Cautionary Note Regarding Forward-Looking Statements In addition to the historical financial information included herein, this Quarterly Report on Form 10-Q includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), that are based on management's reasonable beliefs, as well as on assumptions made by and information currently available to management. All statements other than statements of historical fact included in this Quarterly Report on Form 10-Q, including, without limitation, statements under "Management's Discussion and Analysis of Financial Condition and Results of Operations" and statements located elsewhere herein regarding our financial position and business strategy, may constitute forward-looking statements. You generally can identify forward-looking statements by the use of forward-looking terminology such as "believes," "may," "will," "expects," "intends," "estimates," "anticipates," "plans," "seeks," or "continues," or the negative thereof or variations thereon or similar terminology, although not all forward-looking statements contain these words. Such forward-looking statements involve known and unknown risks, including, but not limited to, market acceptance of our products, general economic and business conditions, the regulatory environment in which we operate, the level and availability of third party payor medical reimbursements, competitive activities, protection of intellectual property rights or other risks. Our actual results, performance or achievements may differ materially from any future results, performance or achievements expressed or implied from such forward-looking statements. Important factors that could cause our actual results, performance or achievements to differ materially from our expectations are disclosed in our Annual Report on Form 10-K for the year ended December 31, 2011, filed with the SEC on March 6, 2012, including but not limited to those factors discussed in "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Risk Factors," "Consolidated Financial Statements" and "Notes to Consolidated Financial Statements." All subsequent written and oral forward-looking statements attributable to us or by persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. We expressly disclaim any intent or obligation to update information contained in any forward-looking statement after the date thereof to conform such information to actual results or to changes in our opinions or expectations.

Overview and Outlook
Our Business
Our corporate headquarters and manufacturing facility is located in Irvine, California. We develop, manufacture, market and sell innovative medical devices for the treatment of aortic disorders. Our principal product is a stent graft and delivery catheter for the treatment of abdominal aortic aneurysms ("AAA") through minimally-invasive endovascular repair.
We sell our products through our U.S. and European sales force. In certain European countries, and in other parts of the world, we sell our products through third-party distributors.
We have continued to execute our mission in 2012 of being the leading innovator of medical devices for the treatment of aortic disorders, by:
• Focusing exclusively on the aorta for the commercialization of innovative medical devices.

•             Designing and manufacturing devices that are easy to use and result
              in excellent clinical outcomes.


•             Providing excellent clinical and technical support to physicians
              through an experienced and knowledgeable sales and marketing
              organization.


Our Products
Our ELG System

•             Anatomical Fixation. Our ELG Device is unique in that it sits on
              the patient's natural aortoiliac bifurcation. This provides a solid
              foundation for the long-term stability of the device. Alternative
              ELG devices rely on hooks, barbs and radial force to anchor into
              the aorta (generally referred to as "proximal fixation") near the
              renal arteries. We believe anatomical fixation inhibits migration
              due to the inherent foundational support from the patient's
              anatomy, as opposed to proximal fixation.


•             Fully Supported. The main body and limbs of our ELG Device are
              fully supported by a cobalt chromium alloy stent. The cobalt
              chromium alloy stent greatly reduces the risk of kinking of the
              device, even in

tortuous anatomies, eliminating the need for additional procedures or costly peripheral stents. Kinking may result in reduced blood flow and limb thrombosis.
• Unique, Minimally Invasive Delivery System. In the majority of procedures, our ELG System requires only a small surgical incision in one leg. The other leg needs only percutaneous placement of an introducer sheath, three millimeters in diameter. Our competitors' ELG systems typically require surgical exposure of the femoral artery in both legs to introduce the multiple components.

•             Preserves Aortic Bifurcation. Our ELG Device allows for future
              endovascular procedures when continued access across the aortic
              bifurcation is required. Approximately 30% of AAA patients also
              have peripheral arterial disease ("PAD").  The preferred
              endovascular approach to treat a patient with PAD is to access from
              one side of the groin and to cross over the aortic bifurcation to
              treat the lesion on the other side.  Our ELG Device is the only
              device presently available that preserves the physician's ability
              to go back over the aortic bifurcation for future interventions.
              This is a meaningful feature of our ELG System, as many AAA
              patients are living longer and having more procedures for PAD.

