Any modification to a 510(k)-cleared device that could significantly affect its safety or effectiveness, or that would constitute a major change in its intended use requires a new 510(k) clearance or, possibly, a PMA or de novo clearance. The FDA requires every manufacturer to make this determination in the first instance, but the FDA may review such determinations. The FDA may not agree with our decisions regarding whether new clearances or approvals are necessary. If the FDA disagrees with our determinations for any future changes, or prior changes to previously marketed products, as the case may be, we may be required to cease marketing or to recall the modified products until we obtain clearance or approval, and we may be subject to significant regulatory fines or penalties.

Furthermore, the FDA’s ongoing review of the 510(k) program may make it more difficult for us to make modifications to our products, either by imposing more strict requirements on when a new 510(k) for a modification to a previously cleared product must be submitted, or applying more onerous review criteria to such submissions. In October 2017, the FDA issued guidance documents addressing when to submit a new 510(k) due to modifications to 510(k) cleared products and the criteria for evaluating substantial equivalence. The interpretation of the guidance documents by the FDA staff could lead to instances where the FDA disagrees with the Company’s decision regarding a change, and could result in warning letters and other enforcement actions.

Even after we have obtained the proper regulatory clearance or approval to market a product, the FDA has the power to require us to conduct post-market studies. These studies can be very expensive and time-consuming to conduct. Failure to complete such studies in a timely manner could result in the revocation of clearance or approval and the recall or withdrawal of the product, which could prevent us from generating sales from that product in the United States. The FDA has broad enforcement powers, and any regulatory enforcement actions or inquiries, or other increased scrutiny on us, could dissuade some surgeons from using our products and adversely affect our reputation and the perceived safety and efficacy of our products.

We are also required to comply with the FDA’s QSR, which covers the methods used in, and the facilities and controls used for, the design, manufacture, quality assurance, labeling, packaging, sterilization, storage, shipping, installation and servicing of our marketed products. The FDA enforces the QSR through periodic announced and unannounced inspections of manufacturing facilities. In addition, in the future, regulatory authorities and/or customers may require specific packaging of sterile products, which could increase our costs and the price of our products. Later discovery of previously unknown problems with our products, including unanticipated adverse events or adverse events of unanticipated severity or frequency, manufacturing problems, or failure to comply with regulatory requirements such as QSR, may result in changes to labeling, restrictions on such products or manufacturing processes, withdrawal of the products from the market, voluntary or mandatory recalls, a requirement to repair, replace or refund the cost of any medical device we manufacture or distribute, fines, suspension of regulatory approvals, product seizures, injunctions or the imposition of civil or criminal penalties which would adversely affect our business, operating results and prospects.

Under the FDA’s MDR regulations, we are required to report to the FDA any incident in which our product may have caused or contributed to a death or serious injury or in which our product malfunctioned and, if the malfunction were to recur, would likely cause or contribute to death or serious injury. Repeated product malfunctions may result in a voluntary or involuntary product recall, which could divert managerial and financial resources, impair our ability to manufacture our products in a cost-effective and timely manner, and have an adverse effect on our reputation, results of operations and financial condition. We are also required to follow detailed recordkeeping requirements for all firm-initiated medical device corrections and removals, and to report such corrective and removal actions to the FDA if they are carried out in response to a risk to health and have not otherwise been reported under the MDR regulations.

All manufacturers bringing medical devices to market in the EEA are legally bound to report any incident that led or might have led to the death or serious deterioration in the state of health of a patient, user or other person, and which the manufacturer’s device is suspected to be a contributory cause, to the competent authority in whose jurisdiction the incident occurred. In such case, the manufacturer must file an initial report with the relevant competent authority, which would be followed by further evaluation or investigation of the incident and a final report indicating whether further action is required.  Any adverse event involving our products could result in future voluntary corrective actions, such as recalls or customer notifications, or agency action, such as inspection or enforcement action. Adverse events involving our products have been reported to us in the past, and we cannot guarantee that they will not occur in the future. 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.

The FDA and similar foreign governmental authorities such as the competent authorities of the EEA countries have the authority to require the recall of commercialized products in the event of material deficiencies or defects in design or manufacture or in the event that a product poses an unacceptable risk to health. Manufacturers may, under their own initiative, recall a product if any material deficiency in a device is found. A government-mandated or voluntary recall by us or one of our distributors could occur as a result of an unacceptable risk to health, component failures, manufacturing errors, design or labeling defects or other deficiencies and issues.

Any future recalls of any of our products would divert managerial and financial resources and could have an adverse effect on our reputation, results of operations and financial condition, which could impair our ability to produce our products in a cost-effective and timely manner in order to meet our customers’ demands. We may also be required to bear other costs or take other actions that may have a negative impact on our future sales and our ability to generate profits.

Legislative changes could significantly alter the statutory provisions governing the regulatory approval, manufacture and marketing of regulated products. In addition, FDA regulations and guidance could be revised or reinterpreted by the FDA in ways that could significantly affect our business and our products. Any new regulations or revisions, or reinterpretations of existing regulations, may impose additional costs or lengthen review times of future products. It is impossible to predict whether legislative changes will be enacted or FDA regulations, guidance or interpretations will be changed, and what the impact of such changes, if any, may be.

Separately, in response to the global COVID-19 pandemic, in early 2020, the FDA announced its intention to postpone most foreign inspections of manufacturing facilities and products through April 2020 and temporarily postponed routine surveillance inspections of domestic manufacturing facilities. In mid-2020, the FDA resumed certain on-site inspections of domestic manufacturing facilities subject to a risk-based prioritization system. In 2021, the FDA resumed standard inspectional operations of domestic facilities and announced its intention to resume certain prioritized inspections of foreign manufacturing facilities, including surveillance and application-related inspections, starting in February 2022. Regulatory authorities outside the United States may adopt similar restrictions or other policy measures in response to the COVID-19 pandemic. If a prolonged government shutdown occurs, or if global health concerns continue to prevent the FDA, other regulatory authorities, or notified bodies from conducting their regular inspections, reviews, or other regulatory activities, it could significantly impact their ability to attract, retaintimely review and motivate highly qualified personnel.   If we are not successful in retaining and recruiting highly qualified personnel,process our business may be harmed asregulatory submissions, which could have a result.

Our business activities are subject to additional healthcare regulation and enforcement by the federal government and by authorities in the states and foreign jurisdictions in which we conduct our business. Such laws include, without limitation, state and federal anti-kickback, fraud and abuse, false claims, privacy and security and physician payment transparency laws. If our operations are found to be in violation of any of such laws that apply to us, we may be subject to penalties, including, without limitation, civil and criminal penalties, damages, fines, the curtailment or restructuring of our operations, exclusion from participation in federal and state healthcare programs and imprisonment, any of which could adversely affect our ability to operate our business and our financial results.

Likewise, the California Consumer Privacy Act, or the CCPA, is a state law that gives California residents expanded rights to access and delete their personal information, opt out of certain personal information sharing, and receive detailed information and how their personal information is used and imposes compliance obligations on many organizations doing business in California that collect information about California residents. The definition of personal information is very broad and may impact our ability to profitably operate across the United States there have been,given that our customers’ employees may be resident in California or to offer products that meet the needs of customers subject to California privacy laws and we expect thereregulations. The CCPA also allows for significant fines by the state attorney general as well as a private right of action for individuals in connection with certain security breaches. The enactment of the CCPA is prompting a wave of similar legislative developments in other US states and creating the potential for a patchwork of overlapping but different state laws. These developments are increasing our compliance burden and our risk, including risks of regulatory fines, litigation and associated reputational harm.

The costs of compliance with, and other burdens imposed by, our customers’ own requirements and the privacy and security laws and regulations that are applicable to continueour customers’ businesses may limit the use and adoption of our products and reduce overall demand. Non-compliance with our customers’ specific requirements may lead to be,termination of contracts with these customers or liabilities to the customers; non-compliance with applicable laws and regulations may lead to significant fines, penalties or liabilities.

Furthermore, privacy concerns may cause our customers’ workers to resist providing the personal data necessary to allow our customers to use our products effectively. If a numbercustomer experiences a significant data security breach involving our products, our customers could lose confidence in our ability to protect the personal information of their employees, customers and suppliers, which could cause our customers to discontinue use of our products. The loss of confidence from a significant data security breach involving our software products could hurt our reputation, cause sales and marketing challenges to existing and new customers, cause loss of market share or exacerbate competitive pressures, result in an increase in our development costs to address any potential vulnerabilities in our software products, and may result in reduced demand and revenue. Even the perception of privacy concerns, whether or not valid, may inhibit market adoption of our products in certain industries.

Domestic and international legislative and regulatory initiatives at bothand our customers’ privacy policies and practices may adversely affect our and our customers’ ability to process, handle, store, use and transmit demographic and personal information from their employees, customers and suppliers, which could reduce demand for our products.

In addition to government activity, privacy advocacy groups and the federaltechnology and state government levels,other industries are considering various new, additional or different self-regulatory standards that may place additional burdens on our software products. Complying with these varying requirements could cause us to incur substantial costs or require it to change the healthcare systemour business practices in ways that, if approved, could affect our abilitya manner adverse to sell our products profitably. While many of the proposed policy changes require congressional approval to implement, we cannot assure you that reimbursement payments under governmental and private third-party payor programs to health care providers will remain at levels comparable to present levels or will be sufficient to cover the costs allocable to patients eligible for reimbursement under these programs. Any changes that lower reimbursement rates under Medicare, Medicaid or private payor programs could negatively affect our business.

General Risk Factors

If we fail to attract and retain key management and professional personnel, we may be unable to successfully commercialize or develop our products.

We will need to effectively manage our operational, sales and marketing, development and other resources in order to successfully pursue our commercialization and research and development efforts for our existing and future products successfully.

Our business exposes us to potential product liability claims that are inherent in the design, testing, manufacture, sale and distribution of our products and each of our product candidates that we are seeking to introduce to the market. Surgical medical devices involve significant risks of serious complications, including bleeding, nerve injury, paralysis, infection, and even death. Any product liability claim brought against us, with or without merit, could result in the increase of our product liability insurance rates or in our inability to secure coverage in the future on commercially reasonable terms, if at all. In addition, if our product liability insurance proves to be inadequate to pay a damages award, we may have to pay the excess of this award out of our cash reserves, which could significantly harm our financial condition. If longer-term patient results and experience indicate that our products or any component of a product causes tissue damage, motor impairment or other adverse effects, we could be subject to significant liability. A product liability claim, even one without merit, could harm our reputation in the industry, lead to significant legal fees, and result in the diversion of management’s attention from managing our business.

We rely on sophisticated information technology systems to operate our business. Our systems are subject to cyber-attacks, viruses, worms, malicious software programs, outages, equipment malfunction or constraints, software deficiencies, human error and other malicious intrusions, which may materially disrupt our business and compromise our data. We may not be able to anticipate and prevent such disruptions or intrusions, and we may not be able to mitigate them when and if they occur. OurAny failure, breach or unauthorized access to our or third-party systems could result in the loss of confidential, sensitive or proprietary information, interruptions in service or production or otherwise our ability to effectively operate ourconduct business operations and comply with applicable lawscould result in potential reductions in revenue and regulations may be materially impaired by any such disruptionprofits, damage to its reputation or intrusion.liability. Furthermore, we may incur significant costs in responding to any such disruption or intrusion and remedying our systems. In such event we may also be subject to litigation and other potential liability, which could materially impact our business and financial condition. Moreover, a breach or disruption of our information technology systems could damage our reputation. Further, as regulatory focus on privacy and data security issues continues to increase and worldwide laws and regulations concerning the protection of information become more complex, the potential risks and costs of compliance to the company’s business will intensify.

2021:

Issuer Purchases of Equity Securities

Total

Maximum

Number of

Number of

Shares

Shares

Purchased

that May

as Part of

Yet be

Total

Publicly

Purchased

Number

Average

Announced

Under the

of Shares

Price Paid

Plans or

Plan or

Period

Purchased

per Share

Programs

Programs

October 1 - 31, 2021

-

-

-

-

November 1 - 30, 2021

1,365

$

1.74

-

-

December 1 - 31, 2021

-

-

-

-

Total

1,365

$

1.74

-

-

These amounts consist of 1,365 shares we acquired from employees associated with the withholding of shares to pay certain withholding taxes upon the vesting of stock-based compensation in accordance with the terms of our equity compensation plan that were previously approved by our stockholders and disclosed in our proxy statements filed with the Securities and Exchange Commission. We are a smaller reporting companypurchased these shares at their fair market value, as defineddetermined by Rule 12b-2reference to the closing price of our common stock on the vesting date.  

Stock Performance Graph

This graph is not “soliciting material” or deemed “filed” with the SEC for purposes of Section 18 of the Exchange Act of 1934., or otherwise subject to liabilities under the Section, and shall not be deemed incorporated by reference into any filings of Asensus Surgical, Inc. under the Securities Act of 1933, as amended, whether made before or after the date hereof and irrespective of any general incorporate language in any such filing.

The graph set forth below compares the cumulative total stockholder return on our common stock between December 31, 2016, and December 31, 2021, with the cumulative total return of (i) the NYSE American Composite Index, (ii) the Russell 2000 Index, and (iii) the Russell Microcap Index over the same period. This graph assumes an investment of $100.00 on December 31, 2016 in our common stock, the NYSE American Composite Index, the Russell 2000 Index, and the Russell Microcap Index and assumes the re-investment of dividends, if any.

The comparisons shown in the graph below are based upon historical data. We caution that the stock price performance shown in the graph below is not requirednecessarily indicative of, nor is it intended to provideforecast, the information under this item.potential future performance of our common stock.

COMPARISON OF CUMULATIVE TOTAL RETURN AMONG ASENSUS SURGICAL, INC., NYSE AMERICAN COMPOSITE, RUSSELL 2000 INDEX, AND RUSSELL MICROCAP INDEX

		COMPARISON OF CUMULATIVE TOTAL RETURN
Company/Market		2016				2017				2018				2019				2020				2021
Asensus Surgical, Inc.		$	100.00			$	148.46			$	173.85			$	8.70			$	3.70			$	6.57
NYSE American Composite Index		$	100.00			$	115.32			$	99.32			$	110.60			$	102.29			$	148.49
Russell 2000 Index		$	100.00			$	114.65			$	102.02			$	128.06			$	153.62			$	176.39
Russell Microcap Index		$	100.00			$	113.17			$	98.36			$	120.43			$	145.67			$	173.84

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Table of Contents

ITEM 6.

RESERVED

ITEM 7.

