##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-K
  þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2008
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the transaction period from  to.
 Commission file number: 000-28440
 Endologix, Inc.
 (Exact name of registrant as specified in its charter)
 Delaware
    
    68-0328265(State or other jurisdiction of
    
    (IRS Employerincorporation or organization)
    
    Identification No.)
 11 Studebaker, Irvine, California 92618  (Address of principal executive offices, including zip code)
 (949) 595-7200
  Title of each class
    
    Name of each exchange on which registeredCommon Stock, $0.001 par value
    
    The NASDAQ Stock Market, LLC
 None
 o þ
 o þ
 þ o
 o
  Large accelerated filer oAccelerated filer þNon-accelerated filer o(Do not check if a smaller reporting company)Smaller reporting company o o þ
   DOCUMENTS INCORPORATED BY REFERENCE




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##### 



ENDOLOGIX, INC.
 ANNUAL REPORT ON
Form 10-K
For the Fiscal Year Ended December 31, 2008
 TABLE OF CONTENTS
 PagePART IItem 1 Business
    
    
    2Item 1A Risk Factors
    
    
    10Item 1B Unresolved Staff Comments
    
    
    20Item 2 Properties
    
    
    20Item 3 Legal Proceedings
    
    
    20Item 4 Submission of Matters to a Vote of Security Holders
    
    
    20PART IIItem 5 Market for Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
    
    
    21Item 6 Selected Financial Data
    
    
    22Item 7 Managements Discussion and Analysis of Financial Condition and Results of Operation
    
    
    22Item 7A Quantitative and Qualitative Disclosures About Market Risk
    
    
    30Item 8 Financial Statements and Supplementary Data
    
    
    31Item 9 Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
    
    
    31Item 9A Controls and Procedures
    
    
    31Item 9B Other Information
    
    
    32PART IIIItem 10 Directors, Executive Officers and Corporate Governance
    
    
    33Item 11 Executive Compensation
    
    
    33Item 12 Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
    
    
    33Item 13 Certain Relationships and Related Transactions, and Director Independence
    
    
    33Item 14 Principal Accounting Fees and Services
    
    
    33PART IVItem 15 Exhibits, Financial Statement Schedules
    
    
    34SIGNATURES
    
    
    37EX-21.1EX-23.1EX-31.1EX-31.2EX-32.1EX-32.2




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This Annual Report on Form 10-K contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended. You can identify forward-looking statements generally by the use of
forward-looking terminology such as believes, expects, may, will, intends, plans,
should, could, seeks, pro forma, anticipates, estimates, continues, or other
variations thereof, including their use in the negative, or by discussions of strategies,
opportunities, plans or intentions. In addition, any statements that refer to projections of our
future financial performance, trends in our businesses, or other characterizations of future events
or circumstances are forward-looking statements. We have based these forward-looking statements
largely on our current expectations based on information currently available to us and projections
about future events and trends affecting the financial condition of our business. These
forward-looking statements are subject to a number of risks, uncertainties, and assumptions
including, among other things:
 
    
    market acceptance of our Powerlink® System;
    
    the level and availability of third party payor reimbursement for our products;
    
    our ability to effectively manage our anticipated growth;
    
    our ability to protect our intellectual property rights and proprietary technology;
    
    our ability to effectively develop new or complementary technologies;
    
    development and management of our business and anticipated trends of our business;
    
    our ability to attract, retain and motivate qualified personnel;
    
    our ability to attract and retain customers;
    
    the market opportunity for our products and technology;
    
    the nature of regulatory requirements that apply to us, our suppliers and competitors
and our ability to obtain and maintain any required regulatory approvals;
    
    our future capital expenditures and needs;
    
    our ability to effectively compete;
    
    general economic and business conditions; and
    
    other risks set forth under Risk Factors in Item 1A of this Annual Report on Form
10-K.
 The forward-looking statements involve known and unknown risks, uncertainties and other
factors that may cause actual results to differ in significant ways from any future results
expressed or implied by the forward-looking statements. Unless otherwise required by law, we
undertake no obligation to publicly update or revise any forward-looking statements, either as a
result of new information, future events or otherwise after the date of this Annual Report on Form
10-K.
 1




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PART I
 
 Item 1. Business
 Introduction
   Industry Background
     Market Opportunity
  2




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
    
    First, these findings support clinical study data showing that endovascular repair
significantly reduces morbidity and mortality versus open surgical repair. Importantly,
these findings are based on a patient population that typically has a significantly higher
co-morbidity rate compared with those patients treated by open surgery.
    
    Second, patients treated by endovascular repair were discharged to their homes in
significantly greater numbers than those treated by surgery. This advantage has substantial
clinical and economic benefits for patients and payors alike.
    
    Finally, the study points to the fact that open surgical repair entails risk of
re-hospitalization due to problems associated with surgical incision. Patients had to be
re-admitted over time for surgical complications associated with the laparotomy, such as
adhesions and bowel resections, at a much higher rate than those undergoing endovascular
repair.
   Our Strategy
  
    
    Focus exclusively on the aorta and become the industry expert in the treatment of aortic
disorders;
    
    Provide differentiated, less invasive devices for the treatment of aortic disorders with
exceptional clinical results;
    
    Develop and introduce innovative new products for the treatment of aortic disorders on a
regular basis; and
    
    Provide excellent clinical and technical support to physicians worldwide by building an
experienced, knowledgeable and well-funded sales and marketing organization.
 Our Products
 Powerlink System
 3




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
    
    One-Piece, Bifurcated ELG.This eliminates many of the problems associated with early
generation multi-piece systems. Our products eliminate much of the guide wire manipulation
required during the procedure to assemble the component parts of a modular system, thereby
simplifying the procedure. In addition, in the follow-up period, there can be no limb
component separation with a one-piece system. We believe this should result in continued
long-term exclusion of the aneurysm, and improved clinical results.
    
    Fully Supported.The main body and limbs of the Powerlink System are fully supported by
a cobalt chromium alloy cage. The cobalt chromium alloy cage greatly reduces or eliminates
the risk of kinking of the stent graft in even tortuous anatomies, eliminating the need for
additional procedures or costly peripheral stents. Kinking may result in reduced blood flow
and limb thrombosis.
    
    Unique, Minimally Invasive Delivery Mechanism.The Powerlink System requires only a
small surgical incision in one leg. The other leg needs only placement of a non-surgical
introducer sheath, three millimeters in diameter. Other ELGs typically need surgical
exposure of the femoral artery in both legs to introduce the multiple components. Our
unique delivery mechanism and downsizing of the catheter permits our technology to be used
in patients having small or very tortuous access vessels.
    
    Self-Expanding.The stent is formed from cobalt chromium alloy in a proprietary
configuration that is protected by our patent portfolio. This proprietary design expands to
the proper size of the target aorta and eliminates the need for hooks or barbs for
attachment. Based on our results to date, the Powerlink System has an excellent record of
successful deployments.
    
    Single Wire and Long Main Body Design.The long main body of the stent cage is made of
a continuous piece of wire shaped into its appropriate configuration. Migration of
individual stent graft sections is eliminated. In addition, the long main body places the
Powerlink System near or at the aortic bifurcation, which minimizes the risk of device
migration during the follow-up period.
 Limitations of Earlier Technology
  Powerlink System Products
  4




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##### Table of Contents



Powerlink Infrarenal Bifurcated Systems.
 Powerlink Aortic Cuffs and Limb Extensions.
 IntuiTrak.
 Clinical Trials
 Powerlink Systems
  Marketing and Sales
 Powerlink System
 United States.
 Europe.
 Japan.
 5




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Rest of World.
 Manufacturing
    Patents and Proprietary Information
      Competition
  
    
    clinical effectiveness;
    
    product safety, reliability and durability;
    
    ease of use;
    
    distribution capability; and
    
    price.
 6




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##### Table of Contents



FDA Approved
Stent Graft Characteristics
 Manufacturer/Product Name
    
    Main Body Design
    
    FixationEndologix/ Powerlink
    
    Single piece
    
    Radial force and anatomical fixationMedtronic/ Talent
    
    Modular
    
    Radial force and suprarenal stentCook/ Zenith
    
    Modular
    
    Radial force, suprarenal stent and barbsWL Gore/ Excluder
    
    Modular
    
    Radial force and barbs
   Third-Party Reimbursement
    7




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Government Regulation
      8




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Product Liability
  Employees
  Research and Development
  General Information
  9




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Item 1A. Risk Factors
 The following risks could affect our business, financial results and results of operations.
These risk factors should be considered in connection with evaluating the forward-looking
statements contained in this Annual Report on Form 10-K because these factors could cause actual
results and conditions to differ materially from those projected in the forward-looking statements.
 Substantially all of our revenue is generated from a single product, the Powerlink System, and
any declines in the sale of this product will negatively impact our business.
  We have limited resources to invest in research and development and to grow our business and
may need to raise additional funds in the future for these activities.
  Our success depends on the growth in the number of AAA patients treated with endovascular
devices.
  Our success depends on convincing physicians to use the Powerlink System in more endovascular
AAA procedures.
  10




