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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K
(MARK ONE)

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

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001

                                       OR

[ ]      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 of Incorporation)                       (IRS Employer Identification No.)

                             2495 XENIUM LANE NORTH
                          MINNEAPOLIS, MINNESOTA 55441
                    (Address of Principal Executive Offices)

                                 (763) 656-4300
               (Registrant's telephone number, including are code)

        Securities registered pursuant to Section 12(b) of the Act: None
          Securities registered pursuant to Section 12(g) of the Act:
                     Common Stock, par value $.01 per share
                                -----------------
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 [ ]

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

The aggregate market value of voting stock held by non-affiliates based upon the
closing Nasdaq sale price on February 15, 2002 was $25,052,000.

As of February 15, 2002, the number of shares outstanding of the registrant's
common stock was 13,337,002.


                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Registrant's Proxy Statement for its 2002 Annual Meeting of
Shareholders to be held on April 16, 2002 are incorporated by reference in Part
III of this Annual Report on Form 10-K.

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                                     PART I

ITEM 1. BUSINESS

OVERVIEW

      We are an interventional medical device company with a focus on designing,
manufacturing and marketing devices that allow interventional cardiologists and
radiologists to seal percutaneous access sites from blood loss. Our principal
product, the Vascular Solutions Duett(TM) sealing device, enables cardiologists
and radiologists to rapidly seal the entire puncture site following
catheterization procedures such as angiography, angioplasty and stenting. Our
second product, the D-Stat(TM) flowable hemostat, enables interventional
physicians to seal less-challenging access sites following the removal of
sheaths and tubes used in a variety of procedures, such as hemodialysis,
electrophysiology and radial arterial access procedures. We are developing
several additional products that leverage our existing technology to bring
additional sealing solutions to the interventional cardiologist and radiologist.

      Our Duett sealing device combines an easy-to-use balloon catheter delivery
mechanism with a biological procoagulant mixture, which we believe offers
advantages over both manual compression and the three other FDA-approved
vascular sealing devices. We began selling our Duett product in Europe in
February 1998. On June 22, 2000, we received approval from the U.S. Food and
Drug Administration, or FDA, of our premarket approval, or PMA, application for
the sale of the Duett sealing device in the United States and commenced selling
our Duett sealing device in the United States. Over 100,000 Duett sealing
devices have been sold and deployed worldwide. While the vascular sealing device
market has developed quickly, it represents less than 20% of the more than $1
billion potential annual market, based on the current number of catheterization
procedures performed.

      Our D-Stat flowable hemostat consists of the procoagulant components of
the Duett sealing device packaged separately as a thick, yet flowable, blood
clotting material that can be delivered locally to bleeding sites. We began
selling our D-Stat flowable hemostat in the United States in the first quarter
of 2002.

VASCULAR SEALING INDUSTRY BACKGROUND

      Over 60 million Americans have one or more types of cardiovascular
disease--diseases of the heart and blood vessels. Cardiovascular disease is the
number one cause of death in the United States and is replacing infectious
disease as the world's pre-eminent health risk. Advances in medicine have
enabled physicians to perform an increasing number of diagnostic and therapeutic
treatments of cardiovascular disease using minimally invasive methods, such as
catheters placed inside the arteries, instead of highly invasive open surgery.
Cardiologists and radiologists use diagnostic procedures, such as angiography,
to confirm, and interventional procedures, such as angioplasty and stenting, to
treat, diseases of the coronary and peripheral arteries. Based on industry
statistics, we estimate that cardiologists and radiologists performed over 8
million diagnostic and interventional catheterization procedures worldwide in
2001. The number of catheterization procedures performed is expected to grow by
more than 5% each year for the next three years as the incidence of
cardiovascular disease continues to increase.

      Each procedure using a catheter requires a puncture in an artery, usually
the femoral artery in the groin area, of the patient to gain access for the
catheter, which is deployed through an introducer sheath. Upon removal of the
catheter, the physician must seal this puncture in the artery and the tissue
tract that leads from the skin surface to the artery to stop bleeding. The
traditional method for sealing the puncture site has been a manual process
whereby a healthcare professional applies direct pressure to the puncture site,
sometimes using a sand bag or a large C-clamp, for 20 minutes to an hour in
order to form a blood clot. The healthcare professional then monitors


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the patient, who must remain immobile in order to prevent dislodging of the
clot, for an additional four to 48 hours.

      Patients subjected to manual compression generally experience significant
pain and discomfort during compression of the puncture site and during the
period in which they are required to be immobile. Many patients report that this
pain is the most uncomfortable aspect of the catheterization procedure. In
addition, patients usually develop a substantial coagulated mass of blood, or
hemotoma, around the puncture site, limiting patient mobility for up to six
weeks following the procedure. Finally, the need for healthcare personnel to
provide compression and the use of hospital beds during the recovery period
results in substantial costs to the institution which, under virtually all
current healthcare payment systems, are not separately reimbursed.

      In addition to this discomfort and cost, manual compression can result in
major complications at the puncture site. These major complications can include
a pseudo-aneurysm, or the continuation of blood flow from the artery into the
coagulated blood mass at the puncture site, collapse of the femoral artery or
femoral nerve damage from the extended compression. Additional procedures may be
required to correct these major complications.

      The increasing use of medications to prevent blood clot formation during
interventional catheterization procedures has increased the difficulty in
sealing the puncture site using manual compression. During and following the
catheterization procedure, physicians are concerned with the formation of blood
clots in the coronary or peripheral arteries. To prevent clots from forming, the
physician typically administers heparin, an anticoagulant, during the
interventional catheterization procedure. More recently, drugs which prevent
blood clotting by inhibiting platelet aggregation, such as ReoPro(R), are also
being used in interventional catheterization procedures. Because these platelet
inhibitor drugs limit the ability of blood to clot, they also increase the
difficulty of sealing the puncture site using manual compression and the natural
clotting process following the catheterization procedure.

      Until 1996, manual compression was used following virtually all
catheterization procedures. In late 1995, the first vascular sealing device
which did not rely on compression was introduced in the United States. In
addition to the Duett sealing device, three devices have received FDA approval
and are currently being marketed around the world.

      In aggregate, approximately $280 million of the four FDA-approved devices
were sold worldwide in 2001 compared to less than $20 million in 1996. Based on
the number of catheterization procedures performed annually by cardiologists and
radiologists, industry sources report that the total market opportunity for
vascular sealing devices is more than $1 billion. Accordingly, the market
opportunity for vascular sealing devices is less than 20% penetrated.

THE VASCULAR SOLUTIONS DUETT SEALING DEVICE

      We believe our Duett sealing device (1) offers a complete seal of the
puncture site with nothing left behind in the artery, (2) is an easy-to-use
system and (3) minimizes patient discomfort and permits early ambulation. Our
product uses a balloon catheter, a device already familiar to cardiologists and
radiologists, which is inserted through the introducer sheath that is already in
the patient. The inflated balloon serves as a temporary mechanical seal,
preventing the flow of blood from the artery. Our biological procoagulant, which
is a proprietary mixture of collagen, thrombin and diluent, is then delivered to
the puncture site, stimulating rapid clotting and creating a complete seal of
both the arterial puncture and the tissue tract from the artery to the skin
surface. The blood-clotting speed and strength of thrombin enables the use of
the Duett sealing device even in the presence of powerful anti-clotting
medications, such as ReoPro(R), increasingly used in interventional
catheterization procedures. With our Duett sealing device, nothing is left
behind in the artery, so immediate reaccess of the site, if necessary, is
possible, and the potential for infection is minimized.


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     We recently commenced sales of a new version of our Duett sealing device,
the Diagnostic Duett(TM) sealing device, for a subset of catheterization
patients. The Diagnostic Duett is tailored specifically for treating diagnostic
patients. Because the Duett sealing device is a one-size-fits-all device, the
procoagulant is dosed appropriately for the most challenging catheterization
patients. We developed the Diagnostic Duett with a lower dose of procoagulant
that is tailored specifically for the less-challenging diagnostic patients where
substantial blood-thinning drugs are less frequently used. All other components
of the Diagnostic Duett, including the balloon catheter, are identical to the
original Duett sealing device. This results in the Diagnostic Duett having
identical deployment steps, but being less expensive and yet fully effective for
the over 2.5 million diagnostic procedures that occur each year in the United
States. We commenced sales of the Diagnostic Duett version of the Duett sealing
device in the United States in December 2001.

THE D-STAT FLOWABLE HEMOSTAT

     Our second product, the D-Stat flowable hemostat, consists of the Duett
procoagulant components without the catheter and is sold as a hemostat which is
thick, yet easily deliverable. The D-Stat consists of the same collagen,
thrombin and diluent components as the Duett sealing device, which has been
proven effective in controlling bleeding from aggressive arterial puncture
sites. After a simple reconstitution step, the D-Stat hemostat can be applied
directly to a wide variety of bleeding surfaces using one of the three included
applicator tips. Since the D-Stat is applied locally, no special catheter
delivery system is required. The D-Stat hemostat is shelf stable and can be
prepared up to three hours before use. We commenced sales of the D-Stat hemostat
through our direct sales force in the United States in the first quarter of
2002.

     The D-Stat flowable hemostat can be used in a wide variety of
interventional procedures as an adjunct to hemostasis. Examples of these uses
include sealing the access site after the removal of catheters used in kidney
dialysis, sealing very small punctures of the femoral artery, and sealing
punctures of the radial artery in the arm. We believe that the D-Stat flowable
hemostat is the only hemostat available in the United States that combines the
thick consistency and extremely flowable delivery that is preferred by the
interventional physician.

BUSINESS STRATEGY

      Our primary objective is to establish ourselves as a leading supplier of
sealing devices for a variety of procedures performed by interventional
physicians, starting with our Duett sealing device in the large vascular sealing
device market. The key steps in achieving our primary objective are the
following:

      o     DEVELOP OUR CLINICALLY-ORIENTED DIRECT SALES FORCE IN THE UNITED
            STATES. During the third quarter of 2000 we commenced sales of our
            Duett sealing device in the United States through a direct sales
            force that includes clinical specialists who train interventional
            cardiologists, radiologists and catheterization laboratory
            administrators on the use of our product. We believe that effective
            training is a key factor in promoting use of our Duett sealing
            device. We have created and will continue to work to improve an
            in-the-field training and certification program for the use of our
            Duett sealing device. As of December 31, 2001, our United States
            direct sales force consisted of approximately 65 employees which we
            expect to grow to approximately 75 employees by the end of 2002.

      o     PROMOTE THE DUETT SEALING DEVICE'S BENEFITS COMPARED TO MANUAL
            COMPRESSION AND OTHER DEVICES. We believe that the primary benefits
            of the Duett sealing device are improved patient outcomes and
            provider efficiencies. We intend to continue to use our existing and
            growing body of clinical results to initiate use of our Duett
            sealing device by physicians currently using manual compression and
            to convert physicians from other vascular sealing devices to our
            product.

      o     CAPITALIZE ON THE LARGE AND GROWING VASCULAR SEALING MARKET. While
            the market for vascular sealing devices has developed quickly, it
            represents less than 20% of the more than $1 billion potential
            annual


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            market, based on the current number of catheterization procedures
            performed. The primary factors underlying the market opportunity for
            vascular sealing devices are the significant and growing number of
            catheterization procedures being performed and the substantial
            majority of the resulting puncture sites still being sealed through
            manual compression. The growth in catheterization procedures by
            cardiologists and radiologists reflects an increasing incidence of
            cardiovascular disease and the growing number of catheterization
            laboratories worldwide. In 2001, over 8 million catheterization
            procedures were performed. This number is expected to increase by
            more than 5% each year for the next three years. Although the market
            for vascular sealing devices has grown rapidly, over 80% of the
            arterial punctures in 2001 were sealed using manual compression. We
            believe that our device offers benefits that position it well to
            capture a significant share of the market for vascular sealing
            devices.

      o     LEVERAGE OUR D-STAT AND FUTURE DEVICES THROUGH OUR DIRECT SALES
            FORCE TO OUR EXISTING CUSTOMERS. Starting with the D-Stat flowable
            hemostat, we intend to leverage our direct sales force by bringing
            additional products to the interventional physician. We commenced
            sales of the D-Stat in the first quarter of 2002. We are performing
            clinical studies in international markets of a new biopsy tract
            sealing device that is intended to seal the needle tract created by
            a biopsy of the liver. Our research and development team is working
            on several additional devices that generally utilize our sealing
            technology to create new products for the interventional physician.

SALES, MARKETING AND DISTRIBUTION

      In the third quarter of 2000 we commenced sales of our Duett sealing
device in the United States through our direct sales organization. As of
December 31, 2001, our direct sales force consisted of approximately 65
employees, which we expect to grow to approximately 75 employees by the end of
2002. We believe that the majority of interventional catheterization procedures
in the United States are performed in high volume catheterization laboratories,
and that these institutions can be served by our focused direct sales force. We
also believe that our sales force will be able to sell additional products to
the same customer base, starting with the D-Stat flowable hemostat in 2002.

      As part of our sales force, we have hired clinical specialists to train
physicians and other healthcare personnel on the use of the Duett sealing
device. We believe that effective training is a key factor in encouraging
physicians to use our Duett sealing device. We have created, and will continue
to work to improve an in-the-field training and certification program for the
use of our Duett sealing device. We will seek to develop and maintain close
working relationships with our customers to continue to receive input concerning
our product development plans.

      We are focused on building market awareness and acceptance of our Duett
sealing device and D-Stat flowable hemostat. Our marketing organization provides
a wide range of programs, materials and events that support our sales force.
These include product training, conference and trade show appearances and sales
literature and promotional materials. Members of our medical advisory board also
aid in marketing our Duett sealing device by publishing articles and making
presentations at physicians' meetings and conferences.

      Our international sales and marketing strategy has been to sell to
interventional cardiologists and radiologists through established independent
distributors in major international markets, subject to required regulatory
approvals. In Germany, we established a direct sales organization by creating
Vascular Solutions GmbH and began selling directly to customers in the German
market in the fourth quarter of 2000. Our Duett sealing device is currently
marketed through independent distributors in Norway, Italy, Austria, the United
Kingdom, Ireland, Denmark, Switzerland, Finland, Sweden, Greece, Belgium, Spain,
the Netherlands and Portugal. We intend to add independent distributors in other
countries as our sales and marketing efforts are expanded. Under multi-year
written distribution agreements with each of our independent distributors, we
ship our Duett sealing device to these distributors upon receipt of purchase
orders. Each of our independent distributors has the exclusive right to sell our
Duett sealing device within a defined territory. These distributors also market
other medical products,


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although they have agreed not to sell other vascular sealing devices. Our
independent distributors purchase our Duett sealing device from us at a discount
from list price and resell the device to hospitals and clinics. Sales to
international distributors are denominated in United States dollars. The
end-user price is determined by the distributor and varies from country to
country.

      Substantially all of our revenues from inception until our FDA approval on
June 22, 2000 were derived from sales to international distributors, primarily
in Europe, none of which is affiliated with us. Sales in Europe constituted 10%,
33% and 93% of our net sales for the years ended December 31, 2001, 2000 and
1999.