MANAGEMENT’S MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our financial condition and results of operations should be read in conjunction with our “Risk Factors”“Risk Factors” and our consolidated financial statements and the related notes to our consolidated financial statements included in this Annual Report. The following discussion contains forward-looking statements. See cautionary note regarding “Forward-Looking Statements”“Forward-Looking Statements” at the beginning of this Annual Report.

Overview

TransEnterix

Asensus Surgical is a medical device company that is digitizing the interface between the surgeon and the patient in laparoscopyto pioneer a new era of Performance-Guided Surgery™ by unlocking clinical intelligence to enable consistently superior outcomes and a new standard of surgery. This builds upon the foundation of Digital Laparoscopy with the Senhance® Surgical System powered by the Intelligent Surgical Unit™, or ISU, to increase surgeon control and reduce surgical variability in today’svariability. With the addition of machine vision, augmented intelligence, and deep learning capabilities throughout the surgical experience, we intend to holistically address the current clinical, cognitive and economic shortcomings that drive surgical outcomes and value-based healthcare environment.healthcare. The Company is focused on the market development for and commercialization of the Senhance®Senhance Surgical System, which digitizes laparoscopic minimally invasive surgery, or MIS. The Senhance System is the first and only digital, multi-port laparoscopic platform designed to maintain laparoscopic MIS standards while providing digital benefits such as haptic feedback, robotic precision, comfortable ergonomics, advanced instrumentation including 3 millimeter3mm microlaparoscopic instruments, 5mm articulating instruments, eye-sensing camera control and reusablefully-reusable standard instruments to help maintain per-procedure costs similar to traditional laparoscopy.

The Senhance System is available for sale in Europe, the United States, Japan, Taiwan, Russia and select other countries.

The Senhance System has a CE Mark in Europe for adult and pediatric laparoscopic abdominal and pelvic surgery, as well as limited thoracic surgeries excluding cardiac and vascular surgery.

•

The Senhance System has a CE Mark in Europe for adult and pediatric laparoscopic abdominal and pelvic surgery, as well as limited thoracic surgeries excluding cardiac and vascular surgery.

•

•

In the United States, the Company has received 510(k) clearance from the FDA for use of the Senhance System in general laparoscopic colorectal surgical procedures and laparoscopic gynecologic surgery in a total of 2831 indicated procedures, including benign and oncologic procedures, laparoscopic inguinal, hiatal and paraesophageal hernia, sleeve gastrectomy and laparoscopic cholecystectomy (gallbladder removal) surgery.

•

In Japan, the Company has received regulatory approval and reimbursement for 98 laparoscopic procedures.

•

The Senhance System received its registration certificate by the Russian medical device regulatory agency, Roszdravnadzor, in December 2020, allowing for its sale and utilization throughout the Russian Federation.

We also enter into lease arrangements with certain qualified customers. For some lease arrangements, the Company has received regulatory approval and reimbursement for 98 laparoscopic procedures.

During 2018 and 2019, we successfully obtained FDA clearance and CE Mark for our 3 millimeter diameter instruments, our Senhance ultrasonic system, our 3 millimeter and 5 millimeter hooks, andcustomers are provided with the Senhance articulating system. The 3 millimeter instruments enableright to purchase the leased Senhance System to be used for microlaparoscopic surgeries, allowing for tiny incisions. The ultrasonic system is an advanced energy device used to deliver controlled energy to ligate and divide tissue, while minimizing thermal injury to surrounding structures. The Senhance articulating system was launched in Europe in November 2019 and we are evaluating our pathway forward to launch such a system in the United States with a planned submission for US clearanceduring or at the end of 2020.the lease term ("Lease Buyout"). In the first quarter of 2021, we completed one Lease Buyout of a Senhance System.

On February 23, 2021, we changed our name from TransEnterix, Inc. to Asensus Surgical, Inc. as part of our strategy to utilize the Senhance System and ISU capabilities, along with our other augmented intelligence related offerings and instrumentation to unlock clinical intelligence to enable consistently superior outcomes and a new standard of surgery we are calling Performance-Guided Surgery. We believe our product offerings, and our digitization of the interface between the surgeon and the patient allows us to assist the surgeon in all aspects of laparoscopic surgery including:

●

Pre-operative - in what we call “intelligent preparation,” our machine learning models will take data from all the procedures done utilizing our current Senhance System with the ISU, such as tracking surgical motion and team interaction, to create a large and constantly improving database of surgeries and their outcomes to enable surgeons to best inform their approach and surgical setup.

●

Intra-operative – we believe the Senhance System provides perceptive real-time guidance for intra-operative tasks, allowing any surgeon performing a procedure with the Senhance System to perform multiple tasks and benefit from the collective knowledge and rules-based performance of thousands of other successful Senhance-based procedures. Not only will this provide the surgeon with a pathway to better outcomes, but we also believe it will ultimately help reduce the cognitive load of the surgeons.

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Table of Contents

In

●

Post-operative – by tapping into the vast amount of data captured during procedures, surgeons and operating room staff will be able to get actionable assessments of their performance giving them the information needed to improve performance over time. We intend to establish a new standard of analytics to improve not only the skills of all surgeons but move towards best-practice-sharing that bridges the global surgeon community.

We received FDA clearance in January 2020 we submitted an application to the FDA seeking clearance of the first machine vision system for robotic surgery (Intelligentour Intelligent Surgical Unit). The Company believesUnit, or ISU. We believe it is the first suchonly FDA submission seeking clearancecleared device for machine vision technology in abdominal robotic surgery. On March 13,September 23, 2020, we announced the Company announced that it hasfirst surgical procedures successfully completed using the ISU. In January 2021, we received FDA clearanceCE Mark for the Intelligent Surgical Unit.

ISU.

In February 2020, we received CE Mark for the Senhance System and related instruments for pediatric use indications in CE Mark territories.

In 2020, we obtained regulatory clearance for the Senhance ultrasonic system in both Taiwan and Japan. We also received clearance for the ISU in both the U.S. and Japan. Finally, in the EU, we expanded our claims for the Senhance System to include pediatric patients, allowing accessibility to more surgeons and patients, as well as expanding our potential market to include pediatric hospitals in Europe. We anticipate the robotic precision provided by the Senhance System, coupled with the already available 3mm instruments will prove to be an effective tool in surgery with smaller patients.

On October 17, 2019,July 28, 2021, the Company announced that it has engaged J.P. Morgan Securities LLCreceived FDA clearance for 5mm diameter articulating instruments, offering better access to assist the Board of Directors in considering strategic alternatives for the Company to enhance stockholder value, including, but not limited to a saledifficult-to-reach areas of the Company, a financinganatomy by providing two additional degrees of the Company, a strategic partnership or collaboration or some other form of commercial relationship. In addition, the Company announced the implementation of a restructuring plan to reduce operating expenses as it continues the global market development of the Senhance platform.

On October 31, 2018, the Company acquired the assets, intellectual property and highly experienced multidisciplinary personnel of MST Medical Surgical Technologies, Inc., or MST, an Israeli-based medical device company.  Through this acquisition, the Company acquired MST’s AutoLap™ technology, one of the only image-guided robotic scope positioning systems with FDA clearance andfreedom. These instruments have previously received CE Mark. The Company believes MST’s image analytics technology will accelerate and drive meaningful Senhance System developments, and allow it to expand the Senhance System to add augmented, intelligent vision capability. On October 15, 2019, the Company announced the sale of certain AutoLap assets, as discussedMark for use in the "Sale of AutoLap Assets" section below.

The Company has also developed the SurgiBot System, a single-port, robotically enhanced laparoscopic surgical platform. In December 2017, the Company entered into an agreement with Great Belief International Limited, or GBIL, to advance the SurgiBot System towards global commercialization. The agreement transferred ownership of the SurgiBot System assets, while the Company retained the option to distribute or co-distribute the SurgiBot System outside of China. GBIL intends to have the SurgiBot System

manufactured in China and obtain Chinese regulatory clearance from the China Food and Drug Administration while entering into a nationwide distribution agreement with China National Scientific and Instruments and Materials Company for the Chinese market. The agreement provides the Company with proceeds of at least $29 million, of which $15 million has been received to date.  The remaining $14.0 million, representing minimum royalties, will be paid beginning at the earlier of receipt of Chinese regulatory approval or March 2023.

EU.

The Company believes that future outcomes of minimally invasive laparoscopic surgery will be enhanced through its combination of more advanced tools and robotic functionality, which are designed to: (i) empower surgeons with improved precision, dexterity and visualization; (ii) improve patient satisfaction and enable a desirable post-operative recovery; and (iii) provide a cost-effective robotic system, compared to existing alternatives today, for a wide range of clinical indications.

From our inception, we devoted a substantial percentage of our resources to research and development and start-up activities, consisting primarily of product design and development, clinical studies, manufacturing, recruiting qualified personnel and raising capital.  We expect to continue to invest in research and development and market development as we implement our strategy.

Since inception, we have been unprofitable. As of December 31, 2019,2021, we had an accumulated deficit of $663.6$785.4 million.

Due to a decline in market conditions and changes in our forecast, the Company tested its goodwill and in-process research & development, or IPR&D, for potential impairment as of September 30, 2019. During the third quarter of 2019, the Company determined that the carrying value of both its goodwill and IPR&D were impaired, and recorded impairment charges of $79.0 million and $7.9 million, respectively.

We operate in one business segment.

On December 11, 2019, following receipt of approval from stockholders at a special meeting of stockholders held on the same day,

Financing Transactions

During late 2020 and 2021, the Company filed an amendment to our Amended and Restated Certificate of Incorporation to effectengaged in a reverse stock split of the Company’s common stock at a ratio of one-for-thirteen, or the Reverse Stock Split. The Company’s common stock began trading on a split-adjusted basis on NYSE American on the morning of December 12, 2019. No fractional shares were issued in connection with the Reverse Stock Split. Instead, the Company rounded up each fractional share resulting from the reverse stock split to the nearest whole share. As a result of the Reverse Stock Split, the Company’s outstanding common stock decreased from approximately 261.9 million shares to approximately 20.2 million shares (without giving effect to the rounding up for each fractional share).

Unless otherwise noted, all share and per share data referenced in this Annual Report have been retroactively adjusted to reflect the Reverse Stock Split. Certain amounts in the financial statements, the notes thereto, and elsewhere in this Annual Report, may be slightly different than previously reported due to rounding of fractional shares as a result of the Reverse Stock Split.

Restructuring

Despite the number of advances and regulatory clearances received in 2018 and 2019, the Company’s Senhance System sales in 2019 were disappointing. Adoption of new technologies, particularly for capital intensive devices such as the Senhance System can be slow and uneven as market development and commercial development is time-consuming and expensive. The Company has determinedequity financing transactions to refocusfund its resources and efforts in 2020 on market development activities to increase awareness of:

the benefits of the use of the Senhance System in laparoscopic surgery;

the digitization of high volume procedures using the Senhance System;

the indications for use, including pediatric indications of use in CE Mark territories;

the overall cost efficiency of the Senhance System

We intend to focus on markets with high utilization of laparoscopic technique, including Japan, Western Europe and the United States. Our focus will be on (1) increasing the number of placements of the Senhance System, not necessarily through sales, but through leasing arrangements, (2) increasing the number of procedures conducted using the Senhance System quarter over quarter, and (3) solidifying key opinion leader support and publications related to the use of the Senhance System in laparoscopic procedures. During this period we will not focus on revenue targets, especially in the United States.

During the fourth quarter of 2019, we announced the implementation of a restructuring plan to reduce operating expenses as we continue the global market development of the Senhance platform. Under the restructuring plan, we reduced headcount primarily in the sales and marketing functions and determined that the carrying value of our inventory exceeded the net realizable value due

to a decrease in expected sales. The restructuring charges amounted to $8.8 million, of which $7.4 million was an inventory write down and was included in cost of product revenue and $1.4 million related to employee severance costs and was included as restructuring and other charges in the consolidated statements of operations and comprehensive loss, during the fourth quarterextend its cash reach to provide capital to progress its strategy. These financings included:

●

October 2020 At-the-Market Offering. On October 9, 2020, the Company filed a prospectus supplement relating to an at-the-market offering with Cantor Fitzgerald & Co., or Cantor, pursuant to which the Company could sell from time to time, at its option, up to an aggregate of $40.0 million of shares of the Company’s common stock through Cantor as sales agent, pursuant to the 2019 Sales Agreement, referred to as the “2020 ATM Offering”. The Company terminated this agreement in January 2021.

●

January 2021 Public Offering. On January 29, 2021, the Company completed an underwritten public offering of 26,545,832 shares of its common stock, including the underwriter’s full exercise of an over-allotment option on February 1, 2021, at the public offering price of $3.00 per share, generating net proceeds of approximately $73.4 million.

●

January 2021 Registered Direct Purchase Agreement. On January 12, 2021, the Company sold in a registered direct offering 25,000,000 shares of common stock at a purchase price per share of $1.25 for aggregate gross proceeds of $31.25 million, and net proceeds of $28.6 million.

●

2021 At-the-Market Offering. On May 19, 2021, we entered into a Controlled Equity OfferingSM Sales Agreement with Cantor, Robert W. Baird & Co. Incorporated and Oppenheimer & Co. Inc., as our sales agents, relating to an at-the-market offering of up to an aggregate of $100,000,000 of shares of our common stock, referred to as the “2021 ATM Offering”.

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Table of 2019. Future payments under the restructuring plan are expected to conclude in 2020.

During March 2020, we continued our restructuring with additional headcount reductions which resulted in $0.8 million related to severance costs which are expected to be paid in 2020 and 2021.

Contents

Debt Transactions

On May 23, 2018, the Company and its domestic subsidiaries, as co-borrowers, entered into a Loan and Security Agreement, or the Hercules Loan Agreement, with several banks and other financial institutions or entities from time to time party to the Loan Agreement, or collectively, the Lender, and Hercules Capital, Inc., as administrative agent and collateral agent, or the Agent. Under the Hercules Loan Agreement, the Lender agreed to make certain term loans to the Company in the aggregate principal amount of up to $40.0 million. Funding of the first $20.0 million tranche occurred on May 23, 2018, or the Initial Funding Date. On October 23, 2018, the Lender funded the second tranche of $10.0 million under the Hercules Loan Agreement.  The Company was entitled to make interest-only payments until December 1, 2020, and at the end of the interest-only period, the Company would have been required to repay the term loans over an eighteen-month period based on an eighteen-month amortization schedule, with a final maturity date of June 1, 2022. The term loans were required to be repaid if the term loans are accelerated following an event of default.

