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EX-31.2 - CFO CERTIFICATION PURSUANT TO RULE 13A-14(A)/15D-14(A) - ENDOLOGIX INC /DE/dex312.htm
EX-10.1 - ADDENDUM NO. 2 TO STANDARD INDUSTRIAL/COMMERCIAL SINGLE-TENANT LEASE - NET - ENDOLOGIX INC /DE/dex101.htm
EX-10.2 - STANDARD INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE - NET - ENDOLOGIX INC /DE/dex102.htm
EX-32.2 - CFO CERTIFICATION PURSUANT TO RULE 13A-14(B)/15D-14(B) - ENDOLOGIX INC /DE/dex322.htm
EX-31.1 - CEO CERTIFICATION PURSUANT TO RULE 13A-14(A)/15D-14(A) - ENDOLOGIX INC /DE/dex311.htm
EX-32.1 - CEO CERTIFICATION PURSUANT TO RULE 13A-14(B)/15D-14(B) - ENDOLOGIX INC /DE/dex321.htm
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

 

FORM 10-Q

 

 

 

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2009.

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission file number 000-28440

 

 

ENDOLOGIX, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   68-0328265

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification Number)

11 Studebaker, Irvine, California 92618

(Address of principal executive offices)

(949) 595-7200

(Registrant’s telephone number, including area code)

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

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

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

 

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

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

On October 12, 2009, there were 48,453,658 shares of the registrant’s only class of common stock outstanding.

 

 

 


Table of Contents

ENDOLOGIX, INC.

Form 10-Q

September 30, 2009

TABLE OF CONTENTS

 

          Page

Part I. Financial Information

  

Item 1. Condensed Consolidated Financial Statements (Unaudited)

  
  

Condensed consolidated balance sheets at September 30, 2009 and December 31, 2008

   3
  

Condensed consolidated statements of operations for the three and nine months ended September  30, 2009 and 2008

   4
  

Condensed consolidated statements of cash flows for the nine months ended September 30, 2009 and 2008

   5
  

Notes to condensed consolidated financial statements

   6

Item  2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

   13

Item 3. Quantitative and Qualitative Disclosures about Market Risk

   17

Item 4. Controls and Procedures

   18

Part II. Other Information

   19

Item 5. Other Information

   19

Item 6. Exhibits

   19

Signatures

   20

Exhibit Index

   21

 

2


Table of Contents

ENDOLOGIX, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and par value amounts)

(Unaudited)

 

     September 30,
2009
    December 31,
2008
 

ASSETS

    

Current assets:

    

Cash and cash equivalents

   $ 21,078      $ 7,611   

Restricted cash equivalents

     500        500   

Accounts receivable, net of allowance for doubtful accounts of $59 and $72, respectively

     8,340        6,371   

Other receivables

     2        3   

Inventories

     6,139        7,099   

Other current assets

     462        443   
                

Total current assets

     36,521        22,027   
                

Property and equipment, net

     2,281        2,993   

Goodwill

     4,631        4,631   

Intangibles, net

     6,455        7,508   

Other assets

     126        104   
                

Total assets

   $ 50,014      $ 37,263   
                

LIABILITIES AND STOCKHOLDERS’ EQUITY

    

Current liabilities:

    

Accounts payable and accrued expenses

   $ 6,607      $ 5,401   

Short-term portion of debt

     78        750   
                

Total current liabilities

     6,685        6,151   
                

Long term debt

     103        4,250   

Other long term liabilities

     1,029        1,045   
                

Long term liabilities

     1,132        5,295   
                

Total liabilities

     7,817        11,446   
                

Commitments and contingencies (Note 11)

    

Stockholders’ equity:

    

Convertible preferred stock, $0.001 par value; 5,000,000 shares authorized, no shares issued and outstanding

     —          —     

Common stock, $0.001 par value; 75,000,000 shares authorized, 48,947,000 and 44,365,000 shares issued, respectively, and 48,452,000 and 43,870,000 shares outstanding, respectively

     49        44   

Additional paid-in capital

     188,301        170,239   

Accumulated deficit

     (145,488     (143,730

Treasury stock, at cost, 495,000 shares

     (661     (661

Accumulated other comprehensive income

     (4     (75
                

Total stockholders’ equity

     42,197        25,817   
                

Total liabilities and stockholders’ equity

   $ 50,014      $ 37,263   
                

See accompanying notes

 

3


Table of Contents

ENDOLOGIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)

 

     Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
     2009     2008     2009     2008  

Revenue:

        

Product

   $ 13,777      $ 9,374      $ 38,779      $ 26,952   

License

     —          9        —          33   
                                

Total revenue

     13,777        9,383        38,779        26,985   

Cost of product revenue

     3,659        2,460        9,820        7,545   
                                

Gross profit

     10,118        6,923        28,959        19,440   
                                

Operating expenses:

        

Research, development and clinical

     1,630        1,412        4,454        4,708   

Marketing and sales

     6,591        6,073        19,783        18,017   

General and administrative

     2,019        2,399        6,347        7,270   
                                

Total operating expenses

     10,240        9,884        30,584        29,995   
                                

Loss from operations

     (122     (2,961     (1,625     (10,555
                                

Other income:

        

Interest income

     16        23        34        99   

Interest expense

     (64     (4     (187     (40

Other income (expense)

     14        (20     20        80   
                                

Total other income (expense)

     (34     (1     (133     139   
                                

Net loss

   $ (156   $ (2,962   $ (1,758   $ (10,416
                                

Basic and diluted net loss per share

   $ (0.00   $ (0.07   $ (0.04   $ (0.24
                                

Shares used in computing basic and diluted net loss per share

     46,220        43,124        44,316        43,018   
                                

See accompanying notes

 

4


Table of Contents

ENDOLOGIX, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

     Nine Months Ended
September 30,
 
     2009     2008  

Cash flows from operating activities:

    