DUETT SEALING DEVICE TECHNOLOGY AND DEPLOYMENT

      The components of our proprietary Duett sealing device consist of a very
thin balloon catheter and a procoagulant mixture. The balloon catheter consists
of a balloon made of polyethylene connected to a wire, covered by a sleeve. The
procoagulant is a proprietary mixture of collagen, thrombin and a diluent. Both
collagen and thrombin have been approved for use as blood clotting agents in the
human body by the FDA for over ten years. The mixture of thrombin, a very rapid
blood clotting agent, and collagen, which allows the procoagulant to assume a
gel-like viscosity, provides a highly effective clotting agent when delivered
directly to the puncture site. The diluent is a liquid used to create the
desired viscosity and neutralize the pH of the mixture. The procoagulant is
mixed before use.

      The Duett catheter can be deployed through any commonly used introducer
sheath from five French to nine French in diameter. Therefore, the sheath that
is already in the femoral artery is left in place and no replacement of the
sheath is required. The Duett catheter is then inserted through the introducer
sheath and into the femoral artery and the syringe containing the Duett
procoagulant is attached to the sidearm of the introducer sheath. Using a
syringe, the balloon is inflated and positioned against the inner surface of the
artery where the arterial pressure and gentle traction result in the balloon
acting as a temporary seal of the puncture.

      Next, the procoagulant is delivered directly to the top of the arterial
puncture and the tissue tract through the sidearm of the introducer sheath. The
procoagulant stimulates rapid clotting through the powerful action of thrombin
and collagen. The introducer sheath is removed from the body as the procoagulant
agent is being delivered.

      Immediately after the delivery of the procoagulant to the tissue tract,
the balloon is deflated and covered by the sleeve. The slippery nature of the
sleeve as well as its low profile (approximately one millimeter in diameter)
allows for removal of the balloon catheter from the artery without disruption of
the procoagulant.

      After removal of the Duett catheter from the artery, manual pressure is
maintained for a short time, usually two to five minutes, to assure the seal. We
recommend ambulation of patients generally one to two hours after diagnostic
catheterizations and two to four hours after interventional catheterization
procedures.

RESEARCH AND DEVELOPMENT

      Our research and development staff is currently focused on improving our
Duett sealing device and developing new products to sell to our existing
customer base through our direct sales force. We incurred expenses of $4,287,726
in 2001, $3,265,536 in 2000 and $3,067,897 in 1999 for research and development
activities. To further reduce our costs, our research and development group
continues to develop in-house capabilities to manufacture some of the components
currently produced by outside vendors.

      We are currently developing several new products and product line
extensions to the Duett sealing device. Our next product line extension is a
biopsy tract sealing device, a device intended to be used to seal the needle
tract left following a solid organ biopsy procedure. During biopsies of organs,
such as the liver, a substantial


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amount of blood can be lost upon the removal of the needle. Utilizing our D-Stat
flowable hemostat and a proprietary delivery device, we believe that we will be
able to seal the needle tract against significant blood loss. Our second product
line extension is the Duett pseudo-aneurysm closure, which also uses the Duett
procoagulant components and a simple delivery system to close pseudo-aneurysms.
A pseudo-aneurysm is a complication which occurs in approximately 1-3% of
patients following a catheterization procedure and often requires a surgical
procedure to repair. The use of the Duett procoagulant components to close
pseudo-aneurysms was demonstrated in a European clinical evaluation during 2001.
Our research and development team also is in the process of developing and
collaborating on next generation sealants for use in our Duett sealing device.

      We expect our research and development activities to expand to include
evaluation of new concepts and products beyond vascular sealing in the
interventional cardiology and radiology field. We believe that there are many
potential new interventional products that would fit within the development,
clinical, manufacturing and distribution network we have created for our Duett
sealing device.

MANUFACTURING

      We manufacture our Duett sealing device and D-Stat flowable hemostat in
our facility in a suburb of Minneapolis, Minnesota. The catheter manufacturing
and packaging processes occur under a controlled clean room environment. Our
manufacturing facility and processes were certified in July 1998 as compliant
with the European Community's ISO 9001 standards and were audited in September
1999 for compliance with the FDA's good manufacturing practices with no
deficiencies noted.

      We purchase components from various suppliers and rely on single sources
for several parts of the Duett sealing device and D-Stat flowable hemostat. In
September 1998, we entered into a ten year, sole-source, supply agreement with
our collagen supplier, Davol Inc., that provides for a fixed price based on
volume purchases which is adjusted annually for increases in the Department of
Labor's employer's cost index. In June 1999, we entered into a five year,
sole-source, supply agreement with our thrombin supplier, GenTrac, Inc., a
subsidiary of King Pharmaceuticals, Inc., that provides for a fixed price with a
price adjustment formula based on increased costs and wholesale price increases.
To date, we have not experienced any significant adverse effects resulting from
shortages of components.

      The manufacture and sale of our products entail significant risk of
product liability claims. Although we have product liability insurance coverage
in an amount which we consider reasonable, it may not be adequate to cover
potential claims. Any product liability claims asserted against us could result
in costly litigation, reduced sales and significant liabilities and divert the
attention of our technical and management personnel away from the development
and marketing of the Duett sealing device for significant periods of time.

COMPETITION

      Competition in the vascular sealing market is intense, and we believe that
it will increase. We believe that the primary bases of competition in the
vascular sealing market are clinical efficacy, ease of use, patient comfort,
minimization of complications and cost-effectiveness. On these bases, we believe
that our product is well-positioned.

      Because the substantial majority of vascular sealing is performed through
manual compression, this represents our primary competition. Manual compression
usually requires a healthcare professional to manually apply pressure to the
puncture site for 20 minutes to one hour following which the patient is confined
to bed rest for between four and 48 hours. Often manual compression involves the
use of mechanical devices, including C-clamps and sandbags, or pneumatic
devices. Manual compression is considered to be uncomfortable for the patient.


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      Our Duett sealing device also competes with three vascular sealing
devices. These three competitive devices are:

      o     The VasoSeal(R) device, manufactured and marketed by Datascope
            Corp., seals the tissue tract by placing a dry collagen plug in the
            tissue tract adjacent to the puncture in the artery.

      o     The Angio-Seal(R) device, sold by the Daig division of St. Jude
            Medical, Inc. and developed by Kensey Nash Corporation, seals the
            puncture site through the use of a collagen plug on the outside of
            the artery connected by a suture to a biodegradable anchor which is
            inserted into the artery.

      o     The Closer(TM) device, sold by Perclose, Inc., a subsidiary of
            Abbott Laboratories, seals the puncture site through the use of a
            mechanical device that enables a physician to perform a minimally
            invasive replication of open surgery.

      We believe that several other companies are developing arterial closure
devices. The medical device industry is characterized by rapid and significant
technological change as well as the frequent emergence of new technologies.
There are likely to be research and development projects related to vascular
sealing devices of which we are currently unaware. A new technology or product
may emerge that results in a reduced need for vascular sealing devices or
results in a product that renders our product noncompetitive.

      There are many companies that are selling or have developed hemostats
which compete generally with our D-Stat flowable hemostat. Virtually all of
these devices, however, are positioned as hemostats for the open surgical market
and are not designed specifically for use in interventional procedures. There
are likely to be new products, or modifications of existing products, that will
compete with our D-Stat flowable hemostat in the interventional segment of the
hemostat market, and these new products may render our product noncompetitive.

REGULATORY REQUIREMENTS

UNITED STATES

      Our Duett sealing device is regulated in the United States as a medical
device by the FDA under the federal Food, Drug and Cosmetic, or FDC, Act, and
required premarket approval by the FDA prior to being sold. In May 1997, the FDA
determined that the review of the Duett sealing device would be delegated to the
Center for Devices and Radiological Health area of the FDA, with a consulting
review by the Center for Biologic Evaluation and Research. During 1998 and 1999,
we received approval of our investigational device exemption, or IDE,
application to start our feasibility clinical study, filed our IDE Supplement to
begin our multi-center clinical study, completed the SEAL multi-center clinical
study and filed our PMA application with the FDA. In September 1999 our
manufacturing facility was audited by the FDA, with no deficiencies or
non-compliances noted by the inspector. In December 1999, we received the FDA's
review letter of our PMA application, and we submitted an amendment to our PMA
to the FDA in January 2000. On June 22, 2000, we received approval from the FDA
of our PMA application to sell the Duett sealing device in the United States.

      Our D-Stat flowable hemostat is also regulated in the United States as a
medical device by the FDA under the FDC Act, and required clearance of our
510(k) application by the FDA prior to being sold in the United States. In
January 2002, our 510(k) application for the D-Stat flowable hemostat was
cleared by the FDA, and we commenced sales in the United States in February
2002.

      The FDA classifies medical devices into one of three classes based upon
controls the FDA considers necessary to reasonably ensure their safety and
effectiveness. Class I devices are subject to general controls such as labeling,
premarket notification and adherence to good manufacturing practices. Class II
devices are subject to the same general controls and also are subject to special
controls such as performance standards, postmarket


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surveillance, patient registries and FDA guidelines, and may also require
clinical testing prior to approval. Class III devices are subject to the highest
level of controls because they are used in life-sustaining or life-supporting
implantable devices. Class III devices require rigorous clinical testing prior
to their approval. Our Duett sealing device is classified as a Class III device.

      Manufacturers must file an IDE application if human clinical studies of a
device are required and if the device presents what the FDA considers to be a
significant risk. The IDE application must be supported by data, typically
including the results of animal and mechanical testing of the device. If the IDE
application is approved by the FDA, human clinical studies may begin at a
specific number of investigational sites with a maximum number of patients, as
approved by the FDA. The clinical studies must be conducted under the review of
an independent institutional board at the hospital performing the clinical
study. Our Duett sealing device is subject to the IDE requirements. We received
approval of our IDE application for the Duett sealing device and performed our
feasibility clinical study at two United States centers in January to March
1998. Based on the results of this feasibility clinical study, we received
approval and performed our 695 patient multi-center SEAL clinical study from
August 1998 through March 1999.

      Generally, upon completion of these human clinical studies, a manufacturer
seeks approval of a Class III medical device from the FDA by submitting a PMA
application. A PMA application must be supported by extensive data, including
the results of the clinical studies, as well as literature to establish the
safety and effectiveness of the device. The FDA allowed us to submit our PMA
application in segments prior to completion of our clinical studies. Upon
completion of the follow-up and data analysis of the SEAL clinical study, we
submitted the final two segments of our PMA application to the FDA in June 1999.
Under the FDC Act, the FDA has 180 days to review a PMA application, although
the review of such an application more often occurs over a longer time period
and may require additional information. In December 1999, we received the FDA's
review letter of our PMA application, and we submitted an amendment to our PMA
to the FDA in January 2000. On June 22, 2000, we received approval from the FDA
of our PMA application for the sale of the Duett sealing device in the United
States. Our PMA approval was conditioned on our agreeing to perform a post
approval study of the immunogenic response to the Duett procoagulant and a post
approval animal study of the 30 day resorption of the Duett procoagulant, both
of which we are conducting. The FDA or international regulatory agencies could
restrict or withdraw their approval of our Duett sealing device if one of the
post approval studies produces adverse results that would support such an
action.

      If a medical device manufacturer can establish that a device is
"substantially equivalent" to a legally marketed Class I or Class II device, or
to an unclassified device, or to a Class III device for which the FDA has not
called for PMAs, the manufacturer may seek clearance from the FDA to market the
device by filing a 510(k) premarket notification. The 510(k) notification may
need to be supported by appropriate data establishing the claim of substantial
equivalence to the satisfaction of the FDA. Following submission of the 510(k)
notification, the manufacturer may not place the device into commercial
distribution in the United States until an order is issued by the FDA. Our
D-Stat flowable hemostat was the subject of a 510(k) application which was
determined to be "substantially equivalent" to a legally marketed predicate
device by the FDA, thereby allowing commercial marketing in the United States.

      We also are subject to FDA regulations concerning manufacturing processes
and reporting obligations. These regulations require that manufacturing steps be
performed according to FDA standards and in accordance with documentation,
control and testing standards. We also are subject to inspection by the FDA on
an on-going basis. We are required to provide information to the FDA on adverse
incidents as well as maintain a documentation and record keeping system in
accordance with FDA guidelines. The advertising of our products also is subject
to both FDA and Federal Trade Commission jurisdiction. If the FDA believes that
we are not in compliance with any aspect of the law, it can institute
proceedings to detain or seize products, issue a recall, stop future violations
and assess civil and criminal penalties against us, our officers and our
employees.


                                       8
<PAGE>


INTERNATIONAL

      The European Union has adopted rules which require that medical products
receive the right to affix the CE mark, an international symbol of adherence to
quality assurance standards and compliance with applicable European medical
device directives. As part of the CE compliance, manufacturers are required to
comply with the ISO 9000 series of standards for quality operations. We received
the CE mark approval for our Duett sealing device and ISO 9001 certification in
July 1998, and we received the CE mark approval for our D-Stat flowable hemostat
in October 2001.

      International sales of the Duett sealing device are subject to the
regulatory requirements of each country in which we sell our product. These
requirements vary from country to country but generally are much less stringent
than those in the United States. Our Duett sealing device is currently marketed
in Germany, Norway, Italy, Austria, the United Kingdom, Ireland, Denmark,
Switzerland, Finland, Sweden, Greece, Belgium, Spain, the Netherlands and
Portugal. We have obtained regulatory approvals where required. Through our
Japanese distributor, we are pursuing the regulatory approval for commercial
sale in Japan.

THIRD PARTY REIMBURSEMENT

      In the United States, healthcare providers that purchase medical devices,
such as vascular sealing devices, generally rely on third-party payors,
principally the Centers for Medicare and Medicaid Services, or CMS, (formerly
the Health Care Financing Administration, or HCFA) and private health insurance
plans, to reimburse all or part of the cost of therapeutic and diagnostic
catheterization procedures. We believe that in the current United States
reimbursement system, the cost of vascular sealing devices is incorporated into
the overall cost of the catheter procedure. We are working to establish the cost
benefit of the Duett sealing device, relying on shortened hospital stays and
decreased use of healthcare professionals, to justify the increased cost of
using our Duett sealing device in the United States.

      During 2000, CMS implemented a new Medicare prospective payment system for
hospital outpatient services. One aspect of the new system involves the
recognition of new technology items and services as discrete payment groups
under the prospective payment system. Under this new system, hospitals receive
separate payments for the use of new medical devices that are recognized by CMS.
The Duett sealing device has been issued a transitional pass through code by CMS
and is currently eligible for device reimbursement under the Medicare
prospective payment system for hospital outpatient services. CMS is proposing
changes to the prospective payment system that could be adopted in 2002.

      Market acceptance of our products in international markets is dependent in
part upon the availability of reimbursement from healthcare payment systems.
Reimbursement and healthcare payment systems in international markets vary
significantly by country. The main types of healthcare payment systems in
international markets are government sponsored healthcare and private insurance.
Countries with government sponsored healthcare, such as the United Kingdom, have
a centralized, nationalized healthcare system. New devices are brought into the
system through negotiations between departments at individual hospitals at the
time of budgeting. In most foreign countries, there are also private insurance
systems that may offer payments for alternative therapies.

