10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 _____________________________________________________

FORM 10-Q

 _____________________________________________________

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2015

Commission File No. 000-52082

 ____________________________________________________

CARDIOVASCULAR SYSTEMS, INC.

(Exact name of registrant as specified in its charter)

 ____________________________________________________

Delaware	No. 41-1698056
(State or other jurisdiction of	(IRS Employer
incorporation or organization)	Identification No.)

1225 Old Highway 8 Northwest

St. Paul, Minnesota 55112-6416

(Address of principal executive offices, including zip code)

Registrant’s telephone number, including area code: (651) 259-1600

____________________________________________________

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	x	Accelerated filer	¨
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	¨

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

The number of shares outstanding of the registrant’s common stock as of April 30, 2015 was: Common Stock, $0.001 par value per share, 31,708,745 shares.

Cardiovascular Systems, Inc.

Consolidated Financial Statements

Table of Contents

	PAGE
PART I. FINANCIAL INFORMATION
ITEM 1. Consolidated Financial Statements (unaudited)	3
Consolidated Balance Sheets as of March 31, 2015 and June 30, 2014	3
Consolidated Statements of Operations for the three and nine months ended March 31, 2015 and 2014	4
Consolidated Statements of Comprehensive Loss for the three and nine months ended March 31, 2015 and 2014	5
Consolidated Statements of Cash Flows for the nine months ended March 31, 2015 and 2014	6
Notes to Consolidated Financial Statements	7
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk	21
ITEM 4. Controls and Procedures	21
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings	22
ITEM 1A. Risk Factors	22
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds	22
ITEM 3. Defaults Upon Senior Securities	22
ITEM 4. Mine Safety Disclosures	22
ITEM 5. Other Information	22
ITEM 6. Exhibits	22
Signatures	23
Exhibit Index	24

2

PART I. — FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Cardiovascular Systems, Inc.

Consolidated Balance Sheets

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

(Unaudited)

	March 31, 2015			June 30, 2014
ASSETS
Current assets
Cash and cash equivalents	$	93,485		$	126,592
Accounts receivable, net	31,220			21,383
Inventories	13,219			12,890
Prepaid expenses and other current assets	3,904			1,846
Total current assets	141,828			162,711
Property and equipment, net	32,359			15,297
Patents, net	4,399			3,823
Other assets	40			70
Total assets	$	178,626		$	181,901
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Short-term borrowings	$	—		$	2,400
Accounts payable	17,527			12,699
Accrued expenses	16,356			14,630
Total current liabilities	33,883			29,729
Long-term liabilities
Other liabilities	2,004			117
Total liabilities	35,887			29,846
Commitments and contingencies	—			—
Common stock, $0.001 par value; authorized 100,000,000 common shares at March 31, 2015 and June 30, 2014; issued and outstanding 31,716,032 at March 31, 2015 and 31,084,742 at June 30, 2014, respectively	32			31
Additional paid in capital	405,320			390,589
Accumulated other comprehensive income	105			—
Accumulated deficit	(262,718		)	(238,565		)
Total stockholders’ equity	142,739			152,055
Total liabilities and stockholders’ equity	$	178,626		$	181,901

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

3

Cardiovascular Systems, Inc.

Consolidated Statements of Operations

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

(Unaudited)

	Three Months Ended   March 31,						Nine Months Ended   March 31,
	2015			2014			2015			2014
Revenues	$	47,004		$	34,945		$	133,090		$	97,048
Cost of goods sold	10,416			7,749			28,647			21,926
Gross profit	36,588			27,196			104,443			75,122
Expenses:
Selling, general and administrative	39,354			31,428			105,414			84,267
Research and development	7,777			5,361			23,014			14,790
Total expenses	47,131			36,789			128,428			99,057
Loss from operations	(10,543		)	(9,593		)	(23,985		)	(23,935		)
Interest and other, net	(113		)	(119		)	(168		)	(1,727		)
Net loss	$	(10,656	)	$	(9,712	)	$	(24,153	)	$	(25,662	)
Net loss per common share:
Basic and diluted	$	(0.34	)	$	(0.32	)	$	(0.77	)	$	(0.94	)
Weighted average common shares used in computation:
Basic and diluted	31,644,522			30,368,685			31,479,803			27,411,237

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

4

Cardiovascular Systems, Inc.

Consolidated Statements of Comprehensive Loss

(Dollars in thousands)

(Unaudited)

	Three Months Ended   March 31,						Nine Months Ended   March 31,
	2015			2014			2015			2014
Net loss	$	(10,656	)	$	(9,712	)	$	(24,153	)	$	(25,662	)
Other comprehensive income:
Unrealized gain on available for sale securities	105			—			105			—
Comprehensive loss	$	(10,551	)	$	(9,712	)	$	(24,048	)	$	(25,662	)

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

5

Cardiovascular Systems, Inc.

Consolidated Statements of Cash Flows

(Dollars in thousands)

(Unaudited)

	Nine Months Ended   March 31,
	2015			2014
Cash flows from operating activities
Net loss	$	(24,153	)	$	(25,662	)
Adjustments to reconcile net loss to net cash used in operations
Depreciation of property and equipment	1,292			895
Amortization and write-off of patents	146			138
Provision for doubtful accounts	1,021			290
Amortization of discount on debt, net	—			137
Debt conversion and valuation of conversion options, net	—			716
Loss on disposal of property and equipment	99			—
Stock-based compensation	11,039			7,682
Changes in assets and liabilities
Accounts receivable	(10,858		)	(5,053		)
Inventories	(329		)	(5,646		)
Prepaid expenses and other assets	166			264
Accounts payable	2,747			3,962
Accrued expenses and other liabilities	3,745			3,981
Net cash used in operating activities	(15,085		)	(18,296		)
Cash flows from investing activities
Expenditures for property and equipment	(16,593		)	(1,185		)
Purchases of marketable securities	(2,094		)	—
Sales of marketable securities	365			—
Costs incurred in connection with patents	(634		)	(465		)
Net cash used in investing activities	(18,956		)	(1,650		)
Cash flows from financing activities
Proceeds from employee stock purchase plan	1,360			1,291
Exercise of stock options and warrants	1,974			16,218
Proceeds from the issuance of common stock, net of issuance costs	—			84,369
Proceeds from line of credit	—			4,800
Payments on debt	(2,400		)	(8,650		)
Net cash provided by financing activities	934			98,028
Net change in cash and cash equivalents	(33,107		)	78,082
Cash and cash equivalents
Beginning of period	126,592			67,897
End of period	$	93,485		$	145,979
Noncash investing activities
Property and equipment included in accounts payable	$	1,860		$	273

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

6

CARDIOVASCULAR SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(For the Nine Months Ended March 31, 2015 and 2014)

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

(Unaudited)

1. Business Overview

Company Description

Cardiovascular Systems, Inc. (the “Company”) develops and commercializes innovative solutions for treating vascular and coronary diseases. The Company’s peripheral arterial disease products, the Stealth 360°^® PAD System, Diamondback 360^® PAD System, and Predator 360°^® PAD System, are catheter-based platforms capable of treating a broad range of plaque types, including calcified plaque, in leg arteries both above and below the knee and address many of the limitations associated with existing surgical, catheter and pharmacological treatment alternatives. In October 2013, the Company received premarket approval (“PMA”) from the FDA to market the Diamondback 360^® Coronary Orbital Atherectomy System (“OAS”) as a treatment for severely calcified coronary arteries. The Company began a controlled commercial launch of the Diamondback 360^® Coronary OAS following receipt of PMA approval. In March 2014, we received approval for the Diamondback 360^® 60cm Peripheral OAS access device and in April 2015 we received approval for the 4 French 1.25 Solid Diamondback 360^® OAS access device. These micro-invasive devices use smaller access sheaths that can provide procedural benefits and allow physicians to treat PAD patients in the small and tortuous vessels located below the knee through alternative access sites in the ankle and foot as well as in the groin. In November 2014, the Company received CE Mark for its Stealth 360° PAD System and is currently evaluating the timing and structure of its plans to commercialize products in Europe.

2. Summary of Significant Accounting Policies

Interim Financial Statements

The Company prepared the unaudited interim consolidated financial statements and related unaudited financial information in the footnotes in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements. The year-end consolidated balance sheet was derived from the Company’s audited consolidated financial statements, but does not include all disclosures as required by GAAP. These interim consolidated financial statements reflect all adjustments consisting of normal recurring accruals, which, in the opinion of management, are necessary to state fairly the Company’s consolidated financial position, the results of its operations and its cash flows for the interim periods. These interim consolidated financial statements should be read in conjunction with the consolidated annual financial statements and the notes thereto included in the Form 10-K filed by the Company with the SEC on August 28, 2014. The nature of the Company’s business is such that the results of any interim period may not be indicative of the results to be expected for the entire year.

Use of Estimates

The preparation of the Company’s consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Stock-Based Compensation

The Company recognizes stock-based compensation expense in an amount equal to the fair value of share-based payments computed at the date of grant. The fair value of all restricted stock awards are expensed in the consolidated statements of operations ratably over the related vesting period.

Revenue Recognition

The Company sells the majority of its products via direct shipment to hospitals or clinics. The Company recognizes revenue when all of the following criteria are met: persuasive evidence of an arrangement exists; delivery has occurred; the sales price is fixed or determinable; and collectability is reasonably assured. The Company records estimated sales returns, discounts and rebates as a reduction of net sales.

7

Costs related to products delivered are recognized in the period revenue is recognized. Cost of goods sold consists primarily of raw materials, direct labor, and manufacturing overhead.

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, “Revenue From Contracts with Customers.” The guidance requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which an entity expects to be entitled in exchange for those goods or services. The guidance also requires expanded disclosures relating to the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. Additionally, qualitative and quantitative disclosures are required about customer contracts, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. ASU 2014-09 is effective for annual periods beginning after December 15, 2016, including interim periods within that reporting period, using one of two prescribed retrospective methods. Early adoption is not permitted. The Company is evaluating the impact of the amended revenue recognition guidance on its consolidated financial statements.

In August 2014, the FASB issued ASU No. 2014-15, “Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern.” The guidance requires management to perform interim and annual assessments of an entity's ability to continue as a going concern within one year of the date of issuance of the entity's financial statements. The entity must also provide certain disclosures if there is substantial doubt about the entity's ability to continue as a going concern. ASU 2014-15 is effective for annual periods ending after December 15, 2016, and interim periods thereafter. Early adoption is permitted. The Company does not anticipate a material impact on its financial statements upon adoption.

3. Selected Consolidated Financial Statement Information

Accounts Receivable

Accounts receivable consists of the following:

	March 31,			June 30,
	2015			2014
Accounts receivable	$	32,599		$	21,834
Less: Allowance for doubtful accounts	(1,379		)	(451		)
Total accounts receivable	$	31,220		$	21,383

Inventories

Inventories consist of the following:

	March 31,		June 30,
	2015		2014
Raw materials	$	7,231	$	5,879
Work in process	943		855
Finished goods	5,045		6,156
Total inventories	$	13,219	$	12,890

8

Property and Equipment

Property and equipment consists of the following:

	March 31,			June 30,
	2015			2014
Land	$	500		$	500
Building	22,902			—
Equipment	10,914			6,436
Furniture	2,570			626
Leasehold improvements	233			233
Construction in progress	458			11,499
	37,577			19,294
Less: Accumulated depreciation	(5,218		)	(3,997		)
Total property and equipment, net	$	32,359		$	15,297

In June 2014, the Company announced plans to build a new corporate headquarters in New Brighton, Minnesota, construction of which was completed in March 2015. The 125,000-square-foot, two-story building has space for more than 500 employees and contains dedicated research and development, training and education, and manufacturing facilities. The new headquarters replaces the two St. Paul, Minnesota leased facilities.

Accrued Expenses

Accrued expenses consist of the following:

	March 31,		June 30,
	2015		2014
Salaries and bonus	$	4,895	$	5,244
Commissions	6,197		6,069
Accrued vacation	3,544		2,843
Other	1,720		474
Total accrued expenses	$	16,356	$	14,630

4. Deferred Compensation Plan

The Company offers certain members of management and highly compensated employees the opportunity to defer up to 100% of their base salary (after 401(k), payroll tax and other deductions), performance bonus and discretionary bonus and elect to receive the deferred compensation at a fixed future date of participant’s choosing. Each participant may, at the time of his or her deferral election, choose to allocate the deferred compensation into investment alternatives set by the Human Resources and Compensation Committee at that time. The amount payable to each participant under the plan will change in value based upon the investment selected by that participant and is classified as current or long-term on the Company's balance sheet based on the disbursement elections made by the participants.

Beginning in August 2014, the Company acquired available-for-sale marketable securities under the deferred compensation plan. These available-for-sale marketable securities are primarily comprised of investments with a fixed income and equity investments. The available-for-sale marketable securities are included with prepaid expenses and other current assets on the consolidated balance sheet at March 31, 2015.

Investments as of March 31, 2015 consisted of the following:

	Amortized Cost	Unrealized Gains	Unrealized Losses	Fair Value
Mutual funds	1,768	105	—	1,873
Total short-term investments	1,768	105	—	1,873

9

There were no other-than-temporary impairments during the nine months ended March 31, 2015. Gross amount of realized losses on a scheduled disbursement during the nine months ended March 31, 2015 was not material.

The following table provides information by level for the Company's available-for-sale marketable securities as of March 31, 2015 that were measured at fair value on a recurring basis:

		Fair Value Measurements Using Inputs Considered as
	Fair Value	Level 1	Level 2	Level 3
Mutual funds	1,873	1,278	595	—
Total short-term investments	1,873	1,278	595	—

The Company's marketable securities classified within Level 1 are valued primarily using real-time quotes for transactions in active exchange markets. Marketable securities within Level 2 are valued using readily available pricing sources. There were no transfers of assets between Level 1 and Level 2 of the fair value measurement hierarchy during the nine months ended March 31, 2015. Any transfers between levels would be recognized on the date of the event or when a change in circumstances causes a transfer.

5. Debt

Loan and Security Agreement with Silicon Valley Bank

On March 29, 2010, the Company entered into an amended and restated loan and security agreement with Silicon Valley Bank. The agreement was amended on December 27, 2011 to increase outstanding borrowings, amended on June 29, 2012 to modify financial covenants and reduce the interest rate and other fees, amended on May 10, 2013 to modify financial covenants, amended on June 26, 2014 to extend the line of credit's maturity date to September 30, 2014 and reduce the interest rate, and amended on September 29, 2014 to extend the line of credit's maturity date to December 31, 2014. The agreement, as amended, included a $15,000 line of credit. The balance outstanding on the line of credit was $0 and $2,400 as of March 31, 2015 and June 30, 2014, respectively. On December 31, 2014, the agreement matured.

The $15,000 line of credit had a floating interest rate equal to the Wall Street Journal’s prime rate. Interest on borrowings were due monthly and the principal balance was due at maturity. Borrowings on the line of credit were based on 85% of eligible accounts. Accounts receivable receipts were deposited into a lockbox account in the name of Silicon Valley Bank. The line of credit was subject to non-use fees, annual fees, and cancellation fees.

Loan and Security Agreement with Partners for Growth

On April 14, 2010, the Company entered into a loan and security agreement with Partners for Growth III, L.P. (“PFG”), as amended on August 23, 2011, December 27, 2011, June 30, 2012, and May 10, 2013. The agreement, as amended, provided that PFG would make loans to the Company up to $5,000. The loans had a floating per annum interest rate equal to 2.75% above Silicon Valley Bank’s prime rate, and such interest was payable monthly. The principal balance of and any accrued and unpaid interest on any notes was due on the maturity date and could not be prepaid by the Company at any time in whole or in part. As of March 31, 2015 and June 30, 2014, there were no loans outstanding, and on April 14, 2015, the agreement matured.

At any time prior to the maturity date, PFG could have, at its option, converted any outstanding loan into shares of the Company’s common stock at the applicable conversion price, which in each case equaled the ten-day volume weighted average price per share of the Company’s common stock prior to the issuance date of each note. The Company could have also effected at any time a mandatory conversion of amounts, subject to certain terms, conditions and limitations provided in the agreement, including a requirement that the ten-day volume weighted average price of the Company’s common stock prior to the date of conversion was at least 15% greater than the conversion price. The Company could have reduced the conversion price to a price that represented a 15% discount to the ten-day volume weighted average price of its common stock to satisfy this condition and effected a mandatory conversion. The Company recorded an expense of $0 and $61 for the nine months ended March 31, 2015 and 2014, respectively, related to the change in fair value of the conversion options on all outstanding loans. This amount is a component of interest and other, net, on the accompanying statement of operations.

10

Loans were secured by certain of the Company’s assets, and the agreement contained customary covenants limiting the Company’s ability to, among other things, incur debt or liens, make certain investments and loans, effect certain redemptions of and declare and pay certain dividends on its stock, permit or suffer certain change of control transactions, dispose of collateral, or change the nature of its business. In addition, the PFG loan and security agreement contained financial covenants requiring the Company to maintain certain liquidity and fixed charge coverage ratios. The Company was in compliance with all financial covenants at March 31, 2015 and through the maturity date. If the Company did not comply with the various covenants, PFG could have, subject to various customary cure rights, declined to provide additional loans, required amortization of any future loan over its remaining term, or required the immediate payment of all amounts outstanding under any future loan and foreclosed on any or all collateral, depending on which financial covenants were not maintained.

6. Interest and Other, Net

Interest and other, net, includes the following:

	Three Months Ended   March 31,						Nine Months Ended   March 31,
	2015			2014			2015			2014
Interest expense, net of premium amortization	$	(1	)	$	(103	)	$	(23	)	$	(948	)
Change in fair value of conversion options	—			—			—			(61		)
Net write-offs upon conversion (option and premium amortization)	—			—			—			(655		)
Other	(112		)	(16		)	(145		)	(63		)
Total Interest and other, net	$	(113	)	$	(119	)	$	(168	)	$	(1,727	)

7. Stock Options and Restricted Stock Awards

On November 12, 2014, the Company's stockholders approved the 2014 Equity Incentive Plan (the “2014 Plan”), under which restricted stock awards have been granted to employees, directors and consultants. Previously, options to purchase common stock and restricted stock awards were granted under the 2007 Equity Incentive Plan (the “2007 Plan”) and the 2003 Stock Option Plan (the “2003 Plan”). The 2014 Plan, the 2007 Plan and the 2003 Plan are collectively referred to as the “Plans.”

Stock Options

All options granted under the Plans become exercisable over periods established at the date of grant. The option exercise price is generally not less than the estimated fair market value of the Company’s common stock at the date of grant, as determined by the Company’s management and Board of Directors. In addition, the Company has granted nonqualified stock options to a director outside of the Plans. An employee's vested options must be exercised at or within 90 days of termination to avoid forfeiture. As of March 31, 2015, all outstanding options were fully vested.

