|
|
|
|
|
x
|
QUARTERLY 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
|
Delaware
|
68-0328265
|
(State or other jurisdiction of
incorporation or organization)
|
(I.R.S. Employer
Identification Number)
|
Large accelerated filer
|
|
o
|
Accelerated filer
|
|
x
|
Non-accelerated filer
|
|
o
(Do not check if a smaller reporting company)
|
Smaller reporting company
|
|
o
|
|
|
|
Emerging growth company
|
|
o
|
Title of each class
|
Trading Symbol(s)
|
Name of each exchange on which registered
|
Common Stock
|
ELGX
|
The Nasdaq Stock Market, LLC
|
|
|
|
|
|
Item
|
Description
|
Page
|
|
|
|
|
||
Item 1.
|
|
|
|
||
|
||
|
||
|
|
|
|
||
Item 2.
|
||
Item 3.
|
||
Item 4.
|
||
|
|
|
|
||
Item 1.
|
||
Item 1A.
|
||
Item 6.
|
||
|
|
March 31,
2019 |
|
December 31,
2018 |
||||
ASSETS
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
9,696
|
|
|
$
|
23,531
|
|
Restricted cash
|
1,200
|
|
|
1,200
|
|
||
Accounts receivable, net of allowance for doubtful accounts of $669 and $802, respectively
|
25,991
|
|
|
20,651
|
|
||
Other receivables
|
337
|
|
|
329
|
|
||
Inventories
|
30,202
|
|
|
30,399
|
|
||
Prepaid expenses and other current assets
|
2,535
|
|
|
2,821
|
|
||
Total current assets
|
$
|
69,961
|
|
|
$
|
78,931
|
|
Property and equipment, net
|
15,236
|
|
|
16,033
|
|
||
Goodwill
|
120,815
|
|
|
120,848
|
|
||
Other intangible assets, net
|
75,302
|
|
|
76,163
|
|
||
Deposits and other assets
|
2,392
|
|
|
1,095
|
|
||
Operating lease right-of-use assets
|
5,787
|
|
|
—
|
|
||
Total assets
|
$
|
289,493
|
|
|
$
|
293,070
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
14,923
|
|
|
$
|
10,986
|
|
Accrued payroll
|
13,173
|
|
|
14,627
|
|
||
Accrued expenses and other current liabilities
|
16,057
|
|
|
13,314
|
|
||
Total current liabilities
|
$
|
44,153
|
|
|
$
|
38,927
|
|
Deferred income taxes
|
150
|
|
|
150
|
|
||
Deferred rent
|
—
|
|
|
8,065
|
|
||
Operating lease liabilities
|
11,976
|
|
|
—
|
|
||
Derivative liabilities
|
6,035
|
|
|
4,012
|
|
||
Other liabilities
|
2,317
|
|
|
1,992
|
|
||
Contingently issuable common stock
|
2,000
|
|
|
2,200
|
|
||
Debt
|
203,482
|
|
|
198,078
|
|
||
Total liabilities
|
$
|
270,113
|
|
|
$
|
253,424
|
|
Commitments and contingencies
|
|
|
|
||||
Stockholders’ equity:
|
|
|
|
||||
Convertible preferred stock, $0.001 par value, 5,000,000 shares authorized, no shares issued and outstanding
|
—
|
|
|
—
|
|
||
Common stock, $0.001 par value, 170,000,000 and 170,000,000 shares authorized, respectively, 10,390,524 and 10,387,926
shares issued, respectively, and 10,347,806 and 10,345
,
367 shares outstanding, respectively
|
10
|
|
|
10
|
|
||
Treasury stock, at cost, 42,718 and 42,559 shares, respectively
|
(4,027
|
)
|
|
(4,026
|
)
|
||
Additional paid-in capital
|
643,150
|
|
|
640,789
|
|
||
Accumulated deficit
|
(621,743
|
)
|
|
(599,715
|
)
|
||
Accumulated other comprehensive income
|
1,990
|
|
|
2,588
|
|
||
Total stockholders’ equity
|
$
|
19,380
|
|
|
$
|
39,646
|
|
Total liabilities and stockholders’ equity
|
$
|
289,493
|
|
|
$
|
293,070
|
|
|
Three Months Ended March 31,
|
||||||
|
2019
|
|
2018
|
||||
Revenue
|
$
|
35,606
|
|
|
$
|
42,284
|
|
Cost of goods sold
|
12,407
|
|
|
13,958
|
|
||
Gross profit
|
23,199
|
|
|
28,326
|
|
||
Operating expenses:
|
|
|
|
||||
Research and development
|
4,787
|
|
|
5,499
|
|
||
Clinical and regulatory affairs
|
3,785
|
|
|
3,571
|
|
||
Marketing and sales
|
16,786
|
|
|
21,725
|
|
||
General and administrative
|
9,416
|
|
|
10,369
|
|
||
Restructuring costs
|
419
|
|
|
233
|
|
||
Total operating expenses
|
35,193
|
|
|
41,397
|
|
||
Loss from operations
|
(11,994
|
)
|
|
(13,071
|
)
|
||
Other income (expense):
|
|
|
|
||||
Interest expense
|
(8,490
|
)
|
|
(5,807
|
)
|
||
Other income (expense), net
|
318
|
|
|
366
|
|
||
Change in fair value of contingent consideration related to acquisition
|
200
|
|
|
1,100
|
|
||
Change in fair value of derivative liabilities
|
(2,023
|
)
|
|
—
|
|
||
Loss on debt extinguishment
|
—
|
|
|
(2,270
|
)
|
||
Total other expense, net
|
(9,995
|
)
|
|
(6,611
|
)
|
||
Net loss before income taxes
|
(21,989
|
)
|
|
(19,682
|
)
|
||
Income tax expense
|
(39
|
)
|
|
(85
|
)
|
||
Net loss
|
$
|
(22,028
|
)
|
|
$
|
(19,767
|
)
|
|
|
|
|
||||
Comprehensive loss, net of taxes:
|
|
|
|
||||
Net loss
|
(22,028
|
)
|
|
(19,767
|
)
|
||
Other comprehensive loss foreign currency translation
|
(598
|
)
|
|
(127
|
)
|
||
Comprehensive loss
|
$
|
(22,626
|
)
|
|
$
|
(19,894
|
)
|
|
|
|
|
||||
Basic and diluted net loss per share
|
$
|
(2.12
|
)
|
|
$
|
(2.36
|
)
|
Shares used in computing basic and diluted net loss per share
|
10,374
|
|
|
8,371
|
|
|
Three Months Ended March 31,
|
||||||
|
2019
|
|
2018
|
||||
Cash flows from operating activities:
|
|
|
|
||||
Net loss
|
$
|
(22,028
|
)
|
|
$
|
(19,767
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
||||
Bad debt expense
|
(126
|
)
|
|
152
|
|
||
Depreciation and amortization
|
1,735
|
|
|
1,992
|
|
||
Stock-based compensation
|
2,361
|
|
|
3,021
|
|
||
Change in fair value of derivative liabilities
