UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): May 5, 2020

ENDOLOGIX, INC.
(Exact name of registrant as specified in its charter)

Delaware
 
000-28440
 
68-0328265
(State or other jurisdiction of incorporation)
 
(Commission File Number)
 
(I.R.S. Employer Identification No.)

2 Musick, Irvine, CA
 
92618
(Address of principal executive offices)
 
(Zip Code)

Registrant's telephone number, including area code: (949) 595-7200
 
N/A
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation
of the registrant under any of the following provisions:
¨
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Title of each class
 
Trading Symbol(s)
 
Name of each exchange on which registered
Common Stock, $0.001 par value
 
ELGX
 
The Nasdaq Stock Market, LLC

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o





Item 1.01    Entry into a Material Definitive Agreement

The information included under Item 2.03 below is incorporated into this Item 1.01 by reference.


Item 2.02    Results of Operations and Financial Condition

On May 11, 2020, Endologix, Inc. (the “Company”) issued a press release to report its preliminary unaudited financial results for the first quarter ended March 31, 2020. The press release is furnished herewith as Exhibit 99.1.

The press release attached as Exhibit 99.1 is being furnished herewith and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, or the Securities Exchange Act of 1934, as amended, except as shall be expressly set forth by specific reference in such a filing.


Item 2.03    Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant

On May 5, 2020, the Company entered into a promissory note (the “Promissory Note”) with Bank of America, N.A., dated May 1, 2020, that provides for a loan in the amount of $9.8 million (the “PPP Loan”) pursuant to the Paycheck Protection Program under the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”). The PPP Loan matures on May 5, 2022 and bears interest at a rate of 1.0% per annum. Monthly amortized principal and interest payments are deferred for six months after the date of disbursement. The Promissory Note contains events of default and other provisions customary for a loan of this type. The Paycheck Protection Program provides that the use of PPP Loan amount shall be limited to certain qualifying expenses and may be partially or wholly forgiven in accordance with the requirements set forth in the CARES Act. The Company intends to apply for forgiveness of a portion of the loan in accordance with the terms of the CARES Act to the extent applicable.

Additionally, on May 5, 2020, the Company entered into the Amendment to Facility Agreements, dated as of May 4, 2020, among the Company, the guarantors party thereto, the lenders party thereto, Deerfield ELGX Revolver, LLC and Deerfield Private Design Fund I.V., L.P. (the “Amendment”). The Amendment amends the Credit Agreement, dated August 9, 2018, by and among the Company, certain of its subsidiaries, the lenders party there to and Deerfield ELGX Revolver, LLC and amends the Term Loan Facility Agreement, dated as of August 9, 2018, among the Company, certain of its subsidiaries, the lenders party thereto and Deerfield Private Design Fund I.V., L.P., as amended from time to time, to permit the company to incur indebtedness in the form of the PPP Loan.

The foregoing descriptions of the Promissory Note and the Amendment are not complete and are qualified in their entirety by reference to the full text of the Promissory Note and of the Amendment, copies of which are filed herewith as Exhibit 10.1 and 10.2, respectively, and to this Current Report on Form 8-K and are incorporated herein by reference.


Item 8.01    Other Information

As a result of the outbreak of, and local, state and federal governmental responses to, the COVID-19 coronavirus pandemic, the Company is furnishing this Current Report on Form 8-K to obtain an extension to file its Quarterly Report on Form 10-Q for the period ended March 31, 2020 (the “Quarterly Report”), originally due on May 11, 2020. Specifically, the Company is relying on an order issued by the Securities and Exchange Commission (the




“SEC”) on March 25, 2020 (which extended and superseded a prior order issued on March 4, 2020), pursuant to Section 36 of the Securities Exchange Act of 1934, as amended (Release No. 34-88465)(the “Order”), regarding potential exemptions granted to public companies with respect to specified filing requirements, subject to the conditions contained in the Order. The Order allows a registrant up to an additional 45 days after the original due date of certain reports required to be filed with the SEC if the registrant’s ability to file such report timely is affected by circumstances related to COVID-19.

The Company’s operations and business have experienced disruptions due to the unprecedented conditions surrounding the COVID-19 pandemic that has spread throughout the United States and the world. These disruptions include, but are not limited to: office closures, limited access to required information and the unavailability of key Company personnel required to prepare the Quarterly Report due to suggested, and mandated, social quarantining and work from home orders. For these reasons additional time will be required to develop and process our financial information as well as prepare required disclosures related to the impact of COVID-19. In addition, given the Company’s substantial debt and the extremely challenging market conditions, the Company anticipates that the Quarterly Report will contain a statement that there is substantial doubt about the Company’s ability to continue as a going concern.

As such, the Company will be relying on the Order and will be making use of the 45-day grace period provided by the Order to delay filing of the Quarterly Report. The Company plans to file the Quarterly Report by the week of May 25, 2020, but in any event by no later than June 25, 2020, 45 days after the original due date of the Quarterly Report.

COVID-19 Risk Factor

In light of the rapidly evolving COVID-19 outbreak, the Company is also filing this Current Report on Form 8-K for the purpose of supplementing the risk factors disclosed in Item 1A of its Annual Report on Form 10-K for the fiscal year ended December 31, 2019. Accordingly, the Company’s risk factor disclosure is hereby updated as follows:

We have limited capital resources and will likely need additional funding before we are able to achieve profitability. If we are unable to raise additional capital on attractive terms, or at all, we may be unable to sustain our operations.

We have limited capital resources and expect to incur further losses for the foreseeable future. In particular our revenues have significantly declined as a result of the COVID-19 pandemic. A significant percentage of our products are utilized in elective surgeries or procedures, which may be deferred or avoided altogether due to COVID-19 outbreak, materially impacting our financial results. The COVID-19 outbreak has materially impacted our operations and financial results and continues to be fluid and uncertain, making it difficult to forecast the final impact it could have on our future operations or financial results.

As of March 31, 2020, we had approximately $42 million of cash, cash equivalents and investments available-for-sale. The Company is evaluating its recurring operating losses, net operating cash flow deficits, and an accumulated deficit, and its Quarterly Report when filed may include a determination that the recurring operating losses, net operating cash flow deficits, and an accumulated deficit raise substantial doubt about the Company’s ability to continue as a going concern for one year from the issuance of the accompanying consolidated financial statements. If the Company reaches this determination, Deerfield will have the ability to declare a default under the Facility Agreement and the Credit Agreement. As of March 31, 2020, we had approximately $180.4 million outstanding under the Deerfield Agreements. Additionally, we would be required to pay exits fees totaling $11.1 million under the Facility Agreement and the remaining $0.1 million commitment fee under the Credit Agreement. Further, if Deerfield had the ability to and were to declare a default, such default would result in a cross default under our 5.00% Notes and our 2020 Exchange Notes. As of March 31, 2020, we had $73.1 million outstanding under our 5.00% Notes and $0.15 million outstanding under our 2020 Exchange Notes. If Deerfield were to declare a default,




other lenders may then declare a default and we may be unable to repay the amounts owed without raising additional capital. If we are unable to repay the amounts owed, we may be forced to declare bankruptcy.

The consolidated financial statements have been prepared assuming the Company will continue as a going concern. The Company has not made any adjustments to the accompanying consolidated financial statements related to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company will require additional capital to sustain its operations and make the investments it needs to execute upon its longer-term business plan. If the Company is unable to generate sufficient revenue from its existing long-term business plan, the Company will need to obtain additional equity or debt financing. If the Company attempts to obtain additional debt or equity financing, the Company cannot assume that such financing will be available on favorable terms, if at all.

If our essential employees who are unable to telework become ill or otherwise incapacitated, our operations may be adversely impacted.

