•Nellix EVAS System. In ~~January~~February 2013, we received CE Mark approval of the Nellix EVAS System. In February 2013, we commenced a limited market introduction of the Nellix EVAS System in ~~Europe. We hope~~Europe and a controlled commercial launch is currently underway. In December 2013, we received IDE approval in the United States to ~~receive~~begin a clinical trial which commenced in January 2014. Enrollment in the IDE was completed in November 2014. Based upon current assumptions and timelines, we anticipate receiving FDA premarket approval in late 2016.

~~We believe that the Nellix System represents groundbreaking technology for EVAR of AAA. Unlike all currently~~

~~available ELG devices, which leave the AAA sac fully intact, the Nellix System seals the AAA sac with a biostable polymer to reduce the potential for endoleaks and secondary interventions.~~

Manufacturing and Supply

All of our commercial products are manufactured, assembled, and packaged at our 60,000 square foot leased facilities in Irvine, California. In February 2015 we commenced moving all operations into two co-located, leased buildings totaling 129,000 square feet in Irvine, California.

We rely on third parties for the supply of certain components used in our ~~ELG System,~~EVAR and EVAS Systems, such as the wire used to form our cobalt chromium alloy ~~stent.~~stent and the raw material used in the manufacturing of polymer. While we obtain ~~some~~many of these components from single source suppliers, we believe there are alternative vendors for the supply of the vast majority of our required components. Many of our third party manufacturers go through a formal qualification and approval process, including periodic renewal to ensure fitness for use and compliance with applicable FDA requirements and International Organization for Standardization ("ISO") 13485 requirements, and/or other required quality standards. Additionally, we actively manage supply risk with our key suppliers through a combination of negotiating favorable terms of supply agreements, maintaining strategic inventory levels, and maintaining frequent communications with our suppliers.

Marketing and Sales

We market and sell our ~~ELG System~~products in the U.S. and in ~~several~~12 Western European countries (United Kingdom, Ireland, France, Germany, Italy, Spain, Switzerland, Netherlands, Austria, Belgium, Luxembourg, and Monaco) through a direct sales force and network of agents. In ~~certain~~10 other European countries, ~~and~~Japan, 9 countries in ~~Asia,~~ South America, New Zealand and Mexico, we sell our ~~ELG System~~EVAR products through exclusive independent ~~distributors.~~distributors or agents. As of February ~~28, 2013~~,26, 2015, we marketed our ~~ELG System~~EVAR products in 2333 countries outside of the U.S. through 13a total of 14 independent distributors. We market our EVAS products through direct sales, agents and distributor channels in Europe and our independent agent in New Zealand.

U.S. We market and sell our products in the U.S. through a direct sales force consisting of (as of December 31, ~~2012) 67~~2014) 69 sales representatives and 1326 clinical specialists. The primary customer and decision maker for ~~ELG systems~~our products in the U.S. is the vascular surgeon, and to a lesser extent, the cardiovascular surgeon, interventional radiologist and interventional cardiologist. Through our direct sales force, we provide clinical support and service to many of the approximately 1,600 hospitals and ~~4,700~~approximately 4,000 physicians in the U.S. that perform EVAR. Approximately ~~82%~~72% of our revenues for the year ended December 31, ~~2012~~2014 were generated from sales of our ~~ELG System~~EVAR products in the U.S.

Europe. Prior to September 2011, our reported revenue to customers outside of the U.S. had been generated exclusively through third-party distributors. As of September 1, 2011, upon mutual agreement for the termination of distribution rights with a significant European distributor, we began direct sales operations in most of Western Europe. ~~Our~~We had an aggregate of 31 direct sales, clinical specialists, agents and training personnel ~~number 20~~ as of December 31, ~~2012.~~2014. Approximately 8%20% of our revenues for the year ended December 31, ~~2012~~2013 were generated from sales of our ~~ELG System~~EVAR and EVAS products in Europe.

Asia Pacific. We commenced commercial sales in Japan in February 2007 ~~after~~upon receipt of Japanese regulatory, or Shonin, approval. We have had limited commercial sales in China since September ~~2009.~~2009 and we terminated our distributor agreement with our Chinese distributor in 2013. Approximately 5%4% of our revenues for the year ended December 31, ~~2012~~2014 were generated from distributor sales of our ~~ELG System~~EVAR and EVAS products in ~~Asia.~~Asia Pacific.

South and Central America and Mexico. We have applicable regulatory approvals for Mexico, Argentina, Brazil, Chile, Peru, Ecuador, Venezuela, Costa Rica, Panama and Colombia. We commenced sales in South America and in Mexico in December 2007. Approximately 5%4% of our revenues for the year ended December 31, ~~2012~~2014 were generated from ~~distributor~~ sales of our ~~ELG System~~EVAR products in South America and Mexico.

See Note 7 of the Notes to the Consolidated Financial Statements for a tabular summary of our revenue by geographic region for the fiscal years 2014, 2013 and 2012.

Competition

The medical device industry is highly competitive. Any product we develop that achieves regulatory clearance or approval will have to compete for market acceptance and market share. We believe that the primary competitive factors in the AAA device market segment are:

clinical effectiveness;

product safety, reliability, and durability;

ease of use;

sales force experience and relationships; and

price.

We experience significant competition and we expect that the intensity of competition will increase over time. For example, our major competitors, - Medtronic, Inc., W.L. Gore Inc., and Cook Medical Products, Inc., and new market entrants, TriVascular Technologies, Inc. and Lombard Medical Technologies, Inc. each have obtained full regulatory approval for their ~~ELG systems~~EVAR products in the U.S. ~~and~~and/or other international markets including Europe. In addition to these major competitors, we also have smaller competitors, and emerging competitors with active ~~ELG~~EVAR system development programs.

~~Many of our~~Our major competitors have substantially greater capital resources than we ~~do. Many~~do and also have greater resources ~~and expertise~~ in the areas of research and development, obtaining regulatory approvals, manufacturing, marketing, and sales. In addition, these competitors have multiple product offerings, which some physicians and hospitals may find more convenient when developing business relationships. We also compete with other medical device companies for clinical trial sites and for the hiring of qualified personnel, including sales ~~representatives.~~representatives and clinical specialists.

Product Developments and Clinical Trials ~~and Product Developments~~

Overview

We incurred expenses of ~~$22.9~~$34.9 million in ~~2012~~, ~~$21.2~~2014, $24.9 million in ~~2011~~,2013, and ~~$11.2~~$22.9 million in ~~2010~~,2012, on research and development activities and clinical studies. Our focus is to continually develop innovative and cost-effective medical devices for the treatment of aortic disorders. We believe that our ability to develop new technologies is a key to our future growth and success. Historically, we have focused on developing our ~~ELG Systems~~EVAR and EVAS to treat infrarenal ~~AAA.~~AAA including initial development of products to treat complex AAAs. However, we expect to devote more resources in the future to continue to develop, enhance and obtain expanded indications for our current EVAR and EVAS products and to develop new ~~technologies~~product indications to treat ~~juxtarenal aneurysms~~more challenging anatomies.

Nellix EVAS System

On December 10, 2010, we completed our acquisition of Nellix (refer to the "Nellix Acquisition and ~~diseases~~Private Placement Transaction" section below). Using the technology we acquired in the Nellix acquisition, we developed the Nellix EVAS System, a next-generation device, to treat infrarenal AAA. We have the following trials in process to build independent and collective clinical and economic evidence of clinical safety and effectiveness:

EVAS FORWARD IDE - Pivotal clinical trial to evaluate the safety and effectiveness of the ~~thoracic aorta.~~Nellix EVAS System. The study is a prospective single arm registry which enroll 180 patients at 30 centers in the U.S., Canada and Europe, of which approximately 25 will be in the U.S. In November 2014, we completed enrollment in the EVAS FORWARD IDE. The patients in this study will be followed for one-year, after which we will submit the final module of the PMA to the FDA. The first patient was treated in January 2014, enrollment was completed in November 2014 and patient follow-up is scheduled for one-year post treatment. We will pursue expanded indications in the future as part of the EVAS FORWARD clinical programs.

EVAS FORWARD Global Registry -This study is designed to provide real world clinical results to demonstrate the effectiveness and broad applicability of the Nellix EVAS System. This registry is designed to include 300 patients enrolled in up to 30 international centers. The first patient in the registry was treated in October 2013. The study utilizes an independent core lab and includes follow-up to five years. In September 2014, we announced completion of patient enrollment in the Nellix EVAS FORWARD global registry.

AFX

In February 2014, we launched a new proximal extension in the U.S., VELA, designed to be used in conjunction with our AFX bifurcated device. VELA features a circumferential graft line marker and controlled delivery system that enable predictable deployment and final positional adjustments. We began a commercial introduction of VELA in Europe in January 2015.

In September 2014, we announced a new clinical study called LEOPARD (Looking at EVAR Outcomes by Primary Analysis of Randomized Data). The study will provide a real-world comparison of the AFX system versus other commercially available EVAR devices. The LEOPARD study is designed to randomize and enroll up to 800 patients at 80 leading centers throughout the United States and is expected to commence in the first quarter of 2015. The centers will be a mix of our current and new customers, with each investigator selecting one competitive device to randomize against AFX. The LEOPARD study is being led by an independent steering committee of leading physicians who will be involved with the study and responsible for presenting the results over the five-year follow-up period.

PEVAR

Vascular access for EVAR ~~requires~~previously required femoral artery exposure (commonly referred to as surgical “cut-down”) of one or both femoral arteries, allowing for safe introduction of ~~ELG systems.~~the EVAR product. Complications from femoral artery exposure ~~in the setting of~~during EVAR procedures is an inherent risk of current surgical practice. ~~Percutaneous EVAR ("PEVAR")~~PEVAR procedures do not require an open surgical cut-down of either femoral artery, as access to the femoral artery is achieved via a needle-puncture through the ~~skin.~~skin and closure with use of a suture-mediated device. Advantages to the patient and to the health care system of an entirely percutaneous procedure include reduced surgical procedure times, less post-operative pain, and fewer access-related wound complications. ~~To date, there are no ELG systems approved by the FDA for full percutaneous access. We expect to receive a percutaneous indication from the FDA for AFX and IntuiTrak in the first half of 2013.~~

In ~~January~~April 2013, we announced ~~data from~~FDA approval of the ~~first prospective, multicenter, randomized clinical trial of~~ PEVAR ~~using~~indication for use for our AFX and ~~IntuiTrak devices. We expect that this data will be published in full in~~Intuitrak products. Trial results show the ~~Journal~~safety and effectiveness of ~~Vascular Surgery during 2013. Key data points from~~ our ~~clinical trial include:~~

~~The trial primary endpoint was met, definitively demonstrating the non-inferiority of~~device and PEVAR ~~using the accompanying~~procedure facilitated with a suture-mediated closure device, and showed significantly reduced surgical procedure time compared to surgical ~~access~~ EVAR.

~~A 94% procedural technical success rate was achieved in a multicenter setting.~~

~~Mean procedure time was reduced in~~ Other trends favoring PEVAR ~~patients by 34 minutes. Likewise, mean procedure time to femoral artery hemostasis was reduced following PEVAR by 13 minutes.~~

~~PEVAR patients required significantly fewer concomitant procedures.~~

~~Favorable trending of PEVAR was observed in several clinical utility outcomes including reduced anesthesia time,~~include less medication prescribed for post-operative groin pain, reduced blood loss, less hospitalization time, and ~~need~~overall lower incidence of complications. To date, no other company has conducted a randomized prospective FDA trial to specifically obtain approval for ~~transfusion, shorter hospital length of stay, and less analgesics prescribed for groin pain.~~

~~The~~a PEVAR ~~non-inferiority to surgical access EVAR in terms of the procedure success persisted through the final six-month follow-up.~~

~~Xpand~~indication.

~~The Xpand Renal Stent Graft ("Xpand") is an ePTFE covered balloon expandable renal stent graft used in conjunction with~~ Ventana ~~to treat patients with short aortic juxtarenal abdominal aortic aneurysms ("JAA") or pararenal abdominal aortic aneurysms ("PAA").~~

~~Ventana~~

The JAA and PAA patient population is a significant and under-served segment of the AAA market. Available industry data suggests 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.

~~The Ventana Fenestrated Stent Graft System (“Ventana”) potentially provides these patients with an innovative and less-invasive alternative to open surgical repair.~~

In January 2012, we received ~~Investigational Device Exemption ("IDE")~~IDE approval from the FDA to begin U.S. clinical trials to evaluate Ventana Fenestrated Stent Graft System (“Ventana”) for the EVAR repair of ~~JAA~~juxtarenal abdominal aortic aneurysms and ~~PAA.~~pararenal abdominal aortic aneurysms. In February 2012, we enrolled the first patient in our U.S. clinical ~~trials~~trial to evaluate Ventana.

Ventana is designed to be used with AFX and Xpand. Although AFX is commercially available in the U.S. and many international markets, Ventana and Xpand are not yet approved for marketing in the U.S. or abroad, and are restricted to investigational use only. We ~~hope to receive~~received CE Mark approval for Ventana in April 2013. In April 2013 ~~and FDA approval for Ventana in 2015.~~

~~Nellix~~

~~On December 10, 2010, we completed our acquisition of Nellix (refer to~~ the "Nellix Acquisition and Private Placement Transaction" section below). Using the technology we acquired from this acquisition, we developed a next-generation device (the "Nellix System") to treat infrarenal AAA.

~~We received CE Mark approval~~company announced that, after completing approximately half of the ~~Nellix System~~U.S. IDE patients, it would temporarily suspend enrollment in ~~January 2013,~~the Ventana U.S. IDE clinical trial and ~~in February 2013, commenced a~~delayed the limited market introduction of ~~the Nellix System~~Ventana in Europe. Preliminary data suggested that the trial would not meet its efficacy endpoint, due to a higher number of renal re-interventions than were allowed. We ~~hope~~announced in November 2013 that we planned to ~~receive an IDE approval from the FDA~~develop and test product enhancements and expected to be back in clinical evaluation sometime in 2015. We announced in 2014 that we were refocusing development efforts for the paravisceral segment on a Nellix ~~System in the first half~~based solution rather than continuing to persue development of ~~2013, and hope to receive FDA premarket approval in the U.S. in 2016.~~an EVAR solution.

We believe that the Nellix System represents groundbreaking technology for EVAR of AAA. Unlike all currently available ELG devices, which leave the AAA sac fully intact, the Nellix System seals the AAA sac with a biostable polymer to reduce endoleaks and secondary interventions.

We believe the other advantages of the Nellix System include: (i) a low profile (17Fr outer diameter), which is beneficial for the delivery of the device; (ii) ease of use and reduced total time of device deployment for physicians; (iii) low expected reintervention rate; and (iv) the potential for reduced CT scan post-procedure follow up.

Nellix Acquisition and Private Placement Transaction

On December 10, 2010, we completed our acquisition of Nellix, Inc. ~~("Nellix")~~, by way of a merger of a wholly-owned subsidiary of our company with and into Nellix. As a result of the merger, Nellix became, and is, a wholly-owned subsidiary of our company. Upon the closing of the merger, we issued an aggregate of 2.9 million unregistered shares of our common stock to the former stockholders of Nellix in exchange for all of the outstanding shares of Nellix stock immediately prior to the closing of the merger. On June 17, 2014 we issued an additional 2.7 shares of our common stock to the former shareholders of Nellix upon achievement of a revenue-based milestone. In addition, ~~we will be required~~the merger agreement requires us to issue additional shares of our common stock to the former stockholders of Nellix as contingent consideration upon our achievement of certain defined revenue and regulatory approval milestones involving the technology obtained in the Nellix acquisition.

Also, on December 10, 2010, concurrent with the closing of our acquisition of Nellix, we issued and sold to Essex Woodlands Health Ventures Fund VII, L.P. (a significant stockholder of Nellix prior to the merger), an aggregate of 3.2 million unregistered shares of our common stock, resulting in gross proceeds to us of $15.0 million. Refer to Note 9 of the Notes to the Consolidated Financial Statements for further discussion.

Patents and Proprietary Information

We believe that our intellectual property and proprietary information is key to protecting our technology. We ~~are building~~continue to build a portfolio of apparatus and method patents covering various aspects of our current and future technology. In the area of aorta treatment systems (exclusive of Nellix technology), our rights include 4234 U.S. issued patents, 1810 pending U.S. applications, 20 foreign patents and 2114 pending foreign ~~patents.~~patent applications. Our current aorta treatment related patents have expiration dates from ~~2013~~2015 to 2031. As a result of our acquisition of Nellix, we added additional patents to our portfolio which have evolved to currently include 1218 U.S. patents and 1210 foreign patents, with expiration dates from ~~2014~~2016 to 2030. We intend to continue to file patent applications to strengthen our intellectual property position as we continue to develop our ~~technology.~~

technology, while simultaneously avoiding paying unnecessary fees to maintain patents and applications when we believe it is not in our best interest.