Net loss

   $ (1,758   $ (10,416

Adjustments to reconcile net loss to net cash used in operating activities:

    

Depreciation and amortization

     2,000        1,835   

Stock-based compensation

     2,375        2,193   

Change in:

    

Accounts receivable

     (1,969     (796

Inventories

     1,159        745   

Other receivables and other assets

     (40     338   

Accounts payable and accrued expenses

     1,190        1,022   
                

Net cash provided by (used in) operating activities

     2,957        (5,079
                

Cash flows used in investing activities:

    

Cash paid for property and equipment

     (453     (369
                

Net cash used in investing activities

     (453     (369
                

Cash flows provided by (used in) financing activities:

    

Proceeds from sale of common stock, net of expenses

     14,735        —     

Proceeds from sale of common stock under employee stock purchase plan

     347        277   

Proceeds from exercise of common stock options

     629        30   

Net financing for capital purchase

     181        —     

Credit facility and term loan payable

     (5,000     5,000   
                

Net cash provided by financing activities

     10,892        5,307   
                

Effect of exchange rate changes on cash and cash equivalents

     71        (74
                

Net increase (decrease) in cash and cash equivalents

     13,467        (215

Cash and cash equivalents, beginning of period

     7,611        8,728   
                

Cash and cash equivalents, end of period

   $ 21,078      $ 8,513   
                

Supplemental Disclosure of Cash Flow Activities:

    

Cash paid during the year for interest

   $ 187      $ 40   
                

See accompanying notes

 

5


Table of Contents

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT PER SHARE, PER UNIT, AND NUMBER OF YEARS)

(Unaudited)

1. Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair statement of the results of the periods presented have been included. Operating results for the unaudited nine month period ended September 30, 2009 are not necessarily indicative of results that may be expected for the year ending December 31, 2009 or any other period. For further information, including information on significant accounting policies and use of estimates, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008.

For the nine months ended September 30, 2009, the Company incurred a net loss of $1,758. As of September 30, 2009, the Company had an accumulated deficit of $145,488. Historically, the Company has relied on the sale and issuance of equity securities to provide a significant portion of funding for its operations. In August 2009, the Company sold shares of its common stock that resulted in gross proceeds to the Company of $15,990.

At September 30, 2009, the Company had cash and cash equivalents of $21,078. The Company believes that its current cash balance, in combination with cash generated from operations and borrowings available under its credit facility, will be sufficient to meet anticipated cash needs for operating and capital expenditures for at least the next twelve months.

2. Stock-Based Compensation

The Company uses the Black-Scholes option pricing model which requires extensive use of financial estimates and accounting judgment, including estimates of the expected period of time employees will retain their vested stock options before exercising them, the expected volatility of the Company’s common stock over the expected term, and the number of shares that are expected to be forfeited before they are vested. Application of alternative assumptions could produce significantly different estimates of the fair value of the stock-based compensation and as a result, significantly different results recognized in the consolidated statements of operations.

Stock-based compensation expense during the three and nine months ended September 30, 2009 and 2008 was as follows:

 

     Three Months
Ended
September 30,
2009
   Three Months
Ended
September 30,
2008
   Nine Months
Ended
September 30,
2009
   Nine Months
Ended
September 30,
2008

General and Administrative

   $ 364    $ 392    $ 1,238    $ 1,043

Marketing and Sales

     276      310      751      797

Research, Development, and Clinical

     78      62      213      173

Cost of Sales

     38      62      141      198
                           

Total

   $ 756    $ 826    $ 2,343    $ 2,211
                           

In addition, the Company had $59 of stock based compensation capitalized into inventory as of September 30, 2009, and $78 of stock-based compensation capitalized into inventory as of December 31, 2008.

During the three and nine months ended September 30, 2009, the Company granted 0 and 160 shares of restricted stock, respectively. In the three and nine month periods ended September 30, 2008, the Company granted 25 and 525 shares of restricted stock, respectively. The Company recognizes the expense associated with the issuance of restricted stock ratably over the requisite

 

6


Table of Contents

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT PER SHARE, PER UNIT, AND NUMBER OF YEARS)—(Continued)

(Unaudited)

 

service period. Included in the table above is $209 and $563 of stock-based compensation expense related to restricted stock grants, which was recognized during the three and nine months ended September 30, 2009, respectively, and $167 and $264 for the three and nine months ended September 30, 2008, respectively.

The Company recognizes the expense associated with non-employee stock option grants by amortizing them over the vesting period, which is generally four years. Excluded from the table above is $19 and $32 of stock-based compensation expense related to non-employee stock option grants, which was recognized during the three and nine months ended September 30, 2009, respectively, and $0 and $(2) for the three and nine months ended September 30, 2008, respectively.

Under the 2004 Performance Compensation Plan, or the Performance Plan, Performance Units (as defined in the Performance Plan) are granted at a discount to the fair market value (as defined in the Performance Plan) of the Company’s common stock on the grant date, or the Base Value. The Performance Units vest over three-years; one-third vests at the end of the first year, and the remainder vests ratably on a quarterly basis. The difference between the immediately preceding twenty-day average closing market price of the Company’s common stock and the Base Value of the vested Performance Unit would be payable in cash at the first to occur of (a) a change of control (as defined in the Performance Plan), (b) the termination of employment for any reason other than Cause (as defined in the Performance Plan), or (c) upon exercise of the Performance Unit, which cannot occur until eighteen months from the grant date. There were no Performance Units granted during the three and nine month periods ended September 30, 2009 and 2008. The total accrued compensation expense as of September 30, 2009 and December 31, 2008 was $224 and $0, respectively, and there were an aggregate of 80 and 110 Performance Units outstanding at the end of the respective periods. The Company recorded an increase in expense totaling $169 and $224 for the three and nine months ended September 30, 2009, and a reduction in expense totaling $4 and an expense totaling $36 for the three and nine months ended September 30, 2008, respectively, due to graded vesting. During the three and nine months ended September 30, 2009, 30 Performance Units were exercised and no Performance Units expired. If incurred, the expense is included in marketing and sales expense in the consolidated statements of operations. The Company records changes in the estimated compensation expense over the vesting period of the Performance Units, and once fully vested, records the difference between the latest twenty-day average closing price of the Company’s common stock and the Base Value as compensation expense in each period until exercised unless the Base Value exceeds such twenty day average closing market price, in which case no compensation expense is accrued.