PATENTS AND INTELLECTUAL PROPERTY

      We file patent applications to protect technology, inventions and
improvements that are significant to the development of our business, and use
trade secrets and trademarks to protect other areas of our business. Prior to
the formation of our company, Dr. Gary Gershony filed a number of patent
applications in the United States and other countries directed to proprietary
technology used in our Duett sealing device. Upon the commencement of our
operations in February 1997, Dr. Gershony assigned all patents and patent
applications


                                       9
<PAGE>


relating to the Duett sealing device to us on a worldwide, perpetual,
royalty-free basis. At the time of assignment, there existed one United States
patent issued that is directed to a balloon catheter sealing device and method
and which expires in May 2013, three United States patents pending and an
international patent application pending which designated numerous foreign
countries and regions.

      Since commencing operations, we have continued the prosecution of the
pending United States patent applications and filed new patent applications. A
second United States patent has issued that is directed to a balloon catheter
and procoagulant sealing device and method and which expires in October 2015. A
third United States patent has also issued that contains method claims
concerning the use of a balloon catheter and flowable procoagulant and which
expires in October 2015. A fourth United States patent has issued concerning the
procoagulant mixture and which expires in October 2015. A fifth United States
patent has issued concerning a balloon catheter sealing device and which expires
in May 2013. A sixth United States patent has issued concerning a balloon
catheter and procoagulant sealing device and which expires in October 2015. A
seventh United States patent has issued concerning a balloon catheter sealing
device and which expires in October 2015. We currently have five additional
United States patents pending concerning aspects of our Duett sealing device and
other interventional products. We also have pursued international patent
applications, which designate the key developed nations with substantive patent
protection systems.

      The interventional cardiology market in general, and the vascular sealing
device field in particular, is characterized by numerous patent filings and
frequent and substantial intellectual property litigation. Each of the three
vascular sealing products with which our Duett sealing device competes has been
subject to infringement litigation. We are aware of many United States patents
issued to other companies in the vascular sealing field which describe vascular
sealing devices. After consultation with our intellectual property counsel, we
believe that our Duett sealing device does not infringe any of these existing
United States issued patents. The interpretation of patents, however, involves
complex and evolving legal and factual questions. Intellectual property
litigation in recent years has proven to be complex and expensive, and the
outcome of such litigation is difficult to predict.

      On July 23, 1999, we were named as the defendant in a patent infringement
lawsuit brought by Datascope Corp. in the United States District Court for the
District of Minnesota. The complaint requested a judgment that our Duett sealing
device infringes and, following FDA approval will infringe, a United States
patent held by Datascope and asks for relief in the form of an injunction that
would prevent us from selling our product in the United States as well as an
award of attorneys' fees, costs and disbursements. On March 15, 2000, the court
granted summary judgment dismissing all of Datascope's claims, subject to the
right of Datascope to recommence the litigation after our receipt of FDA
approval of our Duett sealing device. On July 12, 2000, after our receipt of FDA
approval, Datascope recommenced this litigation, alleging that the Duett sealing
device infringes a United States patent held by Datascope and requesting relief
in the form of an injunction that would prevent us from selling our product in
the United States, damages caused by our alleged infringement, and other costs,
disbursements and attorneys' fees. We believe the allegations included in the
complaint are without merit, have filed our answer to the complaint, and we
intend to defend this litigation vigorously. It is not possible to predict the
timing or outcome of the Datascope litigation, including whether we will be
prohibited from selling our Duett sealing device in the United States or
internationally, or to estimate the amount or range of potential loss, if any.

      On July 3, 2000, we were named as the defendant in a patent infringement
lawsuit brought by the Daig division of St. Jude Medical in the United States
District Court for the District of Minnesota. The complaint requested a judgment
that our Duett sealing device infringes a series of four patents known as the
Fowler patents held by St. Jude Medical and asked for relief in the form of an
injunction that would prevent us from selling our Duett sealing device in the
United States, damages caused by the manufacture and sale of our product, and
other costs, disbursements and attorneys' fees. On July 12, 2001, we entered
into an agreement that settled all existing intellectual property litigation
with St. Jude Medical. Under the terms of the settlement agreement, we agreed to
pay a royalty of 2.5% of net sales of our Duett sealing device to St. Jude
Medical, up to a maximum amount over the remaining life of the St. Jude Fowler
patents. In exchange, St. Jude Medical granted to us a non-exclusive


                                       10
<PAGE>


license to its Fowler patents and has released us from any claim of patent
infringement based on sales of our Duett sealing device. We granted a
non-exclusive cross-license to our Gershony patents to St. Jude Medical, subject
to a similar royalty payment if St. Jude Medical utilizes our Gershony patents
in any future device. Beginning on July 1, 2001, a royalty expense of 2.5% of
net sales is included in our cost of goods sold until the maximum royalty is
attained.

      We may become the subject of additional intellectual property claims in
the future related to our Duett sealing device. Our defense of the Datascope
claim and any other intellectual property claims filed in the future, regardless
of the merits of the complaint, could divert the attention of our technical and
management personnel away from the development and marketing of the Duett
sealing device for significant periods of time. The costs incurred to defend the
Datascope claim and other future claims could be substantial and adversely
affect us, even if we are ultimately successful. An adverse determination in the
Datascope matter or in other litigation or interference proceedings in the
future could prohibit us from selling our product, subject us to significant
liabilities to third parties or require us to seek licenses from third parties.

      We also rely on trade secret protection for certain aspects of our
technology. We typically require our employees, consultants and vendors for
major components to execute confidentiality agreements upon their commencing
services with us or before the disclosure of confidential information to them.
These agreements generally provide that all confidential information developed
or made known to the other party during the course of that party's relationship
with us is to be kept confidential and not disclosed to third parties, except in
special circumstances. The agreements with our employees also provide that all
inventions conceived or developed in the course of providing services to us
shall be our exclusive property.

      We also intend to register the trademarks and trade names through which we
conduct our business. To date, we have applied for registration in the United
States of the mark "Vascular Solutions Duett," "D-Stat" and the Duett logo.

EMPLOYEES

      As of December 31, 2001, we had 140 full time employees. Of these
employees, 31 were in manufacturing activities, 78 were in sales and marketing
activities, 9 were in research and development activities, 12 were in
regulatory, quality assurance and clinical research activities and 10 were in
general and administrative functions. We have never had a work stoppage and none
of our employees are covered by collective bargaining agreements. We believe our
employee relations are good.

EXECUTIVE OFFICERS OF THE REGISTRANT

      The executive officers of the Company as of February 15, 2002 are as
follows:

NAME                   AGE     POSITION
----                   ---     --------
Howard Root            41      Chief Executive Officer and Director
Michael Nagel          39      Vice President of Sales & Marketing and Secretary
Deborah Jensen         45      Vice President of Regulatory Affairs
James Quackenbush      43      Vice President of Manufacturing
William Sutton         38      Vice President of Research & Development
James Butala           46      Chief Financial Officer and Treasurer


                                       11
<PAGE>


      HOWARD ROOT has served as our Chief Executive Officer and a director since
he co-founded Vascular Solutions in February 1997. From April 1996 through
February 1997, Mr. Root was the Vice President of Gateway Alliance, LLC, a
provider of management services to start-up businesses. From 1990 to 1995, Mr.
Root was employed by ATS Medical, Inc., a mechanical heart valve company, most
recently as Vice President and General Counsel. Prior to joining ATS Medical,
Mr. Root practiced corporate law, specializing in representing emerging growth
companies, at the law firm of Dorsey & Whitney for over five years. Mr. Root
received his B.S. in Economics and J.D. degrees from the University of
Minnesota.

      MICHAEL NAGEL has served as our Vice President of Sales & Marketing since
June 1997. Prior to joining us, Mr. Nagel was the Director of Sales & Marketing
at Quantech, Ltd., a developer of point of care medical diagnostic testing
products, where he worked since July 1996. From 1992 through July 1996, Mr.
Nagel was the mid-west division sales manager of B. Braun Cardiovascular, a
manufacturer of cardiovascular devices and catheters. From 1991 through 1992,
Mr. Nagel was the Director of Worldwide Sales for the Medical Products Division
of Angeion Corporation, a manufacturer of angioplasty accessories and pediatric
catheters. Prior to 1991, Mr. Nagel performed a variety of sales and marketing
functions with Abbott Labs Diagnostic Division for over five years. Mr. Nagel
received his B.A. and M.B.A. degrees from the University of St. Thomas.

      DEBORAH JENSEN has served as our Vice President of Regulatory Affairs,
Clinical Affairs and Quality Systems since October 2000. Ms. Jensen served as
the Corporate Compliance Officer and Vice President of Regulatory Affairs,
Clinical Research and Quality Systems for Empi, Inc. from October 1995 to
October 2000. From May 1993 to October 1995, Ms. Jensen was employed as a
Regulatory Affairs Manager for Boston Scientific's Scimed division. Prior to May
1993, Ms. Jensen held regulatory affairs, clinical research and quality
assurance positions at Medtronic and Lifecore Biomedical. She received her B.S.
in Biology from Valparaiso University.

      JAMES QUACKENBUSH has served as our Vice President of Manufacturing since
March 1999. Prior to joining us, Mr. Quackenbush served as Vice President of
Manufacturing and Operations with Optical Sensors, Inc., a diagnostic medical
device company, where he worked since October 1992. From March 1989 through
October 1992, Mr. Quackenbush served as operations manager with Schneider USA's
stent division. Prior to this time, he was an advanced project engineer with the
3M Medical Products Division. Mr. Quackenbush received a B.S. in Industrial
Engineering from Iowa State University.

      WILLIAM SUTTON has served as our Vice President of Research & Development
since December 1999. From 1997 through 1999, Mr. Sutton was Director of Research
& Development for Urologix, Inc., a urology medical device company. From 1994
through 1997, Mr. Sutton was a manager of research and development with C.R.
Bard, Inc., a medical device company. Mr. Sutton was a development engineer with
Abbott Laboratories, Inc., from 1987 through 1994. Mr. Sutton received his M.S.
and B.S. degrees in Mechanical Engineering from Stanford University.

      JAMES BUTALA joined us as our Chief Financial Officer and Treasurer in
January 2002. Prior to joining Vascular Solutions, Mr. Butala was the Chief
Financial Officer of CIVISnet Corporation, a software and E-commerce company.
From 1989 to 1999, Mr. Butala was the Chief Financial Officer for Lucht Inc., a
manufacturer of digital and optical photographic equipment. Mr. Butala received
his B.S. degree in Accounting from the University of St. Thomas and is a
Certified Public Accountant.

      There are no family relationships among any of our executive officers.


                                       12
<PAGE>


ITEM 2. PROPERTIES

      Our principal offices are in approximately 29,000 square feet of leased
space in a suburb of Minneapolis, Minnesota. These facilities include
approximately 12,800 square feet used for manufacturing activities,
approximately 3,400 square feet used for research and laboratory activities,
with the remainder used for administrative offices. Our lease for these
facilities expires March 31, 2003 and includes both an option to renew for an
additional five-year term and options to terminate at six-month intervals. We
believe that these facilities will be adequate to meet our needs through at
least the end of 2002.

ITEM 3. LEGAL PROCEEDINGS

      On July 23, 1999, we were named as the defendant in a patent infringement
lawsuit brought by Datascope Corp. in the United States District Court for the
District of Minnesota. The complaint requested a judgment that our Duett sealing
device infringes and, following FDA approval will infringe, a United States
patent held by Datascope and asks for relief in the form of an injunction that
would prevent us from selling our product in the United States as well as an
award of attorneys' fees, costs and disbursements. On August 12, 1999, we filed
our answer to this lawsuit and brought a counterclaim alleging unfair
competition and tortious interference. On August 20, 1999, we moved for summary
judgement to dismiss Datascope's claims. On March 15, 2000, the court granted
summary judgment dismissing all of Datascope's claims, subject to the right of
Datascope to recommence the litigation after our receipt of FDA approval of our
Duett sealing device. On July 12, 2000, after our receipt of FDA approval,
Datascope recommenced this litigation, alleging that the Duett sealing device
infringes a United States patent held by Datascope and requesting relief in the
form of an injunction that would prevent us from selling our product in the
United States, damages caused by our alleged infringement, and other costs,
disbursements and attorneys' fees. We believe the allegations included in the
complaint are without merit, have filed our answer to the complaint, and intend
to defend this litigation vigorously. It is not possible to predict the timing
or outcome of the Datascope litigation, including whether we will be prohibited
from selling our Duett sealing device in the United States or internationally,
or to estimate the amount or range of potential loss, if any.

      On July 3, 2000, we were named as the defendant in a patent infringement
lawsuit brought by the Daig division of St. Jude Medical in the United States
District Court for the District of Minnesota. The complaint requested a judgment
that our Duett sealing device infringes a series of four patents known as the
Fowler patents held by St. Jude Medical and asks for relief in the form of an
injunction that would prevent us from selling our Duett sealing device in the
United States, damages caused by the manufacture and sale of our product, and
other costs, disbursements and attorneys' fees.

      On July 12, 2001, we entered into an agreement that settled all existing
intellectual property litigation with St. Jude Medical. Under the terms of the
settlement agreement, we agreed to pay a royalty of 2.5% of net sales of our
Duett sealing device to St. Jude Medical, up to a maximum amount over the
remaining life of the St. Jude Fowler patents. In exchange, St. Jude Medical
granted to us a non-exclusive license to its Fowler patents and has released us
from any claim of patent infringement based on sales of our Duett sealing
device. We granted a non-exclusive cross-license to our Gershony patents to St.
Jude Medical, subject to a similar royalty payment if St. Jude Medical utilizes
our Gershony patents in any future device. Beginning on July 1, 2001, a royalty
expense of 2.5% of net sales is included in our cost of goods sold until the
maximum royalty is attained.

      Other than the Datascope claim, there are no legal proceedings pending
against us.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

      No matters were submitted to a vote of security holders during the fourth
quarter ended December 31, 2001.


                                       13
<PAGE>


                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

      The Company's common stock began trading on the Nasdaq National Market
under the symbol "VASC" on July 20, 2000. On July 25, 2000, the Company
completed the initial public offering of its common stock. Upon the closing of
the initial public offering, the Company issued 3,500,000 shares of its common
stock at an offering price of $12.00 per share and all of the Company's Series A
and Series B preferred stock automatically converted into 3,777,777 shares of
common stock. On August 15, 2000, the underwriters exercised in full their
over-allotment option to purchase an additional 525,000 shares of common stock
at $12.00 per share. Cash proceeds from the sale of the 4,025,000 shares of
common stock, net of underwriters' discount and offering expenses, totaled
approximately $44.0 million.

      On July 25, 2000, we sold 3,500,000 shares of our common stock, at an
initial public offering price of $12.00 per share, pursuant to a Registration
Statement on Form S-1 (Registration No. 333-84089), which was declared effective
by the Securities and Exchange Commission on July 19, 2000. The managing
underwriters of our initial public offering were Salomon Smith Barney Inc.,
Stephens Inc. and William Blair & Company, L.L.C. On August 15, 2000, the
underwriters exercised in full their over-allotment option to purchase an
additional 525,000 shares of common stock at $12.00 per share. Our net proceeds
from the offering were approximately $44.0 million. To date, we have spent
approximately $17.1 million of the net proceeds to hire, train and deploy a
direct sales force in the United States, and $2.7 million for general corporate
purposes.