Our policy is to protect our proprietary position by, among other methods, filing U.S. and foreign patent applications to protect technology, inventions and improvements that are important to the development of our business. We also own trademarks to protect the names of our products. In addition to patents and trademarks, we rely on trade secrets and proprietary know-how.

We seek protection of these trade secrets and proprietary know-how, in part, through confidentiality and proprietary information agreements. We make diligent efforts to require our employees, directors, consultants, and advisors to execute confidentiality agreements upon the start of employment, consulting, or other contractual relationships with us. These agreements provide that all confidential information developed or made known to the individual or entity during the course of the relationship is to be kept confidential and not be disclosed to third parties, except in specific circumstances. In the case of employees and certain other parties, the agreements also provide that all inventions conceived by the individual will be our company's exclusive property.

Third-Party Reimbursement

In the U.S., hospitals are the primary purchasers of our ~~ELG System.~~EVAR Systems. Hospitals in turn bill various third-party payors, such as Medicare, Medicaid, and private health insurance plans, for the total healthcare services required to treat the patient's AAA. Government agencies, private insurers and other payors determine whether to provide coverage for a particular procedure and to reimburse hospitals for medical treatment at a fixed rate based on the diagnosis-related group ("DRG") established by the U.S. Centers for Medicare and Medicaid Services ("CMS"). The fixed rate of reimbursement is based on the procedure performed, and is unrelated to the specific medical devices used in that procedure.

Reimbursement of procedures utilizing our ~~ELG System~~EVAR products currently is covered under specific DRG codes. Some payors may deny reimbursement if they determine that the device used in a treatment was unnecessary, not cost-effective, or used for a non-approved indication.

In October 2000, the CMS issued ICD-9 procedure code 39.71, "Endovascular implantation of other graft in abdominal aorta" for the proper procedure coding of EVAR for billing purposes. For hospital reimbursement, patients treated with our ~~ELG~~EVAR System are classified under DRG codes 237 or 238, "Major Cardiovascular Procedures with Major Complications" and "Major Cardiovascular Procedures without Major Complications," respectively. In the latest data published by CMS, the national average reimbursement under DRG codes 237 and 238 is approximately $28,300 and $17,100, respectively.

Outside the U.S., market acceptance of medical devices, including EVAR and EVAS systems, depends partly upon the availability of reimbursement within the prevailing healthcare payment system. Reimbursement levels vary significantly by country, and by region within some countries. Reimbursement is obtained from a variety of sources, including government sponsored healthcare and private health insurance plans.

Presently, the European Union ("EU") is considering a substantial updating of regulations for the sale and reimbursement of medical devices in EU countries. The legislation will harmonize such regulations throughout all EU countries. It is expected that the new regulations will require: (i) stricter guidelines for clinical evidence supporting device efficacy; (ii) more powers for regulatory assessment bodies; (iii) stronger supervision of manufacturers, importers and distributors; and (iv) an extended database for medical devices and better traceability throughout the supply chain. The European Commission proposals are being discussed in the European Parliament and in the European Council. They are expected to be adopted sometime in 2015 to 2016 and would then gradually come into effect from 2016 to 2020.

Government Regulation - Medical Devices

~~U.S.~~

Our ~~products~~medical devices are ~~regulated in~~subject to regulation by various government agencies, including the U.S. ~~as Class III~~Food and Drug Administration ("FDA") and similar agencies within governments outside the U.S. Each of these agencies requires us to comply with laws and regulations governing the development, qualification, manufacturing, labeling, marketing, and distribution of our medical devices.

U.S.

In the U.S., medical devices are regulated by the FDA under the Federal Food, Drug and Cosmetic Act. The FDA classifies medical devices into one of three classes based upon controls the FDA considers necessary to reasonably ensure their safety and effectiveness. Class I devices are subject to general controls such as labeling, adherence to good manufacturing practices and maintenance of product complaint records, but are usually exempt from premarket notification requirements. Class II devices are subject to the same general controls and also are subject to special controls such as performance standards, and FDA guidelines, and may also require clinical testing prior to approval. Class III devices are subject to the highest level of controls because they are life-sustaining or life-supporting devices. Class III devices require rigorous clinical testing prior to their approval and generally require a ~~pre-market~~premarket approval ("PMA") or PMA supplement approval prior to ~~their~~marketing for sale.

~~Manufacturers~~Authorization to commercially distribute a medical device in the U.S. is generally received in one of two ways. The first, known as premarket notification (i.e., the 510(k) process), requires us to submit data to the U.S. FDA to demonstrate that our medical device is substantially equivalent to another medical device that is legally marketed in the U.S. The U.S. FDA must ~~file an IDE application~~issue a finding of substantial equivalence before we can commercially distribute our medical device. Devices that receive a finding of substantial equivalence are referred to as 510(k)-cleared devices. Modifications to medical devices cleared under the 510(k) process can be made under the 510(k) process, or without the 510(k) process if the changes do not significantly affect safety or effectiveness.

The second process, known as premarket approval (i.e., the PMA process), requires us to collect and submit nonclinical and human clinical ~~studies of a~~data on the medical device ~~are required~~for its intended use to demonstrate that it is safe and ~~if the~~effective. Human clinical data must be collected in compliance with FDA ~~considers investigational use of the device to represent significant risk to the patient.~~IDE regulations. The IDE application must be supported by data, typically including the results of animal and engineering testing of the device. If the IDE application is approved by the FDA, human clinical studies may begin at a specific number of investigational sites with a maximum number of ~~patients, as approved by the FDA.~~patients. The clinical studies must be conducted under the review of an independent institutional review board to ensure the protection of the patients’ rights.

~~Generally, upon completion of these human clinical studies, a manufacturer seeks approval of a Class III~~ In the PMA process, the U.S. FDA will approve the medical device ~~from~~and thereby authorize its commercial distribution in the ~~FDA by submitting~~U.S. if it determines that the probable benefits outweigh the risks for the intended patient population, and therefore makes a ~~PMA application. A PMA application must be supported by extensive data, including the results~~determination of ~~the clinical studies, as well as testing and literature to establish the~~reasonable assurances of safety and ~~effectiveness of~~effectiveness. The PMA process takes longer and is more expensive than the ~~device.~~510(k) process. Our Powerlink, Intuitrak and AFX ~~ELG~~EVAR Systems were approved through this PMA ~~process and we anticipate that the~~process. The Nellix ~~and Ventana devices will likewise go~~EVAS System requires future approval through the ~~PMA process.~~process in order to be made commercially available in the United States.

~~FDA regulations require us~~We are required to register as a medical device manufacturer with the FDA. Additionally, the California Department of Health Services ("CDHS") requires us to register as a medical device ~~manufacturer within the state.~~manufacturer. Because of this, the FDA and the CDHS inspect us on a routine basis for compliance with Quality System ~~Records ("QSR")~~ regulations. These regulations require that we manufacture our products and maintain related documentation in a prescribed manner with respect to manufacturing, testing and control activities. We have undergone and expect to continue to undergo regular ~~QSR~~Quality System inspections in connection with the manufacture of our products at our facility. Further, the FDA requires us to comply with various ~~FDA~~ regulations regarding labeling. The Medical Device Reporting (“MDR”) laws and regulations require us to provide information to the FDA on deaths or serious injuries alleged to have been associated with the use of our devices, as well as product malfunctions that likely would cause or contribute to death or serious injury if the malfunction were to recur. ~~In addition,~~Although physicians are permitted to use their medical judgment to apply medical devices to indications other than those cleared or approved by the FDA, ~~prohibits an approved device~~we are prohibited from ~~being marketed~~promoting products for such “off-label” ~~(i.e. unapproved)~~uses, and can only market our products for the 510(k)-cleared or PMA-approved indications for use.

~~We are also subject to other federal, state and local laws, regulations, and recommendations relating to safe working conditions, laboratory, and manufacturing practices.~~

International

~~Our international sales~~Internationally, our medical devices are subject to regulatory requirements in the countries in which ~~our products~~they are sold. The requirements and regulatory ~~review process varies~~approval processes vary from country to country and may in some cases require the submission of clinical data. In addition, the FDA must be notified of, or approve the export to certain countries of devices that require a PMA, which is not yet approved in the U.S.country.

In ~~Europe, we need to~~the EU, one regulatory approval process exists. We must comply with the requirements of the Medical Devices Directive ("MDD"), and appropriately affix the CE Mark on our products to attest to such compliance. To ~~achieve compliance,~~obtain a CE Mark, our products must meet minimum standards of safety, performance, and quality (i.e., "Essential Requirements"), and then comply with defined conformity assessment routes. A notified body, selected by us, assesses our Quality Management System and our product conformity to the ~~“Essential Requirements”~~Essential Requirements and the requirements of the ~~MDD relating~~MDD. The notified body must perform regular inspections to ~~safety~~verify compliance. The EU government ministries of health ("Competent Authorities") oversee human clinical studies and ~~performance and we must successfully undergo verification~~post-market surveillance of ~~our regulatory compliance, or conformity assessment, by a Notified Body selected by us. The level of scrutiny of such assessment depends on the regulatory class of the product.~~

~~In December 1998, we received ISO 9001:1994/ EN46001:1996 certification from our Notified Body with respect~~approved products, referred to the manufacturing of all of our products in our facilities. In September 2002, we received ISO 9001:1994/ EN46001:1996 and ISO 13485:1996 certification. In December 2005, we received ISO13485:2003 certification.as Vigilance Reporting. We are ~~subject to continued surveillance by our Notified Body and will be~~ required to report ~~any~~device failures and serious adverse ~~incidents~~events potentially related to ~~the appropriate authorities.~~product use to responsible Competent Authorities. We also must comply with additional requirements of individual countries in which our products are marketed. Our Powerlink and AFX EVAR Systems and Nellix EVAS System were approved through the CE marking process.

To be sold in Japan, most medical devices must undergo thorough safety examinations and demonstrate medical efficacy before they are granted approval, or "Shonin." In Japan, the Ministry of Health, Labor, and Welfare ("MHLW"), with administration by the Pharmaceutical and Medical Devices Agency ("PMA"), regulates medical devices under the Pharmaceuticals and Medical Device Law ("PMD"). Our quality management system and product conformity to the PMD are overseen by MHLW and Pharmaceutical and Medical Devices Agency ("PMDA"). Our Powerlink and Intuitrak EVAR Systems were approved through the Shonin process.

To be sold in China all medical devices are required to have licenses from the China Food and Drug Administration ("CFDA") (formerly State Food & Drug Administration or SFDA). Quality system, premarket testing and clinical investigation are required for Class II and III devices. CFDA released a new regulation on Innovative Medical Device Registration Applications ("IMDR") in March 2014, which Endologix may utilize to register its product in China. Class II and III submissions will have a full application review conducted; this will include a technical and administrative review. Novel and high-risk products may also be subject to an Expert Panel Meeting (which may result in an additional 4 to 6 months to the review process), and CFDA may conduct an onsite QMS audit of manufacturing facilities.

We are also subject to other local, state, federal and international regulations relating to a variety of areas including laboratory practices, manufacturing practices, medical device export, quality system practices, as well as health care reimbursement and delivery of products and services.

U.S. and Foreign Government ~~Regulation~~Regulations - ~~Anti-Kickback Statute, Federal False Claims Act,~~Healthcare Fraud and ~~HIPAA~~Abuse and Privacy Laws

~~Anti-Kickback Statute~~Healthcare Fraud and Abuse

We are subject to various U.S. and foreign governmental laws and regulations relating to the manufacturing, labeling, marketing and selling of our products, non-compliance with which could adversely affect our business, financial condition and results of operations. We have implemented and maintain a comprehensive program that includes ongoing risk assessment, development of relevant policies, monitoring, and training of our employees to ensure compliance with U.S. and foreign laws and regulations.

Various U.S. federal and state laws and regulations pertaining to ~~healthcare~~health care fraud and abuse ~~including anti-kickback laws. In particular,~~govern how we can and cannot do business in the ~~federal anti-kickback statute prohibits persons from knowingly~~U.S. and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual, or the furnishing, arranging for or recommending a good or service, for which payment may be made in whole or in part under federal healthcare programs, such as the Medicare and Medicaid programs. The anti-kickback statute is broad and prohibits many arrangements and practices that are lawful in businesses outside of the healthcare industry.

In implementing the statute, the Office of Inspector General ("OIG") has issued a series of regulations, known as the “safe harbors”. These safe harbors set forth provisions that, if all their applicable requirements are met, will assure healthcare providers and other parties that they may not be prosecuted under the anti-kickback statute. The failure of a transaction or arrangement to fit precisely within one or more safe harbors does not necessarily mean that it is illegal or that prosecution will be pursued. However, conduct and business arrangements that do not fully satisfy all requirements of an applicable safe harbor may result in increased scrutiny by government enforcement authorities. Penalties for violations of the anti-kickback statute include criminal penalties and civil sanctions such as fines, imprisonment and possible exclusion from Medicare, Medicaid and other federal healthcare programs. Various states have also enacted laws regulating the interactions of medical device companies with healthcare providers to prevent fraud and abuse.

~~False Claims Act~~

The federal False Claims Act prohibits persons from knowingly filing or causing to be filed a false claim to, or the knowing use of false statements to obtain payment from, the federal government. Suits filed under the False Claims Act, known as “qui tam” actions, can be brought by any individual on behalf of the government. These individuals, sometimes known as “relators” or, more commonly, as “whistleblowers”, may share in any amounts paid by the entity to the government in fines or settlement. The number of filings of qui tam actions has increased significantly in recent years, causing more healthcare companies to have to defend a False Claim Act. If an entity is determined to have violated the federal False Claims Act, it may be required to pay up to three times the actual damages sustained by the government, plus civil penalties for each separate false claim. Various states have also enacted similar laws modeled afterglobally, including the federal False Claims Act, which prohibits the submission of false or otherwise improper claims for payment to a federally-funded health care program, the federal Anti-Kickback Statute, which prohibits offers to pay or receive remuneration of any kind for the purpose of inducing or rewarding referrals of items or services reimbursable by a Federal health care program, and similar state false claims and anti-kickback laws and regulations that apply to ~~items~~state funded health care programs. Violations of these laws and ~~services reimbursed under Medicaid~~regulations are punishable by criminal and/or civil sanctions, including, in some instances, fines, imprisonment and, ~~other~~within the U.S., exclusion from participation in federal and/or state health care programs, ~~or, in several states, apply regardless~~including Medicare and Medicaid. The interpretation and enforcement of these laws and regulations are uncertain and subject to rapid change.

We conduct a significant amount of our sales activity outside of the ~~payor.~~U.S. We intend to continue to pursue growth opportunities in sales internationally, including in emerging markets. Our international operations are, and will continue to be, subject to a complex set of laws and regulations, including:

Foreign medical reimbursement policies and programs;

Complex data privacy requirements and laws;

Ever-changing country-specific guidelines, transparency requirements and laws;

The Foreign Corrupt Practices Act, which can be used to prosecute companies in the U.S. for arrangements with physicians, or other parties outside the U.S. if the physician or party is a government official of another country and/or the arrangement violates the law of that country;

Foreign anti-corruption laws, such as the UK Bribery Act; and

Trade protection measures, including import or export restrictions, that may restrict us from doing business in and/or shipping products to certain parts of the world.

~~Health Insurance Portability~~The foregoing are subject to change and ~~Accountability Act of 1996~~evolving interpretations and any violation thereof could subject us to financial or other penalties.

~~The Health Insurance Portability~~US and ~~Accountability Act of 1996 (“HIPAA”) created two general~~Foreign Privacy Laws

We are subject to various U.S. federal ~~violations, (a) healthcare fraud~~ and ~~(b) false statements relating to healthcare matters,~~state privacy and ~~(c) protects~~security laws and regulations that protect the security and privacy of individually identifiable health information. ~~The applicable~~We are mindful that our systems require significant resources and oversight to protect employee, patient, physician and customer information. If we fail to maintain or protect our information systems and data integrity effectively, we could lose existing customers, have difficulty preventing, detecting, and controlling fraud, have disputes with customers, physicians, and other health care professionals, have regulatory sanctions or other penalties imposed, have increases in operating expenses, incur expenses or lose revenues as a result of a data privacy breach, or suffer other adverse consequences.

We are also impacted by the privacy and security requirements of ~~HIPAA~~countries outside the U.S. Privacy standards in Europe and Asia are ~~briefly described below.~~


a)	The healthcare fraud statute prohibits knowingly and willfully executing a scheme to defraud any healthcare benefit program, including private payors. A violation of this statute is a felony and may result in fines, imprisonment, and/or exclusion from government sponsored programs.


b)	The false statements statute prohibits knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious, or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services. A violation of this statute is a felony and may result in fines or imprisonment.

Standards govern the conduct of certain electronic transmission of health care information and to protect the security and privacy of individually identifiable health information maintained or transmitted by health care providers, health plans, and health care clearinghouses. These standards include: (i) Standards for Electronic Transactions and (ii) Standards for Privacy and Security of Individually Identifiable Information.


i)	The Standards for Electronic Transactions establishes standards for common health care transactions such as claims information, plan eligibility, and payment information. It also establishes standards for the use of electronic signatures, unique identifiers for providers, employers, health plans, and individuals.