3. Net Loss Per Share

Net loss per common share is computed using the weighted average number of common shares outstanding during the periods presented. Certain options with an exercise price below the average market price for the three and nine months ended September 30, 2009 and the three and nine months ended September 30, 2008 have been excluded from the calculation of diluted earnings per share, as they are anti-dilutive.

If anti-dilutive stock options were included for the three months ended September 30, 2009 and 2008, the number of shares used to compute diluted net loss per share would have been increased by approximately 2,751 and 5,249 shares, respectively. Of these amounts, 833 shares and 5,202 shares had an exercise price above the average closing price for the three months ended September 30, 2009 and 2008, respectively. If anti-dilutive stock options were included for the nine months ended September 30, 2009 and 2008, the number of shares used to compute diluted net loss per share would have been increased by approximately 3,696 and 4,423 shares, respectively. Of these amounts, 3,061 shares and 4,351 shares had an exercise price above the average closing price for the nine months ended September 30, 2009 and 2008, respectively.

4. Restricted Cash Equivalents

The Company has a $475 line of credit with a bank in conjunction with a corporate credit card agreement. At September 30, 2009, the Company had pledged all of its cash held at the bank as collateral on the line of credit. Per the agreement, the Company must maintain a balance of at least $500 in restricted cash with the bank.

 

7


Table of Contents

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT PER SHARE, PER UNIT, AND NUMBER OF YEARS)—(Continued)

(Unaudited)

 

5. Inventories

Inventories are stated at the lower of cost, determined on a first in, first out basis, or market value. Inventories consist of the following:

 

     September 30,
2009
    December 31,
2008
 

Raw materials

   $ 2,445      $ 2,467   

Work-in-process

     1,735        2,058   

Finished goods

     2,462        3,342   
                
     6,642        7,867   

Less reserve for excess and obsolescence

     (503     (768
                
   $ 6,139      $ 7,099   
                

6. Long Term Liabilities

Long term liabilities consisted of the following:

 

     September 30,
2009
    December 31,
2008
 

Deferred tax

   $ 1,029      $ 1,029   

Term loan

     —          3,000   

Revolving credit facility

     —          2,000   

Other

     181        16   
                

Total long-term liabilities

     1,210        6,045   

Current portion of long-term debt

     (78     (750
                

Long-term portion

   $ 1,132      $ 5,295   
                

On February 21, 2007, the Company entered into a credit facility with Silicon Valley Bank, or SVB, whereby the Company may borrow up to $5,000 under a revolving line of credit. All outstanding amounts under the revolving line of credit bear interest at a variable rate equal to the lender’s prime rate plus 0.5%, which is payable on a monthly basis. The unused portion is subject to an unused revolving line facility fee, payable quarterly, in arrears, on a calendar year basis, in an amount equal to one quarter of one percent per annum of the average unused portion of the revolving line of credit, as determined by SVB. The credit facility is collateralized by all of the Company’s assets with the exception of its intellectual property. All amounts owing under the revolving line of credit become due and payable in July 2010. In September 2008, the Company drew down $2,000. As of September 30, 2009, the Company re-paid on $2,000 in principal and all accrued interest due, leaving $0 in outstanding borrowings under the revolving line of credit.

In July 2008, the Company entered into an amendment to the credit facility which added a term loan whereby the Company may borrow up to $3,000. In September 2008, the Company drew the entire $3,000 available under the term loan. The term loan required interest only payments at a variable rate equal to the lender’s prime rate plus 1.0%, which were payable on a monthly basis through March 31, 2009. The term loan principal is due in 36 monthly installments which began in April 2009. The Company made principal payments of $2,750 and $3,000 during the three and nine months ended September 30, 2009. As of September 30, 2009, the Company re-paid all outstanding principal and interest, leaving $0 in outstanding borrowings under the term loan.

The Company’s existing credit facility with SVB contains negative covenants regarding the operation of its business and financial covenants, including a covenant requiring the Company to maintain a tangible net worth of $20,995. As of September 30, 2009, the Company’s tangible net worth was $31,111. If the Company is not able to maintain compliance with its financial covenants, certain terms of the revolving line of credit and term loan will change, including an increase in the applicable interest rate and a limitation on the amounts available for borrowing under the credit facility based on eligible accounts receivable. Further, if the Company does not maintain a tangible net worth of at least $20,495 from the first date on which the Company is not in complete compliance with its financial covenants, it will be in default under the credit facility which could allow SVB to accelerate the repayment of the indebtedness then existing under the credit facility.

As of September 30, 2009, the Company was in compliance with all covenants under the credit facility.

 

8


Table of Contents

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT PER SHARE, PER UNIT, AND NUMBER OF YEARS)—(Continued)

(Unaudited)

 

7. Product Revenue by Geographic Region

The Company had product sales, based on the locations of its customer, by region as follows:

 

     Three Months
Ended September 30,
   Nine Months
Ended September 30,
     2009    2008    2009    2008

United States

   $ 11,296    $ 8,077    $ 32,883    $ 22,807

Europe

     1,052      657      2,314      2,515

Asia

     574      340      1,806      789

South America

     753      261      1,656      716

Other

     102      39      120      125
                           
   $ 13,777    $ 9,374    $ 38,779    $ 26,952
                           

8. Concentrations of Credit Risk and Significant Customers

During the three and nine months ended September 30, 2009 and 2008, no single customer accounted for more than 10% of total revenue.