      The following table sets forth, for the periods indicated, the range of
high and low last sale prices for the common stock as reported by the Nasdaq
National Market.

                                      High             Low
                                    --------         -------

     2000
        Third Quarter ............. $19.375          $13.875
        Fourth Quarter ............  23.6875           7.375

     2001
        First Quarter .............  10.000            5.750
        Second Quarter ............   9.000            5.125
        Third Quarter .............   9.640            1.770
        Fourth Quarter ............   2.920            1.750

HOLDERS

      As of December 31, 2001, the Company had 140 shareholders of record. Such
number of record holders does not reflect shareholders who beneficially own
common stock in nominee or street name.

DIVIDENDS

      The Company has paid no cash dividends on its common stock, and it does
not intend to pay cash dividends on its common stock in the future.


                                       14
<PAGE>


ITEM 6. SELECTED FINANCIAL DATA

      The selected consolidated financial data below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" in Item 7 below and the Consolidated Financial
Statements and the Notes thereto included in Item 8 below.

<TABLE>
<CAPTION>
                                                                 YEAR ENDED DECEMBER 31,
                                          ------------------------------------------------------------------
                                             2001          2000          1999          1998          1997
                                          ----------    ----------    ----------    ----------    ----------
                                                       (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                       <C>           <C>           <C>           <C>           <C>
Statements of Operations Data:
   Net sales ..........................   $   12,082    $    6,193    $    1,429    $      494    $       --
   Cost of sales ......................        4,961         2,701         1,065           443            --
                                          ----------    ----------    ----------    ----------    ----------
     Gross profit .....................        7,121         3,492           364            51            --
Operating expenses:
   Research and development ...........        4,288         3,265         3,068         2,348           766
   Clinical and regulatory ............        1,288         1,082         1,324         1,376           259
   Sales and marketing ................       12,772         6,700         2,301         1,075           273
   General and administrative .........        2,684         2,107         1,904           667           426
                                          ----------    ----------    ----------    ----------    ----------
     Total operating expenses .........       21,032        13,154         8,597         5,466         1,724
                                          ----------    ----------    ----------    ----------    ----------

Operating loss ........................      (13,911)       (9,662)       (8,233)       (5,415)       (1,724)
     Interest income ..................        1,661         1,453           371           274            72
                                          ----------    ----------    ----------    ----------    ----------
Net loss ..............................   $  (12,250)   $   (8,209)   $   (7,862)   $   (5,141)   $   (1,652)
                                          ==========    ==========    ==========    ==========    ==========
Net loss per common share -
   Basic and diluted ..................   $     (.93)   $     (.95)   $    (1.95)   $    (1.40)   $     (.62)
Weighted average number of common
   shares outstanding .................       13,217         8,645         4,033         3,660         2,668

<CAPTION>
                                                                   AS OF DECEMBER 31,
                                          ------------------------------------------------------------------
                                             2001          2000          1999          1998          1997
                                          ----------    ----------    ----------    ----------    ----------
                                                                    (IN THOUSANDS)
<S>                                       <C>           <C>           <C>           <C>           <C>
Balance Sheet Data:
   Cash and cash equivalents ..........   $   33,318    $   44,098    $   10,529    $    9,897    $    7,299
   Working capital ....................       34,712        46,300        10,487         9,933         7,031
   Total assets .......................       37,593        49,661        12,295        11,007         7,559
   Long-term debt .....................            0             0             0             0             0
   Total shareholders' equity .........       35,630        47,194        11,172        10,546         7,216
</TABLE>


                                       15
<PAGE>


ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
  RESULTS OF OPERATIONS

      The following discussion of the financial condition and results of
operations of the Company should be read in conjunction with the Company's
Consolidated Financial Statements and Notes thereto, and the other financial
information included elsewhere in this Form 10-K Report. This Management's
Discussion and Analysis of Financial Condition and Results of Operations
contains descriptions of the Company's expectations regarding future trends
affecting its business. These forward-looking statements and other
forward-looking statements made elsewhere in this document are made in reliance
upon safe harbor provisions of the Private Securities Litigation Reform Act of
1995. The following discussion sets forth certain factors the Company believes
could cause actual results to differ materially from those contemplated by the
forward looking statements.

OVERVIEW

      Since we commenced operations in February 1997, we have been engaged in
the design, development, clinical testing, manufacture and sale of the Vascular
Solutions Duett sealing device. Our Duett sealing device is designed to seal the
entire puncture site following catheterization procedures such as angiography,
angioplasty and stenting. During 1998 and 1999 we received regulatory approvals
to market the Duett sealing device in several international markets, principally
in Europe. On June 22, 2000, we received approval from the FDA of our PMA
application for the sale of our Duett sealing device in the United States. As a
result, during the third quarter of 2000 we commenced sales of our product in
the United States with a direct sales force. Virtually all of our sales through
December 31, 2001 consisted of sales of our Duett sealing device.

      We have a limited history of operations and have experienced significant
operating losses since inception. As of December 31, 2001, we had an accumulated
deficit of $35.1 million.

      Although we have experienced revenue growth in recent periods, this growth
may not be sustainable and, therefore, these recent periods should not be
considered indicative of future performance. We may never achieve profitability,
or if we achieve profitability it may not be sustained in future periods.

RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 2001 COMPARED TO YEAR ENDED DECEMBER 31, 2000

      Net sales increased 95% to $12,082,379 for the year ended December 31,
2001 from $6,193,234 for the year ended December 31, 2000. The increase in net
sales was principally the result of a full year of United States sales of our
Duett sealing device in 2001, compared to six months of sales in 2000. As a
result, 90% of our net sales for the year ended December 31, 2001 were to
customers in the United States, while 10% of the net sales were to our customers
in international markets.

      Gross profit as a percentage of net sales increased to 59% for the year
ended December 31, 2001 from 56% for the year ended December 31, 2000. This
increase as a percentage of net sales resulted principally from the full year of
United States sales in 2001. In the third quarter of 2001 we settled our
intellectual property litigation with St. Jude Medical. As part of the
settlement agreement, we agreed to pay a royalty of 2.5% of our net sales of the
Duett sealing device to St. Jude Medical up to a maximum amount for the
remaining life of the patents. This 2.5% royalty was included in our costs of
goods sold beginning in the third quarter of 2001. During the fourth quarter of
2001 we commenced initial sales of our Diagnostic Duett version of the Duett
sealing device in the United States. The Diagnostic Duett has a substantially
lower costs of goods sold than the original Duett, which is offset by a lower
average selling price. We believe that our gross profit will continue to
increase slightly toward 60% during 2002.


                                       16
<PAGE>


      Research and development expenses increased 31% to $4,287,726 for the year
ended December 31, 2001 from $3,265,536 for the year ended December 31, 2000.
This increase was attributable to increased development work on the product line
extensions and new products during 2001. We expect our research and development
expenses to continue to increase slightly during 2002 as we pursue additional
new products.

      Clinical and regulatory expenses increased 19% to $1,288,301 for the year
ended December 31, 2001 from $1,082,029 for the year ended December 31, 2000.
The increase was primarily the result of additional personnel and the
commencement of clinical studies for new products and new claims for our Duett
sealing device during 2001. We expect clinical and regulatory expenses to
increase modestly during 2002 as we pursue additional clinical studies of our
Duett sealing device and new products.

      Sales and marketing expenses increased 91% to $12,771,901 for the year
ended December 31, 2001 from $6,699,722 for the year ended December 31, 2000.
This increase was due primarily to the full year of operations of our United
States direct sales force during 2001. As of December 31, 2001, our direct sales
force consisted of approximately 65 employees, which we expect to grow to
approximately 75 employees by the end of 2002. As a result, we expect our sales
and marketing expenses to continue to increase during 2002.

      General and administrative expenses increased 27% to $2,684,592 for the
year ended December 31, 2001 from $2,106,963 for the year ended December 31,
2000. This increase was primarily attributable to an expense of $350,000 upon
the settlement of the litigation with St. Jude Medical in the third quarter of
2001 relating to the royalty on net sales of our Duett sealing device since 1998
(see "Legal Proceedings" in Item 3 of Part I of this Form 10-K). In addition,
legal fees associated with the St. Jude Medical and Datscope litigation
increased during 2001 as compared with 2000. We currently anticipate that
general and administrative expenses will increase by modest amounts for the
foreseeable future as we continue to incur litigation expenses related to the
existing Datascope litigation.

      Interest income increased to $1,660,757 for the year ended December 31,
2001 from $1,453,491 for the year ended December 31, 2000 primarily as a result
of a full year of interest on the cash proceeds received upon the closing of our
initial public offering in July 2000.

YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 1999

      Net sales increased 333% to $6,193,234 for the year ended December 31,
2000 from $1,429,094 for the year ended December 31, 1999. The increase in net
sales was principally the result of United States approval of our Duett sealing
device on June 22, 2000 and the commencement of our formal United States market
launch in July 2000. As a result, 67% of net sales for the year ended December
31, 2000 were to customers in the United States while 33% of the net sales were
to our customers in international markets. In September 2000, we began the
process of transitioning from utilizing an independent distributor in Germany to
organizing Vascular Solutions GmbH as a wholly owned subsidiary for direct sales
in Germany. In October 2000, we commenced direct shipments through Vascular
Solutions GmbH to customers in Germany.

      Gross profit as a percentage of net sales increased to 56% for the year
ended December 31, 2000 from 25% for the year ended December 31, 1999. This
increase as a percentage of net sales resulted from the initiation of United
States sales of the Duett sealing device, a decrease in cost of goods sold due
to the conversion to a new model of the Duett for international sales in the
fourth quarter of 1999, increased volume and improved manufacturing processes.

      Research and development expenses increased 6% to $3,265,536 for the year
ended December 31, 2000 from $3,067,897 for the year ended December 31, 1999.
This increase was attributable to hiring additional development personnel,
continued work on product improvements and exploring new product opportunities.


                                       17
<PAGE>


      Clinical and regulatory expenses decreased 18% to $1,082,029 for the year
ended December 31, 2000 from $1,323,972 for the year ended December 31, 1999.
The decrease was primarily the result of costs associated with the patient
enrollment portion of the 695-patient multi-center clinical study of our Duett
sealing device which commenced in August 1998 and was completed in March 1999.
In addition to the payments to the clinical centers for patient enrollment and
data collection, we contracted with a third party to perform data analysis and
computation for the study in 1999.

      Sales and marketing expenses increased 191% to $6,699,722 for the year
ended December 31, 2000 from $2,301,603 for the year ended December 31, 1999.
This increase was due primarily to $2,815,000 in increased personnel costs with
hiring, training and deploying a direct United States sales force and $997,000
associated with travel, marketing and physician training for the domestic and
international distribution of our Duett sealing device.

      General and administrative expenses increased 11% to $2,106,963 for the
year ended December 31, 2000 from $1,903,946 for the year ended December 31,
1999. This increase was primarily attributable to a $385,000 increase in legal
fees associated with litigation items and a $425,000 increase in personnel costs
to support increased operations. These increases in 2000 were offset by a
$257,000 expense in connection with a warrant granted to a supplier in the
second quarter of 1999 and $453,500 in initial public offering costs that were
expensed in the fourth quarter of 1999 due to the delay of our initial public
offering.

      Interest income increased to $1,453,491 for the year ended December 31,
2000 from $371,066 for the year ended December 31, 1999 primarily as a result of
higher cash balances from the cash proceeds received upon the closing of our
initial public offering in July 2000.

INCOME TAXES

      We have not generated any pre-tax income to date and therefore have not
paid any federal income taxes since inception in December 1996. No provision or
benefit for federal and state income taxes has been recorded for net operating
losses incurred in any period since our inception.

      As of December 31, 2001, we had $32,600,000 of federal net operating loss
carryforwards available to offset future taxable income which begin to expire in
the year 2013. As of December 31, 2001, we also had federal and state research
and development tax credit carryforwards of $1,317,000 which begin to expire in
the year 2013. Under the Tax Reform Act of 1986, the amounts of and benefits
from net operating loss carryforwards may be impaired or limited in certain
circumstances, including significant changes in ownership interests. Future use
of our existing net operating loss carryforwards may be restricted due to
changes in ownership or from future tax legislation.

      We have established a valuation allowance against the entire amount of our
deferred tax asset because we have not been able to conclude that it is more
likely than not that we will be able to realize the deferred tax asset, due
primarily to our history of operating losses.

LIQUIDITY AND CAPITAL RESOURCES

      We have financed all of our operations since inception through the
issuance of equity securities. Through December 31, 2001, we have sold common
stock and preferred stock generating aggregate net proceeds of $70.1 million. At
December 31, 2001, we had $33.3 million in cash and cash equivalents on-hand.
During the year ended December 31, 2001, we used $10.9 million of cash and cash
equivalents in operating activities. The cash used in operating activities was
primarily used to fund our net loss for the period of $12.2 million, which was
partially offset by decreases in accounts receivable and inventories due to
improved controls. During the year ended December 31, 2000, we used $10.0
million of cash and cash equivalents in operating activities. The cash


                                       18
<PAGE>


used in operating activities was primarily used to fund our net loss for the
period of $8.2 million and increases in accounts receivable and inventories to
support our increased operations and a decrease in accounts payable as a result
of the timing of certain vendor payments. For the year ended December 31, 1999,
we used $7.2 million of cash in operating activities. This was primarily used to
fund our net loss for the period of $7.9 million and increases in accounts
receivable and inventories. Cash used in operating activities was partially
offset by an increase of $746,000 in accounts payable. Our other use of cash in
each of these periods was investing activities to acquire manufacturing and
office equipment. Our equipment acquisitions totaled $456,000 during the year
ended December 31, 2001, $576,000 during the year ended December 31, 2000, and
$316,000 for the year ended December 31, 1999.

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

      We currently anticipate that we will continue to experience a negative
cash flow for the foreseeable future and our expenses will be a material use of
our cash resources. We anticipate that our operating losses will continue
through at least December 31, 2002. We believe that current cash balances along
with cash generated from the future sales of products will be sufficient to meet
our operating and capital requirements for at least the next 36 months. Our
liquidity and capital requirements beyond the next 36 months will depend on
numerous factors, including the extent to which our Duett sealing device gains
market acceptance and competitive developments.

      If cash generated from operations is insufficient to satisfy our cash
needs, we may be required to raise additional funds. We currently have no
commitments for additional funding and so our ability to meet our long-term
liquidity needs is uncertain. If we raise additional funds through the issuance
of equity securities, our shareholders may experience significant dilution.
Furthermore, additional financing may not be available when needed or, if
available, financing may not be on terms favorable to us or our shareholders. If
financing is not available when required or is not available on acceptable
terms, we may be unable to develop or market our products or take advantage of
business opportunities or respond to competitive pressures.