|
2,023
|
|
|
—
|
|
||
Change in fair value of contingent consideration related to acquisition
|
(200
|
)
|
|
(1,100
|
)
|
||
Accretion of interest and amortization of deferred financing costs
|
3,554
|
|
|
2,622
|
|
||
Payable in kind interest expense on term loan facility
|
1,943
|
|
|
—
|
|
||
Non-cash foreign exchange (gain) loss
|
(400
|
)
|
|
(326
|
)
|
||
Loss on debt extinguishment
|
—
|
|
|
2,270
|
|
||
Non-cash lease expense
|
53
|
|
|
—
|
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Accounts receivable and other receivables
|
(5,253
|
)
|
|
3,081
|
|
||
Inventories
|
112
|
|
|
(784
|
)
|
||
Prepaid expenses and other current assets
|
(2,367
|
)
|
|
275
|
|
||
Accounts payable
|
5,378
|
|
|
391
|
|
||
Accrued payroll
|
(1,438
|
)
|
|
(585
|
)
|
||
Accrued expenses and other liabilities
|
995
|
|
|
(1,116
|
)
|
||
Net cash used in operating activities
|
(13,658
|
)
|
|
(9,874
|
)
|
||
Cash flows from investing activities:
|
|
|
|
||||
Purchases of property and equipment
|
(107
|
)
|
|
(200
|
)
|
||
Net cash (used in) provided by investing activities
|
(107
|
)
|
|
(200
|
)
|
||
Cash flows from financing activities:
|
|
|
|
||||
Cash paid for debt extinguishment
|
—
|
|
|
(1,310
|
)
|
||
Net (payments) proceeds from revolving line of credit
|
—
|
|
|
(21
|
)
|
||
Minimum tax withholding paid on behalf of employees for stock-based compensation
|
(2
|
)
|
|
—
|
|
||
Proceeds from exercise of stock options
|
—
|
|
|
706
|
|
||
Net cash provided by financing activities
|
(2
|
)
|
|
(625
|
)
|
||
Effect of exchange rate changes on cash, cash equivalents and restricted cash
|
(68
|
)
|
|
187
|
|
||
Net (decrease) increase in cash, cash equivalents and restricted cash
|
(13,835
|
)
|
|
(10,512
|
)
|
||
Cash, cash equivalents and restricted cash, beginning of period
|
24,731
|
|
|
60,599
|
|
||
Total cash, cash equivalents and restricted cash, end of period
|
$
|
10,896
|
|
|
$
|
50,087
|
|
Reconciliation of cash, cash equivalents and restricted cash to the Condensed Consolidated Balance Sheets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
9,696
|
|
|
$
|
48,020
|
|
Restricted cash
|
1,200
|
|
|
2,067
|
|
||
Total cash, cash equivalents and restricted cash
|
$
|
10,896
|
|
|
$
|
50,087
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
||||
Cash paid for interest
|
$
|
2,065
|
|
|
$
|
2,107
|
|
Cash paid for income taxes
|
88
|
|
|
134
|
|
||
Cash paid for amounts included in the measurement of operating lease liabilities
|
$
|
849
|
|
|
$
|
—
|
|
Non-cash investing and financing activities:
|
|
|
|
||||
Acquisition of property and equipment included in accounts payable
|
$
|
59
|
|
|
$
|
147
|
|
|
Three Months Ended March 31, 2019
|
|||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Common Stock
|
|
Additional
Paid-In Capital |
|
Accumulated
Deficit |
|
Treasury
Stock |
|
Accumulated Other Comprehensive Income (Loss)
|
|
Total Stockholders’
Equity |
|||||||||||||||
|
Issued Shares
|
|
Par Value
|
|
|
|
|
|
||||||||||||||||||
Balance at December 31, 2018
|
10,388
|
|
|
$
|
10
|
|
|
$
|
640,789
|
|
|
$
|
(599,715
|
)
|
|
$
|
(4,026
|
)
|
|
$
|
2,588
|
|
|
$
|
39,646
|
|
Treasury stock purchased
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
||||||
Stock-based compensation expense
|
—
|
|
|
—
|
|
|
1,512
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,512
|
|
||||||
Issuance of restricted stock
|
3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Restricted stock expense
|
—
|
|
|
—
|
|
|
849
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
849
|
|
||||||
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(22,028
|
)
|
|
—
|
|
|
—
|
|
|
(22,028
|
)
|
||||||
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(598
|
)
|
|
(598
|
)
|
||||||
Balance at March 31, 2019
|
10,391
|
|
|
$
|
10
|
|
|
$
|
643,150
|
|
|
$
|
(621,743
|
)
|
|
$
|
(4,027
|
)
|
|
$
|
1,990
|
|
|
$
|
19,380
|
|
|
Three Months Ended March 31, 2018
|
|||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Common Stock
|
|
Additional
Paid-In Capital |
|
Accumulated
Deficit |
|
Treasury
Stock |
|
Accumulated Other Comprehensive Income (Loss)
|
|
Total Stockholders’
Equity |
|||||||||||||||
|
Issued Shares
|
|
Par Value
|
|
|
|
|
|
||||||||||||||||||
Balance at December 31, 2017
|
8,386
|
|
|
$
|
8
|
|
|
$
|
594,662
|
|
|
$
|
(520,001
|
)
|
|
$
|
(2,942
|
)
|
|
$
|
3,335
|
|
|
$
|
75,062
|
|
Exercise of common stock options
|
265
|
|
|
—
|
|
|
705
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
705
|
|
||||||
Stock-based compensation expense
|
—
|
|
|
—
|
|
|
2,143
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,143
|
|
||||||
Issuance of restricted stock
|
88
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Restricted stock expense
|
—
|
|
|
—
|
|
|
905
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
905
|
|
||||||
Non-employee restricted stock expense
|
—
|
|
|
—
|
|
|
(27
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(27
|
)
|
||||||
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
(19,767