Stock option activity for the nine months ended March 31, 2015 is as follows:

	Number of Options(a)		Weighted Average Exercise Price
Options outstanding at June 30, 2014	922,809		$	10.16
Options exercised	(202,576	)	$	9.75
Options outstanding at March 31, 2015	720,233		$	10.28
(a) Includes the effect of options granted, exercised, forfeited or expired from the 2003 Plan and 2007 Plan, and options granted outside such plans.

Restricted Stock

The fair value of each restricted stock award is equal to the fair market value of the Company’s common stock at the date of grant. Vesting of restricted stock awards generally ranges from one to three years. The estimated fair value of restricted stock awards, including the effect of estimated forfeitures, is recognized on a straight-line basis over the restricted stock’s vesting period.

11

On August 11, 2014, the Company granted performance based restricted stock awards to certain executives. The performance based awards included grants of a maximum aggregate of 76,112 shares that vest based upon achievement of certain thresholds measuring total shareholder return during periods within fiscal 2015 compared to a pre-determined peer group of companies, and grants of a maximum aggregate of 76,112 shares that vest based upon achievement of certain thresholds measuring annual revenue growth during fiscal 2015 compared to a pre-determined peer group of companies. Management adjusts expense as required based on expected revenue growth performance for those awards.

Restricted stock award activity for the nine months ended March 31, 2015 is as follows:

	Number of Shares		Weighted Average  Fair Value
Restricted stock awards outstanding at June 30, 2014	1,276,403		$	17.37
Restricted stock awards granted (1)	475,827		$	30.06
Restricted stock awards forfeited	(100,269	)	$	20.33
Restricted stock awards vested	(574,195	)	$	17.69
Restricted stock awards outstanding at March 31, 2015	1,077,766		$	20.55
(1) Includes both time-based and performance-based restricted stock awards.

8. Commitment and Contingencies

Operating Leases

The Company leases manufacturing and office space and equipment under various lease agreements that expire at various dates through March 2020. Rental expenses were $1,351 and $1,000 for the nine months endedMarch 31, 2015 and 2014, respectively.

Future minimum lease payments under the agreements as of March 31, 2015 are as follows:

Three months ended June 30, 2015	$	263
Fiscal 2016	766
Fiscal 2017	544
Fiscal 2018	513
Fiscal 2019	462
Thereafter	345
	$	2,893

Construction of New Headquarters

On June 11, 2014, the Company entered into a Design-Build Contract and a Development Services Agreement, as well as various ancillary agreements related to the acquisition of real property located in New Brighton, Minnesota and the development of such property into the Company’s new corporate headquarters. Pursuant to the Development Services Agreement with Ryan Companies, Inc. ("Ryan"), Ryan was to perform certain development services to facilitate development of the project, including coordination with the City of New Brighton and overall coordination of development strategy. The Company pays Ryan a fee for the development services, which includes a sum equal to 3.25% of the adjusted total project costs, payable at certain points in the construction process, and a sum equal to 5% of the adjusted total project costs, payable upon substantial completion of the project, as well as reimbursement of certain expenses incurred by Ryan. The construction was substantially completed in March 2015 and the Company has accrued all remaining payments due to Ryan under the Development Services Agreement.

12

9. Texas Production Facility

Effective on September 9, 2009, the Company entered into an agreement with the Pearland Economic Development Corporation (the “PEDC”) for the construction and lease of an approximately 46,000 square foot production facility located in Pearland, Texas. The facility primarily serves as an additional manufacturing location for the Company.

The Company and the PEDC entered into a Corporate Job Creation Agreement dated June 17, 2009, which was subsequently amended July 2, 2012. The Job Creation Agreement, as amended, provided the Company with $2,975 in net cash incentive funds. The PEDC will provide the Company with an additional $425 of net cash incentive funds if: (1) the Company hires 125 full-time employees at the facility before June 30, 2015 and (2) maintains 125 employees at the facility through June 30, 2016. The Company had the opportunity to receive an additional $425 of net cash incentive funds upon hiring the 75^th employee on or before March 31, 2014; however, the Company did not achieve this incentive.

In order to retain all of the cash incentives, the Company must maintain no fewer than 25 jobs at the Texas facility through June 30, 2015. Failure to meet this requirement will result in an obligation to make reimbursement payments to the PEDC as outlined in the amended agreement. The Company will not have any reimbursement requirements after June 30, 2015. As of March 31, 2015, the Company was in compliance with all minimum requirements under the amended agreement. The Company believes it will be able to comply with the conditions specified in the amended agreement.

The Job Creation Agreement, as amended, also provided the Company with a net $1,020 award, of which $510 was received from the PEDC and the remainder is funded through the Texas Enterprise Fund program associated with the State of Texas. As of March 31, 2015, $340 has been received and the remaining $170 will be provided upon the hiring of the 75^th full-time employee at the facility. The grant from the State of Texas is subject to reimbursement if the Company fails to meet certain job creation targets through 2014 and maintain these positions through 2020. The Company reimbursed the State of Texas $49 and $46 during fiscal 2015 and 2014, respectively, as it did not meet certain employment targets.

The Company has presented the net cash incentive funds as a current and long-term liability on the balance sheet. The liabilities are reduced through the term of the agreement and recorded as an offset to expenditures incurred using a systematic methodology. As of March 31, 2015, the deferred grant incentive liabilities have been reduced by $59 in cumulative expenses, resulting in a remaining current liability of $0.

10. Earnings Per Share

The following table presents a reconciliation of the numerators and denominators used in the basic and diluted earnings per common share computations (in thousands except share and per share amounts):

	Three Months Ended   March 31,						Nine Months Ended   March 31,
	2015			2014			2015			2014
Numerator
Net loss	$	(10,656	)	$	(9,712	)	$	(24,153	)	$	(25,662	)
Denominator
Weighted average common shares – basic	31,644,522			30,368,685			31,479,803			27,411,237
Effect of dilutive stock options and warrants(a)	—			—			—			—
Weighted average common shares outstanding – diluted	31,644,522			30,368,685			31,479,803			27,411,237
Net loss per common share — basic and diluted	$	(0.34	)	$	(0.32	)	$	(0.77	)	$	(0.94	)

(a) At March 31, 2015 and 2014, 720,233 and 927,809 stock options, respectively, were outstanding. The effect of the shares that would be issued upon exercise of these options has been excluded from the calculation of diluted loss per share because those shares are anti-dilutive.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes appearing under Item 1 of Part I of this Quarterly Report on Form 10-Q. Some of the information contained in this discussion and analysis or set forth elsewhere in this quarterly report, including information with respect to our plans and strategy for our business and expected financial results, includes forward-looking statements that involve risks and uncertainties. You should review the “Risk Factors” discussed in our Form 10-K for the year ended June 30, 2014 for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

OVERVIEW

We are a medical device company focused on developing and commercializing innovative solutions for vascular and coronary disease. Our peripheral arterial disease (“PAD”) products, the Stealth 360°^® PAD System (the “Stealth 360”), the Diamondback 360^® PAD System (the “Diamondback 360 Peripheral”), and the Diamondback Predator 360°^® (the “Predator 360”) are catheter-based platforms capable of treating a broad range of plaque types in leg arteries both above and below the knee and address many of the limitations associated with existing surgical, catheter and pharmacological treatment alternatives. In March 2014, we received approval for the Diamondback 360^® 60cm Peripheral Orbital Atherectomy System (“OAS”) access device and in April 2015, we received 510(k) clearance of the Diamondback 360 4 Frent 1.25 Peripheral OAS access device. These micro-invasive devices use smaller access sheaths that can provide procedural benefits and allow physicians to treat PAD patients in the small and tortuous vessels located below the knee through alternative access sites in the ankle and foot as well as in the groin. We refer to the Stealth 360, Diamondback 360 Peripheral, Predator 360, the Diamondback 360 60cm Peripheral OAS and the Diamondback 360 4 French 1.25 Peripheral OAS collectively in this report as the “PAD Systems.” We have also obtained approval to market our Diamondback 360^® Coronary OAS (“CAD System”) as a treatment for severely calcified coronary arteries.

Since 1997, we have devoted substantially all of our resources to the development of the PAD Systems and, since 2007, to the approval of our CAD System. From 2003 to 2005, we conducted numerous bench and animal tests in preparation for application submissions to the Food and Drug Administration (“FDA”). We initially focused our testing on providing a solution for coronary in-stent restenosis, but later changed the focus to PAD. In 2006, we obtained an investigational device exemption from the FDA to conduct our pivotal OASIS clinical trial, which was completed in January 2007. The OASIS clinical trial was a prospective 20-center study that involved 124 patients with 201 lesions.

In August 2007, the FDA granted us 510(k) clearance for the use of the Diamondback 360 Peripheral as a therapy in patients with PAD. We commenced commercial introduction of the Diamondback 360 Peripheral in the United States in September 2007. We were granted 510(k) clearance of the Predator 360 in March 2009 and the Stealth 360 in March 2011. We received 510(k) clearance of the Diamondback 360 60cm Peripheral OAS in March 2014, and in April 2015, we received 510(k) clearance of the Diamondback 360 4 French 1.25 Peripheral OAS. We market the PAD Systems in the United States through a direct sales force and expend significant capital on our sales and marketing efforts to expand our customer base and utilization per customer. At our facilities, we assemble the saline infusion pump and the single-use catheter used in the PAD Systems with components purchased from third-party suppliers, as well as with components manufactured in-house. We purchase supplemental products from third-party suppliers.

In November 2014, we received CE Mark for our Stealth 360 and are currently evaluating the timing and structure of our plans to commercialize our products in Europe.

We have developed a modified version of our orbital technology to treat coronary arteries. A coronary application required us to conduct a clinical trial and file a premarket approval (“PMA”) application and obtain approval from the FDA. In March 2013, we completed submission of our PMA application to the FDA for our OAS to treat calcified coronary arteries. In October 2013, we received PMA from the FDA to market the CAD System as a treatment for severely calcified coronary arteries. We commenced a controlled commercial launch of the CAD System following the receipt of PMA approval.

As of March 31, 2015, we had an accumulated deficit of $262.7 million. We expect our losses to continue as we invest in sales, marketing, medical education, clinical studies and product research and development for our next phase of growth in the peripheral market and broaden the commercial launch of our CAD System. To date, we have financed our operations primarily from the issuance of stock, convertible promissory notes, and debt.

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CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT JUDGMENTS AND ESTIMATES

Our management’s discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of our consolidated financial statements requires us to make estimates, assumptions and judgments that affect amounts reported in those statements. Our estimates, assumptions and judgments, including those related to revenue recognition, allowance for doubtful accounts, excess and obsolete inventory, and stock-based compensation, are updated as appropriate at least quarterly. We use authoritative pronouncements, our technical accounting knowledge, cumulative business experience, judgment and other factors in the selection and application of our accounting policies. While we believe that the estimates, assumptions and judgments that we use in preparing our consolidated financial statements are appropriate, these estimates, assumptions and judgments are subject to factors and uncertainties regarding their outcome. Therefore, actual results may materially differ from these estimates.

Some of our significant accounting policies require us to make subjective or complex judgments or estimates. An accounting estimate is considered to be critical if it meets both of the following criteria: (1) the estimate requires assumptions about matters that are highly uncertain at the time the accounting estimate is made, and (2) different estimates that reasonably could have been used, or changes in the estimate that are reasonably likely to occur from period to period, would have a material impact on the presentation of our financial condition, results of operations, or cash flows.

Our critical accounting policies are identified in our Annual Report on Form 10-K for the fiscal year ended June 30, 2014 in Management's Discussion and Analysis of Financial Condition and Results of Operations under the heading "Critical Accounting Policies and Significant Judgments and Estimates." There were no significant changes to our critical accounting policies during the nine months ended March 31, 2015.

RESULTS OF OPERATIONS

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

	Three Months Ended   March 31,								Nine Months Ended   March 31,
	2015			2014			Percent Change		2015			2014			Percent Change
Revenues	$	47,004		$	34,945		34.5	%	$	133,090		$	97,048		37.1	%
Cost of goods sold	10,416			7,749			34.4		28,647			21,926			30.7
Gross profit	36,588			27,196			34.5		104,443			75,122			39.0
Expenses:
Selling, general and administrative	39,354			31,428			25.2		105,414			84,267			25.1
Research and development	7,777			5,361			45.1		23,014			14,790			55.6
Total expenses	47,131			36,789			28.1		128,428			99,057			29.7
Loss from operations	(10,543		)	(9,593		)	9.9		(23,985		)	(23,935		)	0.2
Interest and other, net	(113		)	(119		)	(5.0	)	(168		)	(1,727		)	(90.3	)
Net loss	$	(10,656	)	$	(9,712	)	9.7		$	(24,153	)	$	(25,662	)	(5.9	)

Comparison of Three Months Ended March 31, 2015 with Three Months Ended March 31, 2014

Revenues. Revenues increased by $12.1 million, or 34.5%, from $34.9 million for the three months ended March 31, 2014 to $47.0 million for the three months ended March 31, 2015. This increase was attributable to sales of our CAD System which increased approximately $5.8 million, due to expanded sales of the CAD System compared to the initial controlled commercial launch in the three months ended March 31, 2014 following our PMA approval in October 2013. Additionally, sales of our PAD Systems increased $5.1 million, or 17.5%, which reflects an 18.8% increase in the number of devices sold. Other product revenue also increased $1.1 million, or 27.0%, during the three months ended March 31, 2015 as compared to the three months ended March 31, 2014, primarily driven by increased sales of PAD and CAD Systems, which the other products support.

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Currently, all of our revenues are in the United States; however, we intend to sell internationally in the future and have commenced the process of seeking approval to do so in both Europe and Japan. In November 2014, we received CE Mark for the Stealth 360 and are currently evaluating the timing and structure of our plans to commercialize products in Europe. We expect our revenue to increase as we continue to increase the number of physicians using the devices, increase the usage per physician, introduce new and improved products, generate additional clinical data, continue the controlled commercial launch of our CAD System, and expand into new geographies.

Cost of Goods Sold. Cost of goods sold increased by $2.7 million, or 34.4%, from $7.7 million for the three months ended March 31, 2014 to $10.4 million for the three months ended March 31, 2015. Cost of goods sold represents the cost of materials, labor and overhead for single-use catheters, guidewires, saline pumps, and other ancillary products. The increase was due to an increase in the quantities of products sold. Cost of goods sold for the three months ended March 31, 2015 and 2014 includes $287,000 and $189,000, respectively, for stock-based compensation. Gross margin remained consistent at 77.8% for the three months ended March 31, 2015 and 2014. The favorable impact of increased sales of our CAD System, which has a higher average selling price than PAD Systems, was offset by higher indirect costs per unit from lower production volumes. We expect that gross margin in the remainder of fiscal 2015 will increase slightly compared to the three months ended March 31, 2015. Quarterly margin fluctuations could occur based on production volumes, timing of new product introductions, sales mix, pricing changes, or other unanticipated circumstances.

Selling, General and Administrative Expenses. Our selling, general and administrative expenses increased by $8.0 million, or 25.2%, from $31.4 million for the three months ended March 31, 2014 to $39.4 million for the three months ended March 31, 2015. The increase was due primarily to the expansion of our sales and marketing organization, medical education, and higher incentive compensation, as well as higher coronary expenses from the commercial launch. Selling, general and administrative expenses for the three months ended March 31, 2015 and 2014 include $3.3 million and $2.4 million, respectively, for stock-based compensation. We expect our selling, general and administrative expenses to increase in the future as a result of the costs associated with expanding our sales and marketing organization and medical education to further commercialize our PAD Systems and expand the commercial launch of our CAD System.

Research and Development Expenses. Research and development expenses increased by $2.4 million, or 45.1%, from $5.4 million for the three months ended March 31, 2014 to $7.8 million for the three months ended March 31, 2015. Research and development expenses relate to specific projects to develop new products or expand into new markets, such as the development of new versions of the PAD and CAD Systems, shaft designs, crown designs, and PAD and CAD clinical trials. The increase related mainly to additional product development projects and clinical studies, and the related increase in headcount. Research and development expenses for the three months ended March 31, 2015 and 2014 include $407,000 and $286,000, respectively, for stock-based compensation. As we continue to expand our product portfolio and clinical studies within the PAD and CAD markets, we generally expect to incur quarterly research and development expenses at or above amounts incurred for the three months ended March 31, 2015. Fluctuations could occur based on the number of projects and studies and the timing of expenditures.

Interest and Other, Net. Interest and other expense, net, was $(113,000) for the three months ended March 31, 2015 compared to $(119,000) for the three months ended March 31, 2014. The decrease was primarily driven by lower interest expense related to lower outstanding debt balances.

Comparison of Nine Months Ended March 31, 2015 with Nine Months Ended March 31, 2014

Revenues. Revenues increased by $36.1 million, or 37.1%, from $97.0 million for the nine months endedMarch 31, 2014 to $133.1 million for the nine months endedMarch 31, 2015. This increase was attributable to sales of our CAD System which contributed approximately $18.1 million in revenues in the nine months ended March 31, 2015, compared to $2.0 million in the nine months ended March 31, 2014 following our PMA approval in October 2013. Additionally, sales of our PAD Systems increased $16.6 million, or 19.9%, which reflects a 20.0% increase in the number of devices sold. Other product revenue also increased $3.3 million, or 28.2%, during the nine months endedMarch 31, 2015 as compared to the nine months endedMarch 31, 2014, primarily driven by increased sales of PAD and CAD Systems, which the other products support.

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Cost of Goods Sold. Cost of goods sold increased by $6.7 million, or 30.7%, from $21.9 million for the nine months endedMarch 31, 2014 to $28.6 million for the nine months endedMarch 31, 2015. Cost of goods sold represents the cost of materials, labor and overhead for single-use catheters, guidewires, saline pumps, and other ancillary products. The increase was due to an increase in the quantities of products sold, partially offset by lower indirect costs per unit from higher production volumes and manufacturing efficiencies. Cost of goods sold for the nine months endedMarch 31, 2015 and 2014 includes $748,000 and $500,000, respectively, for stock-based compensation. Gross margin increased from 77.4% during the nine months endedMarch 31, 2014 to 78.5% for the nine months endedMarch 31, 2015, which was primarily due to the increase in sales of our CAD System, which has a higher average selling price than PAD Systems, and to lower indirect costs per unit.

Selling, General and Administrative Expenses. Our selling, general and administrative expenses increased by $21.1 million, or 25.1%, from $84.3 million for the nine months endedMarch 31, 2014 to $105.4 million for the nine months endedMarch 31, 2015. The increase was due primarily to higher coronary expenses from the commercial launch, the expansion of our sales and marketing organization, medical education, and higher incentive compensation. Selling, general and administrative expenses for the nine months endedMarch 31, 2015 and 2014 include $9.2 million and $6.4 million, respectively, for stock-based compensation.