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Our international operations subject us to certain operating risks, which could adversely impact
our net sales, results of operations and financial condition.
   
    
    the imposition of additional U.S. and foreign governmental controls or regulations;
    
    the imposition of costly and lengthy new export licensing requirements;
    
    the imposition of U.S. 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;
    
    economic instability;
    
    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;
    
    changes in duties and tariffs, license obligations and other non-tariff barriers to
trade;
    
    the imposition of new trade restrictions;
    
    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;
    
    pricing pressure that we may experience internationally;
    
    laws and business practices favoring local companies;
    
    longer payment cycles;
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
    
    difficulties in maintaining consistency with our internal guidelines;
    
    difficulties in enforcing agreements and collecting receivables through certain foreign
legal systems; and
    
    difficulties in enforcing or defending intellectual property rights.
  If our products or processes infringe upon the intellectual property of third parties, the sale
of our products may be challenged and we may have to defend costly and time-consuming
infringement claims.
   
    
    stop selling, making or using products that use the disputed intellectual property;
    
    obtain a license from the intellectual property owner to continue selling, making,
licensing or using products, which license may not be available on reasonable terms, or at
all;
    
    redesign our products, processes or services; or
    
    subject us to significant liabilities to third parties.
  If third-party payors do not provide reimbursement for the use of the Powerlink System, our
revenues may be negatively impacted.
  Current challenges in the commercial and credit environment may adversely affect our business
and financial condition
  12




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Our operating results may vary significantly from quarter to quarter, which may negatively
impact our stock price in the future.
  
    
    physician acceptance of the Powerlink System;
    
    the conduct and results of clinical trials;
    
    the timing and expense of obtaining future regulatory approvals;
    
    fluctuations in our expenses associated with expanding our operations;
    
    the introduction of new products by our competitors;
    
    changes in our pricing policies or in the pricing policies of our competitors or
suppliers; and
    
    changes in third-party payors reimbursement policies.
   Our future success depends on our ability to develop, receive regulatory clearance or approval
for, and introduce new products or product enhancements that will be accepted by the market in a
timely manner.
   
    
    properly identify and anticipate vascular surgeons and patient needs;
    
    develop and introduce new products or product enhancements in a timely manner;
    
    avoid infringing upon the intellectual property rights of third parties;
    
    demonstrate, if required, the safety and efficacy of new products with data from
preclinical studies and clinical trials;
 13




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
    
    obtain the necessary regulatory clearances or approvals for new products or product
enhancements;
    
    be fully FDA-compliant with marketing of new devices or modified products;
    
    provide adequate training to potential users of our products;
    
    receive adequate coverage and reimbursement for procedures performed with our products;
and
    
    develop an effective and FDA-compliant, dedicated marketing and distribution network.
  If clinical trials of our current or future product candidates do not produce results necessary
to support regulatory clearance or approval in the United States or elsewhere, we will be unable
to commercialize these products.
  
    
    the FDA, institutional review boards or other regulatory authorities do not approve a
clinical study protocol, force us to modify a previously approved protocol, or place a
clinical study on hold;
    
    patients do not enroll in, or enroll at the expected rate, or complete a clinical
study;
    
    patients or investigators do not comply with study protocols;
    
    patients do not return for post-treatment follow-up at the expected rate;
    
    patients experience serious or unexpected adverse side effects for a variety of reasons
that may or may not be related to our products such as the advanced stage of co-morbidities
that may exist at the time of treatment, causing a clinical study to be put on hold;
    
    sites participating in an ongoing clinical study may withdraw, requiring us to engage
new sites;
    
    difficulties or delays associated with bringing additional clinical sites on-line;
    
    third-party clinical investigators decline to participate in our clinical studies, do
not perform the clinical studies on the anticipated schedule or consistent with the
investigator agreement, clinical study protocol, good clinical practices, and other FDA and
Institutional Review Board requirements;
    
    third-party organizations do not perform data collection and analysis in a timely or
accurate manner;
    
    regulatory inspections of our clinical studies require us to undertake corrective
action or suspend or terminate our clinical studies;
    
    changes in U.S. federal, state, or foreign governmental statutes, regulations or
policies;
    
    interim results are inconclusive or unfavorable as to immediate and long-term safety or
efficacy; or
    
    the study design is inadequate to demonstrate safety and efficacy.
  14




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Our business is subject to extensive governmental regulation that could make it more expensive
and time consuming for us to introduce new or improved products.
  
    
    FDA approval process;
    
    California Department of Health Services requirements;
    
    ISO 9001:1994 and ENISO 13485:2003; and
    
    European Union CE Mark requirements.
    The use, misuse or off-label use of our products may harm our image in the marketplace or result
in injuries that lead to product liability suits, which could be costly to our business or
result in FDA sanctions if we are deemed to have engaged in such promotion.
  15




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If we fail to develop and maintain our direct sales force, our business could suffer.
  Our third-party distributors may not effectively distribute our products.
  We are in a highly competitive market segment, which is subject to rapid technological change.
If our competitors are better able to develop and market products that are safer, more
effective, less costly, easier to use, or otherwise more attractive than any products that we
may develop, our ability to generate revenue will be reduced or eliminated.
  
    
    greater financial and human resources for product development, sales and marketing and
patent litigation;
    
    significantly greater name recognition;
    
    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 to gain a competitive advantage;
    
    established sales and marketing, and distribution networks; and
    
    greater experience in conducting research and development, manufacturing, clinical
trials, preparing regulatory submissions and obtaining regulatory clearance or approval for
products and marketing approved products.
  Our dependence upon key personnel to operate our business puts us at risk of a loss of expertise
if key personnel were to leave us.
 16




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If we fail to properly manage our anticipated growth, our business could suffer.
  We are required to maintain compliance with financial and other restrictive covenants in our
credit facility which can restrict our ability to operate our business, and if we fail to comply
with those covenants, our outstanding indebtedness may be accelerated or the terms of the credit
facility may become more onerous.
  
    
    incurring additional debt;
 
    
    paying dividends or make other distributions or payments on capital stock;
 
    
    make investments;
 
    
    incurring liens; and
 
    
    merging or consolidating or otherwise combining with another company.
  17




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We have a history of operating losses and may be required to obtain additional funds.
  
    
    the results of our commercialization efforts for the Powerlink System;
    
    the need for additional capital to fund future development programs;
    
    the costs involved in obtaining and enforcing patents or any litigation by third
parties regarding intellectual property;
    
    the establishment of high volume manufacturing and increased sales and marketing
capabilities; and
    
    our success in entering into collaborative relationships with other parties.
  We rely solely on an in-house process to manufacture our graft material for the Powerlink
System, and any disruption in our ability to produce this material could delay or prevent us
from producing the product for sale.
  
    
    failure to comply with regulatory requirements;
    
    fire, flood or earthquake, or other natural disaster; and
    
    a supply interruption in the underlying raw material for the process.
  If we are unable to protect our intellectual property, our business may be negatively affected.
   
    
    we may fail to secure necessary patents prior to or after obtaining regulatory
clearances, thereby permitting competitors to market competing products; and
    
    our already-granted patents may be re-examined, re-issued or invalidated.
 18




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If we are unable to effectively manage our inventory held on consignment by our intended
customers, we will not achieve our expected results.
  We may face product liability claims that could result in costly litigation and significant
liabilities.
  Our operations are currently conducted at a single location that may be at risk from earthquakes
or other natural disasters.
  The price of our stock may fluctuate unpredictably in response to factors unrelated to our
operating performance.
  
    
    announcements by us or our competitors concerning technological innovations;
    
    introductions of new products;
    
    FDA and foreign regulatory actions;
    
    developments or disputes relating to patents or proprietary rights;
 19




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
    
    failure of our results of operations to meet the expectations of stock market analysts
and investors;
    
    changes in stock market analyst recommendations regarding our common stock;
    
    changes in healthcare policy in the United States or other countries; and
    
    general stock market conditions and other factors unrelated to our operating
performance.
 Trading in our stock over the last twelve months has been limited, so investors may not be able
to sell as much stock as they want at prevailing prices.
  Some provisions of our charter documents and Delaware law may make takeover attempts difficult,
which could depress the price of our stock and inhibit your ability to receive a premium price
for your shares.
  We do not anticipate declaring any cash dividends on our common stock.
  