As a medical device manufacturer, we fall within a “critical essential infrastructure” sector, specifically the “Healthcare/Public Health” sector, and we are considered exempt under various stay at home/shelter in place orders, including the California Executive Order N-33-20 (“Stay at Home Order”) dated March 19, 2020.  Accordingly, our employees in California and other locations may continue to work because of the importance of our operations to the health and well-being of citizens in the states in which we operate.  Consistent with these Stay at Home Orders, we have implemented telework policies wherever possible for appropriate categories of “nonessential” employees.  “Essential” employees that are unable to telework continue to work at our facilities, and we have implemented appropriate safety measures, including social distancing, face covering, temperature checking and increased sanitation standards.  We are following guidance from the Center for Disease Control and the Occupational Safety and Health Administration regarding suspension of nonessential travel, self-isolation recommendations for employees returning from certain geographic areas, confirmed reports of any COVID-19 diagnosis among our employees, and the return of such employees to our workplace.  Pursuant to updated guidance from the Equal Employment Opportunity Commission, we are engaging in limited and appropriate inquiries of employees regarding potential COVID-19 exposure, based on the direct threat that such exposure may present to our workforce. We continue to address other unique situations that arise among its workforce due to the COVID-19 pandemic on a case-by-case basis.  While we believe that we have taken appropriate measures to ensure the health and wellbeing of our “essential” employees, there can be no assurances that our measures will be sufficient to protect our employees in our workplace or that they may otherwise be exposed to COVID-19 outside of our workplace.  If a number of our essential employees become ill, incapacitated or are otherwise unable to continue working during the current or any future epidemic, our operations may be adversely impacted.

Public health threats such as COVID-19 could have a material adverse effect on our operations, the operations of our business partners, and the global economy as a whole.

Public health threats and other highly communicable diseases, outbreaks of which have already occurred in various parts of the world, could adversely impact our operations, as well as the operations of our customers, suppliers, distributors and other business partners.  For example, the outbreak in December 2019 of a novel coronavirus (COVID-19) has resulted in decreased economic activity in China, as well as a number of other countries, and the scope of the outbreak and its impacts is continuing to expand.  We anticipate that our business activities will be adversely affected by the COVID-19 outbreak, but it is not currently possible to understand the full extent of the direct and indirect impacts on our business, the business of our partners, or the global economy as a whole.

The COVID-19 outbreak, or other similar outbreaks or epidemics, may have an adverse effect on the overall productivity of our workforce, and we may be required to take extraordinary measures to ensure the safety of our employees and those of our business partners. These measures could require that our employees refrain from traveling to their normal workplace for extended periods of time, which in turn could result in a decrease in our commercial activities, or result in higher costs or other inefficiencies.  In addition, our employees may be required




to take time off for extended periods of time due to illness or as a result of government-imposed changes to daily routines, including school closures.  These impacts could result in delays in or the suspension of our manufacturing operations, research and product development activities, regulatory work streams, clinical development programs and other important commercial functions.  In particular, if we were required to suspend our manufacturing operations, we may encounter severe product shortages, which would adversely affect our results of operations and harm our reputation.  We are also dependent upon our suppliers for many of our product components, and the outbreak could have a material adverse impact on the operations of one or more of our suppliers, which could prevent them from timely delivering products to us.  Further, our business would be harmed if our customers seek to limit or prevent access by our sales and clinical support teams (or the sales and clinical support teams of our distribution partners) to their operating rooms, or to their facilities generally, which we have already experienced in certain locations.  Finally, the outbreak has resulted in restrictions on domestic and international travel, which could have a negative impact on our customer engagement efforts, including through the cancellation or postponement of Company-sponsored educational events, as well as third-party conferences, trade shows and similar events.

We expect any further spread of the COVID-19 outbreak, or even the threat or perception that this could occur, could have a material adverse effect on our business, operations and financial results.

Item 9.01 Financial Statements and Exhibits.
(d)    Exhibits
Exhibit
Number
Description
Promissory Note, dated May 1, 2020, from Bank of America, N.A.
Amendment to Facility Agreements, dated May 4, 2020, by and among the Company, Deerfield ELGX Revolver, LLC and Deerfield Private Design Fund I.V., L.P.
Press Release Regarding First Quarter Financial Results, dated May 11, 2020.





















SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
ENDOLOGIX, INC.
 
 
 
Date: May 11, 2020
 
/s/ Vaseem Mahboob
 
 
Vaseem Mahboob
 
 
Chief Financial Officer
(Principal Financial and Accounting Officer)















































EXHIBIT INDEX

Exhibit
Number
Description
Promissory Note, dated May 1, 2020, from Bank of America, N.A.
Amendment to Facility Agreements, dated May 4, 2020, by and among the Company, Deerfield ELGX Revolver, LLC and Deerfield Private Design Fund I.V., L.P.
Press Release Regarding First Quarter Financial Results, dated May 11, 2020.



Exhibit 10.1


BANK OF AMERICA

PROMISSORY NOTE


Date Period    Loan Amount     Interest Rate after Deferment Period     Deferment Period
May 01, 2020     $9,812,727.00         1.00% fixed per annum         6 months


This Promissory Note ("Note") sets forth and confirms the terms and conditions of a term loan to Endologix Inc (whether one or more than one, "Borrower") from Bank of America, NA, a national banking association having an address of P.O. Box15220, Wilmington, DE 19886-5220 (together with its agents, affiliates, successors and assigns, the "Bank") for the Loan Amount and at the Interest Rate stated above (the "Loan"). The Loan is made pursuant to the Paycheck Protection Program under the Coronavirus Aid, Relief: and Economic Security Act (the "CARES Act"). The funding of the Loan is conditioned upon approval of Borrower's application for the Loan and Bank's receiving confirmation from the SBA that Bank may proceed with the Loan. The date on which the funding of the Loan takes place is referred to as the "Funding Date". If the Funding Date is later than the date of this Note, the Deferment Period commences on the Funding Date and ends six months from the Funding Date. After sixty (60) days from the date the Loan is funded, but not more than ninety (90) days from the date the Loan is funded, Borrower shall apply to Bank for loan forgiveness. If the SBA confirms full and complete forgiveness of the unpaid balance of the Loan, and reimburses Bank for the total outstanding balance, principal and interest, Borrower's obligations under the Loan will be deemed fully satisfied and paid in full. If the SBA does not confirm forgiveness of the Loan, or only partly confirms forgiveness of the Loan, or Borrower fails to apply for loan forgiveness, Borrower will be obligated to repay to the Bank the total outstanding balance remaining due under the Loan, including principal and interest (the "Loan Balance"), and in such case, Bank will establish the terms for repayment of the Loan Balance in a separate letter to be provided to Borrower, which letter will set forth the Loan Balance, the amount of each monthly payment, the interest rate (not in excess of a fixed rate of one per cent (1.00%) per annum), the term of the Loan, and the maturity date of two (2) years from the funding date of the Loan. No principal or interest payments will be due prior to the end of the Deferment Period. Borrower promises, covenants and agrees with Bank to repay the Loan in accordance with the terms for repayment as set forth in that letter (the "Repayment Letter"). Payments greater than the monthly payment or additional payments may be made at any time without a prepayment penalty but shall not relieve Borrower of its obligations to pay the next succeeding monthly payment.

In consideration of the Loan received by Borrower from Bank, Borrower agrees as follows:

1.
DEPOSIT ACCOUNT/USE OF LOAN PROCEEDS: Borrower is required to maintain a deposit account with Bank of America, N.A. (the "Deposit Account'') until the Loan is either forgiven in full or the Loan is fully paid by Borrower. Borrower acknowledges and agrees that the proceeds of the Loan shall be deposited by Bank into the Deposit Account. The Loan proceeds are to not be used by Borrower for any illegal purpose and Borrower represents to the Bank that it will derive material benefit, directly and indirectly, from the making of the Loan.