|
)
|
|
—
|
|
|
—
|
|
|
(19,767
|
)
|
||||||
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(127
|
)
|
|
(127
|
)
|
||||||
Balance at March 31, 2018
|
8,739
|
|
|
$
|
8
|
|
|
$
|
598,388
|
|
|
$
|
(539,768
|
)
|
|
$
|
(2,942
|
)
|
|
$
|
3,208
|
|
|
$
|
58,894
|
|
|
March 31,
2019 |
|
December 31,
2018 |
||||
Production equipment, molds and office furniture
|
$
|
11,451
|
|
|
$
|
11,854
|
|
Computer hardware and software
|
8,252
|
|
|
8,235
|
|
||
Leasehold improvements
|
15,535
|
|
|
15,535
|
|
||
Construction in progress (software and related implementation, production equipment and leasehold improvements)
|
963
|
|
|
993
|
|
||
Property and equipment, at cost
|
36,201
|
|
|
36,617
|
|
||
Accumulated depreciation
|
(20,965
|
)
|
|
(20,584
|
)
|
||
Property and equipment, net
|
$
|
15,236
|
|
|
$
|
16,033
|
|
|
March 31,
2019 |
|
December 31,
2018 |
||||
Raw materials
|
$
|
4,924
|
|
|
$
|
4,636
|
|
Work-in-process
|
7,501
|
|
|
6,401
|
|
||
Finished goods
|
17,777
|
|
|
19,362
|
|
||
Total Inventories
|
$
|
30,202
|
|
|
$
|
30,399
|
|
Balance at December 31, 2018
|
$
|
120,848
|
|
Foreign currency translation adjustment
|
(33
|
)
|
|
Balance at March 31, 2019
|
$
|
120,815
|
|
|
March 31, 2019
|
|
December 31, 2018
|
||||||||||||||||||||
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Carrying Amount
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Carrying Amount
|
||||||||||||
Indefinite-lived intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Trademarks and trade names
|
$
|
2,708
|
|
|
N/A
|
|
|
$
|
2,708
|
|
|
$
|
2,708
|
|
|
N/A
|
|
$
|
2,708
|
|
|||
In-process research and development
|
$
|
11,200
|
|
|
N/A
|
|
|
11,200
|
|
|
11,200
|
|
|
N/A
|
|
11,200
|
|
||||||
Total indefinite-lived intangible assets
|
13,908
|
|
|
|
|
13,908
|
|
|
13,908
|
|
|
|
|
13,908
|
|
||||||||
Finite-lived intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Developed technology
|
67,600
|
|
|
(11,331
|
)
|
|
56,269
|
|
|
67,600
|
|
|
(10,657
|
)
|
|
56,943
|
|
||||||
Customer relationships
|
7,500
|
|
|
(2,375
|
)
|
|
5,125
|
|
|
7,500
|
|
|
(2,188
|
)
|
|
5,312
|
|
||||||
Total finite-lived intangible assets
|
75,100
|
|
|
(13,706
|
)
|
|
61,394
|
|
|
75,100
|
|
|
(12,845
|
)
|
|
62,255
|
|
||||||
Other intangible assets, net
|
$
|
89,008
|
|
|
$
|
(13,706
|
)
|
|
$
|
75,302
|
|
|
$
|
89,008
|
|
|
$
|
(12,845
|
)
|
|
$
|
76,163
|
|
Remainder of 2019
|
$
|
2,584
|
|
2020
|
3,684
|
|
|
2021
|
4,283
|
|
|
2022
|
5,628
|
|
|
2023
|
7,781
|
|
|
Thereafter
|
37,434
|
|
|
Total
|
$
|
61,394
|
|
|
|
March 31, 2019
|
|
December 31, 2018
|
||||||||||||||||||||||||||||
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||||||||||
Financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Contingently issuable common stock
|
(a)
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,000
|
|
|
$
|
2,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,200
|
|
|
$
|
2,200
|
|
Derivative liabilities
|
(b)
|
—
|
|
|
—
|
|
|
6,035
|
|
|
6,035
|
|
|
—
|
|
|
—
|
|
|
4,012
|
|
|
4,012
|
|
||||||||
Total financial liabilities
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
8,035
|
|
|
$
|
8,035
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
6,212
|
|
|
$
|
6,212
|
|
|
Contingently issuable common stock
(a) |
|
Derivative liabilities
(b) |
||||
Balance at December 31, 2018
|
$
|
2,200
|
|
|
$
|
4,012
|
|
Additions
|
—
|
|
|
—
|
|
||
Fair value adjustment
|
(200
|
)
|
|
2,023
|
|
||
Balance at March 31, 2019
|
$
|
2,000
|
|
|
$
|
6,035
|
|
|
March 31, 2019
|
|
December 31, 2018
|
||||||||||||
|
Carrying value
|
|
Fair value
|
|
Carrying value
|
|
Fair value
|
||||||||
Term loan facility
|
$
|
114,701
|
|
|
$
|
127,477
|
|
|
$
|
117,880
|
|
|
$
|
116,916
|
|
Convertible senior notes
|
84,500
|
|
|
57,916
|
|
|
75,917
|
|
|
50,489
|
|
||||
Other debt
|
4,281
|
|
|
1,280
|
|
|
4,281
|
|
|
1,221
|
|
||||
|
$
|
203,482
|
|
|
$
|
186,673
|
|
|
$
|
198,078
|
|
|
$
|
168,626
|
|
|
Three Months Ended March 31,
|
||||||
|
2019
|
|
2018
|
||||
Cost of goods sold
|
$
|
227
|
|
|
$
|
236
|
|
Operating expenses:
|
|
|
|
|
|
||
Research and development
|
332
|
|
|
333
|
|
||
Clinical and regulatory affairs
|
186
|
|
|
176
|
|
||
Marketing and sales
|
709
|
|
|
1,114
|
|
||
General and administrative
|
907
|
|
|
1,162
|
|
||
Total operating expenses
|
2,134
|
|
|
2,785
|
|
||
Total
|
$
|
2,361
|
|
|
$
|
3,021
|
|
|
Three Months Ended March 31,
|
||||
|
2019
|
|
2018
|
||
Common stock options
|
—
|
|
|
2,699
|
|
Restricted stock awards
|
2,690
|
|
|
1,181
|
|
Restricted stock units
|
6,578
|
|
|
3,074
|
|
Total
|
9,268
|
|
|
6,954
|
|
|
Three Months Ended March 31,
|
||||
|
2019
|
|
2018
|
||
Convertible senior notes
|
755,695
|
|
|
1,193,938
|
|
2017 Deerfield Warrants
|
647,001
|
|
|
647,001
|
|
2018 Deerfield Warrants
|
875,001
|
|
|
—
|
|
|
March 31,
2019 |
|
December 31,
2018 |
||||
Term loan facility
|
$
|
163,584
|
|
|
$
|
161,622
|
|
Revolving loan facility
|
—
|
|
|
—
|
|
||
Convertible senior notes
|
84,500
|
|
|
84,500
|
|
||
Other debt
|
4,281
|
|
|
4,281