 Item 1B. Unresolved Staff Comments
  
 Item 2. Properties
  
 Item 3. Legal Proceedings
  
 Item 4. Submission of Matters to a Vote of Security Holders
  20




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PART II
 
 Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
  High
    
    LowYear Ended December 31, 2007First Quarter
    
    $
    4.75
    
    
    $
    3.15Second Quarter
    
    
    4.69
    
    
    
    3.82Third Quarter
    
    
    4.54
    
    
    
    3.13Fourth Quarter
    
    
    4.19
    
    
    
    2.56Year Ended December 31, 2008First Quarter
    
    $
    3.31
    
    
    $
    2.20Second Quarter
    
    
    3.16
    
    
    
    2.25Third Quarter
    
    
    2.95
    
    
    
    1.82Fourth Quarter
    
    
    2.35
    
    
    
    .85
  COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
 
 
 *
    
    $100 invested on 12/31/03 in stock or index, including reinvestment of dividends. Fiscal year ending December 31. 21




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Dividend Policy
  
 Item 6. Selected Financial Data
  Year Ended December 31,2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004(In thousands, except per share data)Consolidated Statement of Operations Data:Revenue:Product
    
    $
    37,631
    
    
    $
    27,017
    
    
    $
    14,422
    
    
    $
    6,889
    
    
    $
    3,019License
    
    
    33
    
    
    
    754
    
    
    
    250
    
    
    
    250
    
    
    
    1,213Total revenue
    
    
    37,664
    
    
    
    27,771
    
    
    
    14,672
    
    
    
    7,139
    
    
    
    4,232Cost of sales:Cost of product sales
    
    
    10,380
    
    
    
    10,539
    
    
    
    6,330
    
    
    
    3,859
    
    
    
    1,851Total cost of sales
    
    
    10,380
    
    
    
    10,539
    
    
    
    6,330
    
    
    
    3,859
    
    
    
    1,851Gross profit
    
    
    27,284
    
    
    
    17,232
    
    
    
    8,342
    
    
    
    3,280
    
    
    
    2,381Operating costs and expenses:Research and development
    
    
    6,060
    
    
    
    6,372
    
    
    
    6,765
    
    
    
    5,817
    
    
    
    6,159Marketing and sales
    
    
    23,794
    
    
    
    20,142
    
    
    
    14,579
    
    
    
    8,794
    
    
    
    2,718General and administrative
    
    
    9,477
    
    
    
    6,380
    
    
    
    5,585
    
    
    
    4,801
    
    
    
    3,548Termination of supply agreement
    
    
    
    
    
    
    550
    
    
    
    
    
    
    
    
    
    
    
    Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total operating costs and expenses
    
    
    39,331
    
    
    
    33,444
    
    
    
    26,929
    
    
    
    19,412
    
    
    
    12,425Loss from operations
    
    
    (12,047
    )
    
    
    (16,212
    )
    
    
    (18,587
    )
    
    
    (16,132
    )
    
    
    (10,044
    )Total other income
    
    
    55
    
    
    
    1,137
    
    
    
    1,044
    
    
    
    614
    
    
    
    361Net loss
    
    $
    (11,992
    )
    
    $
    (15,075
    )
    
    $
    (17,543
    )
    
    $
    (15,518
    )
    
    $
    (9,683
    )Basic and diluted net loss per share
    
    $
    (0.28
    )
    
    $
    (0.35
    )
    
    $
    (0.44
    )
    
    $
    (0.46
    )
    
    $
    (0.31
    )Shares used in computing basic and
diluted net loss per share
    
    
    43,045
    
    
    
    42,796
    
    
    
    40,010
    
    
    
    33,951
    
    
    
    31,149
 December 31,2008
    
    2007
    
    2006
    
    2005
    
    2004(In thousands)Consolidated Balance Sheet Data:Cash, restricted cash and cash equivalents
    
    $
    8,111
    
    
    $
    9,228
    
    
    $
    6,771
    
    
    $
    8,691
    
    
    $
    4,831Marketable securities available-for-sale
    
    
    
    
    
    
    
    
    
    
    13,417
    
    
    
    8,959
    
    
    
    17,085Working capital
    
    
    15,876
    
    
    
    18,365
    
    
    
    26,933
    
    
    
    22,520
    
    
    
    23,477Total assets
    
    
    37,263
    
    
    
    40,043
    
    
    
    52,686
    
    
    
    47,944
    
    
    
    44,512Accumulated deficit
    
    
    (143,730
    )
    
    
    (131,738
    )
    
    
    (116,663
    )
    
    
    (99,120
    )
    
    
    (83,602
    )Total stockholders equity
    
    
    25,817
    
    
    
    34,675
    
    
    
    46,505
    
    
    
    42,207
    
    
    
    41,551
 
 Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
  22




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Overview
 Our Business
        Summary of Accounting Policies and Use of Estimates
  23




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Revenue Recognition and Accounts Receivable
  
    
    Persuasive evidence of an arrangement exists;
    
    The sales price is fixed or determinable;
    
    Collection of the relevant receivable is probable at the time of sale; and
    
    Products have been shipped or used and the customer has taken ownership and assumed
risk of loss.
    Inventories
  Goodwill, Intangible Assets and Long-Lived Assets
  Income Taxes
  24




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Stock-based compensation
  Results of Operations
 Comparison of Years Ended December 31, 2008 and 2007
 Product Sales
  License Revenue.
 Cost of Product Revenue.
 Gross Profit.
 25




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##### Table of Contents



Research, Development and Clinical.
  Marketing and Sales.
  
    
    the marketing related costs to launch two significant new products in 2009  the
IntuiTrak delivery system for Powerlink in the second quarter and the IntuiTrak Express
delivery system for Powerlink XL in the third quarter;
    
    expenses related to more intensive training of sales representatives; and
    
    higher commission expense on the expected increase in sales.
 General and Administrative.
 Termination of Supply Agreement
 Other Income.
 Comparison of Years Ended December 31, 2007 and 2006
 Product Sales
 26




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##### Table of Contents



License Revenue.
 Cost of Product Revenue.
 Gross Profit.
 Research, Development and Clinical.
 Marketing and Sales.
 General and Administrative.
 Termination of Supply Agreement
 Other Income.
 Liquidity and Capital Resources
   27




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##### Table of Contents




    
    the rate of market acceptance of the Powerlink System;
    
    our requirements for additional manufacturing capacity;
    
    our requirements for additional IT infrastructure and systems;
    
    our requirements for additional facility space; and
    
    the need for additional capital to fund future development programs.
 Accounts Receivable.
 28




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##### Table of Contents



Inventories.
 Accounts Payable and Accrued Expenses.
 Cash Used in Operations.
 Cash Provided by (used in) Investing Activities.
 Cash Provided by Financing Activities.
 Off-Balance Sheet Arrangements
  Commitments
  Total
    
    
    2009
    
    
    2010
    
    
    2011
    
    
    2012(In thousands)Contractual Obligations:Borrowings under term loan and credit facilities
    
    $
    5,000
    
    
    $
    750
    
    
    $
    3,000
    
    
    $
    1,000
    
    
    $
    250Operating lease obligations
    
    
    433
    
    
    
    346
    
    
    
    87
    
    
    
    
    
    
    
    Interest
expense on borrowings
    
    
    374
    
    
    
    228
    
    
    
    105
    
    
    
    39
    
    
    
    2Other obligations
    
    
    300
    
    
    
    300
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    6,107
    
    
    $
    1,624
    
    
    $
    3,192
    
    
    $
    1,039
    
    
    $
    252
 Recent Accounting Pronouncements
   29




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##### Table of Contents



Item 7A. Quantitative and Qualitative Disclosures About Market Risk
  Interest Rate and Market Risk.
  30




---



##### Table of Contents



Foreign Currency Transaction Risk.
 
 Item 8. Financial Statements and Selected Quarterly Financial Data
  Summarized Quarterly Data
(Unaudited)
 March 31
    
    June 30
    
    September 30
    
    December 31(in thousands, except per share amounts)2008:Product sales
    
    $
    8,317
    
    
    $
    9,261
    
    
    $
    9,374
    
    
    $
    10,679Total revenues
    
    
    8,329
    
    
    
    9,273
    
    
    
    9,383
    
    
    
    10,679Gross profit
    
    
    5,798
    
    
    
    6,719
    
    
    
    6,923
    
    
    
    7,844Net loss
    
    
    (3,692
    )
    
    
    (3,762
    )
    
    
    (2,962
    )
    
    
    (1,576
    )Basic and diluted net loss per share
    
    
    (0.09
    )
    
    
    (0.09
    )
    
    
    (0.07
    )
    
    
    (0.04
    )2007:Product sales
    
    $
    6,250
    
    
    $
    6,258
    
    
    $
    6,592
    
    
    $
    7,917Total revenues
    
    
    6,308
    
    
    
    6,318
    
    
    
    7,152
    
    
    
    7,993Gross profit
    
    
    3,729
    
    
    
    3,680
    
    
    
    4,720
    
    
    
    5,103Net loss
    
    
    (4,440
    )
    
    
    (3,713
    )
    
    
    (3,394
    )
    
    
    (3,528
    )Basic and diluted net loss per share
    
    
    (0.10
    )
    
    
    (0.09
    )
    
    
    (0.08
    )
    