2.
DIRECT DEBIT. If the Loan is not forgiven and a Loan Balance remains, Borrower agrees that on the due date of any amount due as set forth in the Repayment Letter, Bank will debit the amount due from the Deposit Account established by Borrower in connection with this Loan. Should there be insufficient funds in the Deposit Account to pay all such sums when due, the full amount of such deficiency be shall be immediately due and payable by Borrower.

3.
INTEREST RATE: Bank shall charge interest on the unpaid principal balance of the Loan at the interest rate set forth above under "Interest Rate" from the date the Loan was funded until the Loan is paid in full.

4.
REPRESENTATIONS, WARRANTIES AND COVENANTS. (1) Borrower represents and warrants to


Exhibit 10.1

Bank, and covenants and agrees with Bank, that: (i) Borrower has read the statements included in the Application, including the Statements Required by Law and Executive Orders, and Borrower understands them. (ii) Borrower was and remains eligible to receive a loan under the rules in effect at the time Borrower submitted to Bank its Paycheck Protection Program Application Form (the "Application") that have been issued by the SBA implementing the Paycheck Protection Program under Division A, Title I of the CARES Act (the "Paycheck Protection Program Rule"). (iii) Borrower (a) is an independent contractor, eligible self-employed individual, or sole proprietor or (b) employs no more than the greater of 500 employees or, if applicable, the size standard in number of employees established by the SBA in 13 C.F.R. 121.201 for Borrower's industry. (iv) Borrower will comply whenever applicable, with the civil rights and other limitations in the Application. (v) All proceeds of the Loan will be used only for business-related purposes as specified in the Application and consistent with the Paycheck Protection Program Rule. (vi) To the extent feasible, Borrower will purchase only American-made equipment and products. (vii) Borrower is not engaged in any activity that is illegal under federal. state or local law. (viii) Borrower certifies that any loan received by Borrower under Section 7(b)(2) of the Small Business Act between January 31, 2020 and April 3, 2020 that will remain outstanding after funding of this Loan was for a purpose other than paying payroll costs and other allowable uses loans under the Paycheck Protection Program Rule. (ix) Borrower was in operation on February 15, 2020 and had employees for whom Borrower paid salaries and payroll taxes or paid independent contractors (as reported on Form(s) 1099-MISC). (x) The current economic uncertainty makes the request for the Loan necessary to support the ongoing operations of Borrower. (xi) All proceeds of the Loan will be used to retain workers and maintain payroll or make mortgage interest payments, lease payments, and utility payments, as specified under the Paycheck Protection Program Rule and Borrower acknowledges that if the funds are knowingly used for unauthorized purposes, the federal government may hold Borrower and/or Borrower's authorized representative legally liable, such as for charges of fraud. (xii) Borrower has provided Bank true, correct and complete information demonstrating that Borrower had employees for whom Borrower paid salaries and payroll taxes on or around February 15, 2020. (xiii) Borrower has provided to Bank all documentation available to Borrower on a reasonable basis verifying the dollar amounts of average monthly payroll costs for the calendar year 2019, which documentation shall include, as applicable, copies of payroll processor records, payroll tax filings and/or Form 1099-MISC. (xiv) Borrower will promptly provide to Bank (a) any additional documentation that Bank requests in order to verify payroll costs and (b) documentation verifying the number of full-time equivalent employees on payroll as well as the dollar amounts of payroll costs, covered mortgage interest payments, covered rent payments, and covered utilities for the eight week period following the Loan. (xv) Borrower acknowledges that (a) loan forgiveness will be provided by the SBA for the sum of documented payroll costs, covered mortgage interest payments, covered rent payments, and covered utilities, and not more than 25% of the Forgivable Amount may be for non-payroll costs (xvi) During the period beginning on February 15, 2020 and ending on December 31, 2020, Borrower has not and will not receive any other loan under the Paycheck Protection Program. (xvii) Borrower certifies that the information provided in the Application and the information that Borrower provided in all supporting documents and forms is true and accurate in all material respects. Borrower acknowledges that knowingly making a false statement to obtain a guaranteed loan from SBA is punishable under the law, including under 18 USC 1001 and 3571 by imprisonment of not more than five years and/or a fine of up to $250,000; under 15 USC 645 by imprisonment of not more than two years and/or a fine of not more than $5,000; and, if submitted to a Federally insured institution, under 18 USC 1014 by imprisonment of not more than thirty years and/or a fine of not more than $1,000,000. (xviii) Borrower understands, acknowledges and agrees that Bank can share any tax information received from Borrower or any Owner with SBA's authorized representatives, including authorized representatives of the SBA Office of lnspector General, for the purpose of compliance with SBA Loan Program Requirements and all SBA reviews. (xix) Neither Borrower nor any Owner, is presently suspended, debarred, proposed for debarment, declared ineligible, voluntarily excluded from participation in this transaction by any Federal department or agency, or presently involved in any bankruptcy. (xx) Neither Borrower, nor any Owner, nor any business owned or controlled by any of them, ever obtained a direct or guaranteed loan from SBA or any other Federal agency that is currently delinquent or has defaulted in the last 7 years and caused a loss to the government. (xxi) Neither Borrower, nor any Owner, is an owner of any other business or has common management with any other business, except as disclosed to the Bank in connection with the Borrower's Application. (xxii) Borrower


Exhibit 10.1

did not receive an SBA Economic Injury Disaster Loan between January 31, 2020 and April 3, 2020, except as disclosed to the Bank in connection with the Borrower's Application. (xxiii) Neither Borrower (if an individual), nor any individual owning 20% or more of the equity of Borrower (each, an " Owner"), is subject to an indictment, criminal information, arraignment, or other means by which formal criminal charges are brought in any jurisdiction, or presently incarcerated, on probation or parole. (xxiv) Neither Borrower (if an individual), nor any Owner, has within the last 5 years been convicted; pleaded guilty; pleaded nolo contendere; been placed on pretrial diversion; or been placed on any form of parole or probation (including probation before judgment) for any felony. (xxv) The United States is the principal place of residence for all employees of Borrower included in Borrower's payroll calculation included in the Application. (xxvi) The Borrower correctly indicated on its Application whether it is a franchise that is listed in the SBA's franchise directory. (xxvii) If Borrower is claiming an exemption from all SBA affiliation rules applicable to Paycheck Protection Program loan eligibility under the religious exemption to the affiliation rules, Borrower has made a reasonable, good faith determination that it qualifies for such religious exemption under 13 C.F.R. 121.103(b)(10), which provides that "[t]he relationship of a faith­ based organization to another organization is not considered an affiliation with the other organization... if the relationship is based on a religious teaching or belief or otherwise constitutes a part of the exercise of religion." (2) At all times during the term the of the Loan, Borrower represents and warrants to the Bank, that (i) if Borrower is anything other than a natural person, it is duly formed and existing under the laws of the state or other jurisdiction where organized; (ii) this Note, and any instrument or agreement required under this Note, are within Borrower's powers, have been duly authorized, and do not conflict with any of its organizational papers; (iii) the information included in the Beneficial Ownership Certification most recently provided to the Bank, if applicable, is true and correct in all respects; and (iv) in each state in which Borrower does business, it is properly licensed, in good standing, and, where required, in compliance with fictitious name (e.g. trade name or d/b/a) statutes. IF THE FUNDING DATE IS AFTER THE DATE OF THIS NOTE, BORROWER AGREES THAT BORROWER SHALL BE DEEMED TO HAVE REPEATED AND REISSUED, IMMEDIATELY PRIOR TO THE FUNDING ON TIIE FUNDING DATE, THE REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS SET FORTH ABOVE IN THIS PARAGRAPH.