|
|
||
Debt discounts and deferred financing costs
|
(48,883
|
)
|
|
(52,325
|
)
|
||
Long-term debt, including current portion
|
203,482
|
|
|
198,078
|
|
||
Less current portion
|
—
|
|
|
—
|
|
||
Long-term debt
|
$
|
203,482
|
|
|
$
|
198,078
|
|
|
Number of shares of common stock
|
|
Exercise price
|
|||
2017 Deerfield Warrants
|
647,001
|
|
|
$
|
92.30
|
|
2018 Deerfield Warrants
|
875,001
|
|
|
$
|
47.10
|
|
|
Term loan facility
|
|
Convertible senior notes
|
|
Other debt
|
|
Total
|
||||||||
Year ending December 31,
|
|
|
|
|
|
|
|
||||||||
2019
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
2020
|
—
|
|
|
84,500
|
|
|
—
|
|
|
84,500
|
|
||||
2021
|
40,768
|
|
|
—
|
|
|
—
|
|
|
40,768
|
|
||||
2022
|
61,408
|
|
|
—
|
|
|
—
|
|
|
61,408
|
|
||||
2023
|
61,408
|
|
|
—
|
|
|
4,281
|
|
|
65,689
|
|
||||
|
$
|
163,584
|
|
|
$
|
84,500
|
|
|
$
|
4,281
|
|
|
$
|
252,365
|
|
|
Three Months Ended March 31,
|
|
Three Months Ended March 31,
|
||||||||||||||||||||
|
2019
|
|
2018
|
||||||||||||||||||||
|
Implant-based
|
|
Shipment-based
|
|
Total
|
|
Implant-based
|
|
Shipment-based
|
|
Total
|
||||||||||||
United States
|
$
|
22,463
|
|
|
$
|
323
|
|
|
$
|
22,786
|
|
|
$
|
28,870
|
|
|
$
|
505
|
|
|
$
|
29,375
|
|
International
|
3,807
|
|
|
9,013
|
|
|
12,820
|
|
|
5,542
|
|
|
7,367
|
|
|
12,909
|
|
||||||
Total Revenue
|
$
|
26,270
|
|
|
$
|
9,336
|
|
|
$
|
35,606
|
|
|
$
|
34,412
|
|
|
$
|
7,872
|
|
|
$
|
42,284
|
|
Remainder of 2019
|
$
|
2,568
|
|
2020
|
3,524
|
|
|
2021
|
3,692
|
|
|
2022
|
3,800
|
|
|
2023
|
2,889
|
|
|
2024 and thereafter
|
15,132
|
|
|
Total lease payments
|
$
|
31,605
|
|
Less: Imputed Interest
|
(17,965
|
)
|
|
Present value of operating lease liabilities
|
$
|
13,640
|
|
2019
|
$
|
3,807
|
|
2020
|
$
|
3,791
|
|
2021
|
$
|
3,819
|
|
2022
|
$
|
3,871
|
|
2023
|
$
|
2,889
|
|
2024 and thereafter
|
$
|
15,132
|
|
Total lease payments
|
$
|
33,309
|
|
|
One-time termination benefits
|
||
Accrual balance as of December 31, 2018
|
$
|
562
|
|
Restructuring charges
|
419
|
|
|
Utilization
|
(281
|
)
|
|
Accrual balance as of March 31, 2019
|
$
|
700
|
|
Item 2.
|
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
•
|
continued market acceptance, use and endorsement of our products;
|
•
|
quality control problems with our products;
|
•
|
consolidation in the health care industry;
|
•
|
the success of our clinical trials relating to products under development;
|
•
|
our ability to grow and maintain strong relationships with certain key physicians;
|
•
|
continued growth in the number of patients qualifying for treatment of abdominal aortic aneurysms (“AAA”) through our products;
|
•
|
our ability to effectively compete with the products offered by our competitors;
|
•
|
the level and availability of third party payor reimbursement for our products;
|
•
|
our ability to effectively develop new or complementary products and technologies;
|
•
|
our ability to manufacture our endovascular systems to meet demand;
|
•
|
our ability to grow product revenues;
|
•
|
changes to our international operations including currency exchange rate fluctuations;
|
•
|
our ability to effectively manage our business and keep pace with our anticipated growth;
|
•
|
our ability to develop and retain a direct sales force in the United States and select European countries;
|
•
|
the nature of and any changes to domestic and foreign legislative, regulatory and other legal requirements that apply to us, our products, our suppliers and our competitors;
|
•
|
the timing of and our ability to obtain and maintain any required regulatory clearances and approvals;
|
•
|
our ability to protect our intellectual property rights and proprietary technologies;
|
•
|
our ability to operate our business without infringing the intellectual property rights and proprietary technology of third parties;
|
•
|
product liability claims;
|
•
|
pending and future litigation;
|
•
|
reputational damage to our products caused by the use, misuse or off-label use of our products or government or voluntary recalls of our products;
|
•
|
our utilization of single source suppliers for specialized components of our product lines;
|
•
|
our ability to attract, retain, and motivate qualified personnel;
|
•
|
our ability to make future acquisitions and successfully integrate any such future-acquired businesses;
|
•
|
our ability to maintain adequate liquidity to fund our operational needs and research and developments expenses;
|
•
|
our ability to identify and manage risks; and
|
•
|
general macroeconomic and world-wide business conditions.
|
•
|
Traditional minimally-invasive endovascular aneurysm repair (“EVAR”); or
|
•
|
Endovascular aneurysm sealing (“EVAS”), our innovative solution for sealing the aneurysm sac while maintaining blood flow.
|
•
|
Market Overview and Opportunity
|
•
|
Our Products
|
•
|
Product Developments and Clinical Trials
|
•
|
Manufacturing and Supply
|
•
|
Marketing and Sales
|
•
|
Competition
|
•
|
EVAS FORWARD Investigational Device Exemption (
“
IDE
”
).