On May 7, 2019, the parties executed an amendment to the Hercules Loan Agreement, or the Hercules Amendment, effective April 30, 2019, under which the Hercules Loan Agreement was amended to eliminate the availability of the Tranche III loan facility, add a new Tranche IV loan facility of up to $20.0 million, revise certain financial covenants and make other changes.  The availability of advances under the Tranche IV Loan was not milestone-based, rather the Company could request advances in minimum $5.0 million increments at any time during the period from July 1, 2019 through December 31, 2020, subject to the funding discretion of the Lender. The monthly trailing six month net revenue financial covenant was amended to be tested quarterly and to change the projected net revenue percentage to be met for the six months ending on the last day of each fiscal quarter.  If such quarterly financial covenant was not achieved as of the last day of any fiscal quarter, as tested on the thirtieth day after quarter end, the Company must have complied with the waiver conditions in the Hercules Amendment from such test date until the next quarterly test date. The Amendment was treated as a debt modification for accounting purposes.

In connection with the entry into an agreement to sell certain AutoLap assets, the Company commenced discussions with the Agent in order to obtain the required consent of the Agent and the Lender with respect to such AutoLap assets sale. In connection with obtaining such consent, the Company entered into the Consent and Second Amendment to the Loan and Security Agreement on July 10, 2019, or the Hercules Second Amendment. Under the Hercules Second Amendment, in consideration for the consent to the sale of, and the release of the Lender’s security interest on, the AutoLap assets, the Company reduced its indebtedness under the Hercules Loan Agreement by repaying $15.0 million of the $30.0 million of outstanding indebtedness thereunder, without any prepayment penalties, amendment fee or acceleration of the end of term charges, and received adjustments to the quarterly financial covenants and related waiver conditions to reflect the decreased outstanding indebtedness. The Amendment was treated as a debt modification for accounting purposes.

Under the Hercules Second Amendment, the applicable waiver condition for fiscal year 2019 was changed to maintenance of unrestricted cash equal to $7.0 million.

The term loans bore interest at a rate equal to the greater of (i) 9.55% per annum, or the Fixed Rate, and (ii) the Fixed Rate plus the prime rate (as reported in The Wall Street Journal) minus 5.00%. On the Initial Funding Date, the Company was obligated to pay a facility fee of $0.4 million, recorded as a debt discount. The Company also incurred other debt issuance costs totaling $1.1 million in conjunction with its entry into the Hercules Loan Agreement. In addition, the Company was permitted to prepay the term loans in full at any time, with a prepayment fee of 3.0% of the outstanding principal amount of the loan in the first year after the Initial Funding Date, 2.0% if the prepayment occurred in the second year after the Initial Funding Date and 1.0% thereafter. Upon prepayment of the term loans in full or repayment of the term loans at the maturity date or upon acceleration, the Company was required to pay a final fee of 6.95% of the aggregate principal amount of term loans funded. The final payment fee was accreted to interest expense over the life of the term loan and included within notes payable on the consolidated balance sheet.

The Company’s obligations under the Hercules Loan Agreement were guaranteed by all current and future material foreign subsidiaries of the Company and were secured by a security interest in all of the assets of the Company and their current and future domestic subsidiaries and all of the assets of their current and future material foreign subsidiaries, including a security interest in the intellectual property. The Hercules Loan Agreement contained customary representations and covenants that, subject to

exceptions, restricted the Company’s and its subsidiaries’ ability to do the following, among other things: declare dividends or redeem or repurchase equity interests; incur additional indebtedness and liens; make loans and investments; engage in mergers, acquisitions, and asset sales; transact with affiliates; undergo a change in control; add or change business locations; and engage in businesses that were not related to its existing business. Under the terms of the Hercules Loan Agreement, the Company was required to maintain cash and/or investment property in accounts which perfected the Agent’s first priority security interest in such accounts in an amount equal to the lesser of (i) (x) 120% of the then-outstanding principal balance of the term loans, including accrued interest and any other fees payable under the agreement to the extent accrued and payable plus (y) an amount equal to the then-outstanding accounts payable of the Company on a consolidated basis that were more than 90 days past due and (ii) 80% of the aggregate cash of the Company and its consolidated subsidiaries. The Agent was granted the option to invest up to $2.0 million in any future equity offering broadly marketed by the Company to investors on the same terms as the offering to other investors.

On November 4, 2019, the Company entered into a payoff letter with the Agent pursuant to which the Company terminated the Hercules Loan Agreement, as amended. The Company determined it was in the best interests of the Company to pay down the debt and terminate the Hercules Agreement to simplify the Company’s balance sheet and provide additional flexibility as the Board of Directors continued to evaluate strategic and financial alternatives for the Company. Under the payoff letter, the Company repaid all amounts owed under the Hercules Loan Agreement totaling approximately $16.4 million, which included end of term fees of $1.4 million, and Hercules released all security interests held on the assets of the Company and its subsidiaries, including, without limitation, on the intellectual property assets of the Company. The Company recognized a loss of $1.0 million on the extinguishment of notes payable, which is included in interest expense on the consolidated statement of operations and comprehensive loss for the year ended December 31, 2019.

In connection with its entrance into the Hercules Loan Agreement in 2018, the Company repaid its existing loan and security agreement, or the Innovatus Loan Agreement, with Innovatus Life Sciences Lending Fund I, LP, or Innovatus. The Company recognized a loss of $1.4 million on the extinguishment of notes payable which was included in interest expense on the consolidated statements of operations and comprehensive loss for the year ended December 31, 2018. The Company paid $0.7 million in final payment obligations and $0.3 million in prepayment fees under the Innovatus Loan Agreement upon repayment. For a description of the Innovatus Loan Agreement, see “Notes to Consolidated Financial Statements – Note 13. Notes Payable.”

Financing Transactions

May 2017 Public Offering

On April 28, 2017, we entered into an underwriting agreement with Stifel, Nicolaus & Company, Incorporated, or Stifel, relating to an underwritten public offering of an aggregate of 24.9 million Units, each consisting of approximately 0.077 shares of the Company’s Common Stock, a Series A Warrant to purchase approximately 0.077 shares of Common Stock and a Series B Warrant to purchase approximately 0.058 shares of Common Stock at an offering price to the public of $1.00 per Unit. Certain of the Company’s officers, directors and existing stockholders purchased approximately $2.5 million of Units in the public offering. The closing of the public offering occurred on May 3, 2017. The net proceeds to the Company from the offering were approximately $23.2 million, prior to any exercise of the Series A Warrants or Series B Warrants, after deducting underwriting discounts and commissions and estimated offering expenses paid by the Company. The net proceeds to the Company from the exercise of all of the Series A Warrants and the Series B Warrants exercised prior to December 31, 2019 were approximately $37.6 million.

Each Series A Warrant had an initial exercise price of $13.00 per share and was able to be exercised at any time beginning on the date of issuance, and from time to time thereafter, through and including the first anniversary of the issuance date, unless terminated earlier as provided in the Series A Warrant. Receipt of 510(k) clearance for the Senhance System on October 13, 2017, triggered the acceleration of the expiration date of the Series A Warrants to October 31, 2017. As of December 31, 2017, all of the Series A Warrants had been exercised.

Each Series B Warrant had an initial exercise price of $13.00 per share and may be exercised at any time beginning on the date of issuance and from time to time thereafter through and including the fifth anniversary of the issuance date, or by May 3, 2022. As of December 31, 2019, Series B Warrants representing approximately 1.2 million shares had been exercised.

The exercise prices and the number of shares issuable upon exercise of the outstanding Series B Warrants are subject to adjustment upon the occurrence of certain events, including, but not limited to, stock splits or dividends, business combinations, sale of assets, similar recapitalization transactions, or other similar transactions. The Series B Warrants are subject to adjustment in the event that the Company issues or is deemed to issue shares of common stock for less than the then applicable exercise price of the Series B Warrants. Such adjustments occurred in August, September, November, and December 2019 due to sales under the 2019

Sales Agreement and the Underwriting Agreement at prices less than the then applicable exercise price of the Series B Warrants. See "Notes to Consolidated Financial Statements - Note 16 Warrants." The exercisability of the Series B Warrants may be limited if,

upon exercise, the holder or any of its affiliates would beneficially own more than 4.99% of our common stock. If, at any time Series B Warrants are outstanding, any fundamental transaction occurs, as described in the Series B Warrants and generally including any consolidation or merger into another corporation, the consummation of a transaction whereby another entity acquires more than 50% of the Company’s outstanding voting stock, or the sale of all or substantially all of its assets, the successor entity must assume in writing all of the obligations to the Series B Warrant holders. Additionally, in the event of a fundamental transaction, each Series B Warrant holder will have the right to require the Company, or its successor, to repurchase the Series B Warrants for an amount of cash equal to the Black-Scholes value of the remaining unexercised portion of such Series B Warrants.

On December 15, 2017, we filed a registration statement on Form S-3 (File No. 333-222103) to register shares of common stock underlying outstanding Series B Warrants previously issued as part of the Company’s May 3, 2017 public offering.  The new registration statement replaced the registration statement on Form S-3 that expired on December 19, 2017 with respect to these securities.  On January 26, 2018, we filed an Amendment No. 1 to such registration statement on Form S-3 to update the information in the registration statement.  The registration statement covers up to 736,914 shares of common stock underlying the then-outstanding Series B Warrants.  This registration statement on Form S-3 was declared effective on January 29, 2018. On February 7, 2020, we filed a new registration statement (File No. 333-236337) to register 2,500,000 additional shares of common stock to cover the “down-round protection” adjustments made to the Series B Warrant Shares pursuant to sale prices below the then-current exercise price. This registration statement on Form S-3 was declared effective on February 13, 2020.

On February 24, 2020, the Company entered into a Series B Warrants Exchange Agreement, or the Exchange Agreement, with holders of Series B Warrants. Under the terms of the Exchange Agreement, each Series B Warrant was canceled in exchange for 0.61 of a share of common stock. The Warrant holders participating in the exchange held 3,373,900 of the 3,638,780 Series B Warrants then outstanding, and received an aggregate of 2,040,757 shares of common stock, leaving 264,880 Series B Warrants outstanding to acquire 160,226 shares of common stock.

Lincoln Park Purchase Agreement

On February 10, 2020, we entered into a purchase agreement, or the LPC 2020 Purchase Agreement, with Lincoln Park, pursuant to which we have the right to sell to Lincoln Park up to an aggregate of $25,000,000 in shares of our common stock, subject to certain limitations and conditions set forth in the LPC 2020 Purchase Agreement, including a limitation on the

number of shares of common stock we can put to LPC and the pricing parameters for the sales.   In consideration for entering into the LPC 2020 Purchase Agreement, we issued to Lincoln Park 343,171 shares of Common Stock as commitment shares. We also committed to issue up to an additional 171,585 shares of Common Stock to Lincoln Park on a pro rata basis based on the number of shares Common Stock purchased by Lincoln Park pursuant to the LPC 2020 Purchase Agreement.

At-the-Market Offerings

On December 28, 2018, we entered into an At-the-Market Equity Offering Sales Agreement, or the 2018 Sales Agreement, with Stifel, Nicolaus & Company, Incorporated, or Stifel, under which we could offer and sell, through Stifel, up to approximately $75.0 million in shares of common stock in an at-the-market offering, or the 2018 ATM Offering. All sales of shares were to be made pursuant to an effective shelf registration statement on Form S-3 filed with the SEC. Stifel would have received a commission of approximately 3% of the aggregate gross proceeds received from all sales of common stock under the 2018 Sales Agreement. Effective August 12, 2019, the Company terminated the 2018 Sales Agreement. The Company sold no shares of its common stock under the 2018 Sales Agreement.

On August 12, 2019, the Company entered into a Controlled Equity Offering Sales Agreement, or the 2019 Sales Agreement, with Cantor Fitzgerald & Co., or Cantor, pursuant to which the Company may sell from time to time, at its option, up to an aggregate of $25.0 million shares of the Company’s common stock, through Cantor, as sales agent, or the 2019 ATM Offering. Pursuant to the 2019 Sales Agreement, sales of the common stock were made under the Company’s previously filed and currently effective Registration Statement on Form S-3. The aggregate compensation payable to Cantor was 3.0% of the aggregate gross proceeds from each sale of the Company’s common stock. The Company raised gross proceeds of $7.2 million under the 2019 ATM Offering and net proceeds of $7.0 million during the year ended December 31, 2019, and an additional $11.6 million of gross proceeds and $11.2 million of net proceeds to date in 2020.

On September 4, 2019, the Company entered into an Underwriting Agreement, or the Underwriting Agreement, with Cantor. Subject to the terms and conditions of the 2019 Underwriting Agreement, the Company sold to Cantor, in a firm commitment underwritten offering, 2,153,846 shares of the Company’s common stock, or the Firm Commitment Offering. In addition, the Company granted Cantor a 30-day option to purchase 323,077 of additional shares of common stock. The Company raised $18.8 million in gross proceeds under this offering. The option to purchase additional shares of common stock was not exercised.

The following table summarizes the total sales2021, under the 20192020 and 2021 ATM Offering and Firm Commitment Offering for the period indicatedOfferings are as follows (in thousands except for share and per share amounts):

	2019				Firm Commitment
	ATM Offering				Offering
	For the year ended				For the year ended				Total
	December 31, 2019				December 31, 2019				December 31, 2019
Total shares of common stock sold	1,374,686				2,153,846				3,528,532
Average price per share	$	5.23			$	8.73			$	7.37
Gross proceeds	$	7,193			$	18,796			$	25,989
Commissions earned by Cantor	$	212			$	—			$	212
Net Proceeds	$	6,981			$	18,796			$	25,777

Since January 1,

		Year Ended December 31, 2021
Total shares of common stock sold			20,237,045
Average price per share		$	1.53
Gross proceeds		$	30,943
Commisssion earned by Sales Agents		$	928
Net proceeds		$	30,015

●

2021 Exercise of Warrants. During 2021, certain holders of our Series B, C and D warrants to purchase shares of our common stock exercised such warrants for aggregate proceeds to the Company of $30.6 million.

Paycheck Protection Program

During 2020, the Company has raised,received an unsecured non-recourse loan of $2.8 million under the 2019 ATM Offering, net proceeds of $11.2 million through the sale of 6,687,846 shares of common stock.

