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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 _____________________________________________________
 FORM 10-Q
 _____________________________________________________
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2020
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission File No. 000-52082
 ____________________________________________________
CARDIOVASCULAR SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
 ____________________________________________________
Delaware   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
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol Name of each exchange on which registered
Common Stock, One-tenth of One Cent ($0.001) Par Value Per Share CSII The Nasdaq Stock Market LLC
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 every Interactive Data File required to be submitted 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 such files).    Yes x    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer x Accelerated filer ☐
Non-accelerated filer ☐ Smaller reporting company ☐
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
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, $0.001 par value per share, as of October 30, 2020 was: 40,124,501 shares.

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Cardiovascular Systems, Inc.
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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)
 
September 30,
2020 		June 30,
2020
ASSETS
Current assets
Cash and cash equivalents $ 92,671  $ 185,463 
Marketable securities 130,266  46,691 
Accounts receivable, net 29,973  25,212 
Inventories 29,152  27,706 
Prepaid expenses and other current assets 3,369  2,617 
Total current assets 285,431  287,689 
Property and equipment, net 28,232  27,810 
Intangible assets, net 16,302  16,606 
Other assets 11,758  7,414 
Total assets $ 341,723  $ 339,519 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable $ 13,419  $ 11,539 
Accrued expenses 30,192  31,100 
Deferred revenue 2,091  1,867 
Total current liabilities 45,702  44,506 
Long-term liabilities
Financing obligation 20,767  20,818 
Deferred revenue 4,100  4,707 
Other liabilities 2,749  696 
Total liabilities 73,318  70,727 
Commitments and contingencies (see Note 10)
Common stock, $0.001 par value; authorized 100,000,000 common shares; issued and outstanding 40,126,883 at September 30, 2020 and 39,675,865 at June 30, 2020, respectively
39  39 
Additional paid in capital 636,727  631,559 
Accumulated other comprehensive income 200  269 
Accumulated deficit (368,561) (363,075)
Total stockholders’ equity 268,405  268,792 
Total liabilities and stockholders’ equity $ 341,723  $ 339,519 
The accompanying notes are an integral part of these unaudited consolidated financial statements.

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Cardiovascular Systems, Inc.
Consolidated Statements of Operations
(Dollars in thousands, except per share and share amounts)
(Unaudited)
 
  Three Months Ended
September 30,
  2020 2019
Net revenues $ 60,544  $ 64,490 
Cost of goods sold 12,564  12,672 
Gross profit 47,980  51,818 
Expenses:
Selling, general and administrative 40,282  46,752 
Research and development 9,052  10,765 
Amortization of intangible assets 304  234 
Total expenses 49,638  57,751 
Loss from operations (1,658) (5,933)
Other (income) expense, net:
Interest expense 499  472 
Interest income and other, net (144) (663)
Total other (income) expense, net 355  (191)
Loss before income taxes (2,013) (5,742)
Provision for income taxes 63  38 
Net loss $ (2,076) $ (5,780)
Basic and diluted earnings per share $ (0.05) $ (0.17)
Basic and diluted weighted average shares outstanding 38,683,839  33,870,224 
The accompanying notes are an integral part of these unaudited consolidated financial statements.

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Cardiovascular Systems, Inc.
Consolidated Statements of Comprehensive Income
(Dollars in thousands)
(Unaudited)

Three Months Ended
September 30,
2020 2019
Net loss $ (2,076) $ (5,780)
Other comprehensive (loss) income:
Unrealized (loss) gain on available-for-sale debt securities (69) 24 
Comprehensive loss $ (2,145) $ (5,756)
The accompanying notes are an integral part of these unaudited consolidated financial statements.
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Cardiovascular Systems, Inc.
Consolidated Statements of Changes in Stockholders’ Equity
(Dollars in thousands, except per share amounts)
(Unaudited)

  Common Stock Additional
Paid  In
Capital 		Accumulated Other Comprehensive Income (Loss) Accumulated
Deficit 		Total
 
Balances at June 30, 2020 39  631,559  269  (363,075) 268,792 
Stock-based compensation related to restricted stock awards, net —  4,836  —  —  4,836 
Shares withheld for payroll taxes —  —  —  (3,410) (3,410)
Employee stock purchase plan activity —  332  —  —  332 
Unrealized loss on available-for-sale debt securities —  —  (69) —  (69)
Net loss —  —  —  (2,076) (2,076)
Balances at September 30, 2020 $ 39  $ 636,727  $ 200  $ (368,561) $ 268,405 

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

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Cardiovascular Systems, Inc.
Consolidated Statements of Changes in Stockholders’ Equity
(Dollars in thousands, except per share amounts)
(Unaudited)

  Common Stock Additional
Paid  In
Capital 		Accumulated
Other
Comprehensive
Income 		Accumulated
Deficit 		Total
 
Balances at June 30, 2019 $ 34  $ 477,368  $ 78  $ (329,536) $ 147,944 
Stock-based compensation related to restricted stock awards, net —  3,804  —  —  3,804 
Shares withheld for payroll taxes —  —  —  (5,506) (5,506)
Employee stock purchase plan activity —  242  —  —  242 
Unrealized gain on available-for-sale debt securities —  —  24  —  24 
Stock issued for acquisitions —  1,346  —  —  1,346 
Net loss —  —  —  (5,780) (5,780)
Balances at September 30, 2019 $ 34  $ 482,760  $ 102  $ (340,822) $ 142,074 

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

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Cardiovascular Systems, Inc.
Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
 
  Three Months Ended
September 30,
  2020 2019
Cash flows from operating activities
Net loss $ (2,076) $ (5,780)
Adjustments to reconcile net loss to net cash from operating activities
Depreciation of property and equipment 725  740 
Amortization of intangible assets 304  234 
Write-off of patent costs —  505 
Provision for doubtful accounts —  75 
Stock-based compensation 4,907  3,906 
Amortization of premium (accretion of discount) on marketable securities 215  (94)
Changes in assets and liabilities
Accounts receivable (4,761) 1,316 
Inventories (1,446) (1,431)
Prepaid expenses and other assets (386) 763 
Accounts payable 1,865  2,059 
Accrued expenses and other liabilities (1,126) (7,490)
Deferred revenue (383) (523)
Net cash used in operating activities (2,162) (5,720)
Cash flows from investing activities
Purchases of property and equipment (1,132) (543)
Acquisitions —  (5,741)
Purchases of marketable securities (88,728) (4,844)
Sales of marketable securities 2,400  — 
Maturities of marketable securities 2,450  7,400 
Costs incurred in connection with patents —  (325)
Other investing activities (2,175) — 
Net cash used in investing activities (87,185) (4,053)
Cash flows from financing activities
Payments of employee taxes related to vested restricted stock (3,410) (5,506)
Principal payments made on financing obligation (35) (19)
Net cash used in financing activities (3,445) (5,525)
Net change in cash and cash equivalents (92,792) (15,298)
Cash and cash equivalents
Beginning of period 185,463  74,237 
End of period $ 92,671  $ 58,939 
The accompanying notes are an integral part of these unaudited consolidated financial statements.
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CARDIOVASCULAR SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(For the Three Months Ended September 30, 2020 and 2019)
(Dollars in thousands, except per share and share amounts)
(Unaudited)

1. Basis of Presentation

Cardiovascular Systems, Inc. (the “Company”), based in St. Paul, Minnesota, is a medical device company focused on developing and commercializing innovative solutions for treating vascular and coronary disease. The Company’s Orbital Atherectomy Systems (“OAS”) treat calcified and fibrotic plaque in arterial vessels throughout the leg and heart in a few minutes of treatment time, and address many of the limitations associated with existing surgical, catheter and pharmacological treatment alternatives. 

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 for a fair statement of the Company’s consolidated financial position, the results of its operations, its changes in stockholders’ equity, 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 Company's Annual Report on Form 10-K for the year ended June 30, 2020. 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.

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. The Company has been impacted by the COVID-19 pandemic. The full extent to which the COVID-19 pandemic will directly or indirectly impact the Company's business, results of operations and financial condition, including sales, expenses, reserves and allowances, manufacturing, clinical trials, research and development costs and employee-related amounts, will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19 and the actions taken to contain or treat COVID-19, as well as the economic impact on the Company's customers and markets. The Company has made estimates of the impact of COVID-19 within these consolidated financial statements and there may be changes to those estimates in future periods. Actual results could differ from those estimates.

2. Selected Consolidated Financial Statement Information

Accounts Receivable, Net

Accounts receivable consists of the following:
September 30, June 30,
2020 2020
Accounts receivable $ 31,662  $ 26,971 
Less: Allowance for doubtful accounts (1,689) (1,759)
   Accounts receivable, net $ 29,973  $ 25,212 


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Inventories

Inventories consist of the following:
September 30, June 30,
2020 2020
Raw materials $ 9,289  $ 8,508 
Work in process 3,459  2,637 
Finished goods 16,404  16,561 
   Inventories $ 29,152  $ 27,706 

Property and Equipment, Net

Property and equipment consists of the following:
September 30, June 30,
2020 2020
Land $ 572  $ 572 
Building 22,420  22,420 
Equipment 18,097  18,255 
Furniture 3,345  3,326 
Leasehold improvements 681  672 
Construction in progress 3,895  3,251 
49,010  48,496 
Less: Accumulated depreciation (20,778) (20,686)
Property and equipment, net $ 28,232  $ 27,810 

Accrued Expenses

Accrued expenses consist of the following:
September 30, June 30,
2020 2020
Acquisition consideration $ 10,000  $ 9,914 
Accrued vacation 5,420  5,536 
Salaries and bonus 4,489  8,476 
Commissions 4,311  2,122 
Accrued excise, sales and other taxes 2,011  2,145 
Clinical studies 929  1,420 
Other accrued expenses 3,032  1,487 
Accrued expenses $ 30,192  $ 31,100 


9
3. Revenue

The following table disaggregates the Company’s net revenues by product category and geography for the following periods:
Three Months Ended
September 30,
Product Category 2020 2019
Peripheral $ 42,932  $ 45,529 
Coronary 17,612  18,961 
Total net revenues $ 60,544  $ 64,490 
Geography
United States $ 58,831  $ 61,529 
International 1,713  2,961 
Total net revenues $ 60,544  $ 64,490 

Revenue of $383 was recognized in the three months ended September 30, 2020 that was deferred as of June 30, 2020. As of September 30, 2020 and June 30, 2020, the Company had a liability of $2,260 and $1,719, respectively, related to estimates of variable consideration which are recorded within accounts payable on the consolidated balance sheet.

4. Acquisition

On August 5, 2019, the Company acquired the WIRION Embolic Protection System and related assets from Gardia Medical Ltd. ("Gardia"), a wholly owned Israeli subsidiary of Allium Medical Solutions Ltd., for a total purchase price of $16,687. The device, which received CE Mark in June 2015 and FDA clearance in March 2018, is a distal embolic protection filter used to capture debris that can be associated with all types of peripheral vascular intervention procedures. The Company acquired the device to expand its portfolio of products for physicians that treat complex peripheral arterial disease.

Upon closing, the Company made an initial $5,600 cash payment, net of transaction expenses, and issued Gardia 31,493 shares of common stock of the Company valued at $1,346. Following the successful completion of the manufacturing transfer of the WIRION system to the Company, the Company has agreed to pay Gardia an additional $10,000, half of which may be paid by the Company through an additional issuance of shares of common stock. The Company has accounted for this transaction as an asset acquisition resulting in developed technology of $15,624 and a trade name of $760, both recognized as a component of intangible assets, net within the Company's consolidated balance sheet. The remainder of the purchase price was recognized in property and equipment.

The purchase also includes a performance milestone payment to Gardia equal to $3,000 for each $10,000 in net revenues recognized by the Company from sales of the WIRION system for applications above-the-knee in excess of $30,000 during the 36 month period beginning on the earlier of the first commercial sale of the system by the Company or six months following successful manufacturing transfer. If payment of the performance milestone becomes probable, these additional costs will be added to the carrying value of the acquired assets.

5. Intangible Assets

The Company’s finite-lived intangible assets are stated at cost less accumulated amortization and include developed technology and trade name assets acquired in the asset acquisition discussed in Note 4, as well as costs incurred to obtain patents. Developed technology and trade name assets are amortized over 15 years. Patent costs are amortized beginning at the time of patent approval over a useful life not exceeding 20 years.


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The components of intangible assets, net are as follows:
September 30, 2020 June 30, 2020
Gross Carrying Amount Accumulated Amortization Net Book Value Gross Carrying Amount Accumulated Amortization Net Book Value
Developed technology $ 15,624  $ (1,215) $ 14,409  $ 15,624  $ (955) $ 14,669 
Patents 1,882  (690) 1,192  1,882  (659) 1,223 
Trade name 760  (59) 701  760  (46) 714 
Total intangible assets, net $ 18,266  $ (1,964) $ 16,302  $ 18,266  $ (1,660) $ 16,606 

Amortization expense expected for the next five years and thereafter is as follows:

Remainder of fiscal 2021 $ 912 
Fiscal 2022 1,216 
Fiscal 2023 1,212 
Fiscal 2024 1,208 
Fiscal 2025 1,205 
Thereafter 10,549 
$ 16,302 

6. Debt

Revolving Credit Facility

In March 2017, the Company entered into a Loan and Security Agreement (the “Loan Agreement”) with Silicon Valley Bank (“SVB”). In March 2020, the Company entered into the First Amendment to the Loan Agreement (the "Amendment"). The Amendment extended the maturity date of the Loan Agreement by two years, to March 31, 2022, and increased the maximum amount available under the senior, secured revolving credit facility (the “Revolver”) to $50,000 (the “Maximum Dollar Amount”).

Advances under the Revolver may be made from time to time up to the Maximum Dollar Amount, subject to certain borrowing limitations. The Revolver bears interest at a floating per annum rate equal to the Wall Street Journal prime rate, less 0.75%. Interest on borrowings is due monthly and the principal balance is due at maturity. Upon the Revolver’s maturity, any outstanding principal balance, unpaid accrued interest, and all other obligations under the Revolver will be due and payable. The Company will incur a fee equal to 3% of the Maximum Dollar Amount upon termination of the Loan Agreement, as amended by the Amendment (the "Amended Loan Agreement"), or the Revolver for any reason prior to the date that is fifteen days prior to the maturity date, unless refinanced with SVB.

The Company’s obligations under the Amended Loan Agreement are secured by certain of the Company’s assets, including, among other things, accounts receivable, deposit accounts, inventory, equipment, general intangibles and records pertaining to the foregoing. The collateral does not include the Company’s intellectual property, but the Company has agreed not to encumber its intellectual property without the consent of SVB. The Amended Loan Agreement contains customary covenants limiting the Company’s ability to, among other things, incur debt or liens, make certain investments and loans, enter into transactions with affiliates, undergo certain fundamental changes, dispose of assets, or change the nature of its business. In addition, the Amended Loan Agreement contains financial covenants requiring the Company to maintain, at all times when any amounts are outstanding under the Revolver, either (i) minimum unrestricted cash at SVB and unused availability on the Revolver of at least $10,000 or (ii) minimum trailing three-month Adjusted EBITDA of $1,000. If the Company does not comply with the various covenants under the Amended Loan Agreement or an event of default under the Amended Loan Agreement occurs, such as a material adverse change, the interest rate on outstanding amounts will increase by 5% and SVB may, subject to various customary cure rights and the other terms and conditions of the Amended Loan Agreement, decline to provide additional advances under the Revolver, require the immediate payment of all amounts outstanding under the Revolver, and foreclose on all collateral.

The Company is required to pay a fee equal to 0.15% per annum on the unused portion of the Revolver, payable quarterly in arrears. The Company is not obligated to draw any funds under the Revolver and has not done so under the Revolver since entering into the Loan Agreement. No amounts are outstanding as of September 30, 2020.
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Financing Obligation

In March 2017, in connection with the sale of the Company’s headquarters facility in St. Paul, Minnesota (the “Facility”), the Company entered into a Lease Agreement to lease the Facility. The Lease Agreement has an initial term of 15 years, with four consecutive renewal options of 5 years each at the Company’s option, with a base annual rent in the first year of $1,638 and annual escalations of 3% thereafter. Rent during subsequent renewal terms will be at the then fair market rental rate. As the lease terms resulted in a capital lease classification, the Company accounted for the sale and leaseback of the Facility as a financing transaction where the assets remain on the Company’s balance sheet and a financing obligation was recorded for $20,944. As lease payments are made, they will be allocated between interest expense and a reduction of the financing obligation, resulting in a value of the financing obligation that is equivalent to the net book value of the assets at the end of the lease term. The effective interest rate is 7.89%. At the end of the lease (including any renewal option terms), the Company will remove the assets and financing obligation from its balance sheet.