Research and Development Expenses. Research and development expenses increased by $8.2 million, or 55.6%, from $14.8 million for the nine months endedMarch 31, 2014 to $23.0 million for the nine months endedMarch 31, 2015. Research and development expenses relate to specific projects to develop new products or expand into new markets, such as the development of new versions of the PAD and CAD Systems, shaft designs, crown designs, and PAD and CAD clinical trials. The increase related mainly to additional product development projects and clinical studies, and the related increase in headcount. Research and development expenses for the nine months endedMarch 31, 2015 and 2014 include $1.1 million and $807,000, respectively, for stock-based compensation.

Interest and Other, Net. Interest and other expense, net, was $(168,000) for the nine months endedMarch 31, 2015 compared to $(1.7) million for the nine months endedMarch 31, 2014. The decrease was primarily driven by lower interest expense related to lower outstanding debt balances, as well as the elimination of charges from debt conversions and changes in fair value of the debt conversion option that were associated with the previously outstanding convertible debt.

LIQUIDITY AND CAPITAL RESOURCES

We had cash and cash equivalents of $93.5 million and $126.6 million at March 31, 2015 and June 30, 2014, respectively. During the nine months endedMarch 31, 2015, net cash used in operations amounted to $15.1 million. As of March 31, 2015, we had an accumulated deficit of $262.7 million. We have historically funded our operating losses primarily from the issuance of stock, convertible promissory notes, and debt. Our prior line of credit with Silicon Valley Bank matured on December 31, 2014, and our loan and security agreement with Partners for Growth III, L.P. matured on April 14, 2015.

Changes in Liquidity

Cash and Cash Equivalents. Cash and cash equivalents were $93.5 million at March 31, 2015 and $126.6 million at June 30, 2014. The decrease is primarily attributable to net cash used in operations and investing activities during the nine months ended March 31, 2015.

Operating Activities. Net cash used in operations was $15.1 million and $18.3 million for the nine months ended March 31, 2015 and 2014, respectively. For the nine months ended March 31, 2015 and 2014, we had a net loss of $24.2 million and $25.7 million, respectively. Significant changes in working capital during these periods included:

• Cash used in accounts receivable of $10.9 million and $5.1 million during the nine months ended March 31, 2015 and 2014, respectively, was primarily due to the amount and timing of revenue during the nine months ended March 31, 2015 and 2014.

• Cash used in inventories was $329,000 and $5.6 million during the nine months ended March 31, 2015 and 2014, respectively. For the nine months ended March 31, 2015, the amount of cash used in inventories was primarily due to higher levels of raw materials for the manufacture of products. For the nine months ended March 31, 2014, cash used in inventories was primarily due to higher levels of finished goods for future sales, including the CAD System commercial launch, and timing of inventory purchases and sales.

• Cash provided by prepaid expenses and other current assets was $166,000 and $264,000 during the nine months ended March 31, 2015 and 2014, respectively, primarily due to payment timing of vendor deposits and other expenditures.

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• Cash provided by accounts payable of $2.7 million and $4.0 million during the nine months ended March 31, 2015 and 2014, respectively, was due to the amount and timing of purchases and vendor payments and overall increased levels of spending. Costs related to the construction of our new headquarters are included in the cash provided by accounts payable during the nine months ended March 31, 2015.

• Cash provided by accrued expenses and other liabilities of $3.7 million and $4.0 million during the nine months ended March 31, 2015 and 2014, respectively, was primarily due to the amount and timing of compensation payments.

Investing Activities. Net cash used in investing activities was $19.0 million and $1.7 million for the nine months ended March 31, 2015 and 2014, respectively. During the nine months ended March 31, 2015, cash was used primarily for the construction of our new headquarters and the related equipment purchases. In addition, we purchased available-for-sale marketable securities for the deferred compensation plans during the nine months ended March 31, 2015. Cash used during the nine months ended March 31, 2014 related to the purchase of property and equipment and patents.

Financing Activities. Net cash provided by financing activities was $934,000 and $98.0 million for the nine months ended March 31, 2015 and 2014, respectively. For the nine months ended March 31, 2015, cash provided by financing activities was due to proceeds from the exercise of stock options of $2.0 million and proceeds from employee stock purchases of $1.4 million, partially offset by payments on debt of $2.4 million. For the nine months ended March 31, 2014, cash provided by financing activities included proceeds from the issuance of common stock, net of issuance costs, of $84.4 million, proceeds from exercise of stock options and warrants of $16.2 million, and proceeds from employee stock purchases of $1.3 million, partially offset by net payments on debt of $3.9 million.

Our future liquidity and capital requirements will be influenced by numerous factors, including the extent and duration of future operating losses, the level and timing of future sales and expenditures, the results and scope of ongoing research and product development programs, working capital required to support our sales growth, the receipt of and time required to obtain regulatory clearances and approvals, our sales and marketing programs, the continuing acceptance of our products in the marketplace, competing technologies, market and regulatory developments, ongoing facility requirements and potential strategic transactions (including the potential acquisition of businesses, technologies and products). As of March 31, 2015, we believe our current cash and cash equivalents will be sufficient to fund working capital requirements, capital expenditures (including the new corporate headquarters discussed below) and operations for the foreseeable future, including at least the next twelve months. We intend to retain any future earnings to support operations and to finance the growth and development of our business and we do not anticipate paying any dividends in the foreseeable future. We may raise additional capital in the future, to fund acceleration of our current growth initiatives or additional growth opportunities, if we believe it will significantly enhance our value.

New Corporate Headquarters. On June 11, 2014, we entered into a Design-Build Contract and a Development Services Agreement, as well as various ancillary agreements related to the acquisition of real property located in New Brighton, Minnesota and the development of such property into our new corporate headquarters. Pursuant to the Development Services Agreement with Ryan Companies, Inc. ("Ryan"), Ryan was to perform certain development services to facilitate development of the project, including coordination with the City of New Brighton and overall coordination of development strategy. We pay Ryan a fee for the development services, which includes a sum equal to 3.25% of the adjusted total project costs, payable at certain points in the construction process, and a sum equal to 5% of the adjusted total project costs, payable upon substantial completion of the project, as well as reimbursement of certain expenses incurred by Ryan. The construction was substantially completed in March 2015 and we have accrued all remaining payments due to Ryan under the Development Services Agreement.

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NON-GAAP FINANCIAL INFORMATION

To supplement our consolidated financial statements prepared in accordance with GAAP, our management uses a non-GAAP financial measure referred to as “Adjusted EBITDA.” The following table sets forth, for the periods indicated, a reconciliation of Adjusted EBITDA to the most comparable U.S. GAAP measure expressed as dollar amounts (in thousands):

	Nine Months Ended   March 31,
	2015			2014
Loss from operations	$	(23,985	)	$	(23,935	)
Add: Stock-based compensation	11,039			7,682
Add: Depreciation and amortization	1,417			982
Adjusted EBITDA	$	(11,529	)	$	(15,271	)

Adjusted EBITDA improved as compared to the prior year period due to increased stock-based compensation and depreciation. Stock-based compensation increased $3.4 million, or 43.7%, as a result of increased employee stock awards granted due to our expanded hiring and higher grant date fair values. The increase in depreciation expense was the result of the completion of our new headquarters in March 2015.

Use and Economic Substance of Non-GAAP Financial Measures Used and Usefulness of Such Non-GAAP Financial Measures to Investors

We use Adjusted EBITDA as a supplemental measure of performance and believe this measure facilitates operating performance comparisons from period to period and company to company by factoring out potential differences caused by depreciation and amortization expense and non-cash charges such as stock-based compensation. Our management uses Adjusted EBITDA to analyze the underlying trends in our business, assess the performance of our core operations, establish operational goals and forecasts that are used to allocate resources and evaluate our performance period over period and in relation to our competitors’ operating results. Additionally, our management is partially evaluated on the basis of Adjusted EBITDA when determining achievement of their incentive compensation performance targets.

We believe that presenting Adjusted EBITDA provides investors greater transparency to the information used by our management for its financial and operational decision-making and allows investors to see our results “through the eyes” of management. We also believe that providing this information better enables our investors to understand our operating performance and evaluate the methodology used by our management to evaluate and measure such performance.

The following is an explanation of each of the items that management excluded from Adjusted EBITDA and the reasons for excluding each of these individual items:

• Stock-based compensation. We exclude stock-based compensation expense from our non-GAAP financial measures primarily because such expense, while constituting an ongoing and recurring expense, is not an expense that requires cash settlement. Our management also believes that excluding this item from our non-GAAP results is useful to investors to understand the application of stock-based compensation guidance and its impact on our operational performance, liquidity and ability to make additional investments in the Company, and it allows for greater transparency to certain line items in our financial statements.

• Depreciation and amortization expense. We exclude depreciation and amortization expense from our non-GAAP financial measures primarily because such expenses, while constituting ongoing and recurring expenses, are not expenses that require cash settlement and are not used by our management to assess the core profitability of our business operations. Our management also believes that excluding these items from our non-GAAP results is useful to investors to understand our operational performance, liquidity and ability to make additional investments in the company.

Material Limitations Associated with the Use of Non-GAAP Financial Measures and Manner in Which We Compensate for these Limitations

Non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP. Some of the limitations associated with our use of these non-GAAP financial measures are:

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• Items such as stock-based compensation do not directly affect our cash flow position; however, such items reflect economic costs to us and are not reflected in our Adjusted EBITDA, and therefore these non-GAAP measures do not reflect the full economic effect of these items.

• Non-GAAP financial measures are not based on any comprehensive set of accounting rules or principles and therefore other companies may calculate similarly titled non-GAAP financial measures differently than we do, limiting the usefulness of those measures for comparative purposes.

• Our management exercises judgment in determining which types of charges or other items should be excluded from the non-GAAP financial measures we use.

We compensate for these limitations by relying primarily upon our GAAP results and using non-GAAP financial measures only supplementally.

INFLATION

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

OFF-BALANCE SHEET ARRANGEMENTS

Since inception, we have not engaged in any off-balance sheet activities as defined in Item 303(a)(4) of Regulation S-K.

RECENT ACCOUNTING PRONOUNCEMENTS

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, “Revenue From Contracts with Customers.” The guidance requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which an entity expects to be entitled in exchange for those goods or services. The guidance also requires expanded disclosures relating to the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. Additionally, qualitative and quantitative disclosures are required about customer contracts, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. ASU 2014-09 is effective for annual periods beginning after December 15, 2016, including interim periods within that reporting period, using one of two prescribed retrospective methods. Early adoption is not permitted. We are evaluating the impact of the amended revenue recognition guidance on our consolidated financial statements.

In August 2014, the FASB issued ASU No. 2014-15, “Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern.” The guidance requires management to perform interim and annual assessments of an entity's ability to continue as a going concern within one year of the date of issuance of the entity's financial statements. The entity must also provide certain disclosures if there is substantial doubt about the entity's ability to continue as a going concern. ASU 2014-15 is effective for annual periods ending after December 15, 2016, and interim periods thereafter. Early adoption is permitted. We do not anticipate a material impact on our financial statements upon adoption.

PRIVATE SECURITIES LITIGATION REFORM ACT

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. Such “forward-looking” information is included in this Form 10-Q, including Item 2 of Part I, and in other materials filed or to be filed by the Company with the Securities and Exchange Commission (as well as information included in oral statements or other written statements made or to be made by the Company). Forward-looking statements include all statements based on future expectations. This Form 10-Q contains forward-looking statements that involve risks and uncertainties, including (i) expected compliance with the conditions specified in our Job Creation Agreement; (ii) our expectation that our losses will continue; (iii) the broadening of the commercial launch of the CAD System; (iv) the expectation of selling our products internationally in the future and the timing and structure of our plans to do so; (v) our expectation of increased revenue and increased selling, general and administrative expenses; (vi) our plans to continue to expand our sales and marketing efforts as well as our product portfolio and clinical studies; (vii) our expectation that gross margin in the remainder of fiscal 2015 will increase slightly compared to the three months ended March 31, 2015; (viii) our expectation that we will incur research and development expenses in future quarters at amounts at or above the amounts incurred for the three months ended March 31, 2015; (ix) our belief that our current cash and cash equivalents will be sufficient to fund working capital requirements, capital expenditures and operations for the foreseeable future; (x) our intention to retain any future earnings to support operations and to finance the growth and development of our business; (xi) our dividend expectations; (xii) the potential to raise additional capital in the future; and (xiii) the anticipated impact of adoption of recent accounting pronouncements on the Company's financial statements.

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In some cases, you can identify forward-looking statements by the following words: “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “ongoing,” “plan,” “potential,” “predict,” “project,” “should,” “will,” “would,” or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words. Forward-looking statements are only predictions and are not guarantees of performance. These statements are based on our management’s beliefs and assumptions, which in turn are based on their interpretation of currently available information.

These statements involve known and unknown risks, uncertainties and other factors that may cause our results or our industry’s actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements. These factors include regulatory developments in the U.S. and foreign countries; FDA and similar foreign clearances and approvals; approval of our products for distribution in foreign countries; approval of products for reimbursement and the level of reimbursement; dependence on market growth; agreements with third parties to sell their products; the experience of physicians regarding the effectiveness and reliability of the PAD and CAD Systems; the reluctance of physicians, hospitals and other organizations to accept new products; the potential for unanticipated delays in enrolling medical centers and patients for clinical trials; actual clinical trial and study results; the impact of competitive products and pricing; unanticipated developments affecting our estimates regarding expenses, future revenues and capital requirements; the difficulty of successfully managing operating costs; our inability to expand our sales and marketing organization; our actual research and development efforts and needs; our ability to obtain and maintain intellectual property protection for product candidates; our actual financial resources and our ability to obtain additional financing; fluctuations in results and expenses based on new product introductions, sales mix, unanticipated warranty claims, and the timing of project expenditures; and general economic conditions. These and additional risks and uncertainties are described more fully in our Form 10-K filed with the SEC on August 28, 2014. Copies of filings made with the SEC are available through the SEC’s electronic data gathering analysis and retrieval system (EDGAR) at www.sec.gov.

You should read these risk factors and the other cautionary statements made in this Form 10-Q as being applicable to all related forward-looking statements wherever they appear in this Form 10-Q. We cannot assure you that the forward-looking statements in this Form 10-Q will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. You should read this Form 10-Q completely. Other than as required by law, we undertake no obligation to update these forward-looking statements, even though our situation may change in the future.

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The primary objective of our investment activity is to preserve our capital for the purpose of funding operations, while at the same time maximizing the income we receive from our investments without significantly increasing risk or decreasing availability. To achieve these objectives, our investment policy allows us to maintain a portfolio of cash equivalents and investments in a variety of marketable securities, including money market funds, U.S. government securities, and certain bank obligations. Our cash and cash equivalents as of March 31, 2015 include liquid money market accounts. Due to the short-term nature of these investments, we believe that there is no material exposure to interest rate risk.

Additionally, we have acquired certain available-for-sale marketable securities under our deferred compensation plan. See Note 4 to our Consolidated Financial Statements included in Part 1 of Item I of this Quarterly Report on Form 10-Q for additional information on these available-for-sale marketable securities and the related risks.

ITEM 4.    CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our Chief Executive Officer and Chief Financial Officer, referred to collectively herein as the Certifying Officers, are responsible for establishing and maintaining our disclosure controls and procedures. The Certifying Officers have reviewed and evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of March 31, 2015. Based on that review and evaluation, which included inquiries made to certain other employees of the Company, the Certifying Officers have concluded that, as of the end of the period covered by this Report, the Company’s disclosure controls and procedures, as designed and implemented, are effective.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the three months ended March 31, 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

21

PART II. — OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

None.

ITEM 1A.    RISK FACTORS

In addition to the other information set forth in this report, including the important information in the section entitled “Private Securities Litigation Reform Act,” you should carefully consider the “Risk Factors” discussed in our Form 10-K for the year ended June 30, 2014 filed with the SEC on August 28, 2014 for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in this report, and materially adversely affect our financial condition or future results. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial might materially adversely affect our actual business, financial condition and/or operating results.

ITEM 2.    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3.    DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.    MINE SAFETY DISCLOSURES

None.

ITEM 5.    OTHER INFORMATION

None.

ITEM 6.    EXHIBITS

(a)Exhibits — See Exhibit Index on page following signatures

22

SIGNATURES

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

Dated: May 8, 2015		CARDIOVASCULAR SYSTEMS, INC.
	By	/s/ David L. Martin
		David L. Martin
		President and Chief Executive Officer
		(Principal Executive Officer)
	By	/s/ Laurence L. Betterley
		Laurence L. Betterley
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

23

EXHIBIT INDEX

CARDIOVASCULAR SYSTEMS, INC.

FORM 10-Q

Exhibit No.	Description
10.1*	Amendment No. 2 to Employment Agreement, dated February 4, 2015, by and between the Company and Kevin J. Kenny.
10.2*	Cardiovascular Systems, Inc. Amended Executive Officer Severance Plan.
10.3*	Form of Restricted Stock Unit Agreement for Directors under the 2014 Equity Incentive Plan.
10.4*	Form of Restricted Stock Agreement with Immediate Vesting under the 2014 Equity Incentive Plan.
31.1*	Certification of President and Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**	Certification of President and Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**	Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101	Financial statements from the quarterly report on Form 10-Q of the Company for the quarter ended March 31, 2015, formatted in XBRL: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Cash Flows, and (iv) the Notes to Financial Statements.

_______________________

* Filed herewith.

** Furnished herewith.

24

EX-10.1

EXHIBIT 10.1

AMENDMENT NO. 2

TO

EMPLOYMENT AGREEMENT

This Amendment is made effective as of February 4, 2015, by and between Cardiovascular Systems, Inc. (the “Corporation”) and Kevin J. Kenny (“Employee”).

WHEREAS, the Corporation and Employee entered into an Employment Agreement dated April 15, 2011, and amended the Agreement by entering into Amendment No. 1 to Employment Agreement on December 31, 2012 (as amended, the “Agreement”); and

WHEREAS, in connection with a promotion of Employee to a new position, the parties wish to amend the Agreement to update Employee’s title and compensation arrangements.

NOW, THEREFORE, the parties agree as follows:

1.    Section 1 of the Agreement is hereby amended in its entirety to read as follows:

Nature and Capacity of Employment. The Corporation hereby agrees to employ Employee as Chief Operating Officer, pursuant to the terms of this Agreement. Employee agrees to perform, on a full time basis, the functions of this position, pursuant to the terms of this Agreement. The employee will report to the Corporation’s Chief Executive Officer.