2020 Public Offering

On March 10, 2020, the Company closed an underwritten public offering (the "2020 Public Offering") with Ladenburg Thalmann & Co. Inc. as underwriter and sold an aggregate of 14,121,766 Class A Units at a public offering price of $0.68 per Class A Unit and 7,937,057 Class B Units at a public offering price of $0.68 per Class B Unit. Each Class A Unit consists of one share of the Company’s common stock, one warrant to purchase one share of common stock that expires on the first anniversary of the date of issuance (the "Series C Warrants"), and one warrant to purchase one share of common stock that expires on the fifth anniversary of the date of issuance (the "Series D Warrants"). Each Class B Unit consists of one share of Series A Convertible Preferred Stock, par value $0.01 per share (the "Series A Preferred Stock"), convertible into one share of common stock, a Series C Warrant to purchase one share of common stock and a Series D Warrant to purchase one share of common stock. The Class A Units and Class B Units have no stand-alone rights and were not certificated or issued as stand-alone securities. The shares of common stock, Series A Preferred Stock, Series C Warrants and Series D Warrants are immediately separable. In addition, the underwriter for the public offering exercised an overallotment option allowing it to purchase 3,308,823 additional Series C Warrants and 3,308,823 additional Series D Warrants at the closing.

Each Series C Warrant included in the Units has an exercise price of $0.68 per share, and each Series D Warrant included in the Units has an exercise price of $0.68 per share. The Series C Warrants and the Series D Warrants are exercisable at any time on or after the date of issuance until their respective expiration dates.

The exercise prices and the number of shares issuable upon exercise of each of the Series C Warrants and Series D Warrants are subject to adjustment upon the occurrence of stock splits or dividends, business combinations, similar recapitalization transactions, or other similar transactions. The exercisability of the Series C Warrants and Series D Warrants may be limited if, upon exercise, the holder or any of its affiliates would beneficially own more than 4.99% of the Common Stock. If, at any time Series C Warrants or Series D Warrants are outstanding, any fundamental transaction occurs, as described in the Warrants and generally including any consolidation or merger into another corporation, the consummation of a transaction whereby another entity acquires more than 50% of the Company’s outstanding voting stock, or the sale of all or substantially all of its assets, the successor entity must assume in writing all of the obligations to the holders of the Series C Warrants and Series D Warrants. Additionally, in the event of a fundamental transaction, each holder of the Series C Warrants and Series D Warrants will have the right to require the Company, or its successor, to repurchase the Series C Warrants and Series D Warrants it holds for an amount of cash equal to the Black-Scholes value of the remaining unexercised portion of such Series C Warrants or Series D Warrants, as applicable.

The shares of Series A Preferred Stock rank on par with the shares of the common stock with regard to dividend rights and distributions of assets upon liquidation, dissolution or winding up of the Company. With certain exceptions, as described in the Series A Certificate of Designation, the shares of Series A Preferred Stock have no voting rights. However, as long as any shares of Series A Preferred Stock remain outstanding, the Series A Certificate of Designation provides that the Company shall not, without the affirmative vote of holders of a majority of the then outstanding shares of Series A Preferred Stock, (a) alter or change adversely the powers, preferences or rights given to the Series A Preferred Stock or alter or amend the Series A Certificate of Designation, (b) amend the Company’s certificate of incorporation or other charter documents in any manner that adversely affects

any rights of the holders of Series A Preferred Stock, (c) increase the number of authorized shares of Series A Preferred Stock, or (d) enter into any agreement with respect to any of the foregoing.

Each share of Series A Preferred Stock is convertible at any time at the holder’s option into one share of common stock, which conversion ratio will be subject to adjustment for stock splits, stock dividends, distributions, subdivisions and combinations and other similar transactions as specified in the Series A Certificate of Designation. Notwithstanding the foregoing, the Series A Certificate of Designation further provides that the Company shall not effect any conversion of the shares of Series A Preferred Stock, with certain exceptions, to the extent that, after giving effect to an attempted conversion, the holder of shares of Series A Preferred Stock (together with such holder’s affiliates and any persons acting as a group together with such holder or any of such holder’s affiliates) would beneficially own a number of shares of Common Stock in excess of 4.99% (or 9.99% at the election of the holder prior to the date of issuance) of the shares of Common Stock then outstanding. At the holder’s option, upon notice to the Company, the holder may increase or decrease this beneficial ownership limitation not to exceed 9.99% of the shares of Common Stock then outstanding, with any such increase becoming effective upon 61 days’ prior notice to the Company.

The net proceeds to the Company from the 2020 Public Offering were approximately $13.4 million, after deducting underwriting discounts and commissions and estimated offering expenses payable by the Company.

MST Acquisition and Related Transactions

Purchase Agreement

On September 23, 2018, the Company entered into an Asset Purchase Agreement, or the MST Purchase Agreement, with MST Medical Surgery Technologies Ltd., an Israeli private company, or MST, and two of the Company’s wholly owned subsidiaries, as purchasers of the assets of the Seller, including the intellectual property assets, or collectively, the Buyers. The closing of the transactions contemplated by the MST Purchase Agreement occurred on October 31, 2018, pursuant to which the Company acquired MST's assets consisting of intellectual property and tangible assets related to surgical analytics with its core image analytics technology designed to empower and automate the surgical environment, with a focus on medical robotics and computer-assisted surgery. The core technology acquired under the MST Purchase Agreement is a software-based image analytics information platform powered by advanced visualization, scene recognition, artificial intelligence, machine learning and data analytics.

Under the terms of the MST Purchase Agreement, at the closing the Buyers purchased substantially all of the assets of MST. The acquisition price consisted of two tranches. At or prior to the closing of the transaction the Buyers paid $5.8 million in cash and approximately 242,310 shares of the Company’s common stock, or the Initial Shares. A second tranche of $6.6 million in additional consideration was payable in cash, stock or cash and stock, at the discretion of the Company, within one year after the closing date.

On August 7, 2019, the Company notified MST that the Company would satisfy the payment of additional consideration of $6.6 million due to MST under the MST Purchase Agreement by issuing shares of the Company's common stock, as permitted by the MST Purchase Agreement. The number of shares issued to MST as the additional consideration was 370,423 shares of common stock, or the Additional Consideration Shares. In accordance with thePaycheck Protection Program (PPP) provisions of the MST Purchase Agreement,Coronavirus Aid, Relief, and Economic Security Act (the CARES Act). The Company accounted for the number of Additional Consideration Shares was calculated basedPPP promissory note as debt within notes payable on the volume-weighted averageconsolidated balance sheet. As of December 31, 2020, $1.6 million of the closing prices of the Company's common stockpromissory note was classified as quoted on the NYSE American for the ninety (90) day period ended August 6, 2019.

Sale of AutoLap Assets

long-term and $1.2 million was classified as current. On July 3, 2019,June 10, 2021, the Company entered into a System Sale Agreement with GBIL to sell certain assets related toreceived notification from the AutoLap technology. On October 15, 2019,Small Business Administration that the Company amended the prior AutoLap Sale Agreement with GBIL. Pursuant to the amended agreement the Company sold the AutoLap laparoscopic vision system, or AutoLap,principal amount of $2.8 million and related assets to GBIL. The assets include inventory, spare parts, production equipment, testing equipment and certain intellectual property specifically related to the AutoLap. The purchase priceinterest had been forgiven. Gain on extinguishment of debt of $2.8 million was $17.0 million, all of which was received in 2019 in the form of $16 million in cash and a payment by GBIL of $1.0 million to settle certain Company obligations in China. Under the amended AutoLap Agreement, the Company entered into a cross‑license agreement with GBIL to retain rights to use any AutoLap-related intellectual property sold to GBIL, and to non-exclusively license additional intellectual property to GBIL. The Company recorded a $16 million gain on the sale of the AutoLap assets duringrecognized for the year ended December 31, 2019, which represented2021 on the proceeds received in excessconsolidated statement of the carrying valueoperations and comprehensive loss.  

Results of the assets, less contract costs.

Registration Rights and Lock-Up Agreements

In connection with the closing under the MST Purchase Agreement, or the MST Acquisition, the Company and MST entered into a lock-up agreement dated October 31, 2018, or the Lock-Up Agreement, pursuant to which MST agreed, subject to certain exceptions, not to sell, transfer or otherwise convey any of the Initial Shares for six months following the closing date of the MST Purchase Agreement.  As of the date of this Annual Report, 75% of the Initial Shares are free from the lock-up restrictions. For the remaining 25% of the Initial Shares, the Lock-Up Agreement provides that all of the Initial Shares will be released from the lock-up restrictions on May 1, 2020, or earlier upon certain other conditions.   The Additional Consideration Shares were released from the lock-up restrictions on February 7, 2020.

In connection with the MST Acquisition, the Company also entered into a Registration Rights Agreement, dated as of October 31, 2018, with MST, pursuant to which the Company agreed to register the Initial Shares and Additional Consideration Shares, or collectively, the Securities Consideration, such that such Securities Consideration is eligible for resale following the end of the lock-up periods described above. All of the Securities Consideration is eligible to be sold by the holders without restriction

under Rule 144, therefore the Registration Rights Agreement has expired.

Senhance Acquisition and Related Transactions

Membership Interest Purchase Agreement and Amendment

On September 21, 2015, the Company announced that it had entered into a Membership Interest Purchase Agreement, dated September 18, 2015, or the Purchase Agreement, with Sofar S.p.A., or Sofar, as the seller, Vulcanos S.r.l., as the acquired company, and TransEnterix International, Inc., a wholly owned subsidiary of the Company as the Buyer. The closing of the transactions contemplated by the Purchase Agreement occurred on September 21, 2015. The Buyer acquired all of the membership interests of the acquired company from Sofar, and changed the name of the acquired company to TransEnterix Italia S.r.l. On the closing date, pursuant to the Purchase Agreement, the Company completed the strategic acquisition from Sofar of all of the assets, employees and contracts related to the advanced robotic system for minimally invasive laparoscopic surgery now known as the Senhance System, or the Senhance Acquisition.

Under the terms of the Purchase Agreement, the consideration consisted of the issuance of 1,195,647 shares of the Company’s common stock, or the Sofar Consideration, and approximately $25.0 million U.S. Dollars and €27.5 million Euro in cash consideration, or the Cash Consideration. The Sofar Consideration was issued in full at closing of the acquisition; the Cash Consideration was or will be paid in four tranches, with U.S. $25.0 million paid at closing and the remaining Cash Consideration of €27.5 million to be paid in three additional tranches based on achievement of negotiated milestones. On December 30, 2016, the Company and Sofar entered into an Amendment to the Purchase Agreement to restructure the terms of the second tranche of the Cash Consideration. Under the Amendment, the second tranche was restructured to reduce the contingent cash consideration by €5.0 million in exchangeOperations for the issuance of 286,360 shares of the Company’s common stock with an aggregate fair market value of €5.0 million, which were issued on January 4, 2017. The price per share was $18.252 and was calculated based on the average of the closing prices of the Company’s common stock on ten consecutive trading days ending one day before the execution of the Amendment. 

As ofYears Ended December 31, 2019, the Company has paid all Cash Consideration due under the second tranche2021 and approximately €2.4 million of the €2.5 million due under the fourth tranche. The third tranche, consisting of €15.0 million, has not yet been paid

and is subject to certain sales revenue milestones. The fourth tranche of the Cash Consideration is payable in installments by December 31 of each year as reimbursement for certain debt payments made by Sofar under an existing Sofar loan agreement in such year.

The Purchase Agreement contains customary representations and warranties of the parties and the parties have customary indemnification obligations, which are subject to certain limitations described further in the Purchase Agreement.

Registration Rights

2020

Revenue

In connection with the Senhance Acquisition, we also entered into a Registration Rights Agreement, dated as of September 21, 2015, with Sofar, pursuant to which we agreed to register the Securities Consideration shares for resale following the end of the lock-up periods. The resale Registration Statement has been filed and is effective.

Results of Operations

Revenue

In 2019,2021, our revenue consisted of product and service revenue primarily resulting from the sale of a total of fourtwo Senhance Systems, one Lease Buyout, ongoing Senhance System leasing payments, sales of instruments and accessories, and services for Senhance Systems sold or placed in Europe, (one)Asia and Asia (three),the U.S. In 2020, our revenue consisted of Senhance System leasing payments, and relatedsales of instruments, accessories, and services for current and prior year system sales. The

Company also recognized $1.3 million during the year ended December 31, 2019 related to a 2017 system sale for which revenue was deferred until the first clinical use of the system, which occurred in the second quarter of 2019. In 2018, our revenue consisted of product and service revenue primarily resulting from the sale of a total of fifteen Senhance Systems sold in Europe, (eleven), Asia (one) and the United States (three), and related instruments, accessories and services.

U.S. in prior periods.

Product, instrument, and accessory revenue for the year ended December 31, 2019 decreased2021 increased to $7.1$6.7 million compared to $23.3$1.6 million for the year ended December 31, 2018.2020. The $16.2$5.1 million decreaseincrease was the result of the revenue recognized onderived primarily from the sale of fourtwo Senhance Systems and a Lease Buyout in 2021, versus fifteen in the prior year,2020 revenue driven by system leasing arrangements, as well as instruments and accessories.accessories sales. Services revenue for the year ended December 31, 2019 increased2021 decreased to $1.4$1.5 million from $0.8$1.6 million for the year ended December 31, 20182020 due to the increase intiming of the service contracts and number of Senhance Systems under service contracts.

We expect to experience some variability in the number and trend, and average selling price or leasing price of units soldour products given the early stage of commercialization of our products.

Cost of Revenue

Cost of revenue consists primarily of costs related to contract manufacturing, materials, and manufacturing overhead.overhead incurred internally to produce the products. Depreciation expense related to leased systems is included in the cost of revenue. Shipping and handling costs incurred by the Company are included in the cost of revenue.  We expense all inventory obsolescence provisions related to normal manufacturing changes as cost of revenue. The manufacturing overhead costs include the cost of quality assurance, material procurement, inventory control, facilities, equipment depreciation and operations supervision and management. We expect overhead costs as a percentage of revenues to become less significantdecline as our production volume increases. We expect cost of revenue to increase in absolute dollars to the extent our revenues grow and as we continue to invest in our operational infrastructure to support anticipated growth.

Product cost for the year ended December 31, 20192021 increased to $16.4$8.0 million as compared to $14.2$2.3 million for the year ended December 31, 2018.2020. This $2.2$5.7 million increase over the prior year period was primarily the result of increased materials cost of $6.2 million, which is driven by increased system placements in the $7.4current year. The change also includes a decrease in the inventory reserve of $0.5 million. The decrease in the inventory reserve was driven by the sale of previously reserved inventory. Also contributing to the increase were increased facility costs of $0.1 million inventory write-down under our restructuring plan,and increased freight costs of $0.1 million offset by decreased personnel costs totaling $1.7 million,of $0.6 million in increased standardand decreased supplies cost variances, $0.3 million in increased travel, freight, and supplies costs, and a $1.5 million reserve for obsolete inventory offset by $9.1 million in lower product costs caused by decreased sales.of $0.1 million.