Payments under the initial term of the Lease Agreement as of September 30, 2020 are as follows:
Remainder of fiscal 2021 $ 1,355 
Fiscal 2022 1,857 
Fiscal 2023 1,913 
Fiscal 2024 1,970 
Fiscal 2025 2,029 
Thereafter 15,376 
$ 24,500 

7. Marketable Securities & Fair Value Measurements

The Company’s marketable securities are classified on the consolidated balance sheet as follows:

September 30, June 30,
2020 2020
Short-term available-for-sale debt securities $ 123,075  $ 40,088 
Long-term available-for-sale debt securities 6,839  6,276 
Available-for-sale debt securities 129,914  46,364 
Mutual funds 352  327 
Total marketable securities $ 130,266  $ 46,691 

Available-for-sale debt securities are invested in the following financial instruments:

As of September 30, 2020
Amortized Cost Unrealized Gains Unrealized Losses Fair Value
Commercial paper $ 32,060  $ —  $ —  $ 32,060 
U.S. government securities 46,642  5  (3) 46,644 
Corporate debt 39,695  164  (5) 39,854 
Asset backed securities 11,317  39  —  11,356 
  Total available-for-sale debt securities $ 129,714  $ 208  $ (8) $ 129,914 


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As of June 30, 2020
Amortized Cost Unrealized Gains Unrealized Losses Fair Value
Commercial paper $ 9,778  $ —  $ —  $ 9,778 
U.S. government securities 6,120  1  —  6,121 
Corporate debt 21,267  232  (1) 21,498 
Asset backed securities 8,930  37  —  8,967 
Total available-for-sale debt securities $ 46,095  $ 270  $ (1) $ 46,364 


The following table provides information by level for the Company’s marketable securities that were measured at fair value on a recurring basis:
Fair Value Measurements as of September 30, 2020
Using Inputs Considered as
Fair Value Level 1 Level 2 Level 3
Commercial paper $ 32,060  $ —  $ 32,060  $ — 
U.S. government securities 46,644  —  46,644  — 
Corporate debt 39,854  —  39,854  — 
Asset backed securities 11,356  —  11,356  — 
Mutual funds 352  121  231  — 
  Total marketable securities $ 130,266  $ 121  $ 130,145  $ — 

Fair Value Measurements as of June 30, 2020
Using Inputs Considered as
Fair Value Level 1 Level 2 Level 3
Commercial paper $ 9,778  $ —  $ 9,778  $ — 
U.S. government securities 6,121  —  6,121  — 
Corporate debt 21,498  —  21,498  — 
Asset backed securities 8,967  —  8,967  — 
Mutual funds 327  99  228  — 
  Total marketable securities $ 46,691  $ 99  $ 46,592  $ — 

The Company’s marketable securities classified within Level 1 are valued 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 three months ended September 30, 2020. Any transfers between levels would be recognized on the date of the event or when a change in circumstances causes a transfer.

Strategic Investments

The Company holds equity investments that do not have readily determined fair values. The Company has elected to measure these investments at cost minus impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. Impairment is reviewed each reporting period by performing a qualitative assessment considering impairment indicators to evaluate whether the investment is impaired.

As of September 30, 2020 and June 30, 2020, the carrying value of these investments was $6,793 and $6,306, respectively. During the three months ended September 30, 2020, no impairment indicators were noted. The Company is committed to funding an additional $2,750 into these investments in the future. The Company holds options to acquire all outstanding equity or certain developed technologies with respect to some of these strategic investments. These investments are recorded within other assets on the consolidated balance sheet.


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8. Stock-Based Compensation

On November 15, 2017, the Company’s stockholders approved the 2017 Equity Incentive Plan (the “2017 Plan”) for the purpose of granting equity awards to employees, directors and consultants. The 2017 Plan replaced the 2014 Equity Incentive Plan (the “2014 Plan”), and no further equity awards may be granted under the 2014 Plan (the 2017 Plan and the 2014 Plan are collectively referred to as the “Plans”). On March 12, 2020, the Company’s Board of Directors approved the Amended and Restated 2017 Equity Incentive Plan, which amends the 2017 Plan.

Equity awards classified as restricted stock and performance-based restricted stock are treated as issued shares when granted; however, these shares are not included in the computation of basic weighted average shares outstanding. When shares vest, unless the holder elects to pay the payroll tax liability in cash or through a sale of shares, the Company withholds the appropriate amount of shares to settle the payroll tax liability, on behalf of the individual receiving the shares, as an adjustment to accumulated deficit.

Restricted Stock

The 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 time-based restricted stock awards ranges from one year 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.

Restricted stock award activity for the three months ended September 30, 2020 is as follows:
Number of
Shares 		Weighted
Average  Fair
Value
Outstanding at June 30, 2020 434,067  $ 38.34 
Granted 294,136  $ 31.11 
Forfeited (10,186) $ 37.35 
Vested (151,082) $ 38.96 
Outstanding at September 30, 2020 566,935  $ 34.56 

Performance-Based Restricted Stock

The Company also grants performance-based restricted stock awards to certain executives and other management. In August 2020, the Company granted an aggregate maximum of 339,395 shares that vest based on the Company’s total shareholder return relative to total shareholder return of the Company’s peer group (a market condition), as measured by the closing prices of the stock of the Company and the peer group members for the 90 trading days preceding July 1, 2020 compared to the closing prices of the stock of the Company and the peer group members for the 90 trading days preceding July 1, 2023. Vesting of these awards will be determined on the date that the Company’s Annual Report on Form 10-K for the fiscal year ending June 30, 2023 is filed.

To calculate the estimated fair value of these restricted stock awards with market conditions, the Company uses a Monte Carlo simulation, which uses the expected average stock prices to estimate the expected number of shares that will vest. The Monte Carlo simulation resulted in an aggregate fair value of approximately $4,330, which the Company will recognize as expense using the straight-line method over the period that the awards are expected to vest. Stock-based compensation expense related to an award with a market condition will be recognized regardless of whether the market condition is satisfied, provided that the requisite service has been provided.

Performance-based restricted stock awards granted in fiscal 2019 and 2020 that are outstanding vest based on the Company’s total shareholder return relative to total shareholder return of the Company’s peer group (a market condition), as measured by the closing prices of the stock of the Company and the peer group members for the 90 trading days preceding July 1, 2018 and July 1, 2019, respectively, compared to the closing prices of the stock of the Company and the peer group members for the 90 trading days preceding July 1, 2021 and July 1, 2022, respectively.

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Performance-based restricted stock award activity for the three months ended September 30, 2020 is as follows:
Number of
Shares 		Weighted
Average  Fair
Value
Outstanding at June 30, 2020 660,622  $ 21.69 
Granted 339,395  $ 12.75 
Forfeited (72,549) $ 13.64 
Vested (166,086) $ 13.96 
Outstanding at September 30, 2020 761,382  $ 20.26 

9. Leases

Effective July 1, 2019, the Company adopted Accounting Standards Codification (“ASC”) Topic 842 - Leases using the modified retrospective transition approach and electing the package of practical expedients. This resulted in the recognition of right-of-use assets of $441 and total operating lease liabilities of $463. There was no cumulative-effect adjustment recorded to retained earnings upon adoption.

The Company leases its Texas manufacturing facility under an operating lease agreement. During the three months ended September 30, 2020, the Company exercised its option to extend the term of this lease agreement by five years, so that it now expires in April 2026. The Company is currently in an arbitration process with the landlord in accordance with the provisions of the lease to establish the rate of rent over the five-year extension term. Because the arbitration process is not finalized and the rent is not yet established, the Company has provided an estimate of the present value of lease payments, and the right-of-use asset value associated with this five-year extended term within its consolidated financial statements. The Company expects the arbitration process to be finalized and the rent established in the second quarter of fiscal 2021, at which point the effects of this five-year extension may be remeasured in the Company's consolidated financial statements. The Company also leases office equipment under lease agreements that expire at various dates through April 2024.

As discussed in Note 6, the Company also leases its Minnesota headquarters facility which is accounted for as a financing obligation.

Operating lease right-of-use assets and liabilities are recognized based on the present value of future minimum lease payments over the lease term at commencement dates. The Company considers fixed or variable payment terms, prepayments, incentives, and options to extend, terminate or purchase. Renewal, termination or purchase options affect the lease term used for determining lease asset value only if the option is reasonably certain to be exercised. The Company uses its incremental borrowing rate based on information available at the lease commencement date in determining the present value of lease payments unless the lease provides an implicit interest rate.

Operating lease cost is classified within the consolidated statement of operations based on the nature of the leased asset. The Company's operating lease cost was $126 and $121 for the three months ended September 30, 2020 and 2019, respectively. Cash paid for operating lease liabilities approximated operating lease cost for the three months ended September 30, 2020. There were $2,238 and $437 of operating lease right-of-use assets obtained in exchange for new lease liabilities during the three months September 30, 2020 and 2019, respectively.
September 30, June 30,
2020 2020
Right-of-use assets
Other assets $ 2,543  $ 427 
Operating lease liabilities
Accrued expenses $ 495  412 
Other liabilities $ 2,048  15 
Total operating lease liabilities $ 2,543  $ 427 



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Future minimum lease payments under the agreements as of September 30, 2020 are as follows:
Remainder of fiscal 2021 $ 377 
Fiscal 2022 494 
Fiscal 2023 486 
Fiscal 2024 485 
Fiscal 2025 483 
Thereafter 403 
Total lease payments 2,728 
Less imputed interest (185)
Total operating lease liabilities $ 2,543 

As of September 30, 2020, the weighted average remaining lease term for operating leases was 5.5 years and the weighted average discount rate used to determine operating lease liabilities was 2.55%.

10. Commitment and Contingencies

In the ordinary conduct of business, the Company is subject to various lawsuits and claims covering a wide range of matters including, but not limited to, employment claims and commercial disputes. While the outcome of these matters is uncertain, the Company does not believe there are any significant matters as of September 30, 2020 that are probable or estimable, for which the outcome could have a material adverse impact on its consolidated balance sheets or statements of operations.

11. 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
September 30,
  2020 2019
Numerator
Net (loss) income $ (2,076) $ (5,780)
Income allocated to participating securities —  — 
Net (loss) income available to common stockholders $ (2,076) $ (5,780)
Denominator
Weighted average common shares outstanding – basic(1)
38,683,839  33,870,224 
Effect of dilutive restricted stock units(2)
—  — 
Effect of performance-based restricted stock awards(3)
—  — 
Weighted average common shares outstanding – diluted
38,683,839  33,870,224 
Earnings per common share – basic and diluted $ (0.05) $ (0.17)

(1)The increase in weighted average shares outstanding is primarily from the Company's offering of common stock completed in June 2020.
(2)At September 30, 2020 and 2019, 279,019 and 365,973 additional shares of common stock, respectively, were issuable upon the settlement of outstanding restricted stock units. The effect of the shares that would be issued upon settlement of these restricted stock units has been excluded from the calculation of diluted loss per share for the three months ended September 30, 2020 and 2019, because those shares are anti-dilutive.
(3)At September 30, 2020 and 2019, 761,382 and 663,273 performance-based restricted stock awards, respectively, were outstanding. The effect of the potential vesting of these awards has been excluded from the calculation of diluted loss per share for the three months ended September 30, 2020 and 2019, because those shares are anti-dilutive.

Unvested time-based restricted stock awards that contain nonforfeitable rights to dividends are participating securities and included in the computation of earnings per share pursuant to the two-class method. Under this method, earnings attributable to the Company are allocated between common stockholders and the participating awards, as if the awards were a second class of stock. During periods of net income, the calculation of earnings per share excludes the income attributable to participating
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securities in the numerator and the dilutive impact of these securities from the denominator. In the event of a net loss, undistributed earnings are not allocated to participating securities and the denominator excludes the dilutive impact of these securities as they do not share in the losses of the Company. During the three months ended September 30, 2020 and 2019, there were no undistributed earnings allocated to participating securities due to the net losses.
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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 on Form 10-Q, 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 Annual Report on Form 10-K for the year ended June 30, 2020 and subsequent Quarterly Reports on Form 10-Q, including in Item 1A of Part II of this Quarterly Report on Form 10-Q, 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 technology company leading the way in the effort to successfully treat patients living with peripheral and coronary artery diseases, including those with arterial calcium, the most difficult arterial disease to treat. We are committed to clinical rigor, constant innovation and a defining drive to set the industry standard to deliver safe and effective medical devices that improve lives of patients facing these difficult disease states.

In the past, we have observed some degree of seasonality in our business, as there tends to be a lower number of procedures that use our products during the three months ending September 30. Interventional procedure volume usually grows throughout the course of the fiscal year, with the quarter ending June 30 representing the highest volume of cases and, therefore, the highest amount of revenue generated by us during the course of the fiscal year. With the COVID-19 pandemic in fiscal 2020 and 2021, we have not experienced this same pattern of seasonality due to the significant decrease in procedure volumes, and we cannot be certain if this pattern will resume in the future.

Peripheral

Our peripheral arterial disease (“PAD”) products are catheter-based platforms capable of treating a broad range of plaque types in leg arteries both above and below the knee, including calcified plaque, and address many of the limitations associated with other existing surgical, catheter and pharmacological treatment alternatives. The micro-invasive devices use small access sheaths that can provide procedural benefits, allow physicians to treat PAD patients in even the small and tortuous vessels located below the knee, and facilitate access through alternative sites in the ankle, foot and wrist, as well as in the groin.

The United States Food and Drug Administration (“FDA”) has granted us 510(k) clearances for our Peripheral OAS as a therapy in patients with PAD, as discussed in Item 1 of Part I of our Annual Report on Form 10-K for the year ended June 30, 2020. We refer to these products in this Quarterly Report on Form 10-Q as the “Peripheral OAS.” In addition to our Peripheral OAS, we also offer support products within the peripheral space. Peripheral sales in the United States during the three months ended September 30, 2020 represented 71% of revenue.

Coronary

Our coronary artery disease (“CAD”) product, the Diamondback 360 Coronary OAS (“Coronary OAS”), is a catheter-based platform designed to facilitate stent delivery in patients with CAD who are acceptable candidates for percutaneous transluminal coronary angioplasty or stenting due to de novo, severely calcified coronary artery lesions. The Coronary OAS design is similar to technology used in our Peripheral OAS, customized specifically for the coronary application. In addition to the Coronary OAS, we also offer support products within the coronary space as we expand treatment to a broader patient population with complex coronary artery disease.

We have received premarket approval (“PMA”) from the FDA to market the Coronary OAS as a treatment for severely calcified coronary arteries and we commenced a commercial launch that same month. Coronary sales in the United States during the three months ended September 30, 2020 represented approximately 26% of revenue.

International

Sales of our approved products in Japan are made through our exclusive Japan distributor, Medikit Co., Ltd. ("Medikit"). Sales of our products in the rest of the world, which primarily includes certain countries in Southeast Asia, Europe and the Middle
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East, are made through our exclusive international distributor, OrbusNeich®. International sales during the three months ended September 30, 2020 represented approximately 3% of revenue.

Impact of COVID-19

Beginning in the three months ended March 31, 2020, we experienced a disruption in the procedures using our products as a result of the COVID-19 pandemic in the United States and internationally. Procedures were postponed, and may continue to be postponed, as a result of reduced availability of physicians or lab space to treat patients, the lack of personal protective equipment and active virus test kits, different treatment prioritizations, increased cost pressures and burdens on the overall healthcare infrastructure that result in reallocation of resources, and other governmental guidelines and restrictions. In addition, patients elected to defer or avoid treatment for procedures that use our products due to anxiety about the potential spread of COVID-19 in facilities. Finally, our personnel and the personnel of our distribution partners have experienced, and we expect will continue to experience, restrictions on their ability to access many customers, hospitals, labs and other medical facilities for sales activities, training and case support as they may have been deemed to be “non-essential” personnel by those facilities, and there has been a reduction in procedure activity in these accounts. These disruptions continued in the three months ended September 30, 2020.

In addition to the impact on procedure volumes, we are experiencing and may experience other disruptions as a result of the COVID-19 pandemic. For example, enrollment in our ECLIPSE clinical trial was paused at the outset of the pandemic, but we began to enroll new patients on a limited basis beginning in October 2020. Other disruptions or potential disruptions include restrictions on the ability of our personnel and personnel of our distribution partners to travel; delays in approvals by regulatory bodies; delays in product development efforts, which will also disrupt or delay our ability to launch affected products; reallocation of company resources from our strategic priorities; supply chain disruptions that limit, delay or prevent us from acquiring the components used to develop and manufacture our products or ship those products once manufactured; disruptions and changes in our relationships with our distributors due to the impact of the COVID-19 pandemic on their operations and ability to sell our products; temporary closures of our facilities; loss of employee productivity; and additional government requirements to “shelter at home” or other incremental mitigation efforts that may further impact our capacity to manufacture, sell and support the use of our products.

