1180145--9/29/2009--Cardiovascular_Systems

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The Diamondback 360 and future products may never achieve broad market acceptance. Our future growth depends on physician adoption of the Diamondback 360 , which requires physicians to change their screening and referral practices. Our customers may not be able to achieve adequate reimbursement for using the Diamondback 360 , which could affect the acceptance of our product and cause our business to suffer. Healthcare reform legislation could adversely affect our revenue and financial condition. We have limited data and experience regarding the safety and efficacy of the Diamondback 360 . Any long-term data that is generated may not be positive or consistent with our limited short-term data, which would affect market acceptance of this product. We face significant competition and may be unable to sell the Diamondback 360 at profitable levels. Our ability to compete depends on our ability to innovate successfully. If our competitors demonstrate the increased safety or efficacy of their products as compared to ours, our revenue may decline. We have limited commercial manufacturing experience and could experience difficulty in producing the Diamondback 360 or will need to depend on third parties to manufacture the product. We depend upon third-party suppliers, including single source suppliers to us and our customers, making us vulnerable to supply problems and price fluctuations. We will need to increase the size of our organization and we may experience difficulties managing growth. If we are unable to manage the anticipated growth of our business, our future revenue and operating results may be adversely affected. We anticipate future losses and may require additional financing, and our failure to obtain additional financing when needed could force us to delay, reduce or eliminate our product development programs or commercialization efforts. Raising additional capital through debt financing may restrict our operations. We do not intend to market the Diamondback 360 internationally in the near future, which will limit our potential revenue from this product. We are dependent on our senior management team and scientific personnel, and our business could be harmed if we are unable to attract and retain personnel necessary for our success. We may incur significant costs due to the application of Section 409A of the Internal Revenue Code. We may be subject to damages or other remedies as a result of pending litigation. Risks Related to Government Regulation Our ability to market the Diamondback 360 in the United States is limited to use as a therapy in patients with PAD, and if we want to expand our marketing claims, we will need to file for additional FDA clearances or approvals and conduct further clinical trials, which would be expensive and time-consuming and may not be successful. We may become subject to regulatory actions if we are found to have promoted the Diamondback 360 for unapproved uses. The Diamondback 360 may in the future be subject to product recalls that could harm our reputation. If we or our suppliers fail to comply with ongoing regulatory requirements, or if we experience unanticipated problems, our products could be subject to restrictions or withdrawal from the market. The use, misuse or off-label use of the Diamondback 360 may increase the risk of injury, which could result in product liability claims and damage to our business. We will face risks related to product liability claims, which could exceed the limits of available insurance coverage. Compliance with environmental laws and regulations could be expensive. Failure to comply with environmental laws and regulations could subject us to significant liability. We and our distributors must comply with various federal and state anti-kickback, self-referral, false claims and similar laws, any breach of which could cause a material adverse effect on our business, financial condition and results of operations. We incur significant costs as a result of operating as a public company, and our management is required to devote substantial time to compliance initiatives. Risks Relating to Our Intellectual Property Our inability to adequately protect our intellectual property could allow our competitors and others to produce products based on our technology, which could substantially impair our ability to compete. Claims of infringement or misappropriation of the intellectual property rights of others could prohibit us from commercializing products, require us to obtain licenses from third parties or require us to develop non-infringing alternatives, and subject us to substantial monetary damages and injunctive relief. Risks Relating to Ownership of Our Common Stock Until recently there has not been a public market for our common stock and our stock price is expected to be volatile and you may not be able to resell your shares. We do not expect to pay cash dividends, and accordingly, stockholders must rely on stock appreciation for any return on their investment in the company. If equity research analysts do not publish research or reports about our business or if they issue unfavorable research or downgrade the company s common stock, the price of our common stock could decline. Some provisions of our charter documents and Delaware law may have anti-takeover effects that could discourage an acquisition of us by others, even if an acquisition would be beneficial to our stockholders. Future sales and issuances of our common stock or rights to purchase common stock, including pursuant to equity incentive plans, could result in additional dilution of the percentage ownership of our stockholders and could cause our stock price to fall.

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1180145--9/29/2009--Cardiovascular_Systems_Inc