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Table of Contents

Service cost for the year ended December 31, 20192021 increased to $4.3$3.1 million as compared to $2.0$2.9 million for the year ended December 31, 2018.2020. This $2.3$0.2 million increase over the prior year period was the resultprimarily related to $0.3 million in increased supplies and $0.1 million in increased consulting costs offset by $0.1 million in reduced personnel costs, and $0.1 million in reduced facilities costs. Cost of increasedrevenue exceeds revenue primarily due to part replacements under maintenance plans, which are expensed when incurred, along with salaries for the field service costs of $1.7 million for repairs and maintenance on a greater cumulative number of installed Senhance Systems, and a $0.6 million increase in personnel costs due to increased headcount.

teams.

Research and Development

Research and development, or R&D, expenses primarily consist of engineering, product development and regulatory expenses incurred in the design, development, testing and enhancement of our products and legal services associated with our efforts to obtain and maintain broad protection for the intellectual property related to our products. In future periods, we expect R&D expenses to increase moderately but at a reduced rate due to the restructuring, as we continue to invest in additional regulatory approvals as well as new products, instruments, and accessories to be offered with the Senhance System. R&D expenses are expensed as incurred.

R&D expenses for the year ended December 31, 20192021 increased 3%16% to $22.5$19.3 million as compared to $21.8$16.6 million for the year ended December 31, 2018.2020. The $0.7$2.7 million increase primarily relates to higherincreased personnel costs totalingof $2.0 million, increased supplies costs of $0.3 million, increased consulting costs of $0.3 million and increased facility costs of $0.1 million.

Sales and Marketing

Sales and marketing expenses include costs for sales and marketing personnel, travel, demonstration product, market development, physician training, tradeshows, marketing clinical studies and consulting expenses. We expect sales and marketing expenses to increase moderately as we refocus our resources and efforts on market development activities.

Sales and marketing expenses for the year ended December 31, 2021 increased 2% to $13.4 million compared to $13.1 million for the year ended December 31, 2020. The $0.3 million increase was primarily related to increased consulting costs of $0.2 million, increased software costs of $0.2 million, increased travel costs of $0.1 million, increased supplies expense of $0.1 million, and increased other costs of $0.2 million offset by decreased depreciation expense of $0.4 million and decreased personnel costs of $0.1 million.

General and Administrative

General and administrative expenses consist of personnel costs related to the executive, finance and human resource functions, as well as professional service fees, legal fees, accounting fees, insurance costs, and general corporate expenses. We expect general and administrative costs to remain flat in future periods.

General and administrative expenses for the year ended December 31, 2021 increased 37% to $19.3 million compared to $14.1 million for the year ended December 31, 2020. The $5.2 million increase was primarily due to increased personnel costs of $4.0 million, which is primarily driven by an increase in employee headcount and a $1.6 million increase in stock compensation expense. The change is also driven by increased shareholder meeting costs of $0.6 million, increased supplies expense of $0.2 million, increased product costs of $0.1 million, increased depreciation expense of $0.1 million, and increased other costs of $0.3 million, offset by decreased facilities costs of $0.1 million.

Amortization of Intangible Assets

Amortization of intangible assets for the year ended December 31, 2021 increased to $11.3 million compared to $10.8 million for the year ended December 31, 2020. The $0.5 million increase was primarily the result of a higher headcountEuro to Dollar exchange rate.

Change in Fair Value of Contingent Consideration

The change in fair value of contingent consideration in connection with the Senhance Acquisition described in the Product Overview section above was a $1.6 million decrease for the year ended December 31, 2021 compared to an increase of $2.9 million for the year ended December 31, 2020. The $4.5 million decrease was primarily due to changes in the Company's forecast of future product revenue.  

Other Income (Expense)

Other income (expense) for the year ended December 31, 2021 primarily related to the $2.8 million gain on extinguishment of debt from the PPP loan forgiveness and $1.3 million refund for the Employee Retention Tax Credit (ERTC), offset by a $2.0 million increase in the fair value of warrant liabilities recorded during the year.

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Income Tax (Expense) Benefit

Income tax expense of $0.2 million in the year ended December 31, 2021 consisted primarily of current income taxes related to profitable foreign jurisdictions in Japan, Israel, and the Netherlands.

Income tax benefit of $1.5 million in the year ended December 31, 2020, consisted primarily of taxes related to the amortization of purchase accounting intangibles in connection with the Italian taxing jurisdiction for Asensus Surgical Italia as a result of the MST acquisitionSenhance Acquisition.

Results of Operations for the Years Ended December 31, 2020 and 2019

Revenue

In 2020, our revenue consisted of Senhance System leasing payments, and sales of instruments, accessories, and services for Senhance Systems sold in Europe, Asia and the U.S. in prior periods. In 2019, our revenue consisted of product and service revenue primarily resulting from the sale of a total of four Senhance Systems in Europe (one) and Asia (three), and related instruments, accessories and services for current and prior year system sales. The Company also recognized $1.3 million during the year ended December 31, 2019 related to a 2017 system sale for which revenue was deferred until the first clinical use of the system, which occurred in the second quarter of 2019.

Product, instrument, and accessory revenue for the year ended December 31, 2020 decreased to $1.6 million compared to $7.1 million for the year ended December 31, 2019. The $5.5 million decrease was due to the 2020 revenue being derived primarily from system leasing arrangements, versus 2019 revenue driven by the sale of four Senhance Systems, as well as instruments and accessories. Services revenue for the year ended December 31, 2020 increased to $1.6 million from $1.4 million for the year ended December 31, 2019 due to the increase in the number of Senhance Systems under service contracts.

We expect to experience variability in the number and trend, and average selling price or leasing price of our products given the early stage of commercialization of our products.

Cost of Revenue

Product cost for the year ended December 31, 2020 decreased to $2.3 million as compared to $16.4 million for the year ended December 31, 2019. This $14.1 million decrease over the prior year period was primarily the result of decreased materials cost of $11.6 million, which is driven by fewer system placements compared to the prior period. This change includes an inventory write-down in the amount of $7.4 million under our restructuring plan during the year ended December 31, 2019. Also contributing to the decrease were lower personnel costs totaling $1.6 million, decreased facility costs totaling $0.3 million, decreased freight costs of $0.2 million, decreased travel costs of $0.2 million, and decreased supplies cost of $0.2 million.

Service cost for the year ended December 31, 2020 decreased to $2.9 million as compared to $4.3 million for the year ended December 31, 2019. This $1.4 million decrease over the prior year period was primarily related to $1 million in reduced supplies costs, $0.3 million in reduced travel expenses for field service engineers driven by the COVID-19 pandemic, and $0.1 million in reduced other costs. Cost of revenue exceeds revenue primarily due to part replacements under maintenance plans, which are expensed when incurred, along with salaries for the field service teams.

Research and Development

R&D expenses for the year ended December 31, 2020 decreased 26% to $16.6 million as compared to $22.5 million for the year ended December 31, 2019. The $5.9 million decrease primarily relates to decreased personnel costs of $3.7 million driven by a reduced headcount under our restructuring plan, decreased technology fees of $0.6 million, decreased supplies costs of $0.6 million, decreased travel costs of $0.5 million, decreased consulting costs of $0.4 million, decreased facility costs of $0.1 million, and decreased other costs of $0.2 million offset by $0.5 million in lower technology fees, $0.2 million in lower consulting costs, and $0.2 million in lowerincreased testing and validation costs. R&D expenses for the year ended December 31, 2019 also include an impairment of IPR&D in the amount of $7.9 million that is presented separately in the consolidated statement of operations and comprehensive loss for the year ended December 31, 2019.

Sales and Marketing

Sales and marketing expenses include costs for sales and marketing personnel, travel, demonstration product, market development, physician training, tradeshows, marketing clinical studies and consulting expenses. We expect sales and marketing expenses to decrease significantly as we refocus our resources and efforts on market development activities pursuant to our restructuring plan.

Sales and marketing expenses for the year ended December 31, 2019 increased 9%2020 decreased 53% to $28.0$13.1 million compared to $25.7$28.0 million for the year ended December 31, 2018.2019. The $2.3$14.9 million increasedecrease was primarily related to increaseddecreased personnel related costs of $0.8$7.6 million, increaseddecreased travel of $0.8$3.7 million, decreased consulting costs of $2.1 million, decreased supplies expense of $0.9 million, decreased facilities costs of $0.3 million, decreased depreciation expense of $0.2 million, and increased product demonstration and trade showdecreased other costs of $0.7 million as we increased our U.S, sales and marketing efforts as we focused on$0.1 million. These decreases were primarily the commercializationresult of the Senhance System.restructuring plan implemented in the fourth quarter of 2019 together with reductions in travel and cancellation of tradeshows beginning in the first quarter of 2020 in response to the COVID-19 pandemic.

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General and Administrative

General and administrative expenses consist of personnel costs related to the executive, finance and human resource functions, as well as professional service fees, legal fees, accounting fees, insurance costs, and general corporate expenses. In future periods, we expect general and administrative expenses to decrease due to the restructuring.

General and administrative expenses for the year ended December 31, 2019 increased 35%2020 decreased 25% to $18.8$14.1 million compared to $13.9$18.8 million for the year ended December 31, 2018.2019. The $4.9$4.7 million increasedecrease was primarily due to increaseddecreased personnel costs of $1.5$2.3 million, increaseddecreased bad debt expense of $1.6 million, decreased consulting and outside services costs of $1.3$0.3 million, increased taxes, licenses, and fees of $0.4 million, increased facilities costsdecreased supplies expense of $0.2 million, decreased travel costs of $0.1$0.2 million, and a bad debt chargedecreased other costs of $1.6$0.5 million offset by increased facilities costs of $0.4 million. TheIn 2019, the Company recorded the bad debt charge due to uncertainty regarding collectability on a 2018 system sale in North Africa.

Restructuring Charge

During the fourth quarter of 2019, we announced the implementation of a restructuring plan to reduce operating expenses as we continue the global market development of the Senhance platform. Under the restructuring plan, we reduced headcount primarily in the sales and marketing functions and determined that the carrying value of our inventory exceeded the net realizable value due to a decrease in expected sales. The restructuring charges amounted to $8.8 million, of which $7.4 million was an inventory write down and was included in cost of product revenue and $1.4 million related to employee severance costs and was included as restructuring and other charges in the consolidated statements of operations and comprehensive loss, during the fourth quarter of 2019.

Payments under the restructuring plan concluded in 2020.

During March 2020, we continued our restructuring with additional headcount reductions which resulted in $0.8$0.9 million related to severance costs which are expected to bewere paid in 2020 and 2021.

2020.

Gainfrom Sale of AutoLap Assets, Net

The net gain from the sale of AutoLap assets net to GBIL was $16.0 million for the year ended December 31, 2019, as further explained in the "Overview" section.2019. The gain represented the difference between the purchase price of $17 million and a $1 million liability incurred as a result of entering into the sale.

Gain from Sale of SurgiBot Assets, Net

The gain from the sale of SurgiBot assets, net to GBIL was $11.8 million for the year ended December 31, 2018, as further explained in the “Overview” section.

Amortization of Intangible Assets

Amortization of intangible assets for the year ended December 31, 2019 decreased2020 increased to $10.3$10.8 million compared to $10.9$10.3 million for the year ended December 31, 2018.2019. The $0.6$0.5 million decreaseincrease was primarily the result of a lowerhigher Euro to Dollar exchange rate.

Impairment of Goodwill and IPR&D Assets

The Company typically testshistorically tested goodwill for impairment annually as of year-end, however, due to market conditions as well as reduced forecasts, we tested our goodwill and IPR&D carrying values as of September 30, 2019.

Pursuant to ASU 2017-04, a company must record a goodwill impairment charge if a reporting unit’s carrying value exceeds its fair value. The Company generally determines the fair value of its reporting unit using two valuation methods: the “Income Approach — Discounted Cash Flow Analysis” method, and the “Market Approach — Guideline Public Company Method.”

Under the “Income Approach — Discounted Cash Flow Analysis” method, the key assumptions consider projected sales, cost of sales, and operating expenses. These assumptions were determined by management utilizing the Company's internal operating plan, growth rates for revenues and operating expenses, and margin assumptions. An additional key assumption under this approach is the discount rate, which is determined by looking at current risk-free rates of capital, current market interest rates, and the evaluation of risk premium relevant to the business segment. If our assumptions relative to growth rates were to change or were incorrect, our fair value calculation may change.

Under the “Market Approach — Guideline Public Company Method,” the Company identified several publicly traded companies, which it believed had sufficiently relevant similarities. Similar to the income approach discussed above, sales, cost of sales,

operating expenses, and their respective growth rates are key assumptions utilized. The market prices of the Company’s common stock and other guideline companies are additional key assumptions. If these market prices increase, the estimated market value would increase. If the market prices decrease, the estimated market value would decrease.

The results of these two methods were weighted based upon management’s evaluation of the relevance of the two approaches. In the 2019 evaluation, management determined that the income and market value approach should be weighted 50%-50%. In addition, management considered the decline in both our stock price and market capitalization after the September 30, 2019 measurement date as relevant factors in the analysis.

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As of September 30, 2019, the Company determined that the goodwill associated with the business was impaired, and recorded impairment charges of $79.0 million. The impairment charge resulted from decreased sales and estimated cash flows and a significant decline in the Company's stock price. The Company does not have any goodwill on its consolidated balance sheets as of December 31, 2021 and 2020. The Company also recognized a $7.9 million impairment charge to its IPR&D as it concluded that under the market value approach, the fair value of the IPR&D was lower than the carrying value.

value during the year ended December 31, 2019.  No charge for goodwill and intangible assetsuch impairment was requiredrecognized for the year ended December 31, 2018.

2020.

Change in Fair Value of Contingent Consideration

The change in fair value of contingent consideration in connection with the Senhance Acquisition was a $2.9 million increase for the year ended December 31, 2020 compared to a decrease of $9.6 million decreasefor the year ended December 31, 2019. The $12.5 million increase was primarily due to changes in the Company's fair value measurement of a discounted cash flow model using significant unobservable inputs including the probability of achieving the potential milestone, future Euro-to-USD exchange rates, revenue volatility, and an estimated discount rate associated with the risks of the expected cash flows attributable to the milestone.

Other Income (Expense)

Other income (expense) for the year ended December 31, 2020 primarily related to a $0.3 million increase in the fair value of warrant liabilities recorded for the year. Other income (expense) for the year ended December 31, 2019 comparedprimarily related to a decrease of $1.0$3.6 million forin interest expense related to notes payable obligations outstanding during the year, ended December 31, 2018. The net $8.6 million decrease was primarily due to a significant reduction in the Company's five-year revenue forecast.