5.
EVENTS OF DEFAULT: If the Loan is not forgiven and a Loan Balance remains, then from the date the Repayment Letter is sent to Borrower until the Loan Balance is fully paid, the occurrence and continuation of any of the following events shall constitute a default hereunder: (i) insolvency, bankruptcy, dissolution, issuance of an attachment or garnishment against Borrower; (ii) failure to make any payment when due under the Loan or any or all other loans made by Bank to Borrower, and such failure continues for ten (10) days after it first became due; (iii) failure to provide current financial information promptly upon request by Bank; (iv) the making of any false or materially misleading statement on any application or any financial statement for the Loan or for any or all other loans made by Bank to Borrower; (v) Bank in good faith believes the prospect of payment under the Loan or any or all other loans made by Bank to Borrower is impaired; (vi) Borrower under or in connection with the Loan or any or all other loans made by Bank to Borrower fails to timely and properly observe, keep or perform any term, covenant, agreement, or condition therein; (vii) default shall be made with respect to any other indebtedness for borrowed money of Borrower, if the default is a failure to pay at maturity or if the effect of such default is to accelerate the maturity of such indebtedness for borrowed money or to permit the holder or obligee thereof or other party thereto to cause any such indebtedness for borrowed money to become due prior to its stated maturity; (viii) the Bank in its sole discretion determines in good faith that an event has occurred that materially and adversely affects Borrower; (ix) any change shall occur in the ownership of the Borrower; (x) permanent cessation of Borrower's business operations; (xi) Borrower, if an individual, dies, or becomes disabled, and such disability prevents the Borrower from continuing to operate its business; (xii) Bank receives notification or is otherwise made aware that Borrower, or any affiliate of Borrower, is listed as or appears on any lists of known or suspected terrorists or terrorist organizations provided to Bank by the U.S. government under the USA Patriot Act of 2001; and (xiii) Borrower fails to maintain the Deposit Account with the Bank.

6.
REMEDIES: If the Loan is not forgiven and a Loan Balance remains, then from the date the Repayment


Exhibit 10.1

Letter is sent to Borrower, upon the occurrence of a default, all or any portion of the entire amount owing on the Loan, and any and all other loans made by Bank to Borrower, shall, at Bank' s option, become immediately due and payable without demand or notice. Upon a default, Bank may exercise any other right or remedy available to it at law or in equity. All persons included in the term "Borrower" are jointly and severally liable for repayment, regardless of to whom any advance of credit was made. Borrower shall pay any costs Bank may incur including without limitation reasonable attorney's fees and court costs should the Loan and/or any and all other loans made by Bank to Borrower be referred to an attorney for collection to the extent permitted under applicable state law. EACH PERSON INCLUDED IN THE TERM BORROWER WAIVES ALL SURETYSHIP AND OTHER SIMILAR DEFENSES TO THE FULL EXTENT PERMITTED BY APPLICABLE LAW.

7.
CREDIT INVESTIGATION: If the Loan is not forgiven and a Loan Balance remains, then from the date the Repayment Letter is sent to Borrower until the Loan Balance is fully paid, Borrower authorizes Bank and any of its affiliates at any time to make whatever credit investigation Bank deems is proper to evaluate Borrower's credit, financial standing and employment and Borrower authorizes Bank to exchange Borrower's credit experience with credit bureaus and other creditors Bank reasonably believes are doing business with Borrower. Borrower also agrees to furnish Bank with any financial statements Bank may request at any time and in such detail as Bank may require.

8.
NOTICES: Borrower's request for Loan forgiveness, and the documentation that must accompany that request, shall be submitted to Bank by transmitting the communication to the electronic address, website, or other electronic transmission portal provided by Bank to Borrower. Otherwise, all notices required under this Note shall be personally delivered or sent by first class mail, postage prepaid, or by overnight courier, to the addresses on the signature page of this Note, or sent by facsimile to the fax number(s) listed on the signature page, or to such other addresses as the Bank and the Borrower may specify from time to time in writing (any such notice a "Written Notice"). Written Notices shall be effective if mailed, upon the earlier of receipt or five (5) days after deposit in the U.S. mail, first class, postage prepaid,(ii) if telecopied, when transmitted, or (iii) if hand-delivered, by courier or otherwise (including telegram, lettergram or mailgram), when delivered. In lieu of a Written Notice, notices and/or communications from the Bank to the Borrower may, to the extent permitted by law, be delivered electronically (i) by transmitting the communication to the electronic address provided by the Borrower or to such other electronic address as the Borrower may specify from time to time in writing, or (ii) by posting the communication on a website and sending the Borrower a notice to the Borrower's postal address or electronic address telling the Borrower that the communication has been posted, its location, and providing instructions on how to view it (any such notice, an "Electronic Notice"). Electronic Notices shall be effective when presented to the Borrower, or is sent to the Borrower's electronic address or is posted to the Bank' s website. To retain a copy for your records, please download and print or save a copy to your device.

9.
CHOICE OF LAW; JURISDICTION; VENUE. (I) At all times that Bank is the holder of this Note, except to the extent that any law of the United States may apply, this Note shall be governed and interpreted according to the internal laws of the state of Borrower's principal place of business (the "Governing Law State"), without regard to any choice of law, rules or principles to the contrary. However, the charging and calculating of interest on the obligations under this Note shall be governed by, construed and enforced in accordance with the laws of the state of North Carolina and applicable federal law. Nothing in this paragraph shall be construed to limit or otherwise affect any rights or remedies of Bank under federal law. Borrower and Bank agree and consent to be subject to the personal jurisdiction of any state or federal court located in the Governing Law State so that trial shall only be conducted by a court in that state. (2) Notwithstanding the foregoing, when SBA is the holder, this Note will be interpreted and enforced under federal law, including SBA regulations. Lender or SBA may use state or local procedures for filing papers, recording documents, giving notice, foreclosing liens, and other purposes. By using such procedures, SBA does not waive any federal immunity from state or local control, penalty, tax, or liability. As to this Note, Borrower may not claim or assert against SBA any local or state law to deny any obligation, defeat any claim of SBA, or preempt federal law.



Exhibit 10.1

10.
MISCELLANEOUS. The Loan may be sold or assigned by Bank without notice to Borrower. Borrower may not assign the Loan or its rights hereunder to anyone without Bank's prior written consent. If any provision of this Note is contrary to applicable law or is found unenforceable, such provision shall be severed from this Note without invalidating the other provisions thereof. Bank may delay enforcing any of its rights under this Note without losing them, and no failure or delay on the part of Bank in exercising any right, power or privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, power or privilege hereunder preclude any other or future exercise thereof or the exercise of any other right, power or privilege. Bank, by its acceptance hereof, and the making of the Loan and Borrower understand and agree that this Note constitutes the complete understanding between them. This Note shall be binding upon Borrower, and its successors and assigns, and inure to the benefit of Bank and its successors and assigns.

11.
BORROWING AUTHORIZED. The signer for Borrower represents, covenants and warrants to Bank that he or she is certified to borrow for the Borrower and is signing this Note as the duly authorized sole proprietor, owner, sole shareholder, officer, member, managing member, partner, trustee, principal, agent or representative of Borrower, and further acknowledges and confirms to Bank that by said signature he or she has read and understands all of the terms and provisions contained in this Note and agrees and consents to be bound by them. This Note and any instrument or agreement required herein, are within the Borrower's powers, have been duly authorized, and do not conflict with any of its organizational papers. The individuals signing this Agreement on behalf of each Borrower are authorized to sign such documents on behalf of such entities. For purposes of this Note only, the Bank may rely upon and accept the authority of only one signer on behalf of the Borrower, and for this Note, this resolution supersedes and replaces any prior and existing contrary resolution provided by Borrower to Bank.