Our ELG Device Extensions and Accessories Aortic Extensions and Limb Extensions.We offer proximal aortic extensions and limb extensions which attach to the "main body" of our ELG Device, allowing physicians to customize it to fit the patient's anatomy.

Accessories. We offer various accessories to facilitate the optimal delivery of our ELG Device, including compatible guidewires, snares, and catheter introducer sheaths.
Our Product Evolution
Our core product line has evolved considerably over the years, as highlighted below.
•Powerlink Infrarenal Bifurcated Systems ("Powerlink"). Powerlink is our original ELG System and was commercialized in Europe in 1999 and in the U.S. in 2004. We have since branded the delivery systems for Powerlink under the names Peek, Visiflex, IntuiTrak, and AFX.
•Peek. Peek was the name of our original ELG Device delivery system. This system was replaced in all markets (except Japan), first by Visiflex, and subsequently by IntuiTrak.
•IntuiTrak. In October 2008, we received Food and Drug Administration ("FDA") approval for IntuiTrak, which had an improved catheter delivery system to deliver and deploy our ELG Device.
•IntuiTrak Express. In March 2009, we received FDA approval for a delivery system to deliver our 34mm diameter ELG Device extensions.
•AFX. In June 2011, we received FDA approval for our AFX Endovascular AAA System ("AFX"), which we believe provides physicians with improved vascular access and enhanced sealing characteristics of our ELG Device. We began a full commercial launch of AFX in the U.S. in August 2011. AFX subsequently replaced IntuiTrak in the U.S., Brazil, Argentina, and in most of Europe. We expect AFX to be commercialized in other international markets during late 2012 and 2013. Recent Clinical Trials and Product Developments We believe that our ability to develop new technologies is a key to our future growth and success. Our research and development activities have focused on technology that makes our existing products easier for physicians to use, allows physicians to treat a wider range of AAA patients, and addresses multiple types of aortic disorders. Historically, we have focused on developing our ELG Systems to treat infrarenal AAA. However, we expect to devote more resources in the future to develop new technologies to treat more complex anatomies, including juxtarenal aneurysms and diseases of the thoracic aorta.
PEVAR
Vascular access for endovascular repair ("EVAR") requires femoral artery exposure (commonly referred to as surgical "cut-down") of one or both femoral arteries, allowing for introduction of ELG systems. Complications from femoral artery exposure is an inherent risk of current EVAR practice. Percutaneous EVAR ("PEVAR") procedures do not require an open surgical cut-down of either femoral artery, as access to the femoral artery is achieved via needle-puncture of the skin (i.e., a percutaneous approach). Based upon peer reviewed literature, advantages to the patient and to the health care system of an

entirely percutaneous EVAR procedure are reduced surgical procedure times, less post-operative pain, and fewer wound complications.
In 2010, we initiated a PEVAR pivotal clinical trial. The first PEVAR patient was treated at Oklahoma Heart Hospital in April 2010. In February 2012, we completed our clinical trial enrollment at 20 U.S. sites. Patients in this clinical trial were treated with our IntuiTrak system. The clinical trial utilized a "pre-close" technique, facilitated by the Abbott Vascular, Inc. Prostar® XL Percutaneous Vascular Surgical System or Perclose ProGlide® Suture-Mediated Closure System. We have submitted our clinical results to the FDA. We believe that we will receive FDAapproval for percutaneous delivery of AFX by the end of 2012.
Xpand

