10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________________________

Form 10-K

_______________________________

(Mark One)

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

For the fiscal year ended December 31, 2012

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 incorporation or organization)	(IRS Employer Identification No.)

11 Studebaker, Irvine, California 92618

(Address of principal executive offices, including zip code)

Registrant’s telephone number, including area code: (949) 595-7200

_______________________________

Securities registered pursuant to Section 12(b) of the Act:

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

Securities registered pursuant to Section 12(g) of the Act: None

_______________________________

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  x No    o

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  o    No  x

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

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

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

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

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

As of June 30, 2012, the aggregate market value of the voting stock held by non-affiliates of the Registrant was $955,038,220 (based upon the $15.44 closing price for shares of the Registrant’s Common Stock as reported by the NASDAQ Global Select Market on June 30, 2012, the last trading date of the Registrant’s most recently completed second fiscal quarter).

On February 28, 2013, approximately 62,654,131 shares of the Registrant’s Common Stock, $0.001 par value, were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of Part III of this Annual Report on Form 10-K are incorporated by reference into the Registrant’s Proxy Statement for its Annual Meeting of Stockholders to be held on May 23, 2013.

TABLE OF CONTENTS

Item	Description	Page
	PART I
1.	Business	1
1A.	Risk Factors	1
1B.	Unresolved Staff Comments	1
2.	Properties	1
3.	Legal Proceedings	1
4.	Mine Safety Disclosures	1
PART II
5.	Market for Endologix's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	2
6.	Selected Financial Data	3
7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4
7A.	Quantitative and Qualitative Disclosures About Market Risk	4
8.	Financial Statements and Supplementary Data	5
9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	11
9A.	Controls and Procedures	11
9B.	Other Information	11
PART III
10.	Directors, Executive Officers and Corporate Governance	11
11.	Executive Compensation	11
12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	11
13.	Certain Relationships and Related Transactions, and Director Independence	11
14.	Principal Accountant Fees and Services	11
PART IV
15.	Exhibits, Financial Statement Schedules	12
	Signatures	13

Cautionary Note Concerning Forward-Looking Statements

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 (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934 as amended (the "Exchange Act"). These forward looking statements are intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. You can identify forward-looking statements 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:

• continued market acceptance of our endovascular systems;

• our ability to successfully commercialize products which incorporate the technology obtained as part of the Nellix acquisition;

• the level and availability of third party payor reimbursement for our products;

• our ability to effectively manage our business and keep pace with our anticipated revenue growth;

• our ability to protect our intellectual property rights and proprietary technologies;

• our ability to operate our business without infringing the intellectual property rights and proprietary technology of third parties;

• our ability to effectively develop new or complementary technologies;

• our ability to attract, retain, and motivate qualified personnel;

• our ability to manufacture our endovascular systems to meet demand;

• 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 ability to maintain adequate liquidity to fund our operational needs;

• our ability to effectively compete with the products offered by our competitors;

• general macroeconomic and world-wide business conditions; and

• other risks set forth under “Risk Factors” in Item 1A of this Annual Report on Form 10-K.

Our 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.

The industry and market data contained in this Annual Report on Form 10-K are based either on our management’s own estimates or on independent industry publications, reports by market research firms, or other published independent sources. Although we believe these sources are reliable, we have not independently verified the information and cannot guarantee its accuracy and completeness, as industry and market data are subject to change and cannot always be verified with complete certainty due to limits on the availability and reliability of raw data, the voluntary nature of the data gathering process, and other limitations and uncertainties inherent in any statistical survey of market shares. Accordingly, one should be aware that the industry and market data contained in this Annual Report on Form 10-K, and estimates and beliefs based on such data, may not be reliable. Unless otherwise indicated, all information contained in this Annual Report on Form 10-K concerning our industry in general or any segment thereof, including information regarding our general expectations and market opportunity, is based on management’s estimates using internal data, data from industry related publications, consumer research and marketing studies, and other externally obtained data.

***

Endologix^®, AFX^® , IntuiTrak^®, Xpand^®, Powerlink^® , Powerlink XL^®, and Nellix^® are registered trademarks of Endologix, Inc., IntuiTrak Express™, PowerFit™, Ventana™, and their respective logos are trademarks of Endologix, Inc. Other trademarks used in this Annual Report on Form 10-K are the property of their respective holders.

PART I

Item 1. Business

Company Overview

Endologix, Inc. ("Endologix," the "Company," "we," "us," or "our") is a Delaware corporation with corporate headquarters and production facilities located in Irvine, California. We develop, manufacture, market, and sell innovative medical devices for the treatment of aortic disorders. Our principal product is a stent graft and accompanying delivery system (our "ELG System"), for the treatment of abdominal aortic aneurysms ("AAA") through minimally-invasive endovascular repair ("EVAR"). Sales of our ELG System (including extensions and accessories) to hospitals in the U.S. and Europe, and to third-party international distributors, provide the sole source of our reported revenue.

Our ELG System consists of (i) a self-expanding cobalt chromium alloy stent covered by expanded polytetrafluoroethylene (commonly referred to as "ePTFE") graft material (our "ELG Device") and (ii) an accompanying delivery system. Once our ELG Device is fixed in its proper position within the abdominal aorta, it provides a conduit for blood flow, thereby relieving pressure within the weakened or “aneurysmal” section of the vessel wall, which greatly reduces the potential for the AAA to rupture.

In February 2013, we commenced a limited market introduction of our next generation device to treat AAA, the Nellix System (see "Nellix" section below).

Market Overview and Opportunity

AAA Background

Atherosclerosis is a disease which results in the thickening and hardening of arteries, which generally is attributable to smoking, high blood pressure, and/or high cholesterol damage. This disease generally progresses with age.

Atherosclerosis reduces the integrity and strength of blood vessel walls, causing the vessel to expand or balloon out, which is known as an "aneurysm". Aneurysms are commonly diagnosed in the aorta, which is the body’s largest artery, extending from the chest to the abdomen. The abdominal aorta is the segment between the renal (kidney) arteries and the area where the aorta divides into the two iliac arteries which travel down the legs. AAA occurs when a portion of the abdominal aorta bulges into an aneurysm because of a weakening of the vessel wall, which may result in life threatening internal bleeding upon rupture.

The overall patient mortality rate for ruptured AAA is approximately 80%, making it among the leading causes of death in the U.S. Once diagnosed, patients with AAA require either non-invasive monitoring, or depending on the size and rate of growth of the AAA, will require EVAR or open surgical repair.

EVAR Versus Open Surgical Repair

Our ELG System is used exclusively for minimally-invasive EVAR procedures, as opposed to open surgical repair of AAA. Open surgical repair is a highly invasive procedure requiring (i) a large incision in the patient’s abdomen, (ii) withdrawal of the patient’s intestines to provide access to the aneurysm, (iii) the cross clamping of the aorta to stop blood flow, and (iv) implantation of a graft which is sutured to the aorta, connecting one end above the aneurysm, to the other end below the aneurysm.

Open surgical repair typically lasts two to four hours, while the typical EVAR procedure lasts one to two hours. After receiving open surgical repair, the patient usually requires a few days in the hospital's surgical intensive care unit (SICU), and the total hospital stay may be four to ten days. Post-procedure convalescence may take another four to six weeks due to the invasiveness of the operation.  By comparison, patients are often discharged a day or two after their EVAR procedure, and once discharged, most patients return to normal activity within two weeks.

Today, approximately 70% of all treated AAAs in the U.S. are repaired through EVAR, and 30% through open surgical repair.  Although EVAR has many key advantages over open surgical repair, many patients are not candidates for EVAR due to the limitations of the current EVAR devices to treat a wide range of AAA anatomies. We are developing new ELG systems that we believe, within the next five years, will allow us to address at least 90% of all diagnosed AAAs.

An article published in the New England Journal of Medicine on January 31, 2008 compared the results of open surgical repair versus EVAR for the treatment of AAA on more than 45,000 patients over a three year period. Among the findings discussed in the article were:

• The 30-day mortality rate of all patients in the study undergoing EVAR was approximately 1.2%, as compared to 4.8% for open surgical repair.

• Patients treated by EVAR were three times as likely to be discharged to their homes rather than another rehabilitation facility as compared to patients treated with open repair.

• The average hospital stay for patients in the study undergoing EVAR was 3.4 days versus 9.3 days for patients undergoing open surgical repair.

Market Size

In the U.S. alone, it is estimated that between 1.2 million and 2.0 million people have an AAA. Over 200,000 people were diagnosed with AAA in the U.S. in 2011. Of those diagnosed with an AAA, approximately 68,000 people underwent an AAA repair procedure in the U.S., of which approximately 44,000 were addressed through EVAR (utilizing an ELG system).

Although AAA is one of the most serious cardiovascular diseases, many AAAs are never detected. Most AAA patients do not have symptoms at the time of their initial diagnosis. AAAs generally are discovered coincidentally during procedures to treat or diagnose unrelated medical conditions.

Since AAAs generally arise in people over the age of 65 and come with little warning, initiatives have been undertaken to increase its screening. The most prominent of these initiatives is the Screening Abdominal Aortic Aneurysms Very Efficiently Act (“SAAAVE”), which was signed into law in the U.S. on February 8, 2006, and began providing coverage on January 1, 2007. SAAAVE provides for a one-time free of charge AAA screening for men who have smoked some time in their life, and men or women who have a family history of the disease. This screening is provided as part of the “Welcome to Medicare” physical.

The age 65 and over population in the U.S. presently numbers approximately 40 million, or 13% of the total population, and is expected to grow to 47 million by 2015. Accordingly, we believe that AAA treatments will naturally increase over time, given this demographic trend.

We estimate that the current annual worldwide EVAR market size for our ELG System is approximately $1.0 billion, which includes an approximate $610 million market size in the U.S. The worldwide aortic stent graft market (including thoracic stent grafts, for which we have future product development plans, but do not currently have an approved product) is expected to grow to $2.0 billion by 2016.

Our Mission

Our mission is to be the leading innovator of medical devices to treat aortic disorders. Key elements of our strategy to accomplish this mission are as follows:

• Focus exclusively on the aorta for the commercialization of innovative products.

• Design and manufacture ELG Systems that are easy to use and result in excellent clinical outcomes.

• Provide exceptional clinical and technical support to physicians through an experienced and knowledgeable sales and marketing organization.

Our Products

Our ELG System

Our ELG System consists of our ELG Device and catheter delivery system, branded under the names Powerlink, IntuiTrak, and AFX. We believe that our ELG System offers the following advantages over competitors:

• Anatomical Fixation. Our ELG Device is unique in that the main body of the device sits on the patient's natural aortoiliac bifurcation. This provides a solid foundation for the long-term stability of the device. Alternative ELG devices rely on hooks, barbs and radial force to anchor within the aorta (generally referred to as "proximal fixation") near the renal arteries. We have proven in our clinical studies that anatomical fixation inhibits device migration within the aorta due to the inherent foundational support of the patients own anatomy.

• Unique, Minimally Invasive Delivery System. In the majority of procedures, our ELG System requires only a small incision in one leg. The other leg needs only percutaneous placement of a non-surgical introducer sheath, three millimeters in diameter. With the expected FDA approval of our totally percutaneous EVAR in the first half of 2013 (see "PEVAR" section below), we will have the only FDA approval for a label for this advantageous treatment option. Our competitors' ELG systems typically require surgical exposure of the femoral artery in both legs to introduce multiple device components.

• Preserves Aortic Bifurcation. Our ELG Device allows for future endovascular procedures when continued access across the aortic bifurcation is required. Approximately 30% to 40% of AAA patients also have peripheral arterial disease (“PAD”).  Our ELG Device is the only one presently available that preserves the physician's ability to go back over the aortic bifurcation for future interventions. This is a meaningful feature of our ELG System, as many AAA patients are today living longer and returning to the hospital for PAD procedures.

See the "Nellix" section below regarding our February 2013 limited market introduction of our next-generation device to treat AAA.

Our ELG Device Extensions and Accessories

Aortic Extensions and Limb Extensions.We offer proximal aortic extensions and limb extensions which attach to the "main body" of our ELG Device, allowing physicians to customize it to fit the patient's anatomy.

Accessories. We offer various accessories to facilitate the optimal delivery of our ELG Device, including compatible guidewires, snares, and catheter introducer sheaths.

Our Product Evolution

Our core ELG System was first commercialized in Europe in 1999 and in the U.S. in 2004. We initially branded it as the Powerlink System ("Powerlink"). As our ELG System evolved, we branded Powerlink under the names Visiflex, IntuiTrak, and AFX. In February 2013, we began the European launch of our next-generation device to treat AAA, branded as Nellix.

•Visiflex. Visiflex was our original ELG System.

•IntuiTrak. In October 2008, we received FDA approval for IntuiTrak. We received CE Mark approval for IntuiTrak in March 2010, and Shonin approval in December 2012. IntuiTrak provided an updated delivery system that further simplified the implant procedure for physicians and lowered its profile from Visiflex.

•AFX. In June 2011 and November 2011, we received FDA approval and CE Mark approval, respectively, for our AFX Endovascular AAA System ("AFX"). We believe AFX provides physicians with further improved vascular access and more precise deployment of our ELG Device, as compared to IntuiTrak. We began a full commercial launch of AFX in the U.S. in August 2011 and in numerous international markets in 2012.

•Nellix.  In January 2013, we received CE Mark approval of the Nellix System.  In February 2013, we commenced a limited market introduction of the Nellix System in Europe.  We hope to receive FDA premarket approval in 2016.

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

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

Manufacturing and Supply

All of our commercial products are manufactured, assembled, and packaged at our 60,000 square foot leased facilities in Irvine, California.

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

Marketing and Sales

We market and sell our ELG System in the U.S. and in several European countries through a direct sales force and network of agents. In certain other European countries and in Asia, South America, and Mexico, we sell our ELG System through exclusive independent distributors. As of February 28, 2013, we marketed our ELG System in 23 countries outside of the U.S. through 13 independent distributors.

U.S. We market and sell our products in the U.S. through a direct sales force consisting of (as of December 31, 2012) 67 sales representatives and 13 clinical specialists. The primary customer and decision maker for ELG systems in the U.S. is the vascular surgeon, and to a lesser extent, the interventional radiologist and cardiologist. Through our direct sales force, we provide clinical support and service to many of the approximately 1,600 hospitals and 4,700 physicians in the U.S. that perform EVAR. Approximately 82% of our revenues for the year ended December 31, 2012 were generated from sales of our ELG System in the U.S.

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

Asia Pacific. We commenced commercial sales in Japan in February 2007 after receipt of Japanese regulatory, or Shonin, approval. We have had limited commercial sales in China since September 2009. Approximately 5% of our revenues for the year ended December 31, 2012 were generated from distributor sales of our ELG System in Asia.

South America and Mexico. We have applicable regulatory approvals for Mexico, Argentina, Brazil, Chile, and Colombia. We commenced sales in South America and in Mexico in December 2007. Approximately 5% of our revenues for the year ended December 31, 2012 were generated from distributor sales of our ELG System in South America and Mexico.

Competition

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

• clinical effectiveness;

• product safety, reliability, and durability;

• ease of use;

• sales force experience and relationships; and

• price.

We experience significant competition and we expect that the intensity of competition will increase over time. For example, our major competitors - Medtronic, Inc., W.L. Gore Inc., and Cook Medical Products, Inc. each have obtained full regulatory approval for their ELG systems in the U.S. and Europe. In addition to these major competitors, we also have smaller competitors, and emerging competitors with active ELG system development programs.

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

Clinical Trials and Product Developments

Overview

We incurred expenses of $22.9 million in 2012, $21.2 million in 2011, and $11.2 million in 2010, on research and development activities and clinical studies. Our focus is to continually develop innovative and cost-effective medical devices for the treatment of aortic disorders. We believe that our ability to develop new technologies is a key to our future growth and success. Historically, we have focused on developing our ELG Systems to treat infrarenal AAA. However, we expect to devote more resources in the future to develop new technologies to treat juxtarenal aneurysms and diseases of the thoracic aorta.

PEVAR

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

In January 2013, we announced data from the first prospective, multicenter, randomized clinical trial of PEVAR, using our AFX and IntuiTrak devices.  We expect that this data will be published in full in the Journal of Vascular Surgery during 2013.  Key data points from our clinical trial include:

• The trial primary endpoint was met, definitively demonstrating the non-inferiority of PEVAR using the accompanying closure device to surgical access EVAR.

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

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

• PEVAR patients required significantly fewer concomitant procedures.

• Favorable trending of PEVAR was observed in several clinical utility outcomes including reduced anesthesia time, reduced blood loss and need for transfusion, shorter hospital length of stay, and less analgesics prescribed for groin pain.

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

Xpand

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

Ventana

The JAA and PAA patient population is a significant and under-served segment of the AAA market. Available industry data suggests that 20% to 30% of diagnosed AAAs are not treatable with currently-approved ELG devices, due to the aneurysm's proximal location to the renal arteries.

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

In January 2012, we received Investigational Device Exemption ("IDE") approval from the FDA to begin U.S. clinical trials to evaluate Ventana for the EVAR repair of JAA and PAA. In February 2012, we enrolled the first patient in our U.S. clinical trials to evaluate Ventana.

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

Nellix

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

We received CE Mark approval of the Nellix System in January 2013, and in February 2013, commenced a limited market introduction of the Nellix System in Europe. We hope to receive an IDE approval from the FDA for the Nellix System in the first half of 2013, and hope to receive FDA premarket approval in the U.S. in 2016.

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

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

Nellix Acquisition and Private Placement Transaction

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

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

Patents and Proprietary Information

We believe that our intellectual property and proprietary information is key to protecting our technology. We are building a portfolio of apparatus and method patents covering various aspects of our current and future technology. In the area of aorta treatment systems (exclusive of Nellix technology), our rights include 42 U.S. issued patents, 18 pending U.S. applications, and 21 foreign patents. Our current aorta treatment related patents have expiration dates from 2013 to 2031. As a result of our acquisition of Nellix, we added additional patents to our portfolio which have evolved to currently include 12 U.S. patents and 12 foreign patents, with expiration dates from 2014 to 2030.  We intend to continue to file patent applications to strengthen our intellectual property position as we continue to develop our technology. 

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

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

Third-Party Reimbursement

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

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

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

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

Government Regulation - Medical Devices

U.S.

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

Manufacturers must file an IDE application if human clinical studies of a device are required and if the FDA considers investigational use of the device to represent significant risk to the patient. The IDE application must be supported by data, typically including the results of animal and engineering testing of the device. If the IDE application is approved by the FDA, human clinical studies may begin at a specific number of investigational sites with a maximum number of patients, as approved by the FDA. The clinical studies must be conducted under the review of an independent institutional review board to ensure the protection of the patients’ rights.

Generally, upon completion of these human clinical studies, a manufacturer seeks approval of a Class III medical device from the FDA by submitting a PMA application. A PMA application must be supported by extensive data, including the results of the clinical studies, as well as testing and literature to establish the safety and effectiveness of the device. Our Powerlink and AFX ELG Systems were approved through this PMA process and we anticipate that the Nellix and Ventana devices will likewise go through the PMA process.

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

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

International

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

In Europe, we need to comply with the requirements of the Medical Devices Directive ("MDD"), and appropriately affix the CE Mark on our products to attest to such compliance. To achieve compliance, our products must meet the “Essential Requirements” of the MDD relating to safety and performance and we must successfully undergo verification of our regulatory compliance, or conformity assessment, by a Notified Body selected by us. The level of scrutiny of such assessment depends on the regulatory class of the product.

In December 1998, we received ISO 9001:1994/ EN46001:1996 certification from our Notified Body with respect to the manufacturing of all of our products in our facilities. In September 2002, we received ISO 9001:1994/ EN46001:1996 and ISO 13485:1996 certification. In December 2005, we received ISO13485:2003 certification. We are subject to continued surveillance by our Notified Body and will be required to report any serious adverse incidents to the appropriate authorities. We also must comply with additional requirements of individual countries in which our products are marketed.

Government Regulation - Anti-Kickback Statute, Federal False Claims Act, and HIPAA

Anti-Kickback Statute

We are subject to various federal and state laws pertaining to healthcare fraud and abuse, including anti-kickback laws. In particular, the federal anti-kickback statute prohibits persons from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual, or the furnishing, arranging for or recommending a good or service, for which payment may be made in whole or in part under federal healthcare programs, such as the Medicare and Medicaid programs. The anti-kickback statute is broad and prohibits many arrangements and practices that are lawful in businesses outside of the healthcare industry.

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

False Claims Act

The federal False Claims Act prohibits persons from knowingly filing or causing to be filed a false claim to, or the knowing use of false statements to obtain payment from, the federal government. Suits filed under the False Claims Act, known as “qui tam” actions, can be brought by any individual on behalf of the government. These individuals, sometimes known as “relators” or, more commonly, as “whistleblowers”, may share in any amounts paid by the entity to the government in fines or settlement. The number of filings of qui tam actions has increased significantly in recent years, causing more healthcare companies to have to defend a False Claim Act. If an entity is determined to have violated the federal False Claims Act, it may be required to pay up to three times the actual damages sustained by the government, plus civil penalties for each separate false claim. Various states have also enacted similar laws modeled after the federal False Claims Act which apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply regardless of the payor.

Health Insurance Portability and Accountability Act of 1996

The Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) created two general federal violations, (a) healthcare fraud and (b) false statements relating to healthcare matters, and (c) protects the security and privacy of individually identifiable health information. The applicable requirements of HIPAA are briefly described below.

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

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

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

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

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

We have implemented and maintain a comprehensive program of oversight and training of our employees to ensure compliance with the foregoing laws and regulations.

Product Liability

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

Employees

As of December 31, 2012, we had 411 employees (as compared to 370 employees as of December 31, 2011), including 154 in manufacturing, 25 in research and development, 13 in regulatory and clinical affairs, 47 in quality support, 131 in sales and marketing, and 41 in administration. We believe that the success of our business will depend, in part, on our ability to attract and retain qualified personnel. Our employees are not subject to a collective bargaining agreement, and we believe that we have good relations with our employees.

General Information

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

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

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

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

Item 1A. Risk Factors

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

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

Risks Related to Our Business

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

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

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

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

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

• greater name recognition;

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

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

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

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

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

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

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

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

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

• the results of future clinical trials of the Nellix System.

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

• the receipt of approval from the FDA to sell the Nellix System in the U.S.;

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

• further developing an effective direct sales and marketing organization in Europe.

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

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

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

Our AAA products utilize a different fixation approach within the patient's anatomy than competitive products. Due to our favorable clinical results, and product improvements, and an increase in the size of our sales force, we have been able to increase sales at a rate higher than the general growth within our market segment. However, if we are unable to continue convincing physicians to use our products, our business could be negatively impacted.

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

Sales of our products outside the U.S. represented approximately 18% of our revenue in 2012. As of December 31, 2012, we sell our products through 13 distributors located in the following countries outside of the U.S.: Argentina, Brazil, Chile, Colombia, Greece, Japan, Mexico, China, and Turkey. The sales territories authorized within these various distribution agreements cover a total of 23 countries. As of September 1, 2011, we began selling our product in Europe through our own sales force. The sale and shipment of our products across international borders, as well as the purchase of components and products from international sources, subjects us to extensive U.S. and foreign governmental trade, import and export, and custom regulations and laws.

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

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

• difficulties in enforcing or defending intellectual property rights;

• pricing pressure that we may experience internationally;

• a shortage of high-quality sales people and distributors;

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

• the imposition of additional U.S. and foreign governmental controls or regulations;

• economic instability;

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

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

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

• laws and business practices favoring local companies;

• longer payment cycles;

• foreign currency translation adjustments;

• difficulties in maintaining consistency with our internal guidelines;

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

• the imposition of costly and lengthy new export licensing requirements;

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

• the imposition of new trade restrictions.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

• patients or investigators do not comply with study protocols;

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

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

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

• difficulties or delays associated with establishing additional clinical sites;

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

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

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

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

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

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

• do not meet the study endpoints.

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

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

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

• failure of our supplier to comply with regulatory requirements;

• any strike or work stoppage;

• disruptions in shipping;

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

• a supply shortage experienced by our single source supplier.

Although the supplier is a well-established vendor to the medical device industry and we retain a significant stock of the strata graft material, the occurrence of any of the above disruptions in supply or other unforeseen events that could cause a disruption in the supply from this single source supplier may cause us to halt, or experience a disruption in, manufacturing of AFX, Nellix, Xpand, and Ventana, which would adversely affect our business, financial condition, and results of operations.

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

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

Our success depends in large part on our ability to secure effective patent protection for our products and processes in the U.S. and internationally. We have filed and intend to continue to file patent applications for various aspects of our technology. However, we face the risks that:

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

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

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

If our products or processes infringe upon the intellectual property of third parties, the sale of our products may be challenged and we may have to defend costly and time-consuming infringement claims.

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

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

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

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

• redesign our products, processes or services; or

• subject us to significant liabilities to third parties.

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

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

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

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

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

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

• Todd Abraham, our Vice President of Operations;

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

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

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

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

We currently conduct all of our manufacturing, development and management activities at a single location in Irvine, California, near known earthquake fault zones. Our finished goods inventory is split between our Irvine location and our distribution centers in Memphis, Tennessee and Tilburg, The Netherlands. We have taken precautions to safeguard our facilities, including insurance, health and safety protocols, and off-site storage of computer data. However, any future earthquake could cause substantial delays in our operations, damage or destroy our equipment or inventory, and cause us to incur additional expenses. An earthquake could seriously harm our business and results of operations. The insurance coverage we maintain may not be adequate to cover our losses in any particular case.

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

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

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

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

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

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

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

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

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

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

Risks Related to Our Financial Condition

We have a history of operating losses and may be required to obtain additional funds.

We have a history of operating losses and may need to seek additional capital in the future. Our cash requirements in the future may be significantly different from our current estimates and depend on many factors, including:

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

• the 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.

To finance these activities, we may seek funds through borrowings or through additional rounds of financing, including private or public equity or debt offerings and collaborative arrangements with corporate partners. We may be unable to raise funds on favorable terms, or at all.

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

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

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

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

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

Risks Related to Regulation of Our Industry

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

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

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

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

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

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

• properly identify and anticipate physicians and patient needs;

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

• avoid infringing upon the intellectual property rights of third parties;

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

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

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

• provide adequate training to potential users of our products;

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

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

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

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

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

• FDA Regulations (Title 21 CFR);

• European Union CE mark requirements;

• Medical Device Quality Management System Requirements (ISO 13485:2003);

• Occupational Safety and Health Administration requirements; and

• California Department of Health Services requirements.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Many states have also adopted laws similar to each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payor, including commercial insurers as well as laws that restrict our marketing activities with physicians, and require us to report consulting and other payments to physicians. Some states mandate implementation of commercial compliance programs to ensure compliance with these laws. We also are subject to foreign fraud and abuse laws, which vary by country.

If our operations are found to be in violation of any of the laws described above or any other governmental regulations that apply to us now or in the future, we may be subject to penalties, including civil and criminal penalties, damages, fines, exclusion from governmental health care programs, and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our financial results.

Risks Related to Ownership of Our Common Stock

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

Under the terms of the merger agreement with Nellix and the other parties thereto, we agreed to issue additional shares of our common stock to the former stockholders of Nellix as contingent consideration upon our satisfaction of one or both of two milestones related to the Nellix System and described in the merger agreement, or upon a change of control of our company prior to our completion of one or both milestones. The maximum aggregate number of shares of our common stock issuable to the Nellix stockholders upon our achievement of both milestones, or upon a change of control of our company prior to our achievement of both milestones, is 10.2 million shares.

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

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

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

• physician acceptance of our products;

• the conduct and results of clinical trials;

• the timing and expense of obtaining future regulatory approvals;

• fluctuations in our expenses associated with expanding our operations;

• the introduction of new products by our competitors;

• supplier, manufacturing or quality problems with our devices;

• the timing of stocking orders from our distributors;

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

• changes in third-party payors' reimbursement policies.

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

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

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

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

• announcements by us or our competitors concerning technological innovations;

• introductions of new products;

• FDA and foreign regulatory actions;

• developments or disputes relating to patents or proprietary rights;

• 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 U.S. 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 wish at prevailing prices.

The average daily trading volume in our common stock for the year ended December 31, 2012 was approximately447,000 shares. If limited trading in our stock continues, it may be difficult for investors to sell their shares in the public market at any given time at prevailing prices. Moreover, the market price for shares of our common stock may be made more volatile because of the relatively low volume of trading in our common stock. When trading volume is low, significant price movement can be caused by the trading of a relatively small number of shares. Volatility in our common stock could cause stockholders to incur substantial losses.

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

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

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

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

Item 1B. Unresolved Staff Comments

None.

Item 2. Properties

We lease two adjacent facilities aggregating approximately 60,000 square feet in Irvine, California under separate lease agreements. These Irvine leases expire in August and September 2014, respectively, and may each be renewed for two additional twelve month periods, at our option. We also lease an administrative office of approximately 2,400 square feet on a month-to-month basis in Den Bosch, The Netherlands.

We believe that our current facilities will be adequate and suitable for our operations during 2013, however, we are presently evaluating long-term facility options in the U.S. for potential transition in 2014 to accommodate our continued business growth.

Item 3.     Legal Proceedings

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

LifePort Sciences LLC v. Endologix, Inc.

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

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

Cook Incorporated v. Endologix, Inc.

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

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

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

Item 4.     Mine Safety Disclosures

Not applicable.

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PART II

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

Securities

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

	High		Low
Year Ended December 31, 2011:
First Quarter	$	7.26	$	5.50
Second Quarter	9.30		6.72
Third Quarter	11.17		7.64
Fourth Quarter	11.95		10.00
Year Ended December 31, 2012:
First Quarter	$	14.65	$	11.31
Second Quarter	15.44		13.23
Third Quarter	15.51		11.15
Fourth Quarter	14.66		12.11

On February 28, 2013, the closing price of our common stock on the NASDAQ Global Select Market was $15.36 per share, and there were 211 holders of record of our common stock.

The following chart compares the yearly percentage change in the cumulative total stockholder return on our common stock for the period from December 31, 2007 through December 31, 2012, with the cumulative total return on the NASDAQ Composite Index and the NASDAQ Medical Equipment Index for the same period. The comparison assumes $100 was invested on December 31, 2007 in our common stock at the then closing price of $2.80 per share.

Dividend Policy

We have never paid any dividends. We currently intend to retain all earnings, if any, for use in the expansion of our business and therefore do not anticipate paying any dividends in the foreseeable future. Additionally, the terms of our credit facility with Wells Fargo Bank prohibit us from paying cash dividends without their consent.

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Item 6. Selected Financial Data

The following selected consolidated financial data has been derived from our audited Consolidated Financial Statements. The audited Consolidated Financial Statements for the fiscal years ended December 31, 2012, 2011, and 2010 are included elsewhere in this Annual Report on Form 10-K. The information set forth below should be read in conjunction with "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in Item 7 and the Consolidated Financial Statements and Notes thereto in Item 8.

	Year Ended December 31,
	2012			2011			2010			2009			2008
	(In thousands, except per share data)
Consolidated Statement of Operations Data:
Revenue	$	105,946		$	83,417		$	67,251		$	52,441		$	37,664
Cost of goods sold	25,282			18,746			15,030			13,181			10,380
Gross profit	80,664			64,671			52,221			39,260			27,284
Operating expenses:
Research and development	16,571			16,738			8,997			4,454			3,512
Clinical and regulatory affairs	6,343			4,439			2,169			2,115			2,570
Marketing and sales	53,953			44,655			31,869			26,483			23,794
General and administrative	20,266			15,525			13,410			8,550			9,455
Contract termination and business acquisition expenses	422			1,730			—			—			—
Settlement costs	5,000			—			—			—			—
Total operating expenses	102,555			83,087			56,445			41,602			39,331
Loss from operations	(21,891		)	(18,416		)	(4,224		)	(2,342		)	(12,047		)
Other income (expense)	(13,352		)	(10,400		)	(160		)	(71		)	27
Net loss before income tax	(35,243		)	(28,816		)	(4,384		)	(2,413		)	(12,020		)
Income tax (expense) benefit	(531		)	86			15,037			(21		)	28
Net income (loss)	$	(35,774	)	$	(28,730	)	$	10,653		$	(2,434	)	$	(11,992	)
Basic net income (loss) per share	$	(0.60	)	$	(0.51	)	$	0.22		$	(0.05	)	$	(0.28	)
Shares used in computing basic net income (loss) per share	59,811			56,592			48,902			45,194			43,045
Diluted net income (loss) per share	$	(0.60	)	$	(0.51	)	$	0.21		$	(0.05	)	$	(0.28	)
Shares used in computing diluted net income (loss) per share	59,811			56,592			50,544			45,194			43,045
	December 31,
	2012			2011			2010			2009			2008
	(In thousands)
Consolidated Balance Sheet Data:
Cash (including restricted cash and cash equivalents)	$	45,118		$	20,035		$	38,191		$	24,065		$	8,111
Accounts receivable, net	22,600			15,542			12,212			8,342			6,371
Total assets	$	165,103		$	130,255		$	134,375		$	51,292		$	37,263
Total liabilities (excluding contingent consideration payable in common stock)	$	18,229		$	14,986		$	11,243		$	8,412		$	11,446
Accumulated deficit	(200,014		)	(164,240		)	(135,510		)	(146,164		)	(143,730		)
Total stockholders’ equity	$	94,474		$	76,569		$	93,903		$	42,880		$	25,817

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

The following discussion and analysis should be read in conjunction with “Selected Financial Data” and our consolidated financial statements and the related notes included in this Annual Report on Form 10-K. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of various factors including the risks we discuss in Item 1A of Part I, “Risk Factors” and elsewhere in this Annual Report on Form 10-K.

Overview

Our Business

Our corporate headquarters and manufacturing facility is located in Irvine, California. We develop, manufacture, market, and sell innovative medical devices for the treatment of aortic disorders. Our principal product is a stent graft and delivery catheter for the treatment of abdominal aortic aneurysms ("AAA") through minimally-invasive endovascular repair.

