Special Note Regarding Forward-Looking Statements



In addition to historical information, this Quarterly Report on Form 10-Q
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
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 "anticipates," "believes," "can," "continue," "could," "estimates,"
"expects," "intends," "may," "plans," "potential," "predicts," "projects,"
"should" or "will" or the negative of these terms or other comparable
terminology, 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. Although we do not
make forward-looking statements unless we believe we have a reasonable basis for
doing so, we cannot guarantee their accuracy. These forward-looking statements
are subject to risks, uncertainties and other factors that could cause actual
results and the timing of certain events to differ materially from future
results expressed or implied by such forward-looking statements. Actual results
could differ materially from those projected in forward-looking statements as a
result of the following factors, among others:

• our ability to operate under the Bankruptcy Court's protection for a long

period of time;

• our ability to successfully implement a plan of reorganization;

• claims not discharged in the Chapter 11 Cases;




•      the ability for our management to focus on our operations during the
       Chapter 11 Cases;

• the volatility of our common stock during the Chapter 11 Cases;

• continued market acceptance, use and endorsement of our products;

• quality control problems with our products;

• consolidation in the health care industry;

• the success of our clinical trials relating to products under development;




•      our ability to grow and maintain strong relationships with certain key
       physicians;

• continued growth in the number of patients qualifying for treatment of


       abdominal aortic aneurysms ("AAA") through our products;


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


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


•      our ability to effectively develop new or complementary products and
       technologies;

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

• our ability to grow product revenues;

• changes to our international operations including currency exchange rate


       fluctuations;


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

• our ability to develop and retain a direct sales force in the United


       States and select European countries;


•      the nature of and any changes to domestic and foreign legislative,

regulatory and other legal requirements that apply to us, our products,


       our suppliers and our competitors;


•      the timing of and our ability to obtain and maintain any required
       regulatory clearances and approvals;

• our ability to protect our intellectual property rights and proprietary

technologies;

• our ability to operate our business without infringing the intellectual

property rights and proprietary technology of third parties;

• product liability claims;

• pending and future litigation;

• reputational damage to our products caused by the use, misuse or off-label

use of our products or government or voluntary recalls of our products;

• our utilization of single source suppliers for specialized components of

our product lines;

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




•      our ability to make future acquisitions and successfully integrate any
       such future-acquired businesses;


•      our ability to maintain adequate liquidity to fund our operational needs
       and research and developments expenses;

• our ability to identify and manage risks; and

• general macroeconomic and world-wide business conditions.


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Our actual results, performance or achievements may differ materially from any
future results, performance or achievements expressed or implied from such
forward-looking statements. Important factors that could cause our actual
results, performance or achievements to differ materially from our expectations
are disclosed in our Annual Report on Form 10-K for the fiscal year ended
December 31, 2019, filed with the U.S. Securities and Exchange Commission
("SEC") on March 11, 2020, and in this Quarterly Report on Form 10-Q for the
fiscal period ended June 30, 2020, including but not limited to those factors
discussed in "Management's Discussion and Analysis of Financial Condition and
Results of Operations," "Risk Factors," "Consolidated Financial Statements" and
"Notes to Consolidated Financial Statements." All subsequent written and oral
forward-looking statements attributable to us or by persons acting on our behalf
are expressly qualified in their entirety by these cautionary statements.

Our forward-looking statements speak only as of the date each such statement is
made. We expressly disclaim any intention or obligation to update or revise any
financial projections or any forward-looking statements after the date hereof to
conform such statements to actual results or to changes in our opinions or
expectations, except as required by applicable law or the rules and regulations
of the SEC.

Overview
Our Business
We develop, manufacture, market and sell innovative medical devices for the
treatment of aortic disorders. Our products are intended for the minimally
invasive endovascular treatment of AAA. Our AAA products are built on one of two
platforms:
•Traditional minimally-invasive endovascular aneurysm repair ("EVAR"); or
•Endovascular aneurysm sealing ("EVAS"), our innovative solution for sealing the
aneurysm sac while maintaining blood flow.
Our current EVAR products include the AFX® Endovascular AAA System ("AFX
System"), the VELA® Proximal Endograft ("VELA"), and the Ovation® Abdominal
Stent Graft System ("Ovation System"). Our current EVAS product is the
Nellix® Endovascular Aneurysm Sealing System ("Nellix EVAS System"). We sell our
products through a direct sales force in the United States and internationally
through a combination of direct sales and a network of third party distributors
and agents.
See Item 1 of the Annual Report, entitled "Business," for a discussion of:
•Market Overview and Opportunity
•Our Products
•Product Developments and Clinical Trials
•Manufacturing and Supply
•Marketing and Sales
•Competition
When used in this Quarterly Report on Form 10-Q, "we," "our," "us" or
"Endologix," refer to Endologix, Inc. and our consolidated subsidiaries, unless
otherwise expressly stated or the context otherwise requires. Endologix®, AFX®,
Duraply®, VELA®, IntuiTrak®, ActiveSeal®, Nellix®, Ovation®, Ovation Prime®,
Ovation Alto®, and CustomSeal® are registered trademarks of Endologix, Inc. or
its subsidiaries.
The Nellix® EndoVascular Aneurysm Sealing System has a CE Mark and is an
investigational device in the United States. The Ovation Alto® System has
obtained FDA approval in the United States and CE Mark approval in the EU.

Bankruptcy Filing and Going Concern



As a result of the commencement of the Chapter 11 Cases on July 5, 2020, we are
operating as a debtor-in-possession pursuant to the authority granted under
Chapter 11 of the Bankruptcy Code. Pursuant to the Chapter 11 Cases, we intend
to restructure our balance sheet and reduce overall indebtedness. Additionally,
as a debtor-in-possession, certain of our activities are subject to review and
approval by the Bankruptcy Court, including, among other things, the incurrence
of secured indebtedness, material asset dispositions, and other transactions
outside the ordinary course of business. There can be no guarantee we will
successfully consummate a sale of our assets or agree upon a viable plan of
reorganization with our various stakeholders, or that any such agreement will be
reached in the time frame that is acceptable to the Bankruptcy Court.


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We have concluded that our financial condition and projected operating results,
defaults under our debt agreements, and the risks and uncertainties surrounding
our Chapter 11 Cases raise substantial doubt as to our ability to continue as a
going concern.

See Note 3 for further discussion.