We have been operating our manufacturing facilities and have continued to ship product; however, we will continue to monitor federal, state and local requirements that apply to these operations and we may experience disruptions in these operations or limitations in our ability to continue producing and shipping products. Most of our office-based employees are telecommuting, and our field employees will continue to support cases in clinical settings where they continue to have access. We have taken several actions intended to protect the health and well-being of our workforce and our customers, such as implementing restrictions on access to our facilities; deploying screening and safety protocols for employees who work on site; utilizing remote working systems and providing home office equipment for employees; providing employees with access to coronavirus test kits and antibody tests; training employees on personal protection, hygiene and safe practices in patient care; establishing protocols for our field sales personnel for their interactions with customer and facilities; supplying personal protective equipment to employees and customers; introducing new paid leave programs for employees who have been adversely impacted by the crisis; adopting virtual physician and sales training on the use of our devices; and establishing new company-wide safety policies and a COVID-19 preparedness plan. We are monitoring developments at the local, state and national levels in order to ensure that we and our employees have current information for purposes of making decisions in the dynamic and unpredictable environment and that we comply with applicable requirements. We have continued to manage our expenses during the continuation of the pandemic, which includes freezing most new hiring, ceasing most travel and all in-person conference activity, and suspending work on certain product development and other internal projects. We are also engaged in ongoing business planning for the recovery period as we anticipate how our business will return to a more normalized level of activity once the pandemic and its effects subside.

In the near term, as the pandemic continues, we anticipate that we will likely experience a continued reduction in the number of procedures using our devices relative to prior year comparable periods, which would result in lower revenue and increased utilization of our existing capital resources. We expect that the pandemic will continue to have an acute, short-term impact on our business. Many factors may increase or decrease procedure volumes, including, as noted above, developments relating to social restrictions and government restrictions on elective and semi-elective cases, level of patient anxiety, availability of personal protective equipment, medical facility and workforce capacity, and sales representative access to facilities to support cases. We expect that medical facilities will continue to preserve cash and they will not immediately replenish their inventories. Travel restrictions and our inability to support new accounts will continue to negatively impact our international business. We also expect that the total impact of disruptions resulting from the pandemic could be material on our financial condition, capital resources and results of operations, but we cannot predict the specific extent, or duration, of the impact of the COVID-19 pandemic on our condition, resources and results.
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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 is 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, deferred revenue 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 Item 7 of Part II of our Annual Report on Form 10-K for the fiscal year ended June 30, 2020 under the heading “Critical Accounting Policies and Significant Judgments and Estimates.”

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 September 30,
2020 2019 Percent
Change
Net revenues $ 60,544  $ 64,490  (6.1) %
Cost of goods sold 12,564  12,672  (0.9)
Gross profit 47,980  51,818  (7.4)
Expenses:
Selling, general and administrative 40,282  46,752  (13.8)
Research and development 9,052  10,765  (15.9)
Amortization of intangible assets 304  234  29.9 
Total expenses 49,638  57,751  (14.0)
Loss from operations (1,658) (5,933) 72.1 
Other (income) expense, net 355  (191) (285.9)
Loss before income taxes (2,013) (5,742) 64.9 
Provision for income taxes 63  38  65.8 
Net loss $ (2,076) $ (5,780) 64.1 


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Comparison of Three Months Ended September 30, 2020 with Three Months Ended September 30, 2019

Net revenues. Net revenues decreased by $4.0 million, or 6.1%, from $64.5 million for the three months ended September 30, 2019 to $60.5 million for the three months ended September 30, 2020. Peripheral revenues decreased $2.6 million, or 5.7%, and coronary revenues decreased $1.3 million, or 7.1%. Decreases in peripheral revenue were driven by decreased unit volumes in the hospital site of service as a result of the continuing effects of the COVID-19 pandemic. These volume decreases in the hospital setting were partially offset by increased volumes in office-based labs. Coronary revenue decreases were driven primarily by the decreases in our international revenues as discussed below, as well as slightly lower volumes in the U.S. from the effects of COVID-19. International revenue was $1.7 million for the three months ended September 30, 2020, compared with international revenue of $3.0 million for the three months ended September 30, 2019, a decrease of $1.3 million. The COVID-19 pandemic has impacted global case volumes and our ability to provide case support worldwide. In the second quarter of fiscal 2021 we expect revenue to be higher than first quarter as case volumes continue to recover from the COVID-19 pandemic. Longer-term we expect revenue growth to return to recently observed normal levels driven by increasing the number of physicians using the devices; increasing the usage per physician; introducing new and improved products such as the Sapphire balloons, Teleport Microcatheter, and ViperWire with Flex Tip; generating additional clinical data; and continuing expansion into new geographies, partially offset by potential decreases in average selling prices.

Cost of Goods Sold. Cost of goods sold was $12.6 million for the three months ended September 30, 2020, a decrease of 0.9% from $12.7 million for the three months ended September 30, 2019. These amounts represent the cost of materials, labor and overhead for single-use catheters, guide wires, pumps, and other ancillary products. Gross margin decreased to 79.2% for the three months ended September 30, 2020 from 80.4% for the three months ended September 30, 2019, primarily due to increased sales of lower margin products and lower volumes of devices sold. This decrease was partially offset by product cost reductions and manufacturing efficiencies. We expect that gross margin in the second quarter of fiscal 2021 will be slightly lower than gross margin in the three months ended September 30, 2020 due to sales mix and declining average selling prices, partially offset by increased sales volumes. Quarterly margin fluctuations could also 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 were $40.3 million for the three months ended September 30, 2020, a decrease of $6.5 million, or 13.8%, from $46.8 million for the three months ended September 30, 2019. Expense decreases were driven by reduced costs associated with travel and meetings due to customer facility access restrictions, cessation of in-person sales and physician trainings, and internal and external conferences moving to a virtual format during the pandemic, in addition to lower sales commissions as a result of reduced sales due to COVID-19. Selling, general and administrative expenses for the three months ended September 30, 2020 and 2019 include $3.9 million and $3.1 million, respectively, for stock-based compensation. We expect our selling, general and administrative expenses for the second quarter of fiscal 2021 to be greater than amounts incurred for the three months ended September 30, 2020.

Research and Development Expenses. Research and development expenses decreased by 15.9%, from $10.8 million for the three months ended September 30, 2019 to $9.1 million for the three months ended September 30, 2020. 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 Peripheral and Coronary OAS, shaft designs and crown designs, and to clinical trials. The decrease was primarily due to decreased activity on the ECLIPSE clinical trial as enrollments were paused since the onset of COVID-19. We expect increased research and development expenses in the second quarter of fiscal 2021 as we have resumed enrollments in ECLIPSE and continue ongoing product development activities. Quarterly fluctuations could occur based on the number of projects and studies, the progress of such projects and studies, the rate of study enrollment, and the timing of expenditures.

LIQUIDITY AND CAPITAL RESOURCES

We had cash, cash equivalents and highly liquid marketable securities of $222.9 million and $232.2 million at September 30, 2020 and June 30, 2020, respectively. As of September 30, 2020, we had an accumulated deficit of $368.6 million. We have historically funded our operating losses primarily from the issuance of common and preferred stock, convertible promissory notes, and debt. In June 2020, we completed a public offering of 4,227,941 shares of common stock which resulted in net proceeds to us, before expenses, of approximately $135.0 million.


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A summary of our cash flow activities is as follows:
Three Months Ended
September 30,
2020 2019
Net cash used in operating activities $ (2,162) $ (5,720)
Net cash used in investing activities (87,185) (4,053)
Net cash used in financing activities (3,445) (5,525)
Net change in cash and cash equivalents $ (92,792) $ (15,298)

Changes in Liquidity

Operating Activities

Net cash used in operating activities was $2.2 million for the three months ended September 30, 2020, primarily due to the net loss of $2.1 million, an increase in receivables as we experienced a recovery in our sales volumes, and increased uses of cash to build inventory and diversify our products, as well as for payouts of previously accrued bonuses and commissions. The amount of cash used was partially offset by increased accounts payable due to timing of activity and payments, and non-cash expenditures for the three months ended September 30, 2020.

Net cash provided by operating activities was $5.7 million for the three months ended September 30, 2019, primarily due to the net loss of $5.8 million, and increased use of cash as we build inventory and diversify our products, as well as for payouts of previously accrued bonuses and commissions. The amount of cash used was partially offset by collections on receivables, increased accounts payable due to timing of activity and payments, and non-cash expenditures for the three months ended September 30, 2019.

Investing Activities

Net cash used in investing activities was $87.2 million for the three months ended September 30, 2020, primarily due to investing cash from our recently completed equity offering into marketable securities. We also deployed cash into strategic investments and capital expenditures as we continue to grow our business. These uses of cash were partially offset by maturities and sales of marketable securities.

Net cash used in investing activities was $4.1 million for the three months ended September 30, 2019, primarily due to the cash payment made for the WIRION acquisition and additional purchases of marketable securities, partially offset by maturities of marketable securities.

Financing Activities

Net cash used in financing activities was $3.4 million and $5.5 million for the three months ended September 30, 2020 and 2019, respectively, primarily due to the payment of payroll taxes on the employee vesting of stock awards.

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 business operations, 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, potential strategic transactions (including the potential acquisition of, or investments in, businesses, technologies and products), international expansion, the existence, defense and resolution of legal proceedings, and the severity and duration of the current COVID-19 pandemic. As discussed in the “Overview” above, the total impact of disruptions from COVID-19 have had a material impact on our financial condition and results of operations, and we cannot predict the specific extent, or duration, of the continuing impact of the COVID-19 pandemic on our condition and results. We will continue to closely monitor our liquidity and capital resources through the disruption caused by COVID-19 and will continue to evaluate our financial position to assess additional spending reductions and our liquidity needs. As of September 30, 2020, we believe our current cash, cash equivalents and highly liquid marketable securities will be sufficient to fund working capital requirements, capital expenditures and operations for the foreseeable future, including at least the next twelve months, as well as to fund expenses relating to compliance with our Corporate Integrity Agreement, payments under our lease agreements, payments under development agreements and future
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payments relating to our asset acquisition of the WIRION embolic protection system. If needed, we have the ability to borrow under our senior, secured revolving credit facility. We intend to retain any future earnings to support operations and to finance the growth and development of our business. We do not anticipate paying any dividends in the foreseeable future.

Facility Sale and Lease

On December 29, 2016, we entered into a Purchase and Sale Agreement, as subsequently amended (collectively, the “Sale Agreement”), with Krishna Holdings, LLC (“Krishna”), providing for the sale to Krishna of our headquarters facility in St. Paul, Minnesota (the “Facility”) for a cash purchase price of $21.5 million. On March 30, 2017, the sale of the Facility under the Sale Agreement closed. We received proceeds of approximately $20.9 million ($21.5 million less $556,000 of transaction expenses). In connection with the closing of the facility sale, we entered into a Lease Agreement (the “Lease Agreement”) with Krishna Holdings, LLC, Apex Holdings, LLC, Kashi Associates, LLC, Keva Holdings, LLC, S&V Ventures, LLC, Polo Group LLC, SPAV Holdings LLC, Star Associates LLC, and The Global Villa, LLC. The Lease Agreement has an initial term of fifteen years, with four consecutive renewal options of five years each, with a base annual rent in the first year of $1.6 million and annual escalations of 3%. See Note 6 to our Consolidated Financial Statements included in Item 1 of Part I of this Quarterly Report on Form 10-Q for additional discussion.

Revolving Credit Facility

In March 2017, we entered into a Loan and Security Agreement (the “Loan Agreement”) with Silicon Valley Bank (“SVB”). In March 2020, we entered into the First Amendment to the Loan Agreement (the "Amendment"). The Amendment extended the maturity date of the Loan Agreement by two years, to March 31, 2022, and increased the maximum amount available under the senior, secured revolving credit facility (the "Revolver") to $50.0 million (the “Maximum Dollar Amount”).

Advances under the Revolver may be made from time to time up to the Maximum Dollar Amount, subject to certain borrowing limitations. The Revolver bears interest at a floating per annum rate equal to the Wall Street Journal prime rate, less 0.75%. Interest on borrowings is due monthly and the principal balance is due at maturity. Upon the Revolver’s maturity, any outstanding principal balance, unpaid accrued interest, and all other obligations under the Revolver will be due and payable. We will incur a fee equal to 3% of the Maximum Dollar Amount upon termination of the Loan Agreement, as amended by the Amendment (the "Amended Loan Agreement"), or the Revolver for any reason prior to the date that is fifteen days prior to the maturity date, unless refinanced with SVB.

Our obligations under the Amended Loan Agreement are secured by certain of our assets, including, among other things, accounts receivable, deposit accounts, inventory, equipment, general intangibles and records pertaining to the foregoing. The collateral does not include our intellectual property, but we agreed not to encumber our intellectual property without the consent of SVB. The Amended Loan Agreement contains customary covenants limiting our ability to, among other things, incur debt or liens, make certain investments and loans, enter into transactions with affiliates, undergo certain fundamental changes, dispose of assets, or change the nature of our business. In addition, the Amended Loan Agreement contains financial covenants requiring us to maintain, at all times when any amounts are outstanding under the Revolver, either (i) minimum unrestricted cash at SVB and unused availability on the Revolver of at least $10.0 million or (ii) minimum trailing three-month Adjusted EBITDA (as defined in the Amended Loan Agreement) of $1.0 million. If we do not comply with the various covenants under the Amended Loan Agreement or an event of default under the Amended Loan Agreement occurs, such as a material adverse change, the interest rate on outstanding amounts will increase by 5% and SVB may, subject to various customary cure rights and the other terms and conditions of the Amended Loan Agreement, decline to provide additional advances under the Revolver, require the immediate payment of all amounts outstanding under the Revolver, and foreclose on all collateral.

We are required to pay a fee equal to 0.15% per annum on the unused portion of the Revolver, payable quarterly in arrears. We are not obligated to draw any funds under the Revolver and have not done so under the Revolver since entering into the Loan Agreement. No amounts are outstanding as of September 30, 2020 and we currently do not have plans to borrow under the Amended Loan Agreement.


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NON-GAAP FINANCIAL INFORMATION

To supplement our condensed consolidated financial statements prepared in accordance with GAAP, our management uses a non-GAAP financial measure referred to as “Adjusted EBITDA.” Reconciliations of this non-GAAP measure to the most comparable U.S. GAAP measure for the respective periods can be found in the following table. In addition, an explanation of the manner in which our management uses this measure to conduct and evaluate our business, the economic substance behind our management's decision to use this measure, the substantive reasons why our management believes that this measure provides useful information to investors, the material limitations associated with the use of this measure and the manner in which our management compensates for those limitations is included following the reconciliation table.
  Three Months Ended
September 30,
  2020 2019
Net loss $ (2,076) $ (5,780)
Less: Other (income) expense, net 355  (191)
Less: Provision for income taxes 63  38 
Loss from operations (1,658) (5,933)
Add: Stock-based compensation 4,907  3,906 
Add: Depreciation and amortization 1,029  974 
Adjusted EBITDA $ 4,278  $ (1,053)

Adjusted EBITDA increased for the three months ended September 30, 2020 as compared to the three months ended September 30, 2019 primarily due to a smaller loss from operations and increased stock-based compensation in the current year.

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 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. Management does not use this Adjusted EBITDA measure as a liquidity measure or in the calculation of our financial covenants under the revolving credit facility with Silicon Valley Bank.

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 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 our 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 our company.
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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:

•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.

We provide detailed reconciliations of each non-GAAP measure to its most directly comparable GAAP measure. We encourage investors to review these reconciliations. We qualify our use of non-GAAP financial measures with cautionary statements as set forth above.

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

For a description of recent accounting pronouncements, see Note 1 to the Consolidated Financial Statements included in Item 8 of Part II of our Annual Report on Form 10-K for the year ended June 30, 2020.