~~ii)~~

The Standards for Privacy of Individually Identifiable Information restrict our use and disclosure of certain individually identifiable health information. The HIPAA privacy and security regulations establish a uniform federal “floor” and do not supersede state laws that are more stringent or provide individuals with greater rights with respect to the privacy or security of, and access to, their records containing patient/private health information (“PHI”). As a result, we are required to comply with both HIPAA privacy regulations and varying state privacy and security laws, which include physical and electronic safeguard requirements. These laws contain significant fines and other penalties for wrongful use or disclosure of PHI.

~~We have implemented~~becoming increasingly strict. Enforcement actions and ~~maintain a comprehensive program~~financial penalties related to privacy in the EU are growing, and foreign governmental authorities are regularly passing new laws and restrictions relating to privacy requirements and standards. The management of ~~oversight~~cross border transfers of information among and ~~training~~outside of EU member countries is becoming more complex, which may complicate our consulting arrangements with physicians or our clinical research activities, as well as product offerings that involve transmission or use of clinical data.

Any significant breakdown, intrusion, interruption, corruption, or destruction of our ~~employees~~systems or information could have a material adverse effect on our business, results of operations and financial condition. Thus, we will continue our efforts to ~~ensure~~comply with all applicable privacy and security laws and regulations. To the best of our knowledge at this time, we do not expect that the ongoing cost and impact of assuring compliance with ~~the foregoing~~applicable privacy and security laws and ~~regulations.~~regulations will have a material impact on our business, results of operations or financial condition.

Product Liability

The manufacture and marketing of medical devices carries the significant risk of financial exposure to product liability claims. Our products are used in situations in which there is a high risk of serious injury or death. Such risks will exist even with respect to those products that have received, or in the future may receive, regulatory approval for commercial sale. We are currently covered under a product liability insurance policy with coverage limits of ~~$10~~$20 million per occurrence and ~~$10~~$20 million per year in the aggregate, subject to ~~typical self insured retention amounts.~~customary deductible of $250,000.

Employees

As of December 31, ~~2012~~,2014, we had ~~411~~590 employees (as compared to ~~370~~482 employees as of December 31, ~~2011)~~2013), including ~~154~~230 in manufacturing, 2542 in research and development, 1332 in regulatory and clinical affairs, 4759 in quality support, ~~131~~164 in sales and marketing, and 4163 in administration. We believe that the success of our business will depend, ~~in part,~~ on our ability to attract and retain qualified personnel. Our employees are not subject to a collective bargaining agreement, and we believe that we have good relations with our employees.

General Information

We were incorporated in California in March 1992 under the name Cardiovascular Dynamics, Inc. and reincorporated in Delaware in June 1993. In January 1999, Cardiovascular Dynamics, Inc. (by then a publicly-traded company) merged with privately held Radiance Medical Systems, Inc., and we changed our name to Radiance Medical Systems, Inc. In May 2002, we merged with then privately held Endologix, Inc., and we changed our name to Endologix, Inc.

Our principal executive office is located at ~~11 Studebaker,~~2 Musick, Irvine, California and our telephone number is (949) 595-7200. Our website is located at www.endologix.com. The information on, or that can be accessed through, our website is not incorporated by reference into this Annual Report on Form 10-K and should not be considered to be a part hereof.

We make our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K ~~(and~~and related amendments to these reports, as ~~applicable). These reports are~~applicable, available on our website, at www.endologix.com, free of charge as soon as practicable after filing or furnishing such reports with the U.S. Securities and Exchange Commission ("SEC").

All such reports are also available free of charge via EDGAR through the SEC website at www.sec.gov. In addition, the public may read and copy materials filed by us with the SEC at the SEC’s public reference room located at 100 F Street, NE, Washington, D.C., 20549. Information regarding operation of the SEC’s public reference room can be obtained by calling the SEC at 1-800-SEC-0330.


Item 1A.	Risk Factors

Before deciding to invest in our company, or to maintain or increase your investment, you should carefully consider the risks described below, in addition to the other information contained in this Annual Report on Form 10-K and other reports we have filed with the SEC. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us, or that we currently deem immaterial, may also affect our business operations. If any of these risks are realized, our business, financial condition, or results of operations could be seriously harmed and, in that event, the market price for our common stock could decline and you may lose all or part of your investment.

These risk factors should be considered in connection with evaluating the forward-looking statements contained in this Annual Report on Form 10-K. These factors could cause actual results and conditions to differ materially from those projected in our forward-looking statements.

Risks Related to Our Business

All of our revenue is generated from a limited number of products, and any decline in the sales of these products will negatively impact our business.

We have focused heavily on the development and commercialization of a limited number of products for the treatment of AAA. If we are unable to continue to achieve and maintain market acceptance of these products and do not achieve sustained positive cash flow from operations, we will be constrained in our ability to fund development and commercialization of improvements and other product lines. In addition, if we are unable to market our products as a result of a quality problem or failure to maintain regulatory approvals, we would lose our only source of revenue and our business would be negatively affected.

We are in a highly competitive market segment, which is subject to rapid technological change. If our competitors are better able to develop and market products that are safer, more effective, less costly, easier to use, or otherwise more attractive than any products that we may develop, our business will be adversely impacted.

Our industry is highly competitive and subject to rapid and profound technological change. Our success depends, in part, upon our ability to maintain a competitive position in the development of technologies and products for use in the treatment of AAA and other aortic disorders. We face competition from both established and development stage companies. Many of the companies developing or marketing competing products enjoy several advantages to us, including:

greater financial and human resources for product development, sales and marketing and patent litigation;

greater name recognition;

long established relationships with physicians, customers, and third-party payors;

additional lines of products, and the ability to offer rebates or bundle products to offer greater discounts or incentives;

more established sales and marketing programs, and distribution networks; ~~and~~

greater experience in conducting research and development, manufacturing, clinical trials, preparing regulatory submissions, and obtaining regulatory clearance or approval for products and marketing approved ~~products.~~products; and

greater buying power and influence with suppliers.

Our competitors may develop and patent processes or products earlier than us, obtain regulatory clearance or approvals for competing products more rapidly than us, and develop more effective or less expensive products or technologies that render our technology or products obsolete or less competitive. We also face fierce competition in recruiting and retaining qualified scientific, sales, and management personnel, establishing clinical trial sites and patient enrollment in clinical trials, as well as in acquiring technologies and technology licenses complementary to our products or advantageous to our business. If our competitors are more successful than us in these matters, our business may be harmed.

If third-party payors do not provide reimbursement for the use of our products, our revenues may be negatively impacted.

Our success in marketing our products depends in large part on whether domestic and international government health administrative authorities, private health insurers and other organizations will reimburse customers for the cost of our products. Reimbursement systems in international markets vary significantly by country and by region within some countries, and reimbursement approvals must be obtained on a country-by-country basis. Further, many international markets have government managed healthcare systems that control reimbursement for new devices and procedures. In most markets there are private insurance systems as well as government-managed systems. If sufficient reimbursement is not available for our current or future products, in either the ~~U.S.~~United States or internationally, the demand for our products will be adversely affected.

We may not realize all of the anticipated benefits of our acquisition of Nellix.

The success of our acquisition of Nellix will largely depend on our ability to realize the anticipated growth opportunities of the Nellix System. Our ability to realize these benefits, and the timing of this realization, depend upon a number of factors and future events, many of which we cannot control. These factors and events include, without limitation:

the results of ~~future~~ clinical trials of the Nellix ~~System.~~System;

the receipt of further CE Mark approvals of enhanced versions of the Nellix System from our European Union notified body;

the receipt of approval from the FDA to sell the Nellix System in the United States;

the receipt of approvals from regulatory agencies outside of Europe and the U.S.; to sell the Nellix Systems;

obtaining and maintaining patent rights relating to the Nellix technology; and

further developing an effective direct sales and marketing organization in ~~Europe.~~Europe and other international markets.

Our success depends on the growth in the number of AAA patients treated with endovascular devices.

We estimate that over 200,000 people ~~were~~are diagnosed with AAA in the ~~U.S. in 2012,~~United States annually, and approximately ~~68,000~~58,000 people underwent aneurysm repair, either via EVAR or open surgical repair. Our growth will depend upon an increasing percentage of patients with AAA being diagnosed, and an increasing percentage of those diagnosed receiving EVAR, as opposed to an open surgical procedure. Initiatives to increase screening for AAA include ~~the Screening Abdominal Aortic Aneurysms Very Efficiently Act (“SAAAVE”),~~SAAAVE, which was signed into law on February 8, 2006 in the ~~U.S.~~United States. SAAAVE will provide one-time AAA screening for men who have smoked some time in their life, and men or women who have a family history of the disease. Screening is provided as part of the “Welcome to Medicare” physical and such coverage began on January 1, 2007. Such general screening programs may never gain wide acceptance. The failure to diagnose more patients with AAA could negatively impact our revenue growth.

Our success depends on convincing physicians to use, and continue to use, our products in more endovascular AAA procedures.

Our AAA products utilize a different fixation approach within the ~~patient's~~patient’s anatomy than competitive products. Due to our favorable clinical results, and product improvements, and an increase in the size of our sales force, we have been able to increase sales at a rate higher than the general growth within our market segment. However, if we are unable to continue convincing physicians to use our products, our business could be negatively impacted. Additionally, if we fail to maintain our working relationships with health care professionals, many of our products may not be developed and marketed in line with the needs and expectations of the professionals who use and support our products, which could cause a decline in our earnings and profitability. The research, development, marketing, and sales of many of our new and improved products is dependent upon our maintaining working relationships with health care professionals. We rely on these professionals to provide us with considerable knowledge and experience regarding the development, marketing, and sale of our products. Physicians assist us as researchers, marketing and product consultants, inventors, and public speakers. If we are unable to maintain our strong relationships with these professionals and continue to receive their advice and input, the development and marketing of our products could suffer, which could have a material adverse effect on our consolidated earnings, financial condition, and/or cash flows.

Quality problems with our products could harm our reputation and erode our competitive advantage, sales, and market share.

The manufacture of many of our products is highly complex and subject to strict quality controls, due in part to rigorous regulatory requirements. In addition, quality is extremely important due to the serious and costly consequences of a product failure. Problems can arise during the manufacturing process for a number of reasons, including equipment malfunction, failure to follow protocols and procedures, raw material problems or human error. If these problems arise or if we otherwise fail to meet our internal quality standards or those of the FDA or other applicable regulatory body, which include detailed record-keeping requirements, our reputation could be damaged, we could become subject to a safety alert or a recall, we could incur product liability and other costs, product approvals could be delayed and our business could otherwise be adversely affected.

Our international operations ~~subject us to certain~~involve operating risks, which could adversely impact our net sales, results of operations, and financial condition.

Sales of our products outside the ~~U.S.~~United States represented approximately ~~18%~~28% of our revenue in ~~2012~~.2014. As of December 31, ~~2012,~~2014, we ~~sell~~sold our products through 1314 distributors located in the following countries outside of the ~~U.S.:~~United States: Argentina, Brazil, Chile, ~~Colombia, Greece,~~Czech Republic, Israel, Japan, Mexico, ~~China,~~Latvia, Romania, Puerto Rico, Poland, Sweden, Portugal, and Turkey. The sales territories authorized within these various distribution agreements cover a total of 2325 countries. As of September 1, 2011, we began selling our product in Europe through our own sales force. The sale and shipment of our products across international borders, as well as the purchase of components and products from international sources, subjects us to extensive ~~U.S.~~United States and foreign governmental trade, import and export, and custom regulations and laws.

Recently, the SEC promulgated final rules regarding required disclosure of the use of certain minerals in our products, known as "conflict minerals,” which are mined from the Democratic Republic of the Congo and adjoining countries. Under the rules, we are now required to disclose the procedures we employ to determine the sourcing of such minerals and metals produced from those minerals. The implementation of these rules could adversely affect the sourcing, supply, and pricing of materials used in our products. Although we disclosed that we utilized two of the four conflict minerals (tin and tungsten) in our products in our conflict minerals report for the 2013 calendar year, we were unable to determine that our sources of these minerals have been certified as “conflict free.” We may continue to face difficulties in gathering this information in the future.

Compliance with these regulations is costly and exposes us to penalties for non-compliance. Other laws and regulations that can significantly impact us include various anti-bribery laws, including the ~~U.S.~~United States Foreign Corrupt Practices Act and anti-boycott ~~laws.~~laws and similar laws in foreign jurisdictions. Any failure to comply with applicable legal and regulatory obligations could impact us in a variety of ways that include, but are not limited to, significant criminal, civil and administrative penalties, including imprisonment of individuals, fines and penalties, denial of export privileges, seizure of shipments, restrictions on certain business activities, and exclusion or debarment from government contracting. Also, the failure to comply with applicable legal and regulatory obligations could result in the disruption of our shipping and sales activities.

Substantially all of our sales outside of the United States are denominated in local currencies. Measured in local currency, a substantial portion of our international sales was generated in Europe (and primarily denominated in the Euro) and in Japan. The United States dollar value of our international sales varies with currency exchange rate fluctuations. Decreases in the value of the United States dollar to the Euro or the British Pound Sterling have the effect of increasing our reported revenues even when the volume of international sales has remained constant. Increases in the value of the United States dollar relative to the Euro or the British Pound Sterling, as well as other currencies, have the opposite effect and, if significant, could have a material adverse effect on our reported revenues and results of operations.

In addition, many of the countries in which we sell our products are, to some degree, subject to political, economic or social instability. Our international operations expose us and our distributors to risks inherent in operating in foreign jurisdictions. These risks include:

difficulties in enforcing or defending intellectual property rights;

pricing pressure that we may experience internationally;

a shortage of high-quality sales people and distributors;

changes in third-party reimbursement policies that may require some of the patients who receive our products to directly absorb medical costs or that may necessitate the reduction of the selling prices of our products;

the imposition of additional ~~U.S.~~United States and foreign governmental controls or regulations;

economic instability;

changes in duties and tariffs, license obligations and other non-tariff barriers to trade;

the imposition of restrictions on the activities of foreign agents, representatives and distributors;

scrutiny of foreign tax authorities which could result in significant fines, penalties and additional taxes being imposed on us;

laws and business practices favoring local companies;

longer payment cycles;

~~foreign currency translation adjustments;~~

difficulties in maintaining consistency with our internal guidelines;

difficulties in enforcing agreements and collecting receivables through certain foreign legal systems;

the imposition of costly and lengthy new export licensing requirements;

the imposition of ~~U.S.~~United States or international sanctions against a country, company, person or entity with whom we do business that would restrict or prohibit continued business with the sanctioned country, company, person or entity; and

the imposition of new trade restrictions.

If we experience any of these risks, our sales in international countries may be harmed and our results of operations would suffer.

If we fail to properly manage our anticipated growth, our business could suffer.

We may experience periods of rapid growth and expansion, which could place a significant strain on our limited personnel, information technology systems, and other resources. In particular, the increase in our direct sales force requires significant management and other supporting resources. Any failure by us to manage our growth effectively could have an adverse effect on our ability to achieve our development and commercialization goals.

To achieve our revenue goals, we must successfully increase production output as required by customer demand. In the future, we may experience difficulties in increasing production, including problems with production yields and quality control, component supply, and shortages of qualified personnel. These problems could result in delays in product availability and increases in expenses. Any such delay or increased expense could adversely affect our ability to generate revenues.

Future growth will also impose significant added responsibilities on management, including the need to identify, recruit, train, and integrate additional employees. In addition, rapid and significant growth will place a strain on our administrative and operational infrastructure.

In order to manage our operations and growth, we will need to continue to improve our operational and management controls, reporting and information technology systems, and financial internal control procedures. If we are unable to manage our growth effectively, it may be difficult for us to execute our business strategy and our operating results and business could suffer.

Our transition to a direct sales force in certain European countries may not be successful or may cause us to incur additional expenses sooner than initially planned. If we are not successful or incur such additional expenses sooner than expected, then our business and results of operations may be materially and adversely affected.

Historically, a significant portion of our revenue to customers outside of the U.S. had been derived from sales to a significant European distributor. We completed the termination of our relationship with such significant distributor in September 2011, and have transitioned to a direct sales force in Austria, Belgium, the Czech Republic, Denmark, France, Germany, Luxemburg, The Netherlands, Romania, Sweden, Switzerland and the United Kingdom.

We may be unable to successfully transition to a direct sales force in such countries, or to continue to successfully place, sell and service our products in such countries through a direct sales force, or to successfully ensure the growth of our direct sales force that may be needed in the future. In addition, we may incur significant additional expenses. Our efforts to successfully expand our direct sales strategy in Europe or the failure to achieve our sales objectives in Europe may adversely impact our revenues, results of operations, and financial condition and negatively impact our ability to sustain and grow our business in Europe.