As of September 30, 2009 and December 31, 2008, no single customer accounted for more than 10% of the Company’s accounts receivable balance.

9. Comprehensive Loss

The Company’s comprehensive loss included the following:

 

     Three Months
Ended September 30,
    Nine Months
Ended September 30,
 
     2009     2008     2009     2008  

Net loss

   $ (156   $ (2,962   $ (1,758   $ (10,416

Foreign currency translation adjustment

     23        (163     71        74   
                                

Comprehensive loss

   $ (133   $ (3,125   $ (1,687   $ (10,342
                                

10. Intangible Assets and Goodwill

The following table details the intangible assets, estimated lives, related accumulated amortization and goodwill:

 

     September 30,
2009
    December 31,
2008
 

Developed technology (10 year life)

   $ 14,050      $ 14,050   

Accumulated amortization

     (10,303     (9,250
                

Net developed technology

     3,747        4,800   

Trademarks and trade names (Indefinite life)

     2,708        2,708   
                

Intangible assets, net

   $ 6,455      $ 7,508   
                

Goodwill (Indefinite life)

   $ 4,631      $ 4,631   
                

In accordance with FASB ASC topic 350, “Intangibles-Goodwill and Other” (ASC 350), goodwill and other intangible assets with indeterminate lives are no longer subject to amortization but are tested for impairment annually or whenever events or changes in circumstances indicate that the asset might be impaired. The Company most recently performed its annual impairment analysis as of June 30, 2009 and will continue to test for impairment annually as of June 30 each year. No impairment was indicated in the last analysis. Intangible assets with finite lives continue to be subject to amortization, and any impairment is determined in accordance with FASB ASC topic 360, “Property, Plant, and Equipment” (ASC 360), which includes guidance relating to impairment of long-lived assets.

 

9


Table of Contents

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT PER SHARE, PER UNIT, AND NUMBER OF YEARS)—(Continued)

(Unaudited)

 

During the three and nine months ended September 30, 2009, the Company recognized amortization expense on intangible assets of $351 and $1,053, respectively. During the three and nine months ended September 30, 2008, the Company recognized amortization expense of $351 and $1,053, respectively. Estimated amortization expense for the remainder of 2009 and the four succeeding fiscal years is as follows:

 

2009

   $ 352

2010

   $ 1,405

2011

   $ 1,405

2012

   $ 585

2013

   $ —  

11. Commitments and Contingencies

Legal Matters

The Company is involved in various claims and legal proceedings of a nature considered normal to its business, including product liability, intellectual property, employment and other matters. The Company is involved in litigation with Cook Medical Incorporated, or Cook, alleging that the Company infringes two of Cook’s patents, one of which was granted in 1991 and the other in 1998. The lawsuit was filed by Cook in the United States District Court, Southern District of Indiana, on October 8, 2009. The Company believes the lawsuit is without merit and intends to defend itself vigorously.

The Company accrues for contingent liabilities when it is probable that a liability has been incurred and the amount can be reasonably estimated. These accruals are adjusted periodically as assessments change or additional information becomes available. At September 30, 2009, the Company has accrued an aggregate of $84, for the resolution of various product liability claims. While it is possible that the Company may incur costs in excess of this amount, it is unable to provide a reasonable estimate of the range of additional costs that may be incurred.

Management is of the opinion that the outcome of these matters will not have a material adverse effect on the Company’s financial position, results of operations, or cash flow. However, as these matters are ongoing, there is no assurance that these matters will be resolved favorably by the Company or will not result in a material liability.

12. Related Party Transactions

Until June 11, 2009, a director of a hospital facility from which the Company contracts for physician training and clinical research services also served as a member of the board of directors of the Company. Payments totaling $21 and $20 for the three month periods ended September 30, 2009 and 2008, respectively, were made to this hospital. In addition, this hospital purchased products from the Company totaling $166 and $154 for the three months ended September 30, 2009 and 2008, respectively. Payments totaling $44 and $78 for the nine month periods ended September 30, 2009 and 2008, respectively, were made to this hospital. In addition, this hospital purchased products from the Company totaling $674 and $556 for the nine months ended September 30, 2009 and 2008, respectively. All transactions were in accordance with normal commercial terms and conditions.

13. Subsequent Events

The Company has performed an evaluation of subsequent events through October 30, 2009, which is the date the financial statements were issued.

In October 2009, the Company terminated its revolving line of credit facility with SVB and entered into a revolving credit facility with Wells Fargo Bank, National Association, or Wells, whereby the Company may borrow up to $10.0 million. All outstanding amounts under the credit facility bear interest at a variable rate equal to the greater of 90 day LIBOR, the federal funds rate, or lender’s prime rate, plus 1.25%, which is payable on a monthly basis. The unused portion is subject to an unused revolving line facility fee, payable quarterly, in arrears, on a calendar year basis, in an amount equal to 0.2% per annum of the average unused portion of the revolving line, as determined by Wells. The credit facility also contains customary covenants regarding operations of the business and financial covenants relating to ratios of current assets to current liabilities and tangible net worth during any calendar

 

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT PER SHARE, PER UNIT, AND NUMBER OF YEARS)—(Continued)

(Unaudited)

 

quarter and is collateralized by all of its assets with the exception of its intellectual property. All amounts owing under the credit facility will become due and payable on April 30, 2012. As of October 30, 2009, the Company did not have any outstanding borrowings under this credit facility.

14. Recent Accounting Pronouncements

In December 2007, the Financial Accounting Standards Board, or the FASB, issued Accounting Standards Codification, or ASC, FASB ASC topic 805, “Business Combinations” (ASC 805). ASC 805 is a revision to previously existing guidance on accounting for business combinations. The statement retains the fundamental concept of the purchase method of accounting, and introduces new requirements for the recognition and measurement of assets acquired, liabilities assumed and noncontrolling interests. The statement is effective for fiscal years beginning after December 15, 2008. As of September 30, 2009, the adoption of ASC 805 had no impact on the Company’s consolidated financial statements.

