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 June 30, 2009      
|                                                    |   |                                                                                          
|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 16,253,646 shares of common stock, $.01 par value
per share, outstanding as of July 20, 2009.





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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 |  | 13  
|                               |          |                                                                                        |  |     
|                               | Item 3.  | Quantitative and Qualitative Disclosures about Market Risk                             |  | 18  
|                               |          |                                                                                        |  |     
|                               | Item 4.  | Controls and Procedures                                                                |  | 19  
|                               |          |                                                                                        |  |     
|PART II. OTHER
 INFORMATION    |          |                                                                                       
|                               |          |                                                                                       
|                               | Item 1.  | Legal Proceedings                                                                      |  | 19  
|                               |          |                                                                                        |  |     
|                               | Item 1A. | Risk Factors                                                                           |  | 20  
|                               |          |                                                                                        |  |     
|                               | Item 2.  | Unregistered Sales of Equity Securities and Use of Proceeds                            |  | 20  
|                               |          |                                                                                        |  |     
|                               | Item 3.  | Defaults upon Senior Securities                                                        |  | 20  
|                               |          |                                                                                        |  |     
|                               | Item 4.  | Submission of Matters to a Vote of Security Holders                                    |  | 20  
|                               |          |                                                                                        |  |     
|                               | Item 5.  | Other Information                                                                      |  | 20  
|                               |          |                                                                                        |  |     
|                               | Item 6.  | Exhibits                                                                               |  | 21  

Page 1

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Table of Contents

PART 1. FINANCIAL INFORMATION

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

VASCULAR SOLUTIONS, INC.Consolidated Balance Sheets

|                                                                                              |  |               |             |                   |   |             |  
|--------------------------------------------------------------------------------------------- |  | ------------- | ----------- | ----------------- | - | ----------- | -
|                                                                                              |  | June 30, 2009 |             | December 31, 2008 |  
|                                                                                              |  |               | (unaudited) |                   |   | (see note)  |  
|Assets                                                                                        |  |               |             |                   |   |             |  
|Current assets:                                                                               |  |               |             |                   |   |             |  
|Cash and cash equivalents                                                                     |  | $             | 10,522,000  |                   | $ | 7,209,000   |  
|Accounts receivable, net of reserves of
 $110,000 and $120,000 in 2009 and 2008, respectively |  |               | 8,555,000   |                   |   | 8,706,000   |  
|Inventories                                                                                   |  |               | 9,864,000   |                   |   | 9,974,000   |  
|Prepaid expenses                                                                              |  |               | 1,384,000   |                   |   | 1,045,000   |  
|Current portion of deferred tax assets                                                        |  |               | 2,680,000   |                   |   | 2,680,000   |  
|Total current assets                                                                          |  |               | 33,005,000  |                   |   | 29,614,000  |  
|                                                                                              |  |               |             |                   |   |             |  
|Property and equipment, net                                                                   |  |               | 3,742,000   |                   |   | 3,887,000   |  
|Intangible assets, net                                                                        |  |               | 193,000     |                   |   | 193,000     |  
|Deferred tax assets, net of current portion
 and liabilities                                  |  |               | 9,148,000   |                   |   | 10,486,000  |  
|Total assets                                                                                  |  | $             | 46,088,000  |                   | $ | 44,180,000  |  
|                                                                                              |  |               |             |                   |   |             |  
|Liabilities and shareholders equity                                                          |  |               |             |                   |   |             |  
|Current liabilities:                                                                          |  |               |             |                   |   |             |  
|Accounts payable                                                                              |  | $             | 952,000     |                   | $ | 2,022,000   |  
|Accrued compensation                                                                          |  |               | 2,750,000   |                   |   | 2,584,000   |  
|Accrued expenses                                                                              |  |               | 845,000     |                   |   | 848,000     |  
|Accrued royalties                                                                             |  |               | 542,000     |                   |   | 576,000     |  
|Current portion of deferred revenue                                                           |  |               | 920,000     |                   |   | 907,000     |  
|Total current liabilities                                                                     |  |               | 6,009,000   |                   |   | 6,937,000   |  
|                                                                                              |  |               |             |                   |   |             |  
|Long-term deferred revenue, net of current
 portion                                           |  |               | 4,992,000   |                   |   | 5,417,000   |  
|                                                                                              |  |               |             |                   |   |             |  
|Shareholders equity:                                                                         |  |               |             |                   |   |             |  
|Common stock, $0.01 par value:                                                                |  |               |             |                   |   |             |  
|Authorized shares  40,000,000                                                                |  |               |             |                   |   |             |  
|Issued and outstanding shares  16,253,646
  2009;
 16,027,519  2008                        |  |               | 163,000     |                   |   | 160,000     |  
|Additional paid-in capital                                                                    |  |               | 86,225,000  |                   |   | 85,292,000  |  
|Other                                                                                         |  |               | 84,000      |                   |   | 84,000      |  
|Accumulated deficit                                                                           |  |               | (51,385,000 | )                 |   | (53,710,000 | )
|Total shareholders equity                                                                    |  |               | 35,087,000  |                   |   | 31,826,000  |  
|Total liabilities and shareholders equity                                                    |  | $             | 46,088,000  |                   | $ | 44,180,000  |  

See accompanying notes.