We conducted this pivotal clinical trial to evaluate the safety and effectiveness of the Nellix EVAS System. This study is a prospective single arm registry which enrolled 179 patients at 29 centers in the United States and Europe. In November 2014, we completed enrollment in the study, and we submitted the one year results to the United States Food and Drug Administration (“FDA”) in March 2016. In May 2016, we announced the results of the one-year clinical data from the EVAS FORWARD IDE study that demonstrate
|
•
|
Freedom from all endoleaks (95.1%), rupture (99.4%) and all-cause mortality (93.8%) among all patients.
|
•
|
Highest freedom of type II endoleaks, of 96.6%, ever reported at two years, among all patients.
|
•
|
When applying the refined IFUs for Nellix, patients at the two-year follow-up demonstrated 95.9% freedom from Type IA endoleak, migration >10mm, and sac growth.
|
•
|
EVAS2 IDE.
In May 2017, we announced the decision to seek FDA approval of the Nellix EVAS System by conducting a confirmatory clinical study with the refined IFU and the Company’s next generation Nellix device design (the “Gen2 Nellix EVAS System”). The Gen2 Nellix EVAS System incorporates design improvements to enhance ease of use and offers physicians more sizes to treat more patients with AAA. In October 2017, we announced our receipt of IDE approval from the FDA to commence a confirmatory clinical study to evaluate the safety and effectiveness of the Gen2 Nellix EVAS System for the endovascular treatment of infrarenal AAA. The EVAS2 IDE Multicenter Safety and Effectiveness Confirmatory Study (“EVAS2”) will prospectively evaluate the refined IFU and the Nellix Gen2 EVAS System. The study is approved to enroll up to 105 primary patients, with one-year follow-up data required for the pre-market approval (“PMA”) application. We commenced EVAS2 patient enrollment in March 2018.
|
•
|
EVAS FORWARD
Global Registry
. This registry is designed to provide real world clinical results to demonstrate the effectiveness and applicability of the Nellix EVAS System. The first phase of the registry included 300 patients enrolled in up to 30 international centers. The first patient in the registry was treated in October 2013, and in September 2014, we announced completion of patient enrollment in the EVAS FORWARD Global Registry. In November 2016, we announced positive two-year results on 300 patients from the EVAS FORWARD Global Registry at the Annual Symposium on Vascular and Endovascular Issues (the “VEITH Symposium”). The following outcomes were presented at the VEITH Symposium:
|
•
|
37% of patients having complex anatomies;
|
•
|
98.1% freedom from any persistent endoleaks at latest follow-up;
|
•
|
No secondary interventions for Type II endoleaks;
|
•
|
97.4% freedom from aneurysm-related mortality; and
|
•
|
98.5% freedom from cardiovascular mortality.
|
•
|
ASCEND Registry.
In April 2016, we announced the first data presentation with one-year outcomes from the ASCEND Registry, a physician-initiated registry of the Nellix EVAS System used with aortic branch stent grafts for the treatment of patients with complex AAAs. The results of the study were formally published in the peer-reviewed Journal of Endovascular Therapy in December 2017.
|
•
|
99% freedom from aneurysm-related mortality;
|
•
|
99% freedom from migration, rupture, and conversion;
|
•
|
97% freedom from Type I/III endoleak; and
|
•
|
Excellent freedom from secondary intervention for occlusion (97%), Type I endoleak (97%) and Type II endoleak (95%).
|
•
|
Low major adverse event rate of 0.4%;
|
•
|
No ruptures, conversion, or secondary interventions;
|
•
|
No type III endoleaks and low Type I endoleaks (0.4%);
|
•
|
Fast-Track completed in 216 patients (87%), with positive results compared to non-Fast-Track patients;
|
•
|
Procedure time of 84 minutes vs. 110 minutes;
|
•
|
General anesthesia use 0% vs. 18%;
|
•
|
ICU stay 0% vs. 32%; and
|
•
|
Mean hospital stay 1.2 days vs. 1.9 days.
|
•
|
At least 28% greater EVAR eligibility for women with AAA;
|
•
|
1.3% major adverse events;
|
•
|
No deaths;
|
•
|
No proximal endoleaks;
|
•
|
No limb occlusion;
|
•
|
Low readmission rate of 3.9%; and
|
•
|
100% procedural success.
|
•
|
Broad patient applicability, with 40% of the patients treated outside the labeled indications of other EVAR devices;
|
•
|
Stable aortic neck diameters with an average expansion of 0.1mm, compared to 5.3mm as reported with other EVAR devices;
|
•
|
96.6% freedom from secondary interventions related to type I endoleak; and
|
•
|
No migration or conversions.
|
•
|
99% freedom from AAA-related mortality;
|
•
|
99% freedom from conversion;
|
•
|
99% freedom from rupture;
|
•
|
98% freedom from reintervention for Type Ia endoleak; and
|
•
|
93% freedom from all device-related reintervention.