In December 2007, the FASB issued FASB ASC topic 810, “Consolidation” (ASC 810). ASC 810 requires that noncontrolling interests be reported as stockholders equity. ASC 810 also establishes a single method of accounting for changes in a parent’s ownership interest in a subsidiary as long as that ownership change does not result in deconsolidation. ASC 810 is required to be applied prospectively in 2009, except for the presentation and disclosure requirements which are to be applied retrospectively. The statement is effective for fiscal years beginning after December 15, 2008. As of September 30, 2009, the adoption of ASC 810 had no impact on the Company’s consolidated financial statements.

Effective January 1, 2008, the Company adopted FASB ASC topic 820-10, “Fair Value Measurements and Disclosures - Overall” (ASC 820-10). In February 2008, the FASB issued FASB ASC 820-10-55, “Fair Value Measurements and Disclosures – Overall – Implementation Guidance and Illustrations” (ASC 820-10-55), which provides a one year deferral of the effective date of ASC 820-10 for non-financial assets and non-financial liabilities, except those that are recognized or disclosed in the financial statements at fair value at least annually. ASC 820-10 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. ASC 820-10 applies under other accounting pronouncements that require or permit fair value measurements and does not require any new fair value measurements. ASC 820-10 describes a fair value hierarchy based on three levels of inputs, the first two of which are considered observable and the last unobservable, that may be used to measure fair value. As of September 30, 2009, the adoption of ASC 820-10 had no impact on the Company’s consolidated financial statements. As of September 30, 2009, the adoption of ASC 820-10-55 had no impact on the Company’s consolidated financial statements.

In March 2008, the FASB issued FASB ASC topic 815, “Derivatives and Hedging” (ASC 815). ASC 815 requires enhanced disclosures for derivative instruments, including those used in hedging activities. It is effective for fiscal years and interim periods beginning after November 15, 2008. As of September 30, 2009, the adoption of ASC 805 had no impact on the Company’s consolidated financial statements.

In April 2008, the FASB issued FASB ASC topic 350, “Intangibles-Goodwill and Other” (ASC 350), which amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FASB Statement No. 142, “Goodwill and Other Intangible Assets.” ASC 350 allows an entity to use its own historical experience in renewing or extending similar arrangements, adjusted for specified entity-specific factors, in developing assumptions about renewal or extension used to determine the useful life of a recognized intangible asset and will be effective for fiscal years and interim periods beginning after December 15, 2008. Additional disclosures are required to enable financial statement users to assess the extent to which the expected future cash flows associated with the asset are affected by the entity’s intent and/or ability to renew or extend the arrangement. The guidance for determining the useful life of a recognized intangible asset is to be applied prospectively to intangible assets acquired after the effective date. The disclosure requirements are to be applied prospectively to all intangible assets recognized as of, and subsequent to, the effective date. As of September 30, 2009, the adoption of ASC 350 had no impact on the Company’s consolidated financial statements.

 

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(IN THOUSANDS, EXCEPT PER SHARE, PER UNIT, AND NUMBER OF YEARS)—(Continued)

(Unaudited)

 

In June 2008, the FASB issued FASB ASC topic 260, “Earnings Per Share” (ASC 260). ASC 260 clarifies that share-based payment awards that entitle their holders to receive nonforfeitable dividends before vesting should be considered participating securities. As participating securities, these instruments should be included in the calculation of basic earnings per share. ASC 260 is effective for financial statements issued for fiscal years beginning after December 15, 2008, as well as interim periods in those years. Once effective, all prior period earnings per share data presented must be adjusted retrospectively and early application is not permitted. As of September 30, 2009, the adoption of ASC 260 had no impact on the Company’s consolidated financial statements.

On May 28, 2009, the FASB issued FASB ASC topic 855, “Subsequent Events” (ASC 855). ASC 855 establishes general standards of accounting for, and disclosure of, events that occur after the balance sheet date but before financial statements are issued or are available to be issued. Specifically, ASC 855 provides:

1. The period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements.

2. The circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements.

3. The disclosures that an entity should make about events or transactions that occurred after the balance sheet date.

In accordance with ASC 855, an entity should apply the requirements to interim or annual financial periods ending after June 15, 2009. As of September 30, 2009, the adoption of ASC 855 had no impact on the Company’s consolidated financial statements.

 

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

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, that are based on management’s 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 Powerlink® System and related products, economic and market conditions, estimates regarding patient populations, number of procedures performed and market statistics, the regulatory environment in which we operate, the impact of litigation, the availability of third party payor medical reimbursements, competitive activities or other business conditions. 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 actual results to differ materially from our expectations are disclosed in our Annual Report on Form 10-K for the year ended December 31, 2008, 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 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 hereof to conform such information to actual results or to changes in our opinions or expectations.

Overview

Our Business

We develop, manufacture, market and sell innovative treatments for aortic disorders. Our principal product, the Powerlink® System, is a minimally invasive device for the treatment of abdominal aortic aneurysm, or AAA. AAA is a weakening of the wall of the aorta, the largest artery of the body. Once AAA develops, it continues to enlarge and if left untreated becomes increasingly susceptible to rupture. The overall patient mortality rate for ruptured AAAs is between 50% and 80%, making it a leading cause of death in the United States today.

The Powerlink System is a catheter and endoluminal stent graft, or ELG, system. The device consists of a self-expanding cobalt chromium alloy stent cage covered by ePTFE, a common surgical graft material. The Powerlink ELG is implanted in the abdominal aorta, which is accessed through the femoral artery. Once the Powerlink ELG is deployed into its proper position, blood flow is shunted away from the weakened or “aneurismal” section of the aorta, reducing pressure and the potential for the aorta to rupture. Our clinical trials demonstrated that implantation of our products reduces the mortality and morbidity rates associated with conventional AAA surgery, as well as provides a clinical alternative for many patients who could not undergo conventional surgery. Sales of our Powerlink System in the United States, Europe, Asia, and South America are the primary source of our reported revenues.