Note: The balance sheet at
December 31, 2008 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
 June 30, |            | Six Months Ended
 June 30, |  
|                                           |  | 2009                         |            | 2008                       |   | 2009       |   | 2008 |           
|                                           |  | (unaudited)                  |            | (unaudited)                |  
|Revenue:                                   |  |                              |            |                            |   |            |   |      |            |   |   |            |  
|Product revenue                            |  | $                            | 16,781,000 |                            | $ | 14,871,000 |   | $    | 32,197,000 |   | $ | 28,609,000 |  
|License and collaboration revenue          |  |                              | 385,000    |                            |   | 367,000    |   |      | 779,000    |   |   | 744,000    |  
|Total revenue                              |  |                              | 17,166,000 |                            |   | 15,238,000 |   |      | 32,976,000 |   |   | 29,353,000 |  
|                                           |  |                              |            |                            |   |            |   |      |            |   |   |            |  
|Product costs and operating expenses:      |  |                              |            |                            |   |            |   |      |            |   |   |            |  
|Cost of goods sold                         |  |                              | 5,765,000  |                            |   | 5,360,000  |   |      | 10,980,000 |   |   | 9,941,000  |  
|Collaboration expenses                     |  |                              | 173,000    |                            |   | 187,000    |   |      | 355,000    |   |   | 368,000    |  
|Research and development                   |  |                              | 1,803,000  |                            |   | 1,553,000  |   |      | 3,719,000  |   |   | 3,019,000  |  
|Clinical and regulatory                    |  |                              | 767,000    |                            |   | 759,000    |   |      | 1,379,000  |   |   | 1,610,000  |  
|Sales and marketing                        |  |                              | 5,307,000  |                            |   | 5,174,000  |   |      | 10,560,000 |   |   | 10,387,000 |  
|General and administrative                 |  |                              | 1,104,000  |                            |   | 1,192,000  |   |      | 2,223,000  |   |   | 2,734,000  |  
|Litigation                                 |  |                              |           |                            |   | 1,457,000  |   |      |           |   |   | 1,484,000  |  
|Total product costs and operating expenses |  |                              | 14,919,000 |                            |   | 15,682,000 |   |      | 29,216,000 |   |   | 29,543,000 |  
|                                           |  |                              |            |                            |   |            |   |      |            |   |   |            |  
|Operating income (loss)                    |  |                              | 2,247,000  |                            |   | (444,000   | ) |      | 3,760,000  |   |   | (190,000   | )
|                                           |  |                              |            |                            |   |            |   |      |            |   |   |            |  
|Other income (expenses):                   |  |                              |            |                            |   |            |   |      |            |   |   |            |  
|Interest income                            |  |                              | 14,000     |                            |   | 48,000     |   |      | 37,000     |   |   | 140,000    |  
|Interest expense                           |  |                              | (11,000    | )                          |   | (18,000    | ) |      | (20,000    | ) |   | (42,000    | )
|Foreign exchange gain (loss)               |  |                              | 7,000      |                            |   | (1,000     | ) |      | (5,000     | ) |   | (1,000     | )
|                                           |  |                              |            |                            |   |            |   |      |            |   |   |            |  
|Income (loss) before income taxes          |  |                              | 2,257,000  |                            |   | (415,000   | ) |      | 3,772,000  |   |   | (93,000    | )
|                                           |  |                              |            |                            |   |            |   |      |            |   |   |            |  
|Income tax expense                         |  |                              | (871,000   | )                          |   | (53,000    | ) |      | (1,448,000 | ) |   | (140,000   | )
|Net income (loss)                          |  | $                            | 1,386,000  |                            | $ | (468,000   | ) | $    | 2,324,000  |   | $ | (233,000   | )
|                                           |  |                              |            |                            |   |            |   |      |            |   |   |            |  
|Net income (loss) per share  basic        |  | $                            | 0.09       |                            | $ | (0.03      | ) | $    | 0.15       |   | $ | (0.02      | )
|Net income (loss) per share  diluted      |  | $                            | 0.09       |                            | $ | (0.03      | ) | $    | 0.14       |   | $ | (0.02      | )

See accompanying notes.

Page 3

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Table of Contents

VASCULAR SOLUTIONS, INC.