If we fail to develop and retain our direct sales force, our business could suffer.

We have a direct sales force in the ~~U.S.~~United States and in certain European countries. We also utilize a network of third-party distributors for sales outside of the ~~U.S.~~United States. As we launch new products and increase our marketing efforts with respect to existing products, we will need to retain and develop our direct sales personnel to build upon their experience, tenure with our products, and their relationships with customers. There is significant competition for sales personnel experienced in relevant medical device sales. If we are unable to attract, motivate, develop, and retain qualified sales personnel and thereby grow our sales force, we may not be able to maintain or increase our revenues.

Our third-party distributors may not effectively distribute our products.

We depend in part on medical device distributors and strategic relationships for the marketing and selling of our products outside of the ~~U.S.~~United States and outside of certain countries in Europe. We depend on these ~~distributors'~~distributors’ efforts to market our products, yet we are unable to control their efforts completely. In addition, we are unable to ensure that our distributors comply with all applicable laws regarding the sale of our products. If our distributors fail to effectively market and sell our products, and in full compliance with applicable laws, our operating results and business may suffer.

If clinical trials of our current or future products do not produce results necessary to support regulatory clearance or approval in the ~~U.S.~~United States or elsewhere, we will be unable to commercialize these products.

We are currently conducting clinical trials. We will likely need to conduct additional clinical trials in the future to support new product approvals, or for the approval for new indications for the use of our products, or support the use of existing products. Clinical testing is expensive, and typically takes many years, which carries an uncertain outcome. The initiation and completion of any of these studies may be prevented, delayed, or halted for numerous reasons, including, but not limited to, the following:

the FDA, institutional review boards or other regulatory authorities do not approve a clinical study protocol, force us to modify a previously approved protocol, or place a clinical study on hold;

patients do not enroll in, or enroll at the expected rate, or complete a clinical study;

patients or investigators do not comply with study protocols;

patients do not return for post-treatment follow-up at the expected rate;

patients experience serious or unexpected adverse side effects for a variety of reasons that may or may not be related to our products such as the advanced stage of co-morbidities that may exist at the time of treatment, causing a clinical study to be put on ~~hold;~~hold.

sites participating in an ongoing clinical study may withdraw, requiring us to engage new sites;

difficulties or delays associated with establishing additional clinical sites;

third-party clinical investigators decline to participate in our clinical studies, do not perform the clinical studies on the anticipated schedule, or are inconsistent with the investigator agreement, clinical study protocol, good clinical practices, and other FDA and Institutional Review Board requirements;

~~third-party organizations do not perform~~ data collection ~~and~~ analysis in a timely or accurate manner;

regulatory inspections of our clinical studies require us to undertake corrective action or suspend or terminate our clinical studies;

changes in federal, state, or foreign governmental statutes, regulations or policies;

interim results are inconclusive or unfavorable as to immediate and long-term safety or efficacy; or

the study design is inadequate to demonstrate safety and efficacy; or

do not meet the study endpoints.

Clinical failure can occur at any stage of the testing. Our clinical trials may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additional clinical and/or non-clinical testing in addition to those we have planned. Our failure to adequately demonstrate the efficacy and safety of any of our devices would prevent receipt of regulatory clearance or approval and, ultimately, the commercialization of that device or indication for use.

We rely on a single ~~vendor~~vendors to supply ~~specialized graft material~~several components for our product lines, and any disruption in the supply of such ~~material~~materials could impair our ability to manufacture our products or meet customer demand for our products in a timely and cost effective manner.

Our reliance on a single source ~~supplier~~suppliers exposes our operations to disruptions in supply caused by:

failure of our ~~supplier~~suppliers to comply with regulatory requirements;

any strike or work stoppage;

disruptions in shipping;

a natural disaster caused by fire, flood or earthquakes; or

a supply shortage experienced by ~~our~~a single source supplier.

Although the graft material supplier is a well-established vendor to the medical device industry, and we retain a significant stock of the ~~strata~~ graft membrane material, the occurrence of any of the above disruptions in supply or other unforeseen events that could cause a disruption in the supply from this single source supplier may cause us to halt, or experience a disruption in, manufacturing of AFX, Nellix, ~~Xpand,~~ and ~~Ventana,~~VELA, which would adversely affect our business, financial condition, and results of operations. In addition, although we take reasonable efforts to mitigate risk, a significant extending interruption from other key suppliers could impact our ability to manufacture and adversely affect our business, financial condition, and results of operations.

If we are unable to protect our intellectual property, our business may be negatively affected.

The market for medical devices is subject to frequent litigation regarding patent and other intellectual property rights. It is possible that our patents or licenses may not withstand challenges made by others or protect our rights adequately.

Our success depends ~~in large part~~significantly on our ability to ~~secure effective~~protect our intellectual property and proprietary technologies. Our policy is to obtain and protect our intellectual property rights. We rely on patent protection, ~~for~~as well as a combination of copyright, trade secret and trademark laws, and nondisclosure, confidentiality and other contractual restrictions to protect our proprietary technology. However, these legal means afford only limited protection and may not adequately protect our rights or permit us to gain or keep any competitive advantage. Our pending U.S. and foreign patent applications may not issue as patents or may not issue in a form that will be advantageous to us. Any patents we have obtained or will obtain may be challenged by re-examination, inter partes review, opposition or other administrative proceeding, or in litigation. Such challenges could result in a determination that the patent is invalid. In addition, competitors may be able to design alternative methods or devices that avoid infringement of our patents. To the extent our intellectual property protection offers inadequate protection, or is found to be invalid, we are exposed to a greater risk of direct competition. If our intellectual property does not provide adequate protection against our competitors’ products, our competitive position could be adversely affected, as could our business. Both the patent application process and the process of managing patent disputes can be time consuming and expensive. Furthermore, the laws of some foreign countries may not protect our intellectual property rights to the same extent as do the laws of the United States. In addition, changes in U.S. patent laws could prevent or limit us from filing patent applications or patent claims to protect our products ~~and processes in~~and/or technologies or limit the ~~U.S. and internationally. We have filed and intend~~exclusivity periods that are available to ~~continue to file~~ patent ~~applications for various aspects of our technology. However, we face the risks that:~~

~~we may fail to secure necessary patents prior to or after obtaining regulatory clearances, thereby permitting competitors to market competing products; and~~

~~our already-granted patents may be re-examined, re-issued or invalidated.~~holders.

We also own trade secrets and confidential information that we try to protect by entering into confidentiality agreements and intellectual property assignment agreements with our employees, consultants and other parties. However, ~~the confidentiality~~such agreements may not be honored or, if breached, we may not have sufficient remedies to protect our confidential information. Further, our competitors may independently learn our trade secrets or develop similar or superior technologies. To the extent that our employees, consultants ~~key employees~~ or others apply technological information to our projects that they develop independently or others develop, disputes may arise regarding the ownership of proprietary rights to such information, and such disputes may not be resolved in our favor. If we are unable to protect our intellectual property adequately, our business and commercial prospects will likely suffer.

IfThe medical device industry is subject to extensive patent litigation, and if our products or processes infringe upon the intellectual property of third parties, the sale of our products may be challenged and we may have to defend costly and time-consuming infringement claims.

We may need to engage in expensive and prolonged litigation to assert or defend any of our intellectual property rights or to determine the scope and validity of rights claimed by other parties. With no certainty as to the outcome, litigation could be too expensive for us to pursue. Our failure to prevail in such litigation or our failure to pursue litigation could result in the loss of our rights that could substantially hurt our business. In addition, the laws of some foreign countries do not protect our intellectual property rights to the same extent as the laws of the ~~U.S.,~~United States, if at all.

Our failure to obtain rights to intellectual property of third parties, or the potential for intellectual property litigation, could force us to do one or more of the following:

stop selling, making, or using products that use the disputed intellectual property;

obtain a license from the intellectual property owner to continue selling, making, licensing, or using products, which license may not be available on reasonable terms, or at all;

redesign our products, processes or services; or

subject us to significant liabilities to third parties.

If any of the foregoing occurs, we may be unable to manufacture and sell our products and may suffer severe financial harm. Whether or not an intellectual property claim is valid, the cost of responding to it, in terms of legal fees and expenses and the diversion of management resources, could harm our business.

We may face product liability claims that could result in costly litigation and significant liabilities.

Manufacturing and marketing of our commercial products, and clinical testing of our products under development, may expose us to product liability claims. Although we have, and intend to maintain, product liability insurance, the coverage limits of our insurance policies may not be adequate and one or more successful claims brought against us may have a material adverse effect on our business and results of operations. Additionally, adverse product liability actions could negatively affect our reputation, continued product sales, and our ability to obtain and maintain regulatory approval for our products.

Our ability to maintain our competitive position depends on our ability to attract and retain highly qualified personnel.

We believe that our continued success depends to a significant extent upon the efforts and abilities of our executive officers, particularly:

John McDermott, our Chief Executive Officer and Chairman of our Board of Directors;

~~Todd Abraham, our Vice President of Operations;~~ and

Robert D. Mitchell, our President ~~of International; and~~

~~Stefan G. Schreck, Ph.D., our Vice President of Technology~~

The loss of any of the foregoing individuals would harm our business. Our ability to retain our executive officers and other key employees, and our success in attracting and hiring additional skilled employees, will be critical to our future success.

If our facilities or systems are damaged or destroyed, we may experience delays that could negatively impact our revenues or have other adverse effects.

Our ~~manufacturing operations, research~~facilities and ~~development activities, and corporate headquarters, are currently based at a single location that~~systems may be ~~at risk from earthquakes.~~

affected by natural or man-made disasters. We currently conduct all of our manufacturing, development and management activities at a single location in Irvine, California, near known earthquake fault zones. Our finished goods inventory is split between our Irvine location and our distribution centers in Memphis, Tennessee and Tilburg, The Netherlands. We have taken precautions to safeguard our facilities and systems, including insurance, health and safety protocols, and off-site storage of computer data. However, ~~any future earthquake~~our facilities and systems may be vulnerable to earthquakes, fire, storm, power loss, telecommunications failures, physical and software break-ins, software viruses and similar events which could cause substantial delays in our operations, damage or destroy our equipment or inventory, and cause us to incur additional expenses. ~~An earthquake could seriously harm our business and results of operations. The~~In addition, the insurance coverage we maintain may not be adequate to cover our losses in any particular ~~case.~~case and may not continue to be available to use on acceptable terms, or at all.

Failure to protect our information technology infrastructure against cyber-based attacks, network security breaches, service interruptions, or data corruption could significantly disrupt our operations and adversely affect our business and operating results.

We rely on information technology and telephone networks and systems, including the Internet, to process and transmit sensitive electronic information and to manage or support a variety of business processes and activities, including sales, billing, customer service, procurement and supply chain, manufacturing, and distribution. We use enterprise information technology systems to record, process, and summarize financial information and results of operations for internal reporting purposes and to comply with regulatory financial reporting, legal, and tax requirements. Our information technology systems, some of which are managed by third-parties, may be susceptible to damage, disruptions or shutdowns due to computer viruses, attacks by computer hackers, failures during the process of upgrading or replacing software, databases or components thereof, power outages, hardware failures, telecommunication failures, user errors or catastrophic events. We are not aware of any breaches of our information technology infrastructure. Despite the precautionary measures we have taken to prevent breakdowns in our information technology and telephone systems, if our systems suffer severe damage, disruption or shutdown and we are unable to effectively resolve the issues in a timely manner, our business and operating results may suffer.

We are subject to credit risk from our accounts receivable related to our product sales, which include sales within European countries that are currently experiencing economic turmoil.

The majority of our accounts receivable arise from product sales in the ~~U.S.~~United States. However, we also have significant receivable balances from customers within the European Union, Japan, Brazil, ~~Argentina,~~ and ~~Mexico.~~Argentina. Our accounts receivable in the ~~U.S.~~United States are primarily due from public and private hospitals. Our accounts receivable outside of the ~~U.S.~~United States are primarily due from ~~independent distributors,~~public and private hospitals and to a lesser extent ~~public and private hospitals.~~independent distributors. Our historical write-offs of accounts receivable have not been significant.

We monitor the financial performance and credit worthiness of our customers so that we can properly assess and respond to changes in their credit profile. Our independent distributors and sub-dealers operate in certain countries such as Greece and Italy, where economic conditions continue to present challenges to their businesses, and thus, could place in risk the amounts due to us from them. These distributors are owed amounts from public hospitals that are funded by their governments. Adverse financial conditions in these countries may continue, thus negatively affecting the length of time that it will take us to collect associated accounts receivable, or impact the likelihood of ultimate collection.

Consolidation in the health care industry could have an adverse effect on our revenues and results of operations.

The health care industry has been consolidating, and organizations such as GPOs, independent delivery networks, and large single accounts continue to consolidate purchasing decisions for many of our health care provider customers. As a result, transactions with customers are larger, more complex, and tend to involve more long-term contracts. The purchasing power of these larger customers has increased, and may continue to increase, causing downward pressure on product pricing. If we are not one of the providers selected by one of these organizations, we may be precluded from making sales to its members or participants. Even if we are one of the selected providers, we may be at a disadvantage relative to other selected providers that are able to offer volume discounts based on purchases of a broader range of medical equipment and supplies. Further, we may be required to commit to pricing that has a material adverse effect on our revenues and profit margins, business, financial condition and results of operations. We expect that market demand, governmental regulation, third-party reimbursement policies and societal pressures will continue to change the worldwide health care industry, resulting in further business consolidations and alliances, which may exert further downward pressure on the prices of our products and could adversely impact our business, financial condition, and results of operations.

If any future acquisitions or business development efforts are unsuccessful, our business may be harmed.

As part of our business strategy to be an innovative leader in the treatment of aortic disorders, we may need to acquire other companies, technologies, and product lines in the future. Acquisitions involve numerous risks, including the following:

the possibility that we will pay more than the value we derive from the acquisition, which could result in future non-cash impairment charges;

difficulties in integration of the operations, technologies, and products of the acquired companies, which may require significant attention of our management that otherwise would be available for the ongoing development of our business;

the assumption of certain known and unknown liabilities of the acquired companies; and

difficulties in retaining key relationships with employees, customers, partners, and suppliers of the acquired company.

In addition, we may invest in new technologies that may not succeed in the marketplace. If they are not successful, we may be unable to recover our initial investment, which could include the cost of acquiring the license, funding development efforts, acquiring products, or purchasing inventory. Any of these would negatively impact our future growth and cash reserves.

Risks Related to Our Financial Condition

We have a history of operating losses and may be required to obtain additional ~~funds.~~funds to pursue our business strategy.

We have a history of operating losses and may need to seek additional capital in the future. We believe that our existing cash and cash equivalents will be sufficient to meet our anticipated cash needs for at least the next 24 months. However, we may need to obtain additional financing to pursue our business strategy, to respond to new competitive pressures or to act on opportunities to acquire or invest in complementary businesses, products or technologies. Our cash requirements in the future may be significantly different from our current estimates and depend on many factors, including:

the results of our commercialization efforts for our existing and future products;

the revenues generated by our existing and future products;

the need for additional capital to fund future development programs;

the need to adapt to changing technologies and technical requirements, and the costs related thereto;

the costs involved in obtaining and enforcing patents or any litigation by third parties regarding intellectual property;

the establishment of high volume manufacturing and increased sales and marketing capabilities; and

~~our success in entering~~whether we are successful if we enter into collaborative relationships with other parties.

In addition, we are required to make periodic interest payments to the holders of our senior convertible notes and to make payments of principal upon conversion or maturity. We may also be required to purchase our senior convertible notes from the holders thereof upon the occurrence of a fundamental change involving our company. To finance ~~these activities,~~the foregoing, we may seek funds through borrowings or through additional rounds of financing, including private or public equity or debt offerings and collaborative arrangements with corporate partners. We may be unable to raise funds on favorable terms, or at all.

During the recent economic instability, it has been difficult for many companies to obtain financing in the public markets or to obtain debt financing on commercially reasonable terms, if at all. In addition, theThe sale of additional equity or convertible debt securities could result in additional dilution to our stockholders. If we borrow additional funds or issue debt securities, these securities could have rights superior to holders of our common stock, and could contain covenants that will restrict our operations. We might have to obtain funds through arrangements with collaborative partners or others that may require us to relinquish rights to our technologies, product candidates, or products that we otherwise would not relinquish. If we do not obtain additional resources, our ability to capitalize on business opportunities will be limited, and the growth of our business will be harmed.

~~Current challenges~~Changes in the credit environment may adversely affect our business and financial condition.

~~The global financial markets continue to experience unprecedented levels of volatility.~~ Our ability to enter into or maintain existing financing arrangements on acceptable terms could be adversely affected if there is a material decline in the demand for our products, or our customers become insolvent. Any deterioration in our key financial ratios, or non-compliance with financial covenants in existing credit agreements could also adversely affect our business and financial condition. While these conditions and the current economic instability have not meaningfully impaired our ability to access credit markets or our operations to date, continuing volatility in the global financial markets could increase borrowing costs or affect our ability to access the capital markets. Current or worsening economic conditions may also adversely affect the business of our customers, including their ability to pay for our products. This could result in a decrease in the demand for our products, longer sales cycles, slower adoption of new technologies, and increased price competition.