In February 2008, Cosmotec Co., Ltd., or Cosmotec, our distributor in Japan, obtained Shonin approval to market the Powerlink System from the Japanese Ministry of Health. Shonin is equivalent to the U.S. Food & Drug Administration, or FDA, approval of a premarket approval, or PMA, application in the United States. We commenced commercial sales to Japan in February 2008 through Cosmotec.

 

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We continue to conduct clinical trials for other products related to the Powerlink System. All the required 63 patients have been enrolled in a clinical trial for a 34mm infrarenal bifurcated device designed to treat patients with large aortic necks.

Results of Operations

Comparison of the Three Months Ended September 30, 2009 and 2008

Revenue. Revenue increased 47% to $13.8 million in the three months ended September 30, 2009 from $9.4 million in the three months ended September 30, 2008. Domestic sales increased 40% to $11.3 million in the three months ended September 30, 2009 from $8.1 million in the three months ended September 30, 2008. The increase in domestic sales was primarily due to increased productivity of our sales representatives, as well as the introduction of two new Powerlink System products in the fourth quarter of 2008 and the marketing of IntuiTrak, our new system to deliver and deploy the Powerlink System, in the first quarter of 2009.

International sales increased 91% to $2.5 million in the three months ended September 30, 2009 from $1.3 million for the comparable period in the prior year. This increase was driven primarily by the introduction of IntuiTrak through limited release to some of our international distributors, higher sales to Cosmotec in Japan and various distributors in South America due to greater market acceptance, and an initial stocking order from our distributor in China.

We anticipate that revenue for the full year ending December 31, 2009, will be between $51.0 and $53.0 million.

Cost of Revenue. The cost of revenue increased 49% to $3.7 million in the three months ended September 30, 2009 from $2.5 million in the three months ended September 30, 2008, due to an increase in the volume of Powerlink System sales. As a percentage of product revenue, cost of product revenue increased to 27% in the third quarter of 2009 as compared to 26% in the same period of 2008. The percentage increase in the cost of product revenue was due to a higher international to domestic sales mix in the products sold during the period, offset by favorable product mix due to new product introductions, and certain product cost efficiencies due to higher volume.

We believe that gross profit will increase in the last quarter of 2009 due to the expected higher commercial sales of the Powerlink System both in and outside of the United States. We also expect gross profit as a percentage of product revenue to increase modestly relative to the first nine months of 2009 due to expected continued effect of the positive factors mentioned above.

Research, Development and Clinical. Research, development and clinical expense increased 15% to $1.6 million in the three months ended September 30, 2009 from $1.4 million for the three months ended September 30, 2008. This increase was due to additional headcount added during the period as we increased our efforts in the development of product improvements and new products.

We expect that research, development, and clinical expense will increase sequentially in the remaining quarter of 2009 as we pursue opportunities to develop additional new products for the treatment of aortic disorders.

Marketing and Sales. Marketing and sales expense increased 9% to $6.6 million in the three months ended September 30, 2009 from $6.1 million in the three months ended September 30, 2008. The increase in the third quarter of 2009 resulted primarily from higher commission expense on the 40% increase in domestic sales between those periods.

We anticipate that marketing and sales expense will increase sequentially at a moderate rate for the remaining quarter of 2009 due to the expected addition of four additional sales territories, the higher compensation associated with the anticipated sales growth, and the addition of management staff in the fourth quarter.

 

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General and Administrative. General and administrative expense decreased 16% to $2.0 million in the three months ended September 30, 2009 from $2.4 million in the three months ended September 30, 2008. The decrease is primarily due to the resolution in the second half of 2008 of certain legal matters which were ongoing during the third quarter of 2008.

We expect general and administrative expenses to be in the $2.1 million to $2.3 million range for the remaining quarter of 2009, exclusive of legal fees likely to be incurred due to the patent infringement suit initiated by Cook in October 2009.

Other Expense. Other expense increased to $34,000 in the three months ended September 30, 2009 from $1,000 in the same period of 2008 due to interest expense on the greater time weighted average bank debt outstanding in the 2009 period. We do not expect to incur any significant interest expense in the remaining quarter of 2009.

Comparison of the Nine Months Ended September 30, 2009 and 2008

Revenue. Revenue increased 44% to $38.8 million in the nine months ended September 30, 2009 from $27.0 million in the nine months ended September 30, 2008. Domestic sales increased 44% to $32.9 million in the nine months ended September 30, 2009 from $22.8 million in the nine months ended September 30, 2008. The increase in domestic sales was due to the increased productivity of our sales force, the introduction of new products including Powerlink XL, Powerlink XL Express, and the IntuiTrak delivery system, and increased physician acceptance of the Powerlink System.

International sales increased 42% to $5.9 million in the nine months ended September 30, 2009 from $4.1 million for the comparable period in the prior year. This increase was driven primarily by the introduction of IntuiTrak through limited release to some of our international distributors. Additionally, we had higher sales to our distributors in South America and Japan and an initial stocking order to our distributor in China.

License Revenue. License revenue was $33,000 for the nine months ended September 30, 2008. The minimum royalty provision of our licensing agreement with Abbott Laboratories expired at December 31, 2007 and the license was fully paid up at June 30, 2008.

Cost of Revenue. The cost of revenue increased 30% to $9.8 million in the nine months ended September 30, 2009 from $7.5 million in the nine months ended September 30, 2008, due to an increase in the volume of Powerlink System sales. As a percentage of product revenue, cost of product revenue decreased to 25% in the nine months ended September 30, 2009 from 28% in the same period of 2008. The percentage decline in the cost of product revenue was due to a favorable product mix due to new product introductions and certain product cost efficiencies due to higher volume.