We sell our products through (i) our direct U.S. and European sales forces and (ii) third-party distributors in Europe, Asia, Latin America, and in other parts of the world.

See Item 1., "Business," for a discussion of:

• Market Overview and Opportunity

• Our Products

• Manufacturing and Supply

• Marketing and Sales

• Competition

• Clinical Trials and Product Developments

2012 Overview

2012 was an important year of revenue growth, business expansion, and infrastructure development. We continued to gain market share in the U.S., while also building our direct sales operations in Europe. Combined with good results in other international markets, we achieved 27% annual revenue growth. We also made substantial progress with our new product pipeline, positioning us for several product launches in 2013.

Characteristics of Our Revenue and Expenses

Revenue

Revenue is derived from sales of our ELG System (including extensions and accessories) to hospitals upon completion of an EVAR procedure, or from sales to distributors upon title transfer (which is typically at shipment), provided our other revenue recognition criteria have been met.

Cost of Goods Sold

Cost of goods sold includes compensation (including stock-based compensation) and benefits of production personnel and production support personnel. Cost of goods sold also includes depreciation expense for production equipment, production materials and supplies expense, allocated facilities-related expenses, and certain direct costs such as shipping.

Research and Development

Research and development expenses consist of compensation (including stock-based compensation) and benefits for research and development personnel, materials and supplies, research and development consultants, and allocated facilities-related costs. Our research and development activities primarily relate to the development and testing of new devices and methods to treat aortic disorders.

Clinical and Regulatory

Clinical and regulatory expenses consist of compensation (including stock-based compensation) and benefits for clinical and regulatory personnel, regulatory and clinical payments related to studies, and allocated facilities-related costs. Our clinical and regulatory activities primarily relate to studies in order to gain regulatory approval for the commercialization of our devices.

Sales and Marketing

Sales and marketing expenses primarily consist of compensation (including stock-based compensation) and benefits for our sales force, sales support, and marketing personnel. It also includes costs attributable to marketing our products to our customers and prospective customers.

General and Administrative

General and administrative expenses primarily include compensation (including stock-based compensation) and benefits for personnel that support our general operations such as information technology, executive management, financial accounting, customer service, and human resources. General and administrative expenses also include bad debt expense, patent and legal fees, financial audit fees, insurance, recruiting fees, other professional services, and allocated facilities-related expenses.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and the disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the periods presented. While management believes these estimates are reasonable and consistent, they are by their very nature, estimates of amounts that will depend on future events. Accordingly, actual results could differ from these estimates. Our Audit Committee of the Board of Directors periodically reviews our significant accounting policies. Our critical accounting policies arise in conjunction with the following:

•Revenue recognition and accounts receivable

•Inventory - lower of cost or market

•Goodwill and intangible assets - impairment analysis

•Income taxes

•Stock-based compensation

•Contingent consideration for business acquisition

•Litigation accruals

Revenue Recognition and Accounts Receivable

We recognize revenue when all of the following criteria are met:

•We have appropriate evidence of a binding arrangement with our customer;

•The sales price for our ELG System (including extensions and accessories) is established with our customer;

•Our ELG System has been used by the hospital in an EVAR procedure, or our distributor has assumed title

with no right of return, as applicable; and

•Collection from our customer is reasonably assured at the time of sale.

For sales made to a direct customer (i.e., hospitals), we recognize revenue upon completion of an EVAR procedure, when our ELG Device is implanted in a patient. For sales to distributors, we recognize revenue at the time of title transfer, which is typically at shipment. We do not offer any right of return to our customers, other than honoring our standard warranty.

In the event that we enter into a bill and hold arrangement with our customer, which is uncommon for us, though occurred in 2012 (as discussed in Note 7 to accompanying Consolidated Financial Statements), the following conditions must be met for revenue recognition:

(i) The risks of ownership must have passed to our customer;

(ii) The customer must have made a fixed and written commitment to purchase the ELG Systems;

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

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

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

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

(vii) The ELG Systems must be complete and ready for shipment.

In addition to the above requirements, we also consider other pertinent factors prior to our recognition of revenue for bill and hold arrangements, such as:

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

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

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

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

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

We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to pay amounts due. These estimates are based on our review of the aging of customer balances, correspondence with the customer, and the customer's payment history.

Inventory - Lower of Cost or Market

We adjust our inventory value for estimated amounts of obsolete or unmarketable items. Such assumptions involve projections of future customer demand, as driven by economic and market conditions, and the product's shelf life. If actual demand, or economic or market conditions are less favorable than those projected by us, additional inventory write-downs may be required.

Goodwill and Intangible Assets - Impairment Analysis

Goodwill and other intangible assets with indefinite lives are not subject to amortization, but are tested for impairment

annually as of June 30, or whenever events or changes in circumstances indicate that the asset might be impaired.

We evaluate the possible impairment (i) if/when events or changes in circumstances occur that indicate that the carrying value of assets may not be recoverable; or (ii) in the case of goodwill and indefinite lived intangible assets, our annual impairment assessment date of June 30.

Income Taxes

Our consolidated balance sheets reflect net deferred tax assets that primarily represent the tax benefit of net operating loss carryforwards and credits and timing differences between book and tax recognition of certain revenue and expense items, net of a valuation allowance. When it is more likely than not that all or some portion of deferred tax assets may not be realized, we establish a valuation allowance for the amount that may not be realized. Each quarter, we evaluate the need to retain all or a portion of the valuation allowance on our net deferred tax assets. Our evaluation considers historical earnings, estimated future taxable income and ongoing prudent and feasible tax planning strategies. Adjustments to the valuation allowance increase or decrease net income or loss in the period such adjustments are made. If our estimates require adjustments, it could have a significant impact on our consolidated financial statements.

Changes in tax laws and rates could also affect recorded deferred tax assets in the future. Management is not aware of any such changes that would have a material effect on our consolidated financial statements.

Stock-Based Compensation

We recognize stock-based compensation expense for employees over the equity award vesting period, based on its fair value at the date of grant. For awards granted to consultants, the award is marked-to-market each reporting period, with a corresponding adjustment to stock-based compensation expense. The fair value of equity awards that are expected to vest is amortized on a straight-line basis over (i) the requisite service period or (ii) the period from grant date to the expected date of the completion of the performance condition for vesting of the award. Stock-based compensation expense recognized is net of an estimated forfeiture rate, which is updated as appropriate.

We use the Black-Scholes option pricing model to value stock option grants. The Black-Scholes option pricing model requires the input of highly subjective assumptions, including the expected volatility of our common stock, expected risk-free interest rate, and the option's expected life.

A portion of restricted stock vesting is dependent on us achieving certain regulatory and financial milestones. We use significant judgment in estimating the likelihood and timing of achieving these milestones. Each period, we will reassess the likelihood and estimate the timing of reaching these milestones, and will adjust expense accordingly.

Contingent Consideration for Business Acquisition

We determine the fair value of contingently issuable common stock related to the Nellix acquisition using a probability-based income approach using an appropriate discount rate . Changes in the fair value of the contingently issuable common stock are determined each period end and recorded in the other income (expense) section of the Consolidated Statements of Operations and Comprehensive Income (Loss) and the non-current liabilities section of the Consolidated Balance Sheet.

Litigation Accruals

From time to time we are involved in various claims and legal proceedings of a nature considered normal and

incidental to our business. These matters may include product liability, intellectual property, employment, and other general

claims. We accrue for contingent liabilities when it is probable that a liability has been incurred and the amount can

be reasonably estimated. The accruals are adjusted periodically as assessments change or as additional information becomes

available.

Results of Operations

Operations Overview - 2012, 2011, and 2010

The following table presents our results of continuing operations and the related percentage of the period's revenue (in thousands):

	Year Ended December 31,
	2012					2011					2010
Revenue	$	105,946		100.0	%	$	83,417		100.0	%	$	67,251		100.0	%
Cost of goods sold	25,282			23.9	%	18,746			22.5	%	15,030			22.3	%
Gross profit	80,664			76.1	%	64,671			77.5	%	52,221			77.7	%
Operating expenses:
Research and development	16,571			15.6	%	16,738			20.1	%	8,997			13.4	%
Clinical and regulatory affairs	6,343			6.0	%	4,439			5.3	%	2,169			3.2	%
Marketing and sales	53,953			50.9	%	44,655			53.5	%	31,869			47.4	%
General and administrative	20,266			19.1	%	15,525			18.6	%	13,410			19.9	%
Contract termination and business acquisition expenses	422			0.4	%	1,730			2.1	%	—			—	%
Settlement costs	5,000			4.7	%	—			—	%	—			—	%
Total operating expenses	102,555			96.8	%	83,087			99.6	%	56,445			83.9	%
Loss from operations	(21,891		)	(20.7	)%	(18,416		)	(22.1	)%	(4,224		)	(6.3	)%
Total other expense	(13,352		)	(12.6	)%	(10,400		)	(12.5	)%	(160		)	(0.2	)%
Net loss before income tax	(35,243		)	(33.3	)%	(28,816		)	(34.5	)%	(4,384		)	(6.5	)%
Income tax (expense) benefit	(531		)	(0.5	)%	86			0.1	%	15,037			22.4	%
Net income (loss)	$	(35,774	)	(33.8	)%	$	(28,730	)	(34.4	)%	$	10,653		15.8	%

Year Ended December 31, 2012 versus December 31, 2011

Revenue

	Year Ended December 31,
	2012		2011		Variance		Percent Change
	(in thousands)
Revenue	$	105,946	$	83,417	$	22,529	27.0	%

Our 27.0% revenue increase of $22.5 million over the prior year period resulted from:

(i) $15.4 million increase in U.S. sales due to the (a) expansion of our U.S. sales force through the addition of clinical specialists that exclusively provide field support to our sales representatives, having the impact of increasing overall sales force productivity and (b) the continued market traction of AFX, which was launched in the U.S. in August 2011;

(ii) $4.2 million increase in European sales due to our transition from a third-party distributor to a direct sales organization beginning in September 2011; and

(iii) $2.9 million increase in ROW sales. ROW sales growth is attributable to the July 2012 launch of AFX in Brazil and Argentina, and IntuiTrak orders by our distributor in Japan (in anticipation of its Japanese regulatory approval, which was received in December 2012).

Cost of Goods Sold, Gross Profit, and Gross Margin Percentage

	Year Ended December 31,
	2012			2011			Variance			Percent Change
	(in thousands)
Cost of goods sold	$	25,282		$	18,746		$	6,536		34.9	%
Gross profit	80,664			64,671			15,993			24.7	%
Gross margin percentage (gross profit as a percent of revenue)	76.1		%	77.5		%	(1.4		)%

The $6.5 million increase in cost of goods sold was driven by our revenue increase of $22.5 million.

Gross margin for the year ended December 31, 2012 decreased to 76.1% from 77.5% for the twelve months ended December 31, 2011. This decrease is primarily due to (i) a greater proportion of the total revenue being derived from international sales in 2012 (which have an average sales price below the U.S. sales price); (ii) royalty expenses which were not present for the full prior year period; and (iii) a decline in the average value of the Euro relative to the U.S. dollar in 2012 from 2011. These unfavorable gross margin items were partially offset by a greater proportion of our current period revenue derived from direct sales, as opposed to distributor sales, which typically have a higher average sales price.

Operating Expenses

	Year Ended December 31,
	2012		2011		Variance			Percent Change
	(in thousands)
Research and development	$	16,571	$	16,738	$	(167	)	(1.0	)%
Clinical and regulatory affairs	6,343		4,439		1,904			42.9	%
Marketing and sales	53,953		44,655		9,298			20.8	%
General and administrative	20,266		15,525		4,741			30.5	%
Contract termination and business acquisition expenses	422		1,730		(1,308		)	(75.6	)%
Settlement costs	5,000		—		5,000			100.0	%

Research and Development. The $0.2 million decrease in research and development expenses was primarily driven by decreasing Ventana development activities, as this device reaches the final stages of development and progresses towards production and commercialization. This decrease was partially offset by a $1.0 million purchase in the current period of an exclusive license to patents covering the polymer used in our Nellix System.

Clinical and Regulatory Affairs. The $1.9 million increase in clinical affairs was primarily driven by the continued enrollment and follow-up costs associated with our PEVAR and Ventana clinical trials and our efforts to achieve CE Mark approval of Ventana and the Nellix System.

Marketing and Sales. The $9.3 million increase in marketing and sales expenses was primarily related to marketing costs to support the growth of our U.S. business, costs related to our direct sales force in Europe (which was largely not present in the prior year period), and an increase in variable compensation expense of $1.2 million, driven by an increase in U.S. revenue of 21%.

General and Administrative. The $4.7 million increase in general and administrative expenses is attributable to (i) additional personnel to support our business growth; (ii) increased travel expenses associated with the expansion of our European operations; and (iii) professional service fees to develop our global legal structure.

Contract Termination and Business Acquisition Expenses.  Current period expense of $0.4 million is associated with professional fees incurred as part of the July 2012 acquisition of our Italian distributor's business.  In the prior year period we early terminated a distribution agreement with two former European distributors for aggregate termination fees of $1.7 million.  These actions allowed us to begin selling our products through our direct sales force in most of western Europe, beginning September, 2011, and in Italy, beginning July, 2012.

Settlement Costs.  Settlement costs of $5.0 million in the current period represents our payment in full to settle a patent dispute with Cook Incorporated. 

Provision for Income Taxes

	Year Ended December 31,
	2012		2011		Variance
	(in thousands)
Income tax (expense) benefit	(531	)	$	86	$	(617	)

For the twelve months ended December 31, 2012, our provision for income taxes was $0.5 million and our effective tax rate was 1.5% for the year ended December 31, 2012. During the twelve months ended December 31, 2012, we had operating legal entities in the U.S., Italy, and The Netherlands (plus registered sales branches of our Dutch entity in certain countries in Europe). We had a single operating legal entity in the U.S. during the prior year period until September 2011, when we formed operating legal entities in The Netherlands to begin direct sales activity in Europe. Accordingly, we have certain minimum tax liabilities attributable to our operations in these countries in 2012 that were not present in 2011. 

Year Ended December 31, 2011 versus December 31, 2010

Revenue

	Year Ended December 31,
	2011		2010		Variance		Percent Change
	(in thousands)
Revenue	$	83,417	$	67,251	$	16,166	24.0	%

Our 24% revenue increase primarily resulted from an increase in U.S. sales due to (i) the expansion of our sales force, (ii) the successful market introduction of additional ELG Device sizes and extensions (beginning in the second half of 2010), and (iii) the successful launch of AFX in August 2011. Though our overall revenue growth was driven by U.S. sales, it was partially offset by our decrease in European sales.

From January 1, through August 31, 2011 (and all prior periods), our European sales were solely derived from independent distributors. From September 1, 2011 through December 31, 2011, our European sales were derived from (i) our developing direct European sales force serving the markets of Austria, Belgium, the Czech Republic, Denmark, France, Germany, Luxemburg, The Netherlands, Romania, Sweden, Switzerland, and the United Kingdom (excluding Northern Ireland), and (ii) four independent distributors serving the markets in Italy, Greece, Turkey, and Ireland.

Cost of Goods Sold, Gross Profit, and Gross Margin Percentage

	Year Ended December 31,
	2011			2010			Variance			Percent Change
	(in thousands)
Cost of goods sold	$	18,746		$	15,030		$	3,716		24.7	%
Gross profit	64,671			52,221			12,450			23.8	%
Gross margin percentage (gross profit as a percent of revenue)	77.5		%	77.7		%	(0.2		)%

The $3.7 million increase in cost of goods sold was driven by an increase in revenue of $16.2 million. Gross margin for twelve months ended December 31, 2011 remained consistent with the prior year.

Operating Expenses

	Year Ended December 31,
	2011		2010		Variance		Percent Change
	(in thousands)
Research and development	$	16,738	$	8,997	$	7,741	86.0	%
Clinical and regulatory affairs	4,439		2,169		2,270		104.7	%
Marketing and sales	44,655		31,869		12,786		40.1	%
General and administrative	15,525		13,410		2,115		15.8	%
Contract termination and business acquisition expenses	1,730		—		1,730		100.0	%

Research and Development. The $7.7 million increase in research and development expenses was primarily driven by development activities related to the Nellix System, which represented an increase of $7.1 million of total research and development expenses for the year ended December 31, 2011. The remaining increase in research and development, as compared to 2010, is related to services and materials for general research and development activities for our other projects, including Ventana.

Clinical and Regulatory Affairs. The $2.3 million increase in clinical affairs expenses was primarily driven by the continued enrollment and follow up costs associated with our PEVAR clinical trial.

Marketing and Sales. The $12.8 million increase in marketing and sales expenses for the twelve months ended December 31, 2011 as compared to 2010 was primarily related to additional sales personnel related costs. We experienced an increase in variable compensation expense associated with our 29% increase in U.S. revenue for the twelve months ended December 31, 2011, as compared to the prior year. We also had an increase in marketing costs associated with driving U.S. sales growth, and incurred $1.2 million of incremental expenses in 2011 to build our direct sales force in Europe.

General and Administrative. The $2.1 million increase in general and administrative expenses was primarily related to an increase of (i) $1.2 million in legal costs associated with patent disputes; (ii) $0.2 million in consulting and professional services; (iii) $0.1 million in bank fees; (iv) $0.4 million increase in various costs to enhance our information technology infrastructure; and (v) $2.1 million increase in additional personnel costs, including recruitment and relocation expenses to support our U.S. and European business growth. These increases were partially offset by $3.0 million of Nellix acquisition costs that only arose in the prior year.

Contract termination and business acquisition expenses. Upon mutual agreement, we terminated a European distribution agreement, effective September 1, 2011. In connection therewith, we were contractually required to pay this distributor $1.3 million in order to start directly marketing and selling our products within certain Western European countries. Additionally, upon mutual agreement, we early terminated a distribution agreement with an Italian distributor, effective March 31, 2011. We were contractually required to pay this distributor $0.4 million as part of the transfer of distribution rights to another Italian distributor.

Liquidity and Capital Resources

The chart provided below summarizes selected liquidity data and metrics as of December 31, 2012 and December 31, 2011:

	December 31, 2012		December 31, 2011
	(in thousands, except financial metrics data)
Cash and cash equivalents	$	45,118	$	20,035
Accounts receivable, net	$	22,600	$	15,542
Total current assets	$	87,567	$	55,104
Total current liabilities	$	17,194	$	13,949
Working capital surplus (a)	$	70,373	$	41,155
Days sales outstanding ("DSO") (b)	71		61
Current ratio (c)	5.1		4.0

(a) total current assets at period end minus total current liabilities at period end.

(b) net accounts receivable at period end dividedby revenue for the fourth quarter multiplied by 92 days.

(c) total current assets at period end divided by total current liabilities at period end.

Operating Activities

Cash used in operating activities was $18.5 million for the year ended December 31, 2012, as compared to cash used in operating activities of $22.4 million in the prior year period. The decrease in cash used in operating activities is primarily a function of particularly large inventory expenditures in the prior year period to prepare for our August 2011 launch of AFX, partially offset by a general increase in 2012 expenditures to support our expanding world-wide operations.

During the twelve months ended December 31, 2012 and 2011, our cash collections from customers totaled $98.9 million and $80.0 million, respectively, representing 93% and 96% of reported revenue for the same periods.

Investing Activities

Cash used in investing activities for the twelve months ended December 31, 2012 was $3.5 million and consisted of (i) machinery and equipment purchases for the production of our ELG Systems; (ii) expenditures for various information technology enhancements; and (iii) the acquisition of our former Italian distributor's business.

Financing Activities

Cash provided by financing activities was $47.4 million for the twelve months ended December 31, 2012, as compared to cash provided by financing activities of $7.3 million in the prior year period. The $47.4 million of cash provided by financing activities was attributable to our (i) $40.1 million of net proceeds from the June 2012 Equity Raise (discussed below); (ii) proceeds of $4.9 million from the exercise of stock options; and (iii) proceeds of $2.4 million from our sale of stock through our employee stock purchase plan.

June 2012 Equity Raise

On May 30, 2012, we executed a common stock purchase agreement (the "Stock Purchase Agreement") with Piper Jaffray & Co. ("Piper").   Pursuant to the terms of the Stock Purchase Agreement Piper purchased 2.7 million shares of our common stock at $13.00 per share on June 5, 2012, and subsequently executed an option to purchase an additional 0.4 million shares at the purchase price of $13.00 per share, which closed on June 7, 2012. 

These two transactions resulted in net proceeds to us of $40.1 million (the "June 2012 Equity Raise"). We plan to use these proceeds to support our continued growth, which may include sales and marketing expenditures, research and development activities, clinical trials, business expenditures, and administrative and infrastructure investments.

Credit Arrangements

In October 2009, we entered into a revolving credit facility with Wells Fargo Bank (“Wells”), which was last amended on October 9, 2012, whereby we may borrow up to $20.0 million, subject to the calculation and limitation of a borrowing base (the “Wells Credit Facility”). All amounts owing under the Wells Credit Facility will become due and payable upon its expiration on March 31, 2013. As of December 31, 2012, we did not have any outstanding borrowings under the Wells Credit Facility. Any outstanding amounts under the Wells Credit Facility bear interest at a variable rate equal to the Wells prime rate, plus 1.00%, which is payable on a monthly basis. The Wells Credit Facility is collateralized by all of our assets, except our intellectual property.

The Wells Credit Facility contains financial covenants requiring us to (i) maintain a minimum current ratio of 1.5, equal to the quotient of modified current assets to current liabilities, as defined in the Wells Credit Facility (the "Current Ratio Covenant"), and (ii) not exceed operating loss amounts (excluding non-cash contingent consideration associated with the acquisition of Nellix) of $6.5 million for the quarter ended March 31, 2012; $11.0 million for the six months ended June 30, 2012; $13.0 million for the nine months ended September 30, 2012; and $13.0 million for the year ended December 31, 2012 (the "Operating Loss Covenant"). The Wells Credit Facility carried a 0.2% unused commitment fee through May 19, 2012, when this fee was eliminated. The Wells Credit Facility also included a negative covenant limiting 2012 capital expenditures to an aggregate $3.0 million.

We were not in compliance with the Operating Loss Covenant for the nine months ended September 30, 2012, and for the year ended December 31, 2012. We obtained a waiver from Wells for such breaches of the Operating Loss Covenant on October 26, 2012 and February 11, 2013, respectively, whereby Wells agreed to forbear from enforcing their default rights under the Wells Credit Facility. The waiver does not apply to any subsequent breaches of the same provision, nor any breach of any other provision specified within the Wells Credit Facility.

The Wells Credit Facility also contains a “material adverse change” clause (“MAC”). If we encounter difficulties that would qualify as a MAC in its (i) operations, (ii) condition (financial or otherwise), or (iii) ability to repay amounts outstanding under the Wells Credit Facility, it could be canceled at Wells' sole discretion. Wells could then elect to declare the indebtedness, together with accrued interest and other fees, to be immediately due and payable and proceed against any collateral securing such indebtedness.

In advance of the March 31, 2013 expiration of the Wells Credit facility, we are presently in process of discussing the terms of extended credit facility with Wells, that we expect will be under comparable terms.    

Credit Risk

The majority of our accounts receivable arise from product sales in the U.S. However, we also have significant

receivable balances from customers within the European Union, Japan, Brazil, Argentina, and Mexico. Our accounts

receivable in the U.S. are primarily due from public and private hospitals. Our accounts receivable outside of the U.S. are

primarily due from independent distributors, and to a lesser extent, public and private hospitals.  Our historical write-offs of accounts receivable have not been significant.

We monitor the financial performance and credit worthiness of our customers so that we can properly assess

and respond to changes in their credit profile. Since our customers operate in certain countries such as Greece and Italy, where adverse economic conditions persist, it increases the risk of our inability to collect amounts due to us from them. To determine our allowance for doubtful accounts we consider these factors and other relevant considerations. Our allowance for doubtful accounts of $0.5 million as of December 31, 2012, represents our best estimate of the amount of probable credit losses in our existing accounts receivable.

Future Capital Requirements

We believe that the future growth of our business will depend upon our ability to successfully develop new technologies for the treatment of aortic disorders and successfully bring these technologies to market. We expect to incur significant expenditures in completing product development and clinical trials for Ventana and the Nellix System.

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

• the need for working capital to support our sales growth;

• the need for additional capital to fund future development programs;

• the need for additional capital to fund our sales force expansion;

• the need for additional capital to fund strategic acquisitions;

• our requirements for additional facility space or manufacturing capacity;

• our requirements for additional information technology infrastructure and systems; and

• adverse outcomes from potential litigation and the cost to defend such litigation.

We believe that our world-wide cash resources are adequate to operate our business. We presently have several operating subsidiaries outside of the U.S. As of December 31, 2012, these subsidiaries hold an aggregate $2.1 million in foreign bank accounts to fund their local operations. These balances and any changes thereto, are deemed by management to be permanently reinvested in the corresponding country in which our subsidiary operates. Management has no present or planned intention to repatriate these funds into to U.S. However, in the event that we required additional funds in the U.S. and had to repatriate any foreign-held funds to meet those needs, we would then need to accrue, and ultimately pay, incremental income tax expenses on such “deemed dividend,” unless we then had sufficient net operating losses to offset this potential tax liability.

We expect to generate positive cash flows from operations by the second half of 2013 and beyond. However, in the event we require additional financing in the future, it may not be available on commercially reasonable terms, if at all. Even if we are able to obtain financing, it may cause substantial dilution (in the case of an equity financing), or may contain burdensome restrictions on the operation of our business (in the case of debt financing). If we are not able to obtain required financing, we may need to curtail our operations and/or our planned product development.

Contractual Obligations

As of December 31, 2012, expected future cash payments related to contractual obligations were as follows:

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

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements (except for operating leases) that provide financing, liquidity, market or credit risk support, or involve derivatives. In addition, we have no arrangements that may expose us to liability that are not expressly reflected in the accompanying Consolidated Financial Statements.

As of December 31, 2012, we did not have any relationships with unconsolidated entities or financial partnerships, often referred to as "structured finance" or "special purpose entities," established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As such, we are not subject to any material financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

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

Interest Rate and Market Risk. Our exposure to market risk for changes in interest rates relates primarily to the Wells Credit Facility. All outstanding amounts under the Wells Credit Facility bear interest at a variable rate equal to the Wells prime rate, plus 1.00%, which is payable on a monthly basis. As of December 31, 2012, we had no amounts outstanding under the Wells Credit Facility. However, if we draw down the Wells Credit Facility, we may be exposed to market risk due to changes in the rate at which interest accrues.

We do not use derivative financial instruments in our investment portfolio. We are averse to principal loss and try to ensure the safety and preservation of our invested funds by limiting default risk, market risk, and reinvestment risk. We attempt to mitigate default risk by investing in only high credit quality securities and by positioning our portfolio to appropriately respond to a significant reduction in the credit rating of any investment issuer or guarantor. At December 31, 2012, our investment portfolio solely consisted of money market instruments.

Foreign Currency Transaction Risk. While a majority of our business is denominated in the U.S. dollar, a portion of our revenues and expenses are denominated in foreign currencies. Fluctuations in the rate of exchange between the U.S. dollar and the Euro or the British Pound Sterling may affect our results of operations and the period-to-period comparisons of our operating results.

4

Item 8.         Financial Statements and Selected Supplementary Data

ENDOLOGIX, INC.

FORM 10-K ANNUAL REPORT

For the Fiscal Year Ended December 31, 2012

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page No.
Reports of Independent Registered Public Accounting Firms	6
Consolidated Balance Sheets as of December 31, 2012 and 2011	7
Consolidated Statements of Operations and Comprehensive Income (Loss) for the years ended December 31, 2012, 2011, and 2010	8
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2012, 2011, and 2010	9
Consolidated Statements of Cash Flows for the years ended December 31, 2012, 2011, and 2010	10
Notes to Consolidated Financial Statements	11
Financial Statement Schedule	12
Schedule II - Valuation and Qualifying Accounts for the years ended December 31, 2012, 2011, and 2010	12

All other schedules are omitted because the required information is not applicable or the information is presented in the Consolidated Financial Statements or the notes thereto.

5

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

Endologix, Inc.:

We have audited the accompanying consolidated balance sheet of Endologix, Inc. and subsidiaries as of December 31, 2012, and the related consolidated statements of operations and comprehensive income (loss), stockholders' equity, and cash flows for the year ended December 31, 2012. In connection with our audit of the consolidated financial statements, we also have audited the consolidated financial statement schedule of valuation and qualifying accounts. These consolidated financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Endologix, Inc. and subsidiaries as of December 31, 2012, and the results of their operations and their cash flows for the year ended December 31, 2012, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the related consolidated financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Endologix, Inc's internal control over financial reporting as of December 31, 2012, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 14, 2013 expressed an unqualified opinion on the effectiveness of the Company's internal control over financial reporting.

/s/ KPMG LLP

March 14, 2013

Irvine, California

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

Endologix, Inc.:

We have audited Endologix, Inc.'s internal control over financial reporting as of December 31, 2012, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Endologix, Inc.'s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Endologix, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2012, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Endologix, Inc. and subsidiaries as of December 31, 2012, and the related consolidated statements of operations and comprehensive income (loss), stockholders' equity, and cash flows for the year ended December 31, 2012, and our report dated March 14, 2013, expressed an unqualified opinion on those consolidated financial statements.

/s/ KPMG LLP

March 14, 2013

Irvine, California

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Endologix, Inc.:

In our opinion, the consolidated balance sheet as of December 31, 2011 and related consolidated statements of operations and comprehensive income (loss), stockholders' equity and cash flows for each of the two years in the period ended December 31, 2011 present fairly, in all material respects, the financial position of Endologix, Inc. and its subsidiaries at December 31, 2011, and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2011 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule for each of the two years in the period ended December 31, 2011 presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express opinions on these financial statements and on the financial statement schedule, based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

Orange County, California

March 6, 2012

6

ENDOLOGIX, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and par value amounts)

	December 31,
	2012			2011
ASSETS
Current assets:
Cash and cash equivalents	$	45,118		$	20,035
Accounts receivable, net of allowance for doubtful accounts of $472 and $161, respectively	22,600			15,542
Other receivables	320			405
Inventories	18,087			18,099
Prepaid expenses and other current assets	1,442			1,023
Total current assets	87,567			55,104
Property and equipment, net	4,984			4,454
Goodwill	29,022			27,073
Intangibles, net	43,356			43,439
Deposits and other assets	174			185
Total assets	$	165,103		$	130,255
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	6,348		$	6,377
Accrued payroll	7,825			6,569
Accrued expenses and other current liabilities	3,021			1,003
Total current liabilities	17,194			13,949
Commitments and contingencies
Deferred income taxes	1,035			1,029
Deferred rent	—			8
Contingently issuable common stock	52,400			38,700
Total liabilities	70,629			53,686
Commitments and contingencies
Stockholders’ equity:
Convertible preferred stock, $0.001 par value; 5,000,000 shares authorized. No shares issued and outstanding.	—			—
Common stock, $0.001 par value; 75,000,000 shares authorized, 63,068,463 and 58,577,484 shares issued, respectively. 62,573,763 and 58,082,784 shares outstanding, respectively.	63			59
Additional paid-in capital	295,338			241,441
Accumulated deficit	(200,014		)	(164,240		)
Treasury stock, at cost, 494,700 shares	(661		)	(661		)
Accumulated other comprehensive loss	(252		)	(30		)
Total stockholders’ equity	94,474			76,569
Total liabilities and stockholders’ equity	$	165,103		$	130,255

See accompanying notes to these consolidated financial statements.

7

ENDOLOGIX, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(In thousands, except per share amounts)

	Year Ended December 31,
	2012			2011			2010
Revenue	$	105,946		$	83,417		$	67,251
Cost of goods sold	25,282			18,746			15,030
Gross profit	80,664			64,671			52,221
Operating expenses:
Research and development	16,571			16,738			8,997
Clinical and regulatory affairs	6,343			4,439			2,169
Marketing and sales	53,953			44,655			31,869
General and administrative	20,266			15,525			13,410
Contract termination and business acquisition expenses	422			1,730			—
Settlement costs	5,000			—			—
Total operating expenses	102,555			83,087			56,445
Loss from operations	(21,891		)	(18,416		)	(4,224		)
Other income (expense):
Interest income	30			23			30
Interest expense	(7		)	(32		)	(16		)
Gain on sale of equipment	—			141			—
Other income (expense), net	325			(32		)	(174		)
Change in fair value of contingent consideration related to acquisition	(13,700		)	(10,500		)	—
Total other expense	(13,352		)	(10,400		)	(160		)
Net loss before income tax (expense) benefit	$	(35,243	)	$	(28,816	)	$	(4,384	)
Income tax (expense) benefit	(531		)	86			15,037
Net (loss) income	$	(35,774	)	$	(28,730	)	$	10,653
Other comprehensive loss (foreign currency translation)	$	(222	)	$	(30	)	$	—
Comprehensive income (loss)	$	(35,996	)	$	(28,760	)	$	10,653
Basic net income (loss) per share	$	(0.60	)	$	(0.51	)	$	0.22
Diluted net income (loss) per share	$	(0.60	)	$	(0.51	)	$	0.21
Shares used in computing basic net income (loss) per share	59,811			56,592			48,902
Shares used in computing diluted net income (loss) per share	59,811			56,592			50,544

See accompanying notes to these consolidated financial statements.