12.
ELECTRONIC COMMUNICATIONSAND SIGNATURES. This Note and any document, amendment, approval, consent, information, notice, certificate, request, statement, disclosure or authorization related to this Note (each a " Communication"), including Communications required to be in writing, may, if agreed by the Bank, be in the form of an Electronic Record and may be executed using Electronic Signatures, including, without limitation, facsimile and/or .pdf. The Borrower agrees that any Electronic Signature (including, without limitation, facsimile or .pelf) on or associated with any Communication shall be valid and binding on the Borrower to the same extent as a manual, original signature, and that any Communication entered into by Electronic Signature, will constitute the legal, valid and binding obligation of the Borrower enforceable against the Borrower in accordance with the terms thereof to the same extent as if a manually executed original signature was delivered to the Ban1c. Any Communication may be executed in as many counterparts as necessary or convenient, including both paper and electronic counterparts, but all such counterparts are one and the same Communication. For the avoidance of doubt, the authorization under this paragraph may include, without limitation, use or acceptance by the Bank of a manually signed paper Communication which has been converted into electronic form (such as scanned into PDF format), or an electronically signed Communication converted into another format, for transmission, delivery and/or retention. The Bank may, at its option, create one or more copies of any Communication in the form of an imaged Electronic Record ("Electronic Copy"), which shall be deemed created in the ordinary course of the Ban1c's business, and destroy the original paper document. All Communications in the form of an Electronic Record, including an Electronic Copy, shall be considered an original for all purposes, and shall have the same legal effect, validity and enforceability as a paper record. Notwithstanding anything contained herein to the contrary, the Bank is under no obligation to accept an Electronic Signature in any form or in any format unless expressly agreed to by the Bank pursuant to procedures approved by it; provided, further, without limiting the foregoing, (a) to the extent the Bank has agreed to accept such Electronic Signature, the Bank shall be entitled to rely on any such Electronic Signature without further verification and (b) upon the request of the Bank any Electronic Signature shall be promptly followed by a manually executed, original counterpart. For purposes hereof, "Electronic Record" and "Electronic Signature" shall have the meanings assigned to them, respectively, by 15 USC §7006, as it may be amended from time to time.

13.
CONVERSIONTO PAPER ORIGINAL. At the Bank's discretion the authoritative electronic copy of this Note ("Authoritative Copy") may be converted to paper and marked as the original by the Bank (the "Paper Original"). Unless and until the Bank creates a Paper Original, the Authoritative Copy of this Agreement:


Exhibit 10.1

(1) shall at all times reside in a document management system designated by the Bank for the storage of authoritative copies of electronic records, and (2) is held in the ordinary course of business. In the event the Authoritative Copy is converted to a Paper Original, the parties hereto acknowledge and agree that: (1) the electronic signing of this Agreement also constitutes issuance and delivery of the Paper Original, (2) the electronic signature(s) associated with this Agreement, when affixed to the Paper Original, constitutes legally valid and binding signatures on the Paper Original, and (3) the Borrower's obligations will be evidenced by the Paper Original after such conversion.

14.
BORROWER ATI'ESTATION. Borrower attests and certifies to Bank that it has not provided false or misleading information or statements to the Bank in its application for the Loan, and that the certifications, representations, warranties, and covenants made to the Bank in this Note and elsewhere relating to the Loan are true, accurate, and correct. Borrower further attests and certifies to Bank that it is has read, understands, and acknowledges that the Loan is being made under the CARES Act, and any use of the proceeds of the Loan other than as permitted by the CARES Act, or any false or misleading information or statements provided to the Bank in its application for the Loan or in this Note may subject the Borrower to criminal and civil liability under applicable state and federal laws and regulations, including but not limited to, the False Claims Act, 31 U.S.C. Section 3729, et. seq. Borrower further acknowledges and understands that this Note is not valid and effective until and unless Borrower's application for the Loan is approved and Bank's receiving confirmation from the SBA that Bank may proceed with the Loan.


IN WITNESS WHEREOF, I, the authorized representative of the Borrower, hereto have caused this Promissory Note to be duly executed as of the date set forth below.



BORROWER: Endologix Inc

/s/ James Tejedor
Signature of Authorized Representative of Borrower
James Tejedor
Print Name
Authorized Representative
Title

STREET ADDRESS: 2 Musick
CITY/STATE/ZIP CODE: Irvine, CA, 92618-1631



Exhibit 10.2

AMENDMENT TO FACILITY AGREEMENTS

This AMENDMENT TO FACILITY AGREEMENTS (this “Agreement”), dated as of May 4, 2020, is entered into among Endologix, inc., a Delaware corporation (the “Borrower”), each of the other Loan Parties party hereto, DEERFIELD ELGX REVOLVER, LLC, as agent under the ABL Facility Agreement (as defined below) (the “ABL Agent”), DEERFIELD PRIVATE DESIGN FUND IV, L.P. as agent under the Term Loan Facility Agreement (as defined below) (in such capacity, the “Term Loan Agent” and, collectively with the ABL Agent, the “Agents”) and the other lenders under the ABL Facility Agreement and Term Loan Facility Agreement party hereto.
RECITALS
WHEREAS, the Borrower, certain of its subsidiaries, the lenders from time to time party thereto (the “ABL Lenders”) and the ABL Agent are parties to that certain Credit Agreement, dated as of August 9, 2018 (as amended, modified or supplemented from time to time, the “ABL Facility Agreement”);
WHEREAS, the Borrower, certain of its subsidiaries, the lenders from time to time party thereto (the “Term Loan Lenders” and, collectively with the ABL Lenders, the “Lenders”) and the Term Loan Agent are parties to that certain Amended and Restated Facility Agreement, dated as of August 9, 2018 (as amended, modified or supplemented from time to time, the “Term Loan Facility Agreement” and, collectively with the ABL Facility Agreement, the “Facility Agreements”); and
WHEREAS, the Borrower has requested, and subject to the terms and conditions set forth herein the Agents and the Required Lenders (as defined in each of the Facility Agreements, collectively, the “Required Lenders”) have agreed, to amend each Facility Agreement, as more specifically set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:
SECTION 1.    Defined Terms. All capitalized terms used herein without definition shall have the meanings ascribed thereto in the applicable Facility Agreement, as amended hereby.

SECTION 2.    Amendments to Facility Agreement. Effective as of the Effective Date (as defined below) and subject to and in accordance with the terms and conditions set forth herein, each of the Facility Agreements is hereby amended as follows:
(a)    by adding the following definition to each of Section 1.01 of the ABL Facility Agreement and Section 1.1 of the Term Loan Facility Agreement, in the appropriate alphabetical order:
““CARES Debt” means unsecured Indebtedness incurred by one or more of the Loan Parties pursuant to and in accordance with the Paycheck Protection Program administered by the U.S. Small Business Administration in accordance with Sections 1102 and 1106 of the Coronavirus Aid, Relief and Economic Security Act (P.L. 116-136) and the rules promulgated thereunder, in each case, as in effect on May 1, 2020 (the “CARES Act”).”;
(b)    by replacing clause (q) of the definition of “Permitted Indebtedness” in Section 1.01 of the ABL Facility Agreement with the following:
“(q) (1) CARES Debt in an amount not to exceed $9,812,727 in the aggregate at any time outstanding; provided the CARES Debt shall comply in all respects with the applicable requirements of the CARES Act, including, without limitation, that (i) the CARES Debt shall constitute a “covered loan” under, and as defined in, Section 1102 of the CARES Act, (ii) the proceeds of the CARES Debt shall be used only for the purposes permitted under Section 1102 of the CARES Act and (iii) the Borrower shall use best efforts to comply with Section 1106 of the CARES Act to obtain forgiveness of the CARES Debt to the extent provided thereunder, and (2) other unsecured Indebtedness incurred