Change in Fair Value of Warrant Liabilities

The change in fair value of Series B Warrants issued in April 2017 was a decrease of $2.2 million for the year ended December 31, 2019 compared to an increase of $14.3 million for the year ended December 31, 2018. The net $16.5 million decrease in the change in the fair value of warrant liabilities recorded for the year, ended December 31, 2019 over the year ended December 31, 2018 includes re-measurement associated with the warrants exercised during the year ended December 31, 2019 and 2018, and the outstanding warrants at December 31, 2019. The decrease in value at December 31, 2019 was primarily the result of the decrease in the stock price at December 31, 2019 versus December 31, 2018.

Acquisition Related Costs

Acquisition related costs of $0.6 million for the year ended December 31, 2018 were incurred in connection with the MST Acquisition.

Reversal of Transfer Fee Accrual

In connection with the Senhance Acquisition, the Company recorded an accrual of $3.0 million in the third quarter of 2015 for the potential assessment of additional transfer fees that could be assessed during a three year period. In September 2018, the Company determined that the accrual was no longer required and reversed the accrual.

Interest Income

Interest income for the year ended December 31, 2019 was $0.6 million compared to $1.4 million for the year ended December 31, 2018. The decrease of $0.8 million was due to less cash and short-term investments on hand during the year ended December 31, 2019 earning less interest.

Interest Expense

Interest expense for the year ended December 31, 2019 was $4.6 million compared to $4.2 million for the year ended December 31, 2018. The Company incurred a $1.4 million loss on extinguishment of debt, classified as interest expense, during the second quarter of 2018 as compared to a $1.0 million loss on extinguishment of debt for the year ended December 31, 2019. This decrease in loss on extinguishment of debt was offset by greater interest incurred on the higher average principal balance of notes payable during 2019 as compared to 2018.

debt.

Income Tax Benefit

Income tax benefit consists primarily of taxes related to the amortization of purchase accounting intangibles in connection with the Italian taxing jurisdiction for TransEnterixAsensus Surgical Italia as a result of the acquisition of the Senhance System.Acquisition. We recognized $3.1$1.5 million and $3.4$3.1 million of income tax benefit for the years ended December 31, 2020 and 2019, and 2018, respectively.

Liquidity and Capital Resources

Going Concern

The Company's consolidated financial statements are prepared using U.S. generally accepted accounting principles (“GAAP”)GAAP applicable to a going concern, which contemplate the realization of assets and liquidation of liabilities in the normal course of business. The Company had an accumulated deficit of $663.6 million as of December 31, 2019 and has working capital of $14.9 million as of December 31, 2019. The Company has not established sufficient sales revenues to cover its operating costs and requiresmay require additional capital to proceed with its operating plan. In October 2019, the Company announced the implementation of a restructuring plan to reduce operating expenses. During March 2020, the Company continued the restructuring efforts with additional headcount reductions. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. In order to continue as a going concern, the Company will need, among other things, additional capital resources. The Company believes that its existing cashhad an accumulated deficit of $785.4 million as of December 31, 2021 and cash equivalents from recent financings, together with cash received from product and instrument sales and leases will be sufficient to meet its anticipated cash needs into the fourth quarterworking capital of 2020.

Traditionally, the$103.4 million as of December 31, 2021.

The Company has raised additional capital through equity offerings.offerings, including raising net proceeds of $73.4 million in the January 2021 public offering, $28.6 million in the January 2021 registered direct offering, $57.2 million in the 2019, 2020, and 2021 ATM Offerings, $13.5 million in the March 2020 public offering, an additional $13.6 million in net proceeds in the July 2020 public offering (see Note 17 to the Company’s consolidated financial statements included in this Annual Report), aggregate proceeds to the Company of $33.7 million for exercises of Series B, C and D warrants in 2020 and 2021, and $2.8 million related to a non-recourse loan under the PPP provisions of the CARES Act that was forgiven as of December 31, 2021. Management's plan to obtain suchadditional resources for the Company may include additional sales of equity, traditional financing, such as loans, entry into a strategic collaboration, entry into an out-licensing arrangement or provision of additional distribution rights in some or all of our markets. In addition, as discussed below, the Company has engaged J.P. Morgan Securities LLC to assist it in considering strategic alternatives, including a fundamental business combination transaction. If the Company is unable to obtain adequate capital through one of these methods, it would need to reduce its sales and marketing and administrative expenses, delay research and development projects, including the purchase of equipment and supplies, and take other steps to reduce its expenses until it is able to obtain sufficient funds. If such sufficient funds are not received on a timely basis, the Company would then need to pursue a plan to license or sell its assets, seek to be acquired by another entity, cease operations and/or seek bankruptcy protection. ManagementHowever, management cannot provide any assurance that the Company will be successful in accomplishing any or all of its plans. The Company believes the COVID-19 pandemic will continue to negatively impact its operations and ability to successfully resolve these factors raise substantial doubt aboutimplement its market development efforts, which will have a negative effect on its financial condition.

As of December 31, 2021, the Company’s abilityCompany had cash, cash equivalents, short-term and long-term investments, excluding restricted cash, of $135.8 million. While the Company believes that its existing cash, cash equivalents, short-term investments and long-term investments as of December 31, 2021 will be sufficient to continue as a going concern within one yearsustain operations for at least the next 12 months from the date thatissuance of these financial statements are issued. The consolidated financial statements, of the Company do notbelieves it will need to obtain additional financing in the future to proceed with its business plan. Management's plan to obtain additional resources for the Company may include any adjustments that may result from the outcome of these aforementioned uncertainties.

Sources of Liquidity

Our principal sources of cash to date have been proceeds from public offerings of common stock, private placements of common and preferred stock, incurrence of debt, the saleadditional sales of equity securities heldunder the 2021 ATM Offering or otherwise, traditional financing, such as investments and asset sales.

We currently have two effective shelf registration statements on file with the SEC.  The first shelf registration statement was declared effective by the SEC on May 19, 2017 and registered up to $150.0 millionloans, entry into a strategic collaboration, entry into an out-licensing arrangement or provision of debt securities, common stock, preferred stock,additional distribution rights in some or warrants, orall of our markets. However, management cannot provide any combination thereof for future financing transactions. The second shelf registration statement was declared effective by the SEC on February 10, 2020, and also registers up to $150.0 million of debt securities, common stock, preferred stock, or warrants, or any combination thereof for future financing transactions. We have raised or have reserved for issuance under such registration statements approximately $170.5 million since 2017. As of March 10, 2020,assurance that the Company had approximately $5.5 million available under the first effective shelf registration statement, which is duewill be successful in accomplishing any or all of its plans or be able to expire in May 2020. As of the date of this Annual Report,secure additional funding when needed on terms acceptable to the Company, has approximately $124 million available for future financings under the second shelf registration statement.

or at all. For a discussion of our recent equity financings, see “Financing Transactions” above in this Management’s Discussion and Analysis and Results of Operations,Operations.

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Trends and Uncertainties

Our industry is highly competitive, subject to change and significantly affected by new product introductions and other activities by competitors. Many of these competitors have significantly greater financial and human resources than we do, have established reputations with our target customers, and more established worldwide distribution channels. There were new entrants in the market for robotic surgery in 2021, and some forward steps by existing competitors, such as the CE Mark attained by Medtronic for its Hugo robot. Several competitors have launched devices that enable reduced incision or single incision laparoscopic surgery with or without robotic assistance. We believe that our focus on the laparoscopic market and our Performance-Guided Surgery initiative will help us to remain competitive in this growing field.

Our strategy is to pioneer a discussionnew era of Performance-Guided Surgery by unlocking the clinical intelligence to enable consistently superior outcomes and a new standard of surgery. We are currently focused on increasing utilization of the 2019 saleexisting Senhance Systems by increasing the number of procedures conducted using the AutoLap Assets, see “MST Acquisition and Related Transactions - SaleSenhance System quarter over quarter. We are also focused on increasing the number of AutoLap Assets” above in this Management’s Discussion and Analysis of Financial Condition and Results of Operations.

At December 31, 2019, we had cash and cash equivalents, excluding restricted cash, of approximately $9.6 million.

On October 17, 2019, the Company announced that it has engaged J.P. Morgan Securities LLC to assist the Board of Directors in considering strategic alternatives for the Company to enhance stockholder value, including, but not limited to a sale of the Company, a financing of the Company, a strategic partnership or collaboration or some other form of commercial relationship. In addition, the Company announced the implementation of a restructuring plan to reduce operating expenses as it continues the global market developmentplacements of the Senhance platform. System, not necessarily though sales, but through leasing arrangements. Our efforts to communicate and implement this strategy with hospitals, surgery centers and surgeons may take longer than we anticipate, may not be as successful as we contemplate and may not result in a near-term meaningful increase in our business or financial condition.

We will need additional new products and product enhancements to deliver the opportunities of Performance-Guided Surgery. Such new products and product enhancements are subject to regulatory clearances or approvals, and our ability to provide training and implement the use of such new products.

The Companyglobal spread of COVID-19 and the various attempts to contain it continue to create significant volatility, uncertainty, and economic disruption. Elective surgeries have also been curtailed a number of times during variant surges in 2021 in various parts of the globe. Although such elective surgeries have recommenced in large part, the limits on elective procedures significantly impacted our ability to place our Senhance Systems, provide training, and increase the use of the Senhance Systems in place. It is continuinguncertain whether elective surgeries will continue to evaluate all potential alternatives, including pursuitbe negatively impacted or halted again in the future by a resurgence of financing opportunities.

COVID-19 cases in any of the jurisdictions we operate in.

Changes in economic conditions and supply chain constraints and steps taken by governments and central banks, particularly in response to the COVID-19 pandemic as well as other stimulus and spending programs, could lead to higher inflation than previously experienced or expected, increased labor shortages, our ability to hire and retain personnel, which could, in turn, lead to an increase in costs. An inflationary environment could have a negative impact on our expenses, increase our labor costs and reduce our available cash flow.

Consolidated Cash Flow Data

	Years Ended December 31,
	2019				2018
(in millions)
Net cash (used in) provided by
Operating activities	$	(73.5	)		$	(48.5	)
Investing activities	67.6				(53.5		)
Financing activities	(5.6		)		26.5
Effect of exchange rate changes on cash and cash equivalents	0.4				(0.5		)
Net decrease in cash, cash equivalents and restricted cash	$	(11.1	)		$	(76.0	)

		Year Ended December 31,
		2021				2020				2019
		in millions
Net cash (used in) provided by
Operating activities		$	(40.7	)		$	(46.7	)		$	(73.5	)
Investing activities			(119.7	)			(0.0	)			67.6
Financing activities			161.7				53.4				(5.6	)
Effect of exchange rate changes on cash and cash equivalents			0.4				0.3				0.4
Net increase (decrease) in cash, cash equivalents and restricted cash		$	1.7			$	7.0			$	(11.1	)

Operating Activities

For the year ended December 31, 2021, net cash used in operating activities of $40.7 million consisted of a net loss of $62.5 million and cash provided by working capital of $0.4 million, offset by non-cash items of $21.4 million. The non-cash items primarily consisted of $11.3 million of net amortization of intangible assets, $9.4 million of stock-based compensation expense, $2.9 million of depreciation, $2.8 million gain on extinguishment of debt, $2.0 million change in fair value of warrant liabilities, $1.6 million change in fair value of contingent consideration, $0.5 million change in inventory reserves, $0.4 million of accretion of discounts and amortization of premiums on investments, net, $0.2 million deferred tax expense and $0.1 million bad debt expense. The decrease in cash from changes in working capital included a $4.5 million increase in operating lease liabilities, a $4.3 million increase in operating lease right-of-use assets, a $0.6 million increase in inventories net of transfers to property and equipment, a $1.6 million increase in accounts payable, a $1.3 million increase in tax credit receivable, a $0.9 million increase in other current and long-term assets, a $0.5 million decrease in accrued expenses, a $0.2 million decrease in accounts receivable, a $0.2 million decrease in deferred revenue, and a $0.1 million decrease in prepaid expenses

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For the year ended December 31, 2020, net cash used in operating activities of $46.7 million consisted of a net loss of $59.3 million and cash used for working capital of $7.7 million, offset by non-cash items of $20.3 million. The non-cash items primarily consisted of $10.8 million of net amortization of intangible assets, $7.9 million of stock-based compensation expense, $3.0 million change in inventory reserves, $2.9 million change in fair value of contingent consideration, $2.9 million of depreciation, $1.5 million deferred tax benefit, and $0.3 million change in fair value of warrant liabilities. The decrease in cash from changes in working capital included $4.2 million increase in inventories, $2.2 million decrease in accrued expenses, $1.8 million decrease in accounts payable, $1.2 million decrease in operating lease liabilities, $1.1 million decrease in operating lease right-of-use assets, $0.8 million decrease in prepaid expenses, $0.4 million increase in accounts receivable, $0.4 million decrease in other current and long term assets, $0.1 million decrease in other long term liabilities, and $0.1 million decrease in deferred revenue.

For the year ended December 31, 2019, net cash used in operating activities of $73.5 million consisted of a net loss of $154.2 million and cash used for working capital of $12.8 million, offset by non-cash items of $93.5 million. The non-cash items primarily consisted of $86.9 million in goodwill and IPR&D impairment, $11.5 million of stock-based compensation expense, $11.5$10.3 million of net amortization of intangible assets, $1.5 million amortization of debt discount and debt issuance costs, $0.3 million net amortization of discounts and short-termpremiums on investments, discount, $2.2 million of depreciation, $1.6 million of bad debt expense, $1.0 million loss on debt extinguishment, $8.9 million related to the write-down of obsolete inventory, and $0.8 million in interest expense on deferred consideration related to the MST Acquisition, offset by $16.0 million gain from sale of AutoLap assets, $9.6 million change in fair value of contingent consideration, $3.2 million deferred income tax benefit, and $2.2 million change in fair value of warrant liabilities. The decrease in cash from changes in working capital included $16.4 million increase in inventories, $1.2$6.1 million decrease in accruedaccounts receivable, $5.4 million other current and long-term assets, $2.5 million decrease in operating lease liabilities, $2.5 million decrease in prepaid expenses, $2.4 million other long-term liabilities, $2.3 million decrease in operating lease right-of-use assets, $1.0 million decrease in deferred revenue, $0.7 million decrease in accounts payable, and $0.7 million increase in other current and long term assets, offset by $6.1 million decrease in accounts receivable and $1.0 million increase in other long term liabilities.payable. The decrease in cash from changes in working capital was primarily driven by an increase in manufacturing activities combined with decreased Senhance System sales infor the current year.

year ended December 31, 2019.