                                       19
<PAGE>


                                  RISK FACTORS

      THE RISKS AND UNCERTAINTIES DESCRIBED BELOW ARE NOT THE ONLY ONES FACING
OUR COMPANY. ADDITIONAL RISKS AND UNCERTAINTIES NOT PRESENTLY KNOWN TO US OR
THAT WE CURRENTLY DEEM IMMATERIAL MAY ALSO IMPAIR OUR BUSINESS OPERATIONS. IF
ANY OF THE FOLLOWING RISKS OCCUR, OUR BUSINESS, FINANCIAL CONDITION OR RESULTS
OF OPERATIONS COULD BE SERIOUSLY HARMED.


WE WILL NOT BE SUCCESSFUL IF THE VASCULAR SEALING DEVICE MARKET DOES NOT ADOPT
OUR NEW SEALING METHODOLOGY

      During the third quarter of 2000 we commenced sales of our product in the
United States, which we believe represents the largest market for vascular
sealing devices. Our success will depend on the medical community's acceptance
of our Duett sealing device. We cannot predict how quickly, if at all, the
medical community will accept our Duett sealing device, or, if accepted, the
extent of its use. Our potential customers must:

      o    believe that our device offers benefits compared to the methodologies
           and/or devices that they are currently using to seal vascular
           punctures;

      o    believe that our device is worth the price that they will be asked to
           pay; and

      o    be willing to commit the time and resources required to change their
           current methodology.

      If we encounter difficulties in growing our sales of our Duett sealing
device in the United States, our business will be seriously harmed.


WE CURRENTLY RELY ON THE DUETT SEALING DEVICE AS OUR PRIMARY SOURCE OF REVENUE

      Although we have recently commenced marketing of the D-Stat flowable
hemostat, we continue to rely on sales of our principal product, the Duett
sealing device, which is being sold in a limited number of international markets
and in the United States. Even if we were to develop additional products, FDA
approval would be required in order to sell them in the United States.
Preparation of the requisite materials to seek FDA approval and the approval
process itself require a substantial amount of time and money. As a result, our
success is dependent on the success of our Duett sealing device. If our Duett
sealing device is not successful, our business will be seriously harmed.


WE HAVE INCURRED LOSSES AND WE MAY NOT BE PROFITABLE IN THE FUTURE

      Since we commenced operations in February 1997, we have incurred net
losses from costs relating to the development and commercialization of our Duett
sealing device. At December 31, 2001, we had an accumulated deficit of $35.1
million. We expect to continue to significantly invest in our sales and
marketing, and research and development activities. Because of our plans to
invest heavily in sales and marketing, hire additional employees and expand our
commercialization, we expect to incur significant net losses through at least
December 31, 2002. Our business strategies may not be successful and we may not
be profitable in any future period. If we do become profitable, we cannot be
certain that we can sustain or increase profitability on a quarterly or annual
basis.


WE HAVE BEEN NAMED AS THE DEFENDANT IN A PATENT INFRINGEMENT LAWSUIT AND MAY
FACE ADDITIONAL INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS IN THE FUTURE WHICH
COULD PREVENT US FROM MANUFACTURING AND SELLING OUR PRODUCT OR RESULT IN OUR
INCURRING SUBSTANTIAL COSTS AND LIABILITIES


                                       20
<PAGE>


      An adverse determination in any intellectual property litigation or
interference proceedings could prohibit us from selling our product, subject us
to significant liabilities to third parties or require us to seek licenses from
third parties. The costs associated with these license arrangements may be
substantial and could include ongoing royalties. Furthermore, the necessary
licenses may not be available to us on satisfactory terms, if at all. Adverse
determinations in a judicial or administrative proceeding or failure to obtain
necessary licenses could prevent us from manufacturing and selling our product.

      On July 23, 1999, we were named as the defendant in a patent infringement
lawsuit brought by Datascope Corp. in the United States District Court for the
District of Minnesota. The complaint requested a judgment that our Duett sealing
device infringes and, following FDA approval, will infringe a United States
patent held by Datascope and asks for relief in the form of an injunction that
would prevent us from selling our product in the United States as well as an
award of attorneys' fees, costs and disbursements. On March 15, 2000, the court
granted summary judgment dismissing all of Datascope's claims, subject to the
right of Datascope to recommence the litigation after our receipt of FDA
approval of our Duett sealing device. On July 12, 2000, after our receipt of FDA
approval, Datascope recommenced this litigation, alleging that the Duett sealing
device infringes a United States patent held by Datascope and requesting relief
in the form of an injunction that would prevent us from selling our product in
the United States, damages caused by our alleged infringement, and other costs,
disbursements and attorneys' fees. It is not possible to predict the timing or
outcome of this lawsuit, including whether we will be prohibited from selling
our Duett sealing device in the United States or internationally, or to estimate
the amount or range of potential loss, if any.

      The interventional cardiology industry is characterized by numerous patent
filings and frequent and substantial intellectual property litigation. Companies
in the interventional cardiology industry in general, and in vascular sealing in
particular, have employed intellectual property litigation in an attempt to gain
a competitive advantage. We are aware of many United States patents issued to
other companies in the vascular sealing field which describe vascular sealing
devices. Each of the three vascular sealing products with which our Duett
sealing device competes has been subject to infringement litigation. It is
likely that we will become the subject of additional intellectual property
claims in the future related to our Duett sealing device. Intellectual property
litigation in recent years has proven to be very complex, and the outcome of
such litigation is difficult to predict.

      Our defense of the Datascope lawsuit and any other intellectual property
claims filed in the future, regardless of the merits of the complaint, could
divert the attention of our technical and management personnel away from the
development and marketing of the Duett sealing device for significant periods of
time. The costs incurred to defend the Datascope lawsuit and other future claims
could be substantial and seriously harm us, even if our defense is ultimately
successful.


OUR FUTURE OPERATING RESULTS ARE DIFFICULT TO PREDICT AND MAY VARY SIGNIFICANTLY
FROM QUARTER TO QUARTER, WHICH MAY ADVERSELY AFFECT THE PRICE OF OUR COMMON
STOCK

      The limited history of United States sales of our Duett sealing device and
our history of losses make prediction of future operating results difficult. You
should not rely on our past revenue growth as any indication of future growth
rates or operating results. The price of our common stock will likely fall in
the event that our operating results do not meet the expectations of analysts
and investors. Comparisons of our quarterly operating results are an unreliable
indication of our future performance because they are likely to vary
significantly based on many factors, including:

      o    the level of sales of our Duett sealing device in the United States
           market;

      o    the effect of intellectual property disputes;


                                       21
<PAGE>


      o    the demand for and acceptance of our Duett sealing device;

      o    the success of our competition and the introduction of alternative
           means for vascular sealing;

      o    our ability to command favorable pricing for our Duett sealing
           device;

      o    the growth of the market for vascular sealing devices;

      o    the expansion and rate of success of our direct sales force in the
           United States and our independent distributors internationally;

      o    actions relating to ongoing FDA compliance;

      o    the size and timing of orders from independent distributors or
           customers;

      o    the attraction and retention of key personnel, particularly in sales
           and marketing, regulatory, manufacturing and research and
           development;

      o    unanticipated delays or an inability to control costs with respect
           to our Duett sealing device;

      o    our ability to introduce new products and enhancements in a timely
           manner;

      o    general economic conditions as well as those specific to our
           customers and markets; and

      o    seasonal fluctuations in revenue due to the elective nature of some
           procedures.


OUR DIRECT SALES EFFORTS MAY NOT BE SUCCESSFUL BECAUSE WE HAVE A LIMITED
OPERATING HISTORY WITH A DIRECT SALES FORCE

      Because we received regulatory approval to sell our Duett sealing device
in the United States during 2000, we have only a limited operating history with
a direct sales force. We believe that there is significant competition for
direct sales personnel and clinical specialists with the advanced sales skills
and technical knowledge we require. We may not be able to obtain, train and
retain sufficient numbers of direct sales personnel and the future sales efforts
of our direct sales force may not be successful.


WE MAY FACE PRODUCT LIABILITY CLAIMS THAT COULD RESULT IN COSTLY LITIGATION AND
SIGNIFICANT LIABILITIES

      The manufacture and sale of medical products entail significant risk of
product liability claims. The medical device industry in general has been
subject to significant medical malpractice litigation. Any product liability
claims, with or without merit, could result in costly litigation, reduced sales,
cause us to incur significant liabilities and divert our management's time,
attention and resources. Because of our limited operating history and lack of
experience with these claims, we cannot be sure that our product liability
insurance coverage is adequate or that it will continue to be available to us on
acceptable terms, if at all.


THE MARKET FOR VASCULAR SEALING DEVICES IS HIGHLY COMPETITIVE AND WILL LIKELY
BECOME MORE COMPETITIVE, AND OUR COMPETITORS MAY BE ABLE TO RESPOND MORE QUICKLY
TO NEW OR EMERGING TECHNOLOGIES AND CHANGES IN CUSTOMER REQUIREMENTS THAT MAY
RENDER OUR DUETT SEALING DEVICE OBSOLETE


                                       22
<PAGE>


      The existing market for vascular sealing devices is intensely competitive.
We expect competition to increase further as additional companies begin to enter
this market and/or modify their existing products to compete directly with ours.
Our primary competitors are Abbott Laboratories (through its subsidiary
Perclose, Inc.), Datascope Corp. and St. Jude Medical, Inc., which sells a
product developed by Kensey Nash Corporation. These companies have:

      o    better name recognition;

      o    broader product lines;

      o    greater sales, marketing and distribution capabilities;

      o    significantly greater financial resources;

      o    larger research and development staffs and facilities; and

      o    existing relationships with some of our potential customers.

      We may not be able to effectively compete with these companies. In
addition, broad product lines may allow our competitors to negotiate exclusive,
long-term supply contracts and offer comprehensive pricing for their products.
Broader product lines may also provide our competitors with a significant
advantage in marketing competing products to group purchasing organizations and
other managed care organizations that are increasingly seeking to reduce costs
through centralized purchasing. Greater financial resources and product
development capabilities may allow our competitors to respond more quickly to
new or emerging technologies and changes in customer requirements that may
render our Duett sealing device obsolete.


OUR INTERNATIONAL SALES ARE SUBJECT TO A NUMBER OF RISKS THAT COULD SERIOUSLY
HARM OUR ABILITY TO SUCCESSFULLY COMMERCIALIZE OUR DUETT SEALING DEVICE IN ANY
INTERNATIONAL MARKET

      Our international sales are subject to several risks, including:

      o    the ability of our independent distributors to sell our device;

      o    the impact of recessions in economies outside the United States;

      o    greater difficulty in collecting accounts receivable and longer
           collection periods;

      o    unexpected changes in regulatory requirements, tariffs or other
           trade barriers;

      o    weaker intellectual property rights protection in some countries;

      o    potentially adverse tax consequences; and

      o    political and economic instability.

      The occurrence of any of these events could seriously harm our future
international sales and our ability to successfully commercialize our Duett
sealing device or any future product in any international market.


                                       23
<PAGE>


WE HAVE LIMITED MANUFACTURING EXPERIENCE AND MAY ENCOUNTER DIFFICULTIES IN OUR
MANUFACTURING OPERATIONS WHICH COULD SERIOUSLY HARM OUR BUSINESS

      We have limited experience in manufacturing our Duett sealing device. We
believe our current facilities are adequate for our projected production of our
Duett sealing device for the next year, but future facility requirements will
depend largely on future sales of our product in the United States. We may
encounter unforeseen difficulties in expanding our production of our Duett
sealing device and new products, including problems involving production yields,
quality control and assurance, component supply and shortages of qualified
personnel, compliance with FDA regulations and requirements regarding good
manufacturing practices, and the need for further regulatory approval of new
manufacturing processes. Difficulties encountered by us in expanding our
manufacturing capabilities could seriously harm our business.


OUR BUSINESS AND RESULTS OF OPERATIONS MAY BE SERIOUSLY HARMED BY CHANGES IN
THIRD-PARTY REIMBURSEMENT POLICIES

      We could be seriously harmed by changes in reimbursement policies of
governmental or private healthcare payors, particularly to the extent any
changes affect reimbursement for catheterization procedures in which our Duett
sealing device or D-Stat hemostat is used. Failure by physicians, hospitals and
other users of our products to obtain sufficient reimbursement from healthcare
payors for procedures in which our products are used or adverse changes in
governmental and private third-party payors' policies toward reimbursement for
such procedures would seriously harm our business.

      In the United States, healthcare providers, including hospitals and
clinics that purchase medical devices such as our Duett sealing device or D-Stat
hemostat, generally rely on third-party payors, principally federal Medicare,
state Medicaid and private health insurance plans, to reimburse all or part of
the cost of catheterization procedures. We believe that in a prospective payment
system, such as the system currently used by Medicare, and in many managed care
systems used by private healthcare payors, the cost of our product will be
incorporated into the overall cost of the procedure and that there will be no
separate, additional reimbursement for our product.

      In international markets, acceptance of our products is dependent in part
upon the availability of reimbursement within prevailing healthcare payment
systems. However, we are unaware of any hospitals that receive specific,
cost-based, direct reimbursement for the use of our Duett sealing device or our
D-Stat hemostat. Reimbursement and healthcare payment systems in international
markets vary significantly by country. Our failure to receive international
reimbursement approvals could have a negative impact on market acceptance of our
products in the markets in which these approvals are sought.


OUR PRODUCTS AND OUR MANUFACTURING ACTIVITIES ARE SUBJECT TO EXTENSIVE
GOVERNMENTAL REGULATION THAT COULD PREVENT US FROM SELLING OUR PRODUCTS IN THE
UNITED STATES OR INTRODUCING NEW AND IMPROVED PRODUCTS

      Our products and our manufacturing activities are subject to extensive
regulation by a number of governmental agencies, including the FDA and
comparable international agencies. We are required to:

      o    obtain the approval of the FDA and international agencies before we
           can market and sell our products;

      o    satisfy these agencies' content requirements for all of our labeling,
           sales and promotional materials; and

      o    undergo rigorous inspections by these agencies.


                                       24
<PAGE>


      Compliance with the regulations of these agencies may delay or prevent us
from introducing any new model of our existing products or other new products.
Furthermore, we may be subject to sanctions, including temporary or permanent
suspension of operations, product recalls and marketing restrictions if we fail
to comply with the laws and regulations pertaining to our business.

      We are also required to demonstrate compliance with the FDA's quality
system regulations. The FDA enforces its quality system regulations through
pre-approval and periodic post-approval inspections. These regulations relate to
product testing, vendor qualification, design control and quality assurance, as
well as the maintenance of records and documentation. If we are unable to
conform to these regulations, the FDA may take actions which could seriously
harm our business.

      We are currently conducting two post approval studies of our Duett sealing
device as required by the FDA. It is likely that we will conduct further studies
on the use of our Duett sealing device for the foreseeable future. The FDA and
international regulatory agencies may restrict or withdraw their approval of our
Duett sealing device if additional information becomes available to support this
action through these studies or otherwise.