8

ENDOLOGIX, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

	Common Stock				Additional Paid-In Capital			Accumulated Deficit			Treasury Stock			Accumulated Other Comprehensive Loss			Total Stockholders’ Equity
	Issued Shares		$0.001 Par Value
Balance at December 31, 2009	49,152		$	49	$	189,656		$	(146,164	)	$	(661	)	$	—		$	42,880
Exercise of common stock options	676		1		2,242			—			—			—			2,243
Employee stock purchase plan	293		—		1,117			—			—			—			1,117
Sale of common stock	3,171		3		14,987			—			—			—			14,990
Issuance of common stock for acquisition	3,199		3		19,385			—			—			—			19,388
Stock compensation expense	—		—		2,215			—			—			—			2,215
Issuance of restricted stock	405		1		—			—			—			—			1
Restricted stock expense	—		—		422			—			—			—			422
Non-employee stock option expense	—		—		(7		)	—			—			—			(7		)
Net income	—		—		—			10,653			—			—			10,653
Balance at December 31, 2010	56,896		$	57	$	230,017		$	(135,510	)	$	(661	)	$	—		$	93,902
Exercise of common stock options	1,394		2		5,322			—			—			—			5,324
Employee stock purchase plan	287		—		1,965			—			—			—			1,965
Stock compensation expense	—		—		2,851			—			—			—			2,851
Restricted stock expense	—		—		877			—			—			—			877
Non-employee stock option expense	—		—		409			—			—			—			409
Net loss	—		—		—			(28,730		)	—			—			(28,730		)
Other comprehensive loss	—		—		—			—			—			(30		)	(30		)
Balance at December 31, 2011	58,577		$	59	241,441			$	(164,240	)	$	(661	)	(30		)	$	76,569
Exercise of common stock options	1,168		1		4,991			—			—			—			4,992
Employee stock purchase plan	224		—		2,369			—			—			—			2,369
Sale of common stock	3,105		3		40,066			—			—			—			40,069
Stock compensation expense	—		—		3,649			—			—			—			3,649
Issuance of restricted stock	13		—		—			—			—			—			—
Cancellation of restricted stock	(18	)	—		—			—			—			—			—
Restricted stock expense	—		—		1,906			—			—			—			1,906
Non-employee stock option expense	—		—		916			—			—			—			916
Net loss	—		—		—			(35,774		)	—			—			(35,774		)
Other comprehensive loss	—		—		—			—			—			(222		)	(222		)
Balance at December 31, 2012	63,069		$	63	$	295,338		$	(200,014	)	$	(661	)	$	(252	)	$	94,474

See accompanying notes to these consolidated financial statements.

9

ENDOLOGIX, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

	Year Ended December 31,
	2012			2011			2010
Cash flows from operating activities:
Net income (loss)	$	(35,774	)	$	(28,730	)	$	10,653
Adjustments to reconcile net loss to net cash used in operating activities:
Bad debt expense	325			62			39
Depreciation and amortization	2,183			2,729			2,444
Stock-based compensation	6,471			4,136			2,546
Change in fair value of contingent consideration related to acquisition	13,700			10,500			—
Gain on sale of equipment	—			(141		)	—
Income tax expense (benefit)	531			(86		)	(15,067		)
Changes in operating assets and liabilities:
Accounts receivable and other receivables	(8,319		)	(3,392		)	(3,909		)
Inventories	12			(9,801		)	(2,964		)
Prepaid expenses and other current assets	(408		)	(153		)	(672		)
Accounts payable	199			700			2,098
Accrued payroll	1,255			1,597			498
Accrued expenses and other current liabilities	1,304			189			243
Deferred rent	(8		)	8			(22		)
Net cash used in operating activities	(18,529		)	(22,382		)	(4,113		)
Cash flows from investing activities:
Purchases of property and equipment	(2,238		)	(3,033		)	(861		)
Purchases of patent license	(100		)	—			—
Cash acquired in Nellix acquisition	—			—			698
Business acquisition	(1,156		)	—			—
Net cash used in investing activities	(3,494		)	(3,033		)	(163		)
Cash flows from financing activities:
Proceeds from sale of common stock under secondary offering, net of expenses	40,069			—			14,990
Proceeds from sale of common stock under employee stock purchase plan	2,369			1,965			1,118
Proceeds from exercise of stock options	4,992			5,324			2,347
Repayments of long-term debt	—			—			(79		)
Net cash provided by financing activities	47,430			7,289			18,376
Effect of exchange rate changes on cash and cash equivalents	(324		)	(30		)	26
Net increase (decrease) in cash and cash equivalents	25,083			(18,156		)	14,126
Cash and cash equivalents, beginning of period	20,035			38,191			24,065
Cash and cash equivalents, end of period	$	45,118		$	20,035		$	38,191
Supplemental disclosure of cash flow information:
Cash paid for interest	$	10		$	32		$	16
Cash paid for income taxes	16			24			51
Non-cash investing and financing activities:
Shares issued for acquisition	—			—			19,388

See accompanying notes to these consolidated financial statements.

10

ENDOLOGIX, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(all tabular amounts presented in thousands, except per share, per unit, and number of years)

1. Description of Business, Basis of Presentation, and Operating Segment

(a) Description of Business

Endologix, Inc. (the "Company") is a Delaware corporation with corporate headquarters and production facilities located in Irvine, California. The Company develops, manufactures, markets, and sells innovative medical devices for the treatment of aortic disorders. The Company's principal product is a stent graft and delivery system (the "ELG System"), for the treatment of abdominal aortic aneurysms ("AAA") through minimally-invasive endovascular repair ("EVAR"). Sales of the Company's ELG System (including device extensions and accessories) to hospitals and third-party distributors provide the sole source of reported revenue. In February 2013, the Company began a limited market introduction of its next generation system for the EVAR of AAA, the Nellix System.

The Company's ELG System consists of (i) a self-expanding cobalt chromium alloy stent covered by expanded polytetrafluoroethylene (commonly referred to as "ePTFE") graft material (the "ELG Device") and (ii) an accompanying delivery system. Once the ELG Device is fixed in its proper position within the abdominal aorta it provides a conduit for blood flow and relieves pressure within the weakened or “aneurysmal” section of the vessel wall, greatly reducing the potential for the AAA to rupture.

(b)Basis of Presentation

The accompanying Consolidated Financial Statements in this Annual Report on Form 10-K have been prepared in accordance with generally accepted accounting principles in the United States of America ("GAAP") and with the rules and regulations of the U.S. Securities and Exchange Commission ("SEC"). These financial statements include the financial position, results of operations, and cash flows of the Company, including its subsidiaries, all of which are wholly-owned. All inter-company accounts and transactions have been eliminated in consolidation. Certain amounts due to the Company from its foreign subsidiaries are denominated in U.S. dollars, which differs from the functional currency of these subsidiaries. The impact of the remeasurement to U.S. dollars from the subsidiary's functional currency is a loss of $0.1 million for the year ended December 31, 2012 ($0 for the years ended December 31, 2011 and 2010), and is included in "other income (expense), net" in the accompanying Consolidated Statements of Operations and Comprehensive Income (Loss).

(c) Operating Segment

The Company has one operating and reporting segment that is focused exclusively on the development, manufacture, marketing, and sale of ELG Systems for the treatment of aortic disorders. For the year ended December 31, 2012, all of the Company's revenue and related expenses were solely attributable to these activities. Substantially all of the Company's long-lived assets are located in the U.S.

2. Use of Estimates and Summary of Significant Accounting Policies

The preparation of financial statements in conformity with GAAP requires the Company's management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosure of contingent liabilities. On an on-going basis, the Company's management evaluates its estimates, including those related to (i) collectibility of customer accounts; (ii) whether the cost of inventories can be recovered; (iii) the value of goodwill and intangible assets; (iv) realization of tax assets and estimates of tax liabilities; (v) likelihood of payment and value of contingent liabilities; and (vi) potential outcome of litigation. Such estimates are based on management's judgment which takes into account historical experience and various assumptions. Nonetheless, actual results may differ from management's estimates.

The following critical accounting policies and estimates were used in the preparation of the accompanying Consolidated Financial Statements:

(i) Cash and Cash Equivalents

The carrying amount of the Company's money market funds is included in cash and cash equivalents in the accompanying Consolidated Balance Sheets, and approximates its fair value (utilizing Level 1 inputs) because of the ability to immediately convert these money market funds to cash with minimal change in value.

(ii) Accounts Receivable

Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is management's best estimate of the amount of probable credit losses in existing accounts receivable. Account balances are charged off against the allowance after appropriate collection efforts are exhausted.

(iii) Inventories

The Company values inventory at the lower of the actual cost to purchase or manufacture the inventory, or the market value for such inventory. Cost is determined on the first-in, first-out method (FIFO). The Company regularly reviews inventory quantities in process and on hand, and when appropriate, records a provision for obsolete and excess inventory. The provision is based on actual loss experience and a forecast of product demand compared to its remaining shelf life.

(iv) Property and Equipment

Property and equipment are stated at cost and depreciated on a straight-line basis over the following estimated useful lives:

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

Upon sale or disposition of property and equipment, any gain or loss is included in the accompanying Consolidated Statements of Operations and Comprehensive Income (Loss).

(v) Goodwill and Intangible Assets

Intangible assets with definite lives are amortized over their estimated useful lives using a method that reflects the pattern over which the economic benefit is expected to be realized, and is as follows:

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

Goodwill and other intangible assets with indefinite lives are not subject to amortization, but are tested for impairment annually or whenever events or changes in business circumstances suggest the potential of an impairment. The Company completed its annual indefinite lived intangible asset impairment test as of June 30, 2012, with no resulting impairment based on the discounted cash flows expected to be generated in connection with underlying assets.

The Company most recently completed its annual test for impairment of goodwill as of June 30, 2012, with no resulting impairment, as its market capitalization was in substantial excess of the value of its total stockholders' equity (the Company has one "reporting unit" for purposes of the goodwill impairment test).

Intangible assets with finite lives are tested for impairment only when impairment indicators are present.

(vi) Fair Value Measurements

The Company applies relevant GAAP in measuring the fair value of its Contingent Payment (see Note 10), and assigning fair value of assets acquired and liabilities assumed as part of its business combination accounting (see Note 13). Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. GAAP establishes a fair value hierarchy that distinguishes between (i) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (ii) an entity's own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:

Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

Level 3 - Inputs that are both significant to the fair value measurement and unobservable.

(vii) Contingent Consideration for Business Acquisition

The Company's management determined the fair value of contingently issuable common stock on the Nellix acquisition date (see Note 10) using a probability-based income approach with an appropriate discount rate (determined using both Level 1 and Level 3 inputs). Changes in the fair value of this contingently issuable common stock are determined at each period end and are recorded in the other income(expense) section of the accompanying Consolidated Statements of Operations and Comprehensive Income (Loss), and the non-current liabilities section of the accompanying Consolidated Balance Sheet.

(viii) Revenue Recognition

The Company recognizes revenue when all of the following criteria are met:

•     Appropriate evidence of a binding arrangement exists with the customer;

• The sales price for the ELG System (including device extensions and accessories) is established with the customer;

• The ELG System has been used by the hospital in an EVAR procedure, or the distributor has assumed title with no right of return; and

•     Collection of the corresponding receivable from the customer is reasonably assured at the time of sale.

For sales made to hospitals, the Company recognizes revenue upon completion of an EVAR procedure, when the ELG Device is implanted in a patient. For sales made to distributors, the Company recognizes revenue when title passes, which is typically at the time of shipment, as this represents the period that the customer has assumed custody of the ELG System, without right of return, and assumed risk of loss.

The Company does not offer rights of return, other than honoring a standard warranty.

In the event that the Company enters into a bill and hold arrangement with its customer, which is uncommon, though occurred in 2012 (as discussed in Note 7), the following conditions must be met for revenue recognition:

(i) The risks of ownership must have passed to the customer;

(ii) The customer must have made a fixed and written commitment to purchase the ELG Systems;

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

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

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

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

(vii) The ELG Systems must be complete and ready for shipment.

In addition to the above requirements, the Company also considers other pertinent factors prior to its recognition of revenue for bill and hold arrangements, such as:

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

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

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

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

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

(ix) Shipping Costs

Shipping costs billed to customers are reported within revenue, with the corresponding costs reported within costs of goods sold.

(x) Foreign Currency Transactions

The assets and liabilities of the Company's foreign subsidiaries are translated at the rates of exchange at the balance sheet date. The income and expense items of these subsidiaries are translated at average monthly rates of exchange. Gains and losses resulting from foreign currency transactions, which are denominated in a currency other than the respective entity’s functional currency are included in other income (expense), net, within the accompanying Consolidated Statements of Operations and Comprehensive Income (Loss). Foreign currency translation adjustments between the respective entity's functional currency and the U.S. dollar are recorded to accumulated other comprehensive loss within the stockholders' equity section of the accompanying Consolidated Balance Sheets.

(xi) Income Taxes

The Company records the estimated future tax effects of temporary differences between the tax basis of assets and

liabilities and amounts reported in the financial statements, as well as operating losses and tax credit carry forwards. The Company has recorded a valuation allowance to substantially reduce its net deferred tax assets, because the Company believes that, based upon a number of factors, it is more likely than not that substantially all the deferred tax assets will not be realized. If the Company were to determine that it would be able to realize additional deferred tax assets in the future, an adjustment to the valuation allowance on its deferred tax assets would increase net income in the period such determination was made. In the event that the Company were assessed interest and/or penalties from taxing authorities, such amounts would be included in "income tax expense" within the Consolidated Statements of Operations and Comprehensive Income (Loss) in the period the notice was received.

(xii) Net Income (Loss) Per Share

Net income (loss) per common share is computed using the weighted average number of common shares outstanding

during the periods presented. Because of the net losses during the years ended December 31, 2012 and 2011, options to purchase the common stock, restricted stock awards, and restricted stock units of the Company were excluded from the computation of net loss per share for these periods because the effect would have been antidilutive.

(xiii) Research and Development Costs

Research and development costs are expensed as incurred.

(xiv) Product Warranty

Within six months of shipment, certain customers may request replacement of products they receive that do not meet product specifications; no other warranties are offered. The Company contractually disclaims responsibility for any damages associated with physician's use of its ELG System. Historically, the Company has not experienced a significant amount of costs associated with its warranty policy.

3. Balance Sheet Account Detail

(a) Allowance for Doubtful Accounts

The following is the 2011 and 2012 summary of activity within the allowance for doubtful accounts:

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

(b) Property and Equipment

Property and equipment consisted of the following:

	December 31,
	2012			2011
Production equipment, molds, and office furniture	$	7,256		$	6,440
Computer hardware and software	2,265			1,023
Leasehold improvements	2,819			2,459
Construction in progress (software and related implementation, production equipment, and leasehold improvements)	556			1,133
Property and equipment, at cost	12,896			11,055
Accumulated depreciation	(7,912		)	(6,601		)
Property and equipment, net	$	4,984		$	4,454

Depreciation expense for property and equipment for the years ended December 31, 2012, 2011, and 2010 was $1.5 million, $1.3 million, and $0.9 million, respectively.

(c) Inventories

Inventories consisted of the following:

	December 31,
	2012		2011
Raw materials	$	3,901	$	3,260
Work-in-process	5,102		4,617
Finished goods	9,084		10,222
Inventories	$	18,087	$	18,099

(d) Goodwill and Intangible Assets

The following table presents goodwill, indefinite lived intangible assets, finite lived intangible assets, and related accumulated amortization:

	December 31,
	2012			2011
Goodwill	$	29,022		$	27,073
Intangible assets:
Indefinite lived intangibles
In-process research and development (a)	$	40,100		$	40,100
Trademarks and trade names	2,708			2,708
Total indefinite lived intangibles	$	42,808		$	42,808
Finite lived intangibles
Developed technology	$	—		$	14,050
Accumulated amortization	—			(13,465		)
Developed technology, net	$	—		$	585
Patent	$	100		$	100
Accumulated amortization	(75		)	(54		)
Patent, net	$	25		$	46
License	$	100		$	—
Accumulated amortization	(12		)	—
License, net	$	88		$	—
Customer relationships	$	522		$	—
Accumulated amortization	(87		)	—
Customer relationships, net	$	435		$	—
Intangible assets (excluding goodwill), net	$	43,356		$	43,439

(a)Will be reclassified to finite lived intangibles and amortized through 2025, beginning February 2013, to coincide with the commercial launch of the product (Nellix System) associated with this intangible asset.

Amortization expense for intangible assets for the years ended December 31, 2012, 2011, and 2010 was $0.7 million, $1.4 million, and $1.4 million, respectively.

Estimated amortization expense for the five succeeding years and thereafter (which includes amortization of intangible assets which commenced in February 2013 with the commercial launch of the Nellix System in Europe) is as follows:

	Amortization Expense
2013	$	268
2014	392
2015	892
2016	1,541
2017	2,011
2018 and thereafter	35,544

4. Stock-Based Compensation

2006 Stock Incentive Plan

The Company has one active stockholder-approved stock-based compensation plan, the 2006 Stock Incentive Plan (the "2006 Plan"), which replaced the Company's former stockholder-approved plans. Incentive stock options, non-qualified options, restricted stock awards, restricted stock units, and stock appreciation rights may be granted under the 2006 Plan.

The maximum number of shares of the Company's common stock available for issuance under the 2006 Plan is 8.5 million shares. As of December 31, 2012, 0.3 million shares were available for grant. It is the Company's policy that before stock is issued through the exercise of stock options, the Company must first receive all required cash payment for such shares.

Stock-based awards are governed by agreements between the Company and the recipients. Incentive stock options and nonqualified stock options may be granted under the 2006 Plan at an exercise price of not less than 100% of the closing fair market value of the Company's common stock on the respective date of grant. The grant date is generally the date the award is approved by the Compensation Committee of the Board of Directors, though for aggregate awards of 50,000 or less in each quarter, the grant date is the date the award is approved by the Company's Chief Executive Officer.

The Company's standard stock-based award vests 25% on the first anniversary of the date of grant, or for new hires, the first anniversary of their initial date of employment with the Company. Awards vest monthly thereafter on a straight-line basis over three years. Stock options must be exercised, if at all, no later than 10 years from the date of grant. Upon termination of employment with the Company, vested stock options may be exercised within 90 days from the last date of employment. In the event of an optionee's death, disability, or retirement, the exercise period is 365 days from the last date of employment.

Employee Stock Purchase Plan

Under the terms of the Company's 2006 Employee Stock Purchase Plan (the "ESPP"), eligible employees can purchase common stock through payroll deductions. The purchase price is equal to the closing price of the Company's common stock on the first or last day of the offering period (whichever is less), minus a 15% discount.  The Company uses the Black-Scholes option-pricing model, in combination with the discounted employee price, in determining the value of ESPP expense to be recognized during each offering period.

The table below summarizes the stock-based compensation recognized, common stock shares purchased by Company employees, and the average purchase price per share as part of the ESPP program during the years ended December 31, 2012, 2011, and 2010.

	Year Ended December 31,
	2012		2011		2010
Stock-based compensation expense	$	759	$	733	$	468
Common stock shares purchased by Company employees	224		287		293
Average purchase price per share	$	10.59	$	6.84	$	3.81

Stock Options and Restricted Stock

The Company values stock-based awards, including stock options and restricted stock, as of the date of grant (and is marked-to-market at each reporting period for unvested grants issued to consultants).

The Company recognizes stock-based compensation expense (net of estimated forfeitures) using the straight-line method over the requisite or implicit service period, as applicable. Forfeitures of employee awards are estimated at the time of grant and the forfeiture assumption is periodically adjusted for actual employee exercise behavior.

Stock-Based Compensation Expense Summary

The Company classifies related compensation expense in the accompanying Consolidated Statements of Operations and Comprehensive Income (Loss), based on the Company department to which the recipient belongs. Stock-based compensation expense included in cost of goods sold and operating expenses for years ended December 31, 2012, 2011, and 2010 was as follows:

	Year Ended December 31,
	2012		2011		2010
Cost of goods sold	$	597	$	209	$	188
Operating expenses:
Research and development	1,336		753		362
Clinical and regulatory affairs	320		113		15
Marketing and sales	1,558		1,097		919
General and administrative	2,641		1,740		1,168
Total operating expenses	$	5,855	$	3,703	$	2,464
Total	$	6,452	$	3,912	$	2,652

In addition, the Company had $0.2 million, $0.2 million, and $43,000 of stock-based compensation capitalized in inventory as of December 31, 2012, 2011, and 2010, respectively.

Employee stock-based compensation expense for the years ended December 31, 2012, 2011, and 2010 was recognized (reduced for estimated forfeitures) on a straight-line basis over the vesting period. Applicable GAAP requires forfeitures to be estimated at the time of grant and prospectively revised if actual forfeitures differ from those estimates. The Company estimates forfeitures of stock options using the historical exercise behavior of its employees. For purposes of this estimate, the Company has applied an estimated forfeiture rate of 30% for the years ended December 31, 2012, 2011, and 2010.

Valuation Assumptions

The grant-date fair value per share for restricted stock awards was based upon the closing market price of the Company’s common stock on the award grant-date.

The fair value of stock options granted was estimated at the date of grant using the Black-Scholes option-pricing model. The following assumptions were used to determine fair value for the stock awards granted in the applicable year:

	Year Ended December 31,
	2012	2011	2010
Average expected option life (in years) (a)	6.0	6.0	6.0
Volatility (b)	55.8%	56.6%	56.4%
Risk-free interest rate (c)	1.0%	2.0%	2.4%
Dividend Yield (d)	—%	—%	—%
Weighted-average grant-date fair value per stock option	$6.90	$4.55	$2.46

(a) Determined by the historical stock option exercise behavior of the Company's employees (maximum term is 10

years).

(b) Measured using weekly price observations for a period equal to stock options' expected term.

(c) Based upon the U.S. Treasury yields in effect at the end of the quarter that the options were granted (for a period equaling the stock options' expected term).

(d) The Company has never paid cash dividends on its common stock and does not expect to declare any cash dividends.

Stock Option Activity

Stock option activity during the years ended December 31, 2012, and 2011 is as follows:

	Number of Stock Options	Weighted Average Exercise Price	Weighted- Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value
Outstanding — January 1, 2011	5,914,884	$3.91
Granted	1,264,333	8.38
Exercised	(1,393,794)	3.84		(a)	$7,246
Forfeited	(228,889)	5.29
Expired	—	—
Outstanding — December 31, 2011	5,556,534	$4.89
Granted	756,289	13.31
Exercised	(1,167,715)	4.28		(a)	$11,135
Forfeited	(188,378)	8.32
Expired	—	—
Outstanding — December 31, 2012	4,956,730	$6.21	6.9	(b)	$39,947
Vested and Expected to Vest — December 31, 2012	4,235,058	$5.87	6.7	(b)	$35,536
Vested — December 31, 2012	2,551,156	$4.35	5.7	(b)	$25,242

(a) Represents the total difference between the Company's stock price at the time of exercise and the stock option exercise price, multiplied by the number of options exercised.

(b) Represents the total difference between the Company's closing stock price on the last trading day of 2012 and the stock option exercise price, multiplied by the number of in-the-money options as of December 31, 2012. The amount of intrinsic value will change based on the fair market value of the Company's stock.

As of December 31, 2012 there was $3.3 million of total unrecognized compensation expense related to granted, but unvested stock options, which are expected to be recognized over a weighted average period of 2.8 years.

The following table summarizes information regarding outstanding stock option grants as of December 31, 2012:

					Outstanding				Exercisable
Range of Exercise Prices					Granted Stock Options Outstanding	Weighted- Average Remaining Contractual Life (Years)	Weighted- Average Exercise Price		Granted Stock Options Exercisable	Weighted- Average Exercise Price
$	1.64	—	$	2.25	237,196	5.7	$	2.07	232,301	$	2.07
$	2.26	—	$	2.62	239,228	5.4	2.55		238,707	2.55
$	2.67	—	$	2.69	442,065	5.4	2.67		442,065	2.67
$	2.79	—	$	3.02	57,658	4.1	2.89		57,033	2.89
$	3.35	—	$	3.45	154,821	4.4	3.42		146,281	3.42
$	3.46	—	$	3.90	378,248	4.3	3.55		234,333	3.60
$	3.92	—	$	4.31	302,717	6.0	4.14		149,193	4.10
$	4.32	—	$	4.51	825,479	7.0	4.40		391,046	4.37
$	4.63	—	$	5.49	284,561	5.7	5.26		121,597	5.03
$	5.72	—	$	7.12	403,986	5.8	6.31		166,458	6.23
$	7.14	—	$	8.26	632,754	8.3	8.02		268,550	8.12
$	8.57	—	$	11.68	417,570	8.8	10.40		78,254	10.38
$	11.97	—	$	13.93	307,693	9.5	13.32		18,150	13.53
$	14.01	—	$	15.51	272,754	9.4	14.65		7,188	14.83
$	1.64	—	$	15.51	4,956,730	6.9	$	6.21	2,551,156	$	4.35

Non-employees - Stock Options

During the years ended December 31, 2012, 2011, and 2010, $0, $0, and $(7,000), respectively, was recorded as compensation expense for the change in the fair value of unvested non-employee option grants. During the years ended December 31, 2012 and 2011, the Company did not grant any stock options to non-employees.

As of December 31, 2012, 2011, and 2010, a total of 40,000, 40,000, and 68,750 non-employee stock options, respectively, were outstanding and fully vested.

Restricted Stock Award Activity

The following table summarizes activity and related information for the Company's restricted stock awards:

	Number of Restricted Stock Awards		Weighted Average Fair Value per Share at Grant Date		Grant Date Fair Value		Vest Date Fair Value*
Unvested as of December 31, 2009	685,000
Granted	518,045		$	5.95	$	3,082
Cancelled	(35,965	)
Vested	(575,625	)
Unvested as of December 31, 2010	591,455
Granted	34,000		$	6.19	$	210
Cancelled	(6,303	)
Vested	(35,851	)
Unvested as of December 31, 2011	583,301
Granted	475,253		$	12.67	$	6,022
Canceled	(43,598	)
Vested	(70,111	)					$	1,002
Unvested as of December 31, 2012	944,845

*Represents the Company's stock price on the vesting date multiplied by the number of vested shares.

The Company recognized restricted stock expense of $2.8 million, $0.9 million, and $0.4 million for the years ended December 31, 2012, 2011, and 2010, respectively. As of December 31, 2012, there was $6.4 million of unrecorded expense related to issued restricted stock that will be recognized over an estimated weighted average period of 2.2 years.

Non-employee Restricted Stock

During the years ended December 31, 2012, 2011, and 2010, $0.9 million, $0.4 million, and $43,000, respectively, was recorded as compensation expense for the change in the fair value of unvested non-employee restricted stock. During the years ended December 31, 2012 and 2011, the Company did not grant any restricted stock to non-employees.

As of December 31, 2012, 2011, and 2010, a total of 135,000, 169,000, and 135,000 shares of unvested restricted stock, respectively, issued to non-employees were outstanding.

5. Net Income (Loss) Per Share

Net income (loss) per share was computed by dividing net loss by the weighted average number of common shares outstanding for the years ended December 31, 2012, 2011, and 2010:

	Year Ended December 31,
	2012			2011			2010
Net income (loss)	$	(35,774	)	$	(28,730	)	$	10,653
Weighted average shares - basic	59,811			56,592			48,902
Net income (loss) per share - basic	$	(0.60	)	$	(0.51	)	$	0.22
Weighted average shares - diluted	59,811			56,592			50,544
Net income (loss) per share - diluted	$	(0.60	)	$	(0.51	)	$	0.21

The following outstanding Company securities were excluded from the above calculations of net loss per share because their impact would have been anti-dilutive due to the net losses during the years ended December 31, 2012 and 2011:

	Year Ended December 31,
	2012	2011	2010
Common stock options	2,698	3,127	—
Restricted stock awards	405	640	—
Restricted stock units	492	—	—
Total	3,595	3,767	—

6. Credit Facilities

In October 2009, the Company entered into a revolving credit facility with Wells Fargo Bank (“Wells”), which was last amended on October 9, 2012, whereby the Company may borrow up to $20.0 million, subject to the calculation and limitation of a borrowing base (the “Wells Credit Facility”). All amounts owing under the Wells Credit Facility will become due and payable upon its expiration on March 31, 2013. As of December 31, 2012, the Company did not have any outstanding borrowings under the Wells Credit Facility. Any outstanding amounts under the Wells Credit Facility bear interest at a variable rate equal to the Wells prime rate, plus 1.00%, which is payable on a monthly basis. The Wells Credit Facility carried a 0.2% unused commitment fee though May 19, 2012, when this fee was eliminated. The Wells Credit Facility is collateralized by all of the Company's assets, except its intellectual property.

The Wells Credit Facility contains financial covenants requiring the Company to (i) maintain a minimum current ratio of 1.5, equal to the quotient of modified current assets to current liabilities, as defined in the Wells Credit Facility (the "Current Ratio Covenant"), and (ii) not exceed operating loss amounts (excluding non-cash contingent consideration associated with the acquisition of Nellix) of $6.5 million for the quarter ended March 31, 2012; $11.0 million for the six months ended June 30, 2012; $13.0 million for the nine months ended September 30, 2012; and $13.0 million for the year ended December 31, 2012 (the "Operating Loss Covenant"). The Wells Credit Facility also included a negative covenant limiting 2012 capital expenditures to an aggregate $3.0 million.

The Company was not in compliance with the Operating Loss Covenant for the nine months ended September 30, 2012, and for the year ended December 31, 2012. The Company obtained a waiver from Wells for these breaches of the Operating Loss Covenant on October 26, 2012 and February 11, 2013, respectively, whereby Wells agreed to forbear from enforcing their default rights under the Wells Credit Facility. The waiver does not apply to any subsequent breaches of the same provision, nor any breach of any other provision specified within the Wells Credit Facility.

The Wells Credit Facility also contains a “material adverse change” clause (“MAC”). If the Company encounters difficulties that would qualify as a MAC in its (i) operations, (ii) condition (financial or otherwise), or (iii) ability to repay amounts outstanding under the Wells Credit Facility, it could be canceled at Wells' sole discretion. Wells could then elect to declare the indebtedness, together with accrued interest and other fees, to be immediately due and payable and proceed against any collateral securing such indebtedness.

7. Revenue by Geographic Region

The Company's revenue by geographic region, was as follows:

	Year Ended December 31,
	2012				2011				2010
United States	$	87,092	82.2	%	$	71,695	85.9	%	$	55,443	82.4	%
Europe	$	8,404	7.9	%	$	4,178	5.0	%	$	4,402	6.5	%
Rest of World ("ROW"):
Latin America	$	4,859	4.6	%	$	4,395	5.3	%	$	4,072	6.1	%
Asia/Pacific	5,591		5.3	%	3,149		3.8	%	3,334		5.0	%
Total ROW	$	10,450	9.9	%	$	7,544	9.0	%	$	7,406	11.0	%
Revenue	$	105,946	100.0	%	$	83,417	100.0	%	$	67,251	100.0	%

U.S. The Company's U.S. sales were solely derived from its direct sales force, divided among twelve geographic sales regions.

Europe. For the year ended December 31, 2012, the Company's European sales were derived from (i) its direct European sales force (including dedicated sales agents), serving much of Western Europe, and (ii) five independent distributors serving the markets in Italy (through June 2012), Greece, Turkey, Poland, and Ireland. For the year ended December 31, 2011, the Company's European sales were derived from its direct sales force and independent distributors. For the year ended December 31, 2010, the Company's European sales were derived solely from independent distributors.

ROW. The Company's ROW sales were solely derived from independent distributors. Included in 2012 revenue for Asia/Pacific is $5.6 million of sales of IntuiTrak systems that were not shipped to the Company's distributor in Japan until January 2013 (i.e., representing 2012 “bill and hold” transactions).  Due to applicable medical device regulations in Japan, these IntuiTrak systems could not pass Japanese customs until related Shonin approval was received - which ultimately occurred in late December 2012 (the distributor was solely responsible and bore all the risk for obtaining such approval).  These IntuiTrak systems were subsequently shipped in full to Japan in January 2013. The Company assessed applicable GAAP for these transactions, beginning in the first quarter of 2012, and determined that applicable revenue recognition criteria were achieved in the correspondingquarter that the distributor's written order was fulfilled, physicallysegregated (at the distributor's request), and ready for shipment (at which time full title and risk of loss passed to the distributor, who had no right of return).

8. Commitments and Contingencies

(a) Leases

The Company leases its administrative, research, and manufacturing facilities located in Irvine, California and an administrative office located in Den Bosch, The Netherlands. These facility lease agreements require the Company to pay operating costs, including property taxes, insurance, and maintenance. In addition, the Company has certain equipment, under long-term agreements that are accounted for as operating leases.

Future minimum payments by year under non-cancelable leases with initial terms in excess of one year were as follows as of December 31, 2012:

2013	$	655
2014	474
2015 and thereafter	—
	$	1,129

(b) Employment Agreements and Retention Plan

The Company has entered into employment agreements with its officers and certain other “key employees” under which payment and benefits would become payable in the event of termination by the Company for any reason other than cause, upon a change in control of the Company, or by the employee for good reason. The payment will generally be equal to six months of the employee’s then current salary for termination by the Company without cause, and generally be equal to twelve months of salary upon a change in control of the Company.

(c) Legal Matters

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

Cook

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

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

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

LifePort

On December 28, 2012, LifePort Sciences, LLC filed a complaint against the Company in the United States District Court, District of Delaware alleging that certain of the Company's products infringe U.S. Patent Nos. 5,489,295, 6,117,167, 6,302,906, 5,993,481 and 5,676,696, which are alleged to be owned by LifePort. LifePort is seeking an unspecified amount of monetary damages for sale of the Company's products and injunctive relief. The Company does not believe it infringes on any of these patents and intends to vigorously defend itself in this matter.

At this time, the Company is unable to predict the outcome of this matter, but is of the opinion that the outcome will not have a material adverse effect on its financial position, results of operations, or cash flow. However, in order to avoid further legal costs (recognized within "general and administrative" expenses within the Consolidated Statements of Operations and Comprehensive Income (Loss)) and diversion of management resources, it is reasonably possible that the Company may reach a settlement with LifePort, which could result in a liability. However, the Company cannot presently estimate the amount, or range, of reasonably possible losses due to the nature of this potential litigation settlement.