Debtor-In-Possession Financing



To ensure sufficient liquidity throughout the Chapter 11 Cases, we obtained a
$130.8 million DIP Credit Agreement (See Note 3). This DIP Credit Agreement,
coupled with our normal operating cash flows, is providing liquidity for the
Company to operate as usual and fulfill ongoing commitments to stakeholders.

Delisting of our Common Stock from the NASDAQ Stock Market



Our Common Stock was previously listed on the NASDAQ Global Market under the
symbol ELGX. On July 16, 2020, the NASDAQ Stock Market suspended the trading of
our Common Stock following our filing the Chapter 11 Cases, and our Common Stock
has been quoted "over-the-counter" on the OTC Pink Market under the symbol
ELGXQ.

Impact of COVID-19 Pandemic



During the first quarter of 2020, we were subject to challenging social and
economic conditions created as a result of the novel strain of coronavirus,
SARS-CoV-2 ("COVID-19"). The resulting impact of the COVID-19 outbreak created
various financial impacts to our operations as a result of taking necessary
precautions for essential personnel to operate safely both in person as well as
remotely. Cost incurred include items like incremental payroll costs, consulting
support, IT infrastructure and facilities related costs.

The extent of the impact of the COVID-19 outbreak on our operational and
financial performance will depend on certain developments, including the
duration and spread of the outbreak, impact on our customers and our sales
cycles, employee or industry events, and effect on our vendors, all of which are
uncertain and cannot be predicted. To date, we have experienced a number of
deferred or cancelled procedures as a result of the strain put on the healthcare
system. There can be no assurances these procedures will be rescheduled when
healthcare systems normalize. We may experience constrained supply or curtailed
customer demand that could materially adversely impact our business, results of
operations and overall financial performance in future periods. Specifically, we
may experience impact from changes in how we and companies worldwide conduct
business due to the COVID-19 pandemic, including but not limited to restrictions
on travel and in-person meetings, production delays, closures of manufacturing
facilities, warehouses and logistics supply and distribution chains and staffing
shortages, decreases or delays in customer demand and spending, difficulties or
changes to our sales process and customer support. As of the filing date of this
Form 10-Q, the extent to which COVID-19 may impact our financial condition or
results of operations or guidance is uncertain. The effect of the COVID-19
pandemic will not be fully reflected in our results of operations and overall
financial performance until future periods. See Risk Factors for further
discussion of the possible impact of the COVID-19 pandemic on our business.

Highlights of Our Product Development Initiatives, Clinical Trials and Regulatory Approvals

Overview


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 key to our future growth and success. Historically,
we have focused on developing our EVAR and EVAS products to treat infrarenal
AAA, including initial development of products to treat complex AAA anatomies.
However, we expect to devote more resources in the future to developing,
enhancing and obtaining expanded indications for our current EVAR and EVAS
products and to develop new product indications to treat more complex anatomies.
We have the following trials in process to build independent and collective
clinical and economic evidence of clinical safety and effectiveness:

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Nellix EVAS System
Our Nellix EVAS System is designed to seal the aneurysm and provide blood flow
to the legs through two blood flow lumens. The Nellix EVAS System consists: of
(i) bilateral covered stents with endobags; (ii) a biocompatible polymer
injected into the endobags to seal the aneurysm; and (iii) a delivery system and
associated accessories. The Nellix EVAS System is intended to seal the entire
aneurysm sac effectively excluding the aneurysm and reducing the likelihood of
future aneurysm rupture. We have the following trials in process to build
independent and collective clinical and economic evidence of clinical safety and
effectiveness:
•EVAS FORWARD Investigational Device Exemption ("IDE"). We conducted this
pivotal clinical trial to evaluate the safety and effectiveness of the Nellix
EVAS System. This study is a prospective single arm registry which enrolled 179
patients at 29 centers in the United States and Europe. In November 2014, we
completed enrollment in the study, and we submitted the one year results to the
United States Food and Drug Administration ("FDA") in March 2016. In May 2016,
we announced the results of the one-year clinical data from the EVAS FORWARD IDE
study that demonstrate that the Nellix EVAS System met the study primary
endpoints for major adverse events at 30 days (safety) and treatment success at
one year (effectiveness). Two-year imaging revealed a signal of migration,
leading to a field safety notification issued in October 2016 and a dedicated
root cause analysis, resulting in refinements to the IFU. Following the
implementation of the refined IFU, the Nellix EVAS system is applicable to treat
an estimated 40% of AAA patients with a traditional aneurysm.
Subsequently, the two-year results from the trial were published in the Journal
of Vascular Surgery in March 2018. This data was previously announced in June
2017 at the Society of Vascular Surgery Vascular Annual Meeting ("VAM"). Key
highlights from the Nellix United States IDE trial two-year clinical data are
included below:
•Freedom from all endoleaks (95.1%), rupture (99.4%) and all-cause mortality
(93.8%) among all patients.
•Highest freedom of type II endoleaks, ever reported at two years (96.6%) among
all patients.
•When applying the refined IFUs for Nellix, patients at the two-year follow up
demonstrated 95.9% freedom from Type IA endoleak, migration >10mm, and sac
growth.
•EVAS2 IDE. In May 2017, we announced the decision to seek FDA approval of the
Nellix EVAS System by conducting a confirmatory clinical study with the refined
IFU and the Company's next generation Nellix device design, the "Nellix 3.5 EVAS
System." The Nellix 3.5 EVAS System incorporates design improvements to enhance
ease of use and offers physicians more sizes to treat more patients with AAA. In
October 2017, we announced our receipt of IDE approval from the FDA to commence
a confirmatory clinical study to evaluate the safety and effectiveness of the
Nellix 3.5 EVAS System for the endovascular treatment of infrarenal AAA. EVAS2
will prospectively evaluate the refined IFU and the Nellix 3.5 EVAS System. The
study is approved to enroll up to 105 primary patients, with one-year follow-up
data required for the pre-market approval ("PMA") application. We commenced
EVAS2 patient enrollment in March 2018 and completed enrollment in May 2020.
•EVAS FORWARD Global Registry. This registry is designed to provide real world
clinical results to demonstrate the effectiveness and applicability of the
Nellix EVAS System. The first phase of the registry included 300 patients
enrolled in up to 30 international centers. The first patient in the registry
was treated in October 2013, and in September 2014, we announced completion of
patient enrollment in the EVAS FORWARD Global Registry. In November 2016, we
announced positive two-year results on 300 patients from the EVAS FORWARD Global
Registry at the Annual Symposium on Vascular and Endovascular Issues (the "VEITH
Symposium"). The following outcomes were presented at the VEITH Symposium:
•37% of patients having complex anatomies;
•98.1% freedom from any persistent endoleaks at latest follow-up;
•No secondary interventions for Type II endoleaks;
•97.4% freedom from aneurysm-related mortality; and
•98.5% freedom from cardiovascular mortality.
In 2017, we commenced the EVAS FORWARD Global Registry 2, a post market
evaluation of the Nellix 3.5 EVAS System.
•ASCEND Registry. In April 2016, we announced the first data presentation with
one-year outcomes from the ASCEND Registry, a physician-initiated registry of
the Nellix EVAS System used with aortic branch stent grafts for the treatment of
patients with complex AAAs. The results of the study were formally published in
the peer-reviewed Journal of Endovascular Therapy in December 2017.
In September 2017, we announced CE Mark approval for the Nellix EVAS System with
the refined IFU. The Nellix EVAS System is being studied in the United States
under an IDE. Following a thorough review of supporting clinical data, our
Notified