THE LOSS OF, OR INTERRUPTION OF SUPPLY FROM, KEY VENDORS, INCLUDING SINGLE
SOURCE SUPPLIERS, COULD LIMIT OUR ABILITY TO MANUFACTURE OUR PRODUCTS

      We purchase components used in our Duett sealing device and D-Stat
flowable hemostat from various suppliers and rely on single sources for the
collagen and thrombin components of our Duett sealing device procoagulant and
our D-Stat flowable hemostat. There are currently no FDA-approved alternative
suppliers of thrombin and very few FDA-approved alternative suppliers of
collagen. Because it requires FDA approval, establishing additional or
replacement suppliers for thrombin would require a lead-time of at least two
years and would involve significant additional costs. Any supply interruption
from key vendors or failure by us to engage alternative vendors may limit our
ability to manufacture our Duett sealing device and our D-Stat flowable hemostat
and could therefore seriously harm our business.


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

      Financial instruments that potentially subject us to concentrations of
credit risk consist primarily of cash and cash equivalents and accounts
receivables. We maintain our accounts for cash and cash equivalents principally
at one major bank and two investment firms in the United States. We have a
formal written investment policy that restricts the placement of investments to
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
customer receivables.

      In the United States and Germany, we sell our products directly to
hospitals and clinics. Revenue is recognized upon shipment of products to
customers.

      In international markets outside of Germany, we sell our products to
independent distributors who, in turn, sell to medical clinics. 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.


                                       25
<PAGE>


ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Consolidated Financial Statements and Notes thereto required pursuant to
this Item begin on page 31 of this Annual Report on Form 10-K.


ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
  FINANCIAL DISCLOSURE

      None.


                                       26
<PAGE>


                                    PART III


ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

      Incorporated herein by reference to the Sections under the headings
"Election of Directors" and "Section 16(a) Beneficial Ownership Reporting
Compliance" contained in the Proxy Statement for our Annual Meeting of
Shareholders to be filed with the Securities and Exchange Commission within 120
days of the close of the year ended December 31, 2001.

      See Item 1 of Part I hereof for information regarding our Executive
Officers.


ITEM 11. EXECUTIVE COMPENSATION

      Incorporated herein by reference to the Sections under the headings
"Director Compensation" and "Executive Compensation and Other Information"
contained in the Proxy Statement for our Annual Meeting of Shareholders to be
filed with the Securities and Exchange Commission within 120 days of the close
of the year ended December 31, 2001.


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

      Incorporated herein by reference to the Section under the heading
"Security Ownership of Certain Beneficial Owners and Management" contained in
the Proxy Statement for our Annual Meeting of Shareholders to be filed with the
Securities and Exchange Commission within 120 days of the close of the year
ended December 31, 2001.


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      None.


                                       27
<PAGE>


                                     PART IV


ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)   Documents filed as part of this Report.

      (1)   The following financial statements are filed herewith in Item 8 in
            Part II.

            (i)   Consolidated Balance Sheets

            (ii)  Consolidated Statements of Operations

            (iii) Consolidated Statement of Changes in Shareholders' Equity

            (iv)  Consolidated Statements of Cash Flows

            (v)   Notes to Consolidated Financial Statements

      (2)   Financial Statement Schedules

            Schedule II - Valuation and Qualifying Accounts. Such schedule
should be read in conjunction with the consolidated financial statements. All
other supplemental schedules are omitted because of the absence of conditions
under which they are required.

      (3)   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          Bylaws of Vascular Solutions, Inc. (incorporated by reference
                  to Exhibit 3.2 of Vascular Solutions' Registration Statement
                  on Form S-1 (File No. 333-84089)).
     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)).
     4.2          Form of warrant dated January 31 and February 14, 1997 issued
                  to representatives of Miller, Johnson & Kuehn, Incorporated
                  (incorporated by reference to Exhibit 4.2 of Vascular
                  Solutions' Registration Statement on Form S-1 (File No.
                  333-84089)).
     4.3          Form of warrant dated December 29, 1997 issued to
                  representatives of Miller, Johnson & Kuehn, Incorporated
                  (incorporated by reference to Exhibit 4.3 of Vascular
                  Solutions' Registration Statement on Form S-1 (File No.
                  333-84089)).
     4.4          Amended and Restated Investors' Rights Agreement dated
                  December 9, 1998, by and between Vascular Solutions, Inc. and
                  the purchasers of Series A and Series B preferred stock
                  (incorporated by reference to Exhibit 4.4 of Vascular
                  Solutions' Registration Statement on Form S-1 (File No.
                  333-84089)).
     4.5          Stock Purchase Warrant dated June 10, 1999 by and between
                  Vascular Solutions, Inc. and Jones Pharma, Incorporated
                  (incorporated by reference to Exhibit 4.7 of Vascular
                  Solutions' Registration Statement on Form S-1 (File No.
                  333-84089)).
    10.1          Lease Agreement dated February 11, 1998 by and between
                  Massachusetts Mutual Life Insurance Company as Landlord and
                  Vascular Solutions, Inc. as Tenant (incorporated by reference
                  to Exhibit 10.2 of Vascular Solutions' Registration Statement
                  on Form S-1 (File No. 333-84089)).


                                       28
<PAGE>


    10.2          First Lease Amendment dated June 9, 1999 by and between Duke
                  Realty Limited Partnership as Landlord and Vascular Solutions,
                  Inc. as Tenant (incorporated by reference to Exhibit 10.3 of
                  Vascular Solutions' Registration Statement on Form S-1 (File
                  No. 333-84089)).
    10.3          Second Lease Amendment dated October 24, 1999 by and between
                  Duke Realty Limited Partnership as Landlord and Vascular
                  Solutions, Inc. as Tenant (incorporated by reference to
                  Exhibit 10.3 to Vascular Solutions' Form 10-K for the year
                  ended December 31, 2000).
    10.4          Third Lease Amendment dated August 23, 2000 by and between
                  Duke Realty Limited Partnership as Landlord and Vascular
                  Solutions, Inc. as Tenant (incorporated by reference to
                  Exhibit 10.4 to Vascular Solutions' Form 10-K for the year
                  ended December 31, 2000).
    10.5          Bill of Sale and Assignment dated January 31, 1997 by and
                  between Vascular Solutions, Inc. and Dr. Gary Gershony
                  (incorporated by reference to Exhibit 10.4 of Vascular
                  Solutions' Registration Statement on Form S-1 (File No.
                  333-84089)).
    10.6          Mutual and General Release dated November 9, 1998 by and
                  between Vascular Solutions, Inc., Dr. Gary Gershony and B.
                  Braun Medical, Inc. (incorporated by reference to Exhibit 10.5
                  of Vascular Solutions' Registration Statement on Form S-1
                  (File No. 333-84089)).
    10.7          Purchase and Sale Agreement dated September 17, 1998 by and
                  between Vascular Solutions, Inc. and Davol Inc. (incorporated
                  by reference to Exhibit 10.8 of Vascular Solutions'
                  Registration Statement on Form S-1 (File No. 333-84089)).
    10.8          Purchase Agreement dated June 10, 1999 by and between GenTrac,
                  Inc. and Vascular Solutions, Inc. (incorporated by reference
                  to Exhibit 10.9 of Vascular Solutions' Registration Statement
                  on Form S-1 (File No. 333-84089)).
    10.9*         Form of Employment Agreement by and between Vascular
                  Solutions, Inc. and each of its executive officers
                  (incorporated by reference to Exhibit 10.11 of Vascular
                  Solutions' Registration Statement on Form S-1 (File No.
                  333-84089)).
    10.10         Form of Distribution Agreement (incorporated by reference to
                  Exhibit 10.12 of Vascular Solutions' Registration Statement on
                  Form S-1 (File No. 333-84089)).
    10.11*        Vascular Solutions, Inc. Stock Option and Stock Award Plan, as
                  amended (incorporated by reference to Exhibit 10.13 of
                  Vascular Solutions' Form 10-Q for the quarter ended March 31,
                  2001).
    10.12*        Vascular Solutions, Inc. Employee Stock Purchase Plan, as
                  amended (incorporated by reference to Exhibit 10.14 to
                  Vascular Solutions' Form 10-K for the year ended December 31,
                  2000).
    10.13         Settlement Agreement dated July 12, 2001 by and between
                  Vascular Solutions and St. Jude Medical and Daig Corporation
                  (incorporated by reference to Exhibit 99.2 to Vascular
                  Solutions' Form 8-K dated July 12, 2001).
    23.1          Consent of Ernst & Young LLP.
    24.1          Power of Attorney (included on signature page).

------------------------
* Management contract or compensatory plan or arrangement required to be filed
  as an Exhibit to this Form 10-K.

(b)  Registrant filed no Report on Form 8-K during its fourth quarter ended
     December 31, 2001.

(c)  See Item 14(a)(3) above.

(d)  See Item 14(a)(2) above.


                                       29
<PAGE>


                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 1st day of
March, 2002.


                                        VASCULAR SOLUTIONS, INC.

                                        By:    /s/ Howard Root
                                            ------------------------------------
                                            Howard Root
                                            Chief Executive Officer and Director

         KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Howard Root and James Butala (with full
power to act alone), as his or her true and lawful attorneys-in-fact and agents,
with full powers of substitution and resubstitution, for him or her and in his
or her name, place and stead, in any and all capacities, to sign any and all
amendments to the Annual Report on Form 10-K of Vascular Solutions, Inc., and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents full power and authority to do and perform each and
every act and thing requisite or necessary to be done in and about the premises,
as fully to all intents and purposes as he or she might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents, or
their substitute or substitutes, lawfully do or cause to be done by virtue
hereof.

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed on the 1st day of March 2002, by the following
persons in the capacities indicated.

               Signature                               Title
               ---------                               -----

           /s/ Howard Root            Chief Executive Officer and Director
-----------------------------------   (PRINCIPAL EXECUTIVE OFFICER)
             Howard Root

          /s/ James Butala            Chief Financial Officer
-----------------------------------   (PRINCIPAL FINANCIAL OFFICER AND PRINCIPAL
            James Butala              ACCOUNTING OFFICER)

                                      Director
-----------------------------------
           Paul O'Connell

         /s/ Gerard Langeler          Director
-----------------------------------
           Gerard Langeler

        /s/ James Jacoby, Jr.         Director
-----------------------------------
          James Jacoby, Jr.

          /s/ Richard Nigon           Director
-----------------------------------
            Richard Nigon

          /s/ Michael Kopp            Director
-----------------------------------
            Michael Kopp


                                       30
<PAGE>


                                   SCHEDULE II
                        VALUATION AND QUALIFYING ACCOUNTS
                  YEARS ENDED DECEMBER 31, 2001, 2000, AND 1999


<TABLE>
<CAPTION>
                                                           Additions
                                                            Charged
                                             Balance at    to Costs                 Balance at
                                              Beginning      and          Less        End of
Description                                    of Year     Expenses    Deductions      Year
                                             ----------   ----------   ----------   ----------
<S>                                          <C>          <C>          <C>          <C>
YEAR ENDED DECEMBER 31, 2001:
   Sales return allowance ................   $       --   $  401,733   $  337,207   $   64,526
   Allowance for doubtful accounts .......       80,000       35,304        5,304      110,000
                                             ----------   ----------   ----------   ----------
     Total ...............................   $   80,000   $  437,037   $  342,511   $  174,526
                                             ==========   ==========   ==========   ==========

YEAR ENDED DECEMBER 31, 2000:
   Sales return allowance ................           --           --           --           --
   Allowance for doubtful accounts .......           --       80,000           --       80,000
                                             ----------   ----------   ----------   ----------
     Total ...............................   $       --   $   80,000           --   $   80,000
                                             ==========   ==========   ==========   ==========

YEAR ENDED DECEMBER 31, 1999:
   Sales return allowance ................           --           --           --           --
   Allowance for doubtful accounts .......           --           --           --           --
                                             ----------   ----------   ----------   ----------
     Total ...............................   $       --   $       --   $       --   $       --
                                             ==========   ==========   ==========   ==========
</TABLE>


                                       31
<PAGE>


                         REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Shareholders
Vascular Solutions, Inc.

We have audited the consolidated balance sheets of Vascular Solutions, Inc. as
of December 31, 2001 and 2000, and the related statements of operations, changes
in shareholders' equity and cash flows for each of the three years in the period
ended December 31, 2001. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Vascular Solutions, Inc. at
December 31, 2001 and 2000, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 2001 in conformity
with accounting principles generally accepted in the United States.

                                                 /s/ Ernst & Young LLP

Minneapolis, Minnesota
January 11, 2002


                                       32
<PAGE>


                            VASCULAR SOLUTIONS, INC.

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                             DECEMBER 31
                                                                        2001             2000
                                                                   -----------------------------
<S>                                                                <C>              <C>
ASSETS
Current assets:
   Cash and cash equivalents                                       $ 33,318,115     $ 44,097,563
   Accounts receivable, net of reserves of $174,526 and $80,000
     in 2001 and 2000, respectively                                   1,285,011        1,971,383
   Inventories                                                        1,782,363        2,466,445
   Prepaid expenses                                                     289,888          231,251
                                                                   -----------------------------
Total current assets                                                 36,675,377       48,766,642

Property and equipment, net                                             917,579          894,094
                                                                   -----------------------------
Total assets                                                       $ 37,592,956     $ 49,660,736
                                                                   =============================

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
   Accounts payable                                                $    876,891     $    933,059
   Accrued compensation                                                 923,705        1,344,995
   Accrued expenses                                                     162,476          188,792
                                                                   -----------------------------
Total current liabilities                                             1,963,072        2,466,846

Commitments and contingencies

Shareholders' equity:
   Common stock, $.01 par value:
     Authorized shares - 40,000,000
     Issued and outstanding shares - 13,327,002--2001;
       13,116,008--2000                                                 133,270          131,160
   Additional paid-in capital                                        70,712,174       69,965,240
   Other                                                               (100,834)         (38,182)
   Accumulated deficit                                              (35,114,726)     (22,864,328)
                                                                   -----------------------------
Total shareholders' equity                                           35,629,884       47,193,890
                                                                   -----------------------------
Total liabilities and shareholders' equity                         $ 37,592,956     $ 49,660,736
                                                                   =============================
</TABLE>

SEE ACCOMPANYING NOTES.


                                       33
<PAGE>


                            VASCULAR SOLUTIONS, INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                    YEAR ENDED DECEMBER 31
                                                            2001             2000              1999
                                                       ----------------------------------------------
<S>                                                    <C>              <C>              <C>
Net sales                                              $ 12,082,379     $  6,193,234     $  1,429,094
Cost of goods sold                                        4,961,014        2,701,342        1,065,199
                                                       ----------------------------------------------
Gross profit                                              7,121,365        3,491,892          363,895

Operating expenses:
   Research and development                               4,287,726        3,265,536        3,067,897
   Clinical and regulatory                                1,288,301        1,082,029        1,323,972
   Sales and marketing                                   12,771,901        6,699,722        2,301,603
   General and administrative                             2,684,592        2,106,963        1,903,946
                                                       ----------------------------------------------
Total operating expenses                                 21,032,520       13,154,250        8,597,418
                                                       ----------------------------------------------

Operating loss                                          (13,911,155)      (9,662,358)      (8,233,523)
Interest income                                           1,660,757        1,453,491          371,066
                                                       ----------------------------------------------

Net loss                                               $(12,250,398)    $ (8,208,867)    $ (7,862,457)
                                                       ==============================================

Basic and diluted net loss per share                   $       (.93)    $       (.95)    $      (1.95)
                                                       ==============================================

Shares used in computing basic and diluted net
   loss per share                                        13,216,773        8,645,152        4,032,616
                                                       ==============================================
</TABLE>

SEE ACCOMPANYING NOTES.