Research, Development and Clinical. Research, development and clinical expense decreased 5% to $4.5 million in the nine months ended September 30, 2009 as compared to $4.7 million for the nine months ended September 30, 2008. This decline was due to a reduction of costs associated with our clinical trials.

Marketing and Sales. Marketing and sales expense increased 10% to $19.8 million in the nine months ended September 30, 2009 from $18.0 million in the nine months ended September 30, 2008. The increase in the first three quarters of 2009 resulted primarily from variable commission payments on the 44% increase in domestic sales between those periods.

General and Administrative. General and administrative expense decreased 13% to $6.3 million in the nine months ended September 30, 2009, from $7.3 million in the nine months ended September 30, 2008. The decrease was primarily due to $700,000 in costs associated with our chief executive officer succession, which occurred in May 2008, and significant legal fees, as previously discussed, in the nine months ended September 30, 2008, offset by higher stock based compensation charges and incentive compensation accruals based on performance metrics for the nine months ended September 30, 2009.

 

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Other Income/(Expense), Net. Other income/(expense) decreased 196% to ($133,000) in the nine months ended September 30, 2009, from $139,000 in the same period of 2008. The decrease in other income/(expense) is primarily due to interest expense on the term loan and revolving line of credit with SVB in the 2009 period, and the loss in value of our investment in Cianna Medical, partially offset by a gain in foreign currency exchange.

Liquidity and Capital Resources

For the nine months ended September 30, 2009, we incurred net losses of $1.8 million. As of September 30, 2009, we had an accumulated deficit of approximately $145.5 million. Historically, we have relied on the sale and issuance of equity securities to provide a significant portion of funding for our operations. In August 2009, we completed a sale of our common stock that resulted in net proceeds of approximately $14.7 million.

In February 2007, we entered into a credit facility with Silicon Valley Bank, or SVB, whereby we may borrow up to $5.0 million under a revolving line of credit. All outstanding amounts under the revolving line of credit bear interest at a variable rate equal to the lender’s prime rate plus 0.5%, which is payable on a monthly basis. The unused portion is subject to an unused revolving line facility fee, payable quarterly, in arrears, on a calendar year basis, in an amount equal to one quarter of one percent per annum of the average unused portion of the revolving line of credit, as determined by SVB. The credit facility is collateralized by all of our assets with the exception of our intellectual property. All amounts owing under the revolving line of credit become due and payable in July 2010. In September 2008, we drew down $2.0 million. As of September 30, 2009, we re-paid the principal balance of $2.0 million and all accrued interest, leaving $0 in outstanding borrowings under the revolving line of credit.

In July 2008, we entered into an amendment to the credit facility which added a term loan whereby we may borrow up to $3.0 million. In September 2008, we drew the entire $3.0 million available under the term loan. Interest on the term loan is calculated at a variable rate equal to the lender’s prime rate plus 1.0%, which is payable on a monthly basis. The term loan principal is due in 36 monthly installments which began in April 2009. We made principal payments of $2.8 million and $3.0 million during the three and nine months ended September 30, 2009, respectively. As of September 30, 2009, we re-paid all outstanding principal and interest, leaving $0 in outstanding borrowings under the term loan.

The credit facility contains negative covenants regarding the operation of our business and financial covenants, including a covenant requiring us to maintain a tangible net worth of $21.0 million. As of September 30, 2009, our tangible net worth was $31.1 million. If we are not able to maintain compliance with our financial covenants, certain terms of the revolving line of credit and term loan will change, including an increase in the applicable interest rate and a limitation on the amounts available for borrowing under the credit facility based on eligible accounts receivable. Further, if we do not maintain a tangible net worth of at least $20.5 million, we will be in default under the credit facility which could allow SVB to accelerate the repayment of the indebtedness under the credit facility. As of September 30, 2009, we were in complete compliance with all of our covenants under the credit facility.

In October 2009, we terminated our existing credit facility with SVB and entered into a revolving credit facility with Wells Fargo Bank, National Association, or Wells, whereby we may borrow up to $10.0 million. All outstanding amounts under the credit facility bear interest at a variable rate equal to the greater of 90 day LIBOR, the federal funds rate, or the lender’s prime rate, plus 1.25%, which is payable on a monthly basis. The unused portion is subject to an unused revolving line facility fee, payable quarterly, in arrears, on a calendar year basis, in an amount equal to 0.2% per annum of the average unused portion of the revolving line, as determined by Wells. The credit facility also contains customary covenants regarding operations of our business and financial covenants relating to ratios of current assets to current liabilities and tangible net worth during any calendar quarter and is collateralized by all of our assets with the exception of our intellectual property. All amounts owing under the credit facility will become due and payable on April 30, 2012. As of October 30, 2009, we did not have any outstanding borrowings under this credit facility.

 

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At September 30, 2009, we had cash and cash equivalents of $21.1 million. In the nine months ended September 30, 2009, we generated $3.0 million of positive cash flow from operations. We believe that our current cash balance, in combination with cash flows from operations and borrowings available under our credit facility, will be sufficient to meet anticipated cash needs for operating and capital expenditures for the foreseeable future. If we do not realize expected revenue and gross profit margin levels, or if we are unable to manage our operating expenses in line with our revenues, or if we cannot maintain our days sales outstanding accounts receivable level, we may not continue to achieve positive cash flow from operations, in which case we may need to obtain additional financing.

We believe that the future growth of our business will depend upon our ability to successfully develop new technologies for the treatment of aortic disorders and bring these technologies to market, and to increase the size and productivity of our direct sales force. In order to achieve these objectives, we may need to seek additional sources of financing. In the event that we require additional funding, we will attempt to raise the required capital through either debt or equity arrangements.

The timing and amount of our future capital requirements will depend on many factors, including:

 

   

the need for additional capital to fund future development programs or sales force expansion;

 

   

our requirements for additional facility space or manufacturing capacity;

 

   

our requirements for additional information technology infrastructure and systems; and

 

   

adverse outcome(s) from current or future litigation and the cost to defend such litigation.