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 Quarterly Report on Form 10-Q and in other materials filed or to be filed by us with the SEC (as well as information included in oral statements or other written statements made or to be made by us). Forward-looking statements include all statements based on future expectations. This Quarterly Report on Form 10-Q contains forward-looking statements that involve risks and uncertainties, including, but not limited to, (i) our expectations regarding the impact of the COVID-19 pandemic on our operations; (ii) our expectation of continued sales of our products internationally, including the specific products to be sold, the territories in which such products will be sold, and the timing of such sales; (iii) seasonality in our business; (iv) our expectation that our revenue will be higher in the second quarter of fiscal 2021 than the three months ended September 30, 2020, and that our revenue growth will return to recently observed normal levels longer-term; (v) our expectation that we will incur selling, general and administrative expenses in the second quarter of fiscal 2021 that are higher than the amounts incurred in the three months ended September 30, 2020; (vi) our expectation that gross margin in the second quarter of fiscal 2021 will be less than gross margin in the three months ended September 30, 2020; (vii) our expectation that we will incur research and development expenses in the second quarter of fiscal 2021 that are higher than the amounts incurred in the three months ended September 30, 2020; (viii) 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, as well as to fund certain other anticipated expenses; (ix) our intention to retain any future earnings to support operations and to finance the growth and development of our business; (x) our dividend expectations; (xi) our plan not to borrow under our loan and security agreement; and (xii) the anticipated impact of adoption of recent accounting pronouncements on our 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 the ongoing COVID-19 pandemic; regulatory developments, clearances and approvals; approval of our products for distribution in foreign countries; approval of products for reimbursement and the level of reimbursement in the U.S., Japan and other foreign countries; dependence on market growth; agreements with third parties to sell their products; the ability of OrbusNeich to successfully launch our products outside of the United States and Japan; our ability to maintain third-party supplier relationships and renew existing purchase agreements; our ability to maintain our relationships with Medikit and OrbusNeich; the experience of physicians regarding the effectiveness and reliability of the products we sell; 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; our ability to comply with the financial covenants in our loan and security agreement and to make payments under and comply with the lease agreement for our corporate headquarters; unanticipated developments affecting our estimates regarding expenses, future revenues and capital requirements; the difficulty of successfully managing operating costs; our ability to manage our sales force strategy; actual research and development efforts and needs, including the timing of product development programs; our ability to obtain and maintain intellectual property protection for product candidates; fluctuations in results and expenses based on new product introductions, sales mix, unanticipated warranty claims, and the timing of project expenditures; our ability to manage costs; our actual financial resources and our ability to obtain additional financing; investigations or litigation threatened or initiated against us; court rulings and future actions by the FDA and other regulatory bodies; international trade developments; the impact of federal corporate tax reform on our business, operations and financial statements; shutdowns of the U.S. federal government; unanticipated developments during the manufacturing transfer process for the WIRION system; and general economic conditions.

These and additional risks and uncertainties are described more fully in our Annual Report on Form 10-K for the year ended June 30, 2020 and subsequent Quarterly Reports on Form 10-Q, including in Item 1A of Part II of this Quarterly Report on Form 10-Q. 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 Quarterly Report on Form 10-Q as being applicable to all related forward-looking statements wherever they appear in this Quarterly Report on Form 10-Q. We cannot assure you that the forward-looking statements in this Quarterly Report on 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 Quarterly Report on 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

Other than the negative impact the COVID-19 pandemic has had and will continue to have on our business and results of operations as discussed elsewhere in this report, there have been no material changes in our primary risk exposures or management of market risks from those disclosed in our Annual Report on Form 10-K for the year ended June 30, 2020.

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 our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of September 30, 2020. Based on that review and evaluation, which included inquiries made to certain other of our employees, the Certifying Officers have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures, as designed and implemented, are effective.
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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 September 30, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II. — OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

None.

ITEM 1A.    RISK FACTORS

In addition to the other information set forth in this Quarterly Report on Form 10-Q, including the important information in the section entitled “Private Securities Litigation Reform Act,” you should carefully consider the “Risk Factors” in our Annual Report on Form 10-K for the year ended June 30, 2020 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 Quarterly Report on Form 10-Q and materially adversely affect our business, financial condition and/or future operating results. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also might materially adversely affect our business, financial condition and/or operating results.

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

Company Repurchases of Equity Securities

The following table presents information with respect to purchases made by us of our common stock during the first quarter of fiscal 2021:
Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased under the Plans or Programs
July 1 to July 31, 2020 —  —  N/A N/A
August 1 to August 31, 2020(1)
104,998  $ 32.47  N/A N/A
September 1 to September 30, 2020 —  —  N/A N/A
104,998  $ 32.47 
(1) Comprised of shares withheld pursuant to the terms of restricted stock awards under our stock-based compensation plans to offset tax withholding obligations that occur upon vesting and release of shares. The value of the shares withheld is the closing price of our common stock on the date the relevant transaction occurs.

ITEM 3.    DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.    MINE SAFETY DISCLOSURES

None.

ITEM 5.    OTHER INFORMATION

On September 25, 2020, the Company entered into the Amendment to Purchasing Agreement (the “Amendment”) with HealthTrust Purchasing Group, L.P. (“HPG”), which amends the Purchasing Agreement between the Company and HPG, effective May 1, 2018 (the “Purchasing Agreement”). The Amendment was effective on October 1, 2020. The Amendment extends the expiration date of the Purchasing Agreement to February 1, 2025. The Amendment also adds certain products to the Purchasing Agreement, updates the amount and timing of calculation of the rebates under the Purchasing Agreement, and includes administrative updates. The foregoing description of the material terms of the Amendment does not purport to be a complete description of the Amendment or the Purchasing Agreement and is qualified in its entirety by reference to the full text of the Amendment, which is filed as an exhibit to this report.



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ITEM 6.    EXHIBITS
Exhibit No. Description
10.1*+!
10.2*+!
10.3*+
31.1*
31.2*
32.1**
32.2**
101* Financial statements from the Quarterly Report on Form 10-Q of the Company for the quarter ended September 30, 2020, formatted in Inline XBRL: (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Changes in Stockholders’ Equity, (v) the Consolidated Statements of Cash Flows, and (vi) the Notes to Financial Statements.
104* Cover page interactive data file (formatted in Inline XBRL and contained in Exhibit 101).
_______________________

* Filed herewith.
** Furnished herewith.
+ Certain portions have been omitted from this exhibit.
! Filed with this Quarterly Report on Form 10-Q solely for the purpose of transitioning these previously-filed exhibits, which are the subject of expiring confidential treatment orders, to the rules governing the filing of redacted exhibits under Regulation S-K Item 601(b)(10)(iv) pursuant to the SEC’s CF Disclosure Guidance: Topic 7.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
Dated: November 5, 2020
CARDIOVASCULAR SYSTEMS, INC.
By /s/ Scott R. Ward
Scott R. Ward
Chairman, President and Chief Executive Officer
(Principal Executive Officer)
By /s/ Jeffrey S. Points
Jeffrey S. Points
Chief Financial Officer
(Principal Financial and Accounting Officer)

30
Exhibit 10.1

*Certain information where indicated below in brackets has been excluded from this exhibit because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed*

SUPPLY AGREEMENT

This Supply Agreement (the “Agreement”) is effective as of the 4th day of April, 2011 (the “Effective Date”) by and between
(1)    Fresenius Kabi AB, Rapsgatan 7, 75324 Uppsala, Sweden (“FRESENIUS”)
and
(2)    Cardiovascular Systems, Inc, 651 Campus Drive, Saint Paul, MN 55112, USA (“CSI”).
Recitals
(A)    WHEREAS, CSI holds the market authorization of a product that requires the Product (as defined herein) as a lubricant which is used as a medical device.
(B)    WHEREAS, FRESENIUS has a NDA (new drug application) approval of the Product in bags in the United States of America.
(C)    WHEREAS, FRESENIUS is willing to provide all information to CSI that is required to receive an approval from the FDA for the Product for the intended use as a lubricant.
(D)    WHEREAS, CSI is willing to purchase the Product from FRESENIUS.
(E)    WHEREAS, FRESENIUS is willing to manufacture the Product and supply it to CSI.
(F)    WHEREAS, the parties have agreed to enter into this Agreement to set forth the terms and conditions on which FRESENIUS will manufacture and supply the Product to CST.
Agreement
NOW, THEREFORE, the parties hereto agree as follows:
1.    Definitions
Unless otherwise specifically provided in this Agreement, the following terms shall have the following meanings:
1.1    “The Act” means the United States Federal Food, Drug and Cosmetic Act, as amended from time to time, and the rules and regulations promulgated thereunder.
1.2    “Affiliates” means, with respect to a Party, any person that controls, is controlled by or is under common control with such first person. For purposes of this definition only, “control” means (a) to possess, directly or indirectly, the power to direct the management


or policies of a person, whether through ownership of voting securities or by contract relating to voting rights or corporate governance, or (b) to own, directly or indirectly, more than fifty percent (50%) of the outstanding voting securities or other ownership interest of such person.
1.3    “Change of Control,” with respect to any Party, means an event in which:
1.3.1    any other person or group of persons acquires beneficial ownership of securities of the Party representing more than fifty percent (50%) of the voting power of the then outstanding securities of such Party with respect to the election of directors of such Party; or
1.3.2    the Party enters into a merger, consolidation or similar transaction with another person in which such Party is not the surviving entity in such transaction.
1.4    “Confidential Information” means all Information, disclosed by or on behalf of the relevant Party to the other Party pursuant to this Agreement in written, oral or any other form.
1.5    “Disclosing Party” means the Party disclosing Confidential Information.
1.6    “Effective Date” means the date as set forth in the preamble to this Agreement.
1.7    “FDA” means the United States Food and Drug Administration or any successor entity thereto.
1.8    “First Price Review Date” means the date on which the then current Price for the Product will first be reviewed and negotiated, as specified in item C.4 of the Product Schedule.
1.9    “Fixed Price Term” means the term for which the Price specified in the Product Schedule at the time of signing will remain fixed, as specified in item C.3 of the Product Schedule.
1.10    “Forecast” means a listing of the quantities of the Product that CSI expects to order from FRESENIUS within a rolling time-frame.
1.11    “Invoice Currency” means the currency in which the Product will be invoiced and paid, as specified in Part C.2 of the Product Schedule.
1.12    “Loss” means any and all liabilities, claims, demands, causes of action, damages and expenses, including interest, penalties, and reasonable lawyers’ fees and disbursements.
1.13    “Parties” means FRESENIUS and CSI. “Party” means either FRESENIUS or CSI.
1.14    “Price” with respect to the Product, means the amount payable for such Product, as determined in accordance with the terms hereof and the Product Schedule.
- 2 -