                                       34
<PAGE>

                            VASCULAR SOLUTIONS, INC.

            CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
                                                 SERIES A               SERIES B
                                              PREFERRED STOCK       PREFERRED STOCK         COMMON STOCK        ADDITIONAL
                                          --------------------------------------------------------------------    PAID-IN
                                            SHARES      AMOUNT     SHARES     AMOUNT      SHARES     AMOUNT       CAPITAL
                                          -----------------------------------------------------------------------------------
<S>                                         <C>         <C>        <C>         <C>       <C>          <C>        <C>
Balance at December 31, 1998                2,000,000   $20,000    1,777,777   $17,778   3,699,617    $ 36,996   $17,264,006
   Exercise of stock options                        -         -            -         -   1,550,674      15,507     8,144,018
   Value of options granted for services            -         -            -         -           -           -        22,660
   Value of warrant granted related to
     supply agreement                               -         -            -         -           -           -       257,000
   Deferred compensation related to
     option grants                                  -         -            -         -           -           -       140,625
   Amortization of deferred compensation            -         -            -         -           -           -             -
   Net loss                                         -         -            -         -           -           -             -
                                          -----------------------------------------------------------------------------------
Balance at December 31, 1999                2,000,000    20,000    1,777,777    17,778   5,250,291      52,503    25,828,309
   Exercise of stock options                        -         -            -         -      62,940         629       169,765
   Sale of common stock with the initial
     public offering at $12.00 per share
     in July 2000, net of offering costs            -         -            -         -   4,025,000      40,250    43,932,416
   Conversion of preferred stock in
     connection with initial public        (2,000,000)  (20,000)  (1,777,777)  (17,778)  3,777,777      37,778             -
     offering
   Amortization of deferred compensation            -         -            -         -           -           -             -
   Deferred compensation related to
     option grants                                  -         -            -         -           -           -        34,750
   Comprehensive loss:
     Net loss                                       -         -            -         -           -           -             -
     Translation adjustment                         -         -            -         -           -           -             -

   Total comprehensive loss
                                          -----------------------------------------------------------------------------------
Balance at December 31, 2000                        -         -            -         -  13,116,008     131,160    69,965,240
   Exercise of stock options                        -         -            -         -     120,800       1,208       304,096
   Issuance of common stock under the
     Employee Stock Purchase Plan                   -         -            -         -      90,194         902       308,660
   Value of stock options granted for               -         -            -         -           -           -        10,398
     services
   Deferred compensation related to
     option grants                                  -         -            -         -           -           -       123,780
   Amortization of deferred compensation            -         -            -         -           -           -             -
   Comprehensive loss:
     Net loss                                       -         -            -         -           -           -             -
     Translation adjustment                         -         -            -         -           -           -             -

   Total comprehensive loss
                                          -----------------------------------------------------------------------------------
Balance at December 31, 2001                        -   $     -            -   $     -  13,327,002    $133,270   $70,712,174
                                          ===================================================================================
</TABLE>

[WIDE TABLE CONTINUED FROM ABOVE]

<TABLE>
<CAPTION>
                                                         ACCUMULATED
                                              OTHER        DEFICIT        TOTAL
                                          -----------------------------------------
<S>                                       <C>           <C>             <C>
Balance at December 31, 1998              $          -  $  (6,793,004)  $10,545,776
   Exercise of stock options                         -              -     8,159,525
   Value of options granted for services             -              -        22,660
   Value of warrant granted related to
     supply agreement                                -              -       257,000
   Deferred compensation related to
     option grants                            (140,625)             -             -
   Amortization of deferred compensation        49,694              -        49,694
   Net loss                                          -     (7,862,457)   (7,862,457)
                                          -----------------------------------------
Balance at December 31, 1999                   (90,931)   (14,655,461)   11,172,198
   Exercise of stock options                         -              -       170,394
   Sale of common stock with the initial
     public offering at $12.00 per share
     in July 2000, net of offering costs             -              -    43,972,666
   Conversion of preferred stock in
     connection with initial public                  -              -             -
     offering
   Amortization of deferred compensation        72,561              -        72,561
   Deferred compensation related to
     option grants                             (34,750)             -             -
   Comprehensive loss:
     Net loss                                        -     (8,208,867)   (8,208,867)
     Translation adjustment                     14,938              -        14,938
                                                                      -------------
   Total comprehensive loss                                              (8,193,929)
                                          -----------------------------------------
Balance at December 31, 2000                   (38,182)   (22,864,328)   47,193,890
   Exercise of stock options                         -              -       305,304
   Issuance of common stock under the
     Employee Stock Purchase Plan                    -              -       309,562
   Value of stock options granted for                -              -        10,398
     services
   Deferred compensation related to
     option grants                            (123,780)             -             -
   Amortization of deferred compensation        62,850              -        62,850
   Comprehensive loss:
     Net loss                                        -    (12,250,398)  (12,250,398)
     Translation adjustment                     (1,722)             -        (1,722)
                                                                      -------------
   Total comprehensive loss                                             (12,252,120)
                                          -----------------------------------------
Balance at December 31, 2001                 $(100,834) $ (35,114,726)  $35,629,884
                                          =========================================
</TABLE>

SEE ACCOMPANYING NOTES.

                                       35
<PAGE>


                            VASCULAR SOLUTIONS, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                             YEAR ENDED DECEMBER 31
                                                                     2001             2000             1999
                                                                ----------------------------------------------
<S>                                                             <C>              <C>              <C>
OPERATING ACTIVITIES
Net loss                                                        $(12,250,398)    $ (8,208,867)    $ (7,862,457)
Adjustments to reconcile net loss to net cash used in
   operating activities:
     Depreciation                                                    432,721          366,745          243,318
     Value of options granted for services                            10,398               --           22,660
     Value of warrant granted related to supply agreement                 --               --          257,000
     Deferred compensation expense                                    62,850           72,561           49,694
     Changes in operating assets and liabilities:
       Accounts receivable                                           686,372       (1,592,304)        (249,978)
       Inventories                                                   684,082       (1,851,228)        (293,758)
       Prepaid expenses                                              (58,637)        (138,074)         (40,003)
       Accounts payable                                              (56,168)         (84,509)         745,899
       Accrued compensation and expenses                            (447,606)       1,431,288          (84,069)
                                                                ----------------------------------------------
Net cash used in operating activities                            (10,936,386)     (10,004,388)      (7,211,694)

INVESTING ACTIVITIES
Purchase of property and equipment                                  (456,206)        (575,887)        (315,693)
                                                                ----------------------------------------------
Net cash used in investing activities                               (456,206)        (575,887)        (315,693)

FINANCING ACTIVITIES
Proceeds from exercise of stock options                              305,304          170,394        8,159,525
Net proceeds from sale of common stock                               309,562       43,972,666               --
Net proceeds from sale of preferred stock                                 --               --               --
                                                                ----------------------------------------------
Net cash provided by financing activities                            614,866       44,143,060        8,159,525

Effect of exchange rate changes on cash and cash equivalents          (1,722)           5,587               --
                                                                ----------------------------------------------
(Decrease) increase in cash and cash equivalents                 (10,779,448)      33,568,372          632,138
Cash and cash equivalents at beginning of year                    44,097,563       10,529,191        9,897,053
                                                                ----------------------------------------------
Cash and cash equivalents at end of year                        $ 33,318,115     $ 44,097,563     $ 10,529,191
                                                                ==============================================
</TABLE>

SEE ACCOMPANYING NOTES.


                                       36
<PAGE>


                            VASCULAR SOLUTIONS, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                DECEMBER 31, 2001


1. DESCRIPTION OF BUSINESS

Vascular Solutions, Inc. (the Company) manufactures, markets and sells the
Vascular Solutions Duett(TM) sealing device, which enables cardiologists and
radiologists to rapidly seal the puncture site following catheterization
procedures such as angiography, angioplasty and stenting. The Company was
incorporated in December 1996 and began operations in February 1997.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF CONSOLIDATION

The consolidated financial statements include the accounts of Vascular
Solutions, Inc. and its wholly owned subsidiary, Vascular Solutions GmbH, after
elimination of intercompany accounts and transactions.

FOREIGN CURRENCY TRANSLATION AND TRANSACTIONS

Foreign assets and liabilities are translated using the year-end exchange rates.
Results of operations are translated using the average exchange rates throughout
the year. Translation gains or losses are accumulated as a separate component of
shareholders' equity.

COMPREHENSIVE LOSS

The components of comprehensive loss are net loss and the effects of foreign
currency translation adjustments.

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid investments with a remaining maturity of
three months or less to be cash equivalents. Cash equivalents consist of money
market funds and are carried at cost which approximates market.


                                       37
<PAGE>


                            VASCULAR SOLUTIONS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

INVENTORIES

Inventories are stated at the lower of cost (first-in, first-out method) or
market and are comprised of the following at December 31:

                                                  2001             2000
                                              -----------------------------

   Raw materials                               $1,294,507       $1,746,279
   Work in process                                305,527          371,176
   Finished goods                                 182,329          348,990
                                              -----------------------------
                                               $1,782,363       $2,466,445
                                              =============================

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Depreciation is provided on a
straight-line basis over the estimated useful lives of the assets as follows:

   Manufacturing equipment                    3 to 5 years
   Office and computer equipment              3 years
   Furniture and fixtures                     2 to 5 years
   Leasehold improvements                     Remaining term of the lease
   Research and development equipment         3 to 5 years

IMPAIRMENT OF LONG-LIVED ASSETS

The Company will record impairment losses on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount. The amount of impairment loss recorded will be measured as the
amount by which the carrying value of the assets exceeds the fair value of the
assets.

REVENUE RECOGNITION

In the United States and Germany, the Company sells its products directly to
hospitals and clinics. Revenue is recognized upon shipment of products to
customers.


                                       38
<PAGE>


                            VASCULAR SOLUTIONS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

In all other 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 warranty costs at the time of shipment. To date, warranty costs have
been insignificant.

RESEARCH AND DEVELOPMENT COSTS

All research and development costs are charged to operations as incurred.

STOCK-BASED COMPENSATION

The Company follows Accounting Principles Board Opinion No. 25, ACCOUNTING FOR
STOCK ISSUED TO EMPLOYEES (APB 25), and related interpretations in accounting
for its stock options. Under APB 25, when the exercise price of stock options
equals, or exceeds, the market price of the underlying stock on the date of
grant, no compensation expense is recognized.

The Company determines the fair value of stock options granted to non-employees
for services using the Black-Scholes valuation method. The fair value of the
stock options granted is expensed over the time period the services are
rendered.

INCOME TAXES

Income taxes are accounted for under the liability method. Deferred income taxes
are provided for temporary differences between the financial reporting and the
tax bases of assets and liabilities.

CONCENTRATIONS OF CREDIT RISK

Financial instruments that potentially subject the Company to concentrations of
credit risk consist primarily of cash and cash equivalents and accounts
receivable. The Company maintains its accounts for cash and cash equivalents
principally at one major bank and two investment firms in the United States. The
Company has a formal written investment policy that restricts the placement of
investments to issuers evaluated as creditworthy. The Company has not
experienced any losses on its deposits of its cash and cash equivalents.


                                       39
<PAGE>


                            VASCULAR SOLUTIONS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

With respect to accounts receivable, the Company performs credit evaluations of
its customers and does not require collateral. Two customers accounted for 11%
and 23% of gross accounts receivable as of December 31, 2001 and 2000. There
have been no material losses on customer receivables.

NET LOSS PER SHARE

In accordance with Statement of Financial Accounting Standards No. 128, EARNINGS
PER SHARE, (SFAS 128), basic net loss per share is computed by dividing net loss
by the weighted average common shares outstanding during the periods presented.
Diluted net loss per share is computed by dividing net loss by the weighted
average common and dilutive potential common shares outstanding computed in
accordance with the treasury stock method. For all periods presented, diluted
loss per share is the same as basic loss per share, because the effect of
outstanding options, warrants and convertible preferred stock is antidilutive.

RECLASSIFICATIONS

Certain prior year balances were reclassified to conform to the current year
presentation.

3. PROPERTY AND EQUIPMENT

Property and equipment consists of the following at December 31:

                                                   2001             2000
                                              ------------------------------

   Property and equipment:
     Manufacturing equipment                   $   773,989      $   713,054
     Office and computer equipment                 734,146          555,828
     Furniture and fixtures                        221,347          216,983
     Leasehold improvements                        143,079          105,869
     Research and development equipment            254,906           79,527
                                              ------------------------------
                                                 2,127,467        1,671,261
   Less accumulated depreciation                (1,209,888)        (777,167)
                                              ------------------------------
   Net property and equipment                  $   917,579      $   894,094
                                              ==============================


                                       40
<PAGE>


                            VASCULAR SOLUTIONS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


4. LEASES

The Company leases a 29,000-square-foot office and manufacturing facility under
an operating lease agreement, which expires in March 2003. The Company may
terminate the lease agreement at six-month intervals after December 2001 with a
six-month written notice to the lessor. Rent expense related to the operating
leases was approximately $306,600, $242,100 and $167,900 for the years ended
December 31, 2001, 2000 and 1999.

Future minimum lease commitments under the existing operating lease as of
December 31, 2001 are as follows:

   2002                                                           $315,006
   2003                                                             75,752
                                                                 ----------
                                                                  $390,758
                                                                 ==========

5. INCOME TAXES

At December 31, 2001, the Company had net operating loss carryforwards of
approximately $32,600,000 for federal income tax purposes that are available to
offset future taxable income and begin to expire in the year 2013. At December
31, 2001, the Company also had federal and Minnesota research and development
tax credit carryforwards of approximately $1,317,000 which begin to expire in
the year 2013. No benefit has been recorded for such carryforwards, and
utilization in future years may be limited under Sections 382 and 383 of the
Internal Revenue Code if significant ownership changes have occurred.


                                       41
<PAGE>


                            VASCULAR SOLUTIONS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


5. INCOME TAXES (CONTINUED)

The components of the Company's deferred tax assets and liabilities as of
December 31, 2001 and 2000 are as follows:

                                               2001             2000
                                         -------------------------------
 Deferred tax assets:
  Net operating loss carryforwards        $ 12,852,000     $  8,154,000
  Tax credit carryforwards                   1,317,000        1,084,000
  Depreciation and amortization                156,000          198,000
  Accrued compensation                         245,000          209,000
  Other allowances                              78,000           88,000
                                         -------------------------------
                                            14,648,000        9,733,000
  Less valuation allowances                (14,648,000)      (9,733,000)
                                         -------------------------------
 Net deferred taxes                       $         --     $         --
                                         ===============================


Reconciliation of the statutory federal income tax rate to the Company's
effective tax rate is as follows:

                                             2001       2000       1999
                                           -----------------------------

Tax at statutory rate                        34.0%      34.0%      34.0%
State income taxes                            6.0        6.0        6.0
Impact of net operating loss carryforward   (40.0)     (40.0)     (40.0)
                                           -----------------------------
Effective income tax rate                      --%        --%        --%
                                           =============================

6. INITIAL PUBLIC OFFERING

On July 25, 2000, the Company completed the initial public offering of its
common stock. Upon the closing of the initial public offering, the Company
issued 3,500,000 shares of its common stock at an offering price of $12.00 per
share and all of the Company's Series A and Series B preferred stock
automatically converted into 3,777,777 shares of common stock. On August 15,
2000, the underwriters exercised in full their over-allotment option to purchase
an additional 525,000 shares of common stock at $12.00 per share. Cash proceeds
from the sale of the 4,025,000 shares of common stock, net of underwriters'
discount and offering expenses, totaled approximately $44 million. Upon closing
of the Company's initial public offering, the authorized capital stock of the
Company consisted of 40,000,000 shares of common stock, par value $.01 per
share, with no shares of preferred stock outstanding or designated.