The Xpand Stent Graft ("Xpand") is an ePTFE covered balloon expandable stent graft used in conjunction with Ventana (defined below) to treat patients with short aortic necks (< 15 millimeters), either juxtarenal abdominal aortic aneurysms ("JAA") or pararenal abdominal aortic aneurysms ("PAA"). Ventana
It is estimated that 20% to 30% of diagnosed AAAs are not treatable with currently-approved ELG devices, due to the aneurysm's proximal location to the renal arteries. This includes JAA and PAA patents, as well as patients with short aortic necks (< 15 millimeters). The Ventana Fenestrated Stent Graft System ("Ventana") potentially provides these patients with a less-invasive alternative to open surgical repair, and a life-saving alternative for patients unsuitable for surgery.
In January 2012, we received Investigational Device Exemption ("IDE") approval from the FDA to begin a U.S. clinical trial to evaluate Ventana for the treatment of patients with JAA and PAA and short aortic necks.
In February 2012, we enrolled the first patient in our U.S. clinical trial to evaluate Ventana. Ventana is designed to be used with AFX and Xpand. Though AFX is commercially available in the U.S., Brazil, Argentina, and much of Europe, Ventana and Xpand are not approved for marketing in the U.S. or abroad, and are restricted to investigational use only. Depending upon the clinical trial enrollment and clinical results, we believe we will receive FDA premarket approval for Ventana in 2015, and CE Mark approval by the end of 2012. Nellix
On December 10, 2010, we completed our acquisition of Nellix (see Note 9 to the accompanying Condensed Consolidated Financial Statements). Using the technology we acquired in this acquisition, we are developing a next generation device- the Nellix EndoVascular Aneurysm Sealing System (the "Nellix Device") to treat infrarenal AAA. The Nellix Device is not approved for marketing in the U.S. or abroad and is presently restricted to international investigational use. We received CE Mark approval of our current version of the Nellix Device on September 6, 2012. However, we are completing some design and process enhancements before we commercially launch the Nellix Device. We believe we will receive CE Mark approval for the enhanced version of the Nellix Device in the first half of 2013, upon which we will commence our limited market introduction in Europe. We also expect to file our IDE with the FDA in the first half of 2013, after we complete these design and process enhancements.

We believe that the Nellix Device represents groundbreaking technology for endovascular repair of AAA. Anticipated advantages of the Nellix Device include:
(i) a low profile delivery system (17 french outer diameter), which is beneficial for patients with small access vessels; (ii) improved ELG device fixation; (iii) simple and intuitive procedure steps; (iv) reduced procedure time; (v) low expected reintervention rate; and (vi) the potential for reduced follow up resulting in lower overall costs.

Results of Operations

Operations Overview - Three and Nine Months Ended September 30, 2012 versus 2011
The following table presents our results of continuing operations and the
related percentage of the period's revenue (in thousands):
                           Three Months Ended September 30,                   Nine Months Ended September 30,
                             2012                     2011                     2012                     2011
Revenue             $ 26,696      100.0  %   $ 22,302      100.0  %   $  76,725     100.0  %   $  60,025     100.0  %
Cost of goods sold     6,444       24.1  %      4,829       21.7  %      18,148      23.7  %      13,352      22.2  %
Gross profit          20,252       75.9  %     17,473       78.3  %      58,577      76.3  %      46,673      77.8  %
Operating expenses:
Research and
development            3,076       11.5  %      3,628       16.3  %      11,886      15.5  %      12,812      21.3  %
Clinical and
regulatory affairs     1,462        5.5  %      1,179        5.3  %       4,727       6.2  %       2,994       5.0  %
Marketing and sales   12,705       47.6  %     12,331       55.3  %      38,923      50.7  %      33,201      55.3  %
General and
administrative         4,942       18.5  %      4,184       18.8  %      13,813      18.0  %      11,087      18.5  %
Contract
termination and
business
acquisition
expenses                   -          -  %      1,300        5.8  %         422       0.6  %       1,730       2.9  %
Settlement costs       5,000       18.7  %          -          -  %       5,000       6.5  %           -         -  %
Total operating
expenses              27,185      101.8  %     22,622      101.4  %      74,771      97.5  %      61,824     103.0  %
Loss from
operations            (6,933 )    (26.0 )%     (5,149 )    (23.1 )%     (16,194 )   (21.1 )%     (15,151 )   (25.2 )%
Total other income
(expense)                923        3.5  %     (1,454 )     (6.5 )%     (12,765 )   (16.6 )%      (9,913 )   (16.5 )%
Net loss before
income tax expense    (6,010 )    (22.5 )%     (6,603 )    (29.6 )%     (28,959 )   (37.7 )%     (25,064 )   (41.8 )%
Income tax
(expense) benefit        153        0.6  %          -          -  %        (297 )    (0.4 )%           -         -  %
Net loss            $ (5,857 )    (21.9 )%   $ (6,603 )    (29.6 )%   $ (29,256 )   (38.1 )%   $ (25,064 )   (41.8 )%