(d) Income Taxes

The Company applies an accounting standard which prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities.  The amount of unrecognized tax benefits which, if ultimately recognized, could favorably affect the Company's effective tax rate in a future period was $0.1 million and $0 as of December 31, 2012 and December 31, 2011, respectively. Both amounts are net of any applicable federal and/or state benefits.  The Company expects its unrecognized tax benefits to decrease by $0.1 million over the next 12 months due to ultimate settlement of outstanding tax liabilities.

9. Related Party Transactions

Dr. Edward Diethrich previously served on the Company's Board of Directors; his board term expired on June 11, 2009. Dr. Diethrich also previously served as a director of Arizona Heart Hospital ("AHH") through October, 2010. Dr. Diethrich currently serves as the Company's medical director, under an independent contractor arrangement.

AHH has been a long-standing customer of the Company, and the Company has contracted with AHH for physician training and clinical research services for a number of years. The below table is a summary of all transactions by and between the Company and AHH in 2012, 2011, and 2010.

	Year Ended December 31,
	2012 (a)		2011 (a)		2010
Payments from the Company to AHH:
Physician and clinical research expenses	$	125	$	209	$	114
Company revenue derived from AHH	$	690	$	912	$	1,064

(a) Due to Dr. Diethrich's retirement from the Board of Directors of AHH in October 2010, AHH was not considered to be a related-party to the Company during 2012 and 2011, and is presented for comparative purposes only.

10. Contingently Issuable Common Stock

On December 10, 2010 (the “Nellix Closing Date”), the Company completed its acquisition of Nellix, Inc., a pre-revenue, AAA medical device company. The purchase price consisted of 3.2 million of the Company's common shares, issuable to the former Nellix stockholders as of the Nellix Closing Date, then representing a value of $19.4 million. Additional payments, solely in the form of the Company's common shares (the “Contingent Payment”), will be made upon the achievement of a revenue milestone and a regulatory approval milestone (collectively, the “Nellix Milestones”).

The ultimate value of the Contingent Payment will be determined on the date that each Nellix Milestone is achieved. The number of issuable shares will be established using an applicable per share price, which is subject to a ceiling and/or floor, resulting in a maximum of 10.2 million shares issuable upon the achievement of the Nellix Milestones.

As of the Closing Date, the fair value of the Contingent Payment was estimated to be $28.2 million. At December 31, 2012, the Company's stock price closed at $14.24 per share. Thus, had the Nellix Milestones been achieved on December 31, 2012, the Contingent Payment would have comprised 4.2 million shares, representing a value of $59.8 million.

The value of the Contingent Payment is derived using a discounted income approach model, with a range of probabilities and assumptions related to the timing and likelihood of achievement of the Nellix Milestones (which include Level 3 inputs - see Note 2(vi) and the Company's stock price (Level 1 input) as of the balance sheet date. These varying probabilities and assumptions and changes in the Company's stock price have required fair value adjustments of the Contingent Payment in periods subsequent to the Nellix Closing Date.

The per share price of the Company's common stock increased by $2.76, or 24%, between December 31, 2011 and December 31, 2012. This increase in the value of the Company's common stock was the primary driver affecting the increase in the fair value of the Contingent Payment for the year ended December 31, 2012.

The Contingent Payment fair value will continue to be evaluated on a quarterly basis until milestone achievement occurs, or until the expiration of the "earn-out period," as defined within the Nellix purchase agreement. Adjustments to the fair value of the Contingent Payment are recognized within "other income (expense)" in the Consolidated Statements of Operations and Comprehensive Income (Loss).

	Fair Value of Contingently Issuable Common Stock
December 31, 2011	$	38,700
Fair value adjustment of Contingent Payment for year ended December 31, 2012	13,700
December 31, 2012	$	52,400

11. Income Tax Expense

Net loss before income tax benefit attributable to U.S. and international operations, consists of the following:

	Year Ended December 31,
	2012			2011			2010
U.S.	$	(22,270	)	$	(26,062	)	$	(4,384	)
Foreign	(12,973		)	(2,754		)	—
Net income (loss) before income tax	$	(35,243	)	$	(28,816	)	$	(4,384	)

Income tax expense (benefit) consists of the following:

	Year Ended December 31,
	2012		2011			2010
Current:
Federal	$	30	$	(148	)	$	49
State	176		27			20
Foreign	319		35			—
	525		(86		)	69
Deferred:
Federal	—		—			(13,634		)
State	—		—			(1,472		)
Foreign	$	6	$	—		$	—
Income tax expense (benefit)	$	531	$	(86	)	$	(15,037	)

Income tax expense (benefit) was computed by applying the U.S. federal statutory rate of 34% to net income (loss) before taxes as follows:

	Year Ended December 31,
	2012			2011			2010
Income tax benefit at federal statutory rate	$	(11,983	)	$	(9,797	)	$	(1,490	)
State income tax expense (benefit) net of federal benefit	116			18			(1,458		)
Meals and entertainment	210			264			182
Research and development credits	—			(342		)	(327		)
Stock-based compensation	382			421			684
Contingent consideration	4,658			3,570			—
Foreign tax rate differential	4,736			1,025			—
Net change in valuation allowance	2,244			4,097			(13,974		)
Other, net	168			658			1,346
Income tax expense (benefit)	$	531		$	(86	)	$	(15,037	)

Significant components of the Company’s deferred tax assets and (liabilities) are as follows:

	Year Ended December 31,
	2012			2011
Deferred tax assets:
Net operating loss carryforwards	54,389			53,366
Accrued expenses	711			474
Tax credits	8,400			8,953
Bad debt	183			61
Inventory	578			327
Capitalized research and development	—			31
Other	—			150
Depreciation and amortization	—			758
Deferred compensation	2,364			1,343
Deferred tax assets	66,625			65,463
Valuation allowance	(50,866		)	(50,144		)
Total deferred tax assets	15,759			15,319
Deferred tax liabilities:
Developed technology and trademark	$	(15,575	)	$	(15,319	)
Trademarks and tradenames	(1,029		)	(1,029		)
Depreciation and amortization	(101		)	—
Other	(89		)	—
Total deferred tax liabilities	(16,794		)	(16,348		)
Net deferred tax liability	(1,035		)	(1,029		)

The Company has evaluated the available evidence supporting the realization of its gross deferred tax assets, including the amount and timing of future taxable income, and has determined that it is more likely than not that the domestic deferred tax assets will not be realized and that it is more likely than not that the foreign deferred tax assets will be realized. Due to such uncertainties surrounding the realization of the domestic deferred tax assets, the Company maintains a valuation allowance of $(50.9) million against a substantial portion of its deferred tax assets as of December 31, 2012. Realization of the deferred tax assets will be primarily dependent upon the Company's ability to generate sufficient taxable income prior to the expiration of its net operating losses.

At December 31, 2012, the Company had net operating loss carryforwards for federal and state income tax purposes of approximately $150.0 million and $117.2 million, respectively.

Federal and state net operating loss carryforwards begin expiring in 2013 and will continue to expire through 2032. The majority of the state net operating losses are attributable to California. In addition, the Company had research and development credits for federal and state income tax purposes of approximately $4.3 million and $2.7 million, respectively, which will begin to expire in 2020. The California research and development credits do not expire.

The table of deferred tax assets and liabilities shown above does not include certain deferred tax assets at December 31, 2012 and 2011 that arose directly from (or the use of which was postponed by) tax deductions related to equity compensation in excess of compensation recognized under GAAP. Those deferred tax assets include federal and state net operating losses. The Company employs the “with and without” method of accounting for equity compensation excess tax benefits. Therefore, equity will be increased by $5.9 million, if and when such deferred tax assets are ultimately realized.

Utilization of the Company's net operating loss carryforwards and research and development credit carryforwards may be subject to a substantial annual limitation due to an “ownership change” that may have occurred, or that could occur in the future, as defined and required by Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), as well as similar state provisions. These ownership changes may limit the amount of net operating loss carryforwards and research and development credit carryforwards, and other tax attributes that can be utilized annually to offset future taxable income and tax, respectively. Any limitation may result in the expiration of a portion of the net operating loss carryforwards or research and development credit carryforwards before utilization.

In general, an “ownership change” results from a transaction or series of transactions over a three-year period resulting in an ownership change of more than 50 percentage points of the outstanding stock of a company by certain stockholders or public groups. Since the Company's formation, the Company has raised capital through the issuance of capital stock on several occasions which, combined with the purchasing stockholders' subsequent disposition of those shares, may have resulted in such an ownership change, or could result in an ownership change in the future upon subsequent disposition.

The Company intends to complete a study in the future to assess whether an ownership change has occurred or whether there have been multiple ownership changes since the Company's formation.

The following is a tabular reconciliation of the total amounts of unrecognized tax benefits (in thousands):

	Year Ended December 31, 2012
Balance at January 1, 2012	$	—
Additions for tax positions related to prior periods	122
Reductions	—
Lapse of statute of limitations	—
Balance at December 31, 2012	$	122

Interest and penalties related to unrecognized tax benefits are recognized in income tax expense. For the years ended December 31, 2012 and December 31, 2011, the Company accrued $14,000 and $0 respectively, for the payment of interest and penalties.

The undistributed earnings of the Company's foreign subsidiaries are considered to be indefinitely reinvested. Accordingly, no provision for U.S. federal and state income taxes or foreign withholding taxes has been provided on such undistributed earnings. Determination of the potential amount of unrecognized deferred U.S. income tax liability and foreign withholding taxes is not practicable because of the complexities associated with its hypothetical calculation; however, net operating losses and unrecognized foreign tax credits would be available to reduce some portion of the U.S. liability.

In general, the Company is no longer subject to U.S. federal, state, local, or foreign examinations by taxing authorities for years before 2008, however, net operating loss and other tax attribute carryforwards utilized in subsequent years continue to be subject to examination by the tax authorities until the year to which the net operating loss and/or other tax attributes are carried forward is no longer subject to examination.

12. June 2012 Stock Sale

On May 30, 2012, the Company executed a common stock purchase agreement (the "Stock Purchase Agreement") with Piper Jaffray & Co. ("Piper").   As part of the Stock Purchase Agreement (pursuant to a shelf registration statement filed with the SEC on May 30, 2012, which became effective immediately upon filing), Piper purchased 2.7 million shares of the

Company's common stock at $13.00 per share on June 5, 2012, and subsequently executed an option to purchase an additional 0.4 million shares at $13.00 per share, which closed on June 7, 2012. 

These two transactions resulted in gross proceeds to the Company of $40.3 million (net of $0.1 million withheld by Piper to cover their applicable legal fees). The Company's direct costs to complete this transaction, substantially consisting of legal fees and accounting fees, totaled $0.2 million and are reflected as a reduction of "additional paid-in capital" in the accompanying Consolidated Balance Sheets as of December 31, 2012, in accordance with applicable GAAP.

13. Business Combination

GVT Acquisition Overview

On July 2, 2012 (the “GVT Closing Date”), the Company terminated its exclusive distribution agreement with its Italian distributor, Global Vascular Technologies S.r.l. ("GVT"). Immediately after termination, the Company closed an asset purchase agreement with GVT for its business for total consideration of $2.4 million (the “GVT Acquisition”), of which the Company's cash payment for GVT was offset by $1.0 million of trade receivables due to the Company from GVT. This business consists of (i) a trained and assembled Italian sales workforce (on the GVT Closing Date, four former GVT sales employees joined the Company to assume similar roles), and (ii) various active distribution and direct sales agreements in Italy, which were assumed by the Company.

Since July 2, 2012, the results of operations of the former GVT business, since renamed Endologix Italia S.r.l., have been included in the accompanying Consolidated Statements of Operations and Comprehensive Income (Loss).

Direct Costs of the GVT Acquisition

The Company's direct costs of the GVT Acquisition included legal and accounting fees of $0.4 million. Such amount is included in "contract termination and business acquisition expenses" within the accompanying Consolidated Statements of Operations and Comprehensive Income (Loss) for the year ended December 31, 2012.

GVT Business Purchase Price Allocation

The GVT business purchase price of $2.4 million was allocated based on the below fair value estimates of the acquired assets and liabilities: 

Customer relationships	$	500
Total identifiable net assets	$	500
Goodwill	1,867
Total purchase price allocation	$	2,367

Amortization of the customer relationships intangible asset began in July 2012 and such expense of $0.1 million is included in "general and administrative" expense within the Consolidated Statements of Operations and Comprehensive Income (Loss) for the year ended December 31, 2012. Amortization of the customer relationship intangible asset will continue to be recorded over its estimated period of benefit of three years. To estimate fair value of the customer relationships, the Company used the “income approach” which is a valuation technique that converts future expected net cash flows to be derived from this asset into a single, present-valued amount.

Goodwill

Goodwill presented above of $1.9 million represents the difference of the GVT business purchase price of $2.4 millionminus the net identifiable intangible asset acquired. This goodwill value has been recorded in Euros by the Company's wholly-owned Italian subsidiary, and will thus be subject to foreign currency translation adjustments at each balance sheet date. Such goodwill value adjustment was $0.1 million from the GVT Closing Date to the December 31, 2012 balance sheet date.

In accordance with applicable GAAP, the Company will not amortize goodwill associated with the GVT acquisition. Goodwill is subject to annual impairment testing. The goodwill resulting from the GVT acquisition is expected to be amortized over 18 years for tax purposes.

Applicable GAAP requires that the value of a trained and assembled workforce be included in goodwill, and not presented as a separate intangible asset. The four sales employees hired as part of the GVT Acquisition are clinically adept with the Company's ELG System; have long-standing professional relationships with Italian distributors and physicians; and have a high degree of sales experience within the Italian EVAR market. The Company believes these acquired employees will provide the foundation for meaningful revenue growth in Italy, which is widely recognized as the second-largest EVAR market in Europe, behind Germany.

Supplemental Pro Forma Financial Information (Unaudited)

The following unaudited pro forma financial information is presented to reflect the results of the Company's consolidated operations for the years ended December 31, 2012 and 2011, as if the acquisition of GVT had occurred on January 1, 2011. To reflect the combined businesses, adjustments have been made to include the effects of amortization of the acquired intangible asset and removal of one-time transaction costs directly associated with the GVT Acquisition. These pro forma results have been prepared for informational purposes only and may not be indicative of what operating results would have been, had the acquisition actually taken place on January 1, 2011, and may not be indicative of future operating results.

	(Pro Forma and Unaudited)
	Year Ended December 31,
	2012			2011
Pro Forma Revenue	$	106,132		$	83,879
Pro Forma Cost of goods sold	25,282			18,746
Pro Forma Total operating expenses	102,430			84,402
Pro Forma Net loss	(35,464		)	(28,862		)
Pro Forma Net loss per share - basic and diluted	(0.59		)	(0.51		)

14. Quarterly Results of Operations (Unaudited)

Three Months Ended:	Revenue		Cost of goods sold		Operating expenses		Net loss			Basic loss per share			Diluted loss per share
December 31, 2012 (a)	$	29,222	$	7,158	$	27,761	$	(6,518	)	$	(0.10	)	$	(0.10	)
September 30, 2012	26,696		6,444		27,185		(5,857		)	(0.10		)	(0.10		)
June 30, 2012	25,509		6,277		24,819		(6,696		)	(0.11		)	(0.11		)
March 31, 2012	24,519		5,403		22,790		(16,703		)	(0.29		)	(0.29		)
Three Months Ended:
December 31, 2011	$	23,392	$	5,394	$	21,262	$	(3,665	)	$	(0.06	)	$	(0.06	)
September 30, 2011	22,302		4,829		22,622		(6,603		)	(0.12		)	(0.12		)
June 30, 2011	19,175		4,150		20,202		(13,666		)	(0.24		)	(0.24		)
March 31, 2011	18,548		4,373		19,000		(4,795		)	(0.09		)	(0.09		)

(a) Includes $0.6 million of operating expenses which was recorded to the Consolidated Statements of Operations for the three months ended December 31, 2012. This amount represents a cumulative correction of prior period errors which relate to the recognition of stock-based compensation, though is not material to any previously reported prior period.

15. Subsequent Event

The Company had been an “eligible member” of its former products-liability carrier, Medmarc Mutual Insurance Company (“Medmarc”). On January 3, 2013, Medmarc was acquired by another insurance company, ProAssurance Corporation. This transaction required Medmarc to first convert from a mutual insurance company to a stock insurance company (the “Demutualization”). This Demutualization resulted in a distribution of Medmarc's December 31, 2011 statutory capital and surplus to its “eligible members”.

Accordingly, the Company received a $1.3 million cash distribution in full in January 2013 as a result of this Demutualization, which will be included in the Company's Consolidated Statements of Operations and Comprehensive Income (Loss) for the three months ended March 31, 2013, within “other income (expense)”.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A        CONTROLS AND PROCEDURES.

Management’s Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended or ("the Exchange Act"). Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of the financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. This process includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of the internal control over financial reporting to future periods are subject to risk that the internal control may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate.

Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2012. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework. Based on our management's assessment, we have concluded that, as of December 31, 2012, our internal control over financial reporting was effective based on those criteria.

The effectiveness of our internal control over financial reporting as of December 31, 2012 has been audited by KPMG LLP, an independent registered public accounting firm, as stated in its report, which is included herein.

Disclosure controls and procedures

We carried out an evaluation, under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, of the effectiveness of our disclosure controls and procedures as of December 31, 2012, pursuant to Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on that evaluation, our chief executive officer and chief financial officer have concluded that our disclosure controls and procedures, as of such date, were effective.

Changes in internal control over financial reporting

There has been no change in our internal control over financial reporting during the fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information

Not applicable.

PART III

Item 10. Directors, Executive Officers and Corporate Governance

The information required hereunder is incorporated herein by reference to our Proxy Statement to be filed within 120 days of December 31, 2012 and delivered to stockholders in connection with our Annual Meeting of Stockholders to be held on May 23, 2013.

Item 11. Executive Compensation

The information required hereunder is incorporated herein by reference to our Proxy Statement to be filed within 120 days of December 31, 2012 and delivered to stockholders in connection with our Annual Meeting of Stockholders to be held on May 23, 2013.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required hereunder is incorporated herein by reference to our Proxy Statement to be filed within 120 days of December 31, 2012 and delivered to stockholders in connection with our Annual Meeting of Stockholders to be held on May 23, 2013.

Item 13. Certain Relationships and Related Transactions, and Director Independence

The information required hereunder is incorporated herein by reference to our Proxy Statement to be filed within 120 days of December 31, 2012 and delivered to stockholders in connection with our Annual Meeting of Stockholders to be held on May 23, 2013.

Item 14. Principal Accountant Fees and Services

The information required hereunder is incorporated herein by reference to our Proxy Statement to be filed within 120 days of December 31, 2012 and delivered to stockholders in connection with our Annual Meeting of Stockholders to be held on May 23, 2013.

PART IV

11

Item 15. Exhibits and Financial Statement Schedules

(a)     Financial Statements and Schedules

The following financial statements and schedules listed below are included in this Annual Report on Form 10-K:

Financial Statements

Reports of Independent Registered Public Accounting Firms

Consolidated Balance Sheets as of December 31, 2012 and 2011

Consolidated Statements of Operations and Comprehensive Income (Loss) for the years ended December 31, 2012, 2011, and 2010

Consolidated Statements of Stockholders' Equity for the years ended 2012, 2011, and 2010

Consolidated Statements of Cash Flows for the years ended December 31, 2012, 2011, and 2010

Notes to the Consolidated Financial Statements

Financial Statement Schedule:

Schedule II - Valuation and Qualifying Accounts for the years ended December 31, 2012, 2011 and 2010. All other schedules are omitted, as required information is inapplicable or the information is presented in the consolidated financial statements.

SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS

Years Ended December 31, 2012, 2011, and 2010

Column A	Column B		Column C				Column D			Column E
			Additions (Reductions)
Description	Balance at Beginning of Period		Additions to Bad Debt Expense or Deferred Tax Asset		Charged to Other Accounts		Deductions (1)			Balance at End of Period
	(In thousands)
Year ended December 31, 2012
Allowance for doubtful accounts	$	161	$	325	$	—	$	(14	)	$	472
Year ended December 31, 2011
Allowance for doubtful accounts	$	118	$	62	$	—	$	(19	)	$	161
Year ended December 31, 2010
Allowance for doubtful accounts	$	97	$	39	$	—	$	(18	)	$	118

(1) Deductions represent the actual write-off of accounts receivable balances.

(b)     Exhibits

The following is a list of exhibits required by Item 601 of Regulation S-K filed as part of this Annual Report on Form 10-K. For exhibits that previously have been filed, the Company incorporates those exhibits herein by reference. The exhibit table below includes the Form Type and Filing Date of the previous filing and the original exhibit number in the previous filing which is being incorporated by reference herein.

Exhibit
Number		Description
2.1		Agreement and Plan of Merger and Reorganization, dated October 27, 2010, by and among Endologix, Inc., Nepal Acquisition Corporation, Nellix, Inc., certain of Nellix, Inc.’s stockholders listed therein and Essex Woodlands Health Ventures, Inc., as representative of Nellix, Inc.’s stockholders (Incorporated by reference to Exhibit 2.1 to Endologix, Inc. Current Report on Form 8-K, filed with the SEC on October 27, 2010).
3.1		Amended and Restated Certificate of Incorporation (Incorporated by reference to Exhibit 3.1 to Endologix, Inc. Quarterly Report on Form 10-Q, filed with the SEC on July 28, 2009).
3.2		Amended and Restated Bylaws, as amended (Incorporated by reference to Exhibit 3.1 to Endologix, Inc. Current Report on Form 8-K, filed with the SEC on December 14, 2010).
4.1		Specimen Certificate of Common Stock (Incorporated by reference to Exhibit 4.1 to Amendment No. 2 to Endologix, Inc. Registration Statement on Form S-1, No. 333-04560, filed with the SEC on June 10, 1996).
10.1	(1)	1997 Supplemental Stock Option Plan (Incorporated by reference to Exhibit 99.1 to Endologix, Inc. Registration Statement on Form S-8, No. 333-42161, filed with the SEC on December 12, 1997).
10.2	(1)	1996 Stock Option/Stock Issuance Plan (Incorporated by reference to Exhibit 4.1 to Endologix, Inc. Registration Statement on Form S-8, No. 333-122491, filed with the SEC on February 2, 2005).
10.3	(1)	2006 Stock Incentive Plan (Incorporated by reference to Exhibit 10.1 to Endologix, Inc. Current Report on Form 8-K, filed with the SEC on May 30, 2012).
10.4	(1)	Form of Stock Option Agreement under 2006 Stock Incentive Plan (Incorporated by reference to Exhibit 10.1 to Endologix, Inc. Quarterly Report on Form 10-Q, File No. 000-28440, filed with the SEC on November 9, 2006).
10.5	(1)	Form of Restricted Stock Award Agreement under 2006 Stock Incentive Plan (Incorporated by reference to Exhibit 10.2 to Endologix, Inc. Quarterly Report on Form 10-Q, File No. 000-28440, filed with the SEC on November 9, 2006).
10.6	(1)	Endologix, Inc. 2006 Employee Stock Purchase Plan, as amended and restated on July 2, 2012 (Incorporated by reference to Exhibit 10.19 to Endologix's Inc. Annual Report on form 10-Q, filed with the SEC on August 3, 2012).
10.7		Form of Indemnification Agreement entered into with Endologix, Inc. officers and directors (Incorporated by reference to Exhibit 10.41 to Endologix, Inc Quarterly Report on Form 10-Q, File No. 000-28440, filed with the SEC on November 13, 2002).
10.8		Standard Industrial/Commercial Single-Tenant Lease — Net, dated November 2, 2004, by and between Endologix, Inc. and Del Monico Investments, Inc. (Incorporated by reference to Exhibit 10.46 to Endologix, Inc. Current Report on Form 8-K, File No. 000-28440, filed with the SEC on November 24, 2004).

10.8.1			Addendum No. 2 to Standard Industrial/Commercial Single-Tenant Lease — Net, by and between Endologix, Inc. and Del Monico Investments, Inc., dated June 9, 2009 (Incorporated by reference to Exhibit 10.1 to Endologix, Inc. Quarterly Report on Form 10-Q, filed with the SEC on November 2, 2009).
10.9	(1)		Offer Letter, dated April 28, 2008, between Endologix, Inc. and John McDermott (Incorporated by reference to Exhibit 10.1 to Endologix, Inc Current Report on Form 8-K F.6 No. 000-28440, filed with the SEC on May 16, 2008).
10.10	(1)		Employment Agreement, dated as of December 29, 2008, by and between Endologix, Inc. and John McDermott (Incorporated by reference to Exhibit 10.1 to Endologix, Inc Current Report on Form 8-K, filed with the SEC on January 2, 2009).
10.11	(1)		Employment Agreement, dated as of December 29, 2008, by and between Endologix, Inc. and Robert J. Krist (Incorporated by reference to Exhibit 10.2 to Endologix, Inc Current Report on Form 8-K, filed with the SEC on January 2, 2009).
10.12	(1)		Employment Agreement, dated as of December 29, 2008, by and between Endologix, Inc. and Stefan G. Schreck, Ph.D. (Incorporated by reference to Exhibit 10.3 to Endologix, Inc. Current Report on Form 8-K, filed with the SEC on January 2, 2009).
10.13	(1)		Employment Agreement, dated as of December 29, 2008, by and between Endologix, Inc. and Janet Fauls (Incorporated by reference to Exhibit 10.4 to Endologix, Inc. Current Report on Form 8-K, filed with the SEC on January 2, 2009).
10.14			Standard Industrial/Commercial Multi -Tenant Lease — Net, by and between Endologix, Inc. and Four-In-One Associates, dated August 28, 2009 (Incorporated by reference to Exhibit 10.2 to Endologix, Inc. Quarterly Report on Form 10-Q, filed with the SEC on November 2, 2009).
10.15			Credit Agreement, dated October 30, 2009, by and between Endologix, Inc. and Wells Fargo Bank, National Association (Incorporated by reference to Exhibit 10.16 to Endologix, Inc. Annual Report on Form 10-K, filed with the SEC on March 5, 2010).
10.15.1	†		Third Amendment to Credit Agreement, dated February 20, 2012, by and between Endologix, Inc. and Wells Fargo Bank, National Association. (Incorporated by reference to Exhibit 10.15.1 to Endologix Inc. Annual Report on Form 10-K, filed with the SEC on March 6, 2012).
10.16	(1)		Employment Agreement, dated as of April 13, 2009, by and between Endologix, Inc. and Joseph DeJohn (Incorporated by reference to Exhibit 10.17 to Endologix, Inc. Annual Report on Form 10-K, filed with the SEC on March 5, 2010).
10.17			Securities Purchase Agreement, dated as of October 27, 2010, by and between Endologix, Inc. and Essex Woodlands Health Ventures Fund VII, L.P. (Incorporated by reference to Exhibit 10.1 to Endologix, Inc. Current Report on Form 8-K, filed with the SEC on October 27, 2010).
10.17.1			Amendment to Securities Purchase Agreement, dated as of December 9, 2010, by and between Endologix, Inc. and Essex Woodlands Health Ventures Fund VII, L.P. (Incorporated by reference to Exhibit 10.1 to Endologix, Inc. Current Report on Form 8-K, filed with the SEC on December 14, 2010).
10.18	(1)		Employment Agreement, dated as of December 10, 2010, by and between Endologix, Inc. and Robert D. Mitchell (Incorporated by reference to Exhibit 10.2 to Endologix, Inc. Current Report on Form 8-K, filed with the SEC on December 14, 2010).
10.19	†		Cross License Agreement dated as of October 26, 2011, by and between Endologix, Inc. and Bard Peripheral Vascular, Inc. (Incorporated by reference to Exhibit 10.19 to Endologix Inc. Annual Report on Form 10-K, filed with the SEC on March 6, 2012).
10.20	(1)		Form of Employee Restricted Stock Unit Award Agreement under 2006 Stock Incentive Plan (Incorporated by reference to Exhibit 10.1 to Endologix Inc. Quarterly Report on Form 10-Q, filed with the SEC on November 1, 2012).
10.21	(1)		Form of Director Restricted Stock Unit Award Agreement under 2006 Stock Incentive Plan (Incorporated by reference to Exhibit 10.1 to Endologix Inc. Quarterly Report on Form 10-Q, filed with the SEC on November 1, 2012).
10.22	† (2)		Settlement Agreement, dated October 16, 2012 by and among Endologix, Inc., Cook Incorporated, Cook Group and Cook Medical, Inc.
10.23	(1)		Offer Letter, dated January 2, 2013, between Endologix, Inc. and Shelly B. Thunen (Incorporated by reference to Exhibit 10.1 to Endologix, Inc. Current Report on Form 8-K, filed with the SEC on January 3, 2013).
10.24	(1)		Employment Agreement, dated January 2, 2013, between Endologix, Inc. and Shelly B. Thunen (Incorporated by reference to Exhibit 10.2 to Endologix, Inc. Current Report on Form 8-K, filed with the SEC on January 3, 2013).
10.25	(1)		Severance Agreement and General Release, dated December 31, 2012, between Endologix, Inc. and Robert J. Krist (Incorporated by reference to Exhibit 10.3 to Endologix, Inc. Current Report on Form 8-K, filed with the SEC on January 3, 2013).
14			Code of Ethics for Chief Executive Officer and Principal Financial Officers (Incorporated by reference to Exhibit 14 to Endologix, Inc. Annual Report on Form 10-K, No. 000-28440, filed with the SEC on March 26, 2004).
16.1			Letter from PricewaterhouseCoopers LLP to the Securities and Exchange Commission, Dated August 15, 2012 (Incorporated by reference to Exhibit 16.1 to Endologix, Inc. Current Report on Form 8-K, filed with the SEC on August 15, 2012).
21.1	(2	)	List of Subsidiaries.
23.1	(2	)	Consent of Independent Registered Public Accounting Firm (KPMG LLP).
23.2	(2	)	Consent of Independent Registered Public Accounting Firm (PricewaterhouseCoopers LLP).
24.1	(2	)	Power of Attorney (included on signature page hereto).
31.1	(2	)	Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934.
31.2	(2	)	Certification of Chief Financial Officer Pursuant to Rule 13a-14(a)/15d-14(a) under the Securities Exchange Act of 1934.
32.1	(3	)	Certification of Chief Executive Officer Pursuant to Rule 13a-14(b)/15d-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350.
32.2	(3	)	Certification of Chief Financial Officer Pursuant to Rule 13a-14(b)/15d-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350.
101.INS	(4	)	XBRL Instance Document
101.SCH	(4	)	XBRL Taxonomy Extension Schema Document
101.CAL	(4	)	XBRL Taxonomy Extension Calculation Link Base Document
101.DEF	(4	)	XBRL Taxonomy Extension Definition Link Base Document
101.LAB	(4	)	XBRL Taxonomy Extension Label Link Base Document
101.PRE	(4	)	XBRL Taxonomy Extension Presentation Link Base Document

 ________________________

† 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.

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

(2) Filed herewith

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

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

12

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

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

Date: March 14, 2013

POWER OF ATTORNEY

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

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

Signature	Title	Date
/s/ JOHN McDERMOTT	Chief Executive Officer and Chairman of the Board	March 14, 2013
(John McDermott)	(Principal Executive Officer)
/s/ SHELLEY B. THUNEN	Chief Financial Officer	March 14, 2013
(Shelley B. Thunen )	(Principal Financial and Accounting Officer)
/s/ RODERICK DE GREEF	Director	March 14, 2013
(Roderick de Greef)
/s/ DAN LEMAITRE	Director	March 14, 2013
(Dan Lemaitre)
/s/ THOMAS C. WILDER	Director	March 14, 2013
(Thomas C. Wilder)
/s/ GUIDO J. NEELS	Director	March 14, 2013
(Guido J. Neels)
/s/ GREGORY D. WALLER	Director	March 14, 2013
(Gregory D. Waller)

13

EX-10.22

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT MARKED WITH [***] HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

CONFIDENTIAL SETTLEMENT AGREEMENT

This Confidential Settlement Agreement dated and effective as of October 16, 2012, is entered into by and between Cook Group, Cook Medical Incorporated, and Cook Incorporated, and Endologix, Inc.

WHEREAS, Cook Incorporated initiated a patent infringement action against Endologix, Cook Incorporated v. Endologix, Inc., 1:09-cv-1248 TWP-DKL, alleging infringement of United States Patent Nos. 5,035,706 and 5,755,777, now pending in the United States District Court for the Southern District of Indiana (“the Indiana Action”);

WHEREAS, Endologix has asserted counterclaims in the Indiana Action;

WHEREAS, Cook Incorporated and Endologix desire to settle and resolve their claims and counterclaims in the Indiana Action;

WHEREAS, Cook and Endologix desire to resolve their differences pursuant to the terms and conditions set forth in this Agreement;

NOW THEREFORE, for and in consideration of the mutual promises, agreements, representations and warranties herein contained, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged by each Party, the Parties agree as follows:

1.DEFINITIONS. As used herein, the following terms shall have the meanings set forth below:

1.1.“Agreement” means this agreement, including all Exhibits and Schedules hereto, as the same may be amended from time to time in accordance with its terms.

1.2.“Affiliate” means any person or entity that directly, or indirectly, through one or more intermediaries, controls, or is controlled by, or is under common control with, the person or entity specified. “Control” means ownership of at least fifty percent (50%) of the shares of stock entitled to vote for the election of directors in the case of a corporation, and at least fifty percent (50%) of the voting power in the case of a business entity other than a corporation.

1.3.“Cook” means Cook Group, Cook Medical Incorporated, Cook Incorporated and their Affiliates, officers, and directors.

1.4.“Endologix” means Endologix, Inc. and its Affiliates, officers and directors.

1.5. “Effective Date” means October 16, 2012.