                                       42
<PAGE>


                            VASCULAR SOLUTIONS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


7. CAPITAL STOCK

In connection with the sale of Series B preferred stock, the Company entered
into a Put and Option Agreement (the Agreement) with one of the Series B
investors (the Investor). The Agreement provided the Company with the right to
sell, and the Investor the obligation to purchase, up to $3,000,000 of common
stock at $5.00 or $6.00 per share based on the Company attaining certain
milestones. The Company exercised its right and sold 600,000 shares of common
stock to the Investor at $5.00 per share on June 30, 1999. In addition, the
Agreement provided the Investor with the right to buy, and the Company the
obligation to sell, up to $3,000,000 of common stock at $5.00 or $6.00 per share
based on the Company attaining certain milestones. The Investor exercised its
right and purchased 600,000 shares of common stock from the Company at $5.00 per
share on December 28, 1999.

Furthermore, the Agreement provided an affiliate of the Investor with the right
to buy, and the Company with the obligation to sell, up to $2,000,000 of common
stock at $7.00 or $8.00 per share based on the Company attaining certain
milestones. The affiliate of the Investor exercised its right and purchased
285,714 shares of common stock from the Company at $7.00 per share on December
28, 1999.

On June 10, 1999, the Company issued a warrant to purchase 100,000 shares of
common stock at $5.00 per share to a supplier in connection with entering into a
five-year supply agreement. The warrant is exercisable at any time and expires
on June 10, 2004. Using the Black-Scholes valuation model, the Company
determined a fair value of $257,000 for the warrant and expensed this amount
during the year ended December 31, 1999. The amount was classified as research
and development expense because it related to product development activities.

As of December 31, 2001, the Company had 268,000 warrants outstanding at a
weighted average exercise price of $3.19 per share.

8. STOCK OPTIONS

STOCK OPTION PLAN

The Company has a stock option and stock award plan (the Stock Option Plan)
which provides for the granting of incentive stock options to employees and
nonqualified stock options to employees, directors and consultants. As of
December 31, 2001, the Company reserved 1,900,000 shares of common stock under
the Stock Option Plan. Under the Stock Option Plan, incentive stock options must
be granted at an exercise price not less than the fair market value of the
Company's common stock on the grant date. The exercise price of a non-qualified
option granted under the Stock Option Plan must not be less than 50% of the fair
market value of the Company's common stock on the grant date. Prior to the
initial public offering in July 2000, the Board of Directors determined the fair
value of the common shares underlying options by assessing the business progress
of the Company as well as the market conditions for medical


                                       43
<PAGE>


                            VASCULAR SOLUTIONS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


8. STOCK OPTIONS (CONTINUED)

device companies and other external factors. The options expire on the date
determined by the Board of Directors but may not extend more than ten years from
the grant date. The Stock Option Plan also permits the granting of stock
appreciation rights, restricted stock and other stock-based awards. The
incentive stock options generally become exercisable over a four-year period and
the non-qualified stock options generally become exercisable over a two-year
period. Unexercised options are canceled upon termination of employment and
become available under the Stock Option Plan.

Option activity is summarized as follows:

<TABLE>
<CAPTION>
                                                                                       WEIGHTED
                                         SHARES                                        AVERAGE
                                        AVAILABLE    PLAN OPTIONS       EXERCISE       EXERCISE
                                        FOR GRANT     OUTSTANDING        PRICE          PRICE
                                     -----------------------------------------------------------
<S>                                     <C>           <C>           <C>      <C>       <C>
   Balance at December 31, 1998          340,169        533,131     $ 1.50 - $ 3.25    $  2.34
     Shares reserved                     500,000             --                  --         --
     Granted                            (587,000)       587,000       3.25 -   6.00       5.08
     Exercised                                --        (64,960)      2.00 -   3.25       2.46
     Canceled                            121,560       (121,560)      2.00 -   3.25       2.75
                                     ----------------------------
   Balance at December 31, 1999          374,729        933,611       1.50 -   6.00       4.00
     Granted                            (290,250)       290,250       6.00 -   6.50      11.12
     Exercised                                --        (62,940)      1.50 -   5.00       2.71
     Canceled                             90,150        (90,150)      1.50 -  16.50       4.89
                                     ----------------------------
   Balance at December 31, 2000          174,629      1,070,771       1.50 -  16.50       5.85
     Shares reserved                     500,000             --                  --         --
     Granted                            (972,000)       972,000       2.51 -   7.48       5.35
     Exercised                                --       (120,800)      1.50 -   7.00       2.53
     Canceled                            347,160       (347,160)      1.50 -  16.50       7.41
                                     ----------------------------
   Balance at December 31, 2001           49,789      1,574,811
                                     ============================
</TABLE>


                                       44
<PAGE>


                            VASCULAR SOLUTIONS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


8. STOCK OPTIONS (CONTINUED)

The following table summarizes information about stock options outstanding at
December 31, 2001:

<TABLE>
<CAPTION>
                                     OPTIONS OUTSTANDING                       OPTIONS EXERCISABLE
                         ---------------------------------------------  -------------------------------
                                          WEIGHTED
                         OUTSTANDING       AVERAGE                         EXERCISABLE
                            AS OF         REMAINING       WEIGHTED            AS OF         WEIGHTED
     RANGE OF            DECEMBER 31,    CONTRACTUAL       AVERAGE         DECEMBER 31,     AVERAGE
  EXERCISE PRICES            2001           LIFE        EXERCISE PRICE        2001       EXERCISE PRICE
----------------------------------------------------------------------  -------------------------------
<S>                      <C>                <C>           <C>               <C>            <C>
  $ 0.00 - $ 1.65          101,211          5.4           $  1.50           101,211        $  1.50
    1.66 -   3.30          523,810          8.4              2.71           157,810           2.96
    4.96 -   6.60          526,620          8.4              6.20           172,000           6.09
    6.61 -   8.25          291,860          8.7              7.28            85,150           7.19
    9.91 -  11.55           19,480          7.9             10.00            11,650          10.00
   11.56 -  13.20           92,880          8.2             12.00            37,700          12.00
   14.86 -  16.50           18,950          8.5             16.50             6,370          16.50
                       -------------                                     ------------
                         1,574,811          8.2              5.45           571,891           5.16
                       =============                                     ============
</TABLE>

STOCK-BASED COMPENSATION

The Company accounts for stock options under APB 25, under which no compensation
cost has been recognized. Had compensation cost for these options been
determined consistent with Statement of Financial Accounting Standards No. 123,
ACCOUNTING FOR STOCK-BASED COMPENSATION (FASB 123), the net loss and net loss
per common share would have been increased to the following pro forma amounts
for the years ended December 31, 2001, 2000 and 1999:

<TABLE>
<CAPTION>
                                                    2001            2000           1999
                                               -------------------------------------------
<S>                                            <C>             <C>             <C>
   Net loss:
     As reported                               $(12,250,398)   $ (8,208,867)   $(7,862,457)
     Pro forma                                  (14,882,091)    (10,361,727)    (8,169,981)

   Basic and diluted net loss per share:
     As reported                                $ (.93)         $ (.95)          $(1.95)
     Pro forma                                   (1.21)          (1.20)           (2.03)
</TABLE>

For purposes of calculating the above required disclosure, the fair value of
each option grant is estimated on the date of grant using the Black-Scholes
option pricing model.


                                       45
<PAGE>


                            VASCULAR SOLUTIONS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


8. STOCK OPTIONS (CONTINUED)

The fair value of the Company's stock options was estimated assuming no expected
dividends and the following weighted average assumptions:

                                         2001          2000          1999
                                       ------------------------------------

   Expected life (years)                 7.0           7.5           7.0
   Expected volatility                   1.21           .93           .67
   Risk-free interest rate               2.76%         5.96%         4.90%

The weighted average fair value of options granted with an exercise price equal
to the deemed stock price on the date of grant during 2001, 2000 and 1999 was
$5.31, $9.79 and $3.82.

For the years ended December 31, 2001, 2000 and 1999, the Company recorded
compensation expense of $10,398, zero and $22,660 in connection with
non-qualified stock options granted to Board of Directors members, medical
advisory board members and outside consultants, respectively.

DEFERRED COMPENSATION

In 2001, 2000 and 1999, the Company recorded a total of $299,155 of deferred
compensation for certain stock options granted for the excess of the deemed
value for accounting purposes of the common stock issuable upon exercise of such
options over the aggregate exercise price of such options. The weighted average
fair value of these options was $2.93. Deferred compensation recorded is
amortized ratably over the period that the options vest and is adjusted for
options which have been canceled. Deferred compensation expense was $62,850,
$72,561 and $49,694 for the years ended December 31, 2001, 2000 and 1999,
respectively.

9. EMPLOYEE RETIREMENT SAVINGS PLAN

The Company has an employee 401(k) retirement savings plan (the Plan). The Plan
provides eligible employees with an opportunity to make tax-deferred
contributions into a long-term investment and savings program. All employees
over the age of 21 are eligible to participate in the Plan beginning with the
first quarterly open enrollment date following start of employment. The Plan
allows eligible employees to contribute up to 18% of their annual compensation,
subject to a maximum limit determined by the Internal Revenue Service, with the
Company contributing an amount equal to 25% of the first 5% contributed to the
Plan. The Company recorded an expense of $112,084, $52,357 and $21,573 for
contributions to the Plan for the years ended December 31, 2001, 2000 and 1999.


                                       46
<PAGE>


                            VASCULAR SOLUTIONS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


10. CONCENTRATIONS OF CREDIT AND OTHER RISKS

In the United States and Germany, the Company sells its products directly to
hospitals and clinics. In all other 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 product could have a material adverse effect on the Company's
financial condition and results of operations.

Sales to significant customers as a percentage of total revenues are as follows
for the years ended December 31, 2001, 2000 and 1999:

                                         2001          2000          1999
                                       ------------------------------------

   Customer A                            2.6%          10.7%         19.7%
   Customer B                            2.3            6.3          28.8
   Customer C                            2.0            5.4          11.8
   Customer D                            1.8            2.2           5.8

The Company performs ongoing credit evaluations of its customers but does not
require collateral. There have been no material losses on customer receivables.

Sales by geographic destination as a percentage of total net sales were as
follows for the years ended December 31:

                                         2001          2000          1999
                                       ------------------------------------

   Domestic                               90%           67%           7%
   Foreign                                10            33            93

11. DEPENDENCE ON KEY SUPPLIERS

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.


                                       47
<PAGE>


                            VASCULAR SOLUTIONS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


12. COMMITMENTS AND CONTINGENCIES

In July 1999, the Company was named as a defendant in a patent infringement
lawsuit brought by Datascope Corporation, a competitor, in the United States
District Court of the District of Minnesota. The complaint requested a judgment
that the Company's device infringes and, following FDA approval will infringe, a
United States patent held by Datascope and asks for relief in the form of an
injunction that would prevent the Company from selling its product in the United
States as well as an award of attorney's fees, costs and disbursements. On
August 12, 1999, the Company filed its answer to this lawsuit and brought a
counterclaim alleging unfair competition and tortious interference against
Datascope. On August 20, 1999, the Company moved for summary judgment to dismiss
Datascope's claims. On March 15, 2000, the court granted summary judgment
dismissing all of Datascope's claims, subject to the right of Datascope to
recommence the litigation after the Company's receipt of FDA approval of the
Duett sealing device. On July 12, 2000, after the Company received FDA approval,
Datascope recommenced this litigation, alleging that the Duett sealing device
infringes a United States patent held by Datascope and requesting relief in the
form of an injunction that would prevent the Company from selling its product in
the United States, damages caused by the alleged infringement, and other costs,
disbursements and attorneys' fees. The Company believes the allegations included
in the complaint are without merit, has filed its answer to the complaint and
intends to defend the lawsuit vigorously. It is not possible to predict the
timing or outcome of the Datascope litigation, including whether the Company
will be prohibited from selling the Duett sealing device in the United States or
internationally, or to estimate the amount or range of potential loss, if any.

On July 3, 2000, the Company was named as the defendant in a patent infringement
lawsuit brought by the Daig division of St. Jude Medical, Inc., a competitor, in
the United States District Court of the District of Minnesota. The complaint
requests a judgment that the Company's Duett sealing device infringes a series
of four patents held by St. Jude Medical and asks for relief in the form of an
injunction that would prevent the Company from selling its product in the United
States, damages caused by the manufacture and sale of the Company's product, and
other costs, disbursements and attorneys' fees.

On July 12, 2001, the Company entered into an agreement that settled all
existing intellectual property litigation with St. Jude Medical, Inc. Under the
terms of the settlement agreement, the Company agreed to pay a royalty of 2.5%
of net sales of our Duett sealing device to St. Jude Medical, up to a maximum
amount over the remaining life of the St. Jude Medical Fowler patents. In
exchange, St. Jude Medical granted to the Company a non-exclusive license to its
Fowler patents and has released it from any claim of patent infringement based
on sales of the Duett sealing device. The Company granted a non-exclusive
cross-license to its Gershony patents to St. Jude Medical, subject to a similar
royalty payment if St. Jude Medical utilizes the Gershony patents in any future
device. Beginning on July 1, 2001, a royalty expense of 2.5% of net sales is
included in the Company's cost of goods sold until the maximum royalty is
attained.


                                       48
<PAGE>


                            VASCULAR SOLUTIONS, INC.

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


13. QUARTERLY FINANCIAL DATA (UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                     FIRST         SECOND           THIRD         FOURTH
                2001                QUARTER        QUARTER         QUARTER        QUARTER
-------------------------------------------------------------------------------------------
<S>                                 <C>            <C>             <C>            <C>
Net sales                           $ 3,123        $ 3,540         $ 2,529        $ 2,890
Operating loss                       (2,988)        (3,263)         (3,891)        (3,769)
Net loss                             (2,345)        (2,824)         (3,521)        (3,560)
Basic and diluted net loss
   per share                        $  (.18)       $  (.21)        $  (.27)       $  (.27)


                2000
-------------------------------

Net sales                           $   643        $   708         $ 2,037        $ 2,805
Operating loss                       (2,052)        (2,912)         (2,630)        (2,068)
Net loss                             (1,931)        (2,819)         (2,100)        (1,359)
Basic and diluted net loss
   per share                        $  (.37)       $  (.53)        $  (.19)       $  (.10)
</TABLE>


                                       49