TriVascular Merger

On February 3, 2016, the Company completed its merger with TriVascular pursuant to the Agreement and Plan of Merger (the “Merger Agreement”), dated October 26, 2015, by and among Endologix, TriVascular and Teton Merger Sub, Inc., a Delaware corporation and direct wholly-owned subsidiary of Endologix (“Merger Sub”). Pursuant to the terms of the Merger Agreement, Endologix acquired all of TriVascular’s outstanding capital stock through the merger of Merger Sub with and into TriVascular (the “Merger”), with TriVascular surviving the Merger as a wholly-owned subsidiary of Endologix. The Company completed the merger in order to become the innovation leader with broad clinical indications for the treatment of AAA, leverage the combined company’s commercial capabilities, and provide an accelerated path to profitability. The total purchase consideration given related to the acquisition follows:



Cash consideration	$	84,634
Common stock consideration	100,812
Fair value of assumed TriVascular stock warrants	44
Total purchase consideration	$	185,490

Common stock consideration consisted of 13,586,503 shares of Endologix common stock, worth $100.8 million based on the market value of $7.42 per share as of the effective date of the Merger on February 3, 2016.

In connection with the Merger, the Company assumed stock warrants, originally issued by TriVascular, and converted them to Endologix stock warrants. The fair value of the stock warrants represents a component of the total consideration for the Merger. Stock warrants assumed were valued using the Black-Scholes option pricing model as of the effective date of the Merger.

The acquisition was recorded by allocating the costs of the net assets acquired based on their estimated fair values at the acquisition date. The excess of the cost of the acquisition over the fair value of the net assets acquired is recorded as goodwill. The fair values were based on management’s analysis, including work performed by third-party valuation specialists. The following presents the allocation of the purchase consideration to the assets acquired and liabilities assumed on February 3, 2016 (in thousands):



Cash and cash equivalents	$	24,012
Short-term investments	3,008
Accounts receivable	5,780
Inventories	17,765
Prepaid expenses and other current assets	1,895
Property and equipment	3,152
Intangible assets	46,200
Other assets	317
Accounts payable	(2,214		)
Accrued liabilities and other	(6,450		)
Notes payable	(61		)
Net assets acquired	$	93,404
Goodwill	$	92,086
Total purchase consideration	$	185,490

The goodwill is primarily attributable to strategic opportunities that arose from the acquisition of TriVascular, such as broadening the product portfolio for the treatment of AAA and leveraging the combined company’s technology and commercial capabilities. The goodwill is not expected to be deductible for tax purposes.

During the year ended December 31, 2016, the Company revised the opening net assets acquired and goodwill by $27.1 million, which was comprised of the following: an increase in inventories of $0.2 million; an increase in prepaid expenses and

other current assets of $0.1 million; an increase in accounts receivable of $0.2 million; and an increase in accrued liabilities

and other of $0.6 million as a result of gathering additional information during the measurement period. The Company also

revised the initial values of intangible assets by decreasing them $27.0 million as a result of switching from utilizing

publicly available benchmarking information to determine the fair value of the intangible assets to primarily utilizing an income

method based on forecasts of expected future cash flows. During the three months ended June 30, 2016, the Company recorded

an adjustment to the amortization of intangible assets of $0.3 million, comprising of a $0.2 million and $49 thousand decrease within cost of goods sold and marketing and sales expense, respectively, in the Consolidated Statement of Operations and Comprehensive Loss, that would have been recorded during the three months ended March 31, 2016, if the adjustment to the intangible assets had been recognized as of the date of the Merger.

Trade payables, as well as other current and non-current assets and liabilities, were valued at the existing carrying values as they represented the fair value of those items at the acquisition date, based on management’s judgments and estimates. Trade receivables included gross contractual amounts of $5.8 million and the Company's best estimate of a nominal amount of contractual cash flows not expected to be collected at the acquisition date.

The fair value of property, plant and equipment utilized a combination of the cost and market approaches, depending on the characteristics of the asset classification. Of the $46.2 million of acquired intangible assets, $7.5 million was assigned to customer relationships (10 year life), $27.5 million was assigned to developed technology (11 year life), and $11.2 million was assigned to in-process research and development.

Pro Forma Combined Financial Information (Unaudited)

The following unaudited pro forma financial information summarizes the results of operations for the periods indicated as if the TriVascular merger had been completed as of January 1, 2015. Pro forma information reflects adjustments that are expected to have a continuing impact on our results of operations and are directly attributable to the merger. The unaudited pro forma results include adjustments to reflect the amortization of the inventory step-up, direct transaction costs relating to the acquisition, the incremental intangible asset amortization to be incurred based on the values of each identifiable intangible asset, and to eliminate interest expense related to legacy TriVascular's former loans, which was repaid upon completion of the TriVascular merger. The pro forma amounts do not purport to be indicative of the results that would have actually been obtained if the merger had occurred as of January 1, 2015 or that may be obtained in the future, and do not reflect future synergies, integration costs, or other such costs or savings.



	Twelve Months Ended
	December 31,
	2016			2015
Combined net sales	$	195,596		$	195,605
Combined net loss from continuing operations	(150,054		)	(113,534		)
Combined basic and diluted net loss per share	$	(1.82	)	$	(1.40	)