Comparison of the Three Months Ended September 30, 2012 versus 2011

Revenue
Three Months Ended September 30, 2012 2011 Variance Percent Change

Our 19.7% revenue increase of $4.4 million over the prior year period resulted from:

(i) $1.0 million increase in U.S. sales due to (a) the expansion of our U.S. sales force through the addition of clinical specialists that exclusively provide field support to our sales representatives, increasing overall sales force productivity, and (b)the continued adoption of AFX which was launched in the U.S. in August 2011;

(ii) $1.5 million increase in European sales due to our transition from a significant third-party distributor to a more effective direct sales organization beginning in September 2011; and

(iii) $1.9 million increase in ROW sales due to improved market penetration by our international distributors, particularly in South America. In addition, ROW sales growth was aided by the July 2010 launch of AFX in Brazil and Argentina, and IntuiTrak orders by our distributor in Japan (in anticipation of Japanese regulatory approval), beginning in March 2012.

During the three months ended September 30, 2012, our European sales were derived from (i) our developing direct European sales force (including dedicated agents), serving the markets of Austria, Belgium, the Czech Republic, Denmark, France, Germany, Italy (beginning July 2, 2012), Luxembourg, the Netherlands, Romania, Sweden, Switzerland, and the United Kingdom (excluding Northern Ireland), and (ii) five independent distributors serving the markets in Italy (through June 30, 2012), Greece, Turkey, Poland, and Ireland. For the three months ended September 30, 2011, our European sales were solely derived from independent distributors. Our direct sales force in Europe began operations in September 2011.

Cost of Goods Sold, Gross Profit, and Gross Margin

                                                 Three Months Ended September 30,
                                                                                                       Percent
                                                    2012                   2011           Variance      Change
                                                          (in thousands)
Cost of goods sold                           $         6,444         $         4,829     $ 1,615        33.4 %
Gross profit                                          20,252                  17,473       2,779        15.9 %
Gross margin percentage (gross profit as a
percent of revenue)                                     75.9 %                  78.3 %      (2.4 )%

The $1.6 million increase in cost of goods sold was driven by our revenue increase of $4.4 million.

Gross margin for the three months ended September 30, 2012 decreased to 75.9% from 78.3% for the three months ended
September 30, 2011. This decrease is primarily due to (i) royalty expenses which were not present in the prior year period and
(ii) an 11.6% decline in the value of the Euro relative to the U.S. dollar. These decreases were partially offset by a greater proportion of our current period revenue derived from our direct sales force, as opposed to distributor sales.

Operating Expenses
                                         Three Months Ended September 30,
                                               2012               2011          Variance      Percent Change
                                                  (in thousands)
Research and development                $           3,076     $     3,628     $     (552 )         (15.2 )%
Clinical and regulatory affairs                     1,462           1,179            283            24.0  %
Marketing and sales                                12,705          12,331            374             3.0  %
General and administrative                          4,942           4,184            758            18.1  %
Contract termination and business
acquisition expenses                                    -           1,300         (1,300 )        (100.0 )%
Settlement costs                                    5,000               -          5,000           100.0  %

Research and Development. The $0.6 million decrease in research and development expenses was primarily driven by decreasing Ventana development activities, as the device reaches the final stages of development and progresses towards production and commercialization.
Clinical and Regulatory Affairs. The $0.3 million increase in clinical affairs was primarily driven by the continued enrollment and follow-up costs associated with our Ventana clinical trial and our efforts to achieve CE Mark approval of the Ventana and Nellix devices.
Marketing and Sales. The $0.4 million increase in marketing and sales expenses for the three months ended September 30, 2012, as compared to the prior year period, was primarily related to marketing costs to support the growth of our U.S. business, and costs related to our direct sales force in Europe (which was largely not present in the prior year period), offset by a decrease in variable compensation expense of $0.9 million in the U.S.