Consolidated Statements of
Cash Flows

|                                                                                                |  |                            |            |      |   |            |  
|----------------------------------------------------------------------------------------------- |  | -------------------------- | ---------- | ---- | - | ---------- | -
|                                                                                                |  | Six Months Ended
 June 30, |           
|                                                                                                |  | 2009                       |            | 2008 |  
|                                                                                                |  | (unaudited)                |           
|Operating activities                                                                            |  |                            |            |      |   |            |  
|Net income (loss)                                                                               |  | $                          | 2,324,000  |      | $ | (233,000   | )
|Adjustments to reconcile net income to net
 cash provided by operating activities:              |  |                            |            |      |   |            |  
|Depreciation                                                                                    |  |                            | 684,000    |      |   | 742,000    |  
|Stock-based compensation                                                                        |  |                            | 891,000    |      |   | 879,000    |  
|Deferred compensation expense                                                                   |  |                            |           |      |   | 9,000      |  
|Deferred taxes, net                                                                             |  |                            | 1,338,000  |      |   | 3,000      |  
|Loss on disposal of fixed assets                                                                |  |                            |           |      |   | 40,000     |  
|Change in allowance for doubtful accounts                                                       |  |                            | (10,000    | )    |   |           |  
|Changes in operating assets and
 liabilities:                                                   |  |                            |            |      |   |            |  
|Accounts receivable                                                                             |  |                            | 161,000    |      |   | 29,000     |  
|Inventories                                                                                     |  |                            | 110,000    |      |   | (1,065,000 | )
|Prepaid expenses                                                                                |  |                            | (338,000   | )    |   | 63,000     |  
|Accounts payable                                                                                |  |                            | (1,069,000 | )    |   | 519,000    |  
|Accrued compensation and expenses                                                               |  |                            | 129,000    |      |   | (5,530,000 | )
|Deferred license fees received                                                                  |  |                            |           |      |   | 191,000    |  
|Amortization of deferred license fees and
 other deferred revenue                               |  |                            | (412,000   | )    |   | (395,000   | )
|Net cash
 provided by (used in) operating activities                                            |  |                            | 3,808,000  |      |   | (4,748,000 | )
|                                                                                                |  |                            |            |      |   |            |  
|Investing activities                                                                            |  |                            |            |      |   |            |  
|Purchase of property and equipment, net                                                         |  |                            | (539,000   | )    |   | (512,000   | )
|Cash deposits transferred from restricted
 cash                                                 |  |                            |           |      |   | 5,473,000  |  
|Net cash provided by (used in) investing
 activities                                            |  |                            | (539,000   | )    |   | 4,961,000  |  
|                                                                                                |  |                            |            |      |   |            |  
|Financing activities                                                                            |  |                            |            |      |   |            |  
|Repurchase of common shares                                                                     |  |                            | (333,000   | )    |   | (141,000   | )
|Payment on long-term debt                                                                       |  |                            |           |      |   | (400,000   | )
|Proceeds from the exercise of stock
 options, stock warrants and sale of stock, net of expenses |  |                            | 377,000    |      |   | 437,000    |  
|Net cash provided by (used in) financing
 activities                                            |  |                            | 44,000     |      |   | (104,000   | )
|                                                                                                |  |                            |            |      |   |            |  
|Effect of exchange rate changes on cash and
 cash equivalents                                   |  |                            |           |      |   | 10,000     |  
|Increase in cash and cash equivalents                                                           |  |                            | 3,313,000  |      |   | 119,000    |  
|Cash and cash equivalents at beginning of
 period                                               |  |                            | 7,209,000  |      |   | 5,286,000  |  
|Cash and cash equivalents at end of period                                                      |  | $                          | 10,522,000 |      | $ | 5,405,000  |  
|                                                                                                |  |                            |            |      |   |            |  
|Supplemental disclosure of cash flow                                                            |  |                            |            |      |   |            |  
|Cash paid for interest                                                                          |  | $                          | 14,000     |      | $ | 46,000     |  
|Cash paid for taxes                                                                             |  | $                          | 107,000    |      | $ | 232,000    |  

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, 2008 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 (Loss) per Share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                                                        | In
 accordance with Statement of Financial Accounting Standards No. 128, Earnings Per Share,(SFAS 128), basic
 net income (loss) per share for the three and six months ended June 30, 2009
 and 2008 is computed by dividing net income by the weighted average common
 shares outstanding during the periods presented. Diluted net income per share
 is computed by dividing net income by the weighted average number of 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 six months ended June 30,
 2009 and 2008 was as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

|                                               |  |                               |            |                             |  |            |  |      |            |  |  |            | 
|---------------------------------------------- |  | ----------------------------- | ---------- | --------------------------- |  | ---------- |  | ---- | ---------- |  |  | ---------- | 
|                                               |  | Three Months Ended 
 June 30, |            | Six Months Ended 
 June 30, | 
|                                               |  | 2009                          |            | 2008                        |  | 2009       |  | 2008 |           
|                                               |  | (unaudited)                   |            | (unaudited)                 | 
|Weighted average shares outstanding 
basic    |  |                               | 15,903,000 |                             |  | 15,502,000 |  |      | 15,871,000 |  |  | 15,471,000 | 
|Weighted average shares outstanding 
 diluted |  |                               | 16,207,000 |                             |  | 15,502,000 |  |      | 16,202,000 |  |  | 15,471,000 | 

|    |                                                                                                                                                                                             
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(3) | Comprehensive Income (Loss)                                                                                                                                                                 
|    |                                                                                                                                                                                             
|    | Comprehensive
 income for the Company includes net income and foreign currency translation.
 Comprehensive income for the three and six months ended June 30, 2009 and
 2008 was as follows:

|                                         |  |                              |           |                            |   |          |   |      |           |  |   |          |  
|---------------------------------------- |  | ---------------------------- | --------- | -------------------------- | - | -------- | - | ---- | --------- |  | - | -------- | -
|                                         |  | Three Months Ended
 June 30, |           | Six Months Ended
 June 30, |  
|                                         |  | 2009                         |           | 2008                       |   | 2009     |   | 2008 |          
|                                         |  | (unaudited)                  |           | (unaudited)                |  
|Net income (loss)                        |  | $                            | 1,386,000 |                            | $ | (468,000 | ) | $    | 2,324,000 |  | $ | (233,000 | )
|Foreign currency translation adjustments |  |                              |          |                            |   | (7,000   | ) |      |          |  |   | 26,000   |  
|Comprehensive income (loss)              |  | $                            | 1,386,000 |                            | $ | (475,000 | ) | $    | 2,324,000 |  | $ | (207,000 | )

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

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(4) | 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 the Securities and Exchange Commissions Staff
 Accounting Bulletin No. 104, Revenue
 Recognition(SAB 104), 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.                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | 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. The 500,000 Euro payment 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.                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | 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 Emerging Issues
 Task Force (EITF) Issue No. 00-21, Revenue
 Arrangements with Multiple Deliverables, for deliverables 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 Staff Accounting
 Bulletin (SAB) 104, Revenue Recognition.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|    | In addition,
 the Company has reviewed the provisions of EITF Issue No. 07-01, Accounting for Collaborative Arrangements,and
 has determined this EITF has no impact on the amounts recorded under these
 agreements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