    
    (0.08
    )
 
 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
  
 Item 9A. Controls and Procedures
 Managements Report on Internal Control Over Financial Reporting
   31




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##### Table of Contents



Disclosure controls and procedures
  Changes in internal control over financial reporting
  
 Item 9B. Other Information
  32




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##### Table of Contents



PART III
 
 Item 10. Directors, Executive Officers and Corporate Governance
  
 Item 11. Executive Compensation
  
 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
  Equity Compensation Plan Information
  Number of SecuritiesRemaining Available forFuture Issuance UnderNumber of Securities
    
    
    
    
    
    Equity Compensationto be Issued upon
    
    Weighted Average
    
    Plans (ExcludingExercise of
    
    Exercise Price of
    
    Securities ReflectedOutstanding Options
    
    Outstanding Options
    
    in Column A)Plan Category
    
    (a)
    
    (b)
    
    (c)Equity compensation plans approved by
security holders:2006 Stock Incentive Plan
    
    
    4,137,992
    
    
    $
    2.78
    
    
    
    1,676,5021996 Stock Option/ Stock Issuance Plan
    
    
    1,352,769
    
    
    $
    5.06
    
    
    
    Employee Stock Purchase Plan
    
    
    
    
    
    
    
    
    
    
    20,662Equity compensation plans not
approved by security holders:1997 Supplemental Stock Option Plan
    
    
    19,500
    
    
    $
    3.92
    
    
    
    Total
    
    
    5,510,261
    
    
    $
    3.34
    
    
    
    1,697,164
 1997 Supplemental Stock Option Plan
  
 Item 13. Certain Relationships and Related Transactions, and Director Independence
  
 Item 14. Principal Accounting Fees and Services
  33




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##### Table of Contents



PART IV
 
 Item 15. Exhibits, Financial Statement Schedules
  1. Financial Statements.Report of Independent Registered Public Accounting FirmConsolidated Balance Sheets  December 31, 2008 and 2007Consolidated Statements of Operations for the years ended December 31, 2008, 2007 and 2006Consolidated Statements of Stockholders Equity for the years ended December 31, 2008, 2007 and 2006Consolidated Statements of Cash Flows for the years ended December 31, 2008, 2007 and 2006Notes to Consolidated Financial Statements for the years ended December 31, 2008, 2007 and 20062. Financial Statement Schedule.Schedule II  Valuation and Qualifying Accounts
  3. Exhibits.
  ExhibitNumber
    
    Description3.1
    
    Amended and Restated Certificate of Incorporation
(Incorporated by reference to Exhibit 4.1 to Endologix
Registration Statement on Form S-8, filed with the SEC on
August 7, 2006).3.2
    
    Amended and Restated Bylaws (Incorporated by reference to
Exhibit 3.2 to Endologix Annual Report on Form 10-K filed with
the SEC on March 29, 2001).4.1
    
    Specimen Certificate of Common Stock (Incorporated by
reference to Exhibit 4.1 to Amendment No. 2 to Endologix
Registration Statement on Form S-1, No. 333-04560, filed with
the SEC on June 10, 1996).10.1(2)
    
    Employee Stock Purchase Plan and forms of agreement thereunder
(Incorporated by reference to Exhibit 4.1 to Endologix
Registration Statement on Form S-8, No. 333-114465, filed with
the SEC on April 14, 2004).10.2(2)
    
    1997 Supplemental Stock Option Plan (Incorporated by reference
to Exhibit 99.1 to Endologix Registration Statement on Form
S-8, No. 333-42161, filed with the SEC on December 12, 1997).10.4(2)
    
    1996 Stock Option/Stock Issuance Plan (Incorporated by
reference to Exhibit 4.1 to Endologix Registration Statement
on Form S-8, No. 333-122491, filed with the SEC on February 2,
2005).10.5(2)
    
    1997 Stock Option Plan assumed by Endologix pursuant to its
acquisition of Radiance Medical Systems, Inc. on January 14,
1999 (Incorporated by reference to Exhibit 99.2 to Endologix
Registration Statement on Form S-8, No. 333-72531, filed with
the SEC on February 17, 1999).10.6(2)
    
    2006 Stock Incentive Plan (Incorporated by reference to
Exhibit 10.1 to Endologix Current Report on Form 8-K, filed
with the SEC on May 26, 2006).
 34




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##### Table of Contents



ExhibitNumber
    
    Description10.6.1(2)
    
    Stock Option Agreement under 2006 Stock Incentive Plan
(Incorporated by reference to Exhibit 10.1 to Endologix
Quarterly Report on Form 10-Q, filed with the SEC on November
9, 2006).10.6.2(1)
    
    Restricted Stock Award Agreement under 2006 Stock Incentive
Plan (Incorporated by reference to Exhibit 10.2 to Endologix
Quarterly Report on Form 10-Q, filed with the SEC on November
9, 2006).10.7(2)
    
    2006 Employee Stock Purchase Plan (Incorporated by reference
to Exhibit 10.2 to Endologix Current Report on Form 8-K, filed
with the SEC on May 26, 2006).10.9
    
    Form of Indemnification Agreement entered into with Endologix
officers and directors (Incorporated by reference to Exhibit
10.41 to Endologix Quarterly Report on Form 10-Q, filed with
the SEC on November 13, 2002).10.11
    
    Standard Industrial/Commercial Single-Tenant Lease  Net,
dated November 2, 2004, by and between Endologix and Del
Monico Investments, Inc. (Incorporated by reference to Exhibit
10.46 to Endologix Current Report on Form 8-K, filed with the
SEC on November 24, 2004).10.12
    
    Loan and Security Agreement, dated as of February 21, 2007, by
and between Endologix and Silicon Valley Bank (Incorporated by
reference to Exhibit 10.13 to Endologix Quarterly Report on
Form 10-Q, filed with the SEC on May 9, 2007).10.12.1
    
    First Amendment to Loan and Security Agreement, dated as of
July 22, 2008, by and between Endologix and Silicon Valley
Bank (Incorporated by reference to Exhibit 10.1 to Endologix
Current Report on Form 8-K, filed with the SEC on July 28,
2008).10.13(2)
    
    Offer Letter, dated April 28, 2008, between Endologix and John
McDermott (Incorporated by reference to Exhibit 10.1 to
Endologix Current Report on Form 8-K, filed with the SEC on
May 16, 2008).10.14(2)
    
    Severance Agreement and General Release, effective May 12,
2008, between Endologix and Paul McCormick (Incorporated by
reference to Exhibit 10.2 to Endologix Current Report on Form
8-K, filed with the SEC on May 16, 2008).10.15(2)
    
    Employment Agreement, dated as of December 29, 2008, between
Endologix and John McDermott (Incorporated by reference to
Exhibit 10.1 to Endologix Current Report on Form 8-K, filed
with the SEC on January 2, 2009).10.16(2)
    
    Employment Agreement, dated as of December 29, 2008, between
Endologix and Robert J. Krist (Incorporated by reference to
Exhibit 10.2 to Endologix Current Report on Form 8-K, filed
with the SEC on January 2, 2009).10.17(2)
    
    Employment Agreement, dated as of December 29, 2008, between
Endologix and Stefan G. Schreck, Ph.D. (Incorporated by
reference to Exhibit 10.3 to Endologix Current Report on Form
8-K, filed with the SEC on January 2, 2009).10.18(2)
    
    Employment Agreement, dated as of December 29, 2008, between
Endologix and Janet Fauls (Incorporated by reference to
Exhibit 10.4 to Endologix Current Report on Form 8-K, filed
with the SEC on January 2, 2009).14
    
    Code of Ethics for Chief Executive Officer and Principal
Financial Officers (Incorporated by reference to Exhibit 14 to
Endologix Annual Report on Form 10-K filed with the SEC on
March 26, 2004).21.1
    
    List of Subsidiaries.23.1
    
    Consent of Independent Registered Public Accounting Firm.24.1
    
    Power of Attorney (included on signature page hereto).31.1
    
    Certification of Chief Executive Officer Pursuant to Rule
13a-14(a)/15d-14(a) under the Securities
 35




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##### Table of Contents



ExhibitNumber
    
    DescriptionExchange Act of 1934.31.2
    
    Certification of Chief Financial Officer Pursuant to Rule
13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934.32.1
    
    Certification of Chief Executive Officer Pursuant to Rule
13a-14(b)/15d-14(b) under the Securities Exchange Act of 1934
and 18 U.S.C. Section 1350.32.2
    
    Certification of Chief Financial Officer Pursuant to Rule
13a-14(b)/15d-14(b) under the Securities Exchange Act of 1934
and 18 U.S.C. Section 1350.
 