We expect that sales and marketing expense will remain significantly above prior year amounts due to the continued expansion of our U.S. and European sales forces.
General and Administrative. The $0.8 million increase in general and administrative expenses is attributable to (i) additional personnel to support our business growth; (ii) increased travel expenses associated with, and leading to, the expansion of our European operations; and (iii) professional service fees to develop our global legal structure.
Contract Termination and Business Acquisition Expenses. In the prior year period we early terminated our distribution agreement with our former pan-European distributor in return for a $1.3 million termination fee. This early termination allowed us to begin selling our products in most of western Europe through our direct sales force, beginning September 1, 2011. Settlement Costs. Settlement costs of $5.0 million in the current period represents our accrual to settle a patent dispute with Cook Incorporated (see Note 8 to our accompanying Condensed Consolidated Financial Statements). Provision for Income Taxes
Three Months Ended September 30, 2012 2011 Variance

Our income tax benefit was $0.2 million and our effective tax rate was (2.5)% for the three months ended September 30, 2012. During the third quarter of 2012, we made adjustments to our estimate of income tax payable for 2012, which had the effect of reducing our income tax provision in the current period. During the three months ended September 30, 2012, we had operating legal entities in the U.S., Italy, and the Netherlands (including registered sales branches in certain countries in Europe). We had a single operating legal entity in the U.S. during the prior year period until September 2011, when we formed operating legal entities in the Netherlands to begin direct sales activity in Europe.

Comparison of the Nine Months Ended September 30, 2012 versus 2011

Revenue
Nine Months Ended September 30, 2012 2011 Variance Percent Change

Our 27.8% revenue increase of $16.7 million over the prior year period resulted from:

(i) $11.4 million increase in U.S. sales due to the (a) expansion of our U.S. sales force through the addition of clinical specialists that exclusively provide field support to our sales representatives, increasing overall sales force productivity and (b) the continued adoption of AFX which was launched in the U.S. in August 2011;

(ii) $3.0 million increase in European sales due to our transition from a significant third-party distributor to a more effective direct sales organization beginning in September 2011; and

(iii) $2.3 million increase in ROW sales due to improved market penetration by our international distributors, particularly in South America. In addition, ROW sales growth was aided by the July 2012 launch of AFX in Brazil and Argentina, and IntuiTrak orders by our distributor in Japan (in anticipation of Japanese regulatory approval), beginning in March 2012.

During the nine months ended September 30, 2012, our European sales were derived from (i) our developing direct European sales force (including dedicated agents), serving the markets of Austria, Belgium, the Czech Republic, Denmark, France, Germany, Italy (beginning July 2, 2012), Luxembourg, the Netherlands, Romania, Sweden, Switzerland, and the United Kingdom (excluding Northern Ireland), and (ii) five independent distributors serving the markets in Italy (through June 30,

2012), Greece, Turkey, Poland, and Ireland. For the nine months ended September 30, 2011, our European sales were solely derived from independent distributors. Cost of Goods Sold, Gross Profit, and Gross Margin

                                                Nine Months Ended September 30,
                                                   2012                 2011          Variance     Percent Change
                                                        (in thousands)
Cost of goods sold                           $       18,148       $       13,352     $ 4,796              35.9 %
Gross profit                                         58,577               46,673      11,904              25.5 %
Gross margin percentage (gross profit as a
percent of revenue)                                    76.3 %               77.8 %      (1.5 )%

The $4.8 million increase in cost of goods sold was driven by our revenue increase of $16.7 million.

Gross margin for the nine months ended September 30, 2012 decreased to 76.3% from 77.8% for the nine months ended
September 30, 2011. This decrease is primarily due to (i) royalty expenses which were not present in the prior year period and
(ii) an 8.9% decline in the value of the Euro relative to the U.S. dollar. These decreases were partially offset by a greater proportion of our current period revenue derived from our direct sales force, as opposed to distributor sales.

Operating Expenses
                                          Nine Months Ended September 30,
                                               2012               2011          Variance     Percent Change
                                                  (in thousands)
Research and development                $          11,886     $    12,812     $     (926 )         (7.2 )%
Clinical and regulatory affairs                     4,727           2,994          1,733           57.9  %
. . .