1.6.“Change In Control” means any one or more of the following events: (1) the completion of one or more transactions by which any person or entity other than a Party becomes the beneficial owner of more than 50% of the voting power of any Signatory’s securities; or (2) any merger or consolidation of a Signatory with any person or entity other than a Party, in which the Signatory is not the continuing or surviving company; or (3) the shareholders of a Signatory approve any plan or proposal for the liquidation or dissolution of the Signatory whereby any person or entity other than a Party acquires or controls substantially all of the assets of the Signatory being dissolved or liquidated; or (4) substantially all of the assets of a Signatory are sold or otherwise transferred to a person or entity that is not within a “controlled group of corporations” (as defined in Section 1563 of the Internal Revenue Code) of a Signatory as of the Effective Date.

1.7.“Terms Sheet” means the Binding Settlement Terms Sheet entered into between Cook and Endologix on October 16, 2012.

1.8.“2008 Settlement Agreement” means the Settlement and Release Agreement entered into between Cook Medical Incorporated and Cook Incorporated and Endologix, Inc. and Angela Griffin and others on December 1, 2008.

1.9.“2008 Order” means the Permanent Injunction and Final Judgment entered by the United States District Court for the Southern District of Indiana in Case No. 1:08-cv-00188-SEB-JMS on December 1, 2008.

1.10.“Party” means either Cook or Endologix as defined in Sections 1.3 and 1.4, and “Parties” means Cook and Endologix collectively.

1.11.“Signatory” means Cook Group, Cook Medical Incorporated, Cook Incorporated, or Endologix, Inc.

2.PAYMENT OF SETTLMENT AMOUNT.

2.1.Within ten (10) business days of Cook providing to Endologix a copy of this Agreement that is fully executed by Cook, Endologix shall pay Cook Group $5,000,000.00 (U.S.) (“the Settlement Amount”). Endologix shall make the $5,000,000.00 (U.S.) payment by wire transfer in immediately available funds to Cook Group’s account based on wiring instructions to be provided separately by Cook to Endologix.

3.DISMISSAL OF INDIANA ACTION.

3.1.Within five (5) business days of Endologix’s payment of the Settlement Amount referenced in Section 2, Cook Incorporated and Endologix will jointly file in the Indiana Action a stipulated dismissal with prejudice in the form attached as Exhibit A. If the Court refuses to enter the stipulated dismissal, the Parties and their counsel shall cooperate to prepare, execute, and file a stipulated dismissal in a form as nearly as possible to the attached Exhibit A that is acceptable to the Court.

4.[***]

5.[***]

6.PRIOR AGREEMENTS AND ORDERS.

6.1.Nothing in this Agreement, including the Exhibits attached hereto, or the stipulated dismissal shall supersede, amend, or modify (a) the terms of the 2008 Settlement Agreement or (b) the 2008 Order, both of which shall remain in full force and effect. [***]. Upon the Effective Date of this Agreement, all rights and obligations imposed upon the Parties by the Terms Sheet shall be deemed satisfied and the Terms Sheet shall be superseded and replaced by this Agreement.

[***]: CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

7.MUTUAL RELEASES.

7.1.The Parties fully and mutually release each other, and their officers, directors, managing agents, distributors, and customers, mediate and immediate, of all the claims and counterclaims at issue in the Indiana Action, and all patent infringement claims that Cook could have brought against the accused current versions of the Powerlink and Intuitrak products manufactured or sold by Endologix as of the Effective Date.  Neither Party is releasing any other claims it may have against the other, whether currently known or unknown.

8.COSTS, EXPENSES, AND ATTORNEYS’ FEES.

8.1.The Parties hereto shall bear their own costs, expenses, and attorneys’ fees incurred in connection with the Indiana Action.

9.CONFIDENTIALITY.

9.1.The Terms Sheet and this Agreement, including its terms and conditions contained therein, will be confidential. Nothing herein shall preclude the Parties from disclosing that the Indiana Action has been settled by agreement, or from disclosing in required financial disclosures to investors and regulators (including but not limited to 8-K and 10-Q filings with the SEC) that the payment amount of $5.0 million has been made to Cook as part of this settlement. If any Party determines that a further release of any other terms of this Agreement is required by law, judicial process, regulation or rules of a stock exchange, then that Party shall promptly notify the other Party in writing five (5) days before the time of the proposed release, and this notice shall include the exact text of the proposed release and time and manner of the release. At the other Party’s request and before the release, the Party desiring the release of information shall consult with the other Party on the necessity for the disclosure and the text of the proposed release. Absent approval in advance from the other Party, in no event shall a release include information regarding the terms of the Terms Sheet or this Agreement that is not required by law, judicial process, regulation or stock exchange rule. Should any third-party seek to obtain any information by legal process with respect to the terms of the Terms Sheet or this Agreement from a Party, that Party shall promptly notify the other Party, and the other Party may then take appropriate measures to avoid and minimize the release of such information.

9.2. The Parties may make a press release or announcement disclosing that a binding settlement in the Indiana Action has been reached, that the Indiana Action has been settled in its entirety, that the Indiana Action will be or has been dismissed, and that the Party making the press release or announcement is pleased with the outcome. However, before any such press release or announcement is made, the specific wording shall be mutually agreed upon in advance and in writing. Cook agrees that the draft press release attached as Exhibit D is acceptable for release by Endologix. No further press release or announcement concerning the settlement or its terms will be made by either Party, unless the press release and/or announcement and its specific wording are mutually agreed upon by the Parties in advance and in writing, and the substance of the press release and/or announcement will be limited to the fact that a settlement occurred.

9.3.The Parties agree that each may disclose the terms of the Terms Sheet and this Agreement to their auditors, accountants, tax advisors, valuation experts and/or legal counsel, but only to the extent required for professional advice from those sources and only after securing a commitment from such professionals to maintain the confidentiality of the terms of this Agreement.

10.CHOICE OF LAW; FORUM; NOTICE AND CURE PROVISIONS.

10.1.This Agreement shall be construed and enforced pursuant to the law of the State of Indiana without regard to conflicts of law provisions.

10.2.The Parties agree that any litigation arising from this Agreement will be brought before Judge Pratt in the U.S. District Court for the Southern District of Indiana, and that the Parties will not contest that the Court has diversity jurisdiction over any such litigation, and jurisdiction over the Parties for purposes of construing and enforcing this Agreement, including remedies for violation of said matters.

11.GENERAL PROVISIONS.

11.1.In entering and making this Agreement, the Parties assume the risk of any mistake of fact or law. If any Party should later discover that any fact they relied upon in entering this Agreement is not true, or that their understanding of the facts or law was incorrect, they shall not be entitled to seek rescission of this Agreement by reason thereof. This Agreement is intended to be final and binding upon the Parties regardless of any mistake of fact or law.

11.2.This Agreement shall be binding upon and inure to the benefit of the Parties, including their respective parents, subsidiaries, officers, directors, partners, employees, heirs, conservators, successors, devises and assigns, [***].

11.3.Neither the payment of consideration referred to herein, nor the performance of any covenants contained herein, nor anything contained or incorporated herein shall be deemed, nor shall the negotiation, execution and performance of this Agreement constitute, any admission or concession of liability or wrongdoing on the part of any Party.

11.4.The Parties each warrant that: it is represented by competent counsel with respect to this Agreement and all matters covered by it; it has been fully advised by said counsel with respect to its rights and obligations and with respect to the execution of this Agreement; and it authorizes and directs its respective attorneys to execute such papers and to take such other action as is necessary and appropriate to effectuate the terms of this Agreement.

11.5.Each Party warrants that no promise, inducement or agreement not expressed herein has been made in connection with this Agreement. This Agreement constitutes the entire agreement between the Parties regarding the Indiana Action and supersedes and replaces all prior negotiations or proposed agreements, written or oral regarding the Indiana Action, including but not limited to the Terms Sheet.

11.6.This Agreement may not be altered, amended, modified or otherwise changed in any respect whatsoever except by a writing duly executed by an authorized representative of each of the Parties.

11.7.The language of this Agreement shall be construed as a whole, according to its fair meaning and intention, and not strictly for or against any Party, regardless of who drafted or was principally responsible for drafting the Agreement or any specific term or condition hereof. This Agreement shall be deemed to have been drafted jointly by the Parties, and no Party shall urge otherwise.

11.8.The headings in this Agreement are for convenience only. They in no way limit, alter or affect the meaning of this Agreement.

[***]: CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

11.9.Should any provision of this Agreement be found or held to be invalid or unenforceable, such invalidity or unenforceability shall not invalidate the whole of this Agreement; instead, the Agreement shall be construed as if it did not contain the invalid or unenforceable part, and the rights and obligations of the Parties shall be construed and enforced accordingly.

11.10.This Agreement may be executed in multiple originals, each of which is equally admissible in evidence and shall be deemed to be one and the same instrument. This Agreement shall not take effect until each Party has signed a counterpart.

11.11.Each of the Parties represents and warrants that it has the full power and authority to enter into this Agreement and to perform all transactions, duties and obligations herein set forth. Each signatory to this Agreement who signs on behalf of a Party represents and warrants that he or she has the authority to sign on behalf of that Party.

11.12.Notices regarding this Agreement shall be sent in writing to:

11.12.1.For Cook:

Cook Incorporated

750 Daniels Way

Bloomington, IN 47404

Attn: General Counsel

Fax: 812-339-5369

11.12.2.For Endologix:

Endologix, Inc.

11 Studebaker

Irvine, CA 92618

Attn: John McDermott, Chief Executive Officer

Fax: (949) 457-9561

Signed: /s/ M. Kem HawkinsDated: 12/3/12

By:M. Kem Hawkins

Title:President & CEO

For and on behalf of Cook Group

Signed:/s/ M. Kem HawkinsDated: 12/3/12

By:M. Kem Hawkins

Title:President & CEO

For and on behalf of Cook Incorporated

Signed: /s/ M. Kem Hawkins Dated: 12/3/12

By:M. Kem Hawkins

Title:President & CEO

For and on behalf of Cook Medical Incorporated

Signed: /s/ John McDermott Dated: 12/7/12

By:John McDermott

Title:Chairman, President

For and on behalf of Endologix, Inc.

EXHIBIT A

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
INDIANAPOLIS DIVISION

COOK INCORPORATED,       Plaintiff,    v. ENDOLOGIX, INC.,       Defendant.	) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) )	CIVIL ACTION NO.: 1-09-cv-1248 TWP-DKL
ENDOLOGIX, INC.,       Counter claimant,    v. COOK INCORPORATED,       Counter defendant.

STIPULATED DISMISSAL

Plaintiff and counterclaim defendant Cook Incorporated (“Cook”) and Defendant and counterclaim plaintiff Endologix, Inc. (“Endologix”) have reached a settlement of this case (including all claims and counterclaims). The parties have agreed to the entry of this Stipulated Dismissal with Prejudice including the terms and conditions set forth below.

IT IS HEREBY STIPULATED AND AGREED by and between the parties hereto, through their respective counsel of record, as follows:

1.The claims and counterclaims between Cook and Endologix in the above-captioned matter are hereby dismissed with prejudice.

2.This stipulation is not an acknowledgment of liability of any party for any claim or allegation asserted in this litigation.

3.Each party shall bear its own costs and attorneys’ fees.

IT IS THEREFORE ORDERED THAT:

This action is hereby dismissed with prejudice. Each party shall bear its own costs and attorneys’ fees.

SO ORDERED

Dated: ____________________            By: ________________________________

Honorable Tanya Walton Pratt

United States District Judge

AGREED TO BY:

Dated: November __, 2012

Respectfully submitted,                Respectfully submitted,

(by consent)             

Ralph J. Gabric                    John B. Sganga, Jr. (admitted pro hac vice)

Bradley G. Lane                    Joseph Cianfrani (admitted pro hac vice)

Kelly J. Eberspecher                    J. David Evered (admitted pro hac vice)

Danielle Anne Phillip                    Joshua J. Stowell (admitted pro hac vice)

Jason W. Schigelone                    KNOBBE, MARTENS, OLSON & BEAR, LLP

Bryan J. Leitenberger                     2040 Main Street                

BRINKS HOFER GILSON & LIONE            Fourteenth Floor

NBC Tower - Suite 3600                Irvine, CA 92614

455 North Cityfront Plaza Drive            Phone:     (949) 760-0404

Chicago, Illinois 60611                Facsimile: (949) 760-9502

Phone: (312) 321‑4200                Email:    John.Sganga@kmob.com

Fax:    (312) 321-4299                    jcianfrani@kmob.com

E-mail:    rgabric@brinkshofer.com                2jde@kmob.com

blane@brinkshofer.com                joshua.stowell@kmob.com

keberspecher@brinkshofer.com

dphillip@brinkshofer.com            Andrew W. Hull, #11218-49

jschigelone@brinkshofer.com        Daniel K. Burke, #24572-49

bleitenberger@brinkshofer.com        HOOVER HULL LLP

111 Monument Circle, Suite 4400

Attorneys for Plaintiff,                P.O. Box 44989

COOK INCORPORATED                Indianapolis, Indiana 46244

Phone: (317) 822-4400

Fax: (317) 822-0234

Email:    ahull@hooverhull.com

dburke@hooverhull.com

Attorneys for Defendant,

ENDOLOGIX, INC.

EXHIBIT B

[***]

[***]: CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

EXHIBIT C

[***]

[***]: CONFIDENTIAL PORTIONS OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

EXHIBIT D

COMPANY CONTACT:	INVESTOR CONTACTS:
Endologix, Inc.	The Ruth Group
John McDermott, CEO	Nick Laudico (646) 536-7030
(949) 595-7200	Zack Kubow (646) 536-7020
www.endologix.com

Endologix Settles Patent Litigation with Cook Medical

IRVINE, Calif., October 17, 2012 – Endologix, Inc. (Nasdaq: ELGX), developer and marketer of innovative treatments for aortic disorders, announced today that it has entered into a comprehensive settlement agreement with Cook Incorporated in the patent infringement lawsuit filed against the Company in October 2009 and which involved two Cook Incorporated patents which have subsequently expired. The case had previously been scheduled to go to trial at the end of October 2012.

John McDermott, President and Chief Executive Officer of Endologix, said, “We are pleased to enter this settlement agreement with Cook, which ends the patent dispute between the two companies and eliminates our exposure to continued legal liability and costs in the matter.”

About Endologix, Inc.

Endologix, Inc. develops and manufactures minimally invasive treatments for aortic disorders. Endologix focus is 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 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 75%, making it a leading cause of death in the U.S. Additional information can be found on Endologix's website at www.endologix.com.

Forward-Looking Statements

Except for historical information contained herein, this news release contains forward-looking statements relating to the Company’s legal liabilities and expenses, the accuracy of which are necessarily subject to risks and uncertainties, all of which are difficult or impossible to predict accurately and many of which are beyond the control of Endologix. The Company undertakes no obligation to update its forward looking statements. Please refer to the Company's Annual Report on Form 10-K for the year ended December 31, 2011, and the Company's other filings with the Securities and Exchange Commission, for more detailed information regarding these risks and other factors that may cause actual results to differ materially from those expressed or implied.

# # #

EX-21.1

EXHIBIT 21.1

LIST OF SUBSIDIARIES

1. CVD/RMS Acquisition Corp., a Delaware corporation.

2. Endologix Deutschland GmbH, a German corporation.

3. Nellix, Inc., a Delaware corporation.

4. ELGX International Holdings GP, a Cayman Islands company.

6. Endologix International Holdings B.V., a Dutch corporation.

7. Endologix International B.V., a Dutch corporation.

8. Endologix New Zealand Co., a New Zealand unlimited liability company.

9. Endologix Bermuda L.P., a Bermuda partnership.

10. Endologix International Holdings B.V., a Dutch corporation.

11. Endologix Italia S.r.l., an Italian corporation.

12. Endologix International B.V., a Dutch corporation.

EX-23.1

EXHIBIT 23.1

Consent of Independent Registered Public Accounting Firm

The Board of Directors

Endologix, Inc.:

We consent to the incorporation by reference in the registration statements (Nos.  333-168465, 333-160317, 333-152774, 333-136370, 333-122491, 333-114465, 333-52482, 333-72531, 333-59305, 333-42161, and 333-07959) on Form S-8, and (Nos.  333-181762, 333-171639, 333-159078, 333-133598, 333-107286, 333-35343, 333-33997, 333-71053, 333-52474, 333-90960, 333-126710, and 333-114140) on Form S-3 of Endologix, Inc. of our reports dated March 14, 2013, with respect to the consolidated balance sheet of Endologix, Inc. and subsidiaries as of December 31, 2012, and the related consolidated statements of operations and comprehensive income (loss), stockholders' equity, and cash flows for the year ended December 31, 2012, the related consolidated financial statement schedule, and the effectiveness of internal control over financial reporting as of December 31, 2012, which reports appear in the December 31, 2012 annual report on Form 10‑K of Endologix, Inc.

/s/ KPMG LLP

March 14, 2013

Irvine, California

EX-23.2

EXHIBIT 23.2

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statement on Form S-3 (Nos. 333-181762, 333-171639, 333-159078, 333-133598, 333-107286, 333-35343, 333-33997, 333-71053, 333-52474, 333-90960, 333-126710, and 333-114140) and Form S-8 (Nos. 333-168465, 333-160317, 333-152774, 333-136370, 333-122491, 333-114465, 333-52482, 333-72531, 333-59305, 333-42161, and 333-07959) of Endologix, Inc of our report dated March 6, 2012 relating to the financial statements and financial statement schedule, which appears in this Form 10‑K.

/s/PricewaterhouseCoopers LLP

Orange County, California

March 14, 2013

EX-31.1

Exhibit 31.1

Certification

I, John McDermott, certify that:

1. I have reviewed this Annual Report on Form 10-K of Endologix, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with generally accepted accounting principals;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

March 14, 2013	By:	/s/ JOHN MCDERMOTT
		John McDermott
		President and Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification

I, Shelley B. Thunen, certify that:

1. I have reviewed this Annual Report on Form 10-K of Endologix, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with generally accepted accounting principals;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

March 14, 2013	By:	/s/ SHELLEY B. THUNEN
		Shelley B. Thunen
		Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION

In connection with the Annual Report of Endologix, Inc. (the “Company”) on Form 10-K for the period ended December 31, 2012 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John McDermott, President and Chief Executive Officer of the Company, certify, pursuant to Rule 13a-14(b) or Rule 15d-14(b) under the Securities Exchange Act of 1934 (15 U.S.C. 78m or 780(d)) and 18 U.S.C. Section 1350, that to the best of my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ JOHN MCDERMOTT

John McDermott

President and Chief Executive Officer

This certification accompanies this Report pursuant to Rule 13a-14(b) or Rule 15d-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350 and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934.

Date: March 14, 2013

EX-32.2

Exhibit 32.2

CERTIFICATION

In connection with the Annual Report of Endologix, Inc. (the “Company”) on Form 10-K for the period ended December 31, 2012 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Shelley B. Thunen, Chief Financial Officer of the Company, certify, pursuant to Rule 13a-14(b) or Rule 15d-14(b) under the Securities Exchange Act of 1934 (15 U.S.C. 78m or 780(d)) and 18 U.S.C. Section 1350, that to the best of my knowledge:

(1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ SHELLEY B. THUNEN

Shelley B. Thunen

Chief Financial Officer

This certification accompanies this Report pursuant to Rule 13a-14(b) or Rule 15d-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350 and shall not be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934.

Date: March 14, 2013

XML

Balance Sheet Account Detail (Inventories) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Balance Sheet Related Disclosures [Abstract]
Raw materials	$ 3,901	$ 3,260
Work-in-process	5,102	4,617
Finished goods	9,084	10,222
Inventories	$ 18,087	$ 18,099

XML

Income Tax Expense (Income and Income Tax Expense) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Net Loss before Income Tax Benefit [Abstract]
U.S.	$ (22,270)	$ (26,062)	$ (4,384)
Foreign	(12,973)	(2,754)	0
Net income (loss) before income tax	(35,243)	(28,816)	(4,384)
Current:
Federal	30	(148)	49
State	176	27	20
Foreign	319	35	0
Total	525	(86)	69
Deferred:
Federal	0	0	(13,634)
State	0	0	(1,472)
Deferred Foreign Income Tax Expense (Benefit)	6	0	0
Income tax expense (benefit)	$ 531	$ (86)	$ (15,037)

XML

Net Income (Loss) Per Share (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011	Sep. 30, 2011	Jun. 30, 2011	Mar. 31, 2011	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Net income (loss)	$ (6,518)	$ (5,857)	$ (6,696)	$ (16,703)	$ (3,665)	$ (6,603)	$ (13,666)	$ (4,795)	$ (35,774)	$ (28,730)	$ 10,653	$ 10,653
Weighted average shares - basic									59,811	56,592	48,902
Basic net income (loss) per share (usd per share)	$ (0.10)	$ (0.10)	$ (0.11)	$ (0.29)	$ (0.06)	$ (0.12)	$ (0.24)	$ (0.09)	$ (0.60)	$ (0.51)	$ 0.22
Weighted average shares - diluted									59,811	56,592	50,544
Diluted net income (loss) per share (usd per share)	$ (0.10)	$ (0.10)	$ (0.11)	$ (0.29)	$ (0.06)	$ (0.12)	$ (0.24)	$ (0.09)	$ (0.60)	$ (0.51)	$ 0.21
Securities excluded from calculations of net loss per share because impact would have been anti-dilutive	3,595				3,767				0
Stock Options [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Securities excluded from calculations of net loss per share because impact would have been anti-dilutive	2,698				3,127				0
Restricted Stock [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Securities excluded from calculations of net loss per share because impact would have been anti-dilutive	405				640				0
Restricted Stock Units (RSUs) [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Securities excluded from calculations of net loss per share because impact would have been anti-dilutive	492				0				0

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Income Tax Expense (Income Tax Expense (Benefit)) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Income Tax Disclosure [Abstract]
Income tax benefit at federal statutory rate	$ (11,983)	$ (9,797)	$ (1,490)
State income tax expense (benefit) net of federal benefit	116	18	(1,458)
Meals and entertainment	210	264	182
Research and development credits	0	(342)	(327)
Stock-based compensation	382	421	684
Contingent consideration	4,658	3,570	0
Foreign tax rate differential	4,736	1,025	0
Net change in valuation allowance	2,244	4,097	(13,974)
Income Tax Reconciliation, Balance Sheet True Up	168	658	1,346
Income tax expense (benefit)	$ 531	$ (86)	$ (15,037)

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Stock-Based Compensation (Outstanding Stock Options Grants) (Details) (Stock Options [Member], Common Stock [Member], USD $)	12 Months Ended
	Dec. 31, 2012
$1.64 - $2.25
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Exercise Price Range, Lower Range Limit	$ 1.64
Exercise Price Range, Upper Range Limit	$ 2.25
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range, End of Period [Abstract]
Granted Stock Options Outstanding	237,196
Weighted- Average Remaining Contractual Life (Years)	5 years 8 months 12 days
Weighted- Average Exercise Price	$ 2.07
Granted Stock Options Exercisable	232,301
Weighted- Average Exercise Price	$ 2.07
$2.26 - $2.62
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Exercise Price Range, Lower Range Limit	$ 2.26
Exercise Price Range, Upper Range Limit	$ 2.62
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range, End of Period [Abstract]
Granted Stock Options Outstanding	239,228
Weighted- Average Remaining Contractual Life (Years)	5 years 4 months 24 days
Weighted- Average Exercise Price	$ 2.55
Granted Stock Options Exercisable	238,707
Weighted- Average Exercise Price	$ 2.55
$2.67 - $2.69
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Exercise Price Range, Lower Range Limit	$ 2.67
Exercise Price Range, Upper Range Limit	$ 2.69
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range, End of Period [Abstract]
Granted Stock Options Outstanding	442,065
Weighted- Average Remaining Contractual Life (Years)	5 years 4 months 24 days
Weighted- Average Exercise Price	$ 2.67
Granted Stock Options Exercisable	442,065
Weighted- Average Exercise Price	$ 2.67
$2.79 - $3.02
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Exercise Price Range, Lower Range Limit	$ 2.79
Exercise Price Range, Upper Range Limit	$ 3.02
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range, End of Period [Abstract]
Granted Stock Options Outstanding	57,658
Weighted- Average Remaining Contractual Life (Years)	4 years 1 month 6 days
Weighted- Average Exercise Price	$ 2.89
Granted Stock Options Exercisable	57,033
Weighted- Average Exercise Price	$ 2.89
$3.35 - $3.45
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Exercise Price Range, Lower Range Limit	$ 3.35
Exercise Price Range, Upper Range Limit	$ 3.45
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range, End of Period [Abstract]
Granted Stock Options Outstanding	154,821
Weighted- Average Remaining Contractual Life (Years)	4 years 4 months 24 days
Weighted- Average Exercise Price	$ 3.42
Granted Stock Options Exercisable	146,281
Weighted- Average Exercise Price	$ 3.42
$3.46 - $3.90
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Exercise Price Range, Lower Range Limit	$ 3.46
Exercise Price Range, Upper Range Limit	$ 3.90
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range, End of Period [Abstract]
Granted Stock Options Outstanding	378,248
Weighted- Average Remaining Contractual Life (Years)	4 years 3 months 18 days
Weighted- Average Exercise Price	$ 3.55
Granted Stock Options Exercisable	234,333
Weighted- Average Exercise Price	$ 3.60
$3.92 - $4.31
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Exercise Price Range, Lower Range Limit	$ 3.92
Exercise Price Range, Upper Range Limit	$ 4.31
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range, End of Period [Abstract]
Granted Stock Options Outstanding	302,717
Weighted- Average Remaining Contractual Life (Years)	6 years
Weighted- Average Exercise Price	$ 4.14
Granted Stock Options Exercisable	149,193
Weighted- Average Exercise Price	$ 4.10
$4.32 - $4.51
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Exercise Price Range, Lower Range Limit	$ 4.32
Exercise Price Range, Upper Range Limit	$ 4.51
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range, End of Period [Abstract]
Granted Stock Options Outstanding	825,479
Weighted- Average Remaining Contractual Life (Years)	7 years
Weighted- Average Exercise Price	$ 4.40
Granted Stock Options Exercisable	391,046
Weighted- Average Exercise Price	$ 4.37
$4.63 - $5.49
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Exercise Price Range, Lower Range Limit	$ 4.63
Exercise Price Range, Upper Range Limit	$ 5.49
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range, End of Period [Abstract]
Granted Stock Options Outstanding	284,561
Weighted- Average Remaining Contractual Life (Years)	5 years 8 months 12 days
Weighted- Average Exercise Price	$ 5.26
Granted Stock Options Exercisable	121,597
Weighted- Average Exercise Price	$ 5.03
$5.72 - $7.12
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Exercise Price Range, Lower Range Limit	$ 5.72
Exercise Price Range, Upper Range Limit	$ 7.12
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range, End of Period [Abstract]
Granted Stock Options Outstanding	403,986
Weighted- Average Remaining Contractual Life (Years)	5 years 9 months 18 days
Weighted- Average Exercise Price	$ 6.31
Granted Stock Options Exercisable	166,458
Weighted- Average Exercise Price	$ 6.23
$7.14 - $8.26
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Exercise Price Range, Lower Range Limit	$ 7.14
Exercise Price Range, Upper Range Limit	$ 8.26
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range, End of Period [Abstract]
Granted Stock Options Outstanding	632,754
Weighted- Average Remaining Contractual Life (Years)	8 years 3 months 18 days
Weighted- Average Exercise Price	$ 8.02
Granted Stock Options Exercisable	268,550
Weighted- Average Exercise Price	$ 8.12
$8.57 - $11.68
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Exercise Price Range, Lower Range Limit	$ 8.57
Exercise Price Range, Upper Range Limit	$ 11.68
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range, End of Period [Abstract]
Granted Stock Options Outstanding	417,570
Weighted- Average Remaining Contractual Life (Years)	8 years 9 months 18 days
Weighted- Average Exercise Price	$ 10.40
Granted Stock Options Exercisable	78,254
Weighted- Average Exercise Price	$ 10.38
$11.97 - $13.93
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Exercise Price Range, Lower Range Limit	$ 11.97
Exercise Price Range, Upper Range Limit	$ 13.93
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range, End of Period [Abstract]
Granted Stock Options Outstanding	307,693
Weighted- Average Remaining Contractual Life (Years)	9 years 6 months
Weighted- Average Exercise Price	$ 13.32
Granted Stock Options Exercisable	18,150
Weighted- Average Exercise Price	$ 13.53
$14.01 - $15.51
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Exercise Price Range, Lower Range Limit	$ 14.01
Exercise Price Range, Upper Range Limit	$ 15.51
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range, End of Period [Abstract]
Granted Stock Options Outstanding	272,754
Weighted- Average Remaining Contractual Life (Years)	9 years 4 months 24 days
Weighted- Average Exercise Price	$ 14.65
Granted Stock Options Exercisable	7,188
Weighted- Average Exercise Price	$ 14.83
$1.64 - $15.51
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Exercise Price Range, Lower Range Limit	$ 1.64
Exercise Price Range, Upper Range Limit	$ 15.51
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range, End of Period [Abstract]
Granted Stock Options Outstanding	4,956,730
Weighted- Average Remaining Contractual Life (Years)	6 years 10 months 24 days
Weighted- Average Exercise Price	$ 6.21
Granted Stock Options Exercisable	2,551,156
Weighted- Average Exercise Price	$ 4.35

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Business Combination (Tables)

12 Months Ended

Dec. 31, 2012

Business Combination [Abstract]

Schedule of Purchase Price Allocation

The GVT business purchase price of $2.4 million was allocated based on the below fair value estimates of the acquired assets and liabilities: 

Customer relationships	$	500
Total identifiable net assets	$	500
Goodwill	1,867
Total purchase price allocation	$	2,367

Business Acquisition, Pro Forma Information

These pro forma results have been prepared for informational purposes only and may not be indicative of what operating results would have been, had the acquisition actually taken place on January 1, 2011, and may not be indicative of future operating results.

	(Pro Forma and Unaudited)
	Year Ended December 31,
	2012			2011
Pro Forma Revenue	$	106,132		$	83,879
Pro Forma Cost of goods sold	25,282			18,746
Pro Forma Total operating expenses	102,430			84,402
Pro Forma Net loss	(35,464		)	(28,862		)
Pro Forma Net loss per share - basic and diluted	(0.59		)	(0.51		)

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Income Tax Expense (Narrative) (Details) (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011
Operating Loss Carryforwards [Line Items]
Deferred Tax Assets, Valuation Allowance	$ 50,866,000	$ 50,144,000
U.S. Federal statutory rate to net income (loss) before taxes	34.00%
Operating loss carryforwards	150,000,000	117,200,000
Deferred tax asset related to compensation benefits as well as Federal and State net operating loss carryforwards	5,900,000
Income tax penalties and accrued interest	14,000	0
Unrecognized tax benefits	122,000	0
Research Tax Credit Carryforward | Internal Revenue Service (IRS)
Operating Loss Carryforwards [Line Items]
Tax credit carryforward amount	4,300,000
Research Tax Credit Carryforward | State and Local Jurisdiction
Operating Loss Carryforwards [Line Items]
Tax credit carryforward amount	$ 2,700,000

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Balance Sheet Account Detail (Tables)

12 Months Ended

Dec. 31, 2012

Balance Sheet Related Disclosures [Abstract]

Schedule of Allowance for Doubtful Accounts

The following is the 2011 and 2012 summary of activity within the allowance for doubtful accounts:

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

Schedule of Property and Equipment

Property and equipment consisted of the following:

	December 31,
	2012			2011
Production equipment, molds, and office furniture	$	7,256		$	6,440
Computer hardware and software	2,265			1,023
Leasehold improvements	2,819			2,459
Construction in progress (software and related implementation, production equipment, and leasehold improvements)	556			1,133
Property and equipment, at cost	12,896			11,055
Accumulated depreciation	(7,912		)	(6,601		)
Property and equipment, net	$	4,984		$	4,454

Schedule of Inventory, Current

Inventories consisted of the following:

	December 31,
	2012		2011
Raw materials	$	3,901	$	3,260
Work-in-process	5,102		4,617
Finished goods	9,084		10,222
Inventories	$	18,087	$	18,099

Schedule of Intangible Assets and Goodwill

The following table presents goodwill, indefinite lived intangible assets, finite lived intangible assets, and related accumulated amortization:

	December 31,
	2012			2011
Goodwill	$	29,022		$	27,073
Intangible assets:
Indefinite lived intangibles
In-process research and development (a)	$	40,100		$	40,100
Trademarks and trade names	2,708			2,708
Total indefinite lived intangibles	$	42,808		$	42,808
Finite lived intangibles
Developed technology	$	—		$	14,050
Accumulated amortization	—			(13,465		)
Developed technology, net	$	—		$	585
Patent	$	100		$	100
Accumulated amortization	(75		)	(54		)
Patent, net	$	25		$	46
License	$	100		$	—
Accumulated amortization	(12		)	—
License, net	$	88		$	—
Customer relationships	$	522		$	—
Accumulated amortization	(87		)	—
Customer relationships, net	$	435		$	—
Intangible assets (excluding goodwill), net	$	43,356		$	43,439

(a)Will be reclassified to finite lived intangibles and amortized through 2025, beginning February 2013, to coincide with the commercial launch of the product (Nellix System) associated with this intangible asset.