 (1)
    
    Portions of this exhibit are omitted and were filed separately with the Securities and
Exchange Commission pursuant to Endologix application requesting confidential treatment under
Rule 24b-2 of the Securities Exchange Act of 1934.(2)
    
    These exhibits are identified as management contracts or compensatory plans or arrangements
of Endologix pursuant to Item 15(a)(3) of Form 10-K. 36




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##### Table of Contents



SIGNATURES
  ENDOLOGIX, INC.By:
    /s/ JOHN MCDERMOTTJohn McDermottChief Executive Officer and Director
(Principal Executive Officer)  POWER OF ATTORNEY
   Signature
    
    Title
    
    Date/s/ JOHN MCDERMOTT

(John McDermott)
    
    Chief Executive Officer and Director
(Principal Executive Officer)
    
    March 9, 2009/s/ ROBERT J. KRIST

(Robert J. Krist)
    
    Chief Financial Officer, and Secretary
(Principal Financial and Accounting Officer)
    
    March 9, 2009/s/ FRANKLIN D. BROWN

(Franklin D. Brown)
    
    Chairman and Director
    
    March 9, 2009/s/ RODERICK DE GREEF

(Roderick de Greef)
    
    Director
    
    March 9, 2009/s/ EDWARD DIETHRICH, M.D.

(Edward Diethrich, M.D.)
    
    Director
    
    March 9, 2009/s/ PAUL MCCORMICK

(Paul McCormick)
    
    Director
    
    March 9, 2009/s/ JEFFREY F. ODONNELL

(Jeffrey F. ODonnell)
    
    Director
    
    March 9, 2009/s/ GREGORY D. WALLER

(Gregory D. Waller)
    
    Director
    
    March 9, 2009
 37




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
  Internal Control  Integrated Framework
   /s/ PricewaterhouseCoopers LLPPricewaterhouseCoopers LLPOrange County, California 
March 9, 2009 F-1




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##### Table of Contents



ENDOLOGIX, INC.
 CONSOLIDATED BALANCE SHEETS
 December 31,2008
    
    
    2007(In thousands, exceptshare and pershare amounts)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    7,611
    
    
    $
    8,728Restricted cash equivalents
    
    
    500
    
    
    
    500Accounts receivable, net of allowance for doubtful accounts of $72 and $100
    
    
    6,371
    
    
    
    4,527Other receivables
    
    
    3
    
    
    
    234Inventories
    
    
    7,099
    
    
    
    8,054Other current assets
    
    
    443
    
    
    
    581Total current assets
    
    
    22,027
    
    
    
    22,624Property and equipment, net
    
    
    2,993
    
    
    
    3,771Goodwill
    
    
    4,631
    
    
    
    4,631Intangibles, net
    
    
    7,508
    
    
    
    8,913Other assets
    
    
    104
    
    
    
    104Total assets
    
    $
    37,263
    
    
    $
    40,043LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable and accrued expenses
    
    $
    5,401
    
    
    $
    4,259Current portion of long term debt
    
    
    750
    
    
    
    Total current liabilities
    
    
    6,151
    
    
    
    4,259Long-term liabilities:Long term debt
    
    
    4,250
    
    
    
    Other long-term liabilities
    
    
    1,045
    
    
    
    1,109Total long-term liabilities
    
    
    5,295
    
    
    
    1,109Total liabilities
    
    
    11,446
    
    
    
    5,368Commitments and contingencies (Note 9)Stockholders equity:Preferred stock, $0.001 par value; 5,000,000 shares authorized, no shares
issued and outstanding
    
    
    
    
    
    
    Common stock, $0.001 par value; 60,000,000 shares authorized, 44,365,000
and 43,453,000 shares issued, and 43,870,000 and 42,958,000 outstanding
    
    
    44
    
    
    
    43Additional paid-in capital
    
    
    170,239
    
    
    
    166,912Accumulated deficit
    
    
    (143,730
    )
    
    
    (131,738
    )Treasury stock, at cost, 495,000 shares
    
    
    (661
    )
    
    
    (661
    )Accumulated other comprehensive income(loss)
    
    
    (75
    )
    
    
    119Total stockholders equity
    
    
    25,817
    
    
    
    34,675Total liabilities and stockholders equity
    
    $
    37,263
    
    
    $
    40,043
  F-2




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##### Table of Contents



ENDOLOGIX, INC.
 CONSOLIDATED STATEMENTS OF OPERATIONS
 Year Ended December 31,2008
    
    
    2007
    
    
    2006(In thousands, except per share amounts)Revenue:Product
    
    $
    37,631
    
    
    $
    27,017
    
    
    $
    14,422License
    
    
    33
    
    
    
    754
    
    
    
    250Total revenue
    
    
    37,664
    
    
    
    27,771
    
    
    
    14,672Cost of sales:Cost of product revenue
    
    
    10,380
    
    
    
    10,539
    
    
    
    6,330Gross profit
    
    
    27,284
    
    
    
    17,232
    
    
    
    8,342Operating costs and expenses:Research and development
    
    
    6,060
    
    
    
    6,372
    
    
    
    6,765Marketing and sales
    
    
    23,794
    
    
    
    20,142
    
    
    
    14,579General and administrative
    
    
    9,477
    
    
    
    6,380
    
    
    
    5,585Termination of supply agreement
    
    
    
    
    
    
    550
    
    
    
    Total operating costs and expenses
    
    
    39,331
    
    
    
    33,444
    
    
    
    26,929Loss from operations
    
    
    (12,047
    )
    
    
    (16,212
    )
    
    
    (18,587
    )Other income:Interest income
    
    
    170
    
    
    
    664
    
    
    
    1,019Interest expense
    
    
    (106
    )
    
    
    
    
    
    
    Other income, net
    
    
    (9
    )
    
    
    473
    
    
    
    25Total other income
    
    
    55
    
    
    
    1,137
    
    
    
    1,044Net loss
    
    $
    (11,992
    )
    
    $
    (15,075
    )
    
    $
    (17,543
    )Basic and diluted net loss per share
    
    $
    (0.28
    )
    
    $
    (0.35
    )
    
    $
    (0.44
    )Shares used in computing basic and diluted net loss per share
    
    
    43,045
    
    
    
    42,796
    
    
    
    40,010
  F-3




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##### Table of Contents



ENDOLOGIX, INC.
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
 AccumulatedAdditional
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    OtherCommon Stock
    
    
    Paid-In
    
    
    Accumulated
    
    
    Treasury
    
    
    Comprehensive
    
    
    Stockholders
    
    
    ComprehensiveShares
    
    
    Amount
    
    
    Capital
    
    
    Deficit
    
    
    Shares
    
    
    Amount
    
    
    Income
    
    
    Equity
    
    
    Loss(In thousands, except share amounts)Balance at December 31, 2005
    
    
    36,679,000
    
    
    $
    37
    
    
    $
    141,903
    
    
    $
    (99,120
    )
    
    
    (495,000
    )
    
    $
    (661
    )
    
    $
    48
    
    
    $
    42,207
    
    
    $
    (15,548
    )Exercise of common stock options
    
    
    317,000
    
    
    
    
    
    
    
    934
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    934Employee stock purchase plan
    
    
    77,000
    
    
    
    
    
    
    
    319
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    319Sale of common stock
    
    
    6,061,000
    
    
    
    6
    
    
    
    18,747
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18,753Amortization of stock
compensation expense
    
    
    10,000
    
    
    
    
    
    
    
    37
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    37Grant of stock options
    
    
    
    
    
    
    
    
    
    
    1,764
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,764Amortization expense of
non-employee stock options
    
    
    
    
    
    
    
    
    
    
    (6
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,543
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,543
    )
    
    
    (17,543
    )Unrealized holding gain arising
during the period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23
    
    
    
    23
    
    
    
    23Unrealized exchange rate gain
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17
    
    
    
    17
    
    
    
    17Balance at December 31, 2006
    
    
    43,144,000
    
    
    $
    43
    
    
    $
    163,698
    
    
    $
    (116,663
    )
    
    
    (495,000
    )
    
    $
    (661
    )
    
    $
    88
    
    
    $
    46,505
    
    
    $
    (17,503
    )Exercise of common stock options
    
    
    123,000
    
    
    
    
    
    
    
    228
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    228Employee stock purchase plan
    
    
    180,000
    
    
    
    
    
    
    
    491
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    491Amortization of stock
compensation expense
    
    
    
    
    
    
    
    
    
    
    2,430
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,430Grant of stock awards
    
    
    6,000
    
    
    
    
    
    
    
    23
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23Amortization expense of
non-employee stock options
    
    
    
    
    
    
    
    
    
    
    42
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    42Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15,075
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15,075
    )
    
    
    (15,075
    )Unrealized holding loss arising
during the period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3
    )
    
    
    (3
    )
    
    
    (3
    )Unrealized exchange rate gain
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    34
    
    
    
    34
    
    
    
    34Balance at December 31, 2007
    
    
    43,453,000
    
    
    $
    43
    
    
    $
    166,912
    
    
    $
    (131,738
    )
    
    
    (495,000
    )
    
    $
    (661
    )
    