2.     Section 3 of the Agreement is hereby amended in its entirety to read as follows:

Base Salary. The full-time annual base salary for this position initially will be $430,000.00 per year, payable bi-weekly in accordance with the Corporation’s regular payroll practices, less required and authorized deductions and withholdings. The Corporation will conduct performance and salary reviews on an annual basis and may adjust Employee’s annual base salary as determined appropriate by the Corporation’s Board of Directors or a committee thereof.

3.     Section 4 of the Agreement is hereby amended in its entirety to read as follows:

Bonus. Employee will be eligible to receive an annual cash bonus pursuant to the terms and conditions of the Corporation’s executive officer cash bonus plan established each year and subject to the achievement of the performance goals of the plan.

4.     Section 5 of the Agreement is hereby amended in its entirety to read as follows:

Long Term Incentive Equity Awards. Employee will be eligible to receive equity based awards pursuant to the terms and conditions of the Corporation’s annual long term incentive equity compensation plan established each year, subject to the achievement of performance conditions, if any.

EXHIBIT 10.1

5.    Section 6 of the Agreement is hereby deleted in its entirety and replaced with the word “Reserved” to preserve the integrity of the paragraph numbering in the Agreement.

6.    Section 7 of the Agreement is hereby deleted in its entirety and replaced with the word “Reserved” to preserve the integrity of the paragraph numbering in the Agreement.

7.     Section 11.3 of the Agreement is hereby amended in its entirety to read as follows:

Severance. If at any time Employee is terminated by the Corporation without Cause (as defined below), or Employee terminates his employment for Good Reason (as defined below), and Employee executes, returns and does not rescind, and all rescission periods have expired, by the 60^th day after termination of Employee’s employment, a release of claims agreement in a form supplied by the Corporation, then the Corporation will: (i) pay Employee the Severance Amount (as defined below) at the times and in the manner described below; (ii) pay Employee, at the same time and in the same manner as provided under the Corporation’s cash bonus plan, a pro rata portion of any performance bonus for which the performance period has not expired prior to his termination of employment, with such pro rata portion based on that portion of the performance period during which the Employee was employed; and (iii) continue to pay the Corporation’s ordinary share of premiums for eighteen (18) calendar months for Employee’s COBRA continuation coverage in the Corporation’s group medical, dental, and life insurance plans (as applicable), provided Employee timely elects such continuation coverage and timely pays Employee’s share of such premiums, if any. Notwithstanding the foregoing, if the Corporation determines, in its sole discretion, that the payment of the Corporation’s share of the COBRA premiums would result in a violation of the nondiscrimination rules of Code Section 105(h)(2) or any statute or regulation of similar effect (including, but not limited to, the 2010 Patient Protection and Affordable Care Act, as amended by the 2010 Health Care and Education Reconciliation Act), then, in lieu of paying such COBRA premiums, the Corporation may, in its sole discretion, elect to pay Employee, on the first day of each month, a fully taxable cash payment equal to the Corporation’s share of the COBRA premiums for that month, subject to applicable tax withholdings. Employee may, but is not obligated to, use such payment toward the cost of COBRA premiums. Each of the payments described in clauses (i), (ii) and (iii) above is subject to the application of Code Section 409A as set forth in Section 11.4 below and subject to the condition that Employee, at the time of any such payment, is in compliance with the terms of the release of claims agreement referred to in the preceding sentence and with Sections 12, 13, 14, 15 and 16 of this Agreement.

a. Termination by the Corporation with Cause. For purposes of this Section 11.3, “Cause” means:

(1) Employee’s neglect of any of his material duties or his failure to carry out reasonable directives from the Chief Executive Officer or the Board of Directors or its designees;

EXHIBIT 10.1

(2) Any willful or deliberate misconduct that is injurious to the Corporation;

(3) Any statement, representation or warranty made to the Chief Executive Officer, the Board or its designees by Employee that Employee knows is false or materially misleading; or

(4) Employee’s commission of a felony, whether or not against the Corporation and whether or not committed during Employee’s employment.

b. Termination by Employee for Good Reason. For purposes of this Section 11.3, “Good Reason” means:

(1) The assignment to Employee, without Employee’s written consent, of employment responsibilities that are not of comparable responsibility and status to the employment responsibilities described in this Agreement;

(2) The Corporation’s reduction of Employee’s base salary without Employee’s written consent, unless pursuant to a cost reduction effort approved by the Board of Directors that also results in the reduction of salaries of other executive officers; or

(3) The Corporation’s failure to provide Employee, without Employee’s written consent, those employee benefits specifically required by this Agreement.

c. Severance Amount. Except as set forth in the following sentence with respect to a Change of Control, the “Severance Amount” will be the product of (i) 1.5, multiplied by (ii) Employee’s annual base salary at the time of termination of Employee’s employment. If Employee is terminated following a Change of Control (as that phrase is defined in the Corporation’s Executive Officer Severance Plan) and before the second anniversary of the Change of Control, then the Severance Amount will be the product of (i) 1.5, multiplied by (ii) the sum of (A) Employee’s annual base salary at the time of termination of Employee’s employment and (B) the target bonus amount that Employee was eligible to earn in the year of termination under the Corporation’s cash bonus plan at 100% achievement against Corporation budgets. In either case, the Severance Amount will be paid in approximately equal installments, as determined by the Corporation in its sole and absolute discretion, at regular payroll intervals over a period of eighteen (18) months, beginning on the next regularly scheduled payday coinciding with or immediately following the 60^th day after the termination of the Employee’s employment and continuing until the end of such eighteen (18) month period.

EXHIBIT 10.1

8.    Except as set forth herein, all provisions of the Agreement will remain in full force and effect without modification.

9.    Capitalized terms used in this Amendment, but not otherwise defined, have the meanings assigned to them under the Agreement.

[Signature page follows]

EXHIBIT 10.1

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed on the day and year first above written.

CARDIOVASCULAR SYSTEMS, INC.

By:    /s/ David L. Martin                

Name: David L. Martin                    Title: Chief Executive Officer

/s/ Kevin J. Kenny

Kevin J. Kenny

EX-10.2

EXHIBIT 10.2

CARDIOVASCULAR SYSTEMS, INC.

EXECUTIVE OFFICER SEVERANCE PLAN

Restatement Date: February 27, 2015

I.    Introduction

This document is the Cardiovascular Systems, Inc. Executive Officer Severance Plan (the “Plan”). (Cardiovascular Systems, Inc. is referred to as “the Company” in this document.) The purpose of severance pay is to help ease the financial burden resulting from the Executive Officer’s loss of employment under certain circumstances.

II.    Eligibility for Severance Pay

An Executive Officer is eligible for severance pay hereunder when the Executive Officer’s loss of employment results from (i) the involuntary termination by the Company without Cause, or (ii) termination of employment due to a Reduction-in-Force. Such termination must also constitute a Separation from Service. In all cases, the Executive Officer must execute, return and not rescind a release of claims in a form supplied by and reasonably satisfactory to the Company.

III.    Definitions

A.    Base Salarymeans the then-current annual base salary payable to the Executive Officer in effect on the date of the Executive Officer’s termination of employment; provided, however, that if an Eligible Officer is on an approved short-term disability leave or on designated leave pursuant to the Family and Medical Leave Act or other similar law, “Base Salary” shall mean such Executive Officer’s then-current annual base salary immediately preceding the inception of the leave. Base Salary shall not be reduced for any salary reduction contributions (i) to cash or deferred arrangements under Code Section 401(k), (ii) to a cafeteria plan under Code Section 125, or (iii) to a nonqualified deferred compensation plan. Subject to paragraph (b) in the definition of “Salary Continuation Benefits,” Base Salary shall not take into account or include any bonuses, reimbursed expenses, credits or benefits (including benefits under any plan of deferred compensation), or any additional cash compensation or compensation payable in a form other than cash.

B.Cause means (i) the Executive Officer’s neglect of any of his material duties or his failure to carry out reasonable directives from the Board of Directors or its designees;     (ii) any willful or deliberate misconduct that is injurious to the Company; (iii) any statement, representation or warranty made to the Board or its designees by the Executive Officer that the Executive Officer knows is false or materially misleading; or (iv)    the Executive Officer’s commission of a felony, whether or not against the Company and whether or not committed during the Executive Officer’s employment.

C.    Change of Controlmeans any of the following events occurring after the date of this Agreement:

(a) A merger or consolidation to which the Company is a party if the individuals and entities who were stockholders of the Company immediately prior to the effective date of such merger or consolidation have, immediately following the effective date of such merger or consolidation, beneficial ownership (as defined in Rule 13d‑3 under the Securities Exchange Act of 1934) of less than fifty percent (50%) of the total combined voting power of all classes of securities issued by the surviving corporation for the election of directors of the surviving corporation;

(b) The acquisition of direct or indirect beneficial ownership (as defined in Rule 13d-3 under the Securities Exchange Act of 1934) of securities of the Company by any person or entity or by a group of associated persons or entities acting in concert in one or a series of transactions, which causes the aggregate beneficial ownership of such person, entity or group to equal or exceed twenty percent (20%) or more of the total combined voting power of all classes of the Company’s then issued and outstanding securities;

(c) The sale of the properties and assets of the Company substantially as an entirety, to any person or entity that is not a wholly-owned subsidiary of the Company;

(d) The stockholders of the Company approve any plan or proposal for the liquidation of the Company;

(e) A change in the composition of the Board of the Company at any time during any consecutive twenty-four (24) month period such that the “Continuity Directors” no longer constitute at least a seventy percent (70%) majority of the Board. For purposes of this event, “Continuity Directors” means those members of the Board who were directors at the beginning of such consecutive twenty-four (24) month period and any directors whose election was unanimously approved by the directors serving at the beginning of such 24 month period; or

(f) The Company enters into a letter of intent, an agreement in principle or a definitive agreement relating to an event described in Sections (a), (b), (c), (d) or (e) above that ultimately results in such a Change of Control, or a tender or exchange offer or proxy contest is commenced that ultimately results in an event described in Sections (b) or (e) above.

D.    Code means the Internal Revenue Code of 1986, as amended.

E.    Compensation Committee means the Human Resources and Compensation Committee of the Board of Directors, or any similar successor committee.

F.    Executive Officer means (i) the Chief Executive Officer; (ii) the Chief Financial Officer; (iii) the Chief Operating Officer; (iv) the Executive Vice Presidents and Senior Vice Presidents; (v) the Vice Presidents and other corporate officers; (vi) any other officers of the Company who have been designated by the Board of Directors as “officers” within the meaning of Section 16 of the Securities Exchange Act of 1934, as amended; and (vii) such other employees designated by the Compensation Committee, in its sole discretion, to participate in this Plan.

G.    Reduction-in-Force means a work force reduction, restructuring, or other cost containment or business decision involving the termination of employment of Company employees that is designated by the Compensation Committee, in its sole and absolute discretion, from time to time as a “Reduction-in-Force,” which designation shall be binding for purposes of this Plan.

H.    Separation from Service means the Executive Officer’s termination of employment with the Company other than death or disability. The Executive Officer shall not be deemed to have a Separation from Service while the Executive Officer is on military leave, sick leave or other bona fide leave of absence if the period of the leave does not exceed six (6) months or, if longer, the Executive Officer’s right to reemployment with the Company is provided either by statute or contract. If the period of leave exceeds six (6) months and the Executive Officer’s right to reemployment is not provided either by statute or contract, the Executive Officer shall be deemed to have a Separation from Service on the first day immediately following such six (6) month period. A termination of employment will be deemed to occur if, based on the facts and circumstances, the Executive Officer and the Company reasonably anticipate that no further services would be performed by the Executive Officer (whether as an employee or an independent contractor) after the termination date or that the level of the Executive Officer’s services would permanently decrease to no more than 20% of the average level of bona fide services performed by the Executive Officer (whether as an employee or an independent contractor) over the immediately preceding 36-month period (or the period of time that the Executive Officer performed services for the Company, if less than 36 months). Such determination shall be made in accordance with Code Section 409A and the regulations, notices and other guidance of general applicability issued thereunder.

I.    Severance Period means the period of time set forth in Exhibit A.

J.    Salary Continuation Benefits means:

(a)    In the case of an involuntary termination by the Company without Cause or termination of employment due to a Reduction-in-Force that does not occur within 24 months following the effective date of a Change of Control, the continued payment during the Severance Period of the Executive Officer’s Base Salary.

(b)    In the case of an involuntary termination by the Company without Cause or termination of employment due to a Reduction-in-Force that occurs within 24 months following the effective date of a Change of Control, the payment during the Severance Period of the Executive Officer’s Base Salary, but increased to an amount equal to the sum of (i) Executive Officer’s Base Salary and (ii) the target bonus amount that Executive Officer was eligible to earn for the fiscal year in which termination occurs under the Company’s cash bonus plan assuming 100% achievement against the Company’s budgets.

IV.    Amount of Payment.

An Executive Officer who is eligible for severance benefits under this Plan shall receive Salary Continuation Benefits until the earlier of (i) the end of the Executive Officer’s Severance Period, or (ii) the date the Executive Officer fails to comply with the provisions of any employment or other written agreement in effect between the Executive Officer and the Company that contains non-competition, confidentiality and/or non-solicitation provisions. The Executive Officer’s Salary Continuation Benefit shall be payable in accordance with the Company’s regular payroll practice on the regularly scheduled paydays on which the Executive Officer would have otherwise been paid during the Severance Period if a termination of employment had not occurred.

V.    Time of Payment

Salary Continuation Benefits shall commence on the next regularly scheduled payday coinciding with or immediately following the 60th day after the termination of the Executive Officer’s employment, provided that the Executive Officer has executed and submitted a release of claims in a form supplied by and reasonably satisfactory to the Company and (i) the statutory rescission periods during which the Executive Officer is entitled to revoke such release have expired on or before that 60th day, and (ii) the Executive Officer has not in fact revoked such release of claims by that 60th day.

Notwithstanding the foregoing, if the Executive Officer is a “specified employee” as defined in Code Section 409A and the regulations, notices and other guidance of general applicability issued thereunder, then to the extent any amount payable pursuant to this Article V is subject to and not otherwise exempt from the requirements of Code Section 409A, no payment of such amount shall be made before the first day of the seventh (7^th) month period immediately following the date on which the Executive Officer experiences a Separation from Service, or if earlier, on the date of the Executive Officer’s death. Each amount that is paid to an Executive Officer pursuant to this Article V shall be treated as a separate payment for purposes of Section 409A of the Code.

VI.    Effect on Other Benefits.

In addition to Salary Continuation Benefits, an Executive Officer who is eligible for severance benefits under this Plan shall receive payment for a pro rata portion of any performance bonus for which the performance period has not expired prior to his or her termination of employment, with such pro rata portion based on that portion of the performance period during which the Executive Officer was employed. Such pro rata bonus shall be determined after the end of the performance period, and shall be paid at the same time and in the same manner as provided under the Company’s bonus plan.

The Executive Officer will be paid for any accrued and unused vacation in accordance with the Company’s regular vacation policy, and this Plan does not affect payments made under that policy.

The Executive Officer will have the right to continue his or her medical, dental and/or life insurance benefits to the extent required by applicable federal or state law. If the Executive Officer timely elects to continue such coverage, the Company will pay its ordinary share of the premiums for such coverage during the Severance Period, provided that the Executive Officer timely pays his or her share of the premiums, if any. If continuation of such coverage remains available after under applicable federal or state law after the Severance Period, the Executive Officer will be required to timely pay the full cost of the premiums for such coverage.

Upon the Executive Officer’s involuntary termination by the Company without Cause or termination of employment due to a Reduction-in-Force, the Compensation Committee or Board of Directors (as applicable) shall take any action that may be required under the terms of the Company’s Equity Incentive Plans to (i) accelerate the vesting of that portion of any outstanding stock options, restricted stock awards, restricted stock unit awards or other equity awards previously granted to the Executive Officer that would have vested within the 12-month period immediately following the Executive Officer’s termination of employment, (ii) permit any outstanding stock options to remain exercisable for 180 days following the Executive Officer’s termination of employment, and (iii) provide that, if the Executive Officer breaches any noncompetition, nondisparagement or nonsolicitation provisions of any employment or other written agreement in effect between the Executive Officer and the Company, the Executive Officer shall immediately forfeit any and all rights in any outstanding equity awards and shall immediately forfeit any shares of the Company’s Common Stock that the Executive Officer previously received under such equity awards. Notwithstanding the foregoing, if any such equity awards are intended to be qualified performance-based awards under Code Section 162(m), the vesting of such awards shall be accelerated only if and to the extent permitted by Code Section 162(m) and the regulations issued thereunder.

All other Company-provided benefits (for example, any other paid leave, disability insurance coverage, etc.) will end on the Executive Officer’s termination date.

VII.     Right to Terminate.

The Company reserves the right to change this Plan at any time to any extent and in any manner that it may deem advisable. While the Company expects this Plan to continue, the Company further reserves the right to terminate the Plan at any time. Further, the Company specifically reserves the right to amend this Plan without any Executive Officer’s consent to the extent necessary or desirable to comply with the requirements of Section 409A of the Code and the regulations, notices and other guidance of general application issued thereunder, and with any other applicable federal or state law. Notwithstanding the foregoing, the Company shall not amend or terminate this Plan in any manner that diminishes the benefits paid hereunder: (i) within 24 months after a Change of Control, (ii) if such amendment or termination was requested by a party (other than the Board of Directors of the Company) that had previously taken other steps reasonably calculated to result in a Change of Control and that ultimately results in a Change of Control, or (iii) if such amendment or termination arose in connection with or in anticipation of a Change of Control that ultimately occurs.

VIII.     General Plan Provisions

A.    Withholding. The Company shall be entitled to deduct from all payments or benefits provided for under this Plan any federal, state or local income and employment taxes required by law to be withheld with respect to such payments or benefits.

B.    No Employment Rights. Participation in the Plan does not give an Executive Officer any rights to continuing employment with the Company.

C.    Successors and Assigns. An Executive Officer’s rights under this Plan shall inure to the benefit of and shall be enforceable by the Executive Officer, his or her heirs and the personal representative of his or her estate. Except as otherwise provided, this Plan shall be binding upon and inure to the benefit of the Company and its successors and assigns. The Company shall not be a party to any Change of Control unless and until its obligations under the Plan are expressly assumed by any successor or successors or are otherwise continued as required by Section VII.

D.    Notices. Notices and all other communications required under the Plan shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States certified or registered mail, return receipt requested, postage prepaid. Any such notice or other communication provided to the Company shall be sent to the address of the Agent for Service of Legal Process set forth below, or to such other address as the Company may have furnished in writing. Any such notice or other communication provided to an Executive Officer shall be addressed to the last-known address that the Company has on file for such Executive Officer.