1.15    “Product” means the medical device product to be supplied pursuant to, and as detailed in Part A (Specification) of the Product Schedule.
1.16    “Product Schedule” means a schedule executed and delivered by the Parties in accordance with Section 2.1.
1.17    “Purchase Order” means a binding order for such quantities of the Product as CSI commits to order from FRESENIUS during the Term, with a statement of the date on which delivery of such shipment shall be required.
1.18    “Quality Agreement” means the Quality Agreement(s) entered into by the Parties simultaneously with the execution and delivery of the Product Schedule and attached hereto as Exhibit 2.
1.19    “Receiving Party” means the Party to whom Confidential Information is disclosed.
1.20    “Regulatory Approval” shall mean any approval (including supplements, amendments, pre- and post-marketing approval, and pricing and reimbursement approval), license, registration or authorization of any national, supra-national, regional, state or local regulatory agency, department, bureau, commission, council or other governmental entity, necessary for the manufacture, distribution, use or sale of the Product as a Device in a regulatory jurisdiction. For purposes of this definition, Regulatory Approval shall mean a 510(k) Device approval issued by the FDA (as defined below) or any other relevant Regulatory Authority (as defined below).
1.21    “Regulatory Authority” shall mean any federal, state or local or international regulatory agency, department, bureau or other governmental entity including the FDA which is responsible for issuing approvals, licenses, registrations or authorizations necessary for the manufacture, use, storage, import, transport or sale of the Product as a Device in a regulatory jurisdiction.
1.22    “Specification(s)” with respect to the Product, means the specifications for the Product as specified in Part A of the Product Schedule, as the same may be updated from time to time in accordance with the current Quality Agreement.
1.23    “Term” means the period beginning on the Effective Date and continuing until the date upon which this Agreement is terminated or not renewed in accordance with Article 14.
1.24    “Third Party” shall mean a party other than FRESENIUS or the CSI and their respective Affiliates.
2.    Product
2.1    The parties shall enter into a Product Schedule for the supply of the Product they wish to be governed by the terms and conditions of this Agreement, Exhibit 1.
2.2    Purchase and Sale of Product. Pursuant to the terms and conditions of this Agreement and for the duration of this Agreement, FRESENIUS shall manufacture, sell and deliver
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the Product to CSI, and CSI shall purchase and take delivery of the Product exclusively from FRESENIUS. FRESENIUS shall manufacture Product in accordance with the Specifications. The parties may alter from time to time the Specifications by written agreement without amending this Agreement.
2.3    Government Approvals. FRESENIUS shall consult with and advise CSI in responding to questions from Regulatory Authorities regarding CSI’s submission(s) for the Product. CSI shall be the sole owner of any regulatory submission filed pursuant to this Agreement. CSI shall provide to FRESENIUS for its files a final copy of the CMC section of any such regulatory submission(s).
2.4    Product Labeling. FRESENIUS shall label Product in accordance with label copy that CSI provides. Such copy may be modified from time to time by delivery of written notice by CSI to FRESENIUS. CSI shall reimburse FRESENIUS for FRESENIUS’s actual costs of making any label copy changes and for the cost of any labeling that FRESENIUS is unable to use due to such label copy changes.
2.5    CSI shall be allowed to market the Product for its specific purposes. The usage and marketing of the Product for parenteral nutrition is explicitly excluded.
3.    Forecasting; Minimum purchase quantity
3.1    Initial Forecast. Attached hereto under Part B.3 of the Product Schedule is a binding forecast of the amount of Product that CSI agrees to order during the first twelve (12) month period of this Agreement (“Initial Binding Forecast”).
3.2    Ongoing Forecasts. On or before the 31st of December and the 30th of June of each calendar year occurring after the time period covered by the Initial Binding Forecast, CSI shall submit to FRESENIUS a rolling forecast covering the time period of one year, broken down on a monthly basis. The first six (6) months of any given Forecast shall be binding to CSI. The Forecasts concerning this time period cannot be changed as the forecasting roles on over the months, unless FRESENIUS agrees to such changes in writing. The succeeding six (6) months of any Forecast are estimations and shall be used by FRESENIUS for planning purposes only. The forecasts amounts for the second six month period may be changed by CSI without FRESENIUS’ written consent.
3.3    Failure to Purchase. If CSI fails to submit purchase orders in the amount of a binding forecast, FRESENIUS shall have the right to demand compensation from CST in the amount provided for in Part C.6 of the Product Schedule.
3.4    Obligation to Supply. FRESENIUS shall be required to supply the quantity of Product set forth in the binding portion of any forecast. FRESENIUS shall inform CSI of any unavailability of capacity it might face in fulfilling CSI’s needs during the non-binding portion of the rolling forecast.
4.    Orders
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CST shall submit to FRESENIUS Purchase Orders for its planned requirements of Product not later than three (3) months prior to the shipment date. Each Purchase Order shall detail the CSI purchase order number, FRESENIUS product code and product name, CST product code, and CSI product name as well as the required quantities per delivery date. All Purchase Orders shall be in writing, and shall be confirmed by FRESENIUS in writing at the latest ten (10) working days after receipt of each firm purchase order, naming the calendar week of delivery.
5.    Quality
5.1    Quality Control. FRESENIUS shall manufacture the Product in accordance with the Specifications as set forth in Part A of the Product Schedule. FRESENIUS shall comply with the provisions and requirements of the Quality Agreement with regard to the manufacturing, testing and supplying of the Product to CSI.
5.2    Permits. FRESENIUS shall maintain at all relevant times governmental permits, licenses and approvals enabling FRESENIUS lawfully and properly perform its obligations under this Agreement.
5.3    Raw Materials. The materials which are needed to manufacture the Products shall be tested by FRESENIUS to ensure that they meet applicable specifications and quality standards as set forth in the Specifications and the Quality Agreement.
5.4    Responsibilities. Further quality relevant issues and the allocation of the responsibilities are listed in the Quality Agreement.
5.5    Rejection of Nonconforming Product. CSI shall have a period of thirty (30) days from the date of its receipt of a shipment of Product to inspect and reject such shipment for nonconformance with the Specifications. If CSI rejects such shipment, it shall promptly so notify FRESENIUS and provide to FRESENIUS samples of such shipment for testing. If FRESENIUS tests such shipment and determines that it did conform to the Specifications, the parties shall submit samples of such shipment to a mutually acceptable independent laboratory for testing. If such independent laboratory determines that the shipment conformed to the Specifications, CSI shall bear all expenses of shipping and testing such shipment samples. If FRESENIUS or such independent laboratory confirms that such shipment did not meet the Specifications, FRESENIUS shall replace, at no cost to CSI, that portion of the Product shipment which does not conform to the Specifications, and shall bear all expenses of shipping and testing the shipment samples. Any nonconforming portion of any shipment shall be disposed of as directed by FRESENIUS, at FRESENIUS’ expense.
6.    Price
6.1    Taxes. The Price of the Product is exclusive of value added tax, which, if payable, shall be borne and paid by CSI against the provision by FRESENIUS of an appropriate VAT invoice. The Price is payable in the applicable Invoice Currency set forth in Part C.2 of the relevant Product Schedule.
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6.2    Price. The purchase price for the Product shall be the price set forth in Part C.1 of the Product Schedule. Such price will remain fixed for the Fixed Price Term as provided in Part C.3 of the Product Schedule. On the First Price Review Date (See Part C.4 of the Product Schedule) and on each anniversary of such First Price Review Date, the Price will be renegotiated in good faith. The Product price will be adjusted upwards only if FRESENIUS face documented increased costs of >3% to manufacture Product due to general inflation and increasing costs of raw materials, energy, wages or other third party factor reasonably tied to the manufacture of Product. If the Parties are unable to agree on a Price for the Products for the following period as of the start of such period, the old Price shall remain in effect until the Parties agree otherwise in writing.
7.    Invoicing and Payment
7.1    Invoices. FRESENIUS shall issue an invoice to CSI for the applicable Price for all Products delivered to CSI. The invoice shall contain a reference identifying this Agreement and the Product Schedule, and shall state FRESENIUS’ registered VAT number.
7.2    Payment, CSI shall pay all invoices in full within thirty (30) days from the date of the relevant invoice and certificates of the Product, whichever is later, to FRESENIUS as detailed in Part C.5 of the Product Schedule.
8.    FRESENIUS’ Warranties and Covenants
8.1    Not Adulterated or Misbranded. FRESENIUS represents and warrants to CSI that Product FRESENIUS delivers to CSI pursuant to this Agreement shall, at the time of delivery, not be adulterated or misbranded within the meaning of the Act as the Act is constituted and effective at the time of delivery and will not be an article which may not under the provisions of Sections 404 and 505 of the Act be introduced into interstate commerce.
8.2    Free From Defects. FRESENIUS further represents and warrants to CSI that Product FRESENIUS delivers to CSI pursuant to this Agreement shall, at the time of delivery, be free from defects in material and workmanship and shall be manufactured: (a) in accordance and conformity with the Specifications; and (b) in compliance with all applicable statutes, laws, rules or regulations, including those relating to the environment, food or drugs and occupational health and safety, including, without limitation, those enforced or promulgated by the FDA (including, without limitation, compliance with cGMPs).
8.3    No Violation of Other Agreements. FRESENIUS further represents and warrants to CSI that FRESENIUS’s performance of its obligations under this Agreement will not result in a material violation or breach of any agreement, contract, commitment or obligation to which FRESENIUS is a party or by which it is bound and will not conflict with or constitute a default under its Certificate of Incorporation or corporate bylaws.
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8.4    Limitation of Liability. In case of breach of pre-contractual, contractual and/or non-contractual obligations of FRESENIUS, its statutory representative or executives, including but not limited to defects, delay in delivery or tort, FRESENIUS’ maximum liability shall, to the extent legally permissible, be limited to a maximum of two and a half Million United States Dollars (US$2,500,000). FRESENIUS shall not be liable for loss of profit. Such limitations shall not apply to amounts arising from FRESENIUS’ indemnification obligations to CSI as outlined in Section 9.1.
9.    Indemnification
9.1    Indemnification by FRESENIUS. FRESENIUS shall indemnify and hold harmless CSI, its Affiliates and their respective officers, directors and employees from and against all claims, causes of action, suits, costs and expenses (including reasonable attorney’s fees), losses or liabilities of any kind related to this Agreement and asserted by Third Parties to the extent such arise out of or are attributable to: (a) FRESENIUS’s breach of any representation or warranty set forth in Article 8; (b) any violation of any proprietary right of any Third Party relating to FRESENIUS’s manufacturing processes used in the manufacture of Product pursuant to this Agreement; or (c) any negligent or wrongful act or omission on the part of FRESENIUS, its employees, agents or representatives.
9.2    Indemnification by CSI. CSI shall indemnify and hold harmless FRESENIUS, its Affiliates and their respective officers, directors and employees harmless from and against all claims, causes of action, suits, costs and expenses (including reasonable attorney’s fees), losses or liabilities of any kind related to this Agreement and asserted by Third Parties to the extent such arise out of or are attributable to: (a) any violation of any proprietary right of any Third Party relating to the labeling required by CSI to be used for the Product; and (b) any negligent or wrongful act or omission on the part of CSI, its employees, agents or representatives.
9.3    Conditions of Indemnification. If either Party seeks indemnification from the other hereunder, it shall promptly give written notice to the other Party of any such claim or suit threatened, made or filed against it which forms the basis for such claim of indemnification and shall cooperate fully with the other party in the investigation and defense of all such claims or suits. The indemnifying Party shall have the option to assume the other Party’s defense in any such claim or suit with counsel of its own choosing. The indemnified Party may elect to be represented by its own counsel, but at its own expense. No settlement or compromise that includes any non-monetary provisions shall be binding on an indemnified Party without its prior written consent, such consent not to be unreasonably withheld or delayed.
10.    Product Recall
In the event (a) any Regulatory Authority or other national government authority issues a request, directive or order that Product be recalled, (b) a court of competent jurisdiction orders such a recall, or (c) CSI, in its sole discretion, determines that Product should be recalled, the parties shall take all appropriate corrective actions, and shall cooperate in any governmental investigations surrounding the recall. Each Party shall inform the other
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Party immediately after receiving knowledge of reasons for a product recall. Such notice shall be provided in accordance with the terms of Article 15. In the event that such recall results from the breach of FRESENIUS’ express warranties under Article 8, FRESENIUS shall be responsible for the expenses of the recall. In the event that the recall does not result from the breach of FRESENIUS’ express warranties under this Agreement, CSI shall be responsible for the expenses of the recall. For purposes of this Agreement, the expenses of the recall shall include, but not be limited to, the expenses of notification and destruction or return of the recalled Product, cost of the recalled Product, and any costs associated with the distribution of the replacement Product, but shall not include lost profits of either party.
11.    Intellectual Property
The Product itself as well as any improvement to the Product or to elements of the Product or to the manufacturing process of the Product, patentable or non-patentable, achieved by FRESENIUS during the Term of this Agreement will be the exclusive property of FRESENIUS. CSI or any of its Affiliates will have the benefit of a royalty free non-exclusive license for such exclusive property of FRESENIUS, but only as long as this Agreement is not terminated by any of the Parties. CSI is not allowed to transfer or utilize the knowledge gained through the cooperation with FRESENIUS for their other business activities not related to the Products.
12.    Confidentiality
12.1    Ownership. Except as otherwise provided in this Agreement, any Confidential Information which is disclosed by or on behalf of a Disclosing Party to the Receiving Party will remain the property of the Disclosing Party.
12.2    Undertakings. The Receiving Party undertakes
12.2.1    to use the Confidential Information solely and exclusively for the purposes of this Agreement (or such other purpose as is agreed in writing between the Parties at the time of disclosure), and not to use the Confidential Information for any other purpose whatsoever, including the development, manufacture, marketing, sale or licensing of any process or product or any other commercial purpose anywhere in the world, unless the Parties enter into an agreement specifying otherwise; and
12.2.2    to maintain the confidentiality of the Confidential Information and not to disclose it directly or indirectly to any other company, organization, individual or third Person, except as expressively permitted; and
12.2.3    at the request of the Disclosing Party, to return, delete or destroy all copies of the Confidential Information, in whatever form it is held.
12.3    Allowed Disclosures. Notwithstanding Section 12.2, the Receiving Party may disclose Confidential Information to any of its Affiliates, and its and its Affiliate’s directors, employees and professional advisers who need to know the Confidential Information in
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order to fulfill the purpose of this Agreement, provided that the Receiving Party procures that prior to such disclosure, each such Person to whom Confidential Information is to be disclosed is made aware of the obligations contained in this Agreement, and adheres to these terms as if it were a party to this Agreement.
12.4    Required Disclosures. Nothing in Section 12.2 will preclude disclosure of any Confidential Information required by any governmental, quasi-governmental or regulatory agency or authority or court entitled by law to disclosure of the same, or which is required by law or the requirements of a national securities exchange or another similar regulatory body to be disclosed; provided that the Receiving Party promptly notifies the Disclosing Party when such requirement to disclose has arisen to enable the Disclosing Party to seek an appropriate protective order, to make known to the relevant agency, authority, court or securities exchange the proprietary nature of the Confidential Information, and to make any applicable claim of confidentiality. The Receiving Party agrees to co-operate in any action which the Disclosing Party may decide to take. If the Receiving Party is required to make a disclosure in accordance with this clause, it will only make a disclosure to the extent to which it is obliged.
12.5    Exclusions. The provisions of Section 12.2 will not apply to any Confidential Information which the Receiving Party can demonstrate, to the reasonable satisfaction of the Disclosing Party:
12.5.1    was already in the possession of the Receiving Party or any of its Affiliates and at the Receiving Party’s or any of its Affiliates’ free use and disposal or in the public domain (through in each case no fault of the Receiving Party or any of its Affiliates or no breach of this Agreement by the Receiving Party) prior to its disclosure by the Disclosing Party under this Agreement; or
12.5.2    is purchased or otherwise legally acquired by the Receiving Party or any of its Affiliates at any time from a third Person having and the right to disclose it; or
12.5.3    comes into the public domain, otherwise than through the fault of the Receiving Party or any of its Affiliates; or
12.5.4    is independently generated by the Receiving Party or any of its Affiliates without any recourse or reference to the Confidential Information.
12.6    Survival. The obligations of each Party in this Section will survive for a period of five (5) years after the date of expiration or termination of this Agreement.
13.    Exclusivity
FRESENIUS undertakes to manufacture and supply the Product non-exclusively to CSI, unless both parties have agreed upon differently in writing in the Product Schedule.
14.    Term and Termination
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14.1    Term and Nonrenewable. This Agreement shall become effective at the Effective Date and shall extend for a period of five (5) years after the Effective Date (“Initial Term”), unless earlier termination as described in Sections 14.2 and 14.3. This Agreement shall be automatically extended for subsequent periods of twelve (12) months (“Extension Term(s)”) unless either Party elects not to renew this Agreement by giving the other Party a written notice by registered mail twelve (12) months prior to the end of the Initial Term or prior to the end of any Extension Term.
14.2    Termination by Either Party. In addition to any other provision of this Agreement expressly providing for termination of this Agreement, this Agreement may be terminated immediately by either Party upon delivery of written notice to the other Party:
    in the event of a material breach of this Agreement by the other Party, where such breach is capable of cure and such breach remains uncured for thirty (30) days after notice of such breach;
    in the event of a breach of this Agreement by the other Party where such breach is not capable of cure;
    if the other Party shall file in any court or agency, pursuant to any statute or regulation of any state or country, a petition in bankruptcy or insolvency or for reorganization or for an the appointment of a receiver or trustee of such other Party or of its assets, or if the other Party proposes a written agreement of composition or extension of its debts, or if the other Party shall be served with an involuntary petition against it, filed in any insolvency proceeding, or if the other Party shall propose or be a party to any dissolution or liquidation, or if the other Party shall make an assignment for the benefit of its creditors;
    if any encumbrance takes possession of any material part of the assets of the other Party;
    if any distress, execution or other such process is levied or enforced upon or against any of the material assets of the other Party;
    if the other Party ceases or threatens to cease to carry on the whole or substantially the whole of its business or that part of its business to which this Agreement relates.
14.3    Termination by CSI. CSI shall have the right to terminate this Agreement immediately upon delivery of written notice to FRESENIUS should the FDA fail to approve the Product for resale.
14.4    Obligations on Termination or Expiration. Without prejudice to any other rights or remedies which either Party may have, upon the termination of this Agreement, howsoever the same occurs, each Party shall:
    immediately pay to the other Party all undisputed sums which at the date of termination are due and payable to the other Party under this Agreement; and
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    immediately cease all use of any property of the other Party, including any Intellectual Property Rights of the other Party; and
    within twenty eight (28) days of such termination, at its own expense, return to the other Party any property of the other Party in its possession, custody or control, including all Confidential Information of that Party and copies of it.
14.5    Open Purchase Orders. In the event this Agreement is terminated by FRESENIUS pursuant to Section 14.2, FRESENIUS may terminate or fill, at its option, any open firm purchase orders for Product. In the event this Agreement is not renewed or is terminated by CSI pursuant to Section 14.2, CSI may terminate or require FRESENIUS to fill, at CSI’s option, any open firm purchase orders for Product.
14.6    Survival. The Parties rights and obligations under Articles 1, 8, 9, 10, 11, 12 and this Section 14.5 will survive expiration or termination of this Agreement, howsoever the same occurs.
15.    Notices
Any notice, request, demand, waiver, consent, approval or other communication permitted or required under this Agreement shall be in writing and shall be deemed given only if delivered by hand, sent by facsimile transmission (with transmission confirmed), or by internationally recognized express delivery service that maintains records of delivery, addressed to the Parties at their respective addresses specified in the Quality Agreement or to such other addresses of which notice shall have been given. Such Notice shall be deemed to have been given as of the date received if delivered by hand, the date of transmission if sent by facsimile (with transmission confirmed) or on the second business day after deposit with an internationally recognized express delivery service. Any notice delivered by facsimile shall be confirmed by a hard copy delivered as soon as practicable thereafter. This Section is not intended to govern the day-to-day business communications necessary between the Parties in performing their obligations under the terms of this Agreement.
16.    General Provisions
16.1    Entire Agreement. This Agreement contains the entire understanding between the parties hereto with respect to the subject matter and supersedes any and all prior agreements, understanding and arrangements, whether written or oral, between the parties relating to the subject matter of this Agreement.
16.2    Amendments and Modifications. No amendments, changes, modifications or alterations of the terms and conditions of this Agreement shall be binding upon either party hereto unless in writing and signed by both parties.
16.3    Assignment. This Agreement is personal to FRESENIUS and CSI and neither Party shall be entitled to assign any of its rights or obligations hereunder to any Third Party without the express, prior written consent of the other Party; provided, however: (a) Affiliates of
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a Party shall not be considered a Third Party; and (b) either party may assign this Agreement, without consent of the other party, in connection with the transfer, sale or divestiture of substantially all of its business to which this Agreement pertains or in the event of its merger or consolidation with another party. Any permitted assignee shall assume all obligations of its assignor under this Agreement. No assignment shall relieve any Party of responsibility for the performance of any accrued obligation which such Party then has hereunder.
16.4    Severability. Both parties hereby expressly state that it is the intention of neither party to violate any existing rule, law or regulations. If any of the provisions of this Agreement are held to be void or unenforceable, then such void or unenforceable provisions shall be replaced by valid and enforceable provisions which will achieve as far as possible the economic business intentions of the parties.
16.5    Waivers. No purported waiver of any provision of this Agreement shall be binding unless set forth in a writing signed by the party to be charged thereby. Any waiver shall be limited to the circumstance or event specifically referenced in the written waiver document and shall not be deemed a waiver of any other term of this Agreement or of the same circumstance or event upon any recurrence thereof.
16.6    Inconsistencies. If there is any inconsistency between a Product Schedule, a Quality Agreement or between any other Exhibit on the one side and this Agreement on the other, the terms of this Agreement shall govern, unless it is written expressively in the Exhibit that the terms (or a single term) of the Exhibit shall govern.
17.    Governing Law
This Agreement shall be governed, construed and interpreted in accordance with the laws of Sweden without reference to its conflict of law provisions and excluding specifically the UN Convention on the International Sale of Goods.
18.    Arbitration
18.1    Dispute/Initiation. Any dispute, claim or controversy arising out of or relating to this Agreement, including any action in tort, contract or otherwise, at equity or at law, and any claims of fraud in the inducement (a “Dispute”), shall be resolved in a manner set forth in this Article 18. Either party may initiate negotiation proceedings by writing a letter to the other party setting forth the particulars of the Dispute, the terms of the contract that are involved and the suggested resolution of the Dispute. If the Dispute is not resolved within thirty (30) days after delivery of the initial written letter setting forth the particulars of the Dispute, either party may submit such Dispute to binding arbitration conducted pursuant to the provisions of this Agreement and the arbitration provisions of the International Chamber of Commerce (“ICC”) in effect on the Effective Date of this Agreement (“ICC”), unless such ICC rules are inconsistent with the provisions of this Agreement. Even though the arbitrator(s) shall apply the ICC rules, the arbitration shall not be conducted through the ICC.
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18.2    Selecting Arbitrator(s). The case shall be submitted to a single arbitrator who shall be a retired judge or an attorney who has practiced business litigation or in the substantive area of law related to this Agreement for at least ten (10) years. Each party shall submit a list of three (3) arbitrators to the other party within ten (10) days after the initiating party has delivered a written notice to the other party demanding arbitration of the Dispute. From the combined list, the parties shall mutually agree on the arbitrator. Should the parties be unable to agree on the choice of an arbitrator within thirty (30) days after delivery of the written notice demanding arbitration, a panel of three (3) arbitrators shall conduct the arbitration. Each party shall choose one arbitrator within ten (10) after the expiration of the above thirty (30) day period and the two selected shall choose a third arbitrator within five (5) days after their appointment.
18.3    Location/Costs. The site of the arbitration shall be in Stockholm, Sweden or such other location as the parties may mutually agree. The exact location within such metropolitan area shall be designated by the arbitrator(s). The non-prevailing party shall pay all expenses of the arbitration proceeding, including the expenses and fees of the parties’ witnesses and legal counsel and of the arbitrator(s), unless otherwise provided in the award.
18.4    Discovery/Interim Relief. The arbitrator(s) shall allow the parties to conduct limited discovery. The arbitration shall be conducted in English. Either party may apply to any court having jurisdiction hereof seeking injunctive relief so as to maintain the status quo until such time as the arbitration award is rendered or the Dispute is otherwise resolved.
18.5    Final Award. The arbitration award shall be final and binding upon the parties and may be entered and enforced at any court having jurisdiction.
THIS SUPPLY AGREEMENT is executed by the authorized representatives of the Parties to be effective as of the Effective Date set forth on the first page hereof.