    $
    119
    
    
    $
    34,675
    
    
    $
    (15,044
    )Exercise of common stock options
    
    
    30,000
    
    
    
    
    
    
    
    29
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    29Employee stock purchase plan
    
    
    357,000
    
    
    
    
    
    
    
    480
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    480Amortization of stock
compensation expense
    
    
    
    
    
    
    
    
    
    
    2,381
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,381Grant of restricted stock
    
    
    525,000
    
    
    
    1
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6Amortization expense of
restricted stock
    
    
    
    
    
    
    
    
    
    
    432
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    432Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,992
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,992
    )
    
    
    (11,992
    )Unrealized exchange rate loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (194
    )
    
    
    (194
    )
    
    
    (194
    )Balance at December 31, 2008
    
    
    44,365,000
    
    
    $
    44
    
    
    $
    170,239
    
    
    $
    (143,730
    )
    
    
    (495,000
    )
    
    $
    (661
    )
    
    $
    (75
    )
    
    $
    25,817
    
    
    $
    (12,186
    )
  F-4




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##### Table of Contents



ENDOLOGIX, INC.
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 Year Ended December 31,2008
    
    
    2007
    
    
    2006(In thousands)Operating activities:Net loss
    
    $
    (11,992
    )
    
    $
    (15,075
    )
    
    $
    (17,543
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization
    
    
    2,483
    
    
    
    2,322
    
    
    
    2,303Stock-based compensation and deferred compensation
    
    
    2,900
    
    
    
    2,444
    
    
    
    1,665Realized gain (loss) on investments
    
    
    
    
    
    
    (412
    )
    
    
    Loss on disposal of assets
    
    
    23
    
    
    
    
    
    
    
    Changes:Accounts receivable
    
    
    (1,844
    )
    
    
    (1,764
    )
    
    
    (1,515
    )Inventories
    
    
    980
    
    
    
    1,614
    
    
    
    (1,854
    )Other receivables and other assets
    
    
    369
    
    
    
    (6
    )
    
    
    (84
    )Accounts payable, accrued expenses and long term liabilities
    
    
    1,078
    
    
    
    (813
    )
    
    
    444Net cash used in operating activities
    
    
    (6,003
    )
    
    
    (11,690
    )
    
    
    (16,584
    )Investing activities:Purchases of available-for-sale securities
    
    
    
    
    
    
    (1,850
    )
    
    
    (18,823
    )Maturities of available-for-sale securities
    
    
    
    
    
    
    15,650
    
    
    
    14,388Capital expenditures for property and equipment
    
    
    (447
    )
    
    
    (437
    )
    
    
    (924
    )Net cash provided by (used in) investing activities
    
    
    (447
    )
    
    
    13,363
    
    
    
    (5,359
    )Financing activities:Proceeds from sale of common stock, net of expenses
    
    
    
    
    
    
    
    
    
    
    18,753Proceeds from sale of common stock under employee stock
purchase plan
    
    
    497
    
    
    
    496
    
    
    
    319Proceeds from exercise of stock options
    
    
    30
    
    
    
    228
    
    
    
    934Borrowings under term loan and line of credit (facilities)
    
    
    5,000
    
    
    
    
    
    
    
    Net cash provided by financing activities
    
    
    5,527
    
    
    
    724
    
    
    
    20,006Effect of exchange rate changes on cash and cash equivalents
    
    
    (194
    )
    
    
    60
    
    
    
    17Net increase (decrease) in cash and cash equivalents
    
    
    (1,117
    )
    
    
    2,457
    
    
    
    (1,920
    )Cash and cash equivalents, beginning of year
    
    
    8,728
    
    
    
    6,271
    
    
    
    8,191Cash and cash equivalents, end of year
    
    $
    7,611
    
    
    $
    8,728
    
    
    $
    6,271Supplemental Disclosure of Cash Flow Activities:Cash paid during the year for interest
    
    $
    106
    
    
    $
    
    
    
    $
    
  F-5




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##### Table of Contents



ENDOLOGIX, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share or performance unit and per share amounts)
 1. Business, Basis of Presentation and Summary of Critical Accounting Policies
 Business and Basis of Presentation
    Liquidity and Capital Resources
   Summary of Accounting Policies and Use of Estimates
  Cash and Cash Equivalents
  F-6




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##### Table of Contents



ENDOLOGIX, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share or performance unit and per share amounts)
  Accounts Receivables
  Inventories
  Property and Equipment
  Intangible Assets
   Long-Lived Assets
  Fair Value of Financial Instruments
  F-7




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##### Table of Contents



ENDOLOGIX, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share or performance unit and per share amounts)
 Concentrations of Credit Risk and Significant Customers
     Product Sales by Geographic Region
  Year Ended December 31,2008
    
    
    2007
    
    
    2006United States
    
    $
    31,936
    
    
    $
    23,049
    
    
    $
    12,366Germany
    
    
    2,228
    
    
    
    2,050
    
    
    
    Japan
    
    
    1,370
    
    
    
    68
    
    
    
    Latin America
    
    
    1,171
    
    
    
    699
    
    
    
    164Netherlands
    
    
    
    
    
    
    
    
    
    
    1,183Other
    
    
    926
    
    
    
    1,151
    
    
    
    709$
    37,631
    
    
    $
    27,017
    
    
    $
    14,422
   Revenue Recognition
  
    
    Persuasive evidence of an arrangement exists;
    
    The sales price is fixed or determinable;
    
    Collection of the relevant receivable is probable at the time of sale; and
    
    Products have been shipped or used and the customer has taken ownership and assumed
risk of loss.
   Shipping Costs
 F-8




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##### Table of Contents



ENDOLOGIX, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share or performance unit and per share amounts)
  Foreign Currency
  Income Taxes
   Net Loss Per Share
   Research and Development Costs
  Comprehensive Income (Loss)
  F-9




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##### Table of Contents



ENDOLOGIX, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share or performance unit and per share amounts)
 Product Warranty
  Recent Accounting Pronouncements
       F-10




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##### Table of Contents



ENDOLOGIX, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share or performance unit and per share amounts)
  2. License Agreements
   3. Restricted Cash Equivalents
  4. Inventories
  December 31,2008
    
    
    2007Raw materials
    
    $
    2,467
    
    
    $
    2,785Work in process
    
    
    2,058
    
    
    
    2,295Finished goods
    
    
    3,342
    
    
    
    3,6347,867
    
    
    
    8,714Less reserve for excess and obsolescence
    
    
    (768
    )
    
    
    (660
    )$
    7,099
    
    
    $
    8,054
 F-11




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##### Table of Contents



ENDOLOGIX, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share or performance unit and per share amounts)
 5. Property and Equipment
  December 31,2008
    
    
    2007Construction in progress
    
    $
    
    
    
    $
    17Leasehold improvements
    
    
    2,032
    
    
    
    2,032Furniture and equipment
    
    
    4,818
    
    
    
    4,3876,850
    
    
    
    6,436Less accumulated depreciation and amortization
    
    
    (3,857
    )
    
    
    (2,665
    )$
    2,993
    
    
    $
    3,771
 6. Intangibles
  December 31,2008
    
    
    2007Developed technology
    
    $
    14,050
    
    
    $
    14,050Accumulated amortization
    
    
    (9,250
    )
    
    
    (7,845
    )4,800
    
    
    
    6,205Trademarks and trade names
    
    
    2,708
    
    
    
    2,708Intangible assets, net
    
    $
    7,508
    
    
    $
    8,913
 7. Accounts Payable and Accrued Expenses
  December 31,2008
    
    
    2007Accounts payable
    
    $
    1,822
    
    
    $
    1,395Accrued payroll and related expenses
    
    
    2,629
    
    
    
    2,071Current portion of long term debt
    
    
    750
    
    
    
    Customer deposits
    
    
    684
    
    
    
    418Accrued clinical expenses
    
    
    194
    
    
    
    250Other accrued expenses
    
    
    72
    
    
    
    125$
    6,151
    
    
    $
    4,259
 8. Long Term Liabilities
  December 31,2008
    
    
    2007Term loan
    
    $
    3,000
    
    
    $
    Line of credit facility
    
    
    2,000
    
    
    
    Deferred tax
    
    
    1,029
    
    
    
    1,029Deferred rent
    
    
    16
    
    
    
    80Total long-term liabilities
    
    
    6,045
    
    
    
    1,109Current portion of long-term debt
    
    
    (750
    )
    
    
    Long-term portion
    
    $
    5,295
    
    
    $
    1,109
  December 31,2009
    
    
    2010
    
    
    2011
    
    
    2012Term loan
    
    $
    750
    
    
    $
    1,000
    
    
    $
    1,000
    
    
    $
    250Line of credit facility
    
    
    
    
    
    
    2,000
    
    
    
    
    
    
    