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Body, together with an independent clinical reviewer, determined that the Nellix EVAS System, with the refined IFU, met the applicable safety and clinical performance requirements.



In April 2018, we announced the results of a study, which was presented by Marc
Schermerhorn, M.D., Chief of Vascular Surgery at Beth Israel Deaconess Medical
Center, at the Late-Breaking Aortic Trials Session during the Charing Cross 40th
International Symposium. The results of the study were also formally published
in the Annals of Vascular Surgery in October 2019. This retrospective,
propensity-weighted study compared long-term survival for the Nellix EVAS System
with traditional EVAR. The study reported significantly higher three-year
survival for EVAS patients as compared to EVAR patients. Those patients with
larger aneurysms (greater than 5.5 cm in diameter) treated with EVAS had half
the mortality at three years as compared to those treated with traditional EVAR
systems. The retrospective study included 333 EVAS patients from the original
Nellix United States IDE Trial and 15,431 patients from the Society for Vascular
Surgery Vascular Quality Initiative, all of whom were treated between 2014 and
2016. The patients were propensity weighted for AAA size, patient demographics,
and cardiovascular risk factors. The primary outcome was overall survival, with
a secondary analysis of overall survival stratified by aneurysm size.
In January 2019, we announced that in order to ensure optimal outcomes for
patients, the Nellix EVAS System will, for the foreseeable future, only be
available for use at approved centers outside of the United States in a clinical
investigation setting with pre-screened patients that adhere to the current
anatomical indications for use. All cases will be pre-screened by a physician
panel to ensure adherence to protocol and use in accordance with current product
indications. Compassionate use requests will be reviewed in accordance with the
process established by us and associated national competent authorities. The
existing inventory has been voluntarily recalled.
In January 2019, we announced that the CE Mark for the Nellix EVAS System had
been suspended by our Notified Body following a voluntary recall and field
safety notification issued by us on January 4, 2019. Suspension of the CE Mark
means that we may not affix the CE Mark and sell the Nellix EVAS System in the
European Union ("EU") during the term of the suspension.
In June 2019, we announced that the CE Mark for the Nellix EVAS System had been
reinstated by GMED, the EU Notified Body for the Nellix EVAS System. The
reinstatement followed an assessment of clinical evidence.
In August 2019, we announced that we have received IDE approval from the FDA to
commence a new pivotal study to evaluate the safety and effectiveness of the
Nellix Chimney EndoVascular Aneurysm Sealing System ("ChEVAS") for the
endovascular treatment of complex AAA. The ChEVAS system is an endovascular AAA
therapy designed to combine the Nellix 3.5 endograft with parallel visceral
stents to enable treatment of patients with juxta-renal, para-renal, and
suprarenal AAA. The application of EVAS for patients with complex aneurysms is
expected to offer innovative new technology to a group of patients that are
underserved by the current standard of care.

AFX System and VELA



The AFX System, which is comprised of AFX and AFX2 (discussed in further detail
below), consists of: (i) a cobalt chromium alloy stent covered by expanded
polytetrafluoroethylene (commonly referred to as ePTFE) graft material; and
(ii) accompanying delivery systems. Once fixed in its proper position on the
abdominal aortic bifurcation, the AFX System 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 2014, we launched a new proximal extension in the United States, VELA,
designed to be used in conjunction with our AFX bifurcated device. VELA features
a circumferential graft line marker and controlled delivery system that enable
predictable deployment and final positional adjustments. We began a commercial
introduction of VELA in Europe in January 2015.
In September 2014, we announced a new clinical study called Looking at EVAR
Outcomes by Primary Analysis of Randomized Data ("LEOPARD"). This study was
designed to compare outcomes of the AFX System versus other commercially
available EVAR devices. We designed the LEOPARD study to randomize and enroll at
least 400 patients at up to 80 leading centers throughout the United States and
commenced enrollment in the first quarter of 2015. The centers were a mix of our
current and new customers, with each investigator selecting one competitive
device to randomize against the AFX System. The LEOPARD study is being led by an
independent steering committee of leading physicians who are responsible for
presenting the results over the 5-year follow-up period.
Positive results from LEOPARD were presented at the VEITH Symposium in November
2019. Based on those who completed follow-up, the one-year freedom from Aneurysm
Related Complications ("ARC") shows that overall the AFX System has a comparable
performance to other devices. Analysis of individual clinical outcomes suggests
that different EVAR approaches may have advantages in different patient
populations. The AFX System remains the only device that preserves the patient's
aortic bifurcation.