We have limited resources to invest in research and development and to grow our business and may need to raise additional funds in the future for these activities.

We believe that our growth will depend, in significant part, on our ability to develop new technologies for the treatment of AAA and other aortic disorders, and technology complementary to our current products. Our existing resources may not allow us to conduct all of the research and development activities that we believe would be beneficial for our future growth. As a result, we may need to seek funds in the future to finance these activities. If we are unable to raise funds on favorable terms, or at all, we may not be able to increase our research and development activities and the growth of our business may be negatively impacted.

The accounting method for convertible debt securities that may be settled in cash, such as our senior convertible notes, is the subject of recent changes that could have a material effect on our reported financial results.

In May 2008, the Financial Accounting Standards Board ("FASB"), issued FASB Staff Position No. APB 14-1, Accounting for Convertible Debt Instruments That May Be Settled in Cash Upon Conversion (Including Partial Cash Settlement), which has subsequently been codified as Accounting Standards Codification 470-20, Debt with Conversion and Other Options, which we refer to as ASC 470-20. Under ASC 470-20, an entity must separately account for the liability and equity components of the convertible debt instruments (such as our senior convertible notes) that may be settled entirely or partially in cash upon conversion in a manner that reflects the issuer’s economic interest cost. The effect of ASC 470-20 on the accounting for our senior convertible notes is that the equity component is required to be included in the additional paid-in capital section of stockholders’ equity on our consolidated balance sheet and the value of the equity component would be treated as original issue discount for purposes of accounting for the debt component of such notes. As a result, we will be required to record a greater amount of non-cash interest expense in current periods presented as a result of the accretion of the discounted carrying value of our senior convertible notes to their face amount over the term of such notes. We will report lower net income in our financial results because ASC 470-20 will require interest to include both the current period’s accretion of the debt discount and the instrument’s coupon interest, which could adversely affect our reported or future financial results and the market price of our common stock.

In addition, under certain circumstances, convertible debt instruments (such as the notes) that may be settled entirely or partly in cash are currently accounted for utilizing the treasury stock method, the effect of which is that the shares issuable upon conversion of the notes are not included in the calculation of diluted earnings per share except to the extent that the conversion value of the notes exceeds their principal amount. Under the treasury stock method, for diluted earnings per share purposes, the transaction is accounted for as if the number of shares of common stock that would be necessary to settle such excess, if we elected to settle such excess in shares, are issued. We cannot be sure that the accounting standards in the future will continue to permit the use of the treasury stock method. If we are unable to use the treasury stock method in accounting for the shares issuable upon conversion of the notes, then our diluted earnings per share would be adversely affected.

Servicing our debt requires a significant amount of cash, and we may not have sufficient cash flow from our business to pay our debt.

Our ability to make scheduled payments of the principal of, to pay interest on, to pay any cash due upon conversion of or to refinance our indebtedness, including the senior convertible notes, depends on our future performance, which is subject to economic, financial, competitive and other factors beyond our control. Our business may not continue to generate cash flow from operations in the future sufficient to service our debt and make necessary capital expenditures. If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring debt or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations.

The expense and potential unavailability of insurance coverage for our company may have an adverse effect on our financial position and results of operations.

While we currently have insurance for our business, property, directors and officers, and product liability, insurance is increasingly costly and the scope of coverage is narrower, and we may be required to assume more risk in the future. If we are subject to claims or suffer a loss or damage in excess of our insurance coverage, we will be required to cover the amounts outside of or in excess of our insurance limits. If we are subject to claims or suffer a loss or damage that is outside of our insurance coverage, we may incur significant costs associated with loss or damage that could have an adverse effect on our financial position and results of operations. Furthermore, any claims made on our insurance policies may impact our ability to obtain or maintain insurance coverage at reasonable costs or at all. We do not have the financial resources to self-insure, and it is unlikely that we will have these financial resources in the foreseeable future. Our product liability insurance covers our products and business operations, but we may need to increase and expand this coverage commensurate with our expanding business.

Risks Related to Regulation of Our Industry

Healthcare policy changes, including recent federal legislation to reform the ~~U.S.~~United States healthcare system, may have a material adverse effect on us.

In response to perceived increases in health care costs in recent years, there have been and continue to be proposals by the federal government, state governments, regulators and third-party payors to control these costs and, more generally, to reform the ~~U.S.~~United States healthcare system. Certain of these proposals could limit the prices we are able to charge for our products or the amounts of reimbursement available for our products and could limit the acceptance and availability of our products. Moreover, as discussed below, recent federal legislation would impose significant new taxes on medical device makers such as us. The adoption of some or all of these proposals, including the recent federal legislation, could have a material adverse effect on our financial position and results of operations.

On March 23, 2010, President Obama signed the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act (the ~~"PPACA"~~“PPACA”). The total cost imposed on the medical device industry by the PPACA may be up to approximately $20 billion over ten years. The PPACA includes, among other things, a deductible 2.3% excise tax on any entity that manufactures or imports medical devices offered for sale in the ~~U.S.,~~United States, with limited exceptions, effective January 1, 2013. This excise tax will result in a significant increase in the tax burden on our industry, and if any efforts we undertake to offset the excise tax are unsuccessful, the increased tax burden could have an adverse affect on our results of operations and cash flows. Other elements of the PPACA, including comparative effectiveness research, an independent payment advisory board, payment system reforms including shared savings pilots and other provisions, may significantly affect the payment for, and the availability of, healthcare services and result in fundamental changes to federal healthcare reimbursement programs, any of which may materially affect numerous aspects of our business.

Our future success depends on our ability to develop, receive regulatory clearance or approval for, and introduce new products or product enhancements that will be accepted by the market in a timely manner.

It is important to our business that we continue to build a more complete product offering for treatment of AAA and other aortic disorders. As such, our success will depend in part on our ability to develop and introduce new products. However, we may not be able to successfully develop and obtain regulatory clearance or approval for product enhancements, or new products, or these products may not be accepted by physicians or the payors who financially support many of the procedures performed with our products.

The success of any new product offering or enhancement to an existing product will depend on several factors, including our ability to:

properly identify and anticipate physicians and patient needs;

develop and introduce new products or product enhancements in a timely manner;

avoid infringing upon the intellectual property rights of third parties;

demonstrate, if required, the safety and efficacy of new products with data from preclinical studies and clinical trials;

obtain the necessary regulatory clearances or approvals for new products or product enhancements;

be fully FDA-compliant with marketing of new devices or modified products;

provide adequate training to potential users of our products;

receive adequate coverage and reimbursement for procedures performed with our products; and

develop an effective and FDA-compliant, dedicated marketing and distribution network.

If we do not develop new products or product enhancements in time to meet market demand or if there is insufficient demand for these products or enhancements, our results of operations will suffer.

Our business is subject to extensive governmental regulation that could make it more expensive and time consuming for us to introduce new or improved products.

Our products must comply with regulatory requirements imposed by the FDA in the ~~U.S.,~~United States, and similar agencies in foreign jurisdictions. These requirements involve lengthy and detailed laboratory and clinical testing procedures, sampling activities, an extensive agency review process, and other costly and time-consuming procedures. It often takes several years to satisfy these requirements, depending on the complexity and novelty of the product. We also are subject to numerous additional licensing and regulatory requirements relating to safe working conditions, manufacturing practices, environmental protection, fire hazard control, and disposal of hazardous or potentially hazardous substances. Some of the most important requirements we face include:

FDA Regulations (Title 21 CFR);

European Union CE mark requirements;

Other international regulatory approval requirements;

Medical Device Quality Management System Requirements ~~(ISO~~(21 CFR 820, ISO 13485:~~2003)~~2003, IOS 13485:2012, and other similar international regulations);

Occupational Safety and Health Administration requirements; and

California Department of Health Services requirements.

Government regulation may impede our ability to conduct continuing clinical trials and to manufacture our existing and future products. Government regulation also could delay our marketing of new products for a considerable period of time and impose costly procedures on our activities. The FDA and other regulatory agencies may not approve any of our future products on a timely basis, if at all. Any delay in obtaining, or failure to obtain, such approvals could negatively impact our marketing of any proposed products and reduce our product revenues.

Our products remain subject to strict regulatory controls on manufacturing, marketing and use. We may be forced to modify or recall our product after release in response to regulatory action or unanticipated difficulties encountered in general use. Any such action could have a material effect on the reputation of our products and on our business and financial position.

Further, regulations may change, and any additional regulation could limit or restrict our ability to use any of our technologies, which could harm our business. We could also be subject to new international, federal, state or local regulations that could affect our research and development programs and harm our business in unforeseen ways. If this happens, we may have to incur significant costs to comply with such laws and regulations, which will harm our results of operations.

The misuse or off-label use of our products may harm our image in the marketplace; result in injuries that lead to product liability suits, which could be costly to our business; or result in FDA sanctions if we are deemed to have engaged in promotion of such ~~promotion.~~off-label uses.

The products we currently market have been cleared or approved by the U.S. FDA and international regulatory authorities for specific treatments and anatomies. We cannot, however, prevent a physician from using our products outside of those cleared/approved indications ~~cleared~~ for use, known as ~~"off-label"~~“off-label” use. There may be increased risk of injury if physicians attempt to use our products off-label. We train our sales force to not promote our products for off-label uses. Furthermore, the use of our products for indications other than those ~~cleared~~cleared/approved by the FDA or international regulatory authorities may not effectively treat such conditions, which could harm our reputation in the marketplace among physicians and patients.

Physicians may also misuse our products or use improper techniques if they are not adequately trained, potentially leading to injury and an increased risk of product liability. If our products are misused or used with improper technique, we may become subject to costly litigation by our customers or their patients. Product liability claims could divert ~~management's~~management’s attention from our core business, be expensive to defend, and result in sizable damage awards against us that may not be covered by insurance. If we are deemed by the FDA to have engaged in the promotion of our products for off-label use, we could be subject to FDA prohibitions on the sale or marketing of our products or significant fines and penalties, and the imposition of these sanctions could also affect our reputation and position within the industry. Any of these events could harm our business and results of operations and cause our stock price to decline.

Our products may in the future be subject to product recalls or voluntary market withdrawals that could harm our reputation, business and financial ~~results~~.results.

The FDA and similar foreign governmental authorities have the authority to require the recall of commercialized products in the event of material deficiencies or defects in design or manufacture that could affect patient safety. In the case of the FDA, the authority to require a recall must be based on an FDA finding that there is a reasonable probability that the device would cause serious adverse health consequences or death. Manufacturers may, under their own initiative, recall a product if any material deficiency in a device is found or suspected. A government-mandated recall or voluntary recall by us or one of our distributors could occur as a result of component failures, manufacturing errors, design or labeling defects or other issues. Recalls, which include corrections as well as removals, of any of our products would divert managerial and financial resources and could have an adverse effect on our financial condition, harm our reputation with customers, and reduce our ability to achieve expected revenues.

We are required to comply with medical device reporting (“MDR”) requirements and must report certain malfunctions, deaths, and serious injuries associated with our products, which can result in voluntary corrective actions or agency enforcement ~~actions~~.actions.

Under the FDA MDR regulations, medical device manufacturers are required to submit information to the FDA when they receive a report or become aware that a device has or may have caused or contributed to a death or serious injury or has or may have a malfunction that would likely cause or contribute to death or serious injury if the malfunction were to recur. All manufacturers placing medical devices on the market in the European Economic Area are legally bound to report any serious or potentially serious incidents involving devices they produce or sell to the regulatory agency, or Competent Authority, in whose jurisdiction the incident occurred. Were this to happen to us, the relevant regulatory agency would file an initial report, and there would then be a further inspection or assessment if there are particular issues.

Malfunction of our products could result in future voluntary corrective actions, such as recalls, including corrections, or customer notifications, or agency action, such as inspection or enforcement actions. If malfunctions do occur, we may be unable to correct the malfunctions adequately or prevent further malfunctions, in which case we may need to cease manufacture and distribution of the affected products, initiate voluntary recalls, and redesign the products. Regulatory authorities may also take actions against us, such as ordering recalls, imposing fines, or seizing the affected products. Any corrective action, whether voluntary or involuntary, will require the dedication of our time and capital, distract management from operating our business, and may harm our reputation and financial results.

We may be subject to federal, state and foreign healthcare fraud and abuse laws and regulations, and a finding of failure to comply with such laws and regulations could have a material adverse effect on our ~~business~~.business.

Our operations may be directly or indirectly affected by various broad federal, state or foreign healthcare fraud and abuse laws. In particular, the federal Anti-Kickback Statute prohibits any person from knowingly and willfully offering, paying, soliciting or receiving remuneration, directly or indirectly, in return for or to induce the referring, ordering, leasing, purchasing or arranging for or recommending the ordering, purchasing or leasing of an item or service, for which payment may be made under federal healthcare programs, such as the Medicare and Medicaid programs. We are also subject to the federal HIPAA statute, which created federal criminal laws that prohibit executing a scheme to defraud any health care benefit program or making false statements relating to health care matters, and federal “sunshine” laws that require transparency regarding financial arrangements with health care providers, such as the reporting and disclosure requirements imposed by PPACA on drug manufacturers regarding any “transfer of value” made or distributed to prescribers and other health care providers.

In addition, the federal False Claims Act prohibits persons from knowingly filing, or causing to be filed, a false claim to, or the knowing use of false statements to obtain payment from the federal government. Suits filed under the False Claims Act, known as “qui tam” actions, can be brought by any individual on behalf of the government and such individuals, commonly known as “whistleblowers,” may share in any amounts paid by the entity to the government in fines or settlement. When an entity is determined to have violated the False Claims Act, it may be required to pay up to three times the actual damages sustained by the government, plus civil penalties for each separate false claim. Various states have also enacted laws modeled after the federal False Claims Act.

Many states have also, adopted laws similar to each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payor, including commercial insurers as well as laws that restrict our marketing activities with physicians, and require us to report consulting and other payments to physicians. Some states mandate implementation of commercial compliance programs to ensure compliance with these laws. We also are subject to foreign fraud and abuse laws, which vary by country. For instance, in the European Union, legislation on inducements offered to physicians and other healthcare workers or hospitals differ from country to country. Breach of the laws relating to such inducements may expose us to the imposition of criminal sanctions.

The risk of our being found in violation of these laws is increased by the fact that many of them have not been fully interpreted by the regulatory authorities or the courts, and their provisions are open to a variety of interpretations. Moreover, recent health care reform legislation has strengthened these laws. Further, we expect there will continue to be federal and state laws and/or regulations, proposed and implemented, that could impact our operations and business. The extent to which future legislation or regulations, if any, relating to health care fraud abuse laws and/or enforcement, may be enacted or what effect such legislation or regulation would have on our business remains uncertain. If our operations are found to be in violation of any of the laws described above or any other governmental regulations that apply to us now or in the future, we may be subject to penalties, including civil and criminal penalties, damages, fines, exclusion from governmental health care programs, and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our financial results.

We may be subject to federal health information privacy and security laws and regulations, and a finding of failure to comply with such laws and regulations could have a material adverse effect on our business.

The Health Insurance Portability and Accountability Act of 1996, or HIPAA, and its implementing regulations safeguard the privacy and security of individually-identifiable health information. Certain of our operations may be subject to these requirements. Penalties for noncompliance with these rules include both criminal and civil penalties. In addition, the Health Information Technology for Economic and Clinical Health Act, or HITECH Act, expanded federal health information privacy and security protections. Among other things, HITECH makes certain of HIPAA’s privacy and security standards directly applicable to “business associates”-independent contractors or agents of covered entities that receive or obtain protected health information in connection with providing a service on behalf of a covered entity. HITECH also set forth new notification requirements for health data security breaches, increased the civil and criminal penalties that may be imposed against covered entities, business associates and possibly other persons, and gave state attorneys general new authority to enforce HIPAA and seek attorney's fees and costs associated with pursuing federal civil actions.

Risks Related to ~~Ownership of~~ Our Common Stock

We will be obligated to issue additional shares of our common stock to the former stockholders of Nellix as a result of our satisfaction of a certain ~~milestones~~milestone set forth in the merger agreement with Nellix and the other parties thereto, resulting in stock ownership ~~dilution~~.dilution.

Under the terms of the merger agreement with Nellix and the other parties thereto, we agreed to issue additional shares of our common stock to the former stockholders of Nellix as contingent consideration upon our satisfaction of one or both of two milestones related to the Nellix System and described in the merger agreement, or upon a change of control of our company prior to our completion of one or both milestones. ~~The~~On June 17, 2014, we issued an additional 2.7 million shares of our common stock to the former stockholders of Nellix upon achievement of a revenue-based milestone. One additional regulatory related milestone remains, and the maximum aggregate number of shares of our common stock remaining issuable to the former Nellix stockholders upon our achievement of ~~both milestones,~~such regulatory milestone, or upon a change of control of our company prior to our achievement of ~~both milestones,~~such milestone, assuming the average per share closing price of our common stock (as determined under the terms of the Nellix merger agreement) at such time is ~~10.2~~1.1 million shares.