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense

Estimated amortization expense for the five succeeding years and thereafter (which includes amortization of intangible assets which commenced in February 2013 with the commercial launch of the Nellix System in Europe) is as follows:

	Amortization Expense
2013	$	268
2014	392
2015	892
2016	1,541
2017	2,011
2018 and thereafter	35,544

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Revenue by Geographic Region (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2012 region	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011	Sep. 30, 2011	Jun. 30, 2011	Mar. 31, 2011	Dec. 31, 2012 region	Dec. 31, 2011	Dec. 31, 2010
Schedule of Revenue by Geographic Region [Line Items]
Number of Sales Regions	12								12
Revenue	$ 29,222	$ 26,696	$ 25,509	$ 24,519	$ 23,392	$ 22,302	$ 19,175	$ 18,548	$ 105,946	$ 83,417	$ 67,251
Europe
Schedule of Revenue by Geographic Region [Line Items]
Number of Independent Distributors									5
Revenue									8,404	4,178	4,402
Latin America
Schedule of Revenue by Geographic Region [Line Items]
Revenue									4,859	4,395	4,072
Asia/Pacific
Schedule of Revenue by Geographic Region [Line Items]
Revenue										3,149	3,334
IntuiTrak Systems | Asia/Pacific
Schedule of Revenue by Geographic Region [Line Items]
Revenue									5,591
Direct | United States
Schedule of Revenue by Geographic Region [Line Items]
Revenue									87,092	71,695	55,443
Distributor | Total ROW
Schedule of Revenue by Geographic Region [Line Items]
Revenue									$ 10,450	$ 7,544	$ 7,406
Geographic Concentration Risk [Member] | Sales [Member]
Schedule of Revenue by Geographic Region [Line Items]
Concentration Risk, Percentage									100.00%	100.00%	100.00%
Geographic Concentration Risk [Member] | Sales [Member] | Europe
Schedule of Revenue by Geographic Region [Line Items]
Concentration Risk, Percentage									7.90%	5.00%	6.50%
Geographic Concentration Risk [Member] | Sales [Member] | Latin America
Schedule of Revenue by Geographic Region [Line Items]
Concentration Risk, Percentage									4.60%	5.30%	6.10%
Geographic Concentration Risk [Member] | Sales [Member] | Asia/Pacific
Schedule of Revenue by Geographic Region [Line Items]
Concentration Risk, Percentage									5.30%	3.80%	5.00%
Geographic Concentration Risk [Member] | Sales [Member] | Direct | United States
Schedule of Revenue by Geographic Region [Line Items]
Concentration Risk, Percentage									82.20%	85.90%	82.40%
Geographic Concentration Risk [Member] | Sales [Member] | Distributor | Total ROW
Schedule of Revenue by Geographic Region [Line Items]
Concentration Risk, Percentage									9.90%	9.00%	11.00%

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Stock-Based Compensation (Narrative) (Details) (USD $)	3 Months Ended		12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Annual vesting percentage			25.00%
Expiration period			10 years
Allocated stock-based compensation expense	$ 6,452,000	$ 3,912,000	$ 2,652,000
Employee Service Share-based Compensation, Allocation of Recognized Period Costs, Capitalized Amount			244,000	225,000	43,000
Employee Stock Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation cost, period for recognition			2 years 9 months 18 days
Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation cost, period for recognition			2 years 2 months 12 days
Termination [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expiration period			90 days
Death, Disability, or Retirement [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expiration period			365 days
Non-Employee Option Grants [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Nonemployee compensation expense			0	0	(7,000)
Nonemployee stock options, vested and outstanding			40,000	40,000	68,750
Non-Employee Option Grants [Member] | Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Allocated stock-based compensation expense			900,000	400,000	43,000
Unvested non-employee restricted stock oustanding	135,000	169,000	135,000	169,000	135,000
Restricted Stock [Member] | Common Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Allocated stock-based compensation expense			2,800,000	900,000	400,000
Employee Stock Purchase Plan [Member] | Common Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares issed in period			224,000	287,000	293,000
Per share weighted average price of shares purchased	$ 10.59	$ 6.84	$ 10.59	$ 6.84	$ 3.81
Unrecognized compensation expense related to granted but unvested stock options	759,000	733,000	759,000	733,000	468,000
Employee Stock Purchase Plan [Member] | Employee Stock Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation expense related to granted but unvested stock options	3,300,000		3,300,000
Employee Stock Purchase Plan [Member] | Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation expense related to granted but unvested stock options	$ 6,419,000		$ 6,419,000
Employee Stock Purchase Plan [Member] | Employee Stock [Member] | Common Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Discount from market price			15.00%
Stock Compensation Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares authorized under the plan	8,500,000.0		8,500,000.0
Shares available for grant under the plan	300,000		300,000
Stock Compensation Plan [Member] | Maximum [Member] | Chief Executive Officer [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Quarterly grant approval threshold	50,000		50,000
Stock Compensation Plan [Member] | Employee Stock Option [Member] | Common Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Estimated forfeiture rate			30.00%	30.00%	30.00%
Stock Compensation Plan [Member] | Employee Stock Option [Member] | Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Option exercise price as a percentage of grant date fair value	100.00%		100.00%

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Balance Sheet Account Detail (Allowance for Doubtful Accounts) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Allowance for Doubtful Accounts Receivable [Roll Forward]
Ending balance	$ (161)	$ (118)
Bad debt expense	(325)	(62)	(39)
Write offs	14	19
Ending balance	$ (472)	$ (161)	$ (118)

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Related Party Transactions (Details) (AHH, USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011		Dec. 31, 2010
AHH
Related Party Transaction [Line Items]
Physician and clinical research expenses	$ 125	$ 209	[1]	$ 114
Company revenue derived from AHH	$ 690	$ 912	[1]	$ 1,064

[1] Due to Dr. Diethrich's retirement from the Board of Directors of AHH in October 2010, AHH was not considered to be a related-party to the Company during 2012 and 2011, and is presented for comparative purposes only.

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Quarterly Financial Results (unaudited) (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended								12 Months Ended
	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011	Sep. 30, 2011	Jun. 30, 2011	Mar. 31, 2011	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Quarterly Financial Information Disclosure [Abstract]
Revenue	$ 29,222	$ 26,696	$ 25,509	$ 24,519	$ 23,392	$ 22,302	$ 19,175	$ 18,548	$ 105,946	$ 83,417	$ 67,251
Cost of goods sold	7,158	6,444	6,277	5,403	5,394	4,829	4,150	4,373	25,282	18,746	15,030
Operating Expenses	27,761	27,185	24,819	22,790	21,262	22,622	20,202	19,000	102,555	83,087	56,445
Net income (loss)	$ (6,518)	$ (5,857)	$ (6,696)	$ (16,703)	$ (3,665)	$ (6,603)	$ (13,666)	$ (4,795)	$ (35,774)	$ (28,730)	$ 10,653	$ 10,653
Basic income (loss) per share (usd per share)	$ (0.10)	$ (0.10)	$ (0.11)	$ (0.29)	$ (0.06)	$ (0.12)	$ (0.24)	$ (0.09)	$ (0.60)	$ (0.51)	$ 0.22
Diluted income (loss) per share (usd per share)	$ (0.10)	$ (0.10)	$ (0.11)	$ (0.29)	$ (0.06)	$ (0.12)	$ (0.24)	$ (0.09)	$ (0.60)	$ (0.51)	$ 0.21

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Stock-Based Compensation (Weighted Average Grant Date Fair Value) (Details) (Restricted Stock [Member], Common Stock [Member], USD $) In Thousands, except Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009
Restricted Stock [Member] | Common Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unvested as of December 31,	583,301	591,455	685,000
Granted	475,253	34,000		518,045
Cancelled	(43,598)	(6,303)	(35,965)
Vested	(70,111)	(35,851)	(575,625)
Unvested as of December 31,	944,845	583,301	591,455	685,000
Granted Shares, Weighted Average Fair Value Per Share at Grant Date	$ 12.67	$ 6.19		$ 5.95
Granted Shares, Grant Date Fair Value	$ 6,022	$ 210		$ 3,082
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Vested in Period, Total Fair Value	$ 1,002

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Balance Sheet Account Detail

12 Months Ended

Dec. 31, 2012

Balance Sheet Related Disclosures [Abstract]

Balance Sheet Account Detail

Balance Sheet Account Detail

(a) Allowance for Doubtful Accounts

The following is the 2011 and 2012 summary of activity within the allowance for doubtful accounts:

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

(b) Property and Equipment

Property and equipment consisted of the following:

	December 31,
	2012			2011
Production equipment, molds, and office furniture	$	7,256		$	6,440
Computer hardware and software	2,265			1,023
Leasehold improvements	2,819			2,459
Construction in progress (software and related implementation, production equipment, and leasehold improvements)	556			1,133
Property and equipment, at cost	12,896			11,055
Accumulated depreciation	(7,912		)	(6,601		)
Property and equipment, net	$	4,984		$	4,454

Depreciation expense for property and equipment for the years ended December 31, 2012, 2011, and 2010 was $1.5 million, $1.3 million, and $0.9 million, respectively.

(c) Inventories

Inventories consisted of the following:

	December 31,
	2012		2011
Raw materials	$	3,901	$	3,260
Work-in-process	5,102		4,617
Finished goods	9,084		10,222
Inventories	$	18,087	$	18,099

(d) Goodwill and Intangible Assets

The following table presents goodwill, indefinite lived intangible assets, finite lived intangible assets, and related accumulated amortization:

	December 31,
	2012			2011
Goodwill	$	29,022		$	27,073
Intangible assets:
Indefinite lived intangibles
In-process research and development (a)	$	40,100		$	40,100
Trademarks and trade names	2,708			2,708
Total indefinite lived intangibles	$	42,808		$	42,808
Finite lived intangibles
Developed technology	$	—		$	14,050
Accumulated amortization	—			(13,465		)
Developed technology, net	$	—		$	585
Patent	$	100		$	100
Accumulated amortization	(75		)	(54		)
Patent, net	$	25		$	46
License	$	100		$	—
Accumulated amortization	(12		)	—
License, net	$	88		$	—
Customer relationships	$	522		$	—
Accumulated amortization	(87		)	—
Customer relationships, net	$	435		$	—
Intangible assets (excluding goodwill), net	$	43,356		$	43,439

(a)Will be reclassified to finite lived intangibles and amortized through 2025, beginning February 2013, to coincide with the commercial launch of the product (Nellix System) associated with this intangible asset.

Amortization expense for intangible assets for the years ended December 31, 2012, 2011, and 2010 was $0.7 million, $1.4 million, and $1.4 million, respectively.

Estimated amortization expense for the five succeeding years and thereafter (which includes amortization of intangible assets which commenced in February 2013 with the commercial launch of the Nellix System in Europe) is as follows:

	Amortization Expense
2013	$	268
2014	392
2015	892
2016	1,541
2017	2,011
2018 and thereafter	35,544

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Subsequent Event (Details) (Subsequent Event [Member], USD $) In Millions, unless otherwise specified	1 Months Ended
	Jan. 31, 2013
Subsequent Event [Member]
Subsequent Event [Line Items]
Proceeds from demutualization of insurance entity	$ 1.3

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Stock-Based Compensation (Share-based Compensation Expense) (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		12 Months Ended	3 Months Ended		12 Months Ended	3 Months Ended		12 Months Ended	3 Months Ended		12 Months Ended	3 Months Ended		12 Months Ended	3 Months Ended		12 Months Ended	3 Months Ended		12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2012	Dec. 31, 2012 Cost of Sales [Member]	Dec. 31, 2011 Cost of Sales [Member]	Dec. 31, 2012 Cost of Sales [Member]	Dec. 31, 2012 Research and Development Expense [Member]	Dec. 31, 2011 Research and Development Expense [Member]	Dec. 31, 2012 Research and Development Expense [Member]	Dec. 31, 2012 Clinical and regulatory affairs [Member]	Dec. 31, 2011 Clinical and regulatory affairs [Member]	Dec. 31, 2012 Clinical and regulatory affairs [Member]	Dec. 31, 2012 Selling and Marketing Expense [Member]	Dec. 31, 2011 Selling and Marketing Expense [Member]	Dec. 31, 2012 Selling and Marketing Expense [Member]	Dec. 31, 2012 General and Administrative Expense [Member]	Dec. 31, 2011 General and Administrative Expense [Member]	Dec. 31, 2012 General and Administrative Expense [Member]	Dec. 31, 2012 Operating Expense [Member]	Dec. 31, 2011 Operating Expense [Member]	Dec. 31, 2012 Operating Expense [Member]	Dec. 31, 2012 Employee Stock Purchase Plan [Member] Common Stock [Member]	Dec. 31, 2011 Employee Stock Purchase Plan [Member] Common Stock [Member]	Dec. 31, 2010 Employee Stock Purchase Plan [Member] Common Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Employee Service Share-based Compensation, Nonvested Awards, Total Compensation Cost Not yet Recognized																						$ 759	$ 733	$ 468
Shares issed in period																						224	287	293
Allocated stock-based compensation expense	$ 6,452	$ 3,912	$ 2,652	$ 597	$ 209	$ 188	$ 1,336	$ 753	$ 362	$ 320	$ 113	$ 15	$ 1,558	$ 1,097	$ 919	$ 2,641	$ 1,740	$ 1,168	$ 5,855	$ 3,703	$ 2,464
Per share weighted average price of shares purchased																						$ 10.59	$ 6.84	$ 3.81

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Commitments and Contingencies (Tables)

12 Months Ended

Dec. 31, 2012

Commitments and Contingencies Disclosure [Abstract]

Contractual Obligation, Fiscal Year Maturity Schedule

Future minimum payments by year under non-cancelable leases with initial terms in excess of one year were as follows as of December 31, 2012:

2013	$	655
2014	474
2015 and thereafter	—
	$	1,129

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Revenue by Geographic Region (Tables)

12 Months Ended

Dec. 31, 2012

Geographic Areas, Revenues from External Customers [Abstract]

Revenue by Geographic Region

The Company's revenue by geographic region, was as follows:

	Year Ended December 31,
	2012				2011				2010
United States	$	87,092	82.2	%	$	71,695	85.9	%	$	55,443	82.4	%
Europe	$	8,404	7.9	%	$	4,178	5.0	%	$	4,402	6.5	%
Rest of World ("ROW"):
Latin America	$	4,859	4.6	%	$	4,395	5.3	%	$	4,072	6.1	%
Asia/Pacific	5,591		5.3	%	3,149		3.8	%	3,334		5.0	%
Total ROW	$	10,450	9.9	%	$	7,544	9.0	%	$	7,406	11.0	%
Revenue	$	105,946	100.0	%	$	83,417	100.0	%	$	67,251	100.0	%

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Income Tax Expense (Components of Deferred Tax Assets and Liabilities) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Deferred:
Deferred tax assets:	$ 54,389	$ 53,366
Net operating loss carryforwards	711	474
Accrued expenses	8,400	8,953
Tax credits	183	61
Inventory	578	327
Capitalized research and development	0	31
Deferred tax assets	0	150
Depreciation and amortization	0	758
Deferred compensation	2,364	1,343
Valuation allowance	66,625	65,463
Total deferred tax assets	(50,866)	(50,144)
Deferred Tax Assets, Net of Valuation Allowance	15,759	15,319
Deferred Tax Liabilities, Net [Abstract]
Depreciation and amortization	(101)	0
Other	(89)	0
Total deferred tax liabilities	16,794	16,348
Net deferred tax liability	(1,035)	(1,029)
Trademarks and trade names
Deferred Tax Liabilities, Net [Abstract]
Deferred Tax Liabilities, Intangible Assets	(1,029)	(1,029)
Developed Technology and Trademark [Member]
Deferred Tax Liabilities, Net [Abstract]
Deferred Tax Liabilities, Intangible Assets	$ (15,575)	$ (15,319)

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Stock-Based Compensation (Valuation Assumptions) (Details) (Employee Stock Option [Member], Common Stock [Member], USD $)	12 Months Ended
	Dec. 31, 2012		Dec. 31, 2011		Dec. 31, 2010
Employee Stock Option [Member] | Common Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Average expected option life (in years)	6 years	[1]	6 years	[1]	6 years	[1]
Volatility	55.80%	[2]	56.60%	[2]	56.40%	[2]
Risk-free interest rate	1.00%	[3]	2.00%	[3]	2.40%	[3]
Dividend Yield	0.00%	[4]	0.00%	[4]	0.00%	[4]
Weighted-average grant-date fair value per stock option	$ 6.90		$ 4.55		$ 2.46

[1] Determined by the historical stock option exercise behavior of the Company's employees (maximum term is 10 years).

[2] Measured using weekly price observations for a period equal to stock options' expected term.

[3] Based upon the U.S. Treasury yields in effect at the end of the quarter that the options were granted (for a period equaling the stock options' expected term)

[4] The Company has never paid cash dividends on its common stock and does not expect to declare any cash dividends

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Related Party Transactions (Tables)

12 Months Ended

Dec. 31, 2012

Related Party Transactions [Abstract]

Schedule of Related Party Transactions

The below table is a summary of all transactions by and between the Company and AHH in 2012, 2011, and 2010.

	Year Ended December 31,
	2012 (a)		2011 (a)		2010
Payments from the Company to AHH:
Physician and clinical research expenses	$	125	$	209	$	114
Company revenue derived from AHH	$	690	$	912	$	1,064

(a) Due to Dr. Diethrich's retirement from the Board of Directors of AHH in October 2010, AHH was not considered to be a related-party to the Company during 2012 and 2011, and is presented for comparative purposes only.

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Contingently Issuable Common Stock (Tables)

12 Months Ended

Dec. 31, 2012

Business Combinations [Abstract]

Schedule of Business Acquisitions by Acquisition, Fair Value of Contingent Consideration

Adjustments to the fair value of the Contingent Payment are recognized within "other income (expense)" in the Consolidated Statements of Operations and Comprehensive Income (Loss).

	Fair Value of Contingently Issuable Common Stock
December 31, 2011	$	38,700
Fair value adjustment of Contingent Payment for year ended December 31, 2012	13,700
December 31, 2012	$	52,400

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Use of Estimates and Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2012

Accounting Policies [Abstract]

Use of Estimates and Summary of Significant Accounting Policies

Use of Estimates and Summary of Significant Accounting Policies

The preparation of financial statements in conformity with GAAP requires the Company's management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosure of contingent liabilities. On an on-going basis, the Company's management evaluates its estimates, including those related to (i) collectibility of customer accounts; (ii) whether the cost of inventories can be recovered; (iii) the value of goodwill and intangible assets; (iv) realization of tax assets and estimates of tax liabilities; (v) likelihood of payment and value of contingent liabilities; and (vi) potential outcome of litigation. Such estimates are based on management's judgment which takes into account historical experience and various assumptions. Nonetheless, actual results may differ from management's estimates.

The following critical accounting policies and estimates were used in the preparation of the accompanying Consolidated Financial Statements:

(i) Cash and Cash Equivalents

The carrying amount of the Company's money market funds is included in cash and cash equivalents in the accompanying Consolidated Balance Sheets, and approximates its fair value (utilizing Level 1 inputs) because of the ability to immediately convert these money market funds to cash with minimal change in value.

(ii) Accounts Receivable

Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is management's best estimate of the amount of probable credit losses in existing accounts receivable. Account balances are charged off against the allowance after appropriate collection efforts are exhausted.

(iii) Inventories

The Company values inventory at the lower of the actual cost to purchase or manufacture the inventory, or the market value for such inventory. Cost is determined on the first-in, first-out method (FIFO). The Company regularly reviews inventory quantities in process and on hand, and when appropriate, records a provision for obsolete and excess inventory. The provision is based on actual loss experience and a forecast of product demand compared to its remaining shelf life.

(iv) Property and Equipment

Property and equipment are stated at cost and depreciated on a straight-line basis over the following estimated useful lives:

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

Upon sale or disposition of property and equipment, any gain or loss is included in the accompanying Consolidated Statements of Operations and Comprehensive Income (Loss).

(v) Goodwill and Intangible Assets

Intangible assets with definite lives are amortized over their estimated useful lives using a method that reflects the pattern over which the economic benefit is expected to be realized, and is as follows:

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

Goodwill and other intangible assets with indefinite lives are not subject to amortization, but are tested for impairment annually or whenever events or changes in business circumstances suggest the potential of an impairment. The Company completed its annual indefinite lived intangible asset impairment test as of June 30, 2012, with no resulting impairment based on the discounted cash flows expected to be generated in connection with underlying assets.

The Company most recently completed its annual test for impairment of goodwill as of June 30, 2012, with no resulting impairment, as its market capitalization was in substantial excess of the value of its total stockholders' equity (the Company has one "reporting unit" for purposes of the goodwill impairment test).

Intangible assets with finite lives are tested for impairment only when impairment indicators are present.

(vi) Fair Value Measurements

The Company applies relevant GAAP in measuring the fair value of its Contingent Payment (see Note 10), and assigning fair value of assets acquired and liabilities assumed as part of its business combination accounting (see Note 13). Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. GAAP establishes a fair value hierarchy that distinguishes between (i) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (ii) an entity's own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:

Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

Level 3 - Inputs that are both significant to the fair value measurement and unobservable.

(vii) Contingent Consideration for Business Acquisition

The Company's management determined the fair value of contingently issuable common stock on the Nellix acquisition date (see Note 10) using a probability-based income approach with an appropriate discount rate (determined using both Level 1 and Level 3 inputs). Changes in the fair value of this contingently issuable common stock are determined at each period end and are recorded in the other income(expense) section of the accompanying Consolidated Statements of Operations and Comprehensive Income (Loss), and the non-current liabilities section of the accompanying Consolidated Balance Sheet.

(viii) Revenue Recognition

The Company recognizes revenue when all of the following criteria are met:

•     Appropriate evidence of a binding arrangement exists with the customer;

• The sales price for the ELG System (including device extensions and accessories) is established with the customer;

• The ELG System has been used by the hospital in an EVAR procedure, or the distributor has assumed title with no right of return; and

•     Collection of the corresponding receivable from the customer is reasonably assured at the time of sale.

For sales made to hospitals, the Company recognizes revenue upon completion of an EVAR procedure, when the ELG Device is implanted in a patient. For sales made to distributors, the Company recognizes revenue when title passes, which is typically at the time of shipment, as this represents the period that the customer has assumed custody of the ELG System, without right of return, and assumed risk of loss.

The Company does not offer rights of return, other than honoring a standard warranty.

In the event that the Company enters into a bill and hold arrangement with its customer, which is uncommon, though occurred in 2012 (as discussed in Note 7), the following conditions must be met for revenue recognition:

(i) The risks of ownership must have passed to the customer;

(ii) The customer must have made a fixed and written commitment to purchase the ELG Systems;

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

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

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

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

(vii) The ELG Systems must be complete and ready for shipment.

In addition to the above requirements, the Company also considers other pertinent factors prior to its recognition of revenue for bill and hold arrangements, such as:

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

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

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

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

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

(ix) Shipping Costs

Shipping costs billed to customers are reported within revenue, with the corresponding costs reported within costs of goods sold.

(x) Foreign Currency Transactions

The assets and liabilities of the Company's foreign subsidiaries are translated at the rates of exchange at the balance sheet date. The income and expense items of these subsidiaries are translated at average monthly rates of exchange. Gains and losses resulting from foreign currency transactions, which are denominated in a currency other than the respective entity’s functional currency are included in other income (expense), net, within the accompanying Consolidated Statements of Operations and Comprehensive Income (Loss). Foreign currency translation adjustments between the respective entity's functional currency and the U.S. dollar are recorded to accumulated other comprehensive loss within the stockholders' equity section of the accompanying Consolidated Balance Sheets.

(xi) Income Taxes

The Company records the estimated future tax effects of temporary differences between the tax basis of assets and

liabilities and amounts reported in the financial statements, as well as operating losses and tax credit carry forwards. The Company has recorded a valuation allowance to substantially reduce its net deferred tax assets, because the Company believes that, based upon a number of factors, it is more likely than not that substantially all the deferred tax assets will not be realized. If the Company were to determine that it would be able to realize additional deferred tax assets in the future, an adjustment to the valuation allowance on its deferred tax assets would increase net income in the period such determination was made. In the event that the Company were assessed interest and/or penalties from taxing authorities, such amounts would be included in "income tax expense" within the Consolidated Statements of Operations and Comprehensive Income (Loss) in the period the notice was received.

(xii) Net Income (Loss) Per Share

Net income (loss) per common share is computed using the weighted average number of common shares outstanding

during the periods presented. Because of the net losses during the years ended December 31, 2012 and 2011, options to purchase the common stock, restricted stock awards, and restricted stock units of the Company were excluded from the computation of net loss per share for these periods because the effect would have been antidilutive.

(xiii) Research and Development Costs

Research and development costs are expensed as incurred.

(xiv) Product Warranty

Within six months of shipment, certain customers may request replacement of products they receive that do not meet product specifications; no other warranties are offered. The Company contractually disclaims responsibility for any damages associated with physician's use of its ELG System. Historically, the Company has not experienced a significant amount of costs associated with its warranty policy.

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Income Tax Expense (Tables)

12 Months Ended

Dec. 31, 2012

Income Tax Disclosure [Abstract]

Schedule of Unrecognized Tax Benefits Roll Forward

The following is a tabular reconciliation of the total amounts of unrecognized tax benefits (in thousands):

	Year Ended December 31, 2012
Balance at January 1, 2012	$	—
Additions for tax positions related to prior periods	122
Reductions	—
Lapse of statute of limitations	—
Balance at December 31, 2012	$	122

Schedule of Income before Income Tax, Domestic and Foreign

Net loss before income tax benefit attributable to U.S. and international operations, consists of the following:

	Year Ended December 31,
	2012			2011			2010
U.S.	$	(22,270	)	$	(26,062	)	$	(4,384	)
Foreign	(12,973		)	(2,754		)	—
Net income (loss) before income tax	$	(35,243	)	$	(28,816	)	$	(4,384	)

Schedule of Effective Income Tax Rate Reconciliation

Income tax expense (benefit) consists of the following:

	Year Ended December 31,
	2012		2011			2010
Current:
Federal	$	30	$	(148	)	$	49
State	176		27			20
Foreign	319		35			—
	525		(86		)	69
Deferred:
Federal	—		—			(13,634		)
State	—		—			(1,472		)
Foreign	$	6	$	—		$	—
Income tax expense (benefit)	$	531	$	(86	)	$	(15,037	)

Schedule of Components of Income Tax Expense (Benefit)

Income tax expense (benefit) was computed by applying the U.S. federal statutory rate of 34% to net income (loss) before taxes as follows:

	Year Ended December 31,
	2012			2011			2010
Income tax benefit at federal statutory rate	$	(11,983	)	$	(9,797	)	$	(1,490	)
State income tax expense (benefit) net of federal benefit	116			18			(1,458		)
Meals and entertainment	210			264			182
Research and development credits	—			(342		)	(327		)
Stock-based compensation	382			421			684
Contingent consideration	4,658			3,570			—
Foreign tax rate differential	4,736			1,025			—
Net change in valuation allowance	2,244			4,097			(13,974		)
Other, net	168			658			1,346
Income tax expense (benefit)	$	531		$	(86	)	$	(15,037	)

Schedule of Deferred Tax Assets and Liabilities

Significant components of the Company’s deferred tax assets and (liabilities) are as follows:

	Year Ended December 31,
	2012			2011
Deferred tax assets:
Net operating loss carryforwards	54,389			53,366
Accrued expenses	711			474
Tax credits	8,400			8,953
Bad debt	183			61
Inventory	578			327
Capitalized research and development	—			31
Other	—			150
Depreciation and amortization	—			758
Deferred compensation	2,364			1,343
Deferred tax assets	66,625			65,463
Valuation allowance	(50,866		)	(50,144		)
Total deferred tax assets	15,759			15,319
Deferred tax liabilities:
Developed technology and trademark	$	(15,575	)	$	(15,319	)
Trademarks and tradenames	(1,029		)	(1,029		)
Depreciation and amortization	(101		)	—
Other	(89		)	—
Total deferred tax liabilities	(16,794		)	(16,348		)
Net deferred tax liability	(1,035		)	(1,029		)

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Balance Sheet Account Detail (Goodwill and Intangible Assets) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012		Dec. 31, 2011
Goodwill, Finite-lived, and Indefinite-lived Intangible Assets [Line Items]
Goodwill	$ 29,022		$ 27,073
Indefinite lived intangibles	42,808		42,808
Intangible assets (excluding goodwill), net	43,356		43,439
Developed technology
Goodwill, Finite-lived, and Indefinite-lived Intangible Assets [Line Items]
Finite lived intangibles	0		14,050
Accumulated amortization	0		(13,465)
Finite lived intangibles, net	0		585
Patent
Goodwill, Finite-lived, and Indefinite-lived Intangible Assets [Line Items]
Finite lived intangibles	100		100
Accumulated amortization	(75)		(54)
Finite lived intangibles, net	25		46
License
Goodwill, Finite-lived, and Indefinite-lived Intangible Assets [Line Items]
Finite lived intangibles	100		0
Accumulated amortization	(12)		0
Finite lived intangibles, net	88		0
Customer relationships
Goodwill, Finite-lived, and Indefinite-lived Intangible Assets [Line Items]
Finite lived intangibles	522		0
Accumulated amortization	(87)		0
Finite lived intangibles, net	435		0
In-process research and development
Goodwill, Finite-lived, and Indefinite-lived Intangible Assets [Line Items]
Indefinite lived intangibles	40,100	[1]	40,100	[1]
Trademarks and trade names
Goodwill, Finite-lived, and Indefinite-lived Intangible Assets [Line Items]
Indefinite lived intangibles	$ 2,708		$ 2,708

[1] Will be reclassified to finite lived intangibles and amortized through 2025, beginning February 2013, to coincide with the commercial launch of the product (Nellix System) associated with this intangible asset.

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Contingently Issuable Common Stock (Details) (USD $) Share data in Millions, except Per Share data, unless otherwise specified	12 Months Ended			0 Months Ended	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010	Dec. 10, 2010 Nellix	Dec. 31, 2012 Nellix
Business Acquisition [Line Items]
Purchase price of common shares				3.2
Value of common shares				$ 19,400,000
Maximum shares issuable				10.2	4.2
Fair value of contingent payment	52,400,000	38,700,000		28,200,000
Business acquisition, closing stock price					$ 14.24
Business acquisition, contingent consideration, at fair value hypothetical value					59,800,000
Business acquisition, increase (decrease) common stock					$ 2.76
Business acquisition, percentage increase (decrease)					24.00%
Fair Value of Contingently Issuable Common Stock [Roll Forward]
December 31, 2011	38,700,000
Change in fair value of contingent consideration related to acquisition	13,700,000	10,500,000	0
December 31, 2012	$ 52,400,000	$ 38,700,000		$ 28,200,000

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Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Current:
Cash and cash equivalents	$ 45,118	$ 20,035
Accounts receivable, net of allowance for doubtful accounts of $472 and $161, respectively	22,600	15,542
Other receivables	320	405
Inventories	18,087	18,099
Prepaid expenses and other current assets	1,442	1,023
Total current assets	87,567	55,104
Property and equipment, net	4,984	4,454
Goodwill	29,022	27,073
Intangibles, net	43,356	43,439
Deposits and other assets	174	185
Total assets	165,103	130,255
Current liabilities:
Accounts payable	6,348	6,377
Accrued payroll	7,825	6,569
Accrued expenses and other current liabilities	3,021	1,003
Total current liabilities	17,194	13,949
Long-term liabilities:
Long term debt	1,035	1,029
Deferred rent	0	8
Contingently issuable common stock	52,400	38,700
Total liabilities	70,629	53,686
Commitments and contingencies
Stockholders’ equity:
Convertible preferred stock, $0.001 par value; 5,000,000 shares authorized. No shares issued and outstanding.	0	0
Common stock, $0.001 par value; 75,000,000 shares authorized, 63,068,463 and 58,577,484 shares issued, respectively. 62,573,763 and 58,082,784 shares outstanding, respectively.	63	59
Additional paid-in capital	295,338	241,441
Accumulated deficit	(200,014)	(164,240)
Treasury stock, at cost, 494,700 shares	(661)	(661)
Accumulated other comprehensive income (loss)	(252)	(30)
Total stockholders’ equity	94,474	76,569
Total liabilities and stockholders’ equity	$ 165,103	$ 130,255

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Stock-Based Compensation (Stock Options Activity) (Details) (Stock Options [Member], Common Stock [Member], USD $) In Thousands, except Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2012		Dec. 31, 2011
Stock Options [Member] | Common Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward]
Outstanding — January 1	5,556,534		5,914,884
Granted	756,289		1,264,333
Exercised	(1,167,715)		(1,393,794)
Forfeited	(188,378)		(228,889)
Expired	0		0
Outstanding — December 31	4,956,730		5,556,534
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Roll Forward]
Outstanding — January 1	$ 4.89		$ 3.91
Granted	$ 13.31		$ 8.38
Exercised	$ 4.28		$ 3.84
Forfeited	$ 8.32		$ 5.29
Expired	$ 0.00		$ 0.00
Outstanding — December 31	$ 6.21		$ 4.89
Outstanding, Weighted Average Remaining Contractual Term	6 years 10 months 24 days
Outstanding, Aggregate Intrinsic Value	$ 39,947	[1]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period, Total Intrinsic Value	11	[2]	7	[2]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Additional Disclosures [Abstract]
Vested and Expected to Vest, December 31, 2012 Number of Stock Options (Shares)	4,235,058
Vested and Expected to Vest, December 31, 2012 Outstanding, Weighted Average Exercise Price	$ 5.87
Vested and Expected to Vest, December 31, 2012 Weighted Average Remaining Contractual Term	6 years 8 months 12 days
Vested and Expected to Vest, December 31, 2012 Aggregate Intrinsic Value	35,536	[1]
Vested December 31, 2012 Number of Stock Options (Shares)	2,551,156
Vested, December 31, 2012 Weighted Average Exercise Price	$ 4.35
Vested, December 31, 2012 Weighted Average Remaining Contractual Term	5 years 8 months 12 days
Vested, December 31, 2012 Aggregate Intrinsic Value	$ 25,242	[1]

[1] Represents the total difference between the Company's closing stock price on the last trading day of 2012 and the stock option exercise price, multiplied by the number of in-the-money options as of December 31, 2012. The amount of intrinsic value will change based on the fair market value of the Company's stock.

[2] Represents the total difference between the Company's stock price at the time of exercise and the stock option exercise price, multiplied by the number of options exercised.