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In December 2015, we announced that the AFX System for the treatment of AAA
received Shonin approval from the Japanese Ministry of Health, Labor and
Welfare ("MHLW").
In February 2016, we announced the completion of the first United States
commercial implant of AFX2, which reduces procedure steps for the delivery and
deployment of the bifurcated endograft. AFX2 also facilitates peripheral EVAR,
("PEVAR"), by providing the lowest profile contralateral access through a 7F
introducer. These improvements bring together our ActiveSeal® technology,
DuraPly® PTFE graft material and VELA, into an integrated new EVAR system.
In December 2016, we received notice from our Notified Body that the CE Mark for
AFX and AFX2 would be suspended due to reports of Type III endoleaks with AFX
with Strata graft material ("AFX Strata"), a prior generation of the AFX device.
For our current generation of AFX products, we had implemented device and graft
material improvements and updated IFUs resulting in a substantial reduction in
reported Type III endoleaks. We provided documentation of the foregoing
reduction in Type III endoleaks to our Notified Body. In January 2017, we
received notice from our Notified Body that the CE Mark for AFX and AFX2 had
been reinstated, effective immediately.
Additionally, in December 2016, we placed a temporary hold on shipments of AFX
and AFX2 to complete an investigation of quality concerns with some sizes of
these devices. Subsequently, we removed the temporary hold and resumed shipments
of all sizes of AFX and the smaller diameter sizes of AFX2 and initiated a
voluntary recall: of (i) the small remaining quantity of original AFX Strata;
and (ii) the larger diameter sizes of AFX2. In January 2017, we removed the
temporary hold and resumed shipments of the remaining larger diameter sizes of
AFX2.
In July 2018, we sent a voluntary safety notice ("Safety Notice") to healthcare
professional ("HCP") users of the AFX System to provide updated information on
comparative AFX Type III endoleak rates, patient-tailored surveillance
recommendations, and recommendations for intervening through an AFX device or
re-intervening on an AFX device. No product was removed from the field as part
of that safety update action.
In October 2018, the FDA classified the July 2018 Safety Notice as a Class I
recall.  The FDA defines a Class I recall as including a firm's correction of a
marketed product in circumstances where there is a reasonable probability that
use of or exposure to the device would cause serious adverse health consequences
or death.
The clinical conditions resulting in this Class I recall classification (Type
III endoleaks) are principally related to AFX with Strata material. The AFX with
Strata material was replaced by AFX incorporating the DuraPly material in both
AFX and AFX2 devices. Strata was last manufactured in 2014, last sold in 2016,
and removed from global inventories in the first half of 2017. There is no AFX
with Strata product remaining in any commercial market.
No product return is required under this recall, and no further action by HCPs
were required in addition to the Safety Notice. The guidance provided in the
July 2018 Safety Notice remains current.
On October 8, 2019, our AFX2 product received a 3-year shelf-life approval from
the FDA. On October 28, 2019, the FDA issued a safety update pertaining to our
AFX system, in which the FDA referenced data from an integrated healthcare
system (Rothenberg et. al.), published in a conference abstract and presented at
American College of Surgeons Clinical Congress 2019 on October 28, 2019. The FDA
interpreted such data as suggesting that there "may be a higher than expected
risk of Type III endoleaks occurring with the use of AFX with Duraply and AFX2
endovascular grafts." Both we and the FDA noted meaningful limitations in the
referenced data, including with respect to our currently commercially available
AFX2 system. We are assessing the referenced data and comparing them to our own
multiple data sets, including data from the LEOPARD trial (the only randomized
controlled trial of EVAR providing the highest level evidence on AFX Duraply and
AFX2 systems), real-world data from a vascular registry, our benchmarked
complaint data, and meta-analyses of current literature. The FDA safety update
does not constitute a recall or correction to the AFX System, including the AFX2
system.
Ovation System
The Ovation System consists of: (i) a radiopaque nitinol suprarenal stent with
integral anchors; (ii) a low-permeability polytetrafluoroethylene ("PTFE"),
aortic body graft that contains a network of inflatable rings filled with a
liquid polymer that solidifies during the deployment procedure; (iii) nitinol
iliac limb stents encapsulated with PTFE; and (iv) accompanying ultra-low
profile delivery systems, auto injector and fill polymer kit. The Ovation System
creates a custom seal that conforms to anatomical irregularities and has a
ultra-low profile delivery system allowing for percutaneous access.
In May 2011, we initiated a 3-year European Post-Market Registry to enroll 500
patients across 30 European centers. Enrollment ended in December 2013. In
January 2017, we announced positive 3-year results from the Ovation EU
Post-Market Registry. The data was presented at the 2017 Leipzig Interventional
Course ("LINC") meeting and showed that the Ovation System has the broadest
range of patient applicability on IFU of all commercially available infrarenal
endovascular AAA devices. The resulting outcomes included:

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•99% freedom from aneurysm-related mortality;
•99% freedom from migration, rupture, and conversion;
•97% freedom from Type I/III endoleak; and
•Excellent freedom from secondary intervention for occlusion (97%), Type I
endoleak (97%) and Type II endoleak (95%).
In October 2014, we initiated the LIFE Study to illustrate the potential
advantages of a "Fast Track" protocol including PEVAR, no general anesthesia, no
time in ICU and a one-night stay in the hospital with the Ovation System. In May
2016, we announced the completion of enrollment of 250 patients at 34 sites
participating in the LIFE Study. In February 2018, the results of the one-month
clinical data from the LIFE Study were published in the Journal of Endovascular
Therapy. These results demonstrate that the Ovation System met the study primary
endpoint for major adverse events at 30 days. The following are highlights of
the publication, with outcomes covering one-month follow-up:
•Low major adverse event rate of 0.4%;
•No ruptures, conversion, or secondary interventions;
•No type III endoleaks and low Type I endoleaks (0.4%);
•Fast-Track completed in 216 patients (87%), with positive results compared to
non-Fast-Track patients;
•Procedure time of 84 minutes vs. 110 minutes;
•General anesthesia use 0% vs. 18%;
•ICU stay 0% vs. 32%; and
•Mean hospital stay 1.2 days vs. 1.9 days.
In August 2015, we enrolled the first subject in the LUCY Study, a multi-center
post-market registry designed to explore the clinical benefits associated with
EVAR using the Ovation System in female patients with AAA, as compared to males.
This was the first prospective study evaluating EVAR in females, a population
that has historically been underrepresented in EVAR clinical trials. We
announced completion of enrollment of 225 patients in the LUCY Study in February
2017. The 30-day LUCY data showed that, in women, the ultra-low profile (14F)
Ovation System device resulted in:
•At least 28% greater EVAR eligibility for women with AAA;
•1.3% major adverse events;
•No deaths;
•No proximal endoleaks;
•No limb occlusion;
•Low readmission rate of 3.9%; and
•100% procedural success.
In June 2018 at the VAM, the 1-year results of the LUCY Study were announced in
the late-breaking clinical trial session. Despite having more complex anatomies
at the time of the index procedure women continue to demonstrate similar
outcomes to men through one year. The 1-year outcomes of freedom from
conversion, rupture, AAA-related mortality and device-related reintervention
were similar between the two arms.
In February 2015, the FDA approved the next generation Ovation iX Iliac Stent
Graft for the Ovation System, and in July 2015, the FDA approved the Ovation iX
Abdominal Stent Graft System. In September 2015, the first patients were treated
with the Ovation iX Abdominal Stent Graft System in Europe, and in August 2015,
we initiated the launch of the Ovation iX System in the United States.
In November 2016, we announced at the VEITH Symposium that the 5-year results
from the Ovation Global Pivotal Trial were positive and showed the following
outcomes:
•Broad patient applicability, with 40% of the patients treated outside the
labeled indications of other EVAR devices;
•Stable aortic neck diameters with an average expansion of 0.1mm, compared to
5.3mm as reported with other EVAR devices;
•96.6% freedom from secondary interventions related to type I endoleak; and
•No migration or conversions.
In August 2016, we announced that the first two patients had been treated with
Ovation Alto, which is the newest device in the Ovation System platform of
abdominal stent graft systems. Ovation Alto is an investigational device,
currently not approved in any market. It expands EVAR to include the treatment
of patients with complex AAAs, specifically patients with very short or
otherwise complex aortic neck anatomy. This is achieved by the conformable
O-rings with CustomSeal® polymer that have been