E.    No Assignments. Benefits under the Plan cannot be assigned, transferred or sold to anyone else. Benefits also cannot be used as collateral for loans or pledged in payment of debts, contracts or any other liability.

F.    Superseding Effect. This Plan replaces any and all severance pay plans, policies or practices, written or unwritten, that the Company may have had in effect for its Executive Officers from time to time prior to the Effective Date, including the Executive Officer Severance Plan dated June 28, 2010, as amended. Notwithstanding the foregoing, nothing in this Plan shall adversely affect the rights an Executive Officer may have to severance payments under any employment or other written agreement executed by and between the Company and the Executive Officer (hereinafter referred to as a “Severance Agreement”); provided, however, that in the event the Executive Officer is entitled to and is receiving severance benefits under his Severance Agreement, the Executive Officer shall receive the severance benefits under his Severance Agreement first, and then shall be eligible for benefits under this Plan, but only to the extent such benefits are not duplicative of the benefits previously paid pursuant to such Severance Agreement, with the maximum severance benefits payable to such Eligible Officer under both the Plan and the Severance Agreement equal to the maximum aggregate benefit payable to the Executive Officer under the Severance Agreement or this Plan, whichever is greater.

G.    Governing Law. To the extent not preempted by ERISA, the validity, interpretation, construction and performance of the Plan shall in all respects be governed by the laws of Minnesota, without reference to principles of conflict of law.

H.    Code Section 409A. It is intended that any amounts payable under the Plan will be exempt from or comply with the applicable requirements, if any, of Code Section 409A and the notices, regulations and other guidance of general applicability issued thereunder, and the Company will interpret the Plan in a manner that will preclude the imposition of additional taxes and interest under Code Section 409A. Any payments under the Plan that may be excluded from Code Section 409A either as separation pay due to an involuntary separation from service or as a short-term deferral will be so excluded to the maximum extent possible.

IX.    Additional Information Regarding This Plan

Plan Sponsor/Plan Administrator	Cardiovascular Systems, Inc. 1225 Old Highway 8 NW St. Paul, MN 55112 (651) 259-1600
Employer Identification Number	41-1698056
Plan Number	502
Plan Year	July 1 through June 30
Type of Plan	Welfare benefit plan providing severance benefits to certain officers
Type of Administration	The Plan is administered by the Plan Administrator
Claims Administrator	Cardiovascular Systems, Inc.
Agent for Service of Legal Process	Cardiovascular Systems, Inc.
Funding	The Plan is funded through the general assets of the Company
Administrator Discretion	The Plan Administrator has discretionary authority to interpret, apply and enforce all provisions of the Plan, for example: determining an Executive Officer’s eligibility to participate in the Plan, an Executive Officer’s base pay, whether an Executive Officer is entitled to severance pay and the amount of any such payment.

X. Claims Procedures

If an Executive Officer does not agree with the way his or her claim for benefits has been handled, the Executive Officer may object in writing during the 30-day period after the date payment of benefits is to begin, or would begin if any benefits were payable. The Executive Officer’s authorized representative may also object on the Executive Officer’s behalf, subject to any documentation required by the Company to verify that such representative has that authority.

The Company must respond to the Executive Officer’s written objection. That response must be in writing and must be provided to the Executive Officer during the 90-day period following the Company’s receipt of the written objection. However, if special circumstances require an extension of the time period for the Company to make a decision, the Company will, within the initial 90-day period, notify the Executive Officer of those circumstances and the date by which the Company expects to make its decision. In no event will the Company have longer than 180 days from the receipt of the Executive Officer’s written objection to make its decision. The Company will issue a written explanation of its decision, which must:

• State the reason(s) why the Executive Officer’s claim for benefits was denied;

• Specifically refer to any Plan provisions that formed the basis for the Company’s decision;

• Describe any additional material or information necessary for the Executive Officer to perfect his or her claim and why that material or information is necessary; and

• Describe the procedures the Executive Officer must follow to have his or her claim reviewed further, including the Executive Officer’s right to bring a civil action under ERISA in the event of an adverse decision.

If an Executive Officer disagrees with the Company’s decision, the Executive Officer may request an appeal by filing a written application for review with the Company within the 60-day period following the Executive Officer’s receipt of the notice of denial of his or her original claim. The Executive Officer will be entitled to review any applicable documents or other records, to request copies of such documents or other records without charge, and to submit written comments, documents or other materials relating to his or her claim for benefits. The Company must provide the Executive Officer with a decision on his or her appeal within 60 days following receipt of the Executive Officer’s written request. However, if special circumstances require an extension of the time period for the Company to make a decision, the Company will, within the initial 60-day period, notify the Executive Officer of those circumstances and the date by which the Company expects to make its decision. In no event will the Company have longer than 120 days to make its decision. The Company will issue a written explanation of its decision, which will be considered final. That explanation must:

• State the reason(s) why the Executive Officer’s claim for benefits was denied;

• Specifically refer to any Plan provisions that formed the basis for the Company’s decision;

• Inform the Executive Officer that he or she may have reasonable access to all documents, records and other materials relevant to his or her claim, and may request copies at no charge; and

• Inform the Executive Officer of his or her right to bring a civil action under ERISA.

If an Executive Officer does not give proper notice or otherwise follow the rules for filing and reviewing claims under the Plan, the Executive Officer and/or the Executive Officer’s beneficiary may not be able to take further legal action, including arbitration, to contest any decision made under the Plan with respect to the Executive Officer’s benefits.

XI.    ERISA Rights

Federal law requires the Company to provide to employees a “Statement of ERISA Rights” set forth in federal regulations. That statement, which follows, describes some of the Executive Officers’ rights under federal law with respect to the Plan.

As a participant in the Plan, Executive Officers are entitled to certain rights and protections under the Employee Retirement Income Security Act of 1974 (“ERISA”). ERISA provides that all Plan participants shall be entitled to:

Receive Information About Your Plan and Benefits

(a) Examine, without charge, at the Plan Administrator’s office and at other specified locations, such as worksites, all documents governing this Plan, including insurance contracts and collective bargaining agreements, if any, filed by the Plan with the U.S. Department of Labor and available at the Public Disclosure Room of the Employee Benefits Security Administration.

(b) Obtain, upon written request to the Plan Administrator, copies of documents governing the operation of this Plan, including insurance contracts and collective bargaining agreements, if any, and updated summary plan description. The Administrator may make a reasonable charge for the copies.

(c) Receive a summary of the Plan’s annual financial report. The Plan Administrator is required by law to furnish each participant with a copy of this summary annual report.

Prudent Actions by Plan Fiduciaries

In addition to creating rights for Plan participants, ERISA imposes duties upon the people who are responsible for the operation of the Plan. The people who operate the Plan, called “fiduciaries” of the Plan, have a duty to do so prudently and in the interest of you and other plan participants and beneficiaries. No one, including the Company or any other person, may fire you or otherwise discriminate against you in any way to prevent you from obtaining a benefit or exercising your rights under ERISA.

Enforce Your Rights

If your claim for a benefit is denied or ignored, in whole or in part, you have a right to know why this was done, to obtain copies of documents relating to the decision without charge, and to appeal any denial, all within certain time schedules.

Under ERISA, there are steps you can take to enforce the above rights. For instance, if you request a copy of documents and do not receive them within 30 days, you may file suit in a federal court. In such a case, the court may require the Plan Administrator to provide the materials and pay you up to $110 a day until you receive the materials, unless the materials were not sent because of reasons beyond the control of the Plan Administrator. If you have a claim for benefits that is denied or ignored, in whole or in part, you may file suit in a state or federal court. If it should happen that Plan fiduciaries do not administer the Plan in accordance with its terms, or if you are discriminated against for asserting your rights, you may seek assistance from the U.S. Department of Labor, or you may file suit in a federal court. The court will decide who should pay court costs and legal fees. If you are successful, the court may order the person you have sued to pay these costs and fees. If you lose, the court may order you to pay these costs and fees; for example, if it finds your claim is frivolous.

Assistance with Your Questions

If you have any questions about this Plan, you should contact the Plan Administrator. If you have any questions about this statement or about your rights under ERISA, or if you need assistance in obtaining documents from the Plan Administrator, you should contact the nearest office of the Employee Benefits Security Administration, U.S. Department of Labor, listed in your telephone directory or the Division of Technical Assistance and Inquiries, Employee Benefits Security Administration, U.S. Department of Labor, 200 Constitution Avenue N.W., Washington, D.C. 20210. You may also obtain certain publications about your rights and responsibilities under ERISA by calling the publications hotline of the Employee Benefits Security Administration.

EXHIBIT A

Executive	Severance Period
Chief Executive Officer	24 months
Chief Financial Officer/Chief Operating Officer	18 months
Senior Vice Presidents/Executive Vice Presidents	15 months
Vice Presidents, Other Corporate Officers and Section 16 Officers, and Other Employees Designated by the Compensation Committee	12 months

EX-10.3

EXHIBIT 10.3

RESTRICTED STOCK UNIT AGREEMENT

CARDIOVASCULAR SYSTEMS, INC.

2014 EQUITY INCENTIVE PLAN

THIS AGREEMENT, made effective as of the _____ day of ______, 20__ by and between CARDIOVASCULAR SYSTEMS, INC., a Delaware corporation (the “Company”), and ______________ (“Participant”).

W I T N E S S E T H:

WHEREAS, Participant on the date hereof is a nonemployee director of the Company or one of its Subsidiaries; and

WHEREAS, the Company wishes to grant a restricted stock unit award to Participant for shares of the Company’s Common Stock pursuant to the Company’s 2014 Equity Incentive Plan (the “Plan”); and

WHEREAS, the Administrator of the Plan has authorized the grant of a restricted stock unit award to Participant;

NOW, THEREFORE, in consideration of the premises and of the mutual covenants herein contained, the parties hereto agree as follows:

1.    Grant of Restricted Stock Unit Award; Term. The Company hereby grants to Participant on the date set forth above a restricted stock unit award (the “Award”) for _________________________________ (________) restricted stock units on the terms and conditions set forth herein. Each restricted stock unit shall entitle the Participant to receive either one share of the Company’s Common Stock or a cash payment, as described in Paragraph 3 below.

2.    Immediate Vesting of Restricted Stock Units. The restricted stock units subject to this Award are fully vested upon grant and shall not be subject to any risk of forfeiture in the event Participant ceases to be a nonemployee director of the Company.

3.    Issuance of Shares or Payment. Within thirty (30) days after ____________, 20__ (the “Settlement Date”), the Company shall cause to be issued a stock certificate representing that number of shares of Common Stock which is equivalent to the number of restricted stock units set forth in Paragraph 1 above, less any shares withheld for payment of taxes as provided in Section 4(f) below, and shall deliver such certificate to Participant. Until the issuance of such shares, Participant shall not be entitled to vote the shares of Common Stock represented by such restricted stock units, shall not be entitled to receive dividends attributable to such shares of Common Stock, and shall not have any other rights as a shareholder with respect to such shares.

1

EXHIBIT 10.3

Alternatively, the Company may, in its sole discretion, pay Participant a lump sum payment, in cash, equal to the Fair Market Value of that number of shares of Common Stock which is equivalent to the number of restricted stock units set forth in Paragraph 1. Such Fair Market Value shall be determined as of the Settlement Date. If the Company makes such cash payment, the Participant shall not be entitled to vote the shares of Common Stock represented by such restricted stock units, shall not be entitled to receive dividends attributable to such shares of Common Stock, and shall not have any other rights as a shareholder with respect to such shares.

4.    General Provisions.

a.    Employment or Other Relationship. This Agreement shall not confer on Participant any right with respect to continuance as a director or any other relationship by the Company, nor will it interfere in any way with the right of the Company to terminate such employment or relationship. Nothing in this Agreement shall be construed as creating an employment contract or any other contract for any specified term between Participant and the Company.

b.    280G Limitations. Notwithstanding anything in the Plan, this Agreement or in any other agreement, plan, contract or understanding entered into from time to time between Participant and the Company or any of its Subsidiaries to the contrary (except an agreement that expressly modifies or excludes the application of this Paragraph 4(b)), the lapse of the risks of forfeiture of this Award shall not be accelerated in connection with a Change of Control to the extent that such acceleration, taking into account all other rights, payments and benefits to which Participant is entitled under any other plan or agreement, would constitute a "parachute payment" or an "excess parachute payment" for purposes of Code Sections 280G and 4999, or any successor provisions, and the regulations issued thereunder; provided, however, that the Administrator, in its sole discretion and in accordance with applicable law, may modify or exclude the application of this Paragraph 4(b).

c.    Securities Law Compliance. Participant shall not transfer or otherwise dispose of the shares of Stock received pursuant to this Agreement until such time as counsel to the Company shall have determined that such transfer or other disposition will not violate any state or federal securities laws. Participant may be required by the Company, as a condition of the effectiveness of this restricted stock award, to provide any written assurances that are necessary or desirable in the opinion of the Company and its counsel to ensure the issuance complies with the applicable securities laws, including that all Stock subject to this Agreement shall be held, until such time that such Stock is registered and freely tradable under applicable state and federal securities laws, for Participant’s own account without a view to any further distribution thereof, that the certificates (or, if permitted book entries) for such shares shall bear an appropriate legend or notation to that effect and that such shares will be not transferred or disposed of except in compliance with applicable state and federal securities laws.

d.Mergers, Recapitalizations, Stock Splits, Etc.Except as otherwise specifically provided in any employment, change of control, severance or similar agreement executed by the Participant and the Company, pursuant and subject to Section 15 of the Plan, certain

2

EXHIBIT 10.3

changes in the number or character of the shares of Common Stock of the Company (through sale, merger, consolidation, exchange, reorganization, divestiture (including a spin-off), liquidation, recapitalization, stock split, stock dividend or otherwise) shall result in an adjustment, reduction or enlargement, as appropriate, in Participant’s rights with respect to any restricted stock units subject to this Award (i.e., Participant shall have such “anti-dilution” rights under the Award with respect to such events, but, subject to the Administrator’s discretion, shall not have any “preemptive” rights). Any additional restricted stock units that are credited pursuant to such adjustment shall be subject to the same restrictions as are applicable to the restricted stock units with respect to which the adjustment relates.

e.    Shares Reserved. The Company shall at all times during the term of this Award reserve and keep available such number of shares as will be sufficient to satisfy the requirements of this Agreement.

f.    Withholding Taxes. To permit the Company to comply with all applicable federal and state income tax laws or regulations, the Company may take such action as it deems appropriate to ensure that, if necessary, all applicable federal and state payroll, income or other taxes attributable to this Award are withheld from any amounts payable by the Company to the Participant. If the Company is unable to withhold such federal and state taxes, for whatever reason, the Participant hereby agrees to pay to the Company an amount equal to the amount the Company would otherwise be required to withhold under federal or state law prior to the issuance of any certificates for the shares of Stock subject to this Award. Subject to such rules as the Administrator may adopt, the Administrator may, in its sole discretion, permit Participant to satisfy such withholding tax obligations, in whole or in part, by delivering shares of the Company’s Common Stock, including shares of Common Stock received pursuant to this Award, having a Fair Market Value. As of the date the amount of tax to be withheld is determined under applicable tax law, equal to the statutory minimum amount required to be withheld for tax purposes. In no event may the Participant deliver shares of Common Stock having a Fair Market Value in excess of such statutory minimum required tax withholding. The Participant’s election to deliver shares for purposes of such withholding tax obligations shall be made on or before the date that triggers such obligations or, if later, the date that the amount of tax to be withheld is determined under applicable tax law. Participant’s election to deliver shares for purposes of such withholding tax obligations shall be irrevocable and shall be approved by the Administrator and otherwise comply with such rules as the Administrator may adopt to assure compliance with Rule 16b‑3, or any successor provision, as then in effect, of the General Rules and Regulations under the Securities and Exchange Act of 1934, if applicable.

g.    Nontransferability. No portion of this Award may be assigned or transferred, in whole or in part, other than by will or by the laws of descent and distribution.

h.    2014 Equity Incentive Plan. The Award evidenced by this Agreement is granted pursuant to the Plan, a copy of which Plan has been made available to Participant and is hereby incorporated into this Agreement. This Agreement is subject to and in all respects limited and conditioned as provided in the Plan. All capitalized terms in this Agreement no defined herein shall have the meanings ascribed to them in the Plan. The Plan governs this Award and, in the event

3

EXHIBIT 10.3

of any questions as to the construction of this Agreement or in the event of a conflict between the Plan and this Agreement, the Plan shall govern, except as the Plan otherwise provides.

i.    Lockup Period Limitation. Participant agrees that in the event the Company advises Participant that it plans an underwritten public offering of its Common Stock in compliance with the Securities Act of 1933, as amended, Participant will execute any lock-up agreement the Company and the underwriter(s) deem necessary or appropriate, in their sole discretion, with such public offering.

j.    Blue Sky Limitation. Notwithstanding anything in this Agreement to the contrary, in the event the Company makes any public offering of its securities and determines, in its sole discretion, that it is necessary to reduce the number of Restricted Stock Unit Awards so as to comply with any state securities or Blue Sky law limitations with respect thereto, the Board of Directors of the Company shall accelerate the vesting of this Award (in full or in part), provided that the Company gives Participant 15 days’ prior written notice of such acceleration. Notice shall be deemed given when delivered personally or when deposited in the United States mail, first class postage prepaid and addressed to Participant at the address of Participant on file with the Company.

k.    Accounting Compliance. Participant agrees that, if Participant is an “affiliate” of the Company or any Affiliate (as defined in applicable legal and accounting principles) at the time of a Change of Control, Participant will comply with all requirements of Rule 145 of the Securities Act of 1933, as amended, and the requirements of such other legal or accounting principles, and will execute any documents necessary to ensure such compliance.

l.    Stock Legend. The Administrator may require that the certificates for any shares of Common Stock purchased by Participant (or, in the case of death, Participant’s successors) shall bear an appropriate legend to reflect the restrictions of Paragraph 4(c) and Paragraphs 4(i) through 4(k) of this Agreement; provided, however, that failure to so endorse any of such certificates shall not render invalid or inapplicable Paragraph 4(c) or Paragraph 4(i) through 4(k).

m.    Scope of Agreement. This Agreement shall bind and inure to the benefit of the Company and its successors and assigns and Participant and any successor or successors of Participant. This Award is expressly subject to all terms and conditions contained in the Plan and in this Agreement, and Participant’s failure to execute this Agreement shall not relieve Participant from complying with such terms and conditions.

n.    Choice of Law. The law of the state of Minnesota shall govern all questions concerning the construction, validity, and interpretation of this Plan, without regard to that state’s conflict of laws rules.

o.    Severability. In the event that any provision of this Agreement shall be held illegal or invalid for any reason, such illegality or invalidity shall not affect the remaining provisions of this Agreement, and the Agreement shall be construed and enforced as if the illegal or invalid provision had not been included.