    $
    750
    
    
    $
    3,000
    
    
    $
    1,000
    
    
    $
    250
  F-12




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##### Table of Contents



ENDOLOGIX, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share or performance unit and per share amounts)
     9. Commitments and Contingencies
 Sole-Source, Related-Party Supplier Agreement
    Operating Leases
   F-13




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##### Table of Contents



ENDOLOGIX, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share or performance unit and per share amounts)
 Year Ending December 31,2009
    
    
    3462010
    
    
    87Thereafter
    
    
    $
    433
  Employment Agreements and Retention Plan
  10. Stockholders Equity
 Authorized Shares of Common Stock
  Sale of Common Stock
   Treasury Stock
  Stock Options
  F-14




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##### Table of Contents



ENDOLOGIX, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share or performance unit and per share amounts)
  2008
    
    
    2007
    
    
    2006Number of
    
    
    Weighted Average
    
    
    Number of
    
    
    Weighted Average
    
    
    Number of
    
    
    Weighted AverageShares
    
    
    Exercise Price
    
    
    Shares
    
    
    Exercise Price
    
    
    Shares
    
    
    Exercise PriceOutstanding  Beginning of Year
    
    
    4,124,739
    
    
    $
    4.34
    
    
    
    3,396,929
    
    
    $
    4.38
    
    
    
    2,678,201
    
    
    $
    4.53Granted
    
    
    2,025,000
    
    
    
    2.57
    
    
    
    1,556,500
    
    
    
    4.08
    
    
    
    1,309,300
    
    
    
    3.77Exercised
    
    
    30,000
    
    
    
    2.82
    
    
    
    122,868
    
    
    
    2.38
    
    
    
    316,404
    
    
    
    2.95Forfeited
    
    
    891,978
    
    
    
    4.00
    
    
    
    647,822
    
    
    
    4.34
    
    
    
    274,168
    
    
    
    4.62Expired
    
    
    242,500
    
    
    
    4.63
    
    
    
    58,000
    
    
    
    4.27
    
    
    
    
    
    
    
    Outstanding  End of Year
    
    
    4,985,261
    
    
    $
    3.69
    
    
    
    4,124,739
    
    
    $
    4.34
    
    
    
    3,396,929
    
    
    $
    4.38Exercisable  End of Year
    
    
    2,266,879
    
    
    $
    4.52
    
    
    
    2,059,617
    
    
    $
    4.56
    
    
    
    1,579,764
    
    
    $
    4.53Weighted Average Fair Value of
Options Granted During Year
    
    
    
    
    
    $
    2.57
    
    
    
    
    
    
    $
    2.59
    
    
    
    
    
    
    $
    2.55
    Outstanding
    
    
    ExercisableWeighted-Average
    
    
    Weighted-
    
    
    
    
    
    
    Weighted-Granted
    
    
    Remaining
    
    
    Average
    
    
    Granted
    
    
    AverageShares
    
    
    Contractual
    
    
    Exercise
    
    
    Shares
    
    
    ExerciseRange of Exercise Prices
    
    Outstanding
    
    
    Life (Years)
    
    
    Price
    
    
    Exercisable
    
    
    Price$0.77  2.16
    
    
    332,678
    
    
    
    8.8
    
    
    $
    1.84
    
    
    
    47,678
    
    
    $
    1.362.21  2.55
    
    
    639,000
    
    
    
    9.4
    
    
    
    2.54
    
    
    
    
    
    
    
    2.56  2.69
    
    
    635,000
    
    
    
    9.1
    
    
    
    2.66
    
    
    
    15,000
    
    
    
    2.692.73  3.35
    
    
    500,000
    
    
    
    7.8
    
    
    
    2.91
    
    
    
    82,085
    
    
    
    2.963.40  3.57
    
    
    556,338
    
    
    
    7.5
    
    
    
    3.43
    
    
    
    381,979
    
    
    
    3.423.60  4.20
    
    
    511,895
    
    
    
    6.2
    
    
    
    3.85
    
    
    
    359,021
    
    
    
    3.854.26  4.32
    
    
    698,550
    
    
    
    8.1
    
    
    
    4.31
    
    
    
    372,042
    
    
    
    4.314.44  5.50
    
    
    437,000
    
    
    
    5.5
    
    
    
    4.74
    
    
    
    366,896
    
    
    
    4.755.55  8.75
    
    
    674,800
    
    
    
    5.9
    
    
    
    6.01
    
    
    
    642,178
    
    
    
    6.01$0.77  8.75
    
    
    4,985,261
    
    
    
    7.6
    
    
    $
    3.69
    
    
    
    2,266,879
    
    
    $
    4.52
   F-15




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##### Table of Contents



ENDOLOGIX, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share or performance unit and per share amounts)
 Restricted Stock
  Weighted AverageNumber of
    
    
    Grant-Date FairShares
    
    
    ValueNonvested as of December 31, 2007
    
    
    
    
    
    $
    Granted
    
    
    525,000
    
    
    
    2.65Vested
    
    
    
    
    
    
    Nonvested as of December 31, 2008
    
    
    525,000
    
    
    $
    2.65
  Employee Stock Purchase Plan
  Stock Based Compensation
    2008
    
    2007
    
    2006Expected Life (in years) (1)
    
    
    5.5
    
    
    
    5.5
    
    
    
    5.5Expected Volatility (2)
    
    
    56.1
    %
    
    
    71.2
    %
    
    
    75.8
    %Risk Free Interest Rate (3)
    
    
    3.1
    %
    
    
    4.5
    %
    
    
    4.9
    %Dividend Yield (4)
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %
 
 1.
    
    Estimated based on historical experience.2.
    
    Volatility based on historical experience over a period equivalent to the expected life in
years.3.
    
    Based on the US Treasury constant maturity interest rate with a term consistent with the
expected life of the options granted.4.
    
    The Company does not pay dividends on its common stock and the Company currently does not
have any plans to pay or declare any cash dividends. F-16




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##### Table of Contents



ENDOLOGIX, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share or performance unit and per share amounts)
  2008
    
    
    2007
    
    
    2006General and Administrative
    
    $
    1,413
    
    
    $
    894
    
    
    $
    767Marketing and Sales
    
    
    1,018
    
    
    
    878
    
    
    
    448Research, Development, and Clinical
    
    
    236
    
    
    
    417
    
    
    
    347Cost of Sales
    
    
    245
    
    
    
    195
    
    
    
    72Total Stock Based Compensation
    
    $
    2,912
    
    
    $
    2,384
    
    
    $
    1,634
  11. Related Party Transactions
  12. Income Taxes
  2008
    
    
    2007
    
    
    2006CurrentFederal
    
    $
    (30
    )
    
    $
    
    
    
    $
    State
    
    
    2
    
    
    
    2
    
    
    
    3Foreign
    
    
    
    
    
    
    
    
    
    
    3(28
    )
    
    
    2
    
    
    
    3DeferredFederal
    
    
    
    
    
    
    
    
    
    
    State
    
    
    
    
    
    
    
    
    
    
    Total tax expense (benefit)
    
    $
    (28
    )
    
    $
    2
    
    
    $
    3
  2008
    
    
    2007
    
    
    2006Tax expense (benefit) at U.S. statutory rate
    
    $
    (4,077
    )
    
    $
    (5,126
    )
    
    $
    (5,965
    )State tax (benefit) net of federal benefit
    
    
    (372
    )
    
    
    (493
    )
    
    
    (662
    )Meals & Entertainment (50% addback)
    
    
    128
    
    
    
    114
    
    
    
    76Research & Development Credits
    
    
    (110
    )
    
    
    (201
    )
    
    
    (39
    )Stock based compensation
    
    
    500
    
    
    
    456
    
    
    
    437Net change in valuation allowance
    
    
    3,898
    
    
    
    5,240
    
    
    
    5,811Other, net
    
    
    5
    
    
    
    12
    
    
    
    345$
    (28
    )
    
    $
    2
    
    
    $
    3
  F-17




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##### Table of Contents



ENDOLOGIX, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share or performance unit and per share amounts)
  2008
    
    
    2007Net operating loss carryforwards
    
    $
    40,173
    
    
    $
    36,257Accrued expenses
    
    
    203
    
    
    
    181Tax credits
    
    
    6,341
    
    
    
    6,232License fees
    
    
    51
    
    
    
    61Inventory
    
    
    289
    
    
    
    248Capitalized research and development
    
    
    281
    
    
    
    401Developed technology
    
    
    (1,808
    )
    
    
    (2,337
    )Trademarks and tradenames
    
    
    (1,029
    )
    
    
    (1,029
    )Deferred compensation
    
    
    1,328
    
    
    
    803Other
    
    
    707
    
    
    
    746Deferred tax assets
    
    
    46,536
    
    
    
    41,563Valuation allowance
    
    
    (47,565
    )
    
    
    (42,592
    )Net deferred tax liability
    
    $
    (1,029
    )
    