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Table of Contents

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

|    |                                                                                                                                                                                                                                                            
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | In
 accordance with EITF Issue No. 00-10, Accounting
 for Shipping and Handling Fees and Costs, the Company includes
 shipping and handling revenues in net revenue, and shipping and handling
 costs in cost of sales.                                    
|    |                                                                                                                                                                                                                                                            
|(5) | 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:

|                |  |                |           |                    |   |           | 
|--------------- |  | -------------- | --------- | ------------------ | - | --------- | 
|                |  | June 30,
 2009 |           | December 31,
 2008 |  
|                |  | (unaudited)    |           |                    |  
|                |  |                |           |                    |   |           | 
|Raw materials   |  | $              | 4,299,000 |                    | $ | 4,943,000 | 
|Work-in process |  |                | 982,000   |                    |   | 871,000   | 
|Finished goods  |  |                | 4,583,000 |                    |   | 4,160,000 | 
|                |  | $              | 9,864,000 |                    | $ | 9,974,000 | 

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(6) | 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.
 Accounts receivable over 60 days past due are considered past due. 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 June 30, 2009 and December 31, 2008, the allowance for doubtful
 accounts was $75,000 and $95,000, respectively.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    | 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 June 30,
 2009 and December 31, 2008, the sales and return allowance was $35,000 and
 $25,000, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|    | Accounts
 receivable are shown net of the combined total of the allowance for doubtful
 accounts and allowance for sales returns of $110,000 and $120,000 at June 30,
 2009 and December 31, 2008, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|(7) | 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 medical clinics. Loss, termination or
 ineffectiveness of distributors to effectively promote the Companys products
 could have a material adverse effect on the Companys financial condition and
 results of operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

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Table of Contents

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

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | 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 June 30, 2009 or
 December 31, 2008. There have been no material losses on customer
 receivables.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | Revenue by
 geographic destination as a percentage of total net revenue for the six month
 periods ended June 30, 2009 and 2008 was 87% in the United States and 13% in
 international markets for both periods. No single customer represented
 greater than 10% of the total net revenue for the six months ended June 30,
 2009 or 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|(8) | 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 D-Stat 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.                                                                                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|(9) | Commitments and Contingencies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | Diomed Inc. Litigation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|    | On March 4,
 2004, the Company was named as the defendant in an intellectual property
 lawsuit brought by Diomed Inc. (Diomed) in the United States District Court
 for the District of Massachusetts (the Court). The complaint requested a
 judgment that sales of the Companys Vari-Lase® procedure kit and
 Vari-Lase laser console infringe on a single method patent (No. 6,398,777)
 held by Diomed and asked for relief in the form of an injunction that would
 prevent the Company from selling the Companys Vari-Lase products,
 compensatory and treble damages caused by the manufacture and sale of the
 Companys products, and other costs, disbursements and attorneys fees. The
 trial commenced on March 12, 2007, and concluded on March 28, 2007, when the
 jury reached a verdict that the Company contributed to and induced
 infringement of Diomeds patent and awarded monetary damages in the amount of
 $4,100,000, plus pre-judgment interest. The jury concluded there was no
 willful infringement by the Company and therefore the award was not subject
 to treble damages or attorneys fees. To settle Diomeds claims for
 pre-judgment interest and for additional damages for sales not considered by
 the jury, the Company agreed to amend the judgment amount to $4,975,000 and
 accrued this amount together with additional costs and attorneys fees as of
 June 30, 2007 in the aggregate amount of $5,690,000. On June 20, 2007 the
 Company posted a supersedeas bond and appealed the jury verdict to the U.S.
 Court of Appeals for the Federal Circuit in Washington, D.C. On April 8,
 2008, the Company announced that it entered into a settlement agreement with
 Diomed. Pursuant to the settlement agreement, (i) on April 29, 2008, the
 Company made a one-time payment of $3,586,000 to Diomed, (ii) the Company and
 Diomed jointly dismissed the appeal with the United States Court of Appeals
 for the Federal Circuit, and (iii) Diomed provided to the Company a
 satisfaction of judgment, releasing the Company from the monetary obligations
 of the judgment imposed by the Court in its entirety.

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Table of Contents

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

| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | VNUS®Medical Technologies Litigation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | On October
 13, 2005, the Company was named as one of three defendants in an intellectual
 property lawsuit brought by VNUS® Medical Technologies, Inc.
 (VNUS) in the United States District Court for the Northern District of
 California. The complaint requested a judgment that the Companys Vari-Lase®
 procedure kit and Vari-Lase® laser console infringe on four
 patents held by VNUS and asked for relief in the form of an injunction that
 would prevent the Company from selling the Companys Vari-Lase®
 products, compensatory and treble damages caused by the manufacture and sale
 of these products, and other costs, disbursements and attorneys fees. VNUS
 subsequently indicated that it was not pursuing its allegation of infringement
 concerning one of the four patents. On June 2, 2008, the Company entered into
 a settlement agreement with VNUS for the purpose of resolving the lawsuit.
 Under the terms of the settlement agreement, (i) on June 4, 2008, the Company
 paid VNUS a royalty payment in the aggregate amount of $3,116,000 related to
 all Vari-Lase products shipped within the United States through the end of
 the first quarter of 2008, (ii) the Company agreed to pay a quarterly royalty
 on all on-going U.S. shipments of Vari-Lase laser and kit products payable
 quarterly during the remaining life of the applicable patents, (iii) VNUS
 granted the Company a non-exclusive and non-sublicensable license to the
 applicable patents for use in endovenous laser therapy, and (iv) all
 litigation between the parties was dismissed.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