|
|
Three Months Ended March 31,
|
||||||||||||
|
2019
|
|
2018
|
||||||||||
Revenue
|
$
|
35,606
|
|
|
100.0
|
%
|
|
$
|
42,284
|
|
|
100.0
|
%
|
Cost of goods sold
|
12,407
|
|
|
34.8
|
%
|
|
13,958
|
|
|
33.0
|
%
|
||
Gross profit
|
23,199
|
|
|
65.2
|
%
|
|
28,326
|
|
|
67.0
|
%
|
||
Operating expenses:
|
|
|
|
|
|
|
|
||||||
Research and development
|
4,787
|
|
|
13.4
|
%
|
|
5,499
|
|
|
13.0
|
%
|
||
Clinical and regulatory affairs
|
3,785
|
|
|
10.6
|
%
|
|
3,571
|
|
|
8.4
|
%
|
||
Marketing and sales
|
16,786
|
|
|
47.1
|
%
|
|
21,725
|
|
|
51.4
|
%
|
||
General and administrative
|
9,416
|
|
|
26.4
|
%
|
|
10,369
|
|
|
24.5
|
%
|
||
Restructuring costs
|
419
|
|
|
1.2
|
%
|
|
233
|
|
|
0.6
|
%
|
||
Total operating expenses
|
35,193
|
|
|
98.8
|
%
|
|
41,397
|
|
|
97.9
|
%
|
||
Loss from operations
|
(11,994
|
)
|
|
(33.7
|
)%
|
|
(13,071
|
)
|
|
(30.9
|
)%
|
||
Total other expense, net
|
(9,995
|
)
|
|
(28.1
|
)%
|
|
(6,611
|
)
|
|
(15.6
|
)%
|
||
Net loss before income taxes
|
(21,989
|
)
|
|
(61.8
|
)%
|
|
(19,682
|
)
|
|
(46.5
|
)%
|
||
Income tax expense
|
(39
|
)
|
|
(0.1
|
)%
|
|
(85
|
)
|
|
(0.2
|
)%
|
||
Net loss
|
$
|
(22,028
|
)
|
|
(61.9
|
)%
|
|
$
|
(19,767
|
)
|
|
(46.7
|
)%
|
|
Three Months Ended March 31,
|
|
|
|
|
|||||||||
|
2019
|
|
2018
|
|
Variance
|
|
Percent Change
|
|||||||
|
(in thousands)
|
|
|
|
|
|||||||||
Revenue
|
$
|
35,606
|
|
|
$
|
42,284
|
|
|
$
|
(6,678
|
)
|
|
(15.8
|
)%
|
|
Three Months Ended March 31,
|
|
|
|
|
|||||||||
|
2019
|
|
2018
|
|
Variance
|
|
Percent Change
|
|||||||
|
(in thousands)
|
|
|
|
|
|||||||||
Cost of goods sold
|
$
|
12,407
|
|
|
$
|
13,958
|
|
|
$
|
(1,551
|
)
|
|
(11.1
|
)%
|
Gross profit
|
23,199
|
|
|
28,326
|
|
|
(5,127
|
)
|
|
(18.1
|
)%
|
|||
Gross margin percentage (gross profit as a percent of revenue)
|
65.2
|
%
|
|
67.0
|
%
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
|||||||||
|
2019
|
|
2018
|
|
Variance
|
|
Percent Change
|
|||||||
|
(in thousands)
|
|
|
|
|
|||||||||
Research and development
|
$
|
4,787
|
|
|
$
|
5,499
|
|
|
$
|
(712
|
)
|
|
(12.9
|
)%
|
Clinical and regulatory affairs
|
3,785
|
|
|
3,571
|
|
|
214
|
|
|
6.0
|
%
|
|||
Marketing and sales
|
16,786
|
|
|
21,725
|
|
|
(4,939
|
)
|
|
(22.7
|
)%
|
|||
General and administrative
|
9,416
|
|
|
10,369
|
|
|
(953
|
)
|
|
(9.2
|
)%
|
|||
Restructuring costs
|
419
|
|
|
233
|
|
|
186
|
|
|
79.8
|
%
|
|
Three Months Ended March 31,
|
|
|
|
|
||||||||
|
2019
|
|
2018
|
|
Variance
|
|
Percent Change
|
||||||
|
(in thousands)
|
|
|
|
|
||||||||
Other expense, net
|
$
|
(9,995
|
)
|
|
$
|
(6,611
|
)
|
|
$
|
(3,384
|
)
|
|
51.2%
|
|
Three Months Ended March 31,
|
|
|
|
|
||||||||
|
2019
|
|
2018
|
|
Variance
|
|
Percent Change
|
||||||
|
(in thousands)
|
|
|
|
|
||||||||
Income tax expense
|
$
|
(39
|
)
|
|
$
|
(85
|
)
|
|
$
|
46
|
|
|
(54.1)%
|
|
March 31, 2019
|
|
December 31, 2018
|
|
March 31, 2018
|
||||||
|
(in thousands, except financial metrics data)
|
||||||||||
Cash, cash equivalents and restricted cash
|
$
|
10,896
|
|
|
$
|
24,731
|
|
|
$
|
50,087
|
|
Accounts receivable, net
|
$
|
25,991
|
|
|
$
|
20,651
|
|
|
$
|
29,241
|
|
Total current assets
|
$
|
69,961
|
|
|
$
|
78,931
|
|
|
$
|
128,694
|
|
Total current liabilities
|
$
|
44,153
|
|
|
$
|
38,927
|
|
|
$
|
60,569
|
|
Working capital surplus
|
$
|
25,808
|
|
|
$
|
40,004
|
|
|
$
|
68,125
|
|
Current ratio
|
1.6
|
|
|
2.0
|
|
|
2.1
|
|
|||
Days sales outstanding (“DSO”)
|
65
|
|
|
55
|
|
|
62
|
|
|||
Inventory turnover
|
1.7
|
|
|
1.7
|
|
|
1.2
|
|
•
|
the need for working capital to support our sales growth;
|
•
|
the need for additional capital to fund future development programs;
|
•
|
the need for additional capital to fund strategic acquisitions;
|
•
|
our requirements for additional facility space or manufacturing capacity;
|
•
|
our requirements for additional information technology infrastructure and systems; and
|
•
|
adverse outcomes from potential litigation and the cost to defend such litigation.
|
|
|
|
Payments due by period
|
||||||||||||||||||||||||
|
Total
|
|
Remainder of 2019
|
|
2020
|
|
2021
|
|
2022
|
|
2023
|
|
Thereafter
|
||||||||||||||
Long-term debt obligations
|
$
|
288,602
|
|
|
$
|
200
|
|
|
$
|
84,600
|
|
|
$
|
45,404
|
|
|
$
|
72,743
|
|
|
$
|
85,655
|
|
|
$
|
—
|
|
Interest on debt obligations
|
36,438
|
|
|
9,131
|
|
|
11,637
|
|
|
8,128
|
|
|
5,504
|
|
|
2,038
|
|
|
—
|
|
|||||||
Operating lease obligations
|
32,346
|
|
|
2,832
|
|
|
3,788
|
|
|
3,821
|
|
|
3,884
|
|
|
2,889
|
|
|
15,132
|
|
|||||||
Total
|
$
|
357,386
|
|
|
$
|
12,163
|
|
|
$
|
100,025
|
|
|
$
|
57,353
|
|
|
$
|
82,131
|
|
|
$
|
90,582
|
|
|
$
|
15,132
|
|
Item 3.
|
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
|
Item 4.
|
CONTROLS AND PROCEDURES.
|
Item 1.