4

EXHIBIT 10.3

p.     Arbitration. Any dispute arising out of or relating to this Agreement or the alleged breach of it, or the making of this Agreement, including claims of fraud in the inducement, shall be discussed between the disputing parties in a good faith effort to arrive at a mutual settlement of any such controversy. If, notwithstanding, such dispute cannot be resolved, such dispute shall be settled by binding arbitration. Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. The arbitrator shall be a retired state or federal judge or an attorney who has practiced securities or business litigation for at least 10 years. If the parties cannot agree on an arbitrator within 20 days, any party may request that the chief judge of the District Court of Hennepin County, Minnesota, select an arbitrator. Arbitration will be conducted pursuant to the provisions of this Agreement, and the commercial arbitration rules of the American Arbitration Association, unless such rules are inconsistent with the provisions of this Agreement. Limited civil discovery shall be permitted for the production of documents and taking of depositions. Unresolved discovery disputes may be brought to the attention of the arbitrator who may dispose of such dispute. The arbitrator shall have the authority to award any remedy or relief that a court of this state could order or grant; provided, however, that punitive or exemplary damages shall not be awarded. The arbitrator may award to the prevailing party, if any, as determined by the arbitrator, all of its costs and fees, including the arbitrator’s fees, administrative fees, travel expenses, out-of-pocket expenses and reasonable attorneys’ fees. Unless otherwise agreed by the parties, the place of any arbitration proceedings shall be Hennepin County, Minnesota.

q.    Right to Amend. The Company hereby reserves the right to amend this Agreement without Participant’s consent to the extent necessary or desirable to comply with the requirements of Code Section 409A and the regulations, notices and other guidance of general application issued thereunder.

ACCORDINGLY, the parties hereto have caused this Agreement to be executed on the day and year first above written.

CARDIOVASCULAR SYSTEMS, INC.

By:

Name:

Title:

________________, Participant

5

EX-10.4

EXHIBIT 10.4

RESTRICTED STOCK AGREEMENT

CARDIOVASCULAR SYSTEMS, INC.

2014 EQUITY INCENTIVE PLAN

THIS AGREEMENT is made effective as of the ___ day of __________, 20__, by and between CARDIOVASCULAR SYSTEMS, INC., a Delaware corporation (the “Company”), and ________________ (the “Participant”).

W I T N E S S E T H:

WHEREAS, the Participant is, on the date hereof, a key employee, officer, director of, or a consultant or advisor to, the Company or a subsidiary of the Company; and

WHEREAS, the Company wishes to grant a restricted stock award to the Participant for shares of the Company’s Common Stock pursuant to the Company’s Amended and Restated 2014 Equity Incentive Plan (the “Plan”); and

WHEREAS, the Administrator of the Plan has authorized the grant of a restricted stock award to the Participant;

NOW, THEREFORE, in consideration of the premises and of the mutual covenants herein contained, the parties hereto agree as follows:

1.    Grant of Restricted Stock Award. The Company hereby grants to the Participant on the date set forth above a restricted stock award (the “Award”) for ________________ (______) shares of Common Stock on the terms and conditions set forth herein, which shares are subject to adjustment pursuant to Section 15 of the Plan. The Company shall cause to be issued one or more stock certificates (or, upon request and if permitted in the Administrator’s discretion, an entry to be made in the books of the Company or its designated agent) representing such shares of Common Stock in the Participant’s name, and shall hold each such certificate until such time as the risk of forfeiture and other transfer restrictions set forth in this Agreement have lapsed with respect to the shares represented by the certificate. The Company may also place a legend on such certificates describing the risks of forfeiture and other transfer restrictions set forth in this Agreement providing for the cancellation of such certificates if the shares of Common Stock are forfeited as provided in Section 2 below. Until such risks of forfeiture have lapsed or the shares subject to this Award have been forfeited pursuant to Section 2 below, the Participant shall be entitled to vote the shares represented by such stock certificates and shall receive all dividends attributable to such shares, but the Participant shall not have any other rights as a shareholder with respect to such shares.

2.    Vesting of Restricted Stock. The shares of Common Stock subject to this Award shall be immediately vested and shall not be subject to any risks of forfeiture.

EXHIBIT 10.4

3.    General Provisions.

a.    Employment or Other Relationship. This Agreement shall not confer on the Participant any right with respect to continuance of employment or other relationship by the Company or any of its Subsidiaries, nor will it interfere in any way with the right of the Company to terminate such employment or relationship Nothing in this Agreement shall be construed as creating an employment or service contract for any specified term between Participant and the Company or any Subsidiary.

b.    280G Limitations. Notwithstanding anything in the Plan, this Agreement or in any other agreement, plan, contract or understanding entered into from time to time between Participant and the Company or any of its Subsidiaries to the contrary(except an agreement that expressly modifies or excludes the application of this Paragraph 4(b)),the lapse of the risks of forfeiture of this Awardshall not be accelerated in connection with a Change of Control to the extent that such acceleration, taking into account all other rights, payments and benefits to which Participant is entitled under any other plan or agreement, would constitute a "parachute payment" or an "excess parachute payment" for purposes of Code Sections 280G and 4999, or any successor provisions, and the regulations issued thereunder; provided, however, that the Administrator, in its sole discretion and in accordance with applicable law, may modify or exclude the application of this Paragraph 4(b).

c.    Securities Law Compliance. Participant shall not transfer or otherwise dispose of the shares of Stock received pursuant to this Agreement until such time as counsel to the Company shall have determined that such transfer or other disposition will not violate any state or federal securities laws. The Participant may be required by the Company, as a condition of the effectiveness of this restricted stock award, to provide any written assurances that are necessary or desirable in the opinion of the Company and its counsel to ensure the issuance complies with the applicable securities laws, including that all Stock subject to this Agreement shall be held, until such time that such Stock is registered and freely tradable under applicable state and federal securities laws, for Participant’s own account without a view to any further distribution thereof, that the certificates (or, if permitted book entries) for such shares shall bear an appropriate legend or notation to that effect and that such shares will be not transferred or disposed of except in compliance with applicable state and federal securities laws.

d.    Mergers, Recapitalizations, Stock Splits, Etc. Except as otherwise specifically provided in any employment, change of control, severance or similar agreement executed by the Participant and the Company, pursuant and subject to Section 15 of the Plan, certain changes in the number or character of the shares of Stock of the Company (through sale, merger, consolidation, exchange, reorganization, divestiture (including a spin-off), liquidation, recapitalization, stock split, stock dividend, or otherwise) shall result in an adjustment, reduction, or enlargement, as appropriate, in the number of shares subject to this Award (i.e., Participant shall have such “anti-dilution” rights under the Award with respect to such events, but, subject to the Administrator’s discretion, shall not have any “preemptive” rights). Any additional shares that are credited pursuant to such adjustment shall be subject to the same restrictions as are applicable to the shares with respect to which the adjustment relates.

EXHIBIT 10.4

e.    Shares Reserved. The Company shall at all times during the term of this Award reserve and keep available such number of shares as will be sufficient to satisfy the requirements of this Agreement.

f.    Withholding Taxes. To permit the Company to comply with all applicable federal and state income tax laws or regulations, the Company may take such action as it deems appropriate to ensure that, if necessary, all applicable federal and state payroll, income or other taxes attributable to this Award are withheld from any amounts payable by the Company to the Participant. If the Company is unable to withhold such federal and state taxes, for whatever reason, the Participant hereby agrees to pay to the Company an amount equal to the amount the Company would otherwise be required to withhold under federal or state law prior to the transfer of any certificates for the shares of Stock subject to this Award. Subject to such rules as the Administrator may adopt, the Administrator may, in its sole discretion, permit Participant to satisfy such withholding tax obligations, in whole or in part, by delivering shares of Common Stock, including shares of Common Stock received pursuant to this Award having a Fair Market Value, as of the date the amount of tax to be withheld is determined under applicable tax law, equal to the statutory minimum amount required to be withheld for tax purposes. In no event may the Participant deliver shares of Common Stock having a Fair Market Value in excess of such statutory minimum required tax withholding. Participant’s election to deliver shares for purposes of such withholding tax obligations shall be made on or before the date that triggers such obligations or, if later, the date that the amount of tax to be withheld is determined under applicable tax law. Participant’s election to deliver shares for purposes of such withholding tax obligations shall be irrevocable and shall be approved by the Administrator and otherwise comply with such rules as the Administrator may adopt to assure compliance with Rule 16b-3 or any successor provision, as then in effect, of the General Rules and Regulations under the Securities and Exchange Act of 1934, if applicable.

g.    Nontransferability. No portion of this Award for which the risks of forfeiture have not lapsed may be assigned or transferred, in whole or in part, other than by will or by the laws of descent and distribution.

h.    2014 Equity Incentive Plan. The Award evidenced by this Agreement is granted pursuant to the Plan, a copy of which Plan has been made available to the Participant and is hereby incorporated into this Agreement. This Agreement is subject to and in all respects limited and conditioned as provided in the Plan. All capitalized terms in this Agreement not defined herein shall have the meanings ascribed to them in the Plan. The Plan governs this Award and, in the event of any questions as to the construction of this Agreement or in the event of a conflict between the Plan and this Agreement, the Plan shall govern, except as the Plan otherwise provides.

i.    Lockup Period Limitation. Participant agrees that in the event the Company advises Participant that it plans an underwritten public offering of its Common Stock in compliance with the Securities Act of 1933, as amended, Participant will execute any lock-up agreement the Company and the underwriter(s) deem necessary or appropriate, in their sole discretion, with such public offering.

EXHIBIT 10.4

j.    Blue Sky Limitation. Notwithstanding anything in this Agreement to the contrary, in the event the Company makes any public offering of its securities and determines, in its sole discretion, that it is necessary to reduce the number of Restricted Stock Awards so as to comply with any state securities or Blue Sky law limitations with respect thereto, the Board of Directors of the Company shall accelerate the vesting of this Award (in full or in part), provided that the Company gives Participant 15 days’ prior written notice of such acceleration. Notice shall be deemed given when delivered personally or when deposited in the United States mail, first class postage prepaid and addressed to Participant at the address of Participant on file with the Company.

k.    Accounting Compliance. Participant agrees that, if Participant is an “affiliate” of the Company or any Affiliate (as defined in applicable legal and accounting principles) at the time of a Change of Control, Participant will comply with all requirements of Rule 145 of the Securities Act of 1933, as amended, and the requirements of such other legal or accounting principles, and will execute any documents necessary to ensure such compliance.

l.    Stock Legend. The Administrator may require that the certificates for any shares of Common Stock purchased by Participant (or, in the case of death, Participant’s successors) shall bear an appropriate legend to reflect the restrictions of Paragraph 4(c) and Paragraphs 4(i) through 4(k) of this Agreement; provided, however, that failure to so endorse any of such certificates shall not render invalid or inapplicable Paragraph 4(c) or Paragraph 4(i) through 4(k).

m.    Scope of Agreement. This Agreement shall bind and inure to the benefit of the Company and its successors and assigns and of the Participant and any successor or successors of the Participant. This Award is expressly subject to all terms and conditions contained in the Plan and in this Agreement, and Participant’s failure to execute this Agreement shall not relieve Participant from complying with such terms and conditions.

n.    Choice of Law. The law of the state of Minnesota shall govern all questions concerning the construction, validity, and interpretation of this Plan, without regard to that state’s conflict of laws rules.

o.    Severability. In the event that any provision of this Agreement shall be held illegal or invalid for any reason, such illegality or invalidity shall not affect the remaining provisions of this Agreement, and the Agreement shall be construed and enforced as if the illegal or invalid provision had not been included.

p.    Arbitration. Any dispute arising out of or relating to this Agreement or the alleged breach of it, or the making of this Agreement, including claims of fraud in the inducement, shall be discussed between the disputing parties in a good faith effort to arrive at a mutual settlement of any such controversy. If, notwithstanding, such dispute cannot be resolved, such dispute shall be settled by binding arbitration. Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. The arbitrator shall be a retired state or federal judge or an attorney who has practiced securities or business litigation for at least 10 years. If the parties cannot agree on an arbitrator within 20 days, any party may request that the chief judge of the District Court for Hennepin County, Minnesota, select an arbitrator. Arbitration will be conducted

EXHIBIT 10.4

pursuant to the provisions of this Agreement, and the commercial arbitration rules of the American Arbitration Association, unless such rules are inconsistent with the provisions of this Agreement. Limited civil discovery shall be permitted for the production of documents and taking of depositions. Unresolved discovery disputes may be brought to the attention of the arbitrator who may dispose of such dispute. The arbitrator shall have the authority to award any remedy or relief that a court of this state could order or grant; provided, however, that punitive or exemplary damages shall not be awarded. The arbitrator may award to the prevailing party, if any, as determined by the arbitrator, all of its costs and fees, including the arbitrator’s fees, administrative fees, travel expenses, out-of-pocket expenses and reasonable attorneys’ fees. Unless otherwise agreed by the parties, the place of any arbitration proceedings shall be Hennepin County, Minnesota.

ACCORDINGLY, the parties hereto have caused this Agreement to be executed on the day and year first above written.

CARDIOVASCULAR SYSTEMS, INC.

By:

Name:

Title:

Participant

EX-31.1

Exhibit 31.1

CERTIFICATION UNDER SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, David L. Martin, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Cardiovascular Systems, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

	By:	/s/ David L. Martin
Dated: May 8, 2015		David L. Martin
		President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION UNDER SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Laurence L. Betterley, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Cardiovascular Systems, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

	By:	/s/ Laurence L. Betterley
Dated: May 8, 2015		Laurence L. Betterley
		Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the filing of the Quarterly Report on Form 10-Q for the quarter ended March 31, 2015 (the “Report”) by Cardiovascular Systems, Inc. (“Registrant”), I, David L. Martin, the Chief Executive Officer of the Company, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that to the best of my knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

	By:	/s/ David L. Martin
Dated: May 8, 2015		David L. Martin
		President and Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the filing of the Quarterly Report on Form 10-Q for the quarter ended March 31, 2015 (the “Report”) by Cardiovascular Systems, Inc. (“Registrant”), I, Laurence L. Betterley, the Chief Financial Officer of the Company, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that to the best of my knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

	By:	/s/ Laurence L. Betterley
Dated: May 8, 2015		Laurence L. Betterley
		Chief Financial Officer

XML

Stock Options and Restricted Stock Awards - Restricted Stock Award Activity (Details) (Restricted Stock, USD $)	9 Months Ended
	Mar. 31, 2015
Restricted Stock
Number of Shares
Awards outstanding, balance at beginning of period (in shares)	1,276,403
Awards granted (in shares)	475,827
Awards forfeited (in shares)	(100,269)
Awards vested (in shares)	(574,195)
Awards outstanding, balance at end of period (in shares)	1,077,766
Weighted Average Fair Value
Awards outstanding, balance at beginning of period (in usd per share)	$ 17.37
Awards granted (in usd per share)	$ 30.06
Awards forfeited (in usd per share)	$ 20.33
Awards vested (in usd per share)	$ 17.69
Awards outstanding, balance at end of period (in usd per share)	$ 20.55

XML

Selected Consolidated Financial Statement Information - Inventories (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Jun. 30, 2014
Inventories
Raw materials	$ 7,231	$ 5,879
Work in process	943	855
Finished goods	5,045	6,156
Total inventories	$ 13,219	$ 12,890

XML

Earnings Per Share - EPS Reconciliation (Additional Information) (Details)	3 Months Ended		9 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Mar. 31, 2015	Mar. 31, 2014
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive shares excluded from the calculation (in shares)	0	0	0	0
Stock Options
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Anti-dilutive shares excluded from the calculation (in shares)			720,233	927,809

XML

Selected Consolidated Financial Statement Information

9 Months Ended

Mar. 31, 2015

Quarterly Financial Information Disclosure [Abstract]

Selected Consolidated Financial Statement Information

Selected Consolidated Financial Statement Information

Accounts Receivable

Accounts receivable consists of the following:

	March 31,			June 30,
	2015			2014
Accounts receivable	$	32,599		$	21,834
Less: Allowance for doubtful accounts	(1,379		)	(451		)
Total accounts receivable	$	31,220		$	21,383

Inventories

Inventories consist of the following:

	March 31,		June 30,
	2015		2014
Raw materials	$	7,231	$	5,879
Work in process	943		855
Finished goods	5,045		6,156
Total inventories	$	13,219	$	12,890

Property and Equipment

Property and equipment consists of the following:

	March 31,			June 30,
	2015			2014
Land	$	500		$	500
Building	22,902			—
Equipment	10,914			6,436
Furniture	2,570			626
Leasehold improvements	233			233
Construction in progress	458			11,499
	37,577			19,294
Less: Accumulated depreciation	(5,218		)	(3,997		)
Total property and equipment, net	$	32,359		$	15,297

In June 2014, the Company announced plans to build a new corporate headquarters in New Brighton, Minnesota, construction of which was completed in March 2015. The 125,000-square-foot, two-story building has space for more than 500 employees and contains dedicated research and development, training and education, and manufacturing facilities. The new headquarters replaces the two St. Paul, Minnesota leased facilities.