    $
    (1,029
    )
       F-18




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##### Table of Contents



ENDOLOGIX, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except share or performance unit and per share amounts)
       13. Employee Benefit Plan
  14. Legal Matters
  F-19




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##### Table of Contents



ENDOLOGIX, INC.
 SCHEDULE II  VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 2008, 2007 and 2006
 Column A
    
    Column B
    
    Column C
    
    Column D
    
    Column EAdditions(Reductions)Balance at
    
    Charges to
    
    Charged
    
    
    
    
    
    Balance atBeginning of
    
    Costs and
    
    to Other
    
    
    
    
    
    End ofDescription
    
    Period
    
    Expenses
    
    Accounts
    
    Deductions(a)
    
    Period(In thousands)Year ended December 31, 2008Allowance for doubtful accounts
    
    $
    100
    
    
    $
    89
    
    
    $
    
    
    
    $
    (117
    )
    
    $
    72Reserve for excess and obsolete inventories
    
    $
    660
    
    
    $
    318
    
    
    $
    
    
    
    $
    (210
    )
    
    $
    768Income tax valuation allowance
    
    $
    42,592
    
    
    $
    4,973
    
    
    $
    
    
    
    $
    
    
    
    $
    47,565Year ended December 31, 2007Allowance for doubtful accounts
    
    $
    38
    
    
    $
    81
    
    
    $
    
    
    
    $
    (19
    )
    
    $
    100Reserve for excess and obsolete inventories
    
    $
    79
    
    
    $
    777
    
    
    $
    
    
    
    $
    (196
    )
    
    $
    660Income tax valuation allowance
    
    $
    37,075
    
    
    $
    5,517
    
    
    $
    
    
    
    $
    
    
    
    $
    42,592Year ended December 31, 2006Allowance for doubtful accounts
    
    $
    26
    
    
    $
    38
    
    
    $
    
    
    
    $
    (26
    )
    
    $
    38Reserve for excess and obsolete inventories
    
    $
    426
    
    
    $
    488
    
    
    $
    
    
    
    $
    (835
    )
    
    $
    79Income tax valuation allowance
    
    $
    30,424
    
    
    $
    6,651
    
    
    $
    
    
    
    $
    
    
    
    $
    37,075
 
 (a)
    
    Deductions represent the actual write-off of accounts receivable balances or the disposal of
inventory. F-20




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    
    Description3.1
    
    Amended and Restated Certificate of Incorporation (Incorporated by
reference to Exhibit 4.1 to Endologix Registration Statement on Form S-8,
filed with the SEC on August 7, 2006).3.2
    
    Amended and Restated Bylaws (Incorporated by reference to Exhibit 3.2 to
Endologix Annual Report on Form 10-K filed with the SEC on March 29,
2001).4.1
    
    Specimen Certificate of Common Stock (Incorporated by reference to Exhibit
4.1 to Amendment No. 2 to Endologix Registration Statement on Form S-1,
No. 333-04560, filed with the SEC on June 10, 1996).10.1(2)
    
    Employee Stock Purchase Plan and forms of agreement thereunder
(Incorporated by reference to Exhibit 4.1 to Endologix Registration
Statement on Form S-8, No. 333-114465, filed with the SEC on April 14,
2004).10.2(2)
    
    1997 Supplemental Stock Option Plan (Incorporated by reference to Exhibit
99.1 to Endologix Registration Statement on Form S-8, No. 333-42161, filed
with the SEC on December 12, 1997).10.3(1)
    
    License Agreement by and between Endologix and Guidant dated June 19, 1998
(Incorporated by reference to Exhibit 10.24 to Endologix Quarterly Report
on Form 10-Q, filed with the SEC on August 11, 1998).10.4(2)
    
    1996 Stock Option/Stock Issuance Plan (Incorporated by reference to
Exhibit 4.1 to Endologix Registration Statement on Form S-8, No.
333-122491, filed with the SEC on February 2, 2005).10.5(2)
    
    1997 Stock Option Plan assumed by Endologix pursuant to its acquisition of
Radiance Medical Systems, Inc. on January 14, 1999 (Incorporated by
reference to Exhibit 99.2 to Endologix Registration Statement on Form S-8,
No. 333-72531, filed with the SEC on February 17, 1999).10.6(2)
    
    2006 Stock Incentive Plan (Incorporated by reference to Exhibit 10.1 to
Endologix Current Report on Form 8-K, filed with the SEC on May 26, 2006).10.6.1(2)
    
    Stock Option Agreement under 2006 Stock Incentive Plan (Incorporated by
reference to Exhibit 10.1 to Endologix Quarterly Report on Form 10-Q,
filed with the SEC on November 9, 2006).10.6.2(1)
    
    Restricted Stock Award Agreement under 2006 Stock Incentive Plan
(Incorporated by reference to Exhibit 10.2 to Endologix Quarterly Report
on Form 10-Q, filed with the SEC on November 9, 2006).10.7(2)
    
    2006 Employee Stock Purchase Plan (Incorporated by reference to Exhibit
10.2 to Endologix Current Report on Form 8-K, filed with the SEC on May
26, 2006.10.9
    
    Form of Indemnification Agreement entered into with Endologix officers and
directors (Incorporated by reference to Exhibit 10.41 to Endologix
Quarterly Report on Form 10-Q, filed with the SEC on November 13, 2002).10.11
    
    Standard Industrial/Commercial Single-Tenant Lease  Net, dated November
2, 2004, by and between Endologix and Del Monico Investments, Inc.
(Incorporated by reference to Exhibit 10.46 to Endologix Current Report on
Form 8-K, filed with the SEC on November 24, 2004).10.12
    
    Loan and Security Agreement, dated as of February 21, 2007, by and between
Endologix and Silicon Valley Bank (Incorporated by reference to Exhibit
10.13 to Endologix Quarterly Report on Form 10-Q, filed with the SEC on
May 9, 2007).10.12.1
    
    First Amendment to Loan and Security Agreement, dated as of July 22, 2008,
by and between Endologix and Silicon Valley Bank (Incorporated by
reference to Exhibit 10.1 to Endologix Current Report on Form 8-K, filed
with the SEC on July 28, 2008).




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##### Table of Contents



ExhibitNumber
    
    Description10.13(2)
    
    Offer Letter, dated April 28, 2008, between Endologix and John McDermott
(Incorporated by reference to Exhibit 10.1 to Endologix Current Report on
Form 8-K, filed with the SEC on May 16, 2008).10.14(2)
    
    Severance Agreement and General Release, effective May 12, 2008, between
Endologix and Paul McCormick (Incorporated by reference to Exhibit 10.2 to
Endologix Current Report on Form 8-K, filed with the SEC on May 16, 2008).10.15(2)
    
    Employment Agreement, dated as of December 29, 2008, between Endologix and
John McDermott (Incorporated by reference to Exhibit 10.1 to Endologix
Current Report on Form 8-K, filed with the SEC on January 2, 2009).10.16(2)
    
    Employment Agreement, dated as of December 29, 2008, between Endologix and
Robert J. Krist (Incorporated by reference to Exhibit 10.2 to Endologix
Current Report on Form 8-K, filed with the SEC on January 2, 2009).10.17(2)
    
    Employment Agreement, dated as of December 29, 2008, between Endologix and
Stefan G. Schreck, Ph.D. (Incorporated by reference to Exhibit 10.3 to
Endologix Current Report on Form 8-K, filed with the SEC on January 2,
2009).10.18(2)
    
    Employment Agreement, dated as of December 29, 2008, between Endologix and
Janet Fauls (Incorporated by reference to Exhibit 10.4 to Endologix
Current Report on Form 8-K, filed with the SEC on January 2, 2009).14
    
    Code of Ethics for Chief Executive Officer and Principal Financial
Officers (Incorporated by reference to Exhibit 14 to Endologix Annual
Report on Form 10-K filed with the SEC on March 26, 2004).21.1
    
    List of Subsidiaries.23.1
    
    Consent of Independent Registered Public Accounting Firm.24.1
    
    Power of Attorney (included on signature page hereto).31.1
    
    Certification of Chief Executive Officer Pursuant to Rule
13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934.31.2
    
    Certification of Chief Financial Officer Pursuant to Rule
13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934.32.1
    
    Certification of Chief Executive Officer Pursuant to Rule
13a-14(b)/15d-14(b) under the Securities Exchange Act of 1934 and 18
U.S.C. Section 1350.32.2
    
    Certification of Chief Financial Officer Pursuant to Rule
13a-14(b)/15d-14(b) under the Securities Exchange Act of 1934 and 18
U.S.C. Section 1350.
 
 (1)
    
    Portions of this exhibit are omitted and were filed separately with the Securities and
Exchange Commission pursuant to Endologix application requesting confidential treatment under
Rule 24b-2 of the Securities Exchange Act of 1934.(2)
    
    These exhibits are identified as management contracts or compensatory plans or arrangements
of Endologix pursuant to Item 15(a)(3) of Form 10-K.