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Table of Contents

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

|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     | From time to
 time, the Company is involved in 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.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|(10) | Long-term Debt                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|     | On December
 26, 2007, the Company modified and extended its secured asset-based loan and
 security agreement with Silicon Valley Bank dated December 31, 2003 (as
 previously amended December 28, 2006 and December 29, 2005), consisting of an
 operating line of credit and an equipment line of credit. The operating line
 of credit is a two-year, $10,000,000 facility with availability based
 primarily on eligible customer receivables and inventory. The interest rate
 is the greater of prime plus 0.5% or 7.25%. As of June 30, 2009, the Company
 had no outstanding balance against the operating line of credit. Based on the
 Companys eligible customer receivables, inventory and cash balances,
 $10,000,000 was available for borrowing as of June 30, 2009. The operating
 line of credit requires an annual fee of 0.25% of the average unused portion
 of the committed revolving line as determined by the bank.
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|     | The
 equipment line of credit was paid in full on July 9, 2008 and the Company no
 longer has the ability to borrow any additional funds under the equipment
 line of credit portion of the credit facility.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|     | The credit
 facility includes three covenants: a minimum of $10,000,000 in tangible net
 worth, a minimum of $3,000,000 of unrestricted cash in deposit accounts with
 Silicon Valley Bank and an adjusted net income for each financial reporting
 period. The adjusted net income covenant requires an adjusted net income
 greater than $500,000 for each rolling three month period for the remaining
 term of the agreement. The amount required as a minimum tangible net worth
 will increase by an amount equal to the sum of 50% of the Companys quarterly
 net profit and all consideration received by the Company upon the issuance of
 equity securities. The Company was in compliance with all of the covenants as
 of June 30, 2009.                                                                                                                                                                                        
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|(11) | 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 six month period ended June 30, 2009, the Company recorded a tax
 provision of $1,448,000 on income before tax of $3,772,000 resulting in an
 effective income tax rate of 38%. For the six months ended June 30, 2009, the
 difference between the effective tax rate of 38% and the U.S. federal
 statutory income tax rate of 34% was due mainly to the impact of state income
 taxes. For the six month period ended June 30, 2008, the Company recorded a
 tax provision of $140,000 related to alternative minimum taxes (AMT) as the
 Company continued to maintain a full valuation allowance on its tax benefits.                                                                                                                                

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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 continue to
 assess the potential realization of deferred tax assets on an annual basis,
 or an interim basis if circumstances warrant. If the Companys actual results
 and updated projections vary significantly from the projections used as a
 basis for this determination, the Company may need to increase or decrease
 the valuation allowance against the gross deferred tax assets. The Company
 would adjust earnings for the deferred tax in the period the determination
 was made.
| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | Effective
 January 1, 2007, the Company adopted FIN 48, Accounting
 for Uncertainty in Income Taxes  an Interpretation of FASB Statement No. 109.
 Upon adoption, the Company had $425,000 of unrecognized income tax benefits
 and the adoption of FIN 48 had no effect on shareholders equity. The Company
 has recorded a FIN 48 reserve of $597,000 as of December 31, 2008. The impact
 of tax related interest and penalties is recorded as a component of income
 tax expense. For the six months ended June 30, 2009, 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 June 30, 2009, the
 Company was not under examination by any of these taxing authorities and the
 open tax years are 2006 through 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

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Table of Contents

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:

|                          |  |                           |            |                 |  |              |    |                 |            |  |  |     |   
|------------------------- |  | ------------------------- | ---------- | --------------- |  | ------------ | -- | --------------- | ---------- |  |  | --- | --
|                          |  | Six Months Ended June 30, |           
|                          |  | 2009                      |            | 2008            | 
|                          |  | Net 
 Revenue             |            | Percent
 Change |  | Net
 Revenue |    | Percent
 Change |           
|                         
|Hemostat products         |  | $                         | 12,164,000 |                 |  | 3            | %  | $               | 11,856,000 |  |  | (5  | %)
|Extraction catheters      |  |                           | 8,147,000  |                 |  | 15           | %  |                 | 7,070,000  |  |  | 29  | % 
|Vein products             |  |                           | 5,192,000  |                 |  | 14           | %  |                 | 4,557,000  |  |  | 19  | % 
|Access products           |  |                           | 3,474,000  |                 |  | 50           | %  |                 | 2,312,000  |  |  | 108 | % 
|Specialty catheters       |  |                           | 2,719,000  |                 |  | 19           | %  |                 | 2,279,000  |  |  | 30  | % 
|Other                     |  |                           | 501,000    |                 |  | (7           | %) |                 | 535,000    |  |  | 16  | % 
|Total product revenue     |  | $                         | 32,197,000 |                 |  | 13           | %  | $               | 28,609,000 |  |  | 14  | % 
|License and collaboration |  |                           | 779,000    |                 |  | 5            | %  |                 | 744,000    |  |  | 153 | % 
|Total revenue             |  | $                         | 32,976,000 |                 |  | 12           | %  | $               | 29,353,000 |  |  | 16  | % 

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

Overview

Vascular
Solutions, Inc. (we, us or Vascular) is a medical device company focused on
bringing clinically advanced solutions to interventional cardiologists and
interventional radiologists worldwide. We were incorporated in the state of
Minnesota in December 1996, and began operations in February 1997. Our main
product lines consist of the following:

|  |                                                                                                                                                                                                                                                                                                 
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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,
|  |                                                                                                                                                                                                                                                                                                 
| | Extraction
 catheters, principally consisting of the Pronto® V3 and Pronto®
 LP extraction catheters, mechanical systems for the removal of soft thrombus
 from arteries,                                                                                                                       
|  |                                                                                                                                                                                                                                                                                                 
| | Vein
 products, principally consisting of the Vari-Lase® endovenous
 laser, a laser and procedure kit used for the treatment of varicose veins,                                                                                                                                                 
|  |                                                                                                                                                                                                                                                                                                 
| | Access
 products, principally consisting of micro-introducer kits, MICRO Elite and EXPRO Elite
 snares, the Guardian® hemostasis valve, and guidewires used in
 connection with percutaneous access to the vasculature, and                                                                   
|  |                                                                                                                                                                                                                                                                                                 
| | Specialty
 catheters, consisting of a variety of catheters for clinical niches including
 the Langston® dual lumen catheters, Twin-Pass® dual
 access catheters, Gandras catheters, Minnie support catheter, and Gopher support
 catheter.                                                   