Issuing additional shares of our common stock to the former stockholders in satisfaction of contingent consideration ~~will dilute~~dilutes the ownership interests of holders of our common stock on the dates of such issuances. If we are unable to realize the strategic, operational and financial benefits anticipated from our acquisition of Nellix, our stockholders may experience dilution of their ownership interests in our company upon any such future issuances of shares of our common stock without receiving any commensurate benefit.

Our operating results may vary significantly from quarter to quarter, which may negatively impact our stock price in the future.

Our quarterly revenues and results of operations may fluctuate due to, among others, the following reasons:

physician acceptance of our products;

the conduct and results of clinical trials;

the timing and expense of obtaining future regulatory approvals;

fluctuations in our expenses associated with expanding our operations;

the introduction of new products by our competitors;

the timing of product launch may lead to excess or obsolete inventory;

supplier, manufacturing or quality problems with our devices;

the timing of stocking orders from our distributors;

changes in our pricing policies or in the pricing policies of our competitors or suppliers; and

changes in third-party ~~payors'~~payors’ reimbursement policies.

Because of these and possibly other factors, it is likely that in some future period our operating results will not meet investor expectations or those of public market analysts.

Any unanticipated change in revenues or operating results is likely to cause our stock price to fluctuate since such changes reflect new information available to investors and analysts. New information may cause investors and analysts to revalue our business, which could cause a decline in the trading price of our stock.

The price of our stock may fluctuate unpredictably in response to factors unrelated to our operating performance.

The stock market periodically experiences significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These broad market fluctuations may cause the market price of our common stock to drop. In particular, the market price of securities of small medical device companies, like ours, has been very unpredictable and may vary in response to:

announcements by us or our competitors concerning technological innovations;

introductions of new products;

FDA and foreign regulatory actions;

developments or disputes relating to patents or proprietary rights;

maintain the effectiveness of our Quality System;

failure of our results of operations to meet the expectations of stock market analysts and investors;

changes in stock market analyst recommendations regarding our common stock;

the conversion of some or all of our senior convertible notes and any sales in the public market of shares of our common stock issued upon conversion of such notes;

changes in healthcare policy in the U.S. or other countries; and

general stock market and economic conditions and other factors unrelated to our operating performance.

These factors may materially and adversely affect the market price of our common stock.

Trading in our stock over the last twelve months has been limited, so investors may not be able to sell as much stock as they wish at prevailing prices.

The average daily trading volume in our common stock for the ~~year~~twelve months ended December 31, ~~2012~~2014 was approximately~~447,000~~ 622,293 shares. If limited trading in our stock continues, it may be difficult for investors to sell their shares in the public market at any given time at prevailing prices. Moreover, the market price for shares of our common stock may be made more volatile because of the relatively low volume of trading in our common stock. When trading volume is low, significant price movement can be caused by the trading of a relatively small number of shares. Volatility in our common stock could cause stockholders to incur substantial losses.

Some provisions of our charter documents and Delaware law may make takeover attempts difficult, which could depress the price of our stock and inhibit ~~one's~~one’s ability to receive a premium price for their shares.

Provisions of our amended and restated certificate of incorporation could make it more difficult for a third party to acquire control of our business, even if such change in control would be beneficial to our stockholders. Our amended and restated certificate of incorporation allows our board of directors to issue up to five million shares of preferred stock and to fix the rights and preferences of such shares without stockholder approval. Any such issuance could make it more difficult for a third party to acquire our business and may adversely affect the rights of our stockholders. In addition, our board of directors is divided into three classes for staggered terms of three years. We are also subject to anti-takeover provisions under Delaware law, each of which could delay or prevent a change of control. Together these provisions may delay, deter or prevent a change in control of us, adversely affecting the market price of our common stock.

We do not anticipate declaring any cash dividends on our common stock.

We have never declared or paid cash dividends on our common stock and do not plan to pay any cash dividends in the near future. Our current policy is to retain all funds and any earnings for use in the operation and expansion of our business. Our revolving credit facility contains restrictions prohibiting us from paying any cash dividends without the ~~lender's~~lender’s prior approval. If we do not pay dividends, a return on ~~one's~~one’s investment may only occur if our stock price rises above the price it was purchased.


Item 1B.	Unresolved Staff Comments

None.


Item 2.	Properties

On June 12, 2013, we entered into a lease agreement for two adjacent office, research and development, and manufacturing facilities in Irvine, California. The premises consist of approximately 129,000 combined square feet. The lease has a 15-year term beginning January 1, 2014 and provides for one optional 5 year extension. The initial base rent under the lease is $1.9 million per year, payable in monthly installments, and escalates by 3% per year for years 2015 through 2019, and 4% per year for years 2020 and beyond. We received a rent abatement for the first nine months of the lease. These premises will replace existing Irvine facilities. Refer to Note 8 of the Notes to the Consolidated Financial Statements for further discussion of properties.

We lease two adjacent facilities aggregating approximately ~~60,000~~57,000 square feet in Irvine, California under separate lease ~~agreements. These Irvine~~agreements where manufacturing is being held. We exited one of these leases ~~expire~~ in ~~August~~December 2014 and ~~September 2014, respectively, and may each be renewed for two additional twelve month periods,~~extended the other lease to March 2015 with rights to further extend at our option. We also lease an administrative office of approximately ~~2,400~~2,900 square feet ~~on a month-to-month basis~~ in ~~Den Bosch,~~Rosmalen, The ~~Netherlands.~~Netherlands with lease expiration in December 2015 and renewal at our option.

We believe that all of our ~~current~~ facilities ~~will be~~and equipment are in good condition, suitable and adequate for there purposes, and ~~suitable~~are maintained on a consistent basis for ~~our operations during 2013, however, we are presently evaluating long-term facility options in the U.S. for potential transition in 2014 to accommodate our continued business growth.~~sound operations.

Item 3. Legal Proceedings

~~We are from time~~Refer to ~~time involved in various claims and legal proceedings~~Note 8 of a nature we believe are normal and incidental to a medical device business. These matters may include product liability, intellectual property, employment, and other general claims. We accrue for contingent liabilities when it is probable that a liability has been incurred and the ~~amount can be reasonably estimated. The accruals are adjusted periodically as assessments change or as additional information becomes available.~~

~~LifePort Sciences LLC v. Endologix, Inc.~~

On December 28, 2012, LifePort Sciences, LLC ("LifePort") filed a complaint against us in the U.S. District Court, District of Delaware, alleging that certain of our products infringe U.S. Patent Nos. 5,489,295, 6,117,167, 6,302,906, 5,993,481 and 5,676,696, which are alleged to be owned by LifePort. LifePort is seeking an unspecified amount of monetary damages for sale of our products. We do not believe that we infringe on any of these patents and we intend to vigorously defend against this matter.

At this time, we are unable to predict the outcome of this matter, but we believe that the outcome will not have a material adverse effect on our financial position, results of operations, or cash flow. However, in order to avoid further legal costs and diversion of management resources, it is reasonably possible that we may reach a settlement with LifePort, which could result in a liability. However, we cannot presently estimate the amount, or range, of reasonably possible losses dueNotes to the ~~nature~~Consolidated Financial Statements for discussion of ~~this potential litigation settlement.~~

~~Cook Incorporated v. Endologix, Inc.~~

We had been involved in litigation with Cook Incorporated (“Cook”). Cook alleged that we infringed two of its patents, granted in 1991 and 1998, which expired on October 17, 2009 and October 25, 2011, respectively (the “Patent Dispute”). The lawsuit was filed by Cook in the U.S. District Court for the Southern District of Indiana, on October 8, 2009.

On October 16, 2012, the Company entered into a settlement agreement with Cook for the Patent Dispute (the “Settlement Agreement”), which included a full release from liability for all asserted claims. Without admitting any liability, we agreed to make a one-time cash payment to Cook of $~~5.0 million, which occurred in December 2012.~~

~~The $5.0 million~~ ~~Settlement Agreement is presented in the accompanying Consolidated Statements of Operations and Comprehensive Income (Loss) within operating expenses as "settlement costs" for the~~ ~~year ended December 31, 2012~~.legal proceedings.

Item 4. Mine Safety Disclosures

Not applicable.

Table of Contents

PART II


Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity

Securities

Our common stock trades on the NASDAQ Global Select Market under the symbol “ELGX.” The following table sets forth the high and low close prices for our common stock as reported on the NASDAQ Global Select Market for the periods indicated.


	High		Low		High		Low
Year Ended December 31, 2011:
Year Ended December 31, 2013
First Quarter	$	7.26	$	5.50	$	16.35	$	14.37
Second Quarter	9.30		6.72		15.84		12.60
Third Quarter	11.17		7.64		17.01		13.82
Fourth Quarter	11.95		10.00		18.21		16.10
Year Ended December 31, 2012:
Year Ended December 31, 2014
First Quarter	$	14.65	$	11.31	$	17.90	$	12.52
Second Quarter	15.44		13.23		15.21		11.89
Third Quarter	15.51		11.15		15.46		10.60
Fourth Quarter	14.66		12.11		15.79		10.66

Exhibit
Number Description

2.1 Agreement and Plan of Merger and Reorganization, dated October 27, 2010, by and among Endologix, Inc., Nepal Acquisition Corporation, Nellix, Inc., certain of Nellix, Inc.’s stockholders listed therein and Essex Woodlands Health Ventures, Inc., as representative of Nellix, Inc.’s stockholders (Incorporated by reference to Exhibit 2.1 to Endologix, Inc. Current Report on Form 8-K, filed with the SEC on October 27, 2010).

3.1 Amended and Restated Certificate of Incorporation (Incorporated by reference to Exhibit 3.1 to Endologix, Inc. Quarterly Report on Form 10-Q, filed with the SEC on July 28, 2009).

3.2 Amended and Restated Bylaws, as amended (Incorporated by reference to Exhibit 3.1 to Endologix, Inc. Current Report on Form 8-K, filed with the SEC on December 14, 2010).

4.1 Specimen Certificate of Common Stock (Incorporated by reference to Exhibit 4.1 to Amendment No. 2 to Endologix, Inc. Registration Statement on Form S-1, No. 333-04560, filed with the SEC on June 10, 1996).

10.1 (1) 1997 Supplemental Stock Option Plan (Incorporated by reference to Exhibit 99.1 to Endologix, Inc. Registration Statement on Form S-8, No. 333-42161, filed with the SEC on December 12, 1997).

10.2 (1) 1996 Stock Option/Stock Issuance Plan (Incorporated by reference to Exhibit 4.1 to Endologix, Inc. Registration Statement on Form S-8, No. 333-122491, filed with the SEC on February 2, 2005).

10.3 (1) 2006 Stock Incentive Plan (Incorporated by reference to Exhibit 10.1 to Endologix, Inc. Current Report on Form 8-K, filed with the SEC on May 30, 2012).

10.4 (1) Form of Stock Option Agreement under 2006 Stock Incentive Plan (Incorporated by reference to Exhibit 10.1 to Endologix, Inc. Quarterly Report on Form 10-Q, File No. 000-28440, filed with the SEC on November 9, 2006).

10.5 (1) Form of Restricted Stock Award Agreement under 2006 Stock Incentive Plan (Incorporated by reference to Exhibit 10.2 to Endologix, Inc. Quarterly Report on Form 10-Q, File No. 000-28440, filed with the SEC on November 9, 2006).

10.6 (1) Endologix, Inc. 2006 Employee Stock Purchase Plan, as amended and restated on July 2, 2012 (Incorporated by reference to Exhibit 10.19 to Endologix's Inc. Annual Report on form 10-Q, filed with the SEC on August 3, 2012).

10.7 Form of Indemnification Agreement entered into with Endologix, Inc. officers and directors (Incorporated by reference to Exhibit 10.41 to Endologix, Inc Quarterly Report on Form 10-Q, File No. 000-28440, filed with the SEC on November 13, 2002).

10.8 Standard Industrial/Commercial Single-Tenant Lease — Net, dated November 2, 2004, by and between Endologix, Inc. and Del Monico Investments, Inc. (Incorporated by reference to Exhibit 10.46 to Endologix, Inc. Current Report on Form 8-K, File No. 000-28440, filed with the SEC on November 24, 2004).

10.8.1 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 (Incorporated by reference to Exhibit 10.1 to Endologix, Inc. Quarterly Report on Form 10-Q, filed with the SEC on November 2, 2009).

10.9 (1)
Offer Letter, dated April 28, 2008, between Endologix, Inc. and John McDermott (Incorporated by reference to Exhibit 10.1 to Endologix, Inc Current Report on Form 8-K F.6 No. 000-28440, filed with the SEC on May 16, 2008).

10.10 (1)
Employment Agreement, dated as of December 29, 2008, by and between Endologix, Inc. and John McDermott (Incorporated by reference to Exhibit 10.1 to Endologix, Inc Current Report on Form 8-K, filed with the SEC on January 2, 2009).

10.11 (1)
Employment Agreement, dated as of December 29, 2008, by and between Endologix, Inc. and Robert J. Krist (Incorporated by reference to Exhibit 10.2 to Endologix, Inc Current Report on Form 8-K, filed with the SEC on January 2, 2009).

10.12 (1)
Employment Agreement, dated as of December 29, 2008, by and between Endologix, Inc. and Stefan G. Schreck, Ph.D. (Incorporated by reference to Exhibit 10.3 to Endologix, Inc. Current Report on Form 8-K, filed with the SEC on January 2, 2009).

10.13 (1)
Employment Agreement, dated as of December 29, 2008, by and between Endologix, Inc. and Janet Fauls (Incorporated by reference to Exhibit 10.4 to Endologix, Inc. Current Report on Form 8-K, filed with the SEC on January 2, 2009).

10.14 Standard Industrial/Commercial Multi -Tenant Lease — Net, by and between Endologix, Inc. and Four-In-One Associates, dated August 28, 2009 (Incorporated by reference to Exhibit 10.2 to Endologix, Inc. Quarterly Report on Form 10-Q, filed with the SEC on November 2, 2009).

10.15 Credit Agreement, dated October 30, 2009, by and between Endologix, Inc. and Wells Fargo Bank, National Association (Incorporated by reference to Exhibit 10.16 to Endologix, Inc. Annual Report on Form 10-K, filed with the SEC on March 5, 2010).

10.15.1 † Third Amendment to Credit Agreement, dated February 20, 2012, by and between Endologix, Inc. and Wells Fargo Bank, National Association. (Incorporated by reference to Exhibit 10.15.1 to Endologix Inc. Annual Report on Form 10-K, filed with the SEC on March 6, 2012).
10.16 (1)
Employment Agreement, dated as of April 13, 2009, by and between Endologix, Inc. and Joseph DeJohn (Incorporated by reference to Exhibit 10.17 to Endologix, Inc. Annual Report on Form 10-K, filed with the SEC on March 5, 2010).

10.17 Securities Purchase Agreement, dated as of October 27, 2010, by and between Endologix, Inc. and Essex Woodlands Health Ventures Fund VII, L.P. (Incorporated by reference to Exhibit 10.1 to Endologix, Inc. Current Report on Form 8-K, filed with the SEC on October 27, 2010).

10.17.1
Amendment to Securities Purchase Agreement, dated as of December 9, 2010, by and between Endologix, Inc. and Essex Woodlands Health Ventures Fund VII, L.P. (Incorporated by reference to Exhibit 10.1 to Endologix, Inc. Current Report on Form 8-K, filed with the SEC on December 14, 2010).

10.18 (1) Employment Agreement, dated as of December 10, 2010, by and between Endologix, Inc. and Robert D. Mitchell (Incorporated by reference to Exhibit 10.2 to Endologix, Inc. Current Report on Form 8-K, filed with the SEC on December 14, 2010).

10.19 † Cross License Agreement dated as of October 26, 2011, by and between Endologix, Inc. and Bard Peripheral Vascular, Inc. (Incorporated by reference to Exhibit 10.19 to Endologix Inc. Annual Report on Form 10-K, filed with the SEC on March 6, 2012).

10.20 (1) Form of Employee Restricted Stock Unit Award Agreement under 2006 Stock Incentive Plan (Incorporated by reference to Exhibit 10.1 to Endologix Inc. Quarterly Report on Form 10-Q, filed with the SEC on November 1, 2012).

10.21 (1) Form of Director Restricted Stock Unit Award Agreement under 2006 Stock Incentive Plan (Incorporated by reference to Exhibit 10.1 to Endologix Inc. Quarterly Report on Form 10-Q, filed with the SEC on November 1, 2012).

10.22 † (2)
Settlement Agreement, dated October 16, 2012 by and among Endologix, Inc., Cook Incorporated, Cook Group and Cook Medical, Inc.