|
LEGAL PROCEEDINGS
|
•
|
physicians and hospitals may continue relying on (or revert back to) open surgical repair, or use the other approved EVAR devices available for patients;
|
•
|
our direct sales force may not be large enough, or effective enough in its efforts, to train and educate physicians and hospitals about the benefits of our products so as to drive adoption and continued use of our products;
|
•
|
coverage and reimbursement for our products may not be sufficient for customers to choose our devices when in need of an EVAR device;
|
•
|
challenges in the manufacturing, validation and testing of our products may require us to take actions that delay or otherwise hinder new product introductions or that impact currently available products;
|
•
|
new technologies, or improved products by competitors, may limit or reduce adoption and use of our products;
|
•
|
clinical results associated with our products may not be deemed sufficient by us or applicable regulatory authorities to support the approval or commercial use of such products, or may not be sufficiently robust to drive widespread adoption or use;
|
•
|
adverse regulatory or other governmental statements, findings or reports regarding our products, specifically, our EVAR or EVAS technology and products, may adversely affect the regulatory status and market for our products generally; and
|
•
|
negative publicity about, or actual or perceived problems with our products or with EVAR or EVAS devices and technologies generally, could discourage physician and hospital adoption or use of our products.
|
•
|
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;
|
•
|
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; and
|
•
|
greater buying power and influence with suppliers.
|
•
|
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;
|
•
|
rulings, findings, reports, recommendations or guidance from governmental or industry entities that are adverse to our products or to EVAR/EVAS products and technologies generally;
|
•
|
the imposition of additional United States and foreign governmental controls or regulations;
|
•
|
political, economic and social 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;
|
•
|
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 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.
|
•
|
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, do not enroll at the rate we expect, or do not complete a clinical study;
|
•
|
patients or investigators do not comply with study protocols;
|
•
|
patients do not return for post-treatment follow-up at the rate we expect;
|
•
|
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 or terminated;
|
•
|
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;
|
•
|
failure to complete data collection 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 of our products;
|
•
|
the study design is inadequate to demonstrate safety and efficacy of our products; or
|
•
|
the results of the study do not meet the study endpoints.
|
•
|
failure of our suppliers to comply with regulatory requirements;
|
•
|
contractual or other disputes with any such supplier;
|
•
|
change of ownership of a supplier through acquisition or sale of a business
|
•
|
any strike or work stoppage;
|
•
|
disruptions in shipping;
|
•
|
manufacturing limitations or other restrictions on availability or use of raw materials or components necessary for the development, testing, manufacture or sale of our products;
|
•
|
a natural disaster caused by fire, flood or earthquakes; or
|
•
|
a supply shortage experienced by a single source supplier.
|
•
|
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.
|
•
|
decreased demand for our products;
|
•
|
injury to our reputation;
|
•
|
injury to our relationships with our customers;
|
•
|
significant litigation and other costs;
|
•
|
substantial monetary awards to or costly settlements with patients;
|
•
|
product recalls;
|
•
|
loss of revenue; and
|
•
|
the inability to commercialize new products or maintain existing product approvals.
|
•
|
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.
|
•
|
the results of our commercialization efforts for our existing and future products;
|
•
|
the revenue generated by sales of our existing and future products;
|
•
|
the need for additional capital to fund existing and 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
|
•
|
whether we are successful if we enter into collaborative relationships with other parties.
|
•
|
properly identify and anticipate physicians’ and patients’ 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 pre-clinical 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 regulatory-compliant, dedicated marketing and distribution network.
|
•
|
FDA Regulations (Title 21 CFR);
|
•
|
EU CE Mark requirements, including the new Medical Device Regulations and MEDDEV 2.7.1 Rev.4, which implement stricter requirements for clinical data to support new product approvals;
|
•
|
Other international regulatory approval requirements;
|
•
|
Medical Device Single Audit Program (“MDSAP”);
|
•
|
Medical Device Quality Management System Requirements (21 CFR 820, ISO 13485:2003, EN ISO 13485:2012, ISO 13485:2016, and other similar international regulations);
|
•
|
Occupational Safety and Health Administration requirements; and
|
•
|
California Department of Health Services requirements.
|
•
|
Up to the entire $25 million of New Mandatory Notes and $42.02 million of New Voluntary Notes are potentially convertible into our common stock upon satisfaction of certain conditions, including commencement of the applicable conversion period, achievement of minimum stock price thresholds, and compliance with ownership “blockers” (which are maximum ownership amounts that certain investors can hold at any one time expressed as a percentage of the Company’s total outstanding shares of common stock) .
|
•
|
Up to approximately $75.0 million of the $160.5 million of indebtedness to Deerfield under the Deerfield Agreements are potentially convertible into shares of the Company’s common stock, either at Deerfield’s election, or on a mandatory basis (subject to satisfaction of certain conditions precedent and compliance with ownership blockers).
|
•
|
actual or anticipated fluctuations in our financial and operating results from period to period;
|
•
|
our actual or perceived need for additional capital to fund our operations and future debt repayment obligations, and perceptions about the potential dilutive impact of future financing or restructuring transactions;
|
•
|
perceptions regarding the intentions of Deerfield with respect to the exercise of its warrants;
|
•
|
perceptions regarding our ability to comply with our financial covenants under the Deerfield Agreements;
|
•
|
perceptions about our financial stability generally, and relative to our competitors, including our ability to sustain our business operations, execute on our strategic plans and achieve profitability;
|
•
|
market acceptance of our products;
|
•
|
introduction of proposed products, technologies or treatment techniques by us or our competitors;
|
•
|
announcements of significant contracts, acquisitions or divestitures by us or our competitors;
|
•
|
regulatory approval of our products or the products of our competitors, the loss of regulatory approvals or clearances, or the failure to obtain regulatory approvals or clearances in a timely manner or at all;
|
•
|
product recalls involving our products or the products of our competitors;
|
•
|
perceptions regarding the effectiveness of our product quality systems;
|
•
|
speculative trading practices of market participants;
|
•
|
issuance of securities analysts’ reports or recommendations;
|
•
|
the failure of our operating results to meet expectations of securities analysts and investors, or to be consistent with our financial guidance;
|
•
|
threatened or actual litigation, government investigations or enforcement actions;
|
•
|
changes in healthcare laws or policies in the United States or other countries in which we conduct business; and
|
•
|
general political or economic conditions and other factors unrelated to our operating performance.
|
•
|
our ability to increase sales from our current products, and to commercialize and sell our future products;
|
•
|
introduction of proposed products, technologies or treatment techniques by us or our competitors;
|
•
|
the number and mix of our products sold in each quarter;
|
•
|
changes in our pricing policies or in the pricing policies of our competitors or suppliers;
|
•
|
changes in third party payors’ reimbursement policies;
|
•
|
our ability to maintain and motivate our sales force;
|
•
|
our ability to manufacture products that meet quality and regulatory requirements;
|
•
|
results of clinical research and trials on our existing and future products;
|
•
|
the timing and expense associated with obtaining regulatory approval of our products;
|
•
|
product recalls involving our products or the products of our competitors;
|
•
|
the timing of revenue and expense recognition associated with our product sales pursuant to applicable accounting standards.