Exhibit 10.2

by the Loan Parties or any of their Subsidiaries in an aggregate outstanding amount not to exceed $2,500,000 at any time outstanding;” and
(c)    by replacing clause (r) of the definition of “Permitted Indebtedness” in Section 1.1 of the Term Loan Facility Agreement with the following:
“(r) (1) CARES Debt in an amount not to exceed $9,812,727 in the aggregate at any time outstanding; provided the CARES Debt shall comply in all respects with the applicable requirements of the CARES Act, including, without limitation, that (i) the CARES Debt shall constitute a “covered loan” under, and as defined in, Section 1102 of the CARES Act, (ii) the proceeds of the CARES Debt shall be used only for the purposes permitted under Section 1102 of the CARES Act and (iii) the Borrower shall obtain forgiveness of the CARES Debt to the extent provided thereunder, and (2) other unsecured Indebtedness incurred by the Loan Parties or any of their Subsidiaries in an aggregate outstanding amount not to exceed $2,500,000 at any time outstanding;”.
SECTION 3.    Effectiveness. This Agreement shall become effective on the first date when the following conditions shall have been satisfied or waived (such date, the “Effective Date”):
(a) each Agent’s receipt of counterparts to this Agreement, duly executed by the Borrower, the Loan Parties and the Required Lenders and acknowledged by such Agent;
(b) payment of all fees, costs and expenses of the Lenders and the Agents; including, but not limited to, the fees and expenses of Sullivan & Cromwell LLP incurred up to the date hereof;
(c)    the representations and warranties confirmed herein shall be true and correct and no Default or Event of Default (as defined in each Facility Agreement) shall have occurred and be continuing immediately prior to or after giving effect to this Agreement.
SECTION 4    Representations and Warranties. To induce the Required Lenders to enter into this Agreement, each Loan Party represents and warrants to the Lenders and the Agent on and as of the Effective Date that, in each case:
(a)    the representations and warranties of each Loan Party set forth in Article 4 of the ABL Facility Agreement, Article 3 of the Term Loan Agreement and in each other Facility Document (as defined in each of the Facility Agreements) are true and correct in all material respects on and as of the Effective Date, after giving effect to this Agreement, with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date, in which case they shall be true and correct in all material respects as of such earlier date; provided that any representation and warranty that is qualified as to “materiality,” “Material Adverse Effect” or similar language shall be true and correct (after giving effect to any qualification therein) in all respects as of such respective dates;
(b)    no Default or Event of Default exists and is continuing immediately prior to or after giving effect to this Agreement;
(c)    it has the right, power and authority and has taken all necessary corporate and other action to authorize the execution, delivery and performance of this Agreement in accordance with its terms; and
(d)    this Agreement has been duly executed and delivered by the duly authorized officers of each Loan Party, and each such document constitutes the legal, valid and binding obligation of each such Loan Party, enforceable in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or similar state or federal debtor relief laws from time to time in effect which affect the enforcement of creditors’ rights in general and the availability of equitable remedies.
SECTION 5.    Reference to and Effect on the Facility Agreement and the Other Facility Documents.


Exhibit 10.2

(a)    Each reference in each Facility Agreement to “this Facility Agreement,” “this Agreement,” “hereunder,” “hereof,” “herein” or words of like import referring to such Facility Agreement, and each reference in the other Facility Documents relating to such Facility Agreement to “the Facility Agreement,” “thereunder,” “thereof,” “therein” or words of like import referring to such Facility Agreement, shall mean and be a reference to such Facility Agreement, as amended or modified hereby.
(b)    Except as specifically amended or modified herein, each Facility Agreement and all other Facility Documents relating thereto are and shall continue to be in full force and effect and are hereby in all respects ratified and confirmed.
(c)    Except as expressly provided herein, the execution, delivery and effectiveness of this Agreement shall not operate as a waiver of any right, power or remedy of any Agent or the Lenders under either Facility Agreement or any other Facility Documents, nor constitute a waiver of any provision of either Facility Agreement or any other Facility Documents.
(d)    This Agreement shall be a Facility Document for purposes of each of the Facility Agreements.
SECTION 6.    Execution in Counterparts. This Agreement may be executed in counterparts (and by different parties hereto in different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract. Delivery of an executed counterpart of a signature page of this Agreement by facsimile or other electronic imaging means (e.g. “pdf” or “tiff”) shall be effective as delivery of a manually executed counterpart of this Agreement.
SECTION 7.    Governing Law. This Agreement and any claims, controversy, dispute or cause of action (whether in contract or tort or otherwise) based upon, arising out of or relating to this Agreement and the transactions contemplated hereby shall be governed by, and construed in accordance with, the law of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written.
BORROWER:

ENDOLOGIX, INC.
By:
/s/ Vaseem Mahboob
Name:
Vaseem Mahboob
Title:
Chief Financial Officer

OTHER LOAN PARTIES:

CVD/RMS ACQUISITION CORP.
By:
/s/ Vaseem Mahboob
Name:
Vaseem Mahboob
Title:
Chief Financial Officer

NELLIX, INC.


Exhibit 10.2

By:
/s/ Vaseem Mahboob
Name:
Vaseem Mahboob
Title:
Chief Financial Officer

TRIVASCULAR TECHNOLOGIES, INC.
By:
/s/ Vaseem Mahboob
Name:
Vaseem Mahboob
Title:
Chief Financial Officer

TRIVASCULAR, INC.
By:
/s/ Vaseem Mahboob
Name:
Vaseem Mahboob
Title:
Chief Financial Officer

ENDOLOGIX CANADA, LLC
By:
/s/ Vaseem Mahboob
Name:
Vaseem Mahboob
Title:
Chief Financial Officer

TRIVASCULAR SALES LLC
By:
/s/ Vaseem Mahboob
Name:
Vaseem Mahboob
Title:
Chief Financial Officer

RMS/ENDOLOGIX SIDEWAYS MERGER CORP.
By:
/s/ Vaseem Mahboob
Name:
Vaseem Mahboob
Title:
Chief Financial Officer

ABL AGENT:
DEERFIELD ELGX REVOLVER, LLC
By: Deerfield Management Company, L.P. (Series C), Manager
By: Flynn Management, LLC, General Partner
By:     /s/ David Clark
Name: David Clark


Exhibit 10.2

Title: Authorized Signatory

Term Loan AGENT:

DEERFIELD PRIVATE DESIGN FUND IV, L.P.
By: Deerfield Mgmt IV, L.P., General Partner
By: J.E. Flynn Capital IV, LLC, General Partner
By:     /s/ David Clark
Name: David Clark
Title: Authorized Signatory


LENDERS:

DEERFIELD PARTNERS, L.P.
By: Deerfield Mgmt, L.P., its General Partner
By: J.E. Flynn Capital, LLC, its General Partner
By:     /s/ David Clark
Name: David Clark
Title: Authorized Signatory

DEERFIELD PRIVATE DESIGN FUND III, L.P.
By: Deerfield Mgmt III, L.P., General Partner
By: J.E. Flynn Capital III, LLC, General Partner
By:     /s/ David Clark
Name: David Clark
Title: Authorized Signatory


DEERFIELD PRIVATE DESIGN FUND IV, L.P.
By: Deerfield Mgmt IV, L.P., General Partner


Exhibit 10.2

By: J.E. Flynn Capital IV, LLC, General Partner
By:     /s/ David Clark
Name: David Clark
Title: Authorized Signatory




Exhibit 99.1

ELGX_LOGOA16.JPG             
    
INVESTOR CONTACT:
 
Endologix, Inc.