SIGNED for and on behalf of

Fresenius Kabi AB

/s/ Christoph Funke            
Signature

Name: Christoph Funke        

Title: Managing Director        

SIGNED for and on behalf of

Cardiovascular Systems, Inc.

/s/ James E. Flaherty            
Signature

Name: James E. Flaherty        

Title: Chief Administrative Officer    

SIGNED for and on behalf of

Fresenius Kabi AB

/s/ Anton Gerdenibch            
Signature

Name: Anton Gerdenibch        

Title: Director, CM, Sterile Solutions

Exhibit 1: Product Schedule(s)

Exhibit 2: Quality Agreement


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EXHIBIT 1
Product Schedule
to the SUPPLY AGREEMENT dated 4th day of April 2011 (“the Supply Agreement”), entered into between:
(1)    Fresenius Kabi AB, Rapsgatan 7, 75324 Uppsala, Sweden
(“FRESENIUS”)
and
(2)    Cardiovascular Systems, Inc, 651 Campus Drive, Saint Paul, MN 55112, USA
(“CSI”).
This Product Schedule is made effective as of same day as of the Effective Date of the Supply Agreement (the “Product Schedule Effective Date”), and is subject to all of the terms and conditions contained in the Supply Agreement. Together, this Product Schedule and the Supply Agreement form a binding agreement between the parties in relation to the details set out in this Product Schedule.
The term of this Product Schedule is the same term as the Term of the Supply Agreement. It will terminate at the time of any termination or non-renewal of the Supply Agreement.
This Product Schedule consists of the following parts:
Part A:    Product Specification
Part B:    Delivery terms and orders
Part C:    Pricing and Payment



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PART A: PRODUCT SPECIFICATION
1.    Product:
Injectable lipid emulsion compound in a final dosage form, packaged and labeled with CSI’s proprietary trademark in a 100mL Excel bag, meeting the Specifications.
2.    Product Specification
The Product Specifications are set forth in the Quality Agreement attached to the Supply Agreement as Exhibit 2 and its relevant Annex.


1-2

PART B: DELIVERY TERMS AND ORDERS
1.    Delivery Term (Incoterms 2010)
CIP upon custom transfer at a named destination in the USA*.
* Destination depends on mode of transport (air freight or ship) and carrier. Destination will be named prior to each shipment and in the shipping documents.
2.    Packaging, Labeling and Export Documentation Requirements
The regulations of the Quality Agreement attached to the Supply Agreement as Exhibit 2 apply.
3.    Binding Forecast of Product
CSI agrees to order the following amount of Product during the first twelve (12) months of the Agreement.
[*******]


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PART C: PRICING AND PAYMENT
1.    Price
units ordered / year
Price [USD] per
container
[*******] [*******]

The price calculations are based on following assumptions:

    Price CIP (Incoterms 2010)
    Shipping costs (freight, insurance, custom clearance for export) will be accounted separately and have to be born by CSI
    The parties will agree in advance on the estimated freight cost and insurance coverage/cost.
    Exchange rate: 1 USD = 6.5 Swedish Krona (SEK)*
    100% optical control
    batch size >10 000 units
    raw materials and packaging materials prices given by FRESENIUS standard suppliers.
    Product related registration fees (e.g. according to 21 CFR 820) are not included and have to be born by CSI

* If the exchange rate varies more than 10% the Parties have the right to adjust the Price accordingly.

2.    Invoice Currency
United States Dollars (USD)
3.    Fixed Price Term
Annually beginning from the 1st of January of each year.
4.    First Price Review Date
1st of September 2011
5.    Payment details
30 days after date of invoice or delivery of certificates of the Product, whichever is later
6.    Compensation in case of CSI’s failure to order the amount of Product specified in binding forecasts according to Section 3.3 of the Supply Agreement
If CSI does not submit purchase orders for the full amount of Products set forth in a binding forecast, CSI has to pay compensation concerning the Product of this Product Schedule as follows:
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a.    FRESENIUS’ full price for all work in progress on non-ordered Product, and
b.    FRESENIUS’ direct costs for the labeling materials in stock at the time the product orders should have been placed and were purchased for the dedicated use in the labeling of the Product.
The compensation under this paragraph 6 is given provided that:
(i)    the work in process and the labeling materials were related to Product volumes which were within CSI`s binding forecast; and
(ii)    the work in process and labeling materials cannot reasonably be used for other purposes by FRESENIUS; and
(iii)    CSI is entitled to collect such labeling materials for its own use or sale, without additional charge.

THIS PRODUCT SCHEDULE IS EXECUTED by the authorized representatives of the Parties as of the date first written above.
SIGNED for and on behalf of

Fresenius Kabi AB

/s/ Christoph Funke            
Signature

Name: Christoph Funke        

Title: Managing Director        

SIGNED for and on behalf of

Cardiovascular Systems, Inc.

/s/ James E. Flaherty            
Signature

Name: James E. Flaherty        

Title: Chief Administrative Officer    

SIGNED for and on behalf of

Fresenius Kabi AB

/s/ Anton Gerdenibch            
Signature

Name: Anton Gerdenibch        

Title: Director, CM, Sterile Solutions



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Quality Agreement between Fresenius Kabi AG and CSI
    
EXHIBIT 2

Quality Agreement
– Contract Manufacturer Pharmaceuticals –
between
FRESENIUS KABI Uppsala, Rapsgatan 7, S-751 74 Uppsala, Sweden
represented by its management
- hereinafter referred to as “Fresenius Kabi” -
and
CARDIOVASCULAR SYSTEMS INC., 651 Campus Drive, Saint Paul, MN 55112, USA
represented by its management
- hereinafter referred to as “CSI” -
Preamble
This Quality Agreement is intended to regulate pharmaceutical and medical device, quality assurance and safety issues.
§ 1    Subject Matter of the Quality Agreement
(1)    FRESENIUS KABI is a manufacturer of pharmaceutical products/medical devices for which CSI has a marketing authorization.
(2)    FRESENIUS KABI shall manufacture for CSI the products as specified in Appendix 3 to this Quality Agreement (the “Contractual Products”) pursuant to the terms of a Supply Agreement entered into between FRESENIUS KABI and CSI, dated April 4, 2011 (the “Supply Agreement”).
(3)    FRESENIUS KABI is subject to monitoring by the competent national authority. FRESENIUS KABI has a manufacturing authorization according to the respective legislation.
§ 2    Obligations and Responsibilities
(1)    FRESENIUS KABI shall manufacture and release the Contractual Products based on the current registration and specification as specified in the Appendix 3.
(2)    FRESENIUS KABI shall comply with any recognized pharmaceutical and medical device rules and applicable legal provisions with regard to the manufacture of the
    
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Contractual Products. This includes especially the requirements of the EU and US Good Manufacturing Practices and the applicable Pharmacopoeias in their actual version.
(3)    Any additional request by FRESENIUS KABI or CSI that special instructions or guidelines which are not covered by the generally accepted instructions and guidelines are to be observed for the manufacture of certain Contractual Products must be set down and executed by the parties in writing.
(4)    Both parties will strictly observe the detailed pharmaceutical and medical device responsibilities which are specified in Appendix 1 (“Responsibilities”).
(5)    FRESENIUS KABI and CSI appoint Contact Persons as named in Appendix 2 (“Contact Persons”).
(6)    CSI may perform audits by itself or delegate the audit to external experts at the manufacturing site of FRESENIUS KARI after having agreed on a date with FRESENIUS KABI. The audits will cover processes and facilities related to the Contractual Products including the Quality System only.
(7)    Under no circumstances must any other products which may present a potential hazard to the contractual products, such as beta-lactam and cephalosporin antibiotics, certain potent hormones, cytotoxic compounds, highly potent drugs, biological preparations or non-pharmaceutical chemicals, be manufactured, processed, or packaged with the same production equipment used for CSI product(s).
§ 3    Final Provision
(1)    The contract comes into force after signature of the contractual parties. Term of this contract shall be the same as the Supply Agreement. This contract shall renewal upon renewal of the Supply Agreement and shall terminate upon termination of the Supply Agreement. It is understood that FRESENIUS KABI’s obligation pursuant to the paragraphs in the Appendix 1 “Retaining of batch related Documentation”, “Retaining of analytical data” and “Retaining of samples” shall survive the formal end of the contract period.
(2)    The General Provisions of Article 16, the Governing Law of Article 17 and the Arbitration Provisions of Article 18 of the Supply Agreement shall apply to this contract.


    
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Appendices
Appendix 1    Responsibilities
Appendix 2    Contact Persons
Appendix 3    Contractual Products and Specification


/s/ Christoph Funke        
Fresenius Kabi Uppsala
Mr. Christoph Funke
Managing Director
/s/ Alexander Stoll        
Fresenius Kabi Uppsala
Dr. Alexander Stoll
Head of Quality Management




/s/ James E. Flaherty        
CSI
Jim Flaherty
Chief Administrative Officer
/s/ Jim Murray        
CSI
Jim Murray
Director, Quality Assurance and Supply Chain



    
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Responsibilities: Contract Manufacturing Pharmaceuticals
Abbreviations used in the different chapters:
Term Definition
Annual Product Review Annual review of quality standards and batch documentation to determine the need for Specification and Manufacturing changes, as determined by EU Annex 18, 2.5 and/or CFR 211.180(e)
BOM Bill of Materials
CFR
U.S. Code of Federal Regulations
cGMP Current Good Manufacturing Practices
CMC Chemistry, Manufacturing and Controls
CMO Contract Manufacturing Organization
Device History Record (DHR) A compilation of records containing the product history of a finished device
Device Master Record (DMR) A compilation of records containing the procedures and specification for a finished device
Manufacturing The processes of producing and filling of Drug Product into final container closure system
NDA New Drug Application
OOS Out of Specification
Packaging All operations, including filling and labeling, which a bulk product has to undergo in order to become a finished product.
Primary Packaging Material Material employed in the packaging of the PRODUCT that comes in direct contact with the product.
Printed Components Any component that is controlled for artwork and text including, but not limited to, the Package insert, bag film, carton labels, and cartons.
PRODUCT
Formulation of Intralipid 10% (ViperSlide®) as detailed in Appendix 3.
QA Quality Assurance
QC Quality Control
Regulatory Authorities The U. S. Food and Drug Administration and its successors (the “FDA”) and similar governmental agencies outside the United States and throughout the world that are responsible for granting manufacturing, marketing, price and/or reimbursement price authorizations and includes applicable national, supra-national (e.g. the European Commission or the Council of the European Union), state or local regulatory authorities, departments, bureaus, commissions, councils or other governmental entities that have jurisdiction over the PRODUCT, whether the development, manufacture, handling, storage, transportation, destruction, or otherwise.
Reference Samples Representative reserve of each batch of API or drug product stored to meet CFR 211.170 and/or EU Annex 18, 11.7 requirements.
SOP Standard Operating Procedure
Secondary Packaging Material Material employed in the packaging of the PRODUCT that does not come in direct contact with the product.
Specification A set of criteria to which a material must conform to be considered acceptable for its intended use
USP
United States Pharmacopeia


    
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Appendix 1 to
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RESPONSIBILITIES

CSI
FRESENIUS
KABI
1 General
1.1 Both parties are responsible for ensuring that the terms of the Quality Agreement are complied with and performed in accordance with cGMP. X X
1.2 This Quality Agreement may be revised on an “as-needed” basis or whenever the Manufacturing Agreement is amended. All changes in the Quality Agreement must be documented, reviewed and approved by both parties. X X
1.3 The parties will attempt to resolve disputes or conflicts in a timely and equitable manner and in compliance with all applicable quality and regulatory requirements. Resolutions will be documented and signed by both parties. X X
1.4 CSI is responsible for marketing authorization and import licenses for PRODUCT. X
2 Compliance Requirements
2.1 Regulatory
2.1.1 FRESENIUS KABI will Manufacture, test, Package, and hold the PRODUCT in accordance with cGMP, all applicable requirements of the FDA and/or other Regulatory Authorities. X
2.1.2 FRESENIUS KABI will Manufacture and Package the PRODUCT in strict adherence to the approved drug application. X
2.1.3 CSI shall maintain regulatory filings for the PRODUCT and allow visibility of applicable information to FRESENIUS KABI. FRESINIUS KABI shall maintain the regulatory filings for Intralipid 10% and allow visibility of applicable information to CSI as required. X X
2.1.4 FRESENIUS KABI will provide to CSI a letter of access to the Intralipid 10% NDA. X
2.1.5 FRESENIUS KABI will permit, at CSI’s expense, one escorted audit by CSI and/or its designee(s) (two (2) auditors, two (2) days free of charge) within any twelve month interval, or at any time in the event of a compliance issue, of all relevant premises, procedures, and documentation. X
2.1.6 FRESENIUS KABI will not subcontract any Manufacturing, Packaging, or testing to a third party without prior written agreement by CSI. Sub-contractors will meet FRESENIUS KABI’s requirements for approved vendors. If CSI requests the use of a non-FRESENIUS KABI approved subcontractor, CSI will be responsible for the qualification of that subcontractor. X
2.1.7 FRESENIUS KABI will permit inspection by Regulatory Authorities. CSI representatives will be allowed on-site during inspections specific to the manufacture of PRODUCT at FRESENIUS KABI under the reasonable discretion of FRESENIUS KABI. CSI personnel interactions with the inspector(s) shall be under direction of the FRESENIUS KABI agent in charge. FRESENIUS KABI personnel will address all Manufacturing questions. X X
2.1.8 Each party shall notify the other party of any applicable inspections by Regulatory Authorities, Form 483s, Warning Letters or other communications relating to the PRODUCT from Regulatory Authorities within two (2) business days after receipt of such communications. Each party will have opportunity to review and comment on subsequent responses(s) if they would have an impact on the PRODUCT. X X
2.1.9 Upon request, FRESENIUS KABI will provide copies to CSI of any FDA Form 483, Establishment Inspection Report, or other similar Regulatory Authority notice normally available through Freedom of Information, redacted as necessary where the PRODUCT is specifically mentioned or directly impacted. X
2.1.10 In the event of an inspection of CSI by any Regulatory Authority, FRESENIUS KABI shall make every effort to make available to the Regulatory Authority any production, validation, stability, or testing records requested within two (2) business days of the request, according to the inspection policy of FRESENIUS KABI. X
2.1.11 FRESENIUS KABI will notify CSI within one (1) business day of receipt of any information which could result in any event which could lead to regulatory action. X
2.1.12 FRESENIUS KABI shall notify CSI prior to submitting PRODUCT-specific responses, request(s) for PRODUCT sample(s), and batch records to the Regulatory Authorities for PRODUCT supplied to CSI. FRESENIUS KABI will respond within a reasonable timeframe to questions that may arise from Regulatory Authorities. X
    