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, due to competitive developments in the sealing device
market, we made the strategic decision to develop additional products and
de-emphasize the promotion of our Duett sealing device. We have grown from net
revenue of $6.2 million in 2000 solely from the Duett device to net revenue of
$61.2 million in 2008, with 98% of our 2008 net revenue resulting from products
other than the Duett device. This increase in revenue represents a compound
annual growth rate of 33% and is driven by our commitment to the research and
development of multiple new devices to diagnose and treat existing and new
vascular conditions.

As
a vertically-integrated medical device company, we generate ideas and create
new interventional medical devices and then deliver these products directly to
the physician through our direct domestic sales force and our international
distribution network. We currently have in development several additional
products that leverage our existing infrastructure to bring additional
solutions to the interventional cardiologist and interventional radiologist.

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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
 June 30, |     | Six Months Ended
 June 30, | 
|                                            |  | 2009                         |     | 2008                       |  | 2009 |    | 2008 |    
|Revenue:                                    |  |                              |     |                            |  |      |    |      |     |   |  |     |   
|Product revenue                             |  |                              | 98  | %                          |  | 98   | %  |      | 98  | % |  | 97  | % 
|License and collaboration revenue           |  |                              | 2   | %                          |  | 2    | %  |      | 2   | % |  | 3   | % 
|Total revenue                               |  |                              | 100 | %                          |  | 100  | %  |      | 100 | % |  | 100 | % 
|                                            |  |                              |     |                            |  |      |    |      |     |   |  |     |   
|Product costs and operating
 expenses:      |  |                              |     |                            |  |      |    |      |     |   |  |     |   
|Cost of goods sold                          |  |                              | 34  | %                          |  | 35   | %  |      | 34  | % |  | 34  | % 
|Collaboration expenses                      |  |                              | 1   | %                          |  | 1    | %  |      | 1   | % |  | 1   | % 
|Research and development                    |  |                              | 11  | %                          |  | 10   | %  |      | 11  | % |  | 10  | % 
|Clinical and regulatory                     |  |                              | 4   | %                          |  | 5    | %  |      | 4   | % |  | 6   | % 
|Sales and marketing                         |  |                              | 31  | %                          |  | 34   | %  |      | 32  | % |  | 36  | % 
|General and administrative                  |  |                              | 6   | %                          |  | 8    | %  |      | 7   | % |  | 9   | % 
|Litigation                                  |  |                              |    |                            |  | 10   | %  |      |    |   |  | 5   | % 
|Total product costs and
 operating expenses |  |                              | 87  | %                          |  | 103  | %  |      | 89  | % |  | 101 | % 
|Operating income                            |  |                              | 13  | %                          |  | (3   | %) |      | 11  | % |  | (1  | %)
|Other income and expenses, net              |  |                              |    |                            |  |     |    |      |    |   |  |    |   
|Income before income taxes                  |  |                              | 13  | %                          |  | (3   | %) |      | 11  | % |  | (1  | %)
|Income taxes                                |  |                              | 5   | %                          |  |     |    |      | 4   | % |  |    |   
|Net income                                  |  |                              | 8   | %                          |  | (3   | %) |      | 7   | % |  | (1  | %)

Three and six months
ended June 30, 2009, compared to three and six months ended June 30, 2008

Net
revenue increased 13% to $17,166,000 for the quarter ended June 30, 2009 from
$15,238,000 for the quarter ended June 30, 2008. The increase in net revenue
was a result of an increased market penetration as well as the introduction of
new products, principally in the access products and specialty catheters
categories. Approximately 88% of our net revenue was earned in the United
States and 12% of our net revenue was earned in international markets for both
quarters ended June 30, 2009 and June 30, 2008. Net revenue increased 12% to
$32,976,000 for the six months ended June 30, 2009 from $29,353,000 for the six
months ended June 30, 2008. Approximately 87% of our net revenue was earned in
the United States and 13% of our net revenue was earned in international
markets for each of the six months ended June 30, 2009 and June 30, 2008.

We
recognized $212,000 and $424,000 of licensing revenue during the three and six
month periods ending June 30, 2009, respectively, as the result of our License
Agreement and Device Supply Agreement with King and our distribution agreement
with Nicolai in Germany. We also recognized $173,000 and $355,000 of
collaboration revenue during the three and six month periods ending June 30,
2009, respectively, as a result of performing clinical and development work for
King under the Device Supply Agreement. We expect to recognize approximately
$850,000 of license revenue in 2009, and expect collaboration revenue will
continue in 2009 dependent upon our progress with our pre-clinical and clinical
projects for King.

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Gross
margin across all product lines increased to 66% for the quarter ended June 30,
2009 from 64% for the quarter ended June 30, 2008, principally due to selling
mix. We expect product gross margins to be in the range of 64% to 66% for the
remainder of 2009, 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 increased to 66%
for the six months ended June 30, 2009 from 65% for the six months ended June
30, 2008.

Research
and development expense for the second quarter of 2009 totaled $1,803,000, or
11% of revenue, compared to $1,553,000, or 10% of revenue, for the second
quarter of 2008. Research and development expense for the six month period
ending June 30, 2009 totaled $3,719,000, or 11% of revenue, compared to
$3,019,000, or 10% of revenue, for the six month period ending June 30, 2008.
The increase in research and development expenses resulted from additional new
products moving through our development system in 2009. We expect our
continuing research and development expenses to be approximately 9% to 11% of
revenue during 2009 as we continue to pursue additional new products and to
move our longer term development projects forward.