 
Vaseem Mahboob, CFO

 
(949) 595-7200

 
                
Endologix Reports First Quarter 2020
Financial Results


IRVINE, Calif., May 11, 2020 - Endologix, Inc. (the “Company”) (NASDAQ: ELGX), a developer and marketer of innovative treatments for aortic disorders, today announced its financial results for the first quarter ended March 31, 2020. The Company’s financial results are preliminary and subject to any adjustments that may occur following the completion of the quarterly review of the Company’s financial statements by its independent auditor.

Global revenue in the first quarter of 2020 was $28.51 million, a 19.9% decrease from $35.61 million in the first quarter of 2019.

“Our first quarter results were impacted by the deferral of AAA procedures related to the COVID-19 pandemic,” commented John Onopchenko, Chief Executive Officer of Endologix, Inc. “We are confident that these deferred procedures will be rescheduled once hospitals widen the criteria for treating AAA patients from today's 'emergent only' standard. As we navigate this pandemic, our top priority remains the safety of our employees as well as the patients, surgeons, and affiliated caregivers that we serve. As hospitals resume a more normalized level of care, we are also focused on ensuring the continued availability of products to patients in need. We are taking the necessary actions to prepare for a return to pre-pandemic procedure volume and to provide necessary case support and ongoing execution of our continuous improvement mandate.”



Financial Results
U.S. revenue in the first quarter of 2020 was $18.6 million, a 18.2% decrease from $22.8 million in the first quarter of 2019.

International revenue in the first quarter of 2020 was $9.9 million, a 22.9% decrease from $12.8 million in the first quarter of 2019. On a constant currency basis, international revenue decreased 21.1% compared to the first quarter of 2019.

Gross profit was $15.1 million in the first quarter of 2020, representing a gross margin of 53.1%. This compares to a gross profit of $23.2 million, or a gross margin of 65.2%, in the first quarter of 2019.
Gross profit in the first quarter of 2020 was negatively impacted by unfavorable variances associated with lower revenue.

Total operating expenses in the first quarter of 2020 were $31.3 million, a 11.0% decrease from $35.2 million in the first quarter of 2019. Operating expenses in the first quarter of 2019 included $0.4 million of costs associated with restructuring. Excluding these items, operating expenses decreased 9.9% compared to the first quarter of 2019.

Net Loss for the first quarter of 2020 was $18.1 million, or $(0.90) per share, compared to a Net Loss of $22.0 million, or $(2.12) per share, a year ago. Adjusted Net Loss (non-GAAP measure, defined below) totaled $16.2 million, compared to an Adjusted Net Loss of $11.7 million for the first quarter of 2019. Adjusted EBITDA loss (non-GAAP measure, defined below) totaled $13.2 million for the first quarter of 2020, compared to Adjusted EBITDA loss of $7.6 million a year ago.

Total cash, cash equivalents, and restricted cash were $42.2 million as of March 31, 2020, compared to $42.8 million as of December 31, 2019. The March 31, 2020 balance included $10.5 million outstanding under the Company's revolving credit facility with certain affiliates of Deerfield Management Company, L.P.

Fiscal Year 2020 Financial Guidance
The Company believes that COVID-19 pandemic will continue to have a negative impact on its financial results and business operations. Due to the uncertainty surrounding the magnitude of COVID-19’s spread and evolution, as well as the present inability to accurately forecast the ultimate impact to the Company’s operations and financial results, management has withdrawn the Company’s previously issued financial guidance for 2020 and will not be providing financial guidance at this time.

Conference Call Information
The Company's management will host a conference call today at 4:30 p.m. ET (1:30 p.m. PT) to discuss its first quarter 2020 results.

To participate in the conference call, dial 800-263-0877 (domestic) or +1 323-794-2094 (international) and refer to the passcode 4426442.

This conference call will also be webcast and can be accessed from the “Investors” section of the Company’s website at www.endologix.com. The webcast replay of the call will be available at the same site approximately one hour after the end of the call.

A recording of the call will also be available from 7:30 p.m. ET on Monday, May 11, 2020, until 11:59 p.m. ET on Monday, May 18, 2020. To hear this recording, dial 844-512-2921 (domestic) or +1 412-317-6671 (international) and enter the passcode 4426442.


About Endologix, Inc.
The Company develops and manufactures minimally invasive treatments for aortic disorders. The Company's focus is in endovascular stent grafts for the treatment of abdominal aortic aneurysms (AAA). AAA is a weakening of the wall of the aorta, the largest artery in the body, resulting in a balloon-like enlargement. Once an AAA develops, it continues to enlarge and, if left untreated, becomes increasingly susceptible to rupture. The overall patient mortality rate for ruptured AAA is approximately 80%, making it a leading cause of death in the U.S. For more information, visit www.endologix.com. 

The Nellix® EndoVascular Aneurysm Sealing System has a CE Mark and is an investigational device in the United States. The Ovation Alto® System has obtained FDA approval in the United States and is presently an investigational device in the EU.


Cautionary Note Regarding Forward-Looking Statements
This press release contains “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can generally be identified by the use of words such as “anticipate,” “expect,” “could,” “may,” “will,” “believe,” “estimate,” “forecast,” “goal,” “project,” “continue,” “outlook,” “guidance,” “future,” other words of similar meaning and the use of future dates. Forward-looking statements include all statements other than statements of historical fact contained in this press release, including statements regarding the impact of COVID-19 on the Company’s operations and financial results, the rescheduling of deferred procedures, the normalizing of healthcare services, the Company’s preparedness for a return to pre-pandemic procedure volume and related case support, the Company’s ability to maintain compliance with its covenants under its debt arrangements, and the Company’s confidence that continued execution and commitment to its culture of accountability will enable it to achieve, profitable, long-term growth; accuracy of which are necessarily subject to risks and uncertainties that may cause the Company’s actual results to differ materially and adversely from the statements contained herein. Some of the potential risks and uncertainties that could cause actual results to differ materially and adversely from anticipated results include the scope and duration of the COVID-19 pandemic, the cancellation of deferred procedures, continued market acceptance, endorsement and use of the Company’s products, the Company’s continued compliance with its financial covenants and other operating restrictions under its lending facilities, the Company’s ability to access the capital markets on terms acceptable to it or at all, the Company’s abilities to service its indebtedness and to satisfy and discharge its indebtedness as such indebtedness comes due, the success of clinical trials relating to the Company’s products, product research and development efforts, uncertainty in the process of obtaining and maintaining regulatory approval for the Company’s products, the Company's ability to protect its intellectual property rights and proprietary technologies, the Company’s ability to retain its key executive, sales and other personnel, and other economic, business, competitive, and regulatory factors. Forward-looking statements represent management’s current expectations and predictions about trends affecting the Company's business and industry and are based on information available as of the time such statements are made. The forward-looking statements contained in this press release speak only as of the date of this press release. The Company undertakes no obligation to update any forward- looking statements contained in this press release to reflect new information, events or circumstances after the date they are made, or to reflect the occurrence of unanticipated events. Please refer to the Company’s filings with the Securities and Exchange Commission including its Annual Report on Form 10-K for the year ended December 31, 2019 and subsequent Quarterly Reports on Form 10-Q for more detailed information regarding these risks and uncertainties and other factors that may cause actual results to differ materially from those expressed or implied in the forward-looking statements.