10.23 (1) Offer Letter, dated January 2, 2013, between Endologix, Inc. and Shelly B. Thunen (Incorporated by reference to Exhibit 10.1 to Endologix, Inc. Current Report on Form 8-K, filed with the SEC on January 3, 2013).

10.24 (1) Employment Agreement, dated January 2, 2013, between Endologix, Inc. and Shelly B. Thunen (Incorporated by reference to Exhibit 10.2 to Endologix, Inc. Current Report on Form 8-K, filed with the SEC on January 3, 2013).

10.25 (1) Severance Agreement and General Release, dated December 31, 2012, between Endologix, Inc. and Robert J. Krist (Incorporated by reference to Exhibit 10.3 to Endologix, Inc. Current Report on Form 8-K, filed with the SEC on January 3, 2013).

14 Code of Ethics for Chief Executive Officer and Principal Financial Officers (Incorporated by reference to Exhibit 14 to Endologix, Inc. Annual Report on Form 10-K, No. 000-28440, filed with the SEC on March 26, 2004).

16.1 Letter from PricewaterhouseCoopers LLP to the Securities and Exchange Commission, Dated August 15, 2012 (Incorporated by reference to Exhibit 16.1 to Endologix, Inc. Current Report on Form 8-K, filed with the SEC on August 15, 2012).

21.1 (2 ) List of Subsidiaries.

23.1 (2 ) Consent of Independent Registered Public Accounting Firm (KPMG LLP).

23.2 (2 ) Consent of Independent Registered Public Accounting Firm (PricewaterhouseCoopers LLP).

24.1 (2 ) Power of Attorney (included on signature page hereto).

31.1 (2 ) Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934.

31.2 (2 ) Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934.

32.1 (3 ) Certification of Chief Executive Officer Pursuant to Rule 13a-14(b)/15d-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350.

32.2 (3 ) Certification of Chief Financial Officer Pursuant to Rule 13a-14(b)/15d-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350.

101.INS (4 ) XBRL Instance Document

101.SCH (4 ) XBRL Taxonomy Extension Schema Document

101.CAL (4 ) XBRL Taxonomy Extension Calculation Link Base Document

101.DEF (4 ) XBRL Taxonomy Extension Definition Link Base Document

101.LAB (4 ) XBRL Taxonomy Extension Label Link Base Document
101.PRE (4 ) XBRL Taxonomy Extension Presentation Link Base Document



Exhibit Number		Exhibit Description
2.1		Agreement and Plan of Merger and Reorganization, dated October 27, 2010, by and among Endologix, Inc., Nepal Acquisition Corporation, Nellix, Inc., certain of Nellix, Inc.’s stockholders listed therein and Essex Woodlands Health Ventures, Inc., as representative of Nellix, Inc.’s stockholders (Incorporated by reference to Exhibit 2.1 to Endologix, Inc. Current Report on Form 8-K, File No. 000-28440, filed on October 27, 2010).
3.1		Amended and Restated Certificate of Incorporation (Incorporated by reference to Exhibit 3.1 to Endologix, Inc. Quarterly Report on Form 10-Q, File No. 000-28440, filed on July 31, 2014).
3.2		Amended and Restated Bylaws, as amended (Incorporated by reference to Exhibit 3.1 to Endologix, Inc. Current Report on Form 8-K, File No. 000-28440, filed on December 14, 2010).
4.1		Specimen Certificate of Common Stock (Incorporated by reference to Exhibit 4.1 to Amendment No. 2 to Endologix, Inc. Registration Statement on Form S-1, No. 333-04560, filed on June 10, 1996).
4.1.1	(2)	Updated Specimen Certificate of Common Stock effective as of May 22, 2014.
4.2		Indenture, dated December 10, 2013, between Endologix, Inc. and Wells Fargo Bank, National Association, as trustee (Incorporated by reference to Exhibit 4.1 to Endologix, Inc. Current Report on Form 8-K, File No. 000-28440, filed on December 10, 2013).
4.3		First Supplemental Indenture, dated December 10, 2013, between Endologix, Inc. and Wells Fargo Bank, National Association, as trustee (Incorporated by reference to Exhibit 4.2 to Endologix, Inc. Current Report on Form 8-K, File No. 000-28440, filed on December 10, 2013).
4.4		Form of 2.25% Convertible Senior Notes due 2018 (Incorporated by reference to Exhibit A to Exhibit 4.2 to Endologix, Inc. Current Report on Form 8-K, File No. 000-28440, filed on December 10, 2013).
10.1	(1)	1997 Supplemental Stock Option Plan (Incorporated by reference to Exhibit 99.1 to Endologix, Inc. Registration Statement on Form S-8, No. 333-42161, filed on December 12, 1997).
10.2	(1)	1996 Stock Option/Stock Issuance Plan (Incorporated by reference to Exhibit 4.1 to Endologix, Inc. Registration Statement on Form S-8, No. 333-122491, filed on February 2, 2005).
10.3	(1)	2006 Stock Incentive Plan, as amended (Incorporated by reference to Exhibit 10.1 to Endologix, Inc. Current Report on Form 8-K, File No. 000-28440, filed on May 24, 2013).
10.4	(1)	Form of Stock Option Agreement under 2006 Stock Incentive Plan (Incorporated by reference to Exhibit 10.1 to Endologix, Inc. Quarterly Report on Form 10-Q, File No. 000-28440, filed on November 9, 2006).
10.5	(1)	Form of Restricted Stock Award Agreement under 2006 Stock Incentive Plan (Incorporated by reference to Exhibit 10.2 to Endologix, Inc. Quarterly Report on Form 10-Q, File No. 000-28440, filed on November 9, 2006).
10.6	(1)	Form of Employee Restricted Stock Unit Award Agreement under 2006 Stock Incentive Plan (Incorporated by reference to Exhibit 10.1 to Endologix, Inc, Quarterly Report on Form 10-Q, File No. 000-28440, filed on November 1, 2012.
10.7	(1)	Form of Director Restricted Stock Unit Award Agreement under 2006 Stock Incentive Plan (Incorporated by reference to Exhibit 10.1 to Endologix, Inc. Quarterly Report on Form 10-Q, File No. 000-28440, filed on November 1, 2012.
10.8	(1)	Amended and Restated 2006 Employee Stock Purchase Plan, as amended (Incorporated by reference to Exhibit 10.2 to Endologix, Inc. Current Report on Form 8-K, File No. 000-28440, filed on May 24, 2013).
10.9	(1)	Employment Agreement, dated February 1, 2014, by and between Endologix, Inc. and John McDermott (Incorporated by reference to Exhibit 10.18 to Endologix, Inc. Annual Report on Form 10-K, File No. 000-28440, filed on March 3, 2014).
10.10	(1)	Employment Agreement, dated February 1, 2014, by and between Endologix, Inc. and Shelley B. Thunen (Incorporated by reference to Exhibit 10.19 to Endologix, Inc. Annual Report on Form 10-K, File No. 000-28440, filed on March 3, 2014).
10.11	(1)	Employment Agreement, dated February 1, 2014, by and between Endologix, Inc. and Robert D. Mitchell (Incorporated by reference to Exhibit 10.20 to Endologix, Inc. Annual Report on Form 10-K, File No. 000-28440, filed on March 3, 2014).
10.12	(1)	Employment Agreement, dated February 2, 2014, by and between Endologix, Inc. and Dave Jennings (Incorporated by reference to Exhibit 10.4 to Endologix, Inc. Quarterly Report on Form 10-Q, File No. 000-28440, filed on May 2, 2014)
10.13	(1)	Employment Agreement, dated February 2, 2014, by and between Endologix, Inc. and James Machek (Incorporated by reference to Exhibit 10.5 to Endologix, Inc. Quarterly Report on Form 10-Q, File No. 000-28440, filed on May 2, 2014)
10.14	(1)(2)	Employment Agreement, dated August 18, 2014, by and between Endologix, Inc. and Amanda DePalma.
10.15	(1)(2)	Employment Agreement, dated February 1, 2014, by and between Endologix, Inc. and Jose Lima.
10.16	(1)	Form of Indemnification Agreement entered into with Endologix, Inc. officers and directors (Incorporated by reference to Exhibit 10.23 to Endologix, Inc. Annual Report on Form 10-K, File No. 000-28440, filed on March 3, 2014).
10.17		Standard Industrial/Commercial Single-Tenant Lease - Net, dated November 2, 2004, by and between Endologix, Inc. and Del Monico Investments, Inc. (Incorporated by reference to Exhibit 10.46 to Endologix, Inc. Current Report on Form 8-K, File No. 000-28440, filed on November 24, 2004).
10.17.1		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 (Incorporated by reference to Exhibit 10.1 to Endologix, Inc. Quarterly Report on Form 10-Q, File No. 000-28440, filed on November 2, 2009).
10.17.2	(2)	Addendum No. 3 to Standard Industrial/Commercial Single-Tenant Lease - Net, by and between Endologix, Inc. and Del Monico Investments, Inc., dated June 9, 2009.
10.17.3	(2)	Addendum No. 4 to Standard Industrial/Commercial Single-Tenant Lease - Net, by and between Endologix, Inc. and Del Monico Investments, Inc., dated June 9, 2009.
10.18		Standard Industrial/Commercial Multi -Tenant Lease - Net, by and between Endologix, Inc. and Four-In-One Associates, dated August 28, 2009 (Incorporated by reference to Exhibit 10.2 to Endologix, Inc. Quarterly Report on Form 10-Q, File No. 000-28440, filed on November 2, 2009).
10.18.1	(2)	Addendum No. 3 to Standard Industrial/Commercial Multi -Tenant Lease - Net, by and between Endologix, Inc. and Four-In-One Associates, dated August 28, 2009.
10.19		Standard Industrial/Commercial Multi-Tenant Lease - Net, for 2 Musick, Irvine, California and 35 Hammond, Irvine, dated June 12, 2013, by and between Endologix, Inc. and The Northwestern Mutual Life Insurance Company (Incorporated by reference to Exhibit 10.1 to Endologix, Inc. Quarterly Report on Form 10-Q, File No. 000-28440, filed with on August 5, 2013).
10.20		Credit Agreement, dated October 30, 2009, as amended, by and between Endologix, Inc. and Wells Fargo Bank, National Association (Incorporated by reference to Exhibit 10.27 to Endologix, Inc. Annual Report on Form 10-K, File No. 000-28440, filed on March 3, 2014).
10.20.1	†	Third Amendment to Credit Agreement, dated February 20, 2012, by and between Endologix, Inc. and Wells Fargo Bank, National Association (Incorporated by reference to Exhibit 10.15.1 to Endologix Inc. Annual Report on Form 10-K, File No. 000-28440, filed on March 6, 2012).
10.20.2		Seventh Amendment to Credit Agreement, dated December 3, 2013, by and among Wells Fargo Bank, National Association, Endologix, Inc., and Nellix, Inc. (Incorporated by reference to Exhibit 10.3 to Endologix, Inc. Current Report on Form 8-K, File No. 000-28440, filed on December 6, 2013).
10.20.3	(2)	Eleventh Amendment to Credit Agreement, dated February 3, 2015, by and among Wells Fargo Bank, National Association, Endologix, Inc., and Nellix, Inc.
10.21	†	Cross License Agreement dated as of October 26, 2011, by and between Endologix, Inc. and Bard Peripheral Vascular, Inc. (Incorporated by reference to Exhibit 10.19 to Endologix Inc. Annual Report on Form 10-K, File No. 000-28440, filed on March 6, 2012).
10.22	†	Settlement Agreement, dated October 16, 2012 by and among Endologix, Inc., Cook Incorporated, Cook Group and Cook Medical, Inc. (Incorporated by reference to Exhibit 10.22 to Endologix, Inc. Annual Report on Form 10-K, File No. 000-28440, filed with on March 14, 2013).
10.23		Base Capped Call Confirmation, dated December 4, 2013, between Endologix, Inc. and Bank of America, N.A. (Incorporated by reference to Exhibit 10.1 to Endologix, Inc. Current Report on Form 8-K, File No. 000-28440, filed on December 6, 2013).
10.24		Additional Capped Call Confirmation, dated December 5, 2013, between Endologix, Inc. and Bank of America, N.A. (Incorporated by reference to Exhibit 10.2 to Endologix, Inc. Current Report on Form 8-K, File No. 000-28440, filed on December 6, 2013).
12.1	(2)	Computation of Ratio of Earnings to Fixed Charges.
14		Code of Ethics for Chief Executive Officer and Principal Financial Officers (Incorporated by reference to Exhibit 14 to Endologix, Inc. Annual Report on Form 10-K, File No. 000-28440, filed on March 26, 2004).
21.1	(2)	List of Subsidiaries.
23.1	(2)	Consent of Independent Registered Public Accounting Firm (KPMG LLP).
24.1	(2)	Power of Attorney (included on signature page hereto).
31.1	(2)	Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934.
31.2	(2)	Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934.
32.1	(3)	Certification of Chief Executive Officer Pursuant to Rule 13a-14(b)/15d-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350.
32.2	(3)	Certification of Chief Financial Officer Pursuant to Rule 13a-14(b)/15d-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350.
101.INS	(2)	XBRL Instance Document
101.SCH	(2)	XBRL Taxonomy Extension Schema Document
101.CAL	(2)	XBRL Taxonomy Extension Calculation Link Base Document
101.DEF	(2)	XBRL Taxonomy Extension Definition Link Base Document
101.LAB	(2)	XBRL Taxonomy Extension Label Link Base Document
101.PRE	(2)	XBRL Taxonomy Extension Presentation Link Base Document

________________________


†	Portions of this exhibit are omitted and were filed separately with the Securities and Exchange Commission pursuant to Endologix application requesting confidential treatment under Rule 24b-2 of the Securities Exchange Act of ~~1934.~~1934, as amended.


(1)	These exhibits are identified as management contracts or compensatory plans or arrangements of Endologix pursuant to Item 15(a)(3) of Form 10-K.


(2)	Filed herewith


(3)	Furnished herewith and not ~~"filed"~~“filed” for purposes of Section 18 of the Securities Exchange Act of ~~1934.~~


~~(4)~~	~~Furnished herewith and not "filed" for purposes of Sections 11 and 12 of the Securities Act of 1933 and Section 18 of the Securities Exchange Act of 1934.~~1934, as amended.

1214

Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

By:		/S/ JOHN MCDERMOTT
		John McDermott Chief Executive Officer and Chairman of the Board (Principal Executive Officer)

Date: March ~~14, 2013~~2, 2015

POWER OF ATTORNEY

We, the undersigned directors and officers of Endologix, Inc., do hereby constitute and appoint John McDermott and Shelley B. Thunen, and each of them, as our true and lawful attorneys-in-fact and agents with power of substitution, to do any and all acts and things in our name and behalf in our capacities as directors and officers and to execute any and all instruments for us and in our names in the capacities indicated below, which said attorney-in-fact and agent may deem necessary or advisable to enable said corporation to comply with the Securities Exchange Act of 1934, as amended, and any rules, regulations and requirements of the Securities and Exchange Commission, in connection with this Annual Report on Form 10-K, including specifically but without limitation, power and authority to sign for us or any of us in our names in the capacities indicated below, any and all amendments (including post-effective amendments) hereto; and we do hereby ratify and confirm all that said attorney-in-fact and agent, shall do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.