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repositioned near the top of the endograft, providing seal just below the renal
arteries. In November 2016, we received IDE approval from the FDA to conduct a
clinical study with Ovation Alto in the United States.
In March 2017, we announced the enrollment of the first patients in
the Expanding Patient Applicability with Polymer Sealing Ovation Alto Stent
Graft ("ELEVATE") IDE clinical study, our pivotal clinical trial to evaluate the
safety and effectiveness of Ovation Alto for the repair of infrarenal AAAs. The
ELEVATE IDE clinical trial is approved to enroll 75 patients at up to 16 centers
in the United States. In February 2018, we announced the final patient
enrollment in the ELEVATE IDE clinical study.
In September 2019 and December 2019, the Effectiveness of Custom Seal with
Ovation: Review of Evidence ("ENCORE,") reports regarding the study of polymer
endovascular aneurysm repair ("Polymer EVAR") using Ovation System were
published in the Journal of Vascular Surgery. ENCORE is a pooled retrospective
analysis of the 5 prospective clinical trials and registries and encompasses
1,296 patients, nearly 160 centers and over 200 investigators in the United
States, Europe and Latin America. The studies within ENCORE had predefined
follow-up periods ranging from 1 month to up to 5 years, and across the studies
the median follow up was greater than 2 years. At 5 years, the ENCORE analysis
included the following results for the Ovation System based on the available
data:
•99% freedom from AAA-related mortality;
•99% freedom from conversion;
•99% freedom from rupture;
•98% freedom from reintervention for Type Ia endoleak; and
•93% freedom from all device-related reintervention.
In February 2019, we announced that the Ovation System for the treatment of AAA
received Shonin approval from the MHLW.

In March 2020, we announced FDA approval for our Alto Abdominal Stent Graft
System. Approval was based on our regulatory submission that includes the
ELEVATE IDE clinical study. Pursuant to the terms of approval, the first 100
patients after commercial launch will be included in a post approval imaging
study to determine consistency in device selection between Endologix's internal
imaging services and those of the implanting physicians.

In July 2020, we announced the first commercial implant and the U.S. commercial
release of Alto endograft for the treatment of AAA. The Alto endograft builds
and improves upon the anatomically adaptive sealing technology, which has been
studied in over 1,300 patients in ENCORE analysis and ELEVATE IDE clinical
study.

In July 2020, we also announced CE Mark approval for our Alto Abdominal Stent Graft System.



Characteristics of Our Revenue and Expenses
Revenue
Revenue is derived from sales of our EVAR and EVAS products (including
extensions and accessories) to hospitals upon completion of each AAA repair
procedure, or from sales to distributors upon title transfer (which is typically
at shipment), provided our other revenue recognition criteria have been met. Our
global revenue does not reflect a significant degree of seasonality. However,
for our implant-based revenue, the number of medical procedures incorporating
our products is generally lower during summer months. We believe that this trend
may be due to the summer holiday season in Europe and the United States.
Cost of Goods Sold
Cost of goods sold primarily consists of 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, amortization of developed technology, production materials and
supplies expense, allocated facilities-related expenses, and certain direct
costs such as shipping.
Research and Development
Research and development primarily consist of compensation (including
stock-based compensation) and benefits for research and development personnel,
materials and supplies, research and development consultants, outsourced and
licensed research and development costs, 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.

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Clinical and Regulatory
Clinical and regulatory expenses primarily consist of compensation (including
stock-based compensation) and benefits for clinical and regulatory personnel,
regulatory and clinical payments related to studies, regulatory costs related to
registration and approval activities, and allocated facilities-related costs.
Our clinical and regulatory activities primarily relate to obtaining regulatory
approval for the commercialization of our devices.
Marketing and Sales
Marketing and sales expenses primarily consist of compensation (including
stock-based compensation) and benefits for our sales force, clinical
specialists, internal sales support functions 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 consist of compensation (including
stock-based compensation) and benefits for personnel that support our general
operations such as information technology, executive management, financial
accounting, 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.

Results of Operations
In December 2019, a novel strain of coronavirus, which causes COVID-19, was
identified. Due to the rapid and global spread of the virus, on March 11, 2020,
the World Health Organization declared the COVID-19 outbreak a pandemic. To slow
the proliferation of COVID-19, governments have implemented extraordinary
measures, which include the mandatory closure of businesses, restrictions on
travel and gatherings, and quarantine and physical distancing requirements. In
addition, in March 2020, the U.S. Surgeon General and the American College of
Surgeons issued guidance advising that elective surgical procedures be curtailed
or deferred and hospitals in the U.S. and globally have, to varying degrees,
suspended elective surgeries. While certain abdominal aortic aneurysm procedures
treating larger-diameter or ruptured aneurysms are deemed essential and certain
surgeries, like in cases of trauma, cannot be delayed, we are seeing a
significant reduction in procedural volumes as hospital systems and/or patients
elect to defer abdominal aortic aneurysm procedures with smaller-diameter,
less-severe aneurysms. As a result of these measures, we have experienced
substantial reductions in procedural volumes and anticipate this trend will
continue during the pandemic. In addition, restrictions on the ability to travel
as well as the temporary closures of our facilities and the facilities of our
suppliers has adversely affected our business. Further, due to the travel
restrictions and physical distancing requirements, the Company has been limited
in its ability to train and educate surgeons on the Company's surgical
techniques and products, which may impact its ability to scale demand once
healthcare services return to normal. These restrictions have also impacted the
Company's manufacturing capabilities and distribution and warehousing operations
as it reduces capacity and implements policies to prioritize the health and
safety of employees and contractors.