Investing Activities

For the year ended December 31, 2018,2021, net cash used in operatinginvesting activities was $119.7 million. This amount primarily consists of $48.5$122.3 million consistedin purchases of aavailable-for-sale investments, $1.4 million in purchases of property and equipment, offset by $4.0 million proceeds from maturities of available-for-sale securities.

For the year ended December 31, 2020, net loss of $61.8 million and cash used for working capital of $5.9 million, offset by non-cash items of $19.2 million. The non-cash items primarily consisted of $14.3 million change in fair value of warrant liabilities, $11.2 million of net amortization of intangible assets, debt discount and debt issuance costs and short-term investment discount, $9.0 million of stock-based compensation expense, $2.4 million of depreciation, and $1.4 million loss on debt extinguishment, offset by $11.8 million gain from sale of SurgiBot assets, $3.0 million reversal of transfer fee, $3.4 million deferred income tax benefit, and $1.0 million change in fair value of contingent consideration. The decrease in cash from changes in working capital included $2.1 million increase in inventories, $7.2 million increase in accounts receivable, and $0.3 million increase in other current and long term assets, offset by $0.8 million increase in accounts payable, $2.1 million increase in accrued expenses and $0.8 million increase in deferred revenue.

Investing Activities

investing activities was not significant.

For the year ended December 31, 2019, net cash provided by investing activities was $67.6 million. This amount primarily consists of $65.0 million proceeds from maturities of short-termavailable-for-sale investments and $16.0 million in proceeds related to the sale of the AutoLap assets, offset by $12.9 million purchase of short-termavailable-for-sale investments and $0.4 million purchases of property and equipment.

Financing Activities

For the year ended December 31, 2018,2021, net cash used in investingprovided by financing activities was $53.5$161.7 million. This amountThe net change primarily consistsrelated to $131.9 million in proceeds from the issuance of $55.4shares of our common stock in equity financings, net of issuance costs, $30.9 million purchasein proceeds from the exercise of short-term investments, $5.8 million payment for acquisition of MSTstock options and $0.8 million purchases of property and equipment,warrants, partially offset by $4.5$1.1 million proceedsin taxes paid related to the salenet share settlement of vesting of restricted stock units.

For the year ended December 31, 2020, net cash provided by financing activities was $53.4 million. The net change primarily related to $13.5 million in net proceeds from the issuance of common stock, preferred stock, and warrants under the March 2020 Public Offering, $33.8 million in net proceeds from the issuance of common stock, $3.3 million from the exercise of warrants, and $2.8 million from the receipt of funding under a Promissory Note under the PPP provisions of the SurgiBot assets and proceeds from maturities of short-term investments of $4.0 million.

Financing Activities

CARES Act.

For the year ended December 31, 2019, net cash used in financing activities was $5.6 million. This amount was primarily related to $31.4 million payment of notes payable and $0.5 million related to the taxes withheld on restricted stock unit, or RSU, awards, offset by $25.8 million in proceeds from the issuance of common stock and warrants and $0.5 million in proceeds from the exercise of stock options and warrants.

For the year ended December 31, 2018, net cash provided by financing activities was $26.5 million. This amount was primarily related to $28.5 million in proceeds from the issuance of debt, which was partially offset by $15.3 million in payment of debt, $12.4 million in proceeds from the exercise of stock options and warrants and $3.0 million received for shares issued related to the sale of the SurgiBot assets, offset by $1.7 million related to the taxes withheld on RSU awards and $0.8 million payment of contingent consideration.

Operating Capital and Capital Expenditure Requirements

We intend to spend substantial amounts on commercial activities, on research and development activities, including product development, regulatory and compliance, clinical studies in support of our future product offerings, commercial activities and the enhancement and protection of our intellectual property. We will need to obtaincannot assure you that additional financing will not be required in the future to pursuesupport our business strategy,operations. We intend to responduse financing opportunities strategically to new competitive pressures orcontinue to take advantage of opportunities that may arise. To meetstrengthen our capital needs, we are considering multiple alternatives, including, but not limited to, additional equity financings, debt financings, strategic collaborations, other funding transactions or a fundamental business combination transaction. There can be no assurance that we will be able to complete any such transaction on acceptable terms or otherwise. If we are unable to obtain the necessary capital, we will need to pursue a plan to license or sell our assets, seek to be acquired by another entity, cease operations and/or seek bankruptcy protection.

financial position.

Cash and cash equivalents held by our foreign subsidiaries totaled $1.5$4.8 million at December 31, 2019,2021, including restricted cash. We do not intend or currently foresee a need to repatriate cash and cash equivalents held by our foreign subsidiaries. If these funds are needed in the United States, we believe that the potential U.S. tax impact to repatriate these funds would be immaterial.

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Hercules Loan Agreement

On May 23, 2018, the Company and its domestic subsidiaries, as co-borrowers, entered into the Hercules Loan Agreement with several banks and other financial institutions or entities from time to time party to the Hercules Loan Agreement and Hercules Capital, Inc., or Hercules, as administrative agent and collateral agent. Effective April 30, 2019, the Hercules Loan Agreement was amended to eliminate the availability

Table of the Tranche III loan facility, add a new Tranche IV loan facility of up to $20 million, revise certain financial covenants and make other changes.  On July 10, 2019, the Company entered into the Consent and Second Amendment to the Loan and Security Agreement on July 10, 2019, or the Hercules Second Amendment. Under the Hercules Second Amendment, in consideration for the consent to the sale of, and the release of the Lender’s security interest on, the AutoLap assets, the Company reduced its indebtedness under the Hercules Loan Agreement by repaying $15.0 million of the $30.0 million of outstanding indebtedness thereunder, without any prepayment penalties, amendment fee or acceleration of the end of term charges, and received adjustments to the quarterly financial covenants and related waiver conditions to reflect the decreased outstanding indebtedness. On November 4, 2019, the Company entered into a payoff letter with the Agent pursuant to which the Company terminated the Hercules Loan Agreement, as amended. The Company determined it was in the best interests of the Company to pay down the debt and terminate the Hercules Agreement to simplify the Company's balance sheet and provide additional flexibility as the Board of Directors continues to explore strategic and financial alternatives for the Company. Under the payoff letter, the Company repaid all amounts owed under the Hercules Loan Agreement totaling approximately $16.4 million, which included end of term fees of $1.4 million, and Hercules released all security interests held on the assets of the Company and its subsidiaries, including, without limitation, on the intellectual property assets of the Company. Please see the description of the Hercules Loan Agreement above in the “Notes to the Consolidated Financial Statements - Note 13. Notes Payable.”

Innovatus Loan Agreement

On May 10, 2017, the Company and its domestic subsidiaries, as co-borrowers, entered into the Innovatus Loan Agreement with Innovatus Life Sciences Lending Fund I, LP, as lender and collateral agent.  Please see the description of the Innovatus Loan Agreement above in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations ‑ Debt Refinancing.”

In connection with the entry into the Hercules Loan Agreement, the proceeds of which were used to repay the Innovatus Loan, we were obligated to pay final payment and prepayment fees under the Innovatus Loan Agreement. The final payment fee obligation was $1.0 million and was paid during the year ended December 31, 2018.

Contents

Contractual Obligations and Commercial Commitments

The following table summarizes our contractual obligations as of December 31, 2019 (in millions):

	Payments due by period
	Total				Less than 1 year				1 to 3 years				3 to 5 years				Thereafter
Operating leases	$	2.8			$	1.4			$	1.2			$	0.2			$	—
License, supply and vendor agreements	$	9.1			$	5.6			$	1.3			$	1.1			$	1.1
Total contractual obligations	$	11.9			$	7.0			$	2.5			$	1.3			$	1.1

During 2019, the Company fully repaid its outstanding indebtedness to Hercules Capital, and all related liens and encumbrances

have been terminated.

Off-Balance Sheet Arrangements

As of December 31, 2019, the third tranche contingent consideration that may be paid under the Purchase Agreement with Sofar upon the achievement of milestones is €15.0 million. Due to uncertainty regarding the timing and amount of future payments related to this liability, the amount is excluded from the contractual obligations table above.

Operating lease amounts include future minimum lease payments under all our non-cancelable operating leases with an initial term in excess of one year. We rent office space in North Carolina under an operating lease which expires in 2020. In Italy, we rent space for research and development and demonstration facilities under an operating lease which expires in 2022. In Israel, we rent space for research and development under an operating lease which expires in 2024. In Japan, we rent office space under an operating lease which expires in 2023. In Switzerland, we rent office space under an operating lease which expires in 2023. This table does not include obligations for any lease extensions.

License, supply and third party vendor agreements include agreements assumed as part of the Senhance Acquisition and other third party vendor agreements.

Off-Balance Sheet Arrangements

As of December 31, 2019,2021, we did not have any off-balance sheet arrangements.

Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations set forth above under the headings “Results of Operations” and “Liquidity and Capital Resources” have been prepared in accordance with U.S. GAAP and should be read in conjunction with our consolidated financial statements and notes thereto appearing in Item 8 of this Annual Report. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our critical accounting policies and estimates, including identifiable intangible assets and goodwill, business acquisitions, in-process research and development, contingent consideration, warrant liabilities, stock-based compensation, inventory, revenue recognition and income taxes. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. A more detailed discussion on the application of these and other accounting policies can be found in Note 2 in the Notes to the Consolidated Financial Statements which are included in Item 8 of this Annual Report. Actual results may differ from these estimates under different assumptions and conditions.

While all accounting policies impact the consolidated financial statements, certain policies may be viewed as critical. Critical accounting policies are those that are both most important to the portrayal of financial condition and results of operations and that require management’s most subjective or complex judgments and estimates. Our management believes the policies that fall within this category are the policies on accounting for identifiable intangible assets, and goodwill, business acquisitions, in-process research and development, contingent consideration, warrant liabilities, stock-based compensation, inventory, revenue recognition and income taxes.

Identifiable Intangible Assets and Goodwill

Identifiable intangible assets consist of purchased patent rights recorded at cost and developed technology acquired as part of a business acquisitionacquisitions recorded at estimated fair value. Intangible assets are amortized over 5 to 10 years. We periodically evaluate identifiable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.  

Indefinite-lived intangible assets, such as goodwill, are not amortized. We test the carrying amounts of goodwill for recoverability on an annual basis or when events or changes in circumstances indicate evidence of potential impairment exists by performing either a qualitative evaluation or a quantitative assessment. The qualitative evaluation is an assessment of factors, including industry, market and general economic conditions, market value, and future projections to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill.

As of December 31, 2018, we elected to bypass the qualitative assessment and calculated the fair value of our sole reporting unit based on our market capitalization, which exceeded the carrying amount. Accordingly, no charge for goodwill impairment was required as of December 31, 2018. During the third quarter of 2019, the Company's stock price declined significantly as a result of decreased sales and estimated cash flows. As of September 30, 2019, goodwill was deemed to be fully impaired, and the Company recorded an impairment charge of $79.0 million.

A significant amount of judgment is involved in determining if an indicator of goodwill impairment has occurred. Such indicators may include, among others: a significant decline in expected future cash flows; a sustained, significant decline in the Company's

stock price and market capitalization; a significant adverse change in legal factors or in the business climate; adverse assessment or action by a regulator; and unanticipated competition. Key assumptions used in the annual goodwill impairment test are highly judgmental and include selection of comparable companies and amount of control premium. Any change in these indicators or key assumptions could have a significant negative impact on the Company's financial condition, impact the goodwill impairment analysis or cause the Company to perform a goodwill impairment analysis more frequently than once per year.

Business Acquisitions

Business acquisitions are accounted for using the acquisition method of accounting in accordance with Accounting Standards Codification (“ASC”) 805, “Business Combinations.” ASC 805 requires, among other things, that assets acquired and liabilities assumed be recognized at their fair values, as determined in accordance with ASC 820, “Fair Value Measurements,” as of the acquisition date. For certain assets and liabilities, book value approximates fair value. In addition, ASC 805 establishes that consideration transferred be measured at the closing date of the acquisition at the then-current market price. Under ASC 805, acquisition-related costs (i.e., advisory, legal, valuation and other professional fees) and certain acquisition-related restructuring charges impacting the target company are expensed in the period in which the costs are incurred. The application of the acquisition method of accounting requires the Company to make estimates and assumptions related to the estimated fair values of net assets acquired.

Significant judgments are used during this process, particularly with respect to intangible assets. Generally, intangible assets are amortized over their estimated useful lives. Goodwill and other indefinite-lived intangibles are not amortized, but are annually assessed for impairment. Therefore, the purchase price allocation to intangible assets and goodwill has a significant impact on future operating results.

In-Process Research and Development

In-process research and development (“IPR&D”) assets represent the fair value assigned to technologies that were acquired, which at the time of acquisition have not reached technological feasibility and have no alternative future use. IPR&D assets are considered to be indefinite-lived until the completion or abandonment of the associated research and development projects. During the period that the IPR&D assets are considered indefinite-lived, they are tested for impairment on an annual basis, or more frequently if the Company becomes aware of any events occurring or changes in circumstances that indicate that the fair value of the IPR&D assets are less than their carrying amounts. If and when development is complete, which generally occurs upon regulatory approval, and the Company is able to commercialize products associated with the IPR&D assets, these assets are then deemed definite-lived and are amortized based on their estimated useful lives at that point in time. If development is terminated or abandoned, the Company may have a full or partial impairment charge related to the IPR&D assets, calculated as the excess of carrying value of the IPR&D assets over fair value. During the year ended December 31, 2019, the Company also did an impairment analysis related to its IPR&D, and concluded that under the market value approach, the fair value of its IPR&D was lower than the carrying value and recorded an impairment charge of $7.9 million.

The IPR&D from MST was acquired on October 31, 2018.

Contingent Consideration

Contingent consideration is recorded as a liability and measured at fair value using a discounted cash flow modelMonte-Carlo simulation utilizing significant unobservable inputs including the probability of achieving each of the potential milestones, revenue volatility, and an estimated discount rate associated with the risks of the expected cash flows attributable to the achievement of various milestones. Significant increases or decreases in any of the probabilities of success or changes in expected timelines for achievement of any of these milestones would result in a significantly higher or lower fair value of these milestones, respectively, and commensurate changes to the associated liability. The fair value of the contingent consideration at each reporting date will be updated by reflecting the changes in fair value in our consolidated statements of operations and comprehensive loss.