Accrued Expenses

Accrued expenses consist of the following:

	March 31,		June 30,
	2015		2014
Salaries and bonus	$	4,895	$	5,244
Commissions	6,197		6,069
Accrued vacation	3,544		2,843
Other	1,720		474
Total accrued expenses	$	16,356	$	14,630

XML

Debt (Details) (USD $)	3 Months Ended		9 Months Ended		0 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Mar. 31, 2015	Mar. 31, 2014	Sep. 29, 2014	Apr. 14, 2010	Jun. 30, 2014	Mar. 29, 2010	May 10, 2013
Debt Instrument [Line Items]
Change in fair value of conversion option	$ 0	$ 0	$ 0	$ (61,000)
Silicon Valley Bank
Debt Instrument [Line Items]
Line of credit expiration date					Dec. 31, 2014
Silicon Valley Bank | Line of Credit
Debt Instrument [Line Items]
Borrowings line of credit								15,000,000
Borrowings line of credit eligible accounts								85.00%
Line of credit, outstanding balance							2,400,000
Partners For Growth
Debt Instrument [Line Items]
Floating interest rate									2.75%
PFG Convertible debt	0		0				0
Number of days for determination of price per share						10 days
Reduce in conversion price									15.00%
Partners For Growth | Interest and Other, Net
Debt Instrument [Line Items]
Change in fair value of conversion option			0	61,000
Partners For Growth | Maximum
Debt Instrument [Line Items]
Loan and security agreement									5,000,000

XML

Deferred Compensation Plan (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Mar. 31, 2015
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Amortized Cost	1,768
Unrealized Gains	105
Unrealized Losses	0
Fair Value	1,873
Fair Value, Assets, Level 1 to Level 2 Transfers, Amount	0
Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	1,873
Recurring | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	1,278
Recurring | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	595
Recurring | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	0
Mutual Funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Amortized Cost	1,768
Unrealized Gains	105
Unrealized Losses	0
Fair Value	1,873
Mutual Funds | Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	1,873
Mutual Funds | Recurring | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	1,278
Mutual Funds | Recurring | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	595
Mutual Funds | Recurring | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value	0
Maximum
Deferred Compensation Arrangements [Abstract]
Deferred compensation plan, maximum percentage of employees' base salary	100.00%

XML

Interest and Other, Net (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Mar. 31, 2015	Mar. 31, 2014
Other Income and Expenses [Abstract]
Interest expense, net of premium amortization	$ (1)	$ (103)	$ (23)	$ (948)
Change in fair value of conversion options	0	0	0	(61)
Net write-offs upon conversion (option and premium amortization)	0	0	0	(655)
Other	(112)	(16)	(145)	(63)
Total Interest and other, net	$ (113)	$ (119)	$ (168)	$ (1,727)

XML

Stock Options and Restricted Stock Awards (Details)	9 Months Ended	0 Months Ended
	Mar. 31, 2015	Aug. 11, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Exercise period for employee's vested options	90 days
Restricted Stock | Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period	1 year
Restricted Stock | Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period	3 years
Performance Shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Aggregate shares based on thresholds measuring total shareholder return		76,112
Aggregate shares based on thresholds measuring annual revenue growth during fiscal 2015		76,112

XML

Summary of Significant Accounting Policies

9 Months Ended

Mar. 31, 2015

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

Interim Financial Statements

The Company prepared the unaudited interim consolidated financial statements and related unaudited financial information in the footnotes in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements. The year-end consolidated balance sheet was derived from the Company’s audited consolidated financial statements, but does not include all disclosures as required by GAAP. These interim consolidated financial statements reflect all adjustments consisting of normal recurring accruals, which, in the opinion of management, are necessary to state fairly the Company’s consolidated financial position, the results of its operations and its cash flows for the interim periods. These interim consolidated financial statements should be read in conjunction with the consolidated annual financial statements and the notes thereto included in the Form 10-K filed by the Company with the SEC on August 28, 2014. The nature of the Company’s business is such that the results of any interim period may not be indicative of the results to be expected for the entire year.

Use of Estimates

The preparation of the Company’s consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Stock-Based Compensation

The Company recognizes stock-based compensation expense in an amount equal to the fair value of share-based payments computed at the date of grant. The fair value of all restricted stock awards are expensed in the consolidated statements of operations ratably over the related vesting period.

Revenue Recognition

The Company sells the majority of its products via direct shipment to hospitals or clinics. The Company recognizes revenue when all of the following criteria are met: persuasive evidence of an arrangement exists; delivery has occurred; the sales price is fixed or determinable; and collectability is reasonably assured. The Company records estimated sales returns, discounts and rebates as a reduction of net sales.

Costs related to products delivered are recognized in the period revenue is recognized. Cost of goods sold consists primarily of raw materials, direct labor, and manufacturing overhead.

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, “Revenue From Contracts with Customers.” The guidance requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which an entity expects to be entitled in exchange for those goods or services. The guidance also requires expanded disclosures relating to the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. Additionally, qualitative and quantitative disclosures are required about customer contracts, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. ASU 2014-09 is effective for annual periods beginning after December 15, 2016, including interim periods within that reporting period, using one of two prescribed retrospective methods. Early adoption is not permitted. The Company is evaluating the impact of the amended revenue recognition guidance on its consolidated financial statements.

In August 2014, the FASB issued ASU No. 2014-15, “Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern.” The guidance requires management to perform interim and annual assessments of an entity's ability to continue as a going concern within one year of the date of issuance of the entity's financial statements. The entity must also provide certain disclosures if there is substantial doubt about the entity's ability to continue as a going concern. ASU 2014-15 is effective for annual periods ending after December 15, 2016, and interim periods thereafter. Early adoption is permitted. The Company does not anticipate a material impact on its financial statements upon adoption.

XML

Stock Options and Restricted Stock Awards - Stock Option Activity (Details) (USD $)	9 Months Ended
	Mar. 31, 2015
Number of Options
Options outstanding, balance at beginning of period (in shares)	922,809
Options exercised (in shares)	(202,576)
Options outstanding, balance at end of period (in shares)	720,233
Weighted Average Exercise Price
Options outstanding at beginning of period (in usd per share)	$ 10.16
Options exercised (in usd per share)	$ 9.75
Options outstanding at end of period (in usd per share)	$ 10.28

XML

Consolidated Balance Sheets (Unaudited) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Jun. 30, 2014
Current assets
Cash and cash equivalents	$ 93,485	$ 126,592
Accounts receivable, net	31,220	21,383
Inventories	13,219	12,890
Prepaid expenses and other current assets	3,904	1,846
Total current assets	141,828	162,711
Property and equipment, net	32,359	15,297
Patents, net	4,399	3,823
Other assets	40	70
Total assets	178,626	181,901
Current liabilities
Short-term borrowings	0	2,400
Accounts payable	17,527	12,699
Accrued expenses	16,356	14,630
Total current liabilities	33,883	29,729
Long-term liabilities
Other liabilities	2,004	117
Total liabilities	35,887	29,846
Commitments and contingencies	0	0
Common stock, $0.001 par value; authorized 100,000,000 common shares at March 31, 2015 and June 30, 2014; issued and outstanding 31,716,032 at March 31, 2015 and 31,084,742 at June 30, 2014, respectively	32	31
Additional paid in capital	405,320	390,589
Accumulated other comprehensive income	105	0
Accumulated deficit	(262,718)	(238,565)
Total stockholders’ equity	142,739	152,055
Total liabilities and stockholders’ equity	$ 178,626	$ 181,901

XML

Consolidated Statements of Comprehensive Loss (Unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Mar. 31, 2015	Mar. 31, 2014
Statement of Comprehensive Income [Abstract]
Net loss	$ (10,656)	$ (9,712)	$ (24,153)	$ (25,662)
Other comprehensive income:
Unrealized gain on available for sale securities	105	0	105	0
Comprehensive loss	$ (10,551)	$ (9,712)	$ (24,048)	$ (25,662)

XML

Texas Production Facility (Details) (USD $)	0 Months Ended		9 Months Ended	12 Months Ended
	Jul. 02, 2012 Job Employee	Jun. 17, 2009	Mar. 31, 2015 Employee	Jun. 30, 2014	Jul. 02, 2012 Employee	Sep. 09, 2009 sqft
Production Facility [Abstract]
Agreement lease with PEDC, number of square feet						46,000
Corporate job creation agreement date		Jun. 17, 2009
Net cash incentive funds					$ 2,975,000
Cash incentive funds upon hiring of 125th full time employee at facility	425,000
Number of employees to be maintained for grant of second cash incentive fund					125
Cash Incentive Funds upon Hiring of Seventy Fifth Full Time Employee at Facility	425,000
Number of employees to be maintained for grant of first cash incentive fund			75		75
Maximum number of jobs maintained to retain cash incentive	25
Net award related to job creation agreement	1,020,000
Funded amount grant from state of Texas under Texas enterprise fund program	510,000
Amount received of Texas enterprise fund program			340,000
Remaining amount received of Texas enterprise fund program			170,000
Reimbursement of award related to Job Creation Agreement			49,000	46,000
Cumulative expenses			59,000
Deferred grant incentive current liability			$ 0

XML

Commitment and Contingencies (Tables)

9 Months Ended

Mar. 31, 2015

Commitments and Contingencies Disclosure [Abstract]

Schedule of Future Minimum Rental Payments for Operating Leases

Future minimum lease payments under the agreements as of March 31, 2015 are as follows:

Three months ended June 30, 2015	$	263
Fiscal 2016	766
Fiscal 2017	544
Fiscal 2018	513
Fiscal 2019	462
Thereafter	345
	$	2,893

XML

Earnings Per Share - EPS Reconciliation (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Mar. 31, 2015	Mar. 31, 2014
Numerator
Net loss	$ (10,656)	$ (9,712)	$ (24,153)	$ (25,662)
Denominator
Weighted average common shares – basic	31,644,522	30,368,685	31,479,803	27,411,237
Effect of dilutive stock options and warrants (in shares)	0	0	0	0
Weighted average common shares outstanding – diluted	31,644,522	30,368,685	31,479,803	27,411,237
Net loss per common share — basic and diluted (in usd per share)	$ (0.34)	$ (0.32)	$ (0.77)	$ (0.94)

XML

Selected Consolidated Financial Statement Information - Accounts Receivable (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Jun. 30, 2014
Accounts Receivable
Accounts receivable	$ 32,599	$ 21,834
Less: Allowance for doubtful accounts	1,379	451
Total accounts receivable	$ 31,220	$ 21,383

XML

Business Overview

9 Months Ended

Mar. 31, 2015

Accounting Policies [Abstract]

Business Overview

Business Overview

Company Description

Cardiovascular Systems, Inc. (the “Company”) develops and commercializes innovative solutions for treating vascular and coronary diseases. The Company’s peripheral arterial disease products, the Stealth 360°^® PAD System, Diamondback 360^® PAD System, and Predator 360°^® PAD System, are catheter-based platforms capable of treating a broad range of plaque types, including calcified plaque, in leg arteries both above and below the knee and address many of the limitations associated with existing surgical, catheter and pharmacological treatment alternatives. In October 2013, the Company received premarket approval (“PMA”) from the FDA to market the Diamondback 360^® Coronary Orbital Atherectomy System (“OAS”) as a treatment for severely calcified coronary arteries. The Company began a controlled commercial launch of the Diamondback 360^® Coronary OAS following receipt of PMA approval. In March 2014, we received approval for the Diamondback 360^® 60cm Peripheral OAS access device and in April 2015 we received approval for the 4 French 1.25 Solid Diamondback 360^® OAS access device. These micro-invasive devices use smaller access sheaths that can provide procedural benefits and allow physicians to treat PAD patients in the small and tortuous vessels located below the knee through alternative access sites in the ankle and foot as well as in the groin. In November 2014, the Company received CE Mark for its Stealth 360° PAD System and is currently evaluating the timing and structure of its plans to commercialize products in Europe.

XML

Consolidated Balance Sheets (Unaudited) (Parenthetical) (USD $)	Mar. 31, 2015	Jun. 30, 2014
Statement of Financial Position [Abstract]
Common stock, par value (in usd per share)	$ 0.001	$ 0.001
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	31,716,032	31,084,742
Common stock, shares outstanding	31,716,032	31,084,742

XML

Summary of Significant Accounting Policies (Policies)

9 Months Ended

Mar. 31, 2015

Accounting Policies [Abstract]

Interim Financial Statements

Interim Financial Statements

The Company prepared the unaudited interim consolidated financial statements and related unaudited financial information in the footnotes in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements. The year-end consolidated balance sheet was derived from the Company’s audited consolidated financial statements, but does not include all disclosures as required by GAAP. These interim consolidated financial statements reflect all adjustments consisting of normal recurring accruals, which, in the opinion of management, are necessary to state fairly the Company’s consolidated financial position, the results of its operations and its cash flows for the interim periods. These interim consolidated financial statements should be read in conjunction with the consolidated annual financial statements and the notes thereto included in the Form 10-K filed by the Company with the SEC on August 28, 2014. The nature of the Company’s business is such that the results of any interim period may not be indicative of the results to be expected for the entire year.

Use of Estimates

Use of Estimates

The preparation of the Company’s consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Stock-Based Compensation

Stock-Based Compensation

The Company recognizes stock-based compensation expense in an amount equal to the fair value of share-based payments computed at the date of grant. The fair value of all restricted stock awards are expensed in the consolidated statements of operations ratably over the related vesting period.

Revenue Recognition

Revenue Recognition

The Company sells the majority of its products via direct shipment to hospitals or clinics. The Company recognizes revenue when all of the following criteria are met: persuasive evidence of an arrangement exists; delivery has occurred; the sales price is fixed or determinable; and collectability is reasonably assured. The Company records estimated sales returns, discounts and rebates as a reduction of net sales.

Costs related to products delivered are recognized in the period revenue is recognized. Cost of goods sold consists primarily of raw materials, direct labor, and manufacturing overhead.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, “Revenue From Contracts with Customers.” The guidance requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which an entity expects to be entitled in exchange for those goods or services. The guidance also requires expanded disclosures relating to the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. Additionally, qualitative and quantitative disclosures are required about customer contracts, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract. ASU 2014-09 is effective for annual periods beginning after December 15, 2016, including interim periods within that reporting period, using one of two prescribed retrospective methods. Early adoption is not permitted. The Company is evaluating the impact of the amended revenue recognition guidance on its consolidated financial statements.

In August 2014, the FASB issued ASU No. 2014-15, “Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern.” The guidance requires management to perform interim and annual assessments of an entity's ability to continue as a going concern within one year of the date of issuance of the entity's financial statements. The entity must also provide certain disclosures if there is substantial doubt about the entity's ability to continue as a going concern. ASU 2014-15 is effective for annual periods ending after December 15, 2016, and interim periods thereafter. Early adoption is permitted. The Company does not anticipate a material impact on its financial statements upon adoption.

XML

Document and Entity Information	9 Months Ended
	Mar. 31, 2015	Apr. 30, 2015
Document and Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2015
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	Q3
Trading Symbol	CSII
Entity Registrant Name	CARDIOVASCULAR SYSTEMS INC
Entity Central Index Key	0001180145
Current Fiscal Year End Date	--06-30
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		31,708,745

XML

Selected Consolidated Financial Statement Information (Tables)

9 Months Ended

Mar. 31, 2015

Quarterly Financial Information Disclosure [Abstract]

Schedule of Accounts Receivable

Accounts receivable consists of the following:

	March 31,			June 30,
	2015			2014
Accounts receivable	$	32,599		$	21,834
Less: Allowance for doubtful accounts	(1,379		)	(451		)
Total accounts receivable	$	31,220		$	21,383

Schedule of Inventory

Inventories consist of the following:

	March 31,		June 30,
	2015		2014
Raw materials	$	7,231	$	5,879
Work in process	943		855
Finished goods	5,045		6,156
Total inventories	$	13,219	$	12,890

Schedule of Property and Equipment

Property and equipment consists of the following:

	March 31,			June 30,
	2015			2014
Land	$	500		$	500
Building	22,902			—
Equipment	10,914			6,436
Furniture	2,570			626
Leasehold improvements	233			233
Construction in progress	458			11,499
	37,577			19,294
Less: Accumulated depreciation	(5,218		)	(3,997		)
Total property and equipment, net	$	32,359		$	15,297

Schedule of Accrued Expenses

Accrued expenses consist of the following:

	March 31,		June 30,
	2015		2014
Salaries and bonus	$	4,895	$	5,244
Commissions	6,197		6,069
Accrued vacation	3,544		2,843
Other	1,720		474
Total accrued expenses	$	16,356	$	14,630

XML

Consolidated Statements of Operations (Unaudited) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Mar. 31, 2015	Mar. 31, 2014
Income Statement [Abstract]
Revenues	$ 47,004	$ 34,945	$ 133,090	$ 97,048
Cost of goods sold	10,416	7,749	28,647	21,926
Gross profit	36,588	27,196	104,443	75,122
Expenses:
Selling, general and administrative	39,354	31,428	105,414	84,267
Research and development	7,777	5,361	23,014	14,790
Total expenses	47,131	36,789	128,428	99,057
Loss from operations	(10,543)	(9,593)	(23,985)	(23,935)
Interest and other, net	(113)	(119)	(168)	(1,727)
Net loss	$ (10,656)	$ (9,712)	$ (24,153)	$ (25,662)
Net loss per common share:
Basic and diluted (in usd per share)	$ (0.34)	$ (0.32)	$ (0.77)	$ (0.94)
Weighted average common shares used in computation:
Basic and diluted (in shares)	31,644,522	30,368,685	31,479,803	27,411,237

XML

Interest and Other, Net

9 Months Ended

Mar. 31, 2015

Other Income and Expenses [Abstract]

Interest and Other, Net

Interest and Other, Net

Interest and other, net, includes the following:

	Three Months Ended   March 31,						Nine Months Ended   March 31,
	2015			2014			2015			2014
Interest expense, net of premium amortization	$	(1	)	$	(103	)	$	(23	)	$	(948	)
Change in fair value of conversion options	—			—			—			(61		)
Net write-offs upon conversion (option and premium amortization)	—			—			—			(655		)
Other	(112		)	(16		)	(145		)	(63		)
Total Interest and other, net	$	(113	)	$	(119	)	$	(168	)	$	(1,727	)

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Debt

9 Months Ended

Mar. 31, 2015

Debt Disclosure [Abstract]

Debt

Debt

Loan and Security Agreement with Silicon Valley Bank

On March 29, 2010, the Company entered into an amended and restated loan and security agreement with Silicon Valley Bank. The agreement was amended on December 27, 2011 to increase outstanding borrowings, amended on June 29, 2012 to modify financial covenants and reduce the interest rate and other fees, amended on May 10, 2013 to modify financial covenants, amended on June 26, 2014 to extend the line of credit's maturity date to September 30, 2014 and reduce the interest rate, and amended on September 29, 2014 to extend the line of credit's maturity date to December 31, 2014. The agreement, as amended, included a $15,000 line of credit. The balance outstanding on the line of credit was $0 and $2,400 as of March 31, 2015 and June 30, 2014, respectively. On December 31, 2014, the agreement matured.

The $15,000 line of credit had a floating interest rate equal to the Wall Street Journal’s prime rate. Interest on borrowings were due monthly and the principal balance was due at maturity. Borrowings on the line of credit were based on 85% of eligible accounts. Accounts receivable receipts were deposited into a lockbox account in the name of Silicon Valley Bank. The line of credit was subject to non-use fees, annual fees, and cancellation fees.

Loan and Security Agreement with Partners for Growth

On April 14, 2010, the Company entered into a loan and security agreement with Partners for Growth III, L.P. (“PFG”), as amended on August 23, 2011, December 27, 2011, June 30, 2012, and May 10, 2013. The agreement, as amended, provided that PFG would make loans to the Company up to $5,000. The loans had a floating per annum interest rate equal to 2.75% above Silicon Valley Bank’s prime rate, and such interest was payable monthly. The principal balance of and any accrued and unpaid interest on any notes was due on the maturity date and could not be prepaid by the Company at any time in whole or in part. As of March 31, 2015 and June 30, 2014, there were no loans outstanding, and on April 14, 2015, the agreement matured.