Although the cumulative impact of these disruptions has had a significant impact
on our business, as of the date of this filing, due to uncertainties regarding
the duration and scope of the current COVID-19 pandemic, the Company cannot
predict the specific extent to which the COVID 19 pandemic will have on its
business and financial results.

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Operations Overview - Three and Six Months Ended June 30, 2020 versus 2019

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


                                Three Months Ended June 30,

Six Months Ended June 30,


                               2020                      2019                     2020                      2019
Revenue               $  24,841      100.0  %   $  36,238     100.0  %   $  53,351      100.0  %   $  71,844     100.0  %
Cost of goods sold       10,688       43.0  %      13,254      36.6  %      24,066       45.1  %      25,661      35.7  %
Gross profit             14,153       57.0  %      22,984      63.4  %      29,285       54.9  %      46,183      64.3  %
Operating expenses:
Research and
development               3,624       14.6  %       4,355      12.0  %       7,160       13.4  %       9,142      12.7  %
Clinical and
regulatory affairs        3,071       12.4  %       3,647      10.1  %       6,236       11.7  %       7,432      10.3  %
Marketing and sales      11,610       46.7  %      15,920      43.9  %      26,106       48.9  %      32,706      45.5  %
General and
administrative           13,197       53.1  %       8,929      24.6  %      23,316       43.7  %      18,345      25.5  %
Restructuring costs           -          -  %           -         -  %           -          -  %         419       0.6  %
Total operating
expenses                 31,502      126.8  %      32,851      90.7  %      62,818      117.7  %      68,044      94.7  %
Loss from operations    (17,349 )    (69.8 )%      (9,867 )   (27.2 )%     (33,533 )    (62.9 )%     (21,861 )   (30.4 )%
Total other expense,
net                      (8,698 )    (35.0 )%     (20,520 )   (56.6 )%     (10,602 )    (19.9 )%     (30,515 )   (42.5 )%
Net loss before
income taxes            (26,047 )   (104.9 )%     (30,387 )   (83.9 )%     (44,135 )    (82.7 )%     (52,376 )   (72.9 )%
Income tax benefit
(expense)                   (46 )     (0.2 )%       3,253       9.0  %         (73 )     (0.1 )%       3,214       4.5  %
Net loss              $ (26,093 )   (105.0 )%   $ (27,134 )   (74.9 )%   $ (44,208 )    (82.9 )%   $ (49,162 )   (68.4 )%



Comparison of the Three Months Ended June 30, 2020 versus 2019     `
Revenue
              Three Months Ended June 30,
                   2020                 2019       Variance     Percent Change
                    (in thousands)
Revenue $       24,841                $ 36,238    $ (11,397 )        (31.5 )%


United States Sales. Net sales totaled $14.2 million in the three months ended
June 30, 2020, a 40.7% decrease from $24.0 million in net sales in the three
months ended June 30, 2019, largely driven by the impact of deferred AAA
surgeries related to the COVID-19 pandemic.
International Sales. Net sales of products in our international regions totaled
$10.6 million in the three months ended June 30, 2020, a 13.2% decrease from
$12.2 million in net sales of products in our international regions in the three
months ended June 30, 2019. The decrease was primarily driven by product sunsets
in Latin America and the impact of COVID-19 pandemic.
Cost of Goods Sold, Gross Profit, and Gross Margin
                                            Three Months Ended June 30,
                                              2020               2019

Variance Percent Change


                                                  (in thousands)
Cost of goods sold                      $      10,688       $      13,254     $ (2,566 )        (19.4 )%
Gross profit                                   14,153              22,984       (8,831 )        (38.4 )%
Gross margin percentage (gross profit
as a percent of revenue)                         57.0 %              63.4 %



                                       38

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Gross margin percentage for the three months ended June 30, 2020 decreased to
57.0% from 63.4% for the three months ended June 30, 2019. The decrease in gross
profit margin was primarily attributable to unfavorable geographic mix and lower
volumes in the three months ended June 30, 2020 compared to prior year period.
Operating Expenses
                                          Three Months Ended June 30,
                                              2020              2019        Variance     Percent Change
                                                 (in thousands)
Research and development                $         3,624     $    4,355     $    (731 )        (16.8 )%
Clinical and regulatory affairs                   3,071          3,647          (576 )        (15.8 )%
Marketing and sales                              11,610         15,920        (4,310 )        (27.1 )%
General and administrative                       13,197          8,929         4,268           47.8  %


Research and Development. The $0.7 million decrease in research and development
expenses for the three months ended June 30, 2020, as compared to the prior year
period, was attributable to timing of project spending and prudent expense
management.

Clinical and Regulatory Affairs. The $0.6 million decrease in clinical and regulatory affairs expenses for the three months ended June 30, 2020, as compared to the prior year period, was attributable to expense timing and prudent expense management.



Marketing and Sales. The $4.3 million decrease in marketing and sales expenses
for the three months ended June 30, 2020, as compared to the prior year period,
was attributable to lower sales volume, lower headcount and prudent expense
management.

General and Administrative. The $4.3 million increase in general and
administrative expenses for the three months ended June 30, 2020, as compared to
the prior year period was primarily attributable to bankruptcy professional fees
and increase in bad debt reserve.

Other Expense, Net


                       Three Months Ended June 30,
                        2020                2019          Variance

Percent Change


                             (in thousands)

Other expense, net $ (8,698 ) $ (20,520 ) $ 11,822 (57.6)%




Other expense, net of $8.7 million for the three months ended June 30, 2020
consists primarily of interest expense of $10.9 million, change in fair value of
contingent consideration related to the Nellix acquisition of $0.1 million and
foreign currency translation loss of $0.1 million, which was partially offset by
income from changes in fair value of derivative liabilities of $2.3 million.
Other expense, net of $20.5 million for the three months ended June 30, 2019
consists primarily of loss on debt extinguishment of $11.8 million, interest
expense of $8.9 million and fair value of contingent consideration related to
the Nellix acquisition of $0.3 million, which was partially offset by income
from changes in fair value of derivative liabilities of $0.9 million.