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2.1.13 FRESENIUS KABI shall complete and provide a copy of the Annual Product Review to CSI, per 21CFR211.180(e). FRESENIUS KABI will assess trending and confirm the process is under a state of control. Any changes will be managed through Change Control (see Section 2.5) X
2.1.14 Each party represents that it is not debarred under the U.S. Generic Drug Enforcement Act of 1992 or employs or uses the services of any individual who is debarred or who has engaged in activities that could lead to being debarred. X X
2.1.15 FRESENIUS KABI will conduct and maintain operations in compliance with current applicable environmental and occupational health and safety laws and regulations. X
2.1.16 FRESENIUS KABI will document, investigate, and resolve deviations from approved Manufacturing instructions, testing instructions, and/or Specifications. All deviations shall be recorded and justified. Copies in local Swedish language may be provided to CSI of all deviations related to PRODUCT upon CSI request. FRESENIUS KABI will notify and supply an English summary to CSI, before batch release, of all major and critical    deviation. CSI will approve major deviations assessments prior to batch release. X
2.1.17 FRESENIUS KABI shall maintain all documentation for excipients and PRODUCT Manufacturing and Packaging processes as per current applicable regulations. X
2.1.18 FRESENIUS KABI will conduct stability testing according to the ICH guidelines and the protocol. All PRODUCT related documentation including Product Stability Monitoring as filed in the regulatory submission will be made available to CSI for inspection upon request. X
2.2 Complaints – Product Quality and Adverse Drug Experience
2.2.1 CSI will maintain the collection, logging, and resolution of complaints and adverse drug experiences. CSI will notify FRESENIUS KBI of any complaint or ADR where the quality of PRODUCT is questioned. X
2.2.2 CSI shall investigate and track any adverse events it receives. X
2.2.3
FRESENIUS KABI agrees to transmit to CSI any reports of unexpected side effects or similar problems associated with the PRODUCT or Intralipid 10%.
X
2.2.4 CSI shall investigate and track any complaints it receives. FRESENIUS KABI will forward all PRODUCT complaint reports to CSI within two (2) business days after receipt by FRESENIUS KABI. CSI will investigate, resolve, file, and track all complaint reports per CSI SOPs. FRESENIUS KABI will use commercially reasonable efforts to report the findings of the investigation to CSI within 60 calendar days of notification. CSI will be responsible for customer response communications. Both parties shall agree upon follow up corrective action. X X
2.3 Product Recalls
2.3.1 In the event that either party determines that the PRODUCT violates applicable laws, regulations, agreed upon Specifications, or is deemed unacceptable for some other reason, FRESENIUS KABI and CSI must notify each other within one (1) business day of such determination and meet within two (2) business days of such determination. X X
2.3.2 CSI will make the decision to initiate a recall of the PRODUCT. X
2.3.3 CSI will notify the appropriate Regulatory Authorities in the event of a recall. X
2.3.4 FRESENIUS KABI will investigate PRODUCT issues, using the appropriate procedures, to the extent that the issue relates to or affects the PRODUCT as it is Manufactured at FRESENIUS KABI. X
2.3.5 CSI will manage recalls with assistance from FRESENIUS KABI as requested. X X
2.3.6 CSI will be responsible for reconciliation of returned PRODUCT with assistance from FRESENIUS KABI as required. X X
2.4 Responsibility to Authorities
2.4.1 CSI will liaise with Regulatory Authorities on PRODUCT inquiries and adverse events. X
2.4.2 FRESENIUS KABI will maintain safety/hazard and handling data on excipients and the PRODUCT. X
    
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2.5 Change Control
2.5.1
Change Control for the PRODUCT will be administered through FRESENIUS KABI’s Change Control system.
Changes subject to Change Control (“Changes”) include, but are not limited to, the Manufacturing and Packaging processes, the cleaning processes, process equipment, facilities, utilities, Specifications, and analytical test methods.
X
2.5.2 All major Changes proposed by FRESENIUS KABI for Intralipid 10% in bags will be forwarded to the CSI QA contact for information as soon as practicable. FRESENIUS KABI decision will be final on changes that effect Intralipid 10% registrations. CSI’s decision will be final on changes that affect the PRODUCT registrations. X
2.5.3 All Changes proposed by CSI will be forwarded to the QA contact at FRESENIUS KABI’s Manufacturing site using CSI internal procedures for Change Control. X
2.5.4 CSI shall obtain all necessary and appropriate regulatory and quality approvals prior to authorizing any Change in a timely manner as required. X
2.5.5 Upon approval by CSI (and within the ability of FRESENIUS KABI to do so), FRESENIUS KABI will initiate the Changes as defined by internal FRESENIUS KABI SOP’s. All Change Control documentation will be available to CSI upon request in local Swedish language or English summary. CSI will receive final copies of all updated documents in local Swedish language upon request. FRESENIUS KABI shall obtain and maintain all necessary regulatory and quality approvals as required by FRESENIUS KABI in connection with such Changes. X
2.5.6 Formatting changes, and other non-technical changes, to master records, analytical test methods or Specifications will not require prior approval by CSI. Changes to methods and/or Specifications for consistency with USP or other compendia will not require prior approval by CSI. X
3 PRODUCT MANUFACTURING
3.1 Excipient and Raw Material Handling
3.1.1 FRESENIUS KABI will complete qualification, procurement, inspection, storage, sampling, testing, and release of excipients, and raw materials used in the Manufacture of the PRODUCT. X
3.1.2 FRESENIUS KABI has established validated test methods for all excipient testing. In the event new validations are required, FRESENIUS KABI will draft the test method validation protocol and execute the protocol following CSI ‘s approval for PRODUCT specific testing. CSI will review all associated data and approve the final reports that are generated from the validation. X X
3.1.3 FRESENIUS KABI will follow written procedures describing the identification, quarantine, handling, sampling, testing and approval or rejection of excipients and raw materials. X
3.1.4 FRESENIUS KABI will only use approved raw material and excipient manufacturers, distributors, and suppliers. CSI will be responsible for approval of all such suppliers specified by CSI. If CSI adds, deletes, or changes a manufacturer/distributor/supplier, CSI will notify FRESENIUS KABI and FRESENIUS KABI will issue a Change Control request prior to implementing the change. CSI will provide an audit of all vendors that are not also approved by FRESENIUS KABI. Any changes made to the manufacturer, distributor, and/or supplier of the raw materials will not require a prompt revision of the Quality Agreement. They will be incorporated on the next revision of the Quality Agreement. X X
3.1.5 FRESENIUS KABI will use reasonable efforts to obtain material that conforms to agreed-upon Specifications. If the primary supply source becomes unavailable, CSI will assist FRESENIUS KABI with identifying a new source. Auditing of vendors is the responsibility of the party who sources the material. X X
3.1.6
FRESENIUS KABI will qualify vendors per FRESENIUS KABI SOPs. FRESENIUS KABI shall have sufficient documentation in place to justify any reduced sampling and testing.
X
    
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3.1.7 FRESENIUS KABI will retain Reference Samples of excipients, including samples for periodic re-tests, for one (1) year beyond expiry of last lot of PRODUCT. X
3.1.8 FRESENIUS KABI shall certify that raw materials and processes are Transmissible Spongiform Encephalopathy and Bovine Spongiform Encephalopathy free. X
3.2 Validation
3.2.1 FRESENIUS KABI will perform and maintain all validation including but not limited to: process, analytical method, cleaning, computer, Packaging, and sanitization. Changes to validated systems are subject to Change Control (see Section 2.5). X
3.3 Maintenance and Calibration
3.3.1 FRESENIUS KABI will complete all equipment and instrument maintenance and calibration. X
3.4 Manufacturing Documentation
3.4.1 FRESENIUS KABI will maintain the batch identification system for the PRODUCT Manufactured by FRESENIUS KABI (i.e. batch number assignment) and ensure that unique batch numbers are used for each batch of the PRODUCT. X
3.4.2 FRESENIUS KABI will compile the BOM for PRODUCT Manufacturing with CSI’s final approval. X X
3.4.3 FRESENIUS KABI will maintain all batch records and associated PRODUCT documentation for a minimum of one year beyond expiry date of the PRODUCT. FRESENIUS KABI shall keep validation batch production and testing records permanently. X
3.4.4
FRESENIUS KABI will ensure executed batch records contain the following information to meet Device History Record (DHR) requirements.
•    Dates of manufacture;
•    Quantity manufactured;
•    Quantity released for distribution;
•    Acceptance records which demonstrate the device is manufactured in accordance with the DMR;
•    The primary identification label and labeling used for each production unit; and
•    Any identification(s) and control number(s) used.
X
3.4.5 FRESENIUS KABI will draft and approve master Manufacturing batch records. X
3.4.6 FRESENIUS KABI shall Manufacture the PRODUCT in accordance with principles of cGMP as described by the Regulatory Authority appropriate for the type of PRODUCT. X
3.4.7 FRESENIUS KABI shall assure that the PRODUCT is Manufactured, Packaged, held, labeled, and tested according to FRESENIUS KABI’s procedures and batch records and fulfills the PRODUCT Specification. X
3.5 Packaging of the PRODUCT
3.5.1 FRESENIUS KABI will complete qualification, procurement, incoming inspection, storage, sampling, testing, and release of Primary and Secondary Packaging Materials and Printed Components according to approved Specifications. X
3.5.2 FRESENIUS KABI will follow written procedures describing the identification, quarantine, handling, sampling, testing and approval or rejection of the PRODUCT, Printed Components, and Primary and Secondary Packaging Materials. X
3.5.3 FRESENIUS KABI will qualify Packaging vendors per FRESENIUS KABI SOPs. FRESENIUS KABI shall have sufficient documentation in place to justify any reduced sampling and testing. FRESENIUS KABI will only use approved Packaging manufacturers, distributors, and suppliers. X
    
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3.5.4 FRESENIUS KABI will ensure that the PRODUCT is Packaged, inspected, and held according to FRESENIUS KABI’ s procedures and Packaging instructions, and fulfills the PRODUCT Specification. X
3.5.5 FRESENIUS KABI will control Specifications for Primary and Secondary Packaging Materials and provide reference copies to CSI. X
3.5.6 CSI will control content including artwork and labeling text Specifications of Printed Components. X
3.5.7 FRESENIUS KABI will retain samples of Primary Packaging Materials for one year past expiry of last lot of the PRODUCT contained in the Primary Packaging Materials. X
3.5.8 FRESENIUS KABI will complete reconciliation of Primary Packaging Material and Printed Components after all critical process steps. FRESENIUS KABI will perform component accountability per its approved SOPs. Any reconciliation outside of pre-established limits must be investigated and a copy of the investigation included in the reconciliation. X
3.5.9 FRESENIUS KABI will create and maintain the BOM for PRODUCT Packaging and provide copies of the BOM to CSI. X
3.5.10 FRESENIUS KABI will create and maintain master Packaging instructions in accordance with the PRODUCT Specifications and/or CSI instructions and provide official copies to CSI when the documents are revised. X
3.5.11 FRESENIUS KABI will maintain all executed master Packaging instructions and associated PRODUCT documentation for a minimum of one year beyond expiry date of the PRODUCT. FRESENIUS KABI, if applicable, shall keep validation batch production records permanently. X
3.5.12 FRESENIUS KABI will provide CSI with customer samples of Printed Components, as requested. X
3.6 QC Testing of the PRODUCT
3.6.1 FRESENIUS KABI will generate and maintain the PRODUCT sampling plan and sample the PRODUCT according to the approved sampling plan. X
3.6.2 FRESENIUS KABI has established validated test methods for PRODUCT. In case of need for new validations to perform FRESENIUS KABI will draft the test method validation protocol and execute the protocol following CSI ‘s approval. CSI will review all associated data and approve the final reports that are generated from the validation. X X
3.6.3 FRESENIUS KABI will participate in test method transfers if applicable (ref 3.6.2) and test method validations as applicable. All method transfers and validations shall be performed according to a CSI approved protocol, which shall include acceptance criteria. X X
3.6.4 FRESENIUS KABI will complete in-process and final analysis of the PRODUCT per approved test methods. X
3.6.5 FRESENIUS KABI will complete QC equipment instrument maintenance and calibration. X
3.6.6 CSI will provide FRESENIUS KABI with the PRODUCT final release and stability Specification. X
3.6.7
FRESENIUS KABI will generate the Certificate of Analysis (“CofA”) and the Certificate of Conformity (CofC) per approved PRODUCT Specification. Minimally the CofA will include the following:
•    PRODUCT name and strength
•    Item number
•    Batch Number
•    Date of Manufacture
•    Expiry Date
•    Test, Specification, and Result
•    FRESENIUS KABI Quality Signature
Minimally the CofC will include the following:
•    Statement of conformance
•    FRESENIUS KABI Quality Signature
X
3.6.8 FRESENIUS KABI will store and retain raw data and reports in accordance with cGMP and internal procedures. Raw data will be accessible for on-site review within a reasonable timeframe. X
    
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3.6.9 FRESENIUS KABI will qualify contract test laboratories per FRESENIUS KABI SOPs, if required. If the contract test laboratory is requested by CSI and not a FRESENIUS KABI approved contract test laboratory, CSI will be responsible for qualification of the contract test laboratory. X X
3.6.10 FRESENIUS KABI will retain Retention Samples of PRODUCT according to FRESENIUS KABI procedures, for one (1) year beyond expiry date of PRODUCT. X
3.6.11 FRESENIUS KABI will complete analysis of final PRODUCT by Quality Control per approved methods. X
3.6.12 FRESENIUS KABI will supply reference and impurity standards fully qualified to Compendial Standards (as appropriate) for use in testing of the active ingredient of the API and commercial Drug Product. X
4
STORAGE AND TRANSPORTATION OF THE PRODUCT AND WASTE DISPOSAL
4.1 CSI and FRESENIUS KABI will store the PRODUCT according to labeled storage conditions. X X
4.2 CSI will be responsible for shipping qualification. X
4.3 FRESENIUS KABI shall package the PRODUCT per FRESENIUS KABI’s validated procedures and transfer the product to CSI ‘s qualified shipper. X
4.4 CSI will be responsible for arrival of the PRODUCT at the final destination free of damage and contamination. X
4.5 FRESENIUS KABI will arrange for transportation of the PRODUCT to CSI or a third party designated by CSI. X
4.6 FRESENIUS KABI will dispose of waste and rejected/non conforming PRODUCT. FRESENIUS KABI may discard the PRODUCT only after final disposition of the PRODUCT by CSI. X
5 RELEASE OF THE FINISHED PRODUCT
5.1 FRESENIUS KABI will complete 100% inspection of the PRODUCT. X
5.2 FRESENIUS KABI will complete the executed batch record and associated PRODUCT documentation review, and disposition the batch. X
5.3 In the event FRESENIUS KABI rejection of PRODUCT, CSI may not alter the disposition. X X
5.4
For each lot, FRESENIUS KABI will minimally make available to CSI the following batch specific documentation:
•    Major Deviations and an English summary of the investigation reports
•    QA disposition as part of CoC
•    CofC
X
5.5 FRESENIUS KABI will provide the required documentation for CSI review upon completion of batch disposition and release with a target of thirty (30) calendar days of batch Manufacture. X
5.6 CSI will complete its batch record review and provide final disposition notification in case of major deviations that need CSI approval to FRESENIUS KABI within ten (10) business days upon receipt of required documentation from FRESENIUS KABI. Batches without major deviations will be directly shipped upon release by FRESENIUS KABI. X
5.7 In the event that after the release of the PRODUCT either party becomes aware that the PRODUCT may have a non-conformity that may affect its fitness for use, such party shall notify the other party within two (2) business days after it becomes aware. X X
5.8 CSI will follow internal requirements to establish appropriate batch record review requirements after a minimum of three (3), complete FRESENIUS KABI batch record reviews. X
6 DOCUMENTATION
    
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6.1 FRESENIUS KABI shall maintain all master formulas, PRODUCT Specifications, BOM for Manufacturing the PRODUCT, master batch records, executed batch records, Packaging instructions, Specifications, and validation packages per FRESENIUS KABI’s procedures and in accordance with cGMP. X
6.2 Batch records shall be kept for a minimum of 5 years by FRESENIUS KABI. Prior to batch record destruction for PRODUCT by FRESENIUS KABI, CSI shall notify FRESENIUS KABI in case of transfer of such records to CSI for storage. X
7 MEDICAL DEVICE REQUIREMENTS
7.1 CSI will be responsible for all design control requirements as outlined in CFR 820.30. X
7.2 FRESENIUS KABI will provide CSI with any applicable documentation to satisfy design control requirements that are specific to FRESENIUS KABI. X
7.3 FRESENIUS KABI will create and maintain a Device Master Record (DMR) for PRODUCT. X


    
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Contact Persons: FRESENIUS KABI
Plant Uppsala
Contact / Function
Address:
Fresenius Kabi AB
Rapsgatan 7
SE-751 74 Uppsala, Sweden
Christoph Funke
Managing Director 		Phone    -------------------
Fax    -------------------
Email: -------------------
Alexander Stoll
QA/OP 		Phone     -------------------
Fax    -------------------
Email: -------------------
Cecilia Sjöstedt
Plant Manager 		Phone     -------------------
Fax    -------------------
Email: -------------------
Thomas Larsson
Supply Chain
Manager 		Phone     -------------------
Fax    -------------------
Email: -------------------

Contact Persons: CSI




Address:
CSI
651 Campus Drive
St. Paul, MN 55112 USA
Jim Murray
Quality/Supply Chain 		Phone     -------------------
Fax    -------------------
Email: -------------------
Megan Brandt
Quality/Regulatory 		Phone     -------------------
Fax    -------------------
Email: -------------------
Jim Flaherty
Legal 		Phone     -------------------
Fax    -------------------
Email: -------------------
Paul Koehn
Operations 		Phone     -------------------
Fax    -------------------
Email: -------------------

    
CSI Fresenius Kabi Quality Agreement FINAL 20 Jan 2011.doc    page 12 of 19
2-12
Appendix 2 to
Quality Agreement between Fresenius Kabi AG and CSI
    

    
CSI Fresenius Kabi Quality Agreement FINAL 20 Jan 2011.doc    page 13 of 19
2-13
Appendix 2 to
Quality Agreement between Fresenius Kabi AG and CSI
    
Contractual Products and Specification
The following products are matter of the Technical Agreement:
Material Number Name of Product Size of Product Marketing Authorization Number Country of Fresenius Kabi subsidiary where the product is released
830506350 (ViperSlide) Intralipid 10% 100m1 NDA017643 Sweden

The specifications are to be seen in the current registration file of Intralipid 10%.


