC                                                    
|31.1             |  | Certification
 of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act
 of 2002.                                                                                              
|31.2             |  | Certification
 of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act
 of 2002.                                                                                              
|32.1             |  | Certification
 of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act
 of 2002.                                                                                              
|32.2             |  | Certification
 of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act
 of 2002.                                                                                              

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SIGNATURES

Pursuant to
the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.

|                        |                           |     |                                       | 
|----------------------- | ------------------------- | --- | ------------------------------------- | 
|                        | VASCULAR
 SOLUTIONS, INC.
|                        |                           |     |                                       | 
|Date:
 October 22, 2010 |                           | By: | /s/ Howard
 Root                      | 
|                        |                           |     | Howard Root                          
|                        |                           |     | Chief Executive Officer and Director 
|                        |                           |     | (principal executive officer)        
|                        |                           |     |                                       | 
|                        |                           | By: | /s/ James
 Hennen                     | 
|                        |                           |     | James Hennen                         
|                        |                           |     | Senior Vice
 President of Finance and
|                        |                           |     | Chief Financial Officer              
|                        |                           |     | (principal financial officer)        
|                        |                           |     |                                       | 
|                        |                           | By: | /s/ Timothy
 Slayton                  | 
|                        |                           |     | Timothy
 Slayton                     
|                        |                           |     | Controller                           
|                        |                           |     | (principal accounting officer)       

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