Clinical
and regulatory expense for the second quarter of 2009 totaled $767,000, or 4%
of revenue, compared to $759,000, or 5% of revenue, for the second quarter of
2008. Clinical and regulatory expense for the six month period ending June 30,
2009 totaled $1,379,000, or 4% of revenue, compared to $1,610,000, or 6% of
revenue, for the six month period ending June 30, 2008. 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 during 2009.

Sales
and marketing expense for the second quarter of 2009 totaled $5,307,000, or 31%
of revenue, compared to $5,174,000, or 34% of revenue, for the second quarter
of 2008. Sales and marketing expense for the six month period ending June 30,
2009 totaled $10,560,000, or 32% of revenue, compared to $10,387,000, or 36% of
revenue, for the six month period ending June 30, 2008. We expect to maintain
the same relative size of our direct sales force during 2009 at between 85 and
90 full-time sales employees. As a result, we expect our sales and marketing
expenses will continue to decline as a percentage of revenue to between 29% and
31% of revenue by the end of 2009.

General
and administrative expense for the second quarter of 2009 totaled $1,104,000,
or 6% of revenue, compared to $1,192,000, or 8% of revenue, for the second
quarter of 2008. General and administrative expense for the six month period
ending June 30, 2009 totaled $2,223,000, or 7% of revenue, compared to $2,734,000,
or 9% of revenue, for the six month period ending June 30, 2008. The decrease
was primarily the result of lower legal fees of approximately $670,000 due to
the litigation that was pending in the first half of 2008 (see Note 9 to the
Consolidated Financial Statements included in Item 1 of Part I of this Form
10-Q). We expect general and administrative expenses to be approximately 6% to
7% of revenue during 2009.

Litigation
expenses were $-0- for both the second quarter and six month period ending June
30, 2009 compared to $1,457,000 and $1,484,000 for the second quarter and six
month period ending June 30, 2008. For a complete discussion of litigation
matters, see Note 9 to the Unaudited Consolidated Financial Statements in Item
1 of Part 1 of this Form 10-Q.

Interest
income decreased to $14,000 and $37,000 for the second quarter and six month
period ending June 30, 2009 compared to $48,000 and $140,000 for the second
quarter and six month period ending June 30, 2008. The decrease in interest
income was primarily the result of lower cash balance following payments made
in settlement of the Diomed litigation and VNUS litigation (see Note 9 to the
Consolidated Financial Statements included in Item 1 of Part I of this Form
10-Q) as well as a decrease in interest rates.

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Interest
expense decreased to $11,000 and $20,000 for the second quarter and six month
period ending June 30, 2009 compared to $18,000 and $42,000 for the second
quarter and six month period ending June 30, 2008. The decrease in interest
expense was as a result of repaying our equipment line of credit during the
year ended December 31, 2008.

Foreign
exchange gain was $7,000 for the quarter ending June 30, 2009 compared to a
foreign exchange loss of $1,000 for the quarter ending June 30, 2008. Foreign
exchange loss was $5,000 for the six month period ending June 30, 2009 compared
to a foreign exchange loss of $1,000 for the six month period ending June 30,
2008. Effective April 1, 2008 we began to sell our products to Nicolai (our
German distributor) at prices denominated in Euros. We also 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. We currently have terms of net 60 days with our
distributor and net 30 with our vendors under the agreements providing for
payments in Euros.

Income
tax expense increased to $871,000 and $1,448,000 for the three month and six
month periods ending June 30, 2009 on income before tax of $2,257,000 and
$3,772,000 resulting in an effective income tax rate of 38%. The difference
between the effective tax rate of 38% and the U.S. federal statutory income tax
rate of 34% was due mainly to the impact of state income taxes. For the three
month and six month periods ending June 30, 2008, income tax expense related to
alternative minimum taxes (AMT) was $53,000 and $140,000 as we continued to
maintain a full valuation allowance on our tax benefits through September 30,
2008.

Liquidity and Capital
Resources

Our
cash and cash equivalents totaled $10,522,000 at June 30, 2009 compared to
$7,209,000 in cash and cash equivalents at December 31, 2008, an increase of $3,313,000. 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 $3,808,000 of
cash from operations in the six months ended June 30, 2009. The cash generated
in the first half of 2009 primarily resulted from our income before taxes of
$3,772,000 since essentially all of our income taxes are offset by our deferred
tax assets.

Cash
used for investing activities.We used $539,000 of
cash in investing activities in the six months ended June 30, 2009. We incurred
capital expenditures of $539,000 relating primarily to leasehold improvements
as part of our facility expansion, additional manufacturing equipment and
additional research and development equipment.

Cash
used for financing activities.We generated $44,000 of
cash in financing activities in the six month period ended June 30, 2009. We
used $333,000 of cash to repurchase shares that vested under outstanding
restricted stock awards for income tax withholding purposes. This was offset by
our receipt of $377,000 of cash we received under our Employee Stock Purchase
Plan and upon the exercise of outstanding stock options.

We
have a $10 million revolving line of credit with Silicon Valley Bank, which has
a 24-month term and bears interest at the rate equal to the greater of prime
plus 0.5% or 7.25% and is secured by a first security interest on all of our
assets. As of June 30, 2009, we were in compliance with all the bank covenants
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 $27.0 million at June 30, 2009 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.

If
cash generated from operations is insufficient to satisfy our cash needs, we
may be required to raise additional funds. In the event that additional
financing is needed, and depending on market conditions, we may seek to raise
additional funds for working capital purposes through the sale of equity or
debt securities. There is no assurance such financing will be available on
terms acceptable to us or be available at all.