Signature	Title	Date

/s/ JOHN McDERMOTT	Chief Executive Officer and Chairman of the Board	March ~~14, 2013~~2, 2015
(John McDermott)	(Principal Executive Officer)

/s/ SHELLEY B. THUNEN	Chief Financial Officer	March ~~14, 2013~~2, 2015
(Shelley B. Thunen )	(Principal Financial and Accounting Officer)


/s/ ~~RODERICK DE GREEF~~THOMAS F. ZENTY III	Director	March ~~14, 2013~~2, 2015
(~~Roderick de Greef)~~Thomas F. Zenty III)

/s/ DAN LEMAITRE	Director	March ~~14, 2013~~2, 2015
(Dan Lemaitre)

/s/ THOMAS C. WILDER	Director	March ~~14, 2013~~2, 2015
(Thomas C. Wilder)

/s/ GUIDO J. NEELS	Director	March ~~14, 2013~~2, 2015
(Guido J. Neels)

/s/ GREGORY D. WALLER	Director	March ~~14, 2013~~2, 2015
(Gregory D. Waller)

1315



Delaware		68-0328265
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)



Title of each class		Name of each exchange on which registered
Common Stock, $0.001 par value		The NASDAQ Stock Market, LLC



Large accelerated filer	x	Accelerated filer	o

Non-accelerated filer	o (Do not check if a smaller reporting company)	Smaller reporting company	o



Market Description ($ in millions)	Penetrated		Unpenetrated		Total
Traditional	$	1,250	$	363	$	1,613
Complex	363		1,245		1,608
Total	$	1,613	$	1,608	$	3,221


	Year Ended December 31,															Year Ended December 31,
	2012			2011			2010			2009			2008			2014			2013			2012			2011			2010
	(In thousands, except per share data)															(In thousands, except per share data)
Consolidated Statement of Operations Data:
Revenue	$	105,946		$	83,417		$	67,251		$	52,441		$	37,664		$	147,588		$	132,257		$	105,946		$	83,417		$	67,251
Cost of goods sold	25,282			18,746			15,030			13,181			10,380			41,801			32,750			25,282			18,746			15,030
Gross profit	80,664			64,671			52,221			39,260			27,284			105,787			99,507			80,664			64,671			52,221
Operating expenses:
Research and development	16,571			16,738			8,997			4,454			3,512			21,616			16,199			16,571			16,738			8,997
Clinical and regulatory affairs	6,343			4,439			2,169			2,115			2,570			13,243			8,679			6,343			4,439			2,169
Marketing and sales	53,953			44,655			31,869			26,483			23,794			73,411			63,588			53,953			44,655			31,869
General and administrative	20,266			15,525			13,410			8,550			9,455			26,663			21,409			20,266			15,525			13,410
Contract termination and business acquisition expenses	422			1,730			—			—			—			—			—			422			1,730			—
Settlement costs	5,000			—			—			—			—			—			—			5,000			—			—
Total operating expenses	102,555			83,087			56,445			41,602			39,331			134,933			109,875			102,555			83,087			56,445
Loss from operations	(21,891		)	(18,416		)	(4,224		)	(2,342		)	(12,047		)	(29,146		)	(10,368		)	(21,891		)	(18,416		)	(4,224		)
Other income (expense)	(13,352		)	(10,400		)	(160		)	(71		)	27
Net loss before income tax	(35,243		)	(28,816		)	(4,384		)	(2,413		)	(12,020		)
Income tax (expense) benefit	(531		)	86			15,037			(21		)	28
Total other income (expense)																(3,334		)	(5,710		)	(13,352		)	(10,400		)	(160		)
Net loss before income tax benefit (expense)																(32,480		)	(16,078		)	(35,243		)	(28,816		)	(4,384		)
Income tax benefit (expense)																62			10			(531		)	86			15,037
Net income (loss)	$	(35,774	)	$	(28,730	)	$	10,653		$	(2,434	)	$	(11,992	)	$	(32,418	)	$	(16,068	)	$	(35,774	)	$	(28,730	)	$	10,653
Basic net income (loss) per share	$	(0.60	)	$	(0.51	)	$	0.22		$	(0.05	)	$	(0.28	)	$	(0.50	)	$	(0.26	)	$	(0.60	)	$	(0.51	)	$	0.22
Shares used in computing basic net income (loss) per share	59,811			56,592			48,902			45,194			43,045
Diluted net income (loss) per share	$	(0.60	)	$	(0.51	)	$	0.21		$	(0.05	)	$	(0.28	)	$	(0.50	)	$	(0.26	)	$	(0.60	)	$	(0.51	)	$	0.21
Shares used in computing diluted net income (loss) per share	59,811			56,592			50,544			45,194			43,045


Shares used in computing basic income (loss) per share																65,225			62,607			59,811			56,592			48,902
Shares used in computing diluted income (loss) per share																65,225			62,607			59,811			56,592			50,544
	December 31,
	2012			2011			2010			2009			2008			December 31,
	(In thousands)															2014			2013			2012			2011			2010
Consolidated Balance Sheet Data:																(In thousands)
Cash (including restricted cash and cash equivalents)	$	45,118		$	20,035		$	38,191		$	24,065		$	8,111
Cash and cash equivalents and marketable securities																$	86,669		$	126,465		$	45,118		$	20,035		$	38,191
Accounts receivable, net	22,600			15,542			12,212			8,342			6,371			$	26,113		$	24,972		$	22,600		$	15,542		$	12,212
Total assets	$	165,103		$	130,255		$	134,375		$	51,292		$	37,263		$	248,209		$	256,197		$	165,103		$	130,255		$	134,375
Total liabilities (excluding contingent consideration payable in common stock)	$	18,229		$	14,986		$	11,243		$	8,412		$	11,446
Convertible Notes																$	70,407		$	67,101		$	—		$	—		$	—
Total liabilities																$	124,059		$	151,556		$	70,629		$	53,686		$	40,472
Accumulated deficit	(200,014		)	(164,240		)	(135,510		)	(146,164		)	(143,730		)	$	248,500		$	216,082		$	200,014		$	164,240		$	135,510
Total stockholders’ equity	$	94,474		$	76,569		$	93,903		$	42,880		$	25,817		$	124,150		$	104,641		$	94,474		$	76,569		$	93,903



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



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



Item	Description	Page	Description	Page
	PART I
PART I			PART I
1.	Business	1	Business	1
1A.	Risk Factors	1	Risk Factors	1
1B.	Unresolved Staff Comments	1	Unresolved Staff Comments	1
2.	Properties	1	Properties	1
3.	Legal Proceedings	1	Legal Proceedings	1
4.	Mine Safety Disclosures	1	Mine Safety Disclosures	1

PART II	PART II		PART II
5.	Market for Endologix's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	2	Market for Endologix's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	2
6.	Selected Financial Data	3	Selected Financial Data	2
7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3
7A.	Quantitative and Qualitative Disclosures About Market Risk	4	Quantitative and Qualitative Disclosures About Market Risk	4
8.	Financial Statements and Supplementary Data	5	Financial Statements and Supplementary Data	5
9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	11	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	14
9A.	Controls and Procedures	11	Controls and Procedures	14
9B.	Other Information	11	Other Information	14

PART III	PART III		PART III
10.	Directors, Executive Officers and Corporate Governance	11	Directors, Executive Officers and Corporate Governance	14
11.	Executive Compensation	11	Executive Compensation	14
12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	11	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	14
13.	Certain Relationships and Related Transactions, and Director Independence	11	Certain Relationships and Related Transactions, and Director Independence	14
14.	Principal Accountant Fees and Services	11	Principal Accountant Fees and Services	14

PART IV	PART IV		PART IV
15.	Exhibits, Financial Statement Schedules	12	Exhibits, Financial Statement Schedules	14
	Signatures	13	Signatures	15


Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations


(ii)	The customer must have made a fixed and written commitment to purchase the ~~ELG Systems;~~EVAR or EVAS product;


(iii)	The customer must request that the transaction be on a bill and hold basis;


(iv)	There must be a fixed schedule for delivery of the ~~ELG Systems.~~EVAR or EVAS product. The date for delivery must be reasonable and must be consistent with the customer's business purpose;


(v)	We have no remaining specific performance obligations and our earnings process is complete;


(vi)	Our customer's ordered ~~ELG Systems~~EVAR or EVAS product must be segregated from our inventory and cannot be used to fulfill other customer orders; and


(vii)	The ~~ELG Systems~~EVAR or EVAS product must be complete and ready for shipment.


(i)	The date by which we expect payment, and whether we have modified our normal billing and credit terms for the customer;


(ii)	Our past experiences with, and pattern of, bill and hold transactions;


(iii)	Whether the customer has the expected risk of loss in the event of a decline in the market value of the ~~ELG Systems;~~EVAR or EVAS product;


(iv)	Whether our custodial risks are insurable and insured; and


(v)	Whether extended procedures are necessary in order to assure that there are no exceptions to the customer's commitment to accept and pay for the ~~ELG Systems~~EVAR or EVAS product (i.e., that the business reasons for the bill and hold have not introduced a contingency to the customer's commitment).


	December 31, 2012		December 31, 2011		December 31, 2014		December 31, 2013		December 31, 2012
	(in thousands, except financial metrics data)				(in thousands, except financial metrics data)
Cash and cash equivalents	$	45,118	$	20,035	$	26,798	$	95,152	$	45,118
Marketable securities					$	59,871	$	31,313	$	—
Accounts receivable, net	$	22,600	$	15,542	$	26,113	$	24,972	$	22,600
Total current assets	$	87,567	$	55,104	$	147,767	$	173,633	$	87,567
Total current liabilities	$	17,194	$	13,949	$	29,624	$	67,335	$	17,194
Working capital surplus (a)	$	70,373	$	41,155	$	118,143	$	106,298	$	70,373
Days sales outstanding ("DSO") (b)	71		61
Current ratio ~~(c)~~(b)	5.1		4.0		5.0		2.6		5.1
Days sales outstanding ("DSO") (c)					62		65		71
Inventory turnover (d)					1.6		1.7		1.5



	Payment due by period at December 31, 2012
	Total		Less than 1 Year		1 - 3 Years		3 - 5 Years		After 5 Years
	(In thousands)
Operating lease obligations	$	1,129	$	655	$	474	$	—	$	—



	Payments due by period
Contractual Obligations	Total		2015		2016		2017		2018		2019		2020 and thereafter
Long-term debt obligations	$	86,250	$	—	$	—	$	—	$	86,250	$	—	$	—
Interest on debt obligations	7,764		1,941		1,941		1,941		1,941		—		—
Operating lease obligations	37,117		2,620		2,353		2,320		2,255		2,296		25,273
Total	$	131,131	$	4,561	$	4,294	$	4,261	$	90,446	$	2,296	$	25,273


~~Item 7A.~~	~~Quantitative and Qualitative Disclosures About Market Risk~~



Item	Page ~~No.~~
Reports of Independent Registered Public Accounting ~~Firms~~Firm	6
Consolidated Balance Sheets as of December 31, ~~2012~~2014 and ~~2011~~2013	7
Consolidated Statements of Operations and Comprehensive ~~Income (Loss)~~Loss for the years ended December 31, ~~2012, 2011,~~2014, 2013, and ~~2010~~2012	8
Consolidated Statements of Stockholders’ Equity for the years ended December 31, ~~2012, 2011,~~2014, 2013, and ~~2010~~2012	9
Consolidated Statements of Cash Flows for the years ended December 31, ~~2012, 2011,~~2014, 2013, and ~~2010~~2012	10
Notes to Consolidated Financial Statements	11
Financial Statement Schedule	1214
Schedule II - Valuation and Qualifying Accounts for the years ended December 31, ~~2012, 2011,~~2014, 2013, and ~~2010~~2012	1214


	Common Stock				Additional Paid-In Capital				Accumulated Deficit				Treasury Stock				Accumulated Other Comprehensive Loss				Total Stockholders’ Equity			Common Stock				Additional Paid-In Capital			Accumulated Deficit				Treasury Stock				Accumulated Other Comprehensive Income (Loss)				Total Stockholders’ Equity
	Issued Shares		$0.001 Par Value						Accumulated Deficit				Treasury Stock			Issued Shares					Total Stockholders’ Equity			$0.001 Par Value							Accumulated Deficit				Treasury Stock				Accumulated Other Comprehensive Income (Loss)				Total Stockholders’ Equity
Balance at December 31, 2009	49,152		$	49	Additional Paid-In Capital		$	189,656			$	(146,164	)		$	(661	Accumulated Other Comprehensive Loss	)		$	—			$	42,880
Exercise of common stock options	676		1		2,242				—				—				—				2,243
Employee stock purchase plan	293		—		1,117				—				—				—				1,117
Sale of common stock	3,171		3		14,987				—				—				—				14,990
Issuance of common stock for acquisition	3,199		3		19,385				—				—				—				19,388
Stock compensation expense	—		—		2,215				—				—				—				2,215
Issuance of restricted stock	405		1		—				—				—				—				1
Restricted stock expense	—		—		422				—				—				—				422
Non-employee stock option expense	—		—		(7		)		—				—				—				(7		)
Net income	—		—		—				10,653				—				—				10,653
Balance at December 31, 2010	56,896		$	57	$	230,017			$	(135,510	)		$	(661	)		$	—			$	93,902
Exercise of common stock options	1,394		2		5,322				—				—				—				5,324
Employee stock purchase plan	287		—		1,965				—				—				—				1,965
Stock compensation expense	—		—		2,851				—				—				—				2,851
Restricted stock expense	—		—		877				—				—				—				877
Non-employee stock option expense	—		—		409				—				—				—				409
Net loss	—		—		—				(28,730		)		—				—				(28,730		)
Other comprehensive loss	—		—		—				—				—				(30		)		(30		)
Balance at December 31, 2011	58,577		$	59	241,441				$	(164,240	)		$	(661	)		(30		)		$	76,569		58,577		$	59	Additional Paid-In Capital	$	241,441		$	(164,240	)		$	(661	)		$	(30	)		$	76,569
Exercise of common stock options	1,168		1		4,991				—				—				—				4,992			1,168		1		4,991			—				—				—				4,992
Employee stock purchase plan	224		—		2,369				—				—				—				2,369			224		—		2,369			—				—				—				2,369
Sale of common stock	3,105		3		40,066				—				—				—				40,069			3,105		3		40,066			—				—				—				40,069
Stock compensation expense	—		—		3,649				—				—				—				3,649			—		—		3,649			—				—				—				3,649
Issuance of restricted stock	13		—		—				—				—				—				—			13		—		—			—				—				—				—
Cancellation of restricted stock	(18	)	—		—				—				—				—				—
Cancellation of restricted stock awards																								(18	)	—		—			—				—				—				—
Restricted stock expense	—		—		1,906				—				—				—				1,906			—		—		1,906			—				—				—				1,906
Non-employee stock option expense	—		—		916				—				—				—				916
Non-employee restricted stock expense																								—		—		916			—				—				—				916
Net loss	—		—		—				(35,774		)		—				—				(35,774		)	—		—		—			(35,774		)		—				—				(35,774		)
Other comprehensive loss	—		—		—				—				—				(222		)		(222		)	—		—		—			—				—				(222		)		(222		)
Balance at December 31, 2012	63,069		$	63	$	295,338			$	(200,014	)		$	(661	)		$	(252	)		$	94,474		63,069		$	63	$	295,338		$	(200,014	)		$	(661	)		$	(252	)		$	94,474
Exercise of common stock options																								974		1		4,874			—				—				—				4,875
Employee stock purchase plan																								216		—		2,444			—				—				—				2,444
Issuance of common stock																								48		—		752			—				—				—				752
Treasury stock retired																								(495	)	—		(661		)	—				661				—				—
Stock compensation expense																								—		—		4,627			—				—				—				4,627
Issuance of restricted stock																								54		—		—			—				—				—				—
Restricted stock expense																								—		—		2,476			—				—				—				2,476
Non-employee restricted stock expense																								—		—		819			—				—				—				819
Equity conversion option																								—		—		19,324							—				—				19,324
Debt issuance costs allocated to equity																								—		—		(819		)	—				—				—				(819		)
Capped call																								—		—		(7,418		)	—				—				—				(7,418		)
Net loss																								—		—		—			(16,068		)		—				—				(16,068		)
Other comprehensive loss																								—		—		—			—				—				(845		)		(845		)
Balance at December 31, 2013																								63,866		$	64	$	321,756		$	(216,082	)		$	—			$	(1,097	)		$	104,641
Exercise of common stock options																								315		—		1,776			—				—				—				1,776
Employee stock purchase plan																								254		—		2,613			—				—				—				2,613
Issuance of common stock																								2,684		3		38,627			—				—				—				38,630
Treasury stock purchased																								58		—		—			—				(2,328		)		—				(2,328		)
Stock compensation expense																								—		—		5,172			—				—				—				5,172
Issuance of restricted stock																								145		—		—			—				—				—				—
Restricted stock expense																								—		—		2,620			—				—				—				2,620
Non-employee restricted stock expense																								—		—		75			—				—				—				75
Net loss																								—		—		—			(32,418		)		—				—				(32,418		)
Other comprehensive income																								—				—			—				—				3,369				3,369
Balance at December 31, 2014																								67,322		$	67	$	372,639		$	(248,500	)		$	(2,328	)		$	2,272			$	124,150



Property Class		Useful Life
Office furniture		Seven years
Computer hardware		Three years
Computer software		Three to eight years
Production equipment and molds		Three to seven years
Leasehold improvements		Shorter of expected useful life or remaining term of lease



Intangible Asset Class		Useful Life
Goodwill		Indefinite lived
Trademarks and tradenames		Indefinite lived
~~In-process research and development~~Developed technology	~~Indefinite lived until commercial launch of underlying technology~~	Thirteen years
Patents & license	~~Three~~	One to five years
Customer relationships		Three years


(v)	The Company must have no remaining specific performance obligations and its earnings process must be complete;


(vi)	The customer's ordered ~~ELG Systems~~EVAR or EVAS product must be segregated from the Company's inventory and cannot be used to fulfill other customer orders; and


(vii)	The ~~ELG Systems~~EVAR or EVAS products must be complete and ready for shipment.


(i)	The date by which payment is expected from the customer, and whether the Company has modified its normal billing and credit terms for the customer;


(ii)	The Company's past experiences with, and pattern of, bill and hold transactions;


(iv)	Whether the Company's custodial risks are insurable and insured; and



Ending balance, December 31, 2010	$	(118	)
Bad debt expense	(62		)
Write offs	19
Ending balance, December 31, 2011	$	(161	)
Bad debt expense	(325		)
Write offs	14
Ending balance, December 31, 2012	$	(472	)