|
•
|
authorize the issuance of preferred stock with powers, preferences and rights that may be senior to our common stock, which can be created and issued by the board of directors without prior stockholder approval;
|
•
|
provide for the adoption of a staggered board of directors whereby the board is divided into three classes each of which has a different three-year term;
|
•
|
provide that the number of directors shall be fixed by the board of directors;
|
•
|
prohibit our stockholders from filling board vacancies;
|
•
|
prohibit stockholders from calling special stockholder meetings; and
|
•
|
require advance written notice of stockholder proposals and director nominations.
|
Item 6.
|
EXHIBIT INDEX
|
|
|
|
|
Incorporated by Reference
|
|
|
||||||
Exhibit Number
|
|
Exhibit Description
|
|
Form
|
|
File No.
|
|
Exhibit
|
|
Filing Date
|
|
Filed Herewith
|
|
Form of Pre-Paid Warrant to Purchase Common Stock.
|
|
8-K
|
|
000-28440
|
|
4.1
|
|
|
|
|
|
|
Form of Amended and Restated Initial (2017) Warrant
|
|
8-K
|
|
000-28440
|
|
4.2
|
|
|
|
|
|
|
Form of Amended and Restated Additional (2018) Warrant
|
|
8-K
|
|
000-28440
|
|
4.3
|
|
|
|
|
|
|
Form of First Out Waterfall Note
|
|
8-K
|
|
000-28440
|
|
4.4
|
|
|
|
|
|
|
Form of Indenture in respect of 5.00% Mandatory Convertible Senior Notes due 2024
|
|
8-K
|
|
000-28440
|
|
4.5
|
|
|
|
|
|
|
Form of Indenture in respect of 5.00% Mandatory Convertible Senior Notes due 2024
|
|
8-K
|
|
000-28440
|
|
4.6
|
|
April 1, 2019
|
|
|
|
|
Form of Indenture in respect of 5.00% Voluntary Convertible Senior Notes due 2024
|
|
8-K
|
|
000-28440
|
|
4.7
|
|
April 1, 2019
|
|
|
|
|
Form of 5.00% Voluntary Convertible Senior Note due 2024
|
|
8-K
|
|
000-28440
|
|
4.8
|
|
April 1, 2019
|
|
|
|
|
Purchase Agreement, dated March 31, 2019, among Endologix, Inc. and the investors named on Schedule I thereto.
|
|
8-K
|
|
000-28440
|
|
10.1
|
|
April 1, 2019
|
|
|
|
|
Exchange Agreement, dated March 31, 2019, among Endologix, Inc. and the noteholders named on Schedule A thereto.
|
|
8-K
|
|
000-28440
|
|
10.2
|
|
April 1, 2019
|
|
|
|
|
Second Amendment to Credit Agreement and First Amendment to Guaranty and Security Agreement, dated March 31, 2019, by and among Endologix, Inc. and ELGX Revolver, LLC and certain of its affiliates.
|
|
8-K
|
|
000-28440
|
|
10.3
|
|
April 1, 2019
|
|
|
|
|
Second Amendment to Amended and Restated Facility Agreement and First Amendment to Guaranty and Security Agreement, dated March 31, 2019, by and among Endologix, Inc. and Deerfield Private Design Fund IV, L.P. and certain of its affiliates.
|
|
8-K
|
|
000-28440
|
|
10.4
|
|
April 1, 2019
|
|
|
|
|
Certification of Principal Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
|
|
|
|
|
X
|
|
|
Certification of Principal Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
|
|
|
|
|
X
|
|
|
|
Certification of Principal Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
|
|
|
|
|
X
|
|
|
Certification of Principal Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
|
|
|
|
|
X
|
101.INS
|
|
XBRL Instance Document.
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X
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101.SCH
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XBRL Taxonomy Extension Schema
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X
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101.CAL
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XBRL Taxonomy Extension Calculation Linkbase Document.
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X
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101.LAB
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XBRL Taxonomy Extension Label Linkbase Document.
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X
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101.PRE
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XBRL Taxonomy Extension Presentation Link Base Document
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X
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101.DEF
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XBRL Taxonomy Extension Definition Linkbase Document.
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X
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*
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The certifications attached as Exhibits 32.1 and 32.2 that accompany this Quarterly Report on Form 10-Q pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, shall not be deemed “filed” by the registrant for purposes of Section 18 of the Exchange Act and are not to be incorporated by reference into any of the registrant’s filings under the Securities Act or the Exchange Act, irrespective of any general incorporation language contained in any such filing.
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ENDOLOGIX, INC.
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Date:
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May 8, 2019
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/s/ John Onopchenko
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Chief Executive Officer
(Principal Executive Officer) |
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Date:
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May 8, 2019
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/s/ Vaseem Mahboob
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Chief Financial Officer
(Principal Financial and Accounting Officer)
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1.
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I have reviewed this quarterly report on Form 10-Q of Endologix, Inc.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:
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a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with generally accepted accounting principals;
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c)
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Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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d)
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Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
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5.
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The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
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a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
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b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
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Date:
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May 8, 2019
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By:
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/s/ John Onopchenko
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John Onopchenko
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Chief Executive Officer
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1.
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I have reviewed this quarterly report on Form 10-Q of Endologix, Inc.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:
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a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with generally accepted accounting principals;
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c)
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Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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d)
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Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
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5.
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The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):
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a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
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b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
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Date:
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May 8, 2019
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By:
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/s/ Vaseem Mahboob
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Vaseem Mahboob
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Chief Financial Officer
(Principal Financial and Accounting Officer)
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(1)
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The Quarterly Report on Form 10-Q for the quarterly period ended
March 31, 2019
(the “Quarterly Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 780(d)); and
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(2)
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The information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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Date:
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May 8, 2019
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By:
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/s/ John Onopchenko
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John Onopchenko
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Chief Executive Officer
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(1)
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The Quarterly Report on Form 10-Q for the quarterly period ended
March 31, 2019
(the “Quarterly Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a) or 780(d)); and
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(2)
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The information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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Date:
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May 8, 2019
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By:
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/s/ Vaseem Mahboob
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Vaseem Mahboob
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Chief Financial Officer
(Principal Financial and Accounting Officer)
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