Off-Balance Sheet
Arrangements

We
did not have any off-balance sheet arrangements as of June 30, 2009.

Contractual
Obligations

The
following table summarizes our contractual cash commitments as of June 30,
2009:

|                           |  |                         |           |                    |   |              |  |              |           |                    |   |           |  |   |           | 
|-------------------------- |  | ----------------------- | --------- | ------------------ | - | ------------ |  | ------------ | --------- | ------------------ | - | --------- |  | - | --------- | 
|                           |  | Payments
 Due by Period |          
|Contractual Obligations    |  | Total                   |           | Less than 
 1 year |   | 1 - 3
 years |  | 3 - 5
 years |           | More than
 5 years |  
|Facility
 operating leases |  | $                       | 5,055,000 |                    | $ | 749,000      |  | $            | 1,583,000 |                    | $ | 1,671,000 |  | $ | 1,052,000 | 

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 2008 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. Such
statements are subject to certain risks and uncertainties that could cause
actual results to differ materially from those projected. 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, 2008. 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 revise or
update publically 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 two major
banks 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
denominated in United States dollars. In Germany, through April 1, 2008 we sold
our products to hospitals and clinics denominated in Euros. Effective April 1,
2008, we began selling our products in Germany through our new distributor
Nicolai, GmbH. The sale of our products to Nicolai is denominated in Euros.
Product revenue recognized on sales in Germany represented approximately 1.8%
of our total product revenue for the six months ended June 30, 2009. The
exposure to currency exchange rates on this volume of product sales in Germany
would be considered immaterial to our financial statements.

In
all other international markets, we sell our products to independent
distributors who, in turn, sell to medical clinics. We sell our product in
these countries through independent distributors denominated in United States
dollars. Loss, termination or ineffectiveness of distributors to effectively
promote our product would have a material adverse effect on our financial
condition and results of operations.

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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. As we have earned and
received all Euro installment payments pursuant to the terms of our
distribution agreement with Nicolai, GmbH before the end of 2008, there is no
further exposure to fluctuations in the Euro related to this agreement. A
change of 0.1 in the Euro exchange would result in an increase or decrease of
approximately $22,000 in the amount of United States dollars we receive in
payment on accounts receivable from Nicolai, GmbH. Under our current policies,
we do not use foreign currency derivative instruments to manage exposure to
fluctuations in the Euro exchange rate.

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 prime. 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 June 30, 2009,
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 $11,000 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 controls.

During
the fiscal quarter ended June 30, 2009, 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 as
described in Note 9 to 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 legal proceedings arising in the normal course of business.
As of the date of this report we were 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.

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|         |              
|-------- | -------------
|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.

|        |                                 
|------- | --------------------------------
|Item 3. | Defaults
 Upon Senior Securities

None.

|        |                                                     
|------- | ----------------------------------------------------
|Item 4. | Submission
 of Matters to a Vote of Security Holders

Our
annual meeting of shareholders was held on April 21, 2009, at which time (1)
seven nominees were elected to the Board of Directors for one-year terms, and
(2) the appointment of Baker Tilly Virchow Krause, LLP as our independent
registered public accounting firm was ratified. We solicited proxies pursuant
to Section 14(a) of the Exchange Act, and there was no solicitation in
opposition to managements solicitations. All nominees for directors as listed
in the proxy statement were elected.

The
voting results were as follows:

|                                                            |  |     |            |         |  |          |  |                  |           |  |  |   | 
|----------------------------------------------------------- |  | --- | ---------- | ------- |  | -------- |  | ---------------- | --------- |  |  | - | 
|                                                            |  | For |            | Against |  | Withheld |  | Broker
 Non-Vote |          
|Election of
 Directors:                                     |  |     |            |         |  |          |  |                  |           |  |  |   | 
|Jon Erb                                                     |  |     | 14,494,796 |         |  |         |  |                  | 258,021   |  |  |  | 
|Michael Kopp                                                |  |     | 14,493,626 |         |  |         |  |                  | 259,191   |  |  |  | 
|Richard Nigon                                               |  |     | 14,676,279 |         |  |         |  |                  | 76,538    |  |  |  | 
|Paul OConnell                                              |  |     | 14,607,444 |         |  |         |  |                  | 145,373   |  |  |  | 
|Howard Root                                                 |  |     | 13,298,510 |         |  |         |  |                  | 1,454,307 |  |  |  | 
|Jorge Saucedo                                               |  |     | 14,676,731 |         |  |         |  |                  | 76,086    |  |  |  | 
|Charmaine Sutton                                            |  |     | 12,845,520 |         |  |         |  |                  | 1,907,297 |  |  |  | 
|                                                            |  |     |            |         |  |          |  |                  |           |  |  |   | 
|Approval of
 Independent Registered Public Accounting Firm: |  |     | 14,713,951 |         |  | 20,543   |  |                  | 18,323    |  |  |  | 

|        |                   
|------- | ------------------
|Item 5. | Other
 Information

None.

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Table of Contents

|        |         
|------- | --------
|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)).                                  
|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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Table of Contents

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: July
 22, 2009 |                           | By: | /s/ Howard
 Root                     | 
|                     |                           |     | Howard Root                         
|                     |                           |     | Chief Executive Officer and Director
|                     |                           |     | (principal executive officer)       
|                     |                           |     |                                      | 
|                     |                           | By: | /s/ James
 Hennen                    | 
|                     |                           |     | James Hennen                        
|                     |                           |     | Chief Financial Officer             
|                     |                           |     | (principal
financial officer)       

Page 22

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