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Statement of Stockholders' Equity (USD $) In Thousands, except Share data	Total USD ($)	Common Stock [Member] USD ($)	Additional Paid-in Capital [Member] USD ($)	Retained Earnings [Member] USD ($)	Treasury Stock [Member] USD ($)	Accumulated Other Comprehensive Income (Loss) [Member] USD ($)	Restricted Stock [Member]
Stockholders' Equity, Balance at beginning of period at Dec. 31, 2009	$ 42,880	$ 49	$ 189,656	$ (146,164)	$ (661)	$ 0
Common Stock, Shares, Balance at beginning of period (in shares) at Dec. 31, 2009		49,152,000
Exercised		676,000
Exercise of common stock options	2,243	1	2,242
Employee stock purhcase plan (in shares)		293,000
Employee stock puchase plan	1,117		1,117
Sale of Common Stock (in shares)		3,171,000
Sale of Common Stock	(14,990)	(3)	(14,987)
Issuance of Common Stock for acquisition (in shares)		3,199,000
Shares issued for acquisition	19,388	3	19,385
Amortization of stock compensation stock	2,215		2,215
Grant of restricted stock (in shares)		405,000
Grant of restricted stock	1	1
Amortization expense of restricted stock	422		422
Amortization expense of non-employee stock options	(7)		(7)
Net income (loss)	10,653
Other comprehensive income (loss) (Foreign currency transaction)	0
Comprehensive loss	10,653
Stockholders' Equity, Balance at end of period at Dec. 31, 2010	93,902	57	230,017	(135,510)	(661)	0
Common Stock, Shares, Balance at ending of period (in shares) at Dec. 31, 2010		56,896,000
Exercised		1,394,000
Exercise of common stock options	5,324	2	5,322
Employee stock purhcase plan (in shares)		287,000
Employee stock puchase plan	1,965		1,965
Shares issued for acquisition	0
Amortization of stock compensation stock	2,851		2,851
Amortization expense of restricted stock	877		877
Amortization expense of non-employee stock options	409		409
Net income (loss)	(28,730)			(28,730)
Other comprehensive income (loss) (Foreign currency transaction)	(30)			0		(30)
Comprehensive loss	(28,760)
Stockholders' Equity, Balance at end of period at Dec. 31, 2011	76,569	59	241,441	(164,240)	(661)	(30)
Common Stock, Shares, Balance at ending of period (in shares) at Dec. 31, 2011	58,082,784	58,577,000
Exercised		1,168,000
Exercise of common stock options	4,992	1	4,991
Employee stock purhcase plan (in shares)		224,000
Employee stock puchase plan	2,369		2,369
Sale of Common Stock (in shares)		3,105,000
Sale of Common Stock	(40,069)	(3)	(40,066)
Shares issued for acquisition	0
Amortization of stock compensation stock	3,649		3,649
Grant of restricted stock (in shares)		13,000
Grant of restricted stock	0	0
Cancellation of restricted stock							(18,000)
Amortization expense of restricted stock	1,906		1,906
Amortization expense of non-employee stock options	916		916
Net income (loss)	(35,774)			(35,774)
Other comprehensive income (loss) (Foreign currency transaction)	(222)					(222)
Comprehensive loss	(35,996)
Stockholders' Equity, Balance at end of period at Dec. 31, 2012	$ 94,474	$ 63	$ 295,338	$ (200,014)	$ (661)	$ (252)
Common Stock, Shares, Balance at ending of period (in shares) at Dec. 31, 2012	62,573,763	63,069,000

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June 2012 Stock Sale (Details) (USD $)	12 Months Ended
	Dec. 31, 2012 transaction	Jun. 07, 2012	Jun. 05, 2012
Equity [Abstract]
Common shares sold		400,000	2,700,000
Sale of common stock, price per share		$ 13.00	$ 13.00
Number of transactions	2
Gross proceeds	$ 40,300,000
Legal fees	100,000
Professional fees	$ 200,000

XML

Description of Business, Basis of Presentation, and Operating Segment (Details) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2012 segment
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Foreign currency remeasurement	$ 0.1
Number of reportable segments	1

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Schedule II - Valuation and Qualifying Accounts (Notes)

12 Months Ended

Dec. 31, 2012

Valuation and Qualifying Accounts [Abstract]

Schedule II - Valuation and Qualifying Accounts

SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS

Years Ended December 31, 2012, 2011, and 2010

Column A	Column B		Column C				Column D			Column E
			Additions (Reductions)
Description	Balance at Beginning of Period		Additions to Bad Debt Expense or Deferred Tax Asset		Charged to Other Accounts		Deductions (1)			Balance at End of Period
	(In thousands)
Year ended December 31, 2012
Allowance for doubtful accounts	$	161	$	325	$	—	$	(14	)	$	472
Year ended December 31, 2011
Allowance for doubtful accounts	$	118	$	62	$	—	$	(19	)	$	161
Year ended December 31, 2010
Allowance for doubtful accounts	$	97	$	39	$	—	$	(18	)	$	118

(1) Deductions represent the actual write-off of accounts receivable balances.

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Use of Estimates and Summary of Significant Accounting Policies (Details)	12 Months Ended
	Dec. 31, 2012
Developed technology
Property, Plant and Equipment [Line Items]
Finite-Lived Intangible Asset, Useful Life	10 years
Customer relationships
Property, Plant and Equipment [Line Items]
Finite-Lived Intangible Asset, Useful Life	3 years
Minimum | Patents and license
Property, Plant and Equipment [Line Items]
Finite-Lived Intangible Asset, Useful Life	3 years
Maximum | Patents and license
Property, Plant and Equipment [Line Items]
Finite-Lived Intangible Asset, Useful Life	5 years
Office furniture | Minimum
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Life	3 years
Office furniture | Maximum
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Life	8 years
Computer hardware | Minimum
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Life	3 years
Computer hardware | Maximum
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Life	8 years
Computer software | Minimum
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Life	3 years
Computer software | Maximum
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Life	8 years
Production equipment | Minimum
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Life	3 years
Production equipment | Maximum
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Useful Life	8 years

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Use of Estimates and Summary of Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2012

Accounting Policies [Abstract]

Schedule of Property and Equipment, Useful Lives

Property and equipment are stated at cost and depreciated on a straight-line basis over the following estimated useful lives:

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

Schedule of Intangible Assets and Goodwill, Useful Lives

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

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Description of Business, Basis of Presentation, and Operating Segment

12 Months Ended

Dec. 31, 2012

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Description of Business, Basis of Presentation, and Operating Segment

Description of Business, Basis of Presentation, and Operating Segment

(a) Description of Business

Endologix, Inc. (the "Company") is a Delaware corporation with corporate headquarters and production facilities located in Irvine, California. The Company develops, manufactures, markets, and sells innovative medical devices for the treatment of aortic disorders. The Company's principal product is a stent graft and delivery system (the "ELG System"), for the treatment of abdominal aortic aneurysms ("AAA") through minimally-invasive endovascular repair ("EVAR"). Sales of the Company's ELG System (including device extensions and accessories) to hospitals and third-party distributors provide the sole source of reported revenue. In February 2013, the Company began a limited market introduction of its next generation system for the EVAR of AAA, the Nellix System.

The Company's ELG System consists of (i) a self-expanding cobalt chromium alloy stent covered by expanded polytetrafluoroethylene (commonly referred to as "ePTFE") graft material (the "ELG Device") and (ii) an accompanying delivery system. Once the ELG Device is fixed in its proper position within the abdominal aorta it provides a conduit for blood flow and relieves pressure within the weakened or “aneurysmal” section of the vessel wall, greatly reducing the potential for the AAA to rupture.

(b)Basis of Presentation

The accompanying Consolidated Financial Statements in this Annual Report on Form 10-K have been prepared in accordance with generally accepted accounting principles in the United States of America ("GAAP") and with the rules and regulations of the U.S. Securities and Exchange Commission ("SEC"). These financial statements include the financial position, results of operations, and cash flows of the Company, including its subsidiaries, all of which are wholly-owned. All inter-company accounts and transactions have been eliminated in consolidation. Certain amounts due to the Company from its foreign subsidiaries are denominated in U.S. dollars, which differs from the functional currency of these subsidiaries. The impact of the remeasurement to U.S. dollars from the subsidiary's functional currency is a loss of $0.1 million for the year ended December 31, 2012 ($0 for the years ended December 31, 2011 and 2010), and is included in "other income (expense), net" in the accompanying Consolidated Statements of Operations and Comprehensive Income (Loss).

(c) Operating Segment

The Company has one operating and reporting segment that is focused exclusively on the development, manufacture, marketing, and sale of ELG Systems for the treatment of aortic disorders. For the year ended December 31, 2012, all of the Company's revenue and related expenses were solely attributable to these activities. Substantially all of the Company's long-lived assets are located in the U.S.

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Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Dec. 31, 2012	Dec. 31, 2011
Allowance for doubtful accounts	$ 472	$ 161
Common stock, par value (per share)	$ 0.001	$ 0.001
Common stock, shares authorized	75,000,000	75,000,000
Common stock, shares issued	63,068,463	58,577,484
Common stock, shares outstanding	62,573,763	58,082,784
Treasury stock, shares	494,700	494,700
Convertible Preferred Stock [Member]
Convertible preferred stock, par value (per share)	$ 0.001	$ 0.001
Convertible preferred stock, shares authorized	5,000,000	5,000,000
Convertible preferred stock, shares issued	0	0
Convertible preferred stock, shares outstanding	0	0

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Income Tax Expense

12 Months Ended

Dec. 31, 2012

Income Tax Disclosure [Abstract]

Income Tax Expense

Income Tax Expense

Net loss before income tax benefit attributable to U.S. and international operations, consists of the following:

	Year Ended December 31,
	2012			2011			2010
U.S.	$	(22,270	)	$	(26,062	)	$	(4,384	)
Foreign	(12,973		)	(2,754		)	—
Net income (loss) before income tax	$	(35,243	)	$	(28,816	)	$	(4,384	)

Income tax expense (benefit) consists of the following:

	Year Ended December 31,
	2012		2011			2010
Current:
Federal	$	30	$	(148	)	$	49
State	176		27			20
Foreign	319		35			—
	525		(86		)	69
Deferred:
Federal	—		—			(13,634		)
State	—		—			(1,472		)
Foreign	$	6	$	—		$	—
Income tax expense (benefit)	$	531	$	(86	)	$	(15,037	)

Income tax expense (benefit) was computed by applying the U.S. federal statutory rate of 34% to net income (loss) before taxes as follows:

	Year Ended December 31,
	2012			2011			2010
Income tax benefit at federal statutory rate	$	(11,983	)	$	(9,797	)	$	(1,490	)
State income tax expense (benefit) net of federal benefit	116			18			(1,458		)
Meals and entertainment	210			264			182
Research and development credits	—			(342		)	(327		)
Stock-based compensation	382			421			684
Contingent consideration	4,658			3,570			—
Foreign tax rate differential	4,736			1,025			—
Net change in valuation allowance	2,244			4,097			(13,974		)
Other, net	168			658			1,346
Income tax expense (benefit)	$	531		$	(86	)	$	(15,037	)

Significant components of the Company’s deferred tax assets and (liabilities) are as follows:

	Year Ended December 31,
	2012			2011
Deferred tax assets:
Net operating loss carryforwards	54,389			53,366
Accrued expenses	711			474
Tax credits	8,400			8,953
Bad debt	183			61
Inventory	578			327
Capitalized research and development	—			31
Other	—			150
Depreciation and amortization	—			758
Deferred compensation	2,364			1,343
Deferred tax assets	66,625			65,463
Valuation allowance	(50,866		)	(50,144		)
Total deferred tax assets	15,759			15,319
Deferred tax liabilities:
Developed technology and trademark	$	(15,575	)	$	(15,319	)
Trademarks and tradenames	(1,029		)	(1,029		)
Depreciation and amortization	(101		)	—
Other	(89		)	—
Total deferred tax liabilities	(16,794		)	(16,348		)
Net deferred tax liability	(1,035		)	(1,029		)

The Company has evaluated the available evidence supporting the realization of its gross deferred tax assets, including the amount and timing of future taxable income, and has determined that it is more likely than not that the domestic deferred tax assets will not be realized and that it is more likely than not that the foreign deferred tax assets will be realized. Due to such uncertainties surrounding the realization of the domestic deferred tax assets, the Company maintains a valuation allowance of $(50.9) million against a substantial portion of its deferred tax assets as of December 31, 2012. Realization of the deferred tax assets will be primarily dependent upon the Company's ability to generate sufficient taxable income prior to the expiration of its net operating losses.

At December 31, 2012, the Company had net operating loss carryforwards for federal and state income tax purposes of approximately $150.0 million and $117.2 million, respectively.

Federal and state net operating loss carryforwards begin expiring in 2013 and will continue to expire through 2032. The majority of the state net operating losses are attributable to California. In addition, the Company had research and development credits for federal and state income tax purposes of approximately $4.3 million and $2.7 million, respectively, which will begin to expire in 2020. The California research and development credits do not expire.

The table of deferred tax assets and liabilities shown above does not include certain deferred tax assets at December 31, 2012 and 2011 that arose directly from (or the use of which was postponed by) tax deductions related to equity compensation in excess of compensation recognized under GAAP. Those deferred tax assets include federal and state net operating losses. The Company employs the “with and without” method of accounting for equity compensation excess tax benefits. Therefore, equity will be increased by $5.9 million, if and when such deferred tax assets are ultimately realized.

Utilization of the Company's net operating loss carryforwards and research and development credit carryforwards may be subject to a substantial annual limitation due to an “ownership change” that may have occurred, or that could occur in the future, as defined and required by Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), as well as similar state provisions. These ownership changes may limit the amount of net operating loss carryforwards and research and development credit carryforwards, and other tax attributes that can be utilized annually to offset future taxable income and tax, respectively. Any limitation may result in the expiration of a portion of the net operating loss carryforwards or research and development credit carryforwards before utilization.

In general, an “ownership change” results from a transaction or series of transactions over a three-year period resulting in an ownership change of more than 50 percentage points of the outstanding stock of a company by certain stockholders or public groups. Since the Company's formation, the Company has raised capital through the issuance of capital stock on several occasions which, combined with the purchasing stockholders' subsequent disposition of those shares, may have resulted in such an ownership change, or could result in an ownership change in the future upon subsequent disposition.

The Company intends to complete a study in the future to assess whether an ownership change has occurred or whether there have been multiple ownership changes since the Company's formation.

The following is a tabular reconciliation of the total amounts of unrecognized tax benefits (in thousands):

	Year Ended December 31, 2012
Balance at January 1, 2012	$	—
Additions for tax positions related to prior periods	122
Reductions	—
Lapse of statute of limitations	—
Balance at December 31, 2012	$	122

Interest and penalties related to unrecognized tax benefits are recognized in income tax expense. For the years ended December 31, 2012 and December 31, 2011, the Company accrued $14,000 and $0 respectively, for the payment of interest and penalties.

The undistributed earnings of the Company's foreign subsidiaries are considered to be indefinitely reinvested. Accordingly, no provision for U.S. federal and state income taxes or foreign withholding taxes has been provided on such undistributed earnings. Determination of the potential amount of unrecognized deferred U.S. income tax liability and foreign withholding taxes is not practicable because of the complexities associated with its hypothetical calculation; however, net operating losses and unrecognized foreign tax credits would be available to reduce some portion of the U.S. liability.

In general, the Company is no longer subject to U.S. federal, state, local, or foreign examinations by taxing authorities for years before 2008, however, net operating loss and other tax attribute carryforwards utilized in subsequent years continue to be subject to examination by the tax authorities until the year to which the net operating loss and/or other tax attributes are carried forward is no longer subject to examination.

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Document and Entity Information (USD $)	12 Months Ended
	Dec. 31, 2012	Feb. 28, 2013	Jun. 30, 2012
Document Information [Line Items]
Entity Registrant Name	ENDOLOGIX INC /DE/
Entity Central Index Key	0001013606
Document Type	10-K
Document Period End Date	Dec. 31, 2012
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	FY
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		62,654,131
Entity Well-known Seasoned Issuer	Yes
Entity Voluntary Filers	No
Entity Public Float			$ 955,038,220

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June 2012 Stock Sale

12 Months Ended

Dec. 31, 2012

Equity [Abstract]

June 2012 Stock Sale

June 2012 Stock Sale

On May 30, 2012, the Company executed a common stock purchase agreement (the "Stock Purchase Agreement") with Piper Jaffray & Co. ("Piper").   As part of the Stock Purchase Agreement (pursuant to a shelf registration statement filed with the SEC on May 30, 2012, which became effective immediately upon filing), Piper purchased 2.7 million shares of the

Company's common stock at $13.00 per share on June 5, 2012, and subsequently executed an option to purchase an additional 0.4 million shares at $13.00 per share, which closed on June 7, 2012. 

These two transactions resulted in gross proceeds to the Company of $40.3 million (net of $0.1 million withheld by Piper to cover their applicable legal fees). The Company's direct costs to complete this transaction, substantially consisting of legal fees and accounting fees, totaled $0.2 million and are reflected as a reduction of "additional paid-in capital" in the accompanying Consolidated Balance Sheets as of December 31, 2012, in accordance with applicable GAAP.

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Condensed Consolidated Statements of Operations and Comprehensive Loss (USD $) In Thousands, except Per Share data, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Revenue	$ 105,946	$ 83,417	$ 67,251
Cost of goods sold	25,282	18,746	15,030
Gross profit	80,664	64,671	52,221
Operating expenses:
Research and development	16,571	16,738	8,997
Clinical and regulatory affairs	6,343	4,439	2,169
Marketing and sales	53,953	44,655	31,869
General and administrative	20,266	15,525	13,410
Contract termination and business acquisition expenses	422	1,730	0
Settlement costs	(5,000)	0	0
Total operating expenses	102,555	83,087	56,445
Loss from operations	(21,891)	(18,416)	(4,224)
Other income (expense):
Interest income	30	23	30
Interest expense	(7)	(32)	(16)
Gain on sale of equipment	0	141	0
Other income (expense), net	325	(32)	(174)
Fair value adjustment of Contingent Payment for year ended December 31, 2012	(13,700)	(10,500)	0
Total other expense	(13,352)	(10,400)	(160)
Net income (loss) before income tax	(35,243)	(28,816)	(4,384)
Income tax benefit (expense)	(531)	86	15,037
Net loss before income tax	(35,774)	(28,730)	10,653
Basic net income (loss) per share (usd per share)	$ (0.60)	$ (0.51)	$ 0.22
Diluted net income (loss) per share (usd per share)	$ (0.60)	$ (0.51)	$ 0.21
Weighted average shares - basic	59,811	56,592	48,902
Weighted average shares - diluted	59,811	56,592	50,544
Comprehensive loss:
Foreign currency translation adjustment	(222)	(30)	0
Comprehensive loss	$ (35,996)	$ (28,760)	$ 10,653

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Credit Facilities

12 Months Ended

Dec. 31, 2012

Line of Credit Facility [Abstract]

Credit Facilities

Credit Facilities

In October 2009, the Company entered into a revolving credit facility with Wells Fargo Bank (“Wells”), which was last amended on October 9, 2012, whereby the Company may borrow up to $20.0 million, subject to the calculation and limitation of a borrowing base (the “Wells Credit Facility”). All amounts owing under the Wells Credit Facility will become due and payable upon its expiration on March 31, 2013. As of December 31, 2012, the Company did not have any outstanding borrowings under the Wells Credit Facility. Any outstanding amounts under the Wells Credit Facility bear interest at a variable rate equal to the Wells prime rate, plus 1.00%, which is payable on a monthly basis. The Wells Credit Facility carried a 0.2% unused commitment fee though May 19, 2012, when this fee was eliminated. The Wells Credit Facility is collateralized by all of the Company's assets, except its intellectual property.

The Wells Credit Facility contains financial covenants requiring the Company to (i) maintain a minimum current ratio of 1.5, equal to the quotient of modified current assets to current liabilities, as defined in the Wells Credit Facility (the "Current Ratio Covenant"), and (ii) not exceed operating loss amounts (excluding non-cash contingent consideration associated with the acquisition of Nellix) of $6.5 million for the quarter ended March 31, 2012; $11.0 million for the six months ended June 30, 2012; $13.0 million for the nine months ended September 30, 2012; and $13.0 million for the year ended December 31, 2012 (the "Operating Loss Covenant"). The Wells Credit Facility also included a negative covenant limiting 2012 capital expenditures to an aggregate $3.0 million.

The Company was not in compliance with the Operating Loss Covenant for the nine months ended September 30, 2012, and for the year ended December 31, 2012. The Company obtained a waiver from Wells for these breaches of the Operating Loss Covenant on October 26, 2012 and February 11, 2013, respectively, whereby Wells agreed to forbear from enforcing their default rights under the Wells Credit Facility. The waiver does not apply to any subsequent breaches of the same provision, nor any breach of any other provision specified within the Wells Credit Facility.

The Wells Credit Facility also contains a “material adverse change” clause (“MAC”). If the Company encounters difficulties that would qualify as a MAC in its (i) operations, (ii) condition (financial or otherwise), or (iii) ability to repay amounts outstanding under the Wells Credit Facility, it could be canceled at Wells' sole discretion. Wells could then elect to declare the indebtedness, together with accrued interest and other fees, to be immediately due and payable and proceed against any collateral securing such indebtedness.

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Net Income (Loss) Per Share

12 Months Ended

Dec. 31, 2012

Earnings Per Share [Abstract]

Net Income (Loss) Per Share

Net Income (Loss) Per Share

Net income (loss) per share was computed by dividing net loss by the weighted average number of common shares outstanding for the years ended December 31, 2012, 2011, and 2010:

	Year Ended December 31,
	2012			2011			2010
Net income (loss)	$	(35,774	)	$	(28,730	)	$	10,653
Weighted average shares - basic	59,811			56,592			48,902
Net income (loss) per share - basic	$	(0.60	)	$	(0.51	)	$	0.22
Weighted average shares - diluted	59,811			56,592			50,544
Net income (loss) per share - diluted	$	(0.60	)	$	(0.51	)	$	0.21

The following outstanding Company securities were excluded from the above calculations of net loss per share because their impact would have been anti-dilutive due to the net losses during the years ended December 31, 2012 and 2011:

	Year Ended December 31,
	2012	2011	2010
Common stock options	2,698	3,127	—
Restricted stock awards	405	640	—
Restricted stock units	492	—	—
Total	3,595	3,767	—

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Use of Estimates and Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2012

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying Consolidated Financial Statements in this Annual Report on Form 10-K have been prepared in accordance with generally accepted accounting principles in the United States of America ("GAAP") and with the rules and regulations of the U.S. Securities and Exchange Commission ("SEC"). These financial statements include the financial position, results of operations, and cash flows of the Company, including its subsidiaries, all of which are wholly-owned. All inter-company accounts and transactions have been eliminated in consolidation. Certain amounts due to the Company from its foreign subsidiaries are denominated in U.S. dollars, which differs from the functional currency of these subsidiaries. The impact of the remeasurement to U.S. dollars from the subsidiary's functional currency is a loss of $0.1 million for the year ended December 31, 2012 ($0 for the years ended December 31, 2011 and 2010), and is included in "other income (expense), net" in the accompanying Consolidated Statements of Operations and Comprehensive Income (Loss).

Operating segment

Operating Segment

The Company has one operating and reporting segment that is focused exclusively on the development, manufacture, marketing, and sale of ELG Systems for the treatment of aortic disorders. For the year ended December 31, 2012, all of the Company's revenue and related expenses were solely attributable to these activities. Substantially all of the Company's long-lived assets are located in the U.S.

Accounts Receivables

Accounts Receivable

Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is management's best estimate of the amount of probable credit losses in existing accounts receivable. Account balances are charged off against the allowance after appropriate collection efforts are exhausted.

Inventories

Inventories

The Company values inventory at the lower of the actual cost to purchase or manufacture the inventory, or the market value for such inventory. Cost is determined on the first-in, first-out method (FIFO). The Company regularly reviews inventory quantities in process and on hand, and when appropriate, records a provision for obsolete and excess inventory. The provision is based on actual loss experience and a forecast of product demand compared to its remaining shelf life.

Property and Equipment

Property and Equipment

Property and equipment are stated at cost and depreciated on a straight-line basis over the following estimated useful lives:

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

Upon sale or disposition of property and equipment, any gain or loss is included in the accompanying Consolidated Statements of Operations and Comprehensive Income (Loss).

Goodwill and Intangible Assets

Goodwill and Intangible Assets

Intangible assets with definite lives are amortized over their estimated useful lives using a method that reflects the pattern over which the economic benefit is expected to be realized, and is as follows:

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

Long-Lived Asset Impairment (Indefinite and Definite Lived)

Fair Value Measurements

Fair Value Measurements

The Company applies relevant GAAP in measuring the fair value of its Contingent Payment (see Note 10), and assigning fair value of assets acquired and liabilities assumed as part of its business combination accounting (see Note 13). Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. GAAP establishes a fair value hierarchy that distinguishes between (i) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (ii) an entity's own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:

Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

Level 3 - Inputs that are both significant to the fair value measurement and unobservable.

Contingent Consideration for Business Acquisition

Contingent Consideration for Business Acquisition

The Company's management determined the fair value of contingently issuable common stock on the Nellix acquisition date (see Note 10) using a probability-based income approach with an appropriate discount rate (determined using both Level 1 and Level 3 inputs). Changes in the fair value of this contingently issuable common stock are determined at each period end and are recorded in the other income(expense) section of the accompanying Consolidated Statements of Operations and Comprehensive Income (Loss), and the non-current liabilities section of the accompanying Consolidated Balance Sheet.

Fair Value of Financial Instruments

Revenue Recognition

Revenue Recognition

The Company recognizes revenue when all of the following criteria are met:

•     Appropriate evidence of a binding arrangement exists with the customer;

• The sales price for the ELG System (including device extensions and accessories) is established with the customer;

• The ELG System has been used by the hospital in an EVAR procedure, or the distributor has assumed title with no right of return; and

•     Collection of the corresponding receivable from the customer is reasonably assured at the time of sale.

For sales made to hospitals, the Company recognizes revenue upon completion of an EVAR procedure, when the ELG Device is implanted in a patient. For sales made to distributors, the Company recognizes revenue when title passes, which is typically at the time of shipment, as this represents the period that the customer has assumed custody of the ELG System, without right of return, and assumed risk of loss.

The Company does not offer rights of return, other than honoring a standard warranty.

Shipping Costs

Shipping Costs

Shipping costs billed to customers are reported within revenue, with the corresponding costs reported within costs of goods sold.

Foreign Currency Transactions

Foreign Currency Transactions

The assets and liabilities of the Company's foreign subsidiaries are translated at the rates of exchange at the balance sheet date. The income and expense items of these subsidiaries are translated at average monthly rates of exchange. Gains and losses resulting from foreign currency transactions, which are denominated in a currency other than the respective entity’s functional currency are included in other income (expense), net, within the accompanying Consolidated Statements of Operations and Comprehensive Income (Loss). Foreign currency translation adjustments between the respective entity's functional currency and the U.S. dollar are recorded to accumulated other comprehensive loss within the stockholders' equity section of the accompanying Consolidated Balance Sheets.

Income Taxes

Income Taxes

The Company records the estimated future tax effects of temporary differences between the tax basis of assets and

liabilities and amounts reported in the financial statements, as well as operating losses and tax credit carry forwards. The Company has recorded a valuation allowance to substantially reduce its net deferred tax assets, because the Company believes that, based upon a number of factors, it is more likely than not that substantially all the deferred tax assets will not be realized. If the Company were to determine that it would be able to realize additional deferred tax assets in the future, an adjustment to the valuation allowance on its deferred tax assets would increase net income in the period such determination was made. In the event that the Company were assessed interest and/or penalties from taxing authorities, such amounts would be included in "income tax expense" within the Consolidated Statements of Operations and Comprehensive Income (Loss) in the period the notice was received.

Net Earnings (Loss) Per Share

Net Income (Loss) Per Share

Net income (loss) per common share is computed using the weighted average number of common shares outstanding

during the periods presented. Because of the net losses during the years ended December 31, 2012 and 2011, options to purchase the common stock, restricted stock awards, and restricted stock units of the Company were excluded from the computation of net loss per share for these periods because the effect would have been antidilutive.

Research and Development Costs

Research and Development Costs

Research and development costs are expensed as incurred.

Product Warranty

Product Warranty

Within six months of shipment, certain customers may request replacement of products they receive that do not meet product specifications; no other warranties are offered. The Company contractually disclaims responsibility for any damages associated with physician's use of its ELG System. Historically, the Company has not experienced a significant amount of costs associated with its warranty policy.

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Business Combination (GVT Acquisition)

12 Months Ended

Dec. 31, 2012

GVT Acquisition

Business Acquisition [Line Items]

Business Combination

Business Combination

GVT Acquisition Overview

On July 2, 2012 (the “GVT Closing Date”), the Company terminated its exclusive distribution agreement with its Italian distributor, Global Vascular Technologies S.r.l. ("GVT"). Immediately after termination, the Company closed an asset purchase agreement with GVT for its business for total consideration of $2.4 million (the “GVT Acquisition”), of which the Company's cash payment for GVT was offset by $1.0 million of trade receivables due to the Company from GVT. This business consists of (i) a trained and assembled Italian sales workforce (on the GVT Closing Date, four former GVT sales employees joined the Company to assume similar roles), and (ii) various active distribution and direct sales agreements in Italy, which were assumed by the Company.

Since July 2, 2012, the results of operations of the former GVT business, since renamed Endologix Italia S.r.l., have been included in the accompanying Consolidated Statements of Operations and Comprehensive Income (Loss).

Direct Costs of the GVT Acquisition

The Company's direct costs of the GVT Acquisition included legal and accounting fees of $0.4 million. Such amount is included in "contract termination and business acquisition expenses" within the accompanying Consolidated Statements of Operations and Comprehensive Income (Loss) for the year ended December 31, 2012.

GVT Business Purchase Price Allocation

The GVT business purchase price of $2.4 million was allocated based on the below fair value estimates of the acquired assets and liabilities: 

Customer relationships	$	500
Total identifiable net assets	$	500
Goodwill	1,867
Total purchase price allocation	$	2,367

Amortization of the customer relationships intangible asset began in July 2012 and such expense of $0.1 million is included in "general and administrative" expense within the Consolidated Statements of Operations and Comprehensive Income (Loss) for the year ended December 31, 2012. Amortization of the customer relationship intangible asset will continue to be recorded over its estimated period of benefit of three years. To estimate fair value of the customer relationships, the Company used the “income approach” which is a valuation technique that converts future expected net cash flows to be derived from this asset into a single, present-valued amount.

Goodwill

Goodwill presented above of $1.9 million represents the difference of the GVT business purchase price of $2.4 millionminus the net identifiable intangible asset acquired. This goodwill value has been recorded in Euros by the Company's wholly-owned Italian subsidiary, and will thus be subject to foreign currency translation adjustments at each balance sheet date. Such goodwill value adjustment was $0.1 million from the GVT Closing Date to the December 31, 2012 balance sheet date.

In accordance with applicable GAAP, the Company will not amortize goodwill associated with the GVT acquisition. Goodwill is subject to annual impairment testing. The goodwill resulting from the GVT acquisition is expected to be amortized over 18 years for tax purposes.

Applicable GAAP requires that the value of a trained and assembled workforce be included in goodwill, and not presented as a separate intangible asset. The four sales employees hired as part of the GVT Acquisition are clinically adept with the Company's ELG System; have long-standing professional relationships with Italian distributors and physicians; and have a high degree of sales experience within the Italian EVAR market. The Company believes these acquired employees will provide the foundation for meaningful revenue growth in Italy, which is widely recognized as the second-largest EVAR market in Europe, behind Germany.

Supplemental Pro Forma Financial Information (Unaudited)

The following unaudited pro forma financial information is presented to reflect the results of the Company's consolidated operations for the years ended December 31, 2012 and 2011, as if the acquisition of GVT had occurred on January 1, 2011. To reflect the combined businesses, adjustments have been made to include the effects of amortization of the acquired intangible asset and removal of one-time transaction costs directly associated with the GVT Acquisition. These pro forma results have been prepared for informational purposes only and may not be indicative of what operating results would have been, had the acquisition actually taken place on January 1, 2011, and may not be indicative of future operating results.

	(Pro Forma and Unaudited)
	Year Ended December 31,
	2012			2011
Pro Forma Revenue	$	106,132		$	83,879
Pro Forma Cost of goods sold	25,282			18,746
Pro Forma Total operating expenses	102,430			84,402
Pro Forma Net loss	(35,464		)	(28,862		)
Pro Forma Net loss per share - basic and diluted	(0.59		)	(0.51		)

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Related Party Transactions

12 Months Ended

Dec. 31, 2012

Related Party Transactions [Abstract]

Related Party Transactions

Related Party Transactions

Dr. Edward Diethrich previously served on the Company's Board of Directors; his board term expired on June 11, 2009. Dr. Diethrich also previously served as a director of Arizona Heart Hospital ("AHH") through October, 2010. Dr. Diethrich currently serves as the Company's medical director, under an independent contractor arrangement.

AHH has been a long-standing customer of the Company, and the Company has contracted with AHH for physician training and clinical research services for a number of years. The below table is a summary of all transactions by and between the Company and AHH in 2012, 2011, and 2010.

	Year Ended December 31,
	2012 (a)		2011 (a)		2010
Payments from the Company to AHH:
Physician and clinical research expenses	$	125	$	209	$	114
Company revenue derived from AHH	$	690	$	912	$	1,064

(a) Due to Dr. Diethrich's retirement from the Board of Directors of AHH in October 2010, AHH was not considered to be a related-party to the Company during 2012 and 2011, and is presented for comparative purposes only.