At any time prior to the maturity date, PFG could have, at its option, converted any outstanding loan into shares of the Company’s common stock at the applicable conversion price, which in each case equaled the ten-day volume weighted average price per share of the Company’s common stock prior to the issuance date of each note. The Company could have also effected at any time a mandatory conversion of amounts, subject to certain terms, conditions and limitations provided in the agreement, including a requirement that the ten-day volume weighted average price of the Company’s common stock prior to the date of conversion was at least 15% greater than the conversion price. The Company could have reduced the conversion price to a price that represented a 15% discount to the ten-day volume weighted average price of its common stock to satisfy this condition and effected a mandatory conversion. The Company recorded an expense of $0 and $61 for the nine months ended March 31, 2015 and 2014, respectively, related to the change in fair value of the conversion options on all outstanding loans. This amount is a component of interest and other, net, on the accompanying statement of operations.

Loans were secured by certain of the Company’s assets, and the agreement contained customary covenants limiting the Company’s ability to, among other things, incur debt or liens, make certain investments and loans, effect certain redemptions of and declare and pay certain dividends on its stock, permit or suffer certain change of control transactions, dispose of collateral, or change the nature of its business. In addition, the PFG loan and security agreement contained financial covenants requiring the Company to maintain certain liquidity and fixed charge coverage ratios. The Company was in compliance with all financial covenants at March 31, 2015 and through the maturity date. If the Company did not comply with the various covenants, PFG could have, subject to various customary cure rights, declined to provide additional loans, required amortization of any future loan over its remaining term, or required the immediate payment of all amounts outstanding under any future loan and foreclosed on any or all collateral, depending on which financial covenants were not maintained.

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Earnings Per Share (Tables)

9 Months Ended

Mar. 31, 2015

Earnings Per Share [Abstract]

Reconciliation of Numerators and Denominators Used in Basic and Diluted Earnings Per Common Share Computations

The following table presents a reconciliation of the numerators and denominators used in the basic and diluted earnings per common share computations (in thousands except share and per share amounts):

	Three Months Ended   March 31,						Nine Months Ended   March 31,
	2015			2014			2015			2014
Numerator
Net loss	$	(10,656	)	$	(9,712	)	$	(24,153	)	$	(25,662	)
Denominator
Weighted average common shares – basic	31,644,522			30,368,685			31,479,803			27,411,237
Effect of dilutive stock options and warrants(a)	—			—			—			—
Weighted average common shares outstanding – diluted	31,644,522			30,368,685			31,479,803			27,411,237
Net loss per common share — basic and diluted	$	(0.34	)	$	(0.32	)	$	(0.77	)	$	(0.94	)

(a) At March 31, 2015 and 2014, 720,233 and 927,809 stock options, respectively, were outstanding. The effect of the shares that would be issued upon exercise of these options has been excluded from the calculation of diluted loss per share because those shares are anti-dilutive.

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Deferred Compensation Plan (Tables)

9 Months Ended

Mar. 31, 2015

Compensation and Retirement Disclosure [Abstract]

Schedule of Available-for-sale Marketable Securities

Investments as of March 31, 2015 consisted of the following:

	Amortized Cost	Unrealized Gains	Unrealized Losses	Fair Value
Mutual funds	1,768	105	—	1,873
Total short-term investments	1,768	105	—	1,873

Available-for-sale Securities at Fair Value on Recurring Basis

The following table provides information by level for the Company's available-for-sale marketable securities as of March 31, 2015 that were measured at fair value on a recurring basis:

		Fair Value Measurements Using Inputs Considered as
	Fair Value	Level 1	Level 2	Level 3
Mutual funds	1,873	1,278	595	—
Total short-term investments	1,873	1,278	595	—

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Texas Production Facility

9 Months Ended

Mar. 31, 2015

Production Facility [Abstract]

Texas Production Facility

Texas Production Facility

Effective on September 9, 2009, the Company entered into an agreement with the Pearland Economic Development Corporation (the “PEDC”) for the construction and lease of an approximately 46,000 square foot production facility located in Pearland, Texas. The facility primarily serves as an additional manufacturing location for the Company.

The Company and the PEDC entered into a Corporate Job Creation Agreement dated June 17, 2009, which was subsequently amended July 2, 2012. The Job Creation Agreement, as amended, provided the Company with $2,975 in net cash incentive funds. The PEDC will provide the Company with an additional $425 of net cash incentive funds if: (1) the Company hires 125 full-time employees at the facility before June 30, 2015 and (2) maintains 125 employees at the facility through June 30, 2016. The Company had the opportunity to receive an additional $425 of net cash incentive funds upon hiring the 75^th employee on or before March 31, 2014; however, the Company did not achieve this incentive.

In order to retain all of the cash incentives, the Company must maintain no fewer than 25 jobs at the Texas facility through June 30, 2015. Failure to meet this requirement will result in an obligation to make reimbursement payments to the PEDC as outlined in the amended agreement. The Company will not have any reimbursement requirements after June 30, 2015. As of March 31, 2015, the Company was in compliance with all minimum requirements under the amended agreement. The Company believes it will be able to comply with the conditions specified in the amended agreement.

The Job Creation Agreement, as amended, also provided the Company with a net $1,020 award, of which $510 was received from the PEDC and the remainder is funded through the Texas Enterprise Fund program associated with the State of Texas. As of March 31, 2015, $340 has been received and the remaining $170 will be provided upon the hiring of the 75^th full-time employee at the facility. The grant from the State of Texas is subject to reimbursement if the Company fails to meet certain job creation targets through 2014 and maintain these positions through 2020. The Company reimbursed the State of Texas $49 and $46 during fiscal 2015 and 2014, respectively, as it did not meet certain employment targets.

The Company has presented the net cash incentive funds as a current and long-term liability on the balance sheet. The liabilities are reduced through the term of the agreement and recorded as an offset to expenditures incurred using a systematic methodology. As of March 31, 2015, the deferred grant incentive liabilities have been reduced by $59 in cumulative expenses, resulting in a remaining current liability of $0.

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Stock Options and Restricted Stock Awards

9 Months Ended

Mar. 31, 2015

Share-based Arrangements with Employees and Nonemployees [Abstract]

Stock Options and Restricted Stock Awards

Stock Options and Restricted Stock Awards

On November 12, 2014, the Company's stockholders approved the 2014 Equity Incentive Plan (the “2014 Plan”), under which restricted stock awards have been granted to employees, directors and consultants. Previously, options to purchase common stock and restricted stock awards were granted under the 2007 Equity Incentive Plan (the “2007 Plan”) and the 2003 Stock Option Plan (the “2003 Plan”). The 2014 Plan, the 2007 Plan and the 2003 Plan are collectively referred to as the “Plans.”

Stock Options

All options granted under the Plans become exercisable over periods established at the date of grant. The option exercise price is generally not less than the estimated fair market value of the Company’s common stock at the date of grant, as determined by the Company’s management and Board of Directors. In addition, the Company has granted nonqualified stock options to a director outside of the Plans. An employee's vested options must be exercised at or within 90 days of termination to avoid forfeiture. As of March 31, 2015, all outstanding options were fully vested.

Stock option activity for the nine months ended March 31, 2015 is as follows:

	Number of Options(a)		Weighted Average Exercise Price
Options outstanding at June 30, 2014	922,809		$	10.16
Options exercised	(202,576	)	$	9.75
Options outstanding at March 31, 2015	720,233		$	10.28
(a) Includes the effect of options granted, exercised, forfeited or expired from the 2003 Plan and 2007 Plan, and options granted outside such plans.

Restricted Stock

The fair value of each restricted stock award is equal to the fair market value of the Company’s common stock at the date of grant. Vesting of restricted stock awards generally ranges from one to three years. The estimated fair value of restricted stock awards, including the effect of estimated forfeitures, is recognized on a straight-line basis over the restricted stock’s vesting period.

On August 11, 2014, the Company granted performance based restricted stock awards to certain executives. The performance based awards included grants of a maximum aggregate of 76,112 shares that vest based upon achievement of certain thresholds measuring total shareholder return during periods within fiscal 2015 compared to a pre-determined peer group of companies, and grants of a maximum aggregate of 76,112 shares that vest based upon achievement of certain thresholds measuring annual revenue growth during fiscal 2015 compared to a pre-determined peer group of companies. Management adjusts expense as required based on expected revenue growth performance for those awards.

Restricted stock award activity for the nine months ended March 31, 2015 is as follows:

	Number of Shares		Weighted Average  Fair Value
Restricted stock awards outstanding at June 30, 2014	1,276,403		$	17.37
Restricted stock awards granted (1)	475,827		$	30.06
Restricted stock awards forfeited	(100,269	)	$	20.33
Restricted stock awards vested	(574,195	)	$	17.69
Restricted stock awards outstanding at March 31, 2015	1,077,766		$	20.55
(1) Includes both time-based and performance-based restricted stock awards.

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Commitment and Contingencies

9 Months Ended

Mar. 31, 2015

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitment and Contingencies

Operating Leases

The Company leases manufacturing and office space and equipment under various lease agreements that expire at various dates through March 2020. Rental expenses were $1,351 and $1,000 for the nine months endedMarch 31, 2015 and 2014, respectively.

Future minimum lease payments under the agreements as of March 31, 2015 are as follows:

Three months ended June 30, 2015	$	263
Fiscal 2016	766
Fiscal 2017	544
Fiscal 2018	513
Fiscal 2019	462
Thereafter	345
	$	2,893

Construction of New Headquarters

On June 11, 2014, the Company entered into a Design-Build Contract and a Development Services Agreement, as well as various ancillary agreements related to the acquisition of real property located in New Brighton, Minnesota and the development of such property into the Company’s new corporate headquarters. Pursuant to the Development Services Agreement with Ryan Companies, Inc. ("Ryan"), Ryan was to perform certain development services to facilitate development of the project, including coordination with the City of New Brighton and overall coordination of development strategy. The Company pays Ryan a fee for the development services, which includes a sum equal to 3.25% of the adjusted total project costs, payable at certain points in the construction process, and a sum equal to 5% of the adjusted total project costs, payable upon substantial completion of the project, as well as reimbursement of certain expenses incurred by Ryan. The construction was substantially completed in March 2015 and the Company has accrued all remaining payments due to Ryan under the Development Services Agreement.

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Earnings Per Share

9 Months Ended

Mar. 31, 2015

Earnings Per Share [Abstract]

Earnings Per Share

Earnings Per Share

The following table presents a reconciliation of the numerators and denominators used in the basic and diluted earnings per common share computations (in thousands except share and per share amounts):

	Three Months Ended   March 31,						Nine Months Ended   March 31,
	2015			2014			2015			2014
Numerator
Net loss	$	(10,656	)	$	(9,712	)	$	(24,153	)	$	(25,662	)
Denominator
Weighted average common shares – basic	31,644,522			30,368,685			31,479,803			27,411,237
Effect of dilutive stock options and warrants(a)	—			—			—			—
Weighted average common shares outstanding – diluted	31,644,522			30,368,685			31,479,803			27,411,237
Net loss per common share — basic and diluted	$	(0.34	)	$	(0.32	)	$	(0.77	)	$	(0.94	)

(a) At March 31, 2015 and 2014, 720,233 and 927,809 stock options, respectively, were outstanding. The effect of the shares that would be issued upon exercise of these options has been excluded from the calculation of diluted loss per share because those shares are anti-dilutive.

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Commitment and Contingencies (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended		0 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Jun. 11, 2014
Commitments and Contingencies Disclosure [Abstract]
Lease expiration date	Mar. 31, 2020
Rental expense	$ 1,351	$ 1,000
Future Minimum Lease Payments:
Three months ended June 30, 2015	263
Fiscal 2016	766
Fiscal 2017	544
Fiscal 2018	513
Fiscal 2019	462
Thereafter	345
Future minimum lease payments	$ 2,893
Ryan Companies | Payable at Certain Point in the Construction Process
Other Commitments [Line Items]
Development costs paid to third party, percentage of adjusted total project costs			3.25%
Ryan Companies | Payable Upon Completion of the Project
Other Commitments [Line Items]
Development costs paid to third party, percentage of adjusted total project costs			5.00%

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Stock Options and Restricted Stock Awards (Tables)

9 Months Ended

Mar. 31, 2015

Share-based Arrangements with Employees and Nonemployees [Abstract]

Stock Option Activity

Stock option activity for the nine months ended March 31, 2015 is as follows:

	Number of Options(a)		Weighted Average Exercise Price
Options outstanding at June 30, 2014	922,809		$	10.16
Options exercised	(202,576	)	$	9.75
Options outstanding at March 31, 2015	720,233		$	10.28
(a) Includes the effect of options granted, exercised, forfeited or expired from the 2003 Plan and 2007 Plan, and options granted outside such plans.

Restricted Stock Award Activity

Restricted stock award activity for the nine months ended March 31, 2015 is as follows:

	Number of Shares		Weighted Average  Fair Value
Restricted stock awards outstanding at June 30, 2014	1,276,403		$	17.37
Restricted stock awards granted (1)	475,827		$	30.06
Restricted stock awards forfeited	(100,269	)	$	20.33
Restricted stock awards vested	(574,195	)	$	17.69
Restricted stock awards outstanding at March 31, 2015	1,077,766		$	20.55
(1) Includes both time-based and performance-based restricted stock awards.

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Selected Consolidated Financial Statement Information - Property and Equipment (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Jun. 30, 2014
Property and Equipment
Land	$ 500	$ 500
Building	22,902	0
Equipment	10,914	6,436
Furniture	2,570	626
Leasehold improvements	233	233
Construction in progress	458	11,499
Property and equipment, gross	37,577	19,294
Less: Accumulated depreciation	(5,218)	(3,997)
Total property and equipment, net	$ 32,359	$ 15,297
New Brighton, Minnesota | Building
Property, Plant and Equipment [Line Items]
Area of real estate property (in square feet)	125,000
Capacity of new building (number of employees)	500

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Consolidated Statements of Cash Flows (Unaudited) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Cash flows from operating activities
Net loss	$ (24,153)	$ (25,662)
Adjustments to reconcile net loss to net cash used in operations
Depreciation of property and equipment	1,292	895
Amortization and write-off of patents	146	138
Provision for doubtful accounts	1,021	290
Amortization of discount on debt, net	0	137
Debt conversion and valuation of conversion options, net	0	716
Loss on disposal of property and equipment	99	0
Stock-based compensation	11,039	7,682
Changes in assets and liabilities
Accounts receivable	(10,858)	(5,053)
Inventories	(329)	(5,646)
Prepaid expenses and other assets	166	264
Accounts payable	2,747	3,962
Accrued expenses and other liabilities	3,745	3,981
Net cash used in operating activities	(15,085)	(18,296)
Cash flows from investing activities
Expenditures for property and equipment	(16,593)	(1,185)
Purchases of marketable securities	(2,094)	0
Sales of marketable securities	365	0
Costs incurred in connection with patents	(634)	(465)
Net cash used in investing activities	(18,956)	(1,650)
Cash flows from financing activities
Proceeds from employee stock purchase plan	1,360	1,291
Proceeds From Exercise Of Stock Options And Warrants	1,974	16,218
Proceeds from the issuance of common stock, net of issuance costs	0	84,369
Proceeds from line of credit	0	4,800
Payments on debt	(2,400)	(8,650)
Net cash provided by financing activities	934	98,028
Net change in cash and cash equivalents	(33,107)	78,082
Cash and cash equivalents
Beginning of period	126,592	67,897
End of period	93,485	145,979
Noncash investing activities
Property and equipment included in accounts payable	$ 1,860	$ 273

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Deferred Compensation Plan

9 Months Ended

Mar. 31, 2015

Compensation and Retirement Disclosure [Abstract]

Deferred Compensation Plan

Deferred Compensation Plan

The Company offers certain members of management and highly compensated employees the opportunity to defer up to 100% of their base salary (after 401(k), payroll tax and other deductions), performance bonus and discretionary bonus and elect to receive the deferred compensation at a fixed future date of participant’s choosing. Each participant may, at the time of his or her deferral election, choose to allocate the deferred compensation into investment alternatives set by the Human Resources and Compensation Committee at that time. The amount payable to each participant under the plan will change in value based upon the investment selected by that participant and is classified as current or long-term on the Company's balance sheet based on the disbursement elections made by the participants.

Beginning in August 2014, the Company acquired available-for-sale marketable securities under the deferred compensation plan. These available-for-sale marketable securities are primarily comprised of investments with a fixed income and equity investments. The available-for-sale marketable securities are included with prepaid expenses and other current assets on the consolidated balance sheet at March 31, 2015.

Investments as of March 31, 2015 consisted of the following:

	Amortized Cost	Unrealized Gains	Unrealized Losses	Fair Value
Mutual funds	1,768	105	—	1,873
Total short-term investments	1,768	105	—	1,873

There were no other-than-temporary impairments during the nine months ended March 31, 2015. Gross amount of realized losses on a scheduled disbursement during the nine months ended March 31, 2015 was not material.

The following table provides information by level for the Company's available-for-sale marketable securities as of March 31, 2015 that were measured at fair value on a recurring basis:

		Fair Value Measurements Using Inputs Considered as
	Fair Value	Level 1	Level 2	Level 3
Mutual funds	1,873	1,278	595	—
Total short-term investments	1,873	1,278	595	—

The Company's marketable securities classified within Level 1 are valued primarily using real-time quotes for transactions in active exchange markets. Marketable securities within Level 2 are valued using readily available pricing sources. There were no transfers of assets between Level 1 and Level 2 of the fair value measurement hierarchy during the nine months ended March 31, 2015. Any transfers between levels would be recognized on the date of the event or when a change in circumstances causes a transfer.

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Selected Consolidated Financial Statement Information - Accrued Expenses (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2015	Jun. 30, 2014
Accrued Expenses
Salaries and bonus	$ 4,895	$ 5,244
Commissions	6,197	6,069
Accrued vacation	3,544	2,843
Other	1,720	474
Total accrued expenses	$ 16,356	$ 14,630

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Interest and Other, Net (Tables)

9 Months Ended

Mar. 31, 2015

Other Income and Expenses [Abstract]

Interest and Other, Net

Interest and other, net, includes the following:

	Three Months Ended   March 31,						Nine Months Ended   March 31,
	2015			2014			2015			2014
Interest expense, net of premium amortization	$	(1	)	$	(103	)	$	(23	)	$	(948	)
Change in fair value of conversion options	—			—			—			(61		)
Net write-offs upon conversion (option and premium amortization)	—			—			—			(655		)
Other	(112		)	(16		)	(145		)	(63		)
Total Interest and other, net	$	(113	)	$	(119	)	$	(168	)	$	(1,727	)