Discussion of Non-GAAP Financial Measures
The Company’s management believes that the non-GAAP measures of (1) “Adjusted Net Income (Loss)” and (2) “Adjusted EBITDA” enhance an investor’s overall understanding of the Company’s financial and operating performance and its future prospects by (i) being more reflective of core operating performance and (ii) being more comparable with financial results over various periods. These measures, when used in conjunction with related financial measures calculated in accordance with generally accepted accounting principles in the United States (“GAAP”), provide investors with an additional financial analytical framework that may be useful in assessing the Company’s financial condition and results of operations. The Company’s management uses these financial measures for strategic decision making, forecasting future financial results, and evaluating current period financial and operating performance. The presentation of non-GAAP financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. Furthermore, these measures are not intended to be liquidity measures. Other companies, including other companies in the Company’s industry, may not use these measures or may calculate these measures differently than the Company does, limiting their usefulness as comparative measures. The Company intends to calculate these non-GAAP financial measures in a consistent manner from period to period. A reconciliation of each of the non-GAAP financial measures to the most directly comparable GAAP measures has been provided under the heading “Non-GAAP Reconciliations” in the financial statement tables attached to this press release.

Adjusted Net Income (Loss) Definition:
(1) “Adjusted Net Income (Loss)” is a non-GAAP measure defined by the Company as net income (loss) under GAAP, excluding (to the extent relevant in a particular reporting period): (i) restructuring and other transition costs; (ii) contract termination, product withdrawal and business acquisition expenses; (iii) legal settlement costs; (iv) business development expenses, including licensing costs related to research and development activities; (v) inventory step-up amortization; (vi) interest expense; (vii) foreign currency loss (gain); (viii) fair value adjustment to Nellix® contingent consideration liability; (ix) fair value adjustment of derivative liabilities; and (x) loss on debt extinguishment.

In the three months ended March 31, 2020 and 2019, this GAAP adjustment to net loss specifically represents: (i) restructuring and other transition costs; (ii) contract termination, product withdrawal and business acquisition expenses; (iii) interest expense; (iv) foreign currency loss (gain); (v) fair value adjustment to Nellix® contingent consideration liability; (vi) fair value adjustment of derivative liabilities; and (vii) loss on debt extinguishment.


Adjusted EBITDA Definition:

(2) “Adjusted EBITDA” is a non-GAAP measure defined by the Company as “Adjusted Net Income (Loss)” excluding income tax (benefit) expense, depreciation and amortization expense, and stock-based compensation expense.























# # #


Exhibit 99.1

ENDOLOGIX, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
Unaudited
(In thousands, except per share amounts)
 
Quarter Ended
 
 
March 31,
 
 
2020
 
2019
 
Revenue
 
 
 
 
U.S.
$
18,629

 
$
22,786

 
International
9,881

 
12,820

 
Total Revenue
28,510

 
35,606

 
Cost of goods sold
13,378

 
12,407

 
Gross profit
15,132

 
23,199

 
Gross margin
 
 
 
 
Operating expenses:
 
 
 
 
Research and development
3,536

 
4,787

 
Clinical and regulatory affairs
3,165

 
3,785

 
Marketing and sales
14,496

 
16,786

 
General and administrative
10,119

 
9,416

 
Restructuring costs
—

 
419

 
Total operating expenses
31,316

 
35,193

 
Loss from operations
(16,184
)
 
(11,994
)
 
Other expense, net
(11,649
)
 
(8,172
)
 
Change in fair value of contingent consideration related to acquisition
300

 
200

 
Loss on debt extinguishment
(730
)
 
—

 
Change in fair value of derivative liabilities
10,175

 
(2,023
)
 
Total other expense, net
(1,904
)
 
(9,995
)
 
Net loss before income taxes
(18,088
)
 
(21,989
)
 
Income tax expense
(28
)
 
(39
)
 
Net loss
$
(18,116
)
 
$
(22,028
)
 
 
 
 
 
 
Comprehensive loss, net of taxes:
 
 
 
 
Net loss
$
(18,116
)
 
$
(22,028
)
 
Other comprehensive income (loss) foreign currency translation
748

 
(598
)
 
Comprehensive loss
$
(17,368
)
 
$
(22,626
)
 
 
 
 
 
 
Basic and diluted net loss per share
$
(0.90
)
 
$
(2.12
)
 
Shares used in computing basic and diluted net loss per share
20,067

 
10,374

 



Exhibit 99.1

Non-GAAP Reconciliations:
 
 
 
 
 
 
 
 
 
 
Quarter Ended
 
 
March 31,
 
 
2020
 
2019
 
Net Loss to Adjusted Net Loss:
 
 
 
 
Net loss
$
(18,116
)
 
$
(22,028
)
 
Fair value adjustment to Nellix contingent consideration liability
(300
)
 
(200
)
 
Interest expense
10,527

 
8,490

 
Foreign currency (gain) loss
1,141

 
(400
)
 
Restructuring and other transition costs
—

 
419

 
Fair value adjustment of derivative liabilities
(10,175
)
 
2,023

 
Loss on extinguishment of debt
730

 
—

 
(1) Adjusted Net Loss
$
(16,193
)
 
$
(11,696
)
 
 
 
 
 
 
Adjusted Net Loss to Adjusted EBITDA:
 
 
 
 
Adjusted Net Loss
$
(16,193
)
 
$
(11,696
)
 
Income tax expense
28

 
39

 
Depreciation and amortization expense
1,192

 
1,735

 
Stock-based compensation expense
1,733

 
2,362

 
(2) Adjusted EBITDA
$
(13,240
)
 
$
(7,560
)
 











Exhibit 99.1


ENDOLOGIX, INC.
CONSOLIDATED BALANCE SHEETS
Unaudited
(In thousands, except share and per share amounts)
 
March 31,
2020
 
December 31,
2019
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
40,854

 
$
41,560

Restricted cash
1,381

 
1,200

Accounts receivable, net of allowance for doubtful accounts of $1,596 and $1,317, respectively
18,951

 
22,392

Other receivables
298

 
282

Inventories
24,486

 
26,405

Prepaid expenses and other current assets
2,548

 
1,864

Total current assets
88,518

 
93,703

Property and equipment, net
12,473

 
13,152

Goodwill
120,783

 
120,814

Other intangible assets, net
72,086

 
72,603

Deposits and other assets
786

 
1,124

Operating lease right-of-use assets
5,707

 
5,768

Total assets
$
300,353

 
$
307,164

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
12,464

 
$
14,024

Accrued payroll
21,870

 
18,232

Accrued expenses and other current liabilities
16,443

 
12,931

Current portion of debt
167,861

 
10,606

Revolving line of credit
10,519

 
—

Total current liabilities
229,157

 
55,793

Deferred income taxes
150

 
150

Operating lease liabilities
11,376

 
11,621

Derivative liabilities
—

 
940

Other liabilities
1,866

 
2,244

Contingently issuable common stock
200

 
500

Debt
4,281

 
172,060

Total liabilities
247,030

 
243,308

Commitments and contingencies
 
 
 
Stockholders’ equity:
 
 
 
Series DF-1 convertible preferred stock, $0.001 par value, 1,150,000 shares authorized, 14,649 shares issued and outstanding
—

 
—

Common stock, $0.001 par value, 170,000,000 shares authorized, 19,215,059 and 18,190,054 shares issued, respectively, and 19,097,506 and 18,098,464 shares outstanding, respectively
19

 
18

Treasury stock, at cost, 117,553 and 91,590 shares, respectively
(4,271
)
 
(4,235
)
Additional paid-in capital
737,599

 
730,729

Accumulated deficit
(682,588
)
 
(664,472
)
Accumulated other comprehensive income
2,564

 
1,816

Total stockholders’ equity
53,323

 
63,856

Total liabilities and stockholders’ equity
$
300,353

 
$
307,164