Income Tax Benefit (Expense)



                                              Three Months Ended June 30,
                                              2020                  2019

Variance Percent Change


                                                    (in thousands)
Income tax benefit (expense)            $        (46 )       $

3,253 $ (3,299 )<100%




Our income tax expense was $46 thousand and our effective tax rate was (0.18)%
for the three months ended June 30, 2020 due to our tax positions in various
jurisdictions. During the three months ended June 30, 2020 and 2019, we had
operating legal

                                       39
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entities in the U.S., Canada, Italy, New Zealand, Poland, Singapore and the Netherlands (including registered sales branches in certain countries in Europe).



Comparison of the Six Months Ended June 30, 2020 versus 2019     `
Revenue
             Six Months Ended June 30,
                  2020               2019       Variance     Percent Change
                   (in thousands)
Revenue $      53,351              $ 71,844    $ (18,493 )        (25.7 )%


United States Sales. Net sales totaled $32.9 million in the six months ended
June 30, 2020, a 29.8% decrease from $46.8 million in net sales in the six
months ended June 30, 2019, largely driven by the impact of deferred AAA
surgeries related to the COVID-19 pandemic.
International Sales. Net sales of products in our international regions totaled
$20.5 million in the six months ended June 30, 2020, a 13.2% decrease from $25.0
million in net sales of products in our international regions in the six months
ended June 30, 2019. The decrease was primarily driven by product sunsets in
Latin America, exit of South Korea and the impact of COVID-19 pandemic.
Cost of Goods Sold, Gross Profit, and Gross Margin
                                            Six Months Ended June 30,
                                             2020               2019         Variance    Percent Change
                                                 (in thousands)
Cost of goods sold                      $     24,066       $     25,661     $ (1,595 )         (6.2 )%
Gross profit                                  29,285             46,183      (16,898 )        (36.6 )%
Gross margin percentage (gross profit
as a percent of revenue)                        54.9 %             64.3 %


Gross margin percentage for the six months ended June 30, 2020 decreased to
54.9% from 64.3% for the six months ended June 30, 2019. The decrease in gross
profit margin was primarily attributable to unfavorable geographic mix and lower
volumes in the six months ended June 30, 2020 compared to prior year period.
Operating Expenses
                                          Six Months Ended June 30,
                                             2020             2019        Variance     Percent Change
                                                (in thousands)
Research and development                $       7,160     $    9,142     $ (1,982 )         (21.7 )%
Clinical and regulatory affairs                 6,236          7,432       (1,196 )         (16.1 )%
Marketing and sales                            26,106         32,706       (6,600 )         (20.2 )%
General and administrative                     23,316         18,345        4,971            27.1  %
Restructuring costs                                 -            419         (419 )        (100.0 )%


Research and Development. The $2.0 million decrease in research and development
expenses for the six months ended June 30, 2020, as compared to the prior year
period, was attributable to timing of project spending and prudent expense
management.

Clinical and Regulatory Affairs. The $1.2 million decrease in clinical and
regulatory affairs expenses for the six months ended June 30, 2020, as compared
to the prior year period, was attributable to expense timing and prudent expense
management.


                                       40

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Marketing and Sales. The $6.6 million decrease in marketing and sales expenses
for the six months ended June 30, 2020, as compared to the prior year period,
was attributable to lower sales volume, lower headcount and prudent expense
management.

General and Administrative. The $5.0 million increase in general and
administrative expenses for the six months ended June 30, 2020, as compared to
the prior year period was primarily attributable to higher legal and finance
costs associated with debt restructuring, bankruptcy professional fees and
increase in bad debt reserve.

Restructuring costs. The $0.4 million decrease in restructuring costs for the six months ended June 30, 2020, as compared to the prior year period was attributable to one-time restructuring activities in 2019.

Other Expense, Net


                      Six Months Ended June 30,
                         2020             2019        Variance    Percent Change
                           (in thousands)
Other expense, net $     (10,602 )     $ (30,515 )   $  19,913        >100%


Other expense, net of $10.6 million for the six months ended June 30, 2020
consists primarily of interest expense of $21.4 million, foreign currency
translation loss of $1.2 million and change in fair value of derivative
liabilities of $0.7 million, which was partially offset by gain on debt
extinguishment of $12.5 million and fair value of contingent consideration
related to the Nellix acquisition of $0.2 million. Other expense, net of $30.5
million for the six months ended June 30, 2019 consists primarily of interest
expense of $17.3 million and loss on debt extinguishment of $1.2 million,
expense from changes in fair value of derivative liabilities of $1.2 million and
change in fair value of contingent consideration related to the Nellix
acquisition of $0.1 million.

Income Tax Expense

                                              Six Months Ended June 30,
                                              2020                 2019

Variance Percent Change


                                                    (in thousands)
Income tax benefit (expense)            $        (73 )       $

3,214 $ (3,287 )<100%




Our income tax expense was $73 thousand and our effective tax rate was (0.17)%
for the six months ended June 30, 2020 due to our tax positions in various
jurisdictions. During the six months ended June 30, 2020 and 2019, we had
operating legal entities in the U.S., Canada, Italy, New Zealand, Poland,
Singapore and the Netherlands (including registered sales branches in certain
countries in Europe).



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Liquidity and Capital Resources
The chart provided below summarizes selected liquidity data and metrics as of
June 30, 2020, December 31, 2019 and June 30, 2019:
                                            June 30, 2020       December

31, 2019 June 30, 2019


                                                  (in thousands, except financial metrics data)
Cash, cash equivalents and restricted cash $       19,696     $            42,760     $        52,143
Accounts receivable, net                   $       11,087     $            22,392     $        21,926
Total current assets                       $       61,407     $            93,703     $       107,418
Total current liabilities                  $      229,598     $            55,793     $        42,531
Working capital (deficit) surplus          $     (168,191 )   $            37,910     $        64,887
Current ratio                                         0.3                     1.7                 2.5
Days sales outstanding ("DSO")                         41                      58                  55
Inventory turnover                                    1.7                     1.8                 1.7