If we are required to obtain additional financing, we may not be able to do so on acceptable terms, if at all. Even if we are able to obtain such financing it may cause substantial dilution for our stockholders, in the case of an equity financing, or may contain burdensome restrictions on the operations of our business, in the case of debt financing.

 

Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

We do not believe that we currently have material exposure to interest rate, foreign currency exchange rate or other relevant market risks.

Interest Rate and Market Risk. Our exposure to market risk for changes in interest rates relates primarily to our revolving lines of credit with SVB and Wells. Under our revolving line of credit with SVB, all outstanding amounts bear interest at a variable rate equal to the lender’s prime rate plus 0.5%. As of September 30, 2009, we had no amounts outstanding and the interest rate under the revolving line of credit with SVB was 4.5%. Under the revolving line of credit with SVB, interest is payable on a monthly basis which may expose us to market risk due to changes in interest rates. Under our revolving line of credit with Wells, all outstanding amounts bear interest at a variable rate equal to the greater of 90 day LIBOR, the federal funds rate, or the lender’s prime rate, plus 1.25%. As of October 30, 2009, we had no amounts outstanding under the revolving line of credit with Wells. We may be exposed to market risk with respect to the revolving line of credit with Wells due to changes in interest rates.

We do not use derivative financial instruments in our investment portfolio. We place our investments with high credit quality issuers and, by policy, limit the amount of credit exposure to any one issuer other than the U.S. government. We are averse to principal loss and try to ensure the safety and preservation of our invested funds by limiting default risk, market risk, and reinvestment risk. We attempt to mitigate default risk by investing in only high credit quality securities and by constantly positioning our portfolio to respond appropriately to a significant reduction in a credit rating of any investment issuer or guarantor. At September 30, 2009, our investment portfolio included only money market instruments.

 

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Foreign Currency Transaction Risk. We do not currently have material foreign currency exposure as the majority of our assets are denominated in U.S. currency and our foreign-currency based transaction exchange risk is not material.

 

Item 4. CONTROLS AND PROCEDURES.

We carried out an evaluation, under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report, pursuant to Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act. Based on that evaluation, our chief executive officer and chief financial officer have concluded that our disclosure controls and procedures, as of the end of the period covered by this report, were effective to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our chief executive officer and chief financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

There has been no change in our internal control over financial reporting during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

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Part II.

OTHER INFORMATION

 

Item 5. OTHER INFORMATION.

On June 9, 2009, we entered into Addendum No. 2 to Standard Industrial/Commercial Single-Tenant Lease – Net, or the Second Addendum, with Del Monico Investments, Inc., to extend our corporate headquarters building lease, in Irvine, California, for an additional seventeen months, or through August 31, 2011. We have the option to extend the term of the lease for two additional 12 month periods.

On August 28, 2009, we entered into a Standard Industrial/Commercial Multi -Tenant Lease – Net, or the Lease, with Four-In-One Associates. The Lease provides approximately 13,300 square feet of additional office space in a building adjacent to our corporate headquarters in Irvine, California, for a 24 month term, commencing September 1, 2009 and ending August 31, 2011. This additional space will accommodate the expansion of our research and development activities. The initial monthly rent under the Lease, including common area charges will be approximately $14,364. We have the option to extend the term of the Lease for two additional 12 month periods.

The foregoing descriptions of the Second Addendum and the Lease do not purport to be complete and are qualified in their entirety by reference to the Second Addendum and the Lease, copies of which are attached hereto as Exhibits 10.1 and 10.2, respectively, and are incorporated herein by this reference.

 

Item 6. EXHIBITS.

The following exhibits are filed herewith:

 

Exhibit
Number

  

Description

  1.1    Purchase Agreement dated July 29, 2009 by and between Endologix, Inc. and Piper Jaffray & Co. (Incorporated by reference to Exhibit 1.1 to Endologix Current Report on Form 8-K, filed with the SEC on July 30, 2009).
10.1    Addendum No. 2 to Standard Industrial/Commercial Single-Tenant Lease – Net, by and between Endologix, Inc. and Del Monico Investments, Inc., dated June 9, 2009.
10.2    Standard Industrial/Commercial Multi -Tenant Lease – Net, by and between Endologix, Inc. and Four-In-One Associates, dated August 28, 2009.
31.1    Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934.
31.2    Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934.
32.1    Certification of Chief Executive Officer Pursuant to Rule 13a-14(b)/15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350.
32.2    Certification of Chief Financial Officer Pursuant to Rule 13a-14(b)/15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350.

 

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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.

 

  ENDOLOGIX, INC.
Date: October 30, 2009  

/S/    JOHN MCDERMOTT        

  President and Chief Executive Officer
  (Principal Executive Officer)
Date: October 30, 2009  

/S/    ROBERT J. KRIST        

  Chief Financial Officer and Secretary
  (Principal Financial and Accounting Officer)

 

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EXHIBIT INDEX

The following exhibits are filed herewith:

 

Exhibit
Number

  

Description

  1.1    Purchase Agreement dated July 29, 2009 by and between Endologix, Inc. and Piper Jaffray & Co. (Incorporated by reference to Exhibit 1.1 to Endologix Current Report on Form 8-K, filed with the SEC on July 30, 2009).
10.1    Addendum No. 2 to Standard Industrial/Commercial Single-Tenant Lease – Net, by and between Endologix, Inc. and Del Monico Investments, Inc., dated June 9, 2009.
10.2    Standard Industrial/Commercial Multi -Tenant Lease – Net, by and between Endologix, Inc. and Four-In-One Associates, dated August 28, 2009.
31.1    Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934.
31.2    Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934.
32.1    Certification of Chief Executive Officer Pursuant to Rule 13a-14(b)/15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350.
32.2    Certification of Chief Financial Officer Pursuant to Rule 13a-14(b)/15d-14(b) of the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350.

 

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