    
CSI Fresenius Kabi Quality Agreement FINAL 20 Jan 2011.doc    page 14 of 19
2-14
Exhibit 10.2


*Certain information where indicated below in brackets has been excluded from this exhibit because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed*

AMENDMENT NO. 1
TO
PRODUCT SCHEDULE

    This Amendment is made effective as of the last date indicated on the signature page hereto, by and between Cardiovascular Systems, Inc. (“CSI”) and Fresenius Kabi AB (“Fresenius”).

    WHEREAS, CSI and Fresenius entered into a Supply Agreement dated as of April 4, 2011 and a related Product Schedule (the “Product Schedule”); and

    WHEREAS, the parties wish to amend certain terms of the Product Schedule.

    NOW, THEREFORE, the parties agree as follows:

1.    CSI’s address is hereby changed to 1225 Old Highway 8 NW, St. Paul, MN 55112, USA.

2.     Section 1 of PART A of the Product Schedule is hereby deleted in its entirety and replaced with the following:

“1.    Product
Intralipid (injectable lipid emulsion) 10% in a final dosage form, packaged and labeled with CSI’s proprietary trademark in a 100mL FreeFlex (Biofine) bag, meeting the Specifications.

3.     Section 1 of PART C of the Product Schedule is hereby deleted in its entirety and replaced with the following:

“1.    Price

Price in 2016: $[*******] per container

Price after 2016:

Containers ordered / year Price [USD] per container
≥ [*******] containers $[*******]
≥ [*******] containers $[*******]
≥ [*******] containers $[*******]

    Price FCA (Incoterms 2010)
    100% optical control
    Batch size = 15,500 containers


    Raw materials and packaging materials prices given by FRESENIUS standard suppliers.
    Product related registration fees (e.g., according to 21 CFR 820) are not included and have to be borne by CSI.”

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

    IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed on the dates indicated below.

                    CARDIOVASCULAR SYSTEMS, INC.


                    By: /s/ Laurence L. Betterley        
                    Name: Laurence L. Betterley
                    Title: CFO

                    Date: 3/2/16                

    
    FRESENIUS KABI AB             FRESENIUS KABI AB


    By: /s/Anton Gerdenitsch            By: /s/Dr. Johann Schlogl
    Name: Anton Gerndenitsh             Name: Dr. Johann Schlogl
    Title: Head of Market Unit            Title:            
    Contract Manufacturing

    Date: March 9, 2016                Date: March 17, 2016

Exhibit 10.3
*Certain information where indicated below in brackets has been excluded from this exhibit because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed*

Amendment to Purchasing Agreement
Agreement No.: HPG-4037
Vendor: Cardiovascular Systems, Inc.
Agreement Date: May 1, 2018
Amendment Date: October 1, 2020

    Effective as of the Amendment Date above, HealthTrust Purchasing Group, L.P., a Delaware limited partnership having its principal place of business at 1100 Dr. Martin L. King Jr. Blvd., Suite 1100, Nashville, Tennessee, 37203 (hereinafter referred to as "HPG"), and Cardiovascular Systems, Inc., a Delaware corporation, with a place of business at 1225 Old Hwy 8 NW, St. Paul, MN 55112 hereby agree to amend their Purchasing Agreement dated May 1, 2018, and as subsequently amended, for ATHERECTOMY (collectively, the “Agreement”), as follows:

1.    Definitions.    The capitalized terms in this Amendment shall have the meaning designated in the Agreement unless otherwise expressly provided herein.

2.    Products and Pricing. Exhibit A to the Agreement is hereby amended by adding those additional items stated on Exhibit AA, attached hereto and incorporated by reference, as new Products to the Agreement and at the corresponding price indicated with the table.

3.    Rebates. “Rebates” within Exhibit A and Exhibit A-1 to the Agreement are hereby deleted in their entirety and replaced with the following, respectively:

    Exhibit A: “Rebates: [******] percent ([******]%) on all net Purchases during each calendar month.”

    Exhibit A-1: “Rebates: [******] percent ([******]%) on all net Purchases of Product within this Exhibit A-1 during each calendar month. In addition to the foregoing, Vendor also agrees to pay [******] dollars ($[******]) to HealthTrust for allocation to Purchasers on each purchased individual unit of measure of Product listed within this Exhibit A-1 during each calendar month.”

4.    Specific Purchasing Terms. Exhibit B to the Agreement is hereby deleted in its entirety and replaced with Exhibit BB, attached hereto and incorporated by reference, as the new Exhibit B to the Agreement.

5.    Except as expressly amended by this Amendment, the terms and conditions of the Agreement shall remain in full force and effect.

Signatures Follow on Next Page

    IN WITNESS WHEREOF, the parties hereby indicate their agreement to the terms of this Amendment by the signatures of their authorized representatives.
Amendment – HPG-4037 - Page 1 of 8



HealthTrust Purchasing Group, L.P.,    Cardiovascular Systems, Inc.
by HPG Enterprises, LLC, its general partner


HealthTrust Signee: /s/ Cyrus Hadjesmaili        Vendor Signee: /s/ Jeff Points    

HealthTrust Signee Name: Cyrus Hadjesmaili        Vendor Signee Name: Jeff Points    

HealthTrust Signee Title: AVP, Medical Device        Vendor Signee Title: Chief Financial Officer
    Sourcing
HealthTrust Signature Date: 9/25/2020        Vendor Signature Date: 9/25/2020

































Amendment – HPG-4037 - Page 2 of 8


Exhibit AA
to
Amendment Date: October 1, 2020
for
Purchasing Agreement No. 4037
Vendor: Cardiovascular Systems, Inc.
Agreement Date: May 1, 2018



Additional Items:

Mfgr Catalog Number Long Description UOM UOM Factor Tier 1
220-13-1000U TELEPORT MICROCATHETER 2.0Fr x 135cm EA 1
$[******]
220-15-1000U TELEPORT MICROCATHETER 2.0Fr x 150cm EA 1
$[******]
221-13-1000U TELEPORT CONTROL MICROCATHETER 2.1Fr x 135cm EA 1
$[******]
221-15-1000U TELEPORT CONTROL MICROCATHETER 2.1Fr x 150cm EA 1
$[******]
WRN-D6 WIRION EMBOLIC PROTECTION SYSTEM FOR LOWER EXTREMITY 3.5-6.0mm VESSEL DIAMETERS EA 1
$[******]








Amendment – HPG-4037 - Page 3 of 8



Exhibit BB
to
Amendment Date: October 1, 2020
for
Purchasing Agreement No. 4037
Vendor: Cardiovascular Systems, Inc.
Agreement Date: May 1, 2018


Exhibit B
Specific Purchasing Terms
1.    Product and Award Basis
Product Award Basis
ATHERECTOMY Multi

2.    Effective Date:    May 1, 2018
3.    Expiration Date:    February 1, 2025
4.    Prior Agreement:    
The prior agreement between HealthTrust and Vendor dated August 1, 2014 is replaced by this Agreement upon the Effective Date, as provided in Section 15.1 (Entire Agreement; Prior Agreement).
5.    Market Level Pricing:
If the award basis stated above for any Product is other than Sole Source, Vendor acknowledges that if any Participant is able to commit a selected group of its Affiliated Purchasers to purchase from Vendor a higher commitment basis (either by market share percentage or award basis), or to otherwise provide value to Vendor, then Vendor agrees to provide mutually acceptable reduced prices for Products for such Purchasers (“Committed Purchasers”). In each such event, HealthTrust, Vendor and the Participant shall enter into an amendment to this Agreement specifically for such Committed Purchasers, which shall state the reduced prices for Products and other applicable terms, and shall list the Committed Purchasers that are eligible for such prices, subject to any applicable commitment stated therein. Except as modified by such amendment, the terms of this Agreement shall apply to purchases of Products by Committed Purchasers, and such purchases shall be deemed to have been made under this Agreement. If the Committed Purchasers fail to meet any agreed upon commitments, Vendor’s sole remedy shall be to terminate the applicable amendment and move the Committed Purchasers to the prices applicable under this Agreement. The terms of this Agreement shall control in the event of any conflict with the terms of any such amendment.

Amendment – HPG-4037 - Page 4 of 8



6.    Contacts for Notices:
HealthTrust’s contact for notices under the Agreement:
Senior Vice President, Strategic Sourcing
HealthTrust Purchasing Group, L.P.
1100 Dr. Martin L. King Jr. Blvd., Suite 1100
Nashville, TN 37203
With a copy to:
Chief Legal Officer
HealthTrust Purchasing Group, L.P.
1100 Dr. Martin L. King Jr. Blvd., Suite 1100
Nashville, TN 37203
Vendor’s contact for notices under the Agreement:
    Vice President, Market Development
    Cardiovascular Systems, Inc.
    1225 Old Hwy 8 NW
    St. Paul, MN 55112

With a copy to:
    General Counsel
    Cardiovascular Systems, Inc.
    1225 Old Hwy 8 NW
    St. Paul, MN 55112    

7.    Additional Products or Services Provided at No Additional Charge:
The value of any additional product or service provided by Vendor to Purchasers may be considered to be an additional discount, rebate or other reduction in price to the Products and/or Services obtained under the Agreement. Purchasers may have an obligation to disclose and/or appropriately reflect any such discounts, rebates or price reductions in any costs claimed or charges made to Medicare, Medicaid, or health insurers requiring disclosure. Vendor agrees to provide estimates of the value of such additional products or services to Purchasers upon request.
8.    Product Warranty Duration: For shelf life of the Products as indicated on the packaging.
No later than sixty (60) days after use of the Product, the Purchaser must notify Vendor of any such defects or failure to conform to warranties set forth in this Agreement.
9.    Tracked Devices: N/A

10.    Ordering Process:
Purchasers may place orders directly from Vendor by the means checked below:
    Internet
    EDI
Amendment – HPG-4037 - Page 5 of 8


    Purchase Order
    Verbal
    Facsimile
    Other
    Not applicable - Product only available from Distributors
11.    Ordering Point:
Purchasers may place orders directly from Vendor and/or from Distributors as checked below:
    Vendor Direct only
    Distributor only
    Either Vendor Direct or Distributor
12.    Distributors: N/A
Purchasers may place orders with Distributors approved by HealthTrust, including the Distributors checked below:
    Cardinal Health 200, LLC
    Claflin Company
    Concordance Healthcare Solutions, LLC d/b/a Seneca
    Henry Schein, Inc.
    McKesson and associated affiliates
    Medline Industries, Inc.
    Owens & Minor Distribution, Inc.
RGH Enterprises, Inc. d/b/a AssuraMed
    Suture Express, Inc.
13.    Distributor Pricing: N/A
For Products obtained through Distributors, the price to Distributors shall be that listed in Exhibit A unless otherwise expressly provided in this Agreement.
14.    F.O.B. Designation:
Shipments of orders placed directly with Vendor shall be fulfilled as checked below:
    F.O.B. Origin
    F.O.B. Destination
If Products are shipped on an F.O.B. Origin basis, Vendor shall remain responsible for replacing, at Vendor’s sole expense, any Products lost or damaged in transit and, provided that Vendor has timely shipped replacement Products to the applicable Purchaser, shall be entitled to retain the proceeds of any damage-in-transit insurance claim.
15.    Delivery Time: Seven (7) calendar days from receipt of order.
16.    Required Fill Rate: Ninety-five percent (95%).
17.    Payment Terms:
Amendment – HPG-4037 - Page 6 of 8


GPO Fees: [******] percent ([******]%)
Vendor shall pay to HealthTrust such GPO Fees related to purchases hereunder during each calendar month during the Term within thirty (30) days after the expiration of each calendar month.
Rebates: Rebates shall be based on purchases by Purchasers under this Agreement made during each calendar month during the Term, and shall be paid within thirty (30) days after the expiration of each calendar month.
Purchasing Invoice: Net due forty-five (45) days from the latter of receipt of invoice or receipt of Product.
Electronic Payment Programs: Vendor shall accept payment through electronic payment programs (e.g., the American Express Buyer Initiated Payment (BIP) Solution, Bank of America’s ePayables, FifthThird Bank PayMode-X Solution, SunTrust MasterCard or Visa E-Payables Solution) for all payments arising under this Agreement.
18.    Addresses for Payments: GPO Fees and Rebates shall be sent to HealthTrust as follows:
For delivery of checks that require proof of delivery:
HealthTrust Purchasing Group, L.P.
c/o Wells Fargo
Attn: Wholesale Lockbox- P. O. Box 751576
Building 2C2-NC 0802
1525 West WT Harris Blvd.
Charlotte, North Carolina 28262
Telephone No.: 704-590-5382
For ACH payments:    
Bank Name: Wells Fargo
        
        Account Name: HealthTrust Purchasing Group, L.P.    
        
For wire payments:
    HealthTrust Purchasing Group, L.P.
        c/o Wells Fargo
        

For all other mail deliveries:    
HealthTrust Purchasing Group, L.P.
    c/o Wells Fargo
    
    P.O. Box 751576
    Charlotte, North Carolina 28275-1576
Amendment – HPG-4037 - Page 7 of 8


HealthTrust reserves the right to revise the above payment address information by providing written notice to Vendor.
19.    Freight / Shipping Charges:
Freight/shipping charges for purchases directly from Vendor shall be subject to the additional terms checked below:
    Freight/shipping charges are not included in the Product price and shall be “prepaid” by Vendor and added to the invoice as a separate line item that is identified as either a “freight” or “shipping” charge. The freight/shipping charge shall not include any additional amounts for shipping for which Vendor is responsible pursuant to Section 8.1 of the Agreement.
    Freight/shipping charges are included in the Product price, subject to Purchaser’s obligations to pay any additional expedited freight/shipping charges (if such expedited delivery is requested by Purchaser), as stated in Section 8.1 of the Agreement.
    Freight collect via carrier designated by Purchaser or HealthTrust.
    N/A – Products available only via distribution.
20.    Insurance Policy Minimum Amounts:
Per Occurrence: Ten million dollars ($10,000,000.00).
In the Annual Aggregate: Twenty-five million dollars ($25,000,000.00).
21.    Vendor Customer Service:    
Vendor’s customer service representatives shall be available between 8:00 A.M. and 8:00 P.M. Eastern Time, Monday through Friday, except for holidays.
22.    Training, Repair, Safety:
Vendor shall supply training, repair and safety information to each Purchaser as checked below:
    Operator training
    Preventative maintenance and repair instruction
    Repair and replacement parts lists, ordering instructions, and alternative sources of parts
    Material Safety Data Sheets for all material/chemical Product purchases in compliance with OSHA standards and those of any other applicable federal, state or local law or regulation
23.    Related Product Offerings:
With respect to each product category under this Agreement, Vendor shall provide to HealthTrust quarterly a listing of (i) its and its Affiliates’ entire offering of products in each
Amendment – HPG-4037 - Page 8 of 8


such product category and (ii) to the extent reasonably available, its competitors’ offerings of products in each such product category, in the form of the following worksheet:

    
The file containing the products listings shall be uploaded to: http://www.healthtrustcorp.com/xref
Amendment – HPG-4037 - Page 9 of 8


Exhibit 31.1

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

I, Scott R. Ward, 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.


Dated: November 5, 2020        
/s/ Scott R. Ward
Scott R. Ward
Chairman, President and Chief Executive Officer



Exhibit 31.2

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

I, Jeffrey S. Points, 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.


Dated: November 5, 2020        
/s/ Jeffrey S. Points
Jeffrey S. Points
Chief Financial Officer





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 September 30, 2020 (the “Report”) by Cardiovascular Systems, Inc. (“Registrant”), I, Scott R. Ward, 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.


Dated: November 5, 2020    
/s/ Scott R. Ward
Scott R. Ward
Chairman, President and Chief Executive Officer




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 September 30, 2020 (the “Report”) by Cardiovascular Systems, Inc. (“Registrant”), I, Jeffrey S. Points, 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.


Dated: November 5, 2020
/s/ Jeffrey S. Points
Jeffrey S. Points
Chief Financial Officer