Operating Activities
In the six months ended June 30, 2020, cash used in operating activities was
$31.3 million. This was primarily the result of a net loss of $44.2 million,
non-cash operating expenses of $13.3 million, and changes in operating assets
and liabilities of $0.5 million. In the six months ended June 30, 2019, our
operating activities used $20.5 million in cash. This was primarily the result
of a net loss of $49.2 million, non-cash operating expenses of $29.9 million,
and changes in operating assets and liabilities of $1.2 million.
During the six months ended June 30, 2020 and 2019, our cash collections from
customers totaled $64.6 million and $70.8 million, respectively, representing
121.1% and 98.5% of reported revenue for the same periods.
Investing Activities
Cash used in investing activities was $0.1 million for the six months ended
June 30, 2020 as compared to cash used in investing activities of $0.2 million
for the six months ended June 30, 2019. For the six months ended June 30, 2020,
cash used in investing activities consisted of $0.1 million used for machinery
and equipment purchases. For the six months ended June 20, 2019, cash used in
investing activities consisted of $0.2 million used for machinery and equipment
purchases.
Financing Activities
Cash provided by financing activities was $8.4 million for the six months ended
June 30, 2020, as compared to cash provided by financing activities of $48.1
million in the prior year period. For the six months ended June 30, 2020, cash
provided by financing activities consisted of proceeds from our PPP loan of $9.8
million, which was offset by $1.4 million used in deferred financing costs.
Credit Arrangements
See Note 7 of the Notes to the Condensed Consolidated Financial Statements for a
discussion of our credit arrangements.
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 our products.
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 strategic acquisitions;

                                       42
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•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 have limited capital resources and expect to incur further losses for the
foreseeable future. The Company's recurring operating losses, net operating cash
flow deficits, accumulated deficit and bankruptcy filing, raise substantial
doubt about the Company's ability to continue as a going concern for one year
from the issuance of the accompanying consolidated financial statements. We
presently have several operating subsidiaries outside of the United States. As
of June 30, 2020, these subsidiaries held an aggregate of $2.7 million in
foreign bank accounts to fund their local operations. These balances related to
undistributed earnings, are deemed by management to be permanently reinvested in
the corresponding countries in which our subsidiaries operate. Management has no
present or planned intention to repatriate foreign earnings into the United
States and may have to repatriate any foreign earnings to meet those needs, we
would then need to accrue, and ultimately pay, incremental income tax expenses
on such "deemed dividend," unless we then have sufficient net operating losses
to offset this potential tax liability.
We will require additional capital to sustain our operations and make the
investments we need to execute upon our business plan. If we are unable to
generate sufficient revenue from our existing business plan, we will need to
obtain additional equity or debt financing. Further, the COVID-19 outbreak has
negatively impacted the global economy and financial markets which could
interfere with our ability to access financing. If we attempt to obtain
additional debt or equity financing, we cannot assume that such financing will
be available on favorable terms, if at all. Further, 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).
Lastly, if we are not able to obtain required financing, we may need to curtail
our operations and/or our planned product development.
Contractual Obligations
Contractual obligation payments by year with initial terms in excess of 1 year
were as follows as of June 30, 2020 (in thousands):

Payments due by period


                                  Remainder of
                      Total           2020           2021         2022

2023 2024 2025 Thereafter Debt obligations $ 284,926 $ 250 $ 22,951 $ 93,705

$ 93,286 $ 74,734 $ - $ - Interest on debt obligations

           45,621            7,628       16,417        12,713         6,965        1,898           -                -
Operating lease
obligations           28,324            1,799        4,269         3,994         3,016        2,909       2,905            9,432
Purchase
commitments            1,087     $        249     $    838             -             -            -           -                -
Total              $ 359,958     $      9,926     $ 44,475     $ 110,412     $ 103,267     $ 79,541     $ 2,905     $      9,432


Debt obligations includes interest payable in kind on our term loan facility and
a $11.1 million exit fee under our credit facility agreement with affiliates of
Deerfield Management Company, L.P. (collectively, "Deerfield"). Interest on debt
obligations includes interest on the 5% convertible notes, which shall be paid,
at the Company's option, either in cash or, if certain terms are met in
accordance with the 5% convertible notes indentures, shares of common stock or
paid in kind. See Note 7 of the Notes to the Condensed Consolidated Financial
Statements for a discussion of debt obligations and Note 9(a) of the Notes to
the Condensed Consolidated Financial Statements for a discussion of operating
lease obligations.
The commencement of the Chapter 11 Cases constituted an event of default and
caused the automatic and immediate acceleration of all debt outstanding under
our various debt agreements. However, any efforts to enforce payment obligations
under the debt agreements are automatically stayed as a result of the filing of
the Chapter 11 Cases, and the creditors' rights of enforcement in respect of the
debt agreements are subject to the applicable provisions of the Bankruptcy Code.
Further, the entire amount of outstanding debt has been classified as current in
these financial statements.

Off-Balance Sheet Arrangements

Other than the purchase commitments described above, we do not have any off-balance sheet arrangements as of June 30, 2020.


                                       43
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Critical Accounting Policies and Estimates
We have prepared the accompanying unaudited condensed consolidated financial
statements in accordance with accounting principles generally accepted in the
United States ("GAAP"). The preparation of the financial statements in
conformity with GAAP requires us to make estimates and assumptions that affect
the reported amounts of assets and liabilities, revenues and expenses, and the
related 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. Management evaluates its estimates on an ongoing basis,
including those related to: (i) the collectibility of customer accounts; (ii)
whether the cost of inventories can be recovered; (iii) the value of goodwill
and intangible assets; (iv) the realization of tax assets and estimates of tax
liabilities; (v) the likelihood of payment and the value of contingent
liabilities; and (vi) the 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.
See Part II, Item 7 of the Annual Report for a discussion of our critical
accounting policies and estimates. There have been no other material changes in
our critical accounting policies and estimates from those disclosed in the
Annual Report.
The price of our common stock has declined significantly and may continue to
fluctuate in future periods. Fluctuations in our stock price may negatively
affect the liquidity of our common stock, which could further adversely impact
our stock price. If the recent negative volatility of our market capitalization
is sustained, we may perform impairment tests more frequently and it is possible
that our goodwill could become impaired, which could result in a material charge
and adversely affect our results of operations. To date, we have not recorded
any impairment charges.

Recent Accounting Pronouncements
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic
820): Disclosure Framework - Changes to the Disclosure Requirements for Fair
Value Measurement. The new guidance modifies the disclosure requirements on fair
value measurements. The Company adopted this standard on January 1, 2020, and
adoption of this standard did not have a material impact on the Company's
consolidated financial statement presentation or results.

Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants and the SEC are not expected to have a material effect on our consolidated financial statements.

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