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Business Combination (Details) (USD $)	6 Months Ended	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2012	Dec. 31, 2011	Jul. 02, 2012
Business Combinations [Abstract]
Goodwill	$ 29,022,000	$ 29,022,000	$ 27,073,000
Customer relationships
Business Combinations [Abstract]
Estimated period of benefit		3 years
GVT Acquisition
Business Acquisition [Line Items]
Business acquisition, purchase price				2,400,000
Business Combinations [Abstract]
Identifiable net assets				500,000
Goodwill				1,867,000
Total purchase price allocation				2,367,000
Goodwill translation adjustment	100,000
Acquisition legal and accounting fees		400,000
Business Combination, Pro Forma Information [Abstract]
Pro Forma Revenue		106,132,000	83,879,000
Pro Forma Cost of goods sold		25,282,000	18,746,000
Pro Forma Total operating expenses		102,430,000	84,402,000
Pro Forma Net loss		(35,464,000)	(28,862,000)
Pro Forma Net loss per share - basic and diluted		(0.59)	(0.51)
GVT Acquisition | Customer relationships
Business Combinations [Abstract]
Identifiable net assets				500,000
Amortization expense	$ 100,000

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Revenue by Geographic Region

12 Months Ended

Dec. 31, 2012

Geographic Areas, Revenues from External Customers [Abstract]

Revenue by Geographic Region

Revenue by Geographic Region

The Company's revenue by geographic region, was as follows:

	Year Ended December 31,
	2012				2011				2010
United States	$	87,092	82.2	%	$	71,695	85.9	%	$	55,443	82.4	%
Europe	$	8,404	7.9	%	$	4,178	5.0	%	$	4,402	6.5	%
Rest of World ("ROW"):
Latin America	$	4,859	4.6	%	$	4,395	5.3	%	$	4,072	6.1	%
Asia/Pacific	5,591		5.3	%	3,149		3.8	%	3,334		5.0	%
Total ROW	$	10,450	9.9	%	$	7,544	9.0	%	$	7,406	11.0	%
Revenue	$	105,946	100.0	%	$	83,417	100.0	%	$	67,251	100.0	%

U.S. The Company's U.S. sales were solely derived from its direct sales force, divided among twelve geographic sales regions.

Europe. For the year ended December 31, 2012, the Company's European sales were derived from (i) its direct European sales force (including dedicated sales agents), serving much of Western Europe, and (ii) five independent distributors serving the markets in Italy (through June 2012), Greece, Turkey, Poland, and Ireland. For the year ended December 31, 2011, the Company's European sales were derived from its direct sales force and independent distributors. For the year ended December 31, 2010, the Company's European sales were derived solely from independent distributors.

ROW. The Company's ROW sales were solely derived from independent distributors. Included in 2012 revenue for Asia/Pacific is $5.6 million of sales of IntuiTrak systems that were not shipped to the Company's distributor in Japan until January 2013 (i.e., representing 2012 “bill and hold” transactions).  Due to applicable medical device regulations in Japan, these IntuiTrak systems could not pass Japanese customs until related Shonin approval was received - which ultimately occurred in late December 2012 (the distributor was solely responsible and bore all the risk for obtaining such approval).  These IntuiTrak systems were subsequently shipped in full to Japan in January 2013. The Company assessed applicable GAAP for these transactions, beginning in the first quarter of 2012, and determined that applicable revenue recognition criteria were achieved in the correspondingquarter that the distributor's written order was fulfilled, physicallysegregated (at the distributor's request), and ready for shipment (at which time full title and risk of loss passed to the distributor, who had no right of return).

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Commitments and Contingencies

12 Months Ended

Dec. 31, 2012

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

(a) Leases

The Company leases its administrative, research, and manufacturing facilities located in Irvine, California and an administrative office located in Den Bosch, The Netherlands. These facility lease agreements require the Company to pay operating costs, including property taxes, insurance, and maintenance. In addition, the Company has certain equipment, under long-term agreements that are accounted for as operating leases.

Future minimum payments by year under non-cancelable leases with initial terms in excess of one year were as follows as of December 31, 2012:

2013	$	655
2014	474
2015 and thereafter	—
	$	1,129

(b) Employment Agreements and Retention Plan

The Company has entered into employment agreements with its officers and certain other “key employees” under which payment and benefits would become payable in the event of termination by the Company for any reason other than cause, upon a change in control of the Company, or by the employee for good reason. The payment will generally be equal to six months of the employee’s then current salary for termination by the Company without cause, and generally be equal to twelve months of salary upon a change in control of the Company.

(c) Legal Matters

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

Cook

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

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

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

LifePort

On December 28, 2012, LifePort Sciences, LLC filed a complaint against the Company in the United States District Court, District of Delaware alleging that certain of the Company's products infringe U.S. Patent Nos. 5,489,295, 6,117,167, 6,302,906, 5,993,481 and 5,676,696, which are alleged to be owned by LifePort. LifePort is seeking an unspecified amount of monetary damages for sale of the Company's products and injunctive relief. The Company does not believe it infringes on any of these patents and intends to vigorously defend itself in this matter.

At this time, the Company is unable to predict the outcome of this matter, but is of the opinion that the outcome will not have a material adverse effect on its financial position, results of operations, or cash flow. However, in order to avoid further legal costs (recognized within "general and administrative" expenses within the Consolidated Statements of Operations and Comprehensive Income (Loss)) and diversion of management resources, it is reasonably possible that the Company may reach a settlement with LifePort, which could result in a liability. However, the Company cannot presently estimate the amount, or range, of reasonably possible losses due to the nature of this potential litigation settlement.

(d) Income Taxes

The Company applies an accounting standard which prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities.  The amount of unrecognized tax benefits which, if ultimately recognized, could favorably affect the Company's effective tax rate in a future period was $0.1 million and $0 as of December 31, 2012 and December 31, 2011, respectively. Both amounts are net of any applicable federal and/or state benefits.  The Company expects its unrecognized tax benefits to decrease by $0.1 million over the next 12 months due to ultimate settlement of outstanding tax liabilities.

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Contingently Issuable Common Stock (Nellix)

12 Months Ended

Dec. 31, 2012

Nellix

Business Acquisition [Line Items]

Contingently Issuable Common Stock

Contingently Issuable Common Stock

On December 10, 2010 (the “Nellix Closing Date”), the Company completed its acquisition of Nellix, Inc., a pre-revenue, AAA medical device company. The purchase price consisted of 3.2 million of the Company's common shares, issuable to the former Nellix stockholders as of the Nellix Closing Date, then representing a value of $19.4 million. Additional payments, solely in the form of the Company's common shares (the “Contingent Payment”), will be made upon the achievement of a revenue milestone and a regulatory approval milestone (collectively, the “Nellix Milestones”).

The ultimate value of the Contingent Payment will be determined on the date that each Nellix Milestone is achieved. The number of issuable shares will be established using an applicable per share price, which is subject to a ceiling and/or floor, resulting in a maximum of 10.2 million shares issuable upon the achievement of the Nellix Milestones.

As of the Closing Date, the fair value of the Contingent Payment was estimated to be $28.2 million. At December 31, 2012, the Company's stock price closed at $14.24 per share. Thus, had the Nellix Milestones been achieved on December 31, 2012, the Contingent Payment would have comprised 4.2 million shares, representing a value of $59.8 million.

The value of the Contingent Payment is derived using a discounted income approach model, with a range of probabilities and assumptions related to the timing and likelihood of achievement of the Nellix Milestones (which include Level 3 inputs - see Note 2(vi) and the Company's stock price (Level 1 input) as of the balance sheet date. These varying probabilities and assumptions and changes in the Company's stock price have required fair value adjustments of the Contingent Payment in periods subsequent to the Nellix Closing Date.

The per share price of the Company's common stock increased by $2.76, or 24%, between December 31, 2011 and December 31, 2012. This increase in the value of the Company's common stock was the primary driver affecting the increase in the fair value of the Contingent Payment for the year ended December 31, 2012.

The Contingent Payment fair value will continue to be evaluated on a quarterly basis until milestone achievement occurs, or until the expiration of the "earn-out period," as defined within the Nellix purchase agreement. Adjustments to the fair value of the Contingent Payment are recognized within "other income (expense)" in the Consolidated Statements of Operations and Comprehensive Income (Loss).

	Fair Value of Contingently Issuable Common Stock
December 31, 2011	$	38,700
Fair value adjustment of Contingent Payment for year ended December 31, 2012	13,700
December 31, 2012	$	52,400

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Schedule II - Valuation and Qualifying Accounts (Details) (Allowance for Doubtful Accounts, USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012		Dec. 31, 2011		Dec. 31, 2010
Allowance for Doubtful Accounts
Movement in Valuation Allowances and Reserves [Roll Forward]
Balance at Beginning of Period	$ 161		$ 118		$ 97
Additions to Bad Debt Expense or Deferred Tax Asset	325		62		39
Charged to Other Accounts	0	[1]	0	[1]	0	[1]
Deductions	(14)	[1],[2]	(19)	[1],[2]	(18)	[1],[2]
Balance at End of Period	$ 472		$ 161		$ 118

[1]

[2] Deductions represent the actual write-off of accounts receivable balances.

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Quarterly Financial Results (unaudited) (Tables)

12 Months Ended

Dec. 31, 2012

Quarterly Financial Information Disclosure [Abstract]

Schedule of Quarterly Financial Information

Three Months Ended:	Revenue		Cost of goods sold		Operating expenses		Net loss			Basic loss per share			Diluted loss per share
December 31, 2012 (a)	$	29,222	$	7,158	$	27,761	$	(6,518	)	$	(0.10	)	$	(0.10	)
September 30, 2012	26,696		6,444		27,185		(5,857		)	(0.10		)	(0.10		)
June 30, 2012	25,509		6,277		24,819		(6,696		)	(0.11		)	(0.11		)
March 31, 2012	24,519		5,403		22,790		(16,703		)	(0.29		)	(0.29		)
Three Months Ended:
December 31, 2011	$	23,392	$	5,394	$	21,262	$	(3,665	)	$	(0.06	)	$	(0.06	)
September 30, 2011	22,302		4,829		22,622		(6,603		)	(0.12		)	(0.12		)
June 30, 2011	19,175		4,150		20,202		(13,666		)	(0.24		)	(0.24		)
March 31, 2011	18,548		4,373		19,000		(4,795		)	(0.09		)	(0.09		)

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Commitments and Contingencies (Details) (USD $)	1 Months Ended	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010	Oct. 08, 2009 patent
Loss Contingencies [Line Items]
Number of Patent Infringements Alleged					2
Operating Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract]
2013	$ 655,000	$ 655,000
2014	474,000	474,000
2015 and thereafter	0	0
Total	1,129,000	1,129,000
Cash paid for legal settlement	5,000,000.0	16,000	24,000	51,000
Settlement cost		$ 5,000,000	$ 0	$ 0

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Subsequent Event

12 Months Ended

Dec. 31, 2012

Subsequent Events [Abstract]

Subsequent Event

Subsequent Event

The Company had been an “eligible member” of its former products-liability carrier, Medmarc Mutual Insurance Company (“Medmarc”). On January 3, 2013, Medmarc was acquired by another insurance company, ProAssurance Corporation. This transaction required Medmarc to first convert from a mutual insurance company to a stock insurance company (the “Demutualization”). This Demutualization resulted in a distribution of Medmarc's December 31, 2011 statutory capital and surplus to its “eligible members”.

Accordingly, the Company received a $1.3 million cash distribution in full in January 2013 as a result of this Demutualization, which will be included in the Company's Consolidated Statements of Operations and Comprehensive Income (Loss) for the three months ended March 31, 2013, within “other income (expense)”.

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Stock-Based Compensation (Tables)

12 Months Ended

Dec. 31, 2012

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Schedule of Employee Service Share-based Compensation, Allocation of Recognized Period Costs

Stock-based compensation expense included in cost of goods sold and operating expenses for years ended December 31, 2012, 2011, and 2010 was as follows:

	Year Ended December 31,
	2012		2011		2010
Cost of goods sold	$	597	$	209	$	188
Operating expenses:
Research and development	1,336		753		362
Clinical and regulatory affairs	320		113		15
Marketing and sales	1,558		1,097		919
General and administrative	2,641		1,740		1,168
Total operating expenses	$	5,855	$	3,703	$	2,464
Total	$	6,452	$	3,912	$	2,652

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions

The fair value of stock options granted was estimated at the date of grant using the Black-Scholes option-pricing model. The following assumptions were used to determine fair value for the stock awards granted in the applicable year:

	Year Ended December 31,
	2012	2011	2010
Average expected option life (in years) (a)	6.0	6.0	6.0
Volatility (b)	55.8%	56.6%	56.4%
Risk-free interest rate (c)	1.0%	2.0%	2.4%
Dividend Yield (d)	—%	—%	—%
Weighted-average grant-date fair value per stock option	$6.90	$4.55	$2.46

(a) Determined by the historical stock option exercise behavior of the Company's employees (maximum term is 10

years).

(b) Measured using weekly price observations for a period equal to stock options' expected term.

(c) Based upon the U.S. Treasury yields in effect at the end of the quarter that the options were granted (for a period equaling the stock options' expected term).

(d) The Company has never paid cash dividends on its common stock and does not expect to declare any cash dividends.

Schedule of Share-based Compensation, Stock Options, Activity

Stock option activity during the years ended December 31, 2012, and 2011 is as follows:

	Number of Stock Options	Weighted Average Exercise Price	Weighted- Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value
Outstanding — January 1, 2011	5,914,884	$3.91
Granted	1,264,333	8.38
Exercised	(1,393,794)	3.84		(a)	$7,246
Forfeited	(228,889)	5.29
Expired	—	—
Outstanding — December 31, 2011	5,556,534	$4.89
Granted	756,289	13.31
Exercised	(1,167,715)	4.28		(a)	$11,135
Forfeited	(188,378)	8.32
Expired	—	—
Outstanding — December 31, 2012	4,956,730	$6.21	6.9	(b)	$39,947
Vested and Expected to Vest — December 31, 2012	4,235,058	$5.87	6.7	(b)	$35,536
Vested — December 31, 2012	2,551,156	$4.35	5.7	(b)	$25,242

Schedule of Share-based Compensation, Shares Authorized under Stock Option Plans, by Exercise Price Range

The following table summarizes information regarding outstanding stock option grants as of December 31, 2012:

					Outstanding				Exercisable
Range of Exercise Prices					Granted Stock Options Outstanding	Weighted- Average Remaining Contractual Life (Years)	Weighted- Average Exercise Price		Granted Stock Options Exercisable	Weighted- Average Exercise Price
$	1.64	—	$	2.25	237,196	5.7	$	2.07	232,301	$	2.07
$	2.26	—	$	2.62	239,228	5.4	2.55		238,707	2.55
$	2.67	—	$	2.69	442,065	5.4	2.67		442,065	2.67
$	2.79	—	$	3.02	57,658	4.1	2.89		57,033	2.89
$	3.35	—	$	3.45	154,821	4.4	3.42		146,281	3.42
$	3.46	—	$	3.90	378,248	4.3	3.55		234,333	3.60
$	3.92	—	$	4.31	302,717	6.0	4.14		149,193	4.10
$	4.32	—	$	4.51	825,479	7.0	4.40		391,046	4.37
$	4.63	—	$	5.49	284,561	5.7	5.26		121,597	5.03
$	5.72	—	$	7.12	403,986	5.8	6.31		166,458	6.23
$	7.14	—	$	8.26	632,754	8.3	8.02		268,550	8.12
$	8.57	—	$	11.68	417,570	8.8	10.40		78,254	10.38
$	11.97	—	$	13.93	307,693	9.5	13.32		18,150	13.53
$	14.01	—	$	15.51	272,754	9.4	14.65		7,188	14.83
$	1.64	—	$	15.51	4,956,730	6.9	$	6.21	2,551,156	$	4.35

Schedule of Share-based Compensation, Restricted Stock and Restricted Stock Units Activity

The following table summarizes activity and related information for the Company's restricted stock awards:

	Number of Restricted Stock Awards		Weighted Average Fair Value per Share at Grant Date		Grant Date Fair Value		Vest Date Fair Value*
Unvested as of December 31, 2009	685,000
Granted	518,045		$	5.95	$	3,082
Cancelled	(35,965	)
Vested	(575,625	)
Unvested as of December 31, 2010	591,455
Granted	34,000		$	6.19	$	210
Cancelled	(6,303	)
Vested	(35,851	)
Unvested as of December 31, 2011	583,301
Granted	475,253		$	12.67	$	6,022
Canceled	(43,598	)
Vested	(70,111	)					$	1,002
Unvested as of December 31, 2012	944,845

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Credit Facilities (Details) (USD $)	3 Months Ended	5 Months Ended	12 Months Ended
	Mar. 31, 2012	May 19, 2012	Dec. 31, 2012	Feb. 20, 2012 Revolving Credit Facility Wells Fargo Bank
Line of Credit Facility [Line Items]
Line of credit facility, maximum borrowing capacity				$ 20,000,000.0
Debt instrument, basis spread on variable rate			1.00%
Line of credit facility, unused capacity, commitment fee percentage		0.20%
Debt covenant, minimum current ratio			1.5
Debt covenant, maximum quarterly operating loss, quarter one	6,500,000
Debt covenant, maximum quarterly operating loss, quarter two			11,000,000
Debt covenant, maximum quarterly operating loss, quarter three			13,000,000
Debt covenant, maximum quarterly operating loss, quarter four			13,000,000
Debt covenant, maximum capital expenditures			$ 3,000,000

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Balance Sheet Account Detail (Amortization) (Details) (USD $) In Thousands, unless otherwise specified	Dec. 31, 2012
Balance Sheet Related Disclosures [Abstract]
2013	$ 268
2014	392
2015	892
2016	1,541
Finite-Lived Intangible Assets, Amortization Expense, Year Five	2,011
Finite-Lived Intangible Assets, Amortization Expense, after Year Five	$ 35,544

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Condensed Consolidated Statements of Cash Flows (USD $)	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Cash flows from operating activities:
Net loss before income tax	$ (35,774,000)	$ (28,730,000)	$ 10,653,000
Adjustments to reconcile net loss to net cash used in operating activities:
Bad debt expense	325,000	62,000	39,000
Depreciation and amortization	2,183,000	2,729,000	2,444,000
Stock-based compensation	6,471,000	4,136,000	2,546,000
Change in fair value of contingent consideration related to acquisition	13,700,000	10,500,000	0
Gain on sale of equipment	0	(141,000)	0
Income Tax Expense (Benefit)	531,000	(86,000)	(15,067,000)
Changes in operating assets and liabilities:
Accounts receivable	(8,319,000)	(3,392,000)	(3,909,000)
Inventories	12,000	(9,801,000)	(2,964,000)
Prepaid expenses and other current assets	(408,000)	(153,000)	(672,000)
Accounts payable	199,000	700,000	2,098,000
Accrued payroll	1,255,000	1,597,000	498,000
Accrued expenses and other current liabilities	1,304,000	189,000	243,000
Deferred rent	(8,000)	8,000	(22,000)
Net cash used in operating activities	(18,529,000)	(22,382,000)	(4,113,000)
Cash flows from investing activities:
Purchases of property and equipment	(2,238,000)	(3,033,000)	(861,000)
Purchases of patent license	(100,000)	0	0
Cash acquired in Nellix acquisition	0	0	698,000
Business acquisition	(1,156,000)	0	0
Net cash used in investing activities	(3,494,000)	(3,033,000)	(163,000)
Cash flows from financing activities:
Proceeds from sale of common stock under secondary offering, net of expenses	40,069,000	0	14,990,000
Proceeds from sale of common stock under employee stock purchase plan	2,369,000	1,965,000	1,118,000
Proceeds from exercise of stock options	4,992,000	5,324,000	2,347,000
Repayments of long-term debt	0	0	(79,000)
Net cash provided by financing activities	47,430,000	7,289,000	18,376,000
Effect of exchange rate changes on cash and cash equivalents	(324,000)	(30,000)	26,000
Net decrease in cash and cash equivalents	25,083,000	(18,156,000)	14,126,000
Cash and cash equivalents, beginning of period	20,035,000	38,191,000	24,065,000
Cash and cash equivalents, end of period	45,118,000	20,035,000	38,191,000
Supplemental disclosure of cash flow information:
Cash paid for interest	10,000	32,000	16,000
Cash paid for legal settlement	16,000	24,000	51,000
Non-cash investing and financing activities:
Shares issued for acquisition	$ 0	$ 0	$ 19,388,000

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Stock-Based Compensation

12 Months Ended

Dec. 31, 2012

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-Based Compensation

Stock-Based Compensation

2006 Stock Incentive Plan

The Company has one active stockholder-approved stock-based compensation plan, the 2006 Stock Incentive Plan (the "2006 Plan"), which replaced the Company's former stockholder-approved plans. Incentive stock options, non-qualified options, restricted stock awards, restricted stock units, and stock appreciation rights may be granted under the 2006 Plan.

The maximum number of shares of the Company's common stock available for issuance under the 2006 Plan is 8.5 million shares. As of December 31, 2012, 0.3 million shares were available for grant. It is the Company's policy that before stock is issued through the exercise of stock options, the Company must first receive all required cash payment for such shares.

Stock-based awards are governed by agreements between the Company and the recipients. Incentive stock options and nonqualified stock options may be granted under the 2006 Plan at an exercise price of not less than 100% of the closing fair market value of the Company's common stock on the respective date of grant. The grant date is generally the date the award is approved by the Compensation Committee of the Board of Directors, though for aggregate awards of 50,000 or less in each quarter, the grant date is the date the award is approved by the Company's Chief Executive Officer.

The Company's standard stock-based award vests 25% on the first anniversary of the date of grant, or for new hires, the first anniversary of their initial date of employment with the Company. Awards vest monthly thereafter on a straight-line basis over three years. Stock options must be exercised, if at all, no later than 10 years from the date of grant. Upon termination of employment with the Company, vested stock options may be exercised within 90 days from the last date of employment. In the event of an optionee's death, disability, or retirement, the exercise period is 365 days from the last date of employment.

Employee Stock Purchase Plan

Under the terms of the Company's 2006 Employee Stock Purchase Plan (the "ESPP"), eligible employees can purchase common stock through payroll deductions. The purchase price is equal to the closing price of the Company's common stock on the first or last day of the offering period (whichever is less), minus a 15% discount.  The Company uses the Black-Scholes option-pricing model, in combination with the discounted employee price, in determining the value of ESPP expense to be recognized during each offering period.

The table below summarizes the stock-based compensation recognized, common stock shares purchased by Company employees, and the average purchase price per share as part of the ESPP program during the years ended December 31, 2012, 2011, and 2010.

	Year Ended December 31,
	2012		2011		2010
Stock-based compensation expense	$	759	$	733	$	468
Common stock shares purchased by Company employees	224		287		293
Average purchase price per share	$	10.59	$	6.84	$	3.81

Stock Options and Restricted Stock

The Company values stock-based awards, including stock options and restricted stock, as of the date of grant (and is marked-to-market at each reporting period for unvested grants issued to consultants).

The Company recognizes stock-based compensation expense (net of estimated forfeitures) using the straight-line method over the requisite or implicit service period, as applicable. Forfeitures of employee awards are estimated at the time of grant and the forfeiture assumption is periodically adjusted for actual employee exercise behavior.

Stock-Based Compensation Expense Summary

The Company classifies related compensation expense in the accompanying Consolidated Statements of Operations and Comprehensive Income (Loss), based on the Company department to which the recipient belongs. Stock-based compensation expense included in cost of goods sold and operating expenses for years ended December 31, 2012, 2011, and 2010 was as follows:

	Year Ended December 31,
	2012		2011		2010
Cost of goods sold	$	597	$	209	$	188
Operating expenses:
Research and development	1,336		753		362
Clinical and regulatory affairs	320		113		15
Marketing and sales	1,558		1,097		919
General and administrative	2,641		1,740		1,168
Total operating expenses	$	5,855	$	3,703	$	2,464
Total	$	6,452	$	3,912	$	2,652

In addition, the Company had $0.2 million, $0.2 million, and $43,000 of stock-based compensation capitalized in inventory as of December 31, 2012, 2011, and 2010, respectively.

Employee stock-based compensation expense for the years ended December 31, 2012, 2011, and 2010 was recognized (reduced for estimated forfeitures) on a straight-line basis over the vesting period. Applicable GAAP requires forfeitures to be estimated at the time of grant and prospectively revised if actual forfeitures differ from those estimates. The Company estimates forfeitures of stock options using the historical exercise behavior of its employees. For purposes of this estimate, the Company has applied an estimated forfeiture rate of 30% for the years ended December 31, 2012, 2011, and 2010.

Valuation Assumptions

The grant-date fair value per share for restricted stock awards was based upon the closing market price of the Company’s common stock on the award grant-date.

The fair value of stock options granted was estimated at the date of grant using the Black-Scholes option-pricing model. The following assumptions were used to determine fair value for the stock awards granted in the applicable year:

	Year Ended December 31,
	2012	2011	2010
Average expected option life (in years) (a)	6.0	6.0	6.0
Volatility (b)	55.8%	56.6%	56.4%
Risk-free interest rate (c)	1.0%	2.0%	2.4%
Dividend Yield (d)	—%	—%	—%
Weighted-average grant-date fair value per stock option	$6.90	$4.55	$2.46

(a) Determined by the historical stock option exercise behavior of the Company's employees (maximum term is 10

years).

(b) Measured using weekly price observations for a period equal to stock options' expected term.

(c) Based upon the U.S. Treasury yields in effect at the end of the quarter that the options were granted (for a period equaling the stock options' expected term).

(d) The Company has never paid cash dividends on its common stock and does not expect to declare any cash dividends.

Stock Option Activity

Stock option activity during the years ended December 31, 2012, and 2011 is as follows:

	Number of Stock Options	Weighted Average Exercise Price	Weighted- Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value
Outstanding — January 1, 2011	5,914,884	$3.91
Granted	1,264,333	8.38
Exercised	(1,393,794)	3.84		(a)	$7,246
Forfeited	(228,889)	5.29
Expired	—	—
Outstanding — December 31, 2011	5,556,534	$4.89
Granted	756,289	13.31
Exercised	(1,167,715)	4.28		(a)	$11,135
Forfeited	(188,378)	8.32
Expired	—	—
Outstanding — December 31, 2012	4,956,730	$6.21	6.9	(b)	$39,947
Vested and Expected to Vest — December 31, 2012	4,235,058	$5.87	6.7	(b)	$35,536
Vested — December 31, 2012	2,551,156	$4.35	5.7	(b)	$25,242

(a) Represents the total difference between the Company's stock price at the time of exercise and the stock option exercise price, multiplied by the number of options exercised.

(b) Represents the total difference between the Company's closing stock price on the last trading day of 2012 and the stock option exercise price, multiplied by the number of in-the-money options as of December 31, 2012. The amount of intrinsic value will change based on the fair market value of the Company's stock.

As of December 31, 2012 there was $3.3 million of total unrecognized compensation expense related to granted, but unvested stock options, which are expected to be recognized over a weighted average period of 2.8 years.

The following table summarizes information regarding outstanding stock option grants as of December 31, 2012:

					Outstanding				Exercisable
Range of Exercise Prices					Granted Stock Options Outstanding	Weighted- Average Remaining Contractual Life (Years)	Weighted- Average Exercise Price		Granted Stock Options Exercisable	Weighted- Average Exercise Price
$	1.64	—	$	2.25	237,196	5.7	$	2.07	232,301	$	2.07
$	2.26	—	$	2.62	239,228	5.4	2.55		238,707	2.55
$	2.67	—	$	2.69	442,065	5.4	2.67		442,065	2.67
$	2.79	—	$	3.02	57,658	4.1	2.89		57,033	2.89
$	3.35	—	$	3.45	154,821	4.4	3.42		146,281	3.42
$	3.46	—	$	3.90	378,248	4.3	3.55		234,333	3.60
$	3.92	—	$	4.31	302,717	6.0	4.14		149,193	4.10
$	4.32	—	$	4.51	825,479	7.0	4.40		391,046	4.37
$	4.63	—	$	5.49	284,561	5.7	5.26		121,597	5.03
$	5.72	—	$	7.12	403,986	5.8	6.31		166,458	6.23
$	7.14	—	$	8.26	632,754	8.3	8.02		268,550	8.12
$	8.57	—	$	11.68	417,570	8.8	10.40		78,254	10.38
$	11.97	—	$	13.93	307,693	9.5	13.32		18,150	13.53
$	14.01	—	$	15.51	272,754	9.4	14.65		7,188	14.83
$	1.64	—	$	15.51	4,956,730	6.9	$	6.21	2,551,156	$	4.35

Non-employees - Stock Options

During the years ended December 31, 2012, 2011, and 2010, $0, $0, and $(7,000), respectively, was recorded as compensation expense for the change in the fair value of unvested non-employee option grants. During the years ended December 31, 2012 and 2011, the Company did not grant any stock options to non-employees.

As of December 31, 2012, 2011, and 2010, a total of 40,000, 40,000, and 68,750 non-employee stock options, respectively, were outstanding and fully vested.

Restricted Stock Award Activity

The following table summarizes activity and related information for the Company's restricted stock awards:

	Number of Restricted Stock Awards		Weighted Average Fair Value per Share at Grant Date		Grant Date Fair Value		Vest Date Fair Value*
Unvested as of December 31, 2009	685,000
Granted	518,045		$	5.95	$	3,082
Cancelled	(35,965	)
Vested	(575,625	)
Unvested as of December 31, 2010	591,455
Granted	34,000		$	6.19	$	210
Cancelled	(6,303	)
Vested	(35,851	)
Unvested as of December 31, 2011	583,301
Granted	475,253		$	12.67	$	6,022
Canceled	(43,598	)
Vested	(70,111	)					$	1,002
Unvested as of December 31, 2012	944,845

*Represents the Company's stock price on the vesting date multiplied by the number of vested shares.

The Company recognized restricted stock expense of $2.8 million, $0.9 million, and $0.4 million for the years ended December 31, 2012, 2011, and 2010, respectively. As of December 31, 2012, there was $6.4 million of unrecorded expense related to issued restricted stock that will be recognized over an estimated weighted average period of 2.2 years.

Non-employee Restricted Stock

During the years ended December 31, 2012, 2011, and 2010, $0.9 million, $0.4 million, and $43,000, respectively, was recorded as compensation expense for the change in the fair value of unvested non-employee restricted stock. During the years ended December 31, 2012 and 2011, the Company did not grant any restricted stock to non-employees.

As of December 31, 2012, 2011, and 2010, a total of 135,000, 169,000, and 135,000 shares of unvested restricted stock, respectively, issued to non-employees were outstanding.

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Income Tax Expense (Unrecognized Tax Benefits - Roll Forward) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012
Reconciliation of Unrecognized Tax Benefits, Excluding Amounts Pertaining to Examined Tax Returns [Roll Forward]
Balance at January 1, 2012	$ 0
Additions for tax positions related to prior periods	122
Reductions	0
Lapse of statute of limitations	0
Balance at December 31, 2012	$ 122

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Net Income (Loss) Per Share (Tables)

12 Months Ended

Dec. 31, 2012

Earnings Per Share [Abstract]

Schedule of Weighted Average Number of Shares

Net income (loss) per share was computed by dividing net loss by the weighted average number of common shares outstanding for the years ended December 31, 2012, 2011, and 2010:

	Year Ended December 31,
	2012			2011			2010
Net income (loss)	$	(35,774	)	$	(28,730	)	$	10,653
Weighted average shares - basic	59,811			56,592			48,902
Net income (loss) per share - basic	$	(0.60	)	$	(0.51	)	$	0.22
Weighted average shares - diluted	59,811			56,592			50,544
Net income (loss) per share - diluted	$	(0.60	)	$	(0.51	)	$	0.21

Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share

The following outstanding Company securities were excluded from the above calculations of net loss per share because their impact would have been anti-dilutive due to the net losses during the years ended December 31, 2012 and 2011:

	Year Ended December 31,
	2012	2011	2010
Common stock options	2,698	3,127	—
Restricted stock awards	405	640	—
Restricted stock units	492	—	—
Total	3,595	3,767	—

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Balance Sheet Account Detail (Property, Plant and Equipment) (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Property, Plant and Equipment [Line Items]
Property and equipment, at cost	$ 12,896	$ 11,055
Accumulated depreciation	(7,912)	(6,601)
Property and equipment, net	4,984	4,454
Depreciation expense	1,500	1,300	900
Production equipment, molds, and office furniture
Property, Plant and Equipment [Line Items]
Property and equipment, at cost	7,256	6,440
Computer hardware and software
Property, Plant and Equipment [Line Items]
Property and equipment, at cost	2,265	1,023
Leasehold improvements
Property, Plant and Equipment [Line Items]
Property and equipment, at cost	2,819	2,459
Construction in progress (software and related implementation, production equipment, and leasehold improvements)
Property, Plant and Equipment [Line Items]
Property and equipment, at cost	$ 556	$ 1,133

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Quarterly Financial Results (unaudited)

12 Months Ended

Dec. 31, 2012

Quarterly Financial Information Disclosure [Abstract]

Quarterly Financial Information

Quarterly Results of Operations (Unaudited)

Three Months Ended:	Revenue		Cost of goods sold		Operating expenses		Net loss			Basic loss per share			Diluted loss per share
December 31, 2012 (a)	$	29,222	$	7,158	$	27,761	$	(6,518	)	$	(0.10	)	$	(0.10	)
September 30, 2012	26,696		6,444		27,185		(5,857		)	(0.10		)	(0.10		)
June 30, 2012	25,509		6,277		24,819		(6,696		)	(0.11		)	(0.11		)
March 31, 2012	24,519		5,403		22,790		(16,703		)	(0.29		)	(0.29		)
Three Months Ended:
December 31, 2011	$	23,392	$	5,394	$	21,262	$	(3,665	)	$	(0.06	)	$	(0.06	)
September 30, 2011	22,302		4,829		22,622		(6,603		)	(0.12		)	(0.12		)
June 30, 2011	19,175		4,150		20,202		(13,666		)	(0.24		)	(0.24		)
March 31, 2011	18,548		4,373		19,000		(4,795		)	(0.09		)	(0.09		)

(a) Includes $0.6 million of operating expenses which was recorded to the Consolidated Statements of Operations for the three months ended December 31, 2012. This amount represents a cumulative correction of prior period errors which relate to the recognition of stock-based compensation, though is not material to any previously reported prior period.