Warrant Liabilities

For the Series B Warrants, the warrants are recorded as liabilities and are revalued at each reporting period. The change in fair value is recognized in the consolidated statements of operations and comprehensive loss. The selection of the appropriate valuation model and the inputs and assumptions that are required to determine the valuation requires significant judgment and requires management to make estimates and assumptions that affect the reported amount of the related liability and reported amounts of the change in fair value. Actual results could differ from those estimates, and changes in these estimates are recorded when known. As the warrant liability is required to be measured at fair value at each reporting date, it is reasonably possible that these estimates and assumptions could change in the near term.

All remaining outstanding Series B Warrants were exercised in the first quarter 2021.

Stock-Based Compensation

We recognize as expense, the grant-date fair value of stock options and other stock basedstock-based compensation issued to employees and non-employee directors over the requisite service periods, which are typically the vesting periods. We use the Black-Scholes-Merton model to estimate the fair value of our stock-based payments. The volatility assumption used in the Black-Scholes-Merton model is based on the calculated historical volatility based on an analysis of reported data for a peer group of companies as well as the Company’s historical volatility. The expected term of options granted by us has been determined based upon the simplified method, because we do not have sufficient historical information regarding our options to derive the expected term. Under this approach, the expected term is the mid-point between the weighted average of vesting period and the contractual term. The risk-free interest rate is based on U.S. Treasury rates whose term is consistent with the expected life of the stock options. We have not paid and do not anticipate paying cash dividends on our shares of common stock; therefore, the expected dividend yield is assumed to be zero. We estimate forfeitures based on our historical experience and adjust the estimated forfeiture rate based upon actual experience.

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Inventory

Table of Contents

Inventories

Inventory, which includes material, labor and overhead costs, is stated at the lower of cost, determined on a first-in, first-out basis, or net realizable value. We record reserves, when necessary, to reduce the carrying value of inventory to its net realizable value. At the point of loss recognition, a new, lower-cost basis for that inventory is established, and any subsequent improvements in facts and circumstances do not result in the restoration or increase in that newly established cost basis.

Any inventory on hand at the measurement date in excess of the Company's current requirements based on anticipated levels of sales is classified as long-term on the Company's consolidated balance sheets. The Company's classification of long-term inventory requires us to estimate the portion of on hand inventory that can be realized over the upcoming twelve months.

Revenue Recognition

Our

The Company’s revenue consists of product revenue resulting from the sale and lease of systems, systemSenhance Systems, Senhance System components, instruments and accessories, and service revenue. We accountThe Company accounts for a contract with a customer when there is a legally enforceable contract between the Company and the customer, the rights of the parties are identified, the contract has commercial substance, and collectability of the contract consideration is probable. OurThe Company's revenues are measured based on consideration specified in the contract with each customer, net of any sales incentives and taxes collected from customers that are remitted to government authorities.

Our system The Company’s Senhance System sale arrangements generally include a five-year service period; the first year of service is generally free and included in the Senhance System sale arrangement and the remaining four years are generally included at a stated service price.

The Company’s Senhance System sale arrangements generally contain multiple products and services. For these bundledconsolidated sale arrangements, we accountthe Company accounts for individual products and services as separate performance obligations if they are distinct, which is if a product or service is separately identifiable from other items in the bundledconsolidated package, and if a customer can benefit from it on its own or with other resources that are readily available to the customer. Our systemThe Company’s Senhance System sale arrangements may include a combination of the following performance obligations: system(s), system components, instruments, accessories, and system service. Our system sale arrangements generally include a five-year period of service. The first year of service is generally free and included in the system sale arrangement and the remaining four years are generally included at a stated service price. We consider the service terms in theservices.

For arrangements that contain multiple performance obligations, revenue is allocated to each performance obligation based on its relative estimated standalone selling price. When available, standalone selling prices are legally enforceablebased on observable prices at which the Company separately sells the products or services; however due to limited sales to date, standalone selling prices may not be performance obligations. Other than service, we generally satisfy alldirectly observable. The Company estimates the standalone selling price using the market assessment approach considering market conditions and entity-specific factors including, but not limited to, features and functionality of the performance obligations up-front. System components, system accessories, instruments, accessories,products and service are also sold on aservices, geographies, type of customer, and market conditions. The Company regularly reviews estimated standalone basis.

We recognizeselling prices and updates these estimates if necessary.

The Company recognizes revenues when or as the performance obligations are satisfied by transferring control of the product or service to a customer. WeThe Company generally recognizerecognizes revenue for the performance obligations at the following points in time:

as follows: 

•

System sales. For systemsSenhance Systems and systemSenhance System components sold directly to end customers (including those arising from System purchases under lease rights to purchase), revenue is recognized when we transferthe Company transfers control to the customer, which is generally at the point when acceptance occurs that indicates customer acknowledgment of delivery or installation, depending on the terms of the arrangement. For systemslease buyouts, where the customer has already acknowledged installation of the system, transfer of control occurs when we receive an executed contract for the lease buyout of the Senhance System. For Senhance Systems sold through distributors, with thefor which distributors are responsible for installation, revenue is recognized generally at the time of shipment. Our systemThe Company’s Senhance System arrangements generally do not provide a right of return. The systemsSenhance Systems are generally covered by a one-year warranty. Warranty costs were not material for the periods presented.

•

Instruments and accessories.Revenue from sales of instruments and accessories is recognized when control is transferred to the customers, which generally occuroccurs at the time of shipment, but also occuroccurs at the time of delivery depending on the customer arrangement. Accessory products include sterile drapes used to help ensure a sterile field during surgery, vision products such as replacement endoscopes, camera heads, light guides, and other items that facilitate use of the Senhance Surgical System.

•	Service. Service revenue is recognized ratably over the term of the service period as the customers benefit from the service throughout the service period. Revenue related to services performed on a time-and-materials basis is recognized when performed.

For multiple-element

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We enter into lease arrangements revenue isfor our Senhance Systems with certain qualified customers. Revenue related to arrangements including lease elements are allocated to each performance obligationlease and non-lease elements based on itstheir relative standalone selling price. Standalone selling pricesprices. Lease elements generally include a Senhance System, while non-lease elements generally include instruments, accessories, and services. For some lease arrangements, the customers are provided with the right to purchase the leased Senhance at some point during and/or at the end of the lease term. In some arrangements lease payments are based on observable prices at which we separately sell the products or services. Due to limited sales to date, standalone selling prices are not yet directly observable. We estimate the standalone selling price using the market assessment approach considering market conditions and entity-specific factors including, but not limited to, features and functionalityusage of the productsSenhance System. In determining whether a transaction should be classified as a sales-type, operating, or direct financing lease, we consider the following terms at lease commencement: (1) whether title of the Senhance System transfers automatically or for a nominal fee by the end of the lease term, (2) whether the present value of the minimum lease payments equals or exceeds substantially all of the fair value of the leased Senhance System, (3) whether the lease term is for the major part of the remaining economic life of the leased Senhance System, (4) whether the lease grants the lessee an option to purchase the leased Senhance System that the lessee is reasonably certain to exercise, and services, geographies, type(5) whether the underlying Senhance System is of customer,such a specialized nature that it is expected to have no alternative use to the Company at the end of the lease term. All such arrangements through December 31, 2021 are classified as operating leases. Revenue related to lease elements from operating lease arrangements is generally recognized on a straight-line basis over the lease term or based upon Senhance System usage and market conditions. We regularly review standalone selling prices and update these estimates if necessary. Transaction price allocated to remaining performance obligations relates to amounts allocated to products and services for which the revenue has not yet been recognized. A significant portion of this amount relates to service obligations performed under our system sales contracts that will be invoiced and recognizedis presented as revenue in future periods.

product revenue. 

We invoice our customers based on the billing schedules in ourits sales arrangements. Contract assets for the periods presented primarily represent the difference between the revenue that was recognized based on the relative selling price of the related performance obligations and the contractual billing terms in the arrangements. Deferred revenue for the periods presented was primarily related to service obligations, for which the service fees are billed up-front, generally annually. The associated deferred revenue is generally recognized ratably over the service period.

In connection with assets recognized from the costs to obtain a contract with a customer, we have determined that sales incentive programs for our sales team do not meet the requirements to be capitalized as we do not expect to generate future economic benefits from the related revenue from the initial sales transaction.

Income Taxes

We account for income taxes using the asset and liability method, which requires the recognition of deferred tax assets or liabilities for the temporary differences between financial reporting and tax basis of our assets and liabilities, and for tax carryforwards at enacted statutory rates in effect for the years in which the asset or liability is expected to be realized. The effect on deferred taxes of a change in tax rates is recognized in income during the period that includes the enactment date. In addition, valuation allowances are established when necessary to reduce deferred tax assets and liabilities to the amounts expected to be realized.

On December 22, 2017, the Tax Cuts and Jobs Act (“Tax Legislation”) was enacted into law, which reduced the U.S. federal corporate income tax rate to 21% for tax years beginning after December 31, 2017. As a result of the newly enacted tax rate, we adjusted our U.S. deferred tax assets as of December 31, 2017, by applying the new 21% rate, which resulted in a decrease to the deferred tax assets and a corresponding decrease to the valuation allowance of approximately $36.1 million.

The Tax Legislation also implements a territorial tax system. Under the territorial tax system, in general, our foreign earnings will no longer be subject to tax in the U.S. As part of transition to the territorial tax system the Tax Legislation includes a mandatory deemed repatriation of all undistributed foreign earnings that are subject to a U.S. income tax. We estimate that the deemed repatriation will not result in any additional U.S. income tax liability as we estimate we currently have no undistributed foreign earnings.

U.S. shareholders are subject to tax on global intangible low-taxed income (GILTI) earned by certain foreign subsidiaries. The FASB Staff Q&A, Topic 740, No. 5, Accounting for Global Intangible Low-Taxed Income, states that an entity can make an accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years or to provide for the tax expense related to GILTI in the year the tax is incurred as a period expense only. The Company has elected to account for GILTI in the year the tax is incurred. As of December 31, 2019,2020 and 2021, no GILTI tax has been recorded.

In a referendum held on May 19, 2019, Swiss voters adopted the Federal Act on Tax Reform and AVS Financing (TRAF). TRAF introduces major changes in the Swiss tax system by abolishing certain current preferential tax regimes and replacing them with new measures that are in line with international standards. The referendum did not have a material impact on the Company’s 2019 tax provision. The Company will continue to evaluate the impact of these provisions in future periods as the enactment process in completed.

Recent Accounting Pronouncements

See “Note 2. Summary of Significant Accounting Policies” of the Notes to Consolidated Financial Statements in “Item 8. Financial Statements and Supplementary Data” of this Annual Report for a full description of recent accounting pronouncements including

the respective expected dates of adoption and effects on our Consolidated Balance Sheets and Consolidated Statements of Operations and Comprehensive Loss.

ITEM 7.A.
ITEM 7.A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are a smaller reporting company as defined by Rule 12b-2exposed to changes in foreign currency exchange rates. Operations outside of the Exchange ActUnited States accounted for 87% and 73% of revenue for 2021 and 2020, respectively, and are not requiredconcentrated principally in Europe. We translate the revenue and expenses of our foreign operations using average exchange rates prevailing during the period. The effect of a 10% change in the average foreign currency exchange rates among the U.S. dollar versus the Euro for the year ended December 31, 2021, would result in revenue changing by $0.8 million. This change would be material to provide the information under this item.our cash flows and our results of operations.

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ITEM 8.
ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

	Page
Reports of Independent Registered Public Accounting Firm	5047
(BDO USA, LLP; Raleigh, NC; PCAOB ID #243)
Consolidated Financial Statements:
Consolidated Balance Sheets as of December 31, 20192021 and 20182020	5350
Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 20192021, 2020 and 20182019	5451
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 20192021, 2020 and 20182019	5552
Consolidated Statements of Cash Flows for the years ended December 31, 20192021, 2020 and 20182019	5653
Notes to Consolidated Financial Statements	5855

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Report of Independent Registered Public Accounting Firm

Stockholders

Shareholders and Board of Directors

TransEnterix,

Asensus Surgical, Inc.

Morrisville,

Durham, North Carolina

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of TransEnterix,Asensus Surgical, Inc. (the “Company”) as of December 31, 20192021 and 2018,2020, the related consolidated statements of operations and comprehensive loss, stockholders’ equity, and cash flows for each of the three years thenin the period ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 20192021 and 2018,2020, and the results of its operations and its cash flows for each of the three years thenin the period ended, December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company's internal control over financial reporting as of December 31, 2019,2021, based on criteria established in Internal Control -– Integrated Framework(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated March 16, 2020February 28, 2022 expressed an adverseunqualified opinion thereon.

Change in Accounting Principle

As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for leases in the year ended December 31, 2019 upon adoption of Accounting Standards Codification Topic 842, Leases, using the modified retrospective method.

Going Concern Uncertainty

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As described in Note 2 to the consolidated financial statements, the Company has suffered recurring losses from operations and has not generated significant revenue or positive cash flows from operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Inventories Valuation

Inventories totaled approximately $15.7 million at December 31, 2021, including approximately $7.1 million classified as long-term. As described in Note 2 to the Company’s consolidated financial statements, inventories are stated at the lower of cost or net realizable value. Management considers forecasted demand in relation to inventories on hand, competitiveness of product offerings, and product life cycles when estimating net realizable value.

We identified management’s estimation of the net realizable value of inventories as a critical audit matter. The Company’s limited sales history requires management to make significant judgments and assumptions with respect to future demand for the Company’s products and product life cycles that affect the estimation of the net realizable value of inventories. Auditing such assumptions required a high degree of auditor judgment and an increased auditor effort.

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The primary procedures we performed to address this critical audit matter included:

●

Assessing the reasonableness of management’s forecasted demand for instruments and accessories, included in finished goods inventories, by (i) comparing forecasts to historical sales of the Company’s identical products, (ii) evaluating the reasonableness of the period over which forecasted sales are expected to occur, and (iii) performing a lookback analysis to compare the Company’s historical estimates of future demand to actual sales results for the same period.

●

Assessing the reasonableness of management’s forecasted consumption of raw materials inventories by (i) comparing to production plans obtained from the Company’s supply chain personnel, and (ii) evaluating forecasted demand and expectations with respect to changes in product life cycles of the Company’s finished products.

●

Testing management’s estimation of the net realizable value of Senhance Systems, included in finished goods inventories, by evaluating the Company’s assumptions with respect to future sales quantities and selling prices as well as the Company’s assumptions with respect to expected sale and lease terms of future arrangements related to the Senhance Systems.

Contingent Consideration Valuation

As described in Notes 2 and 6 to the Company’s consolidated financial statements, the Company has recorded a contingent consideration liability of approximately $2.4 million related to the Senhance acquisition. Contingent consideration is recorded as the estimated fair value of potential milestone payments to be made related to the acquisition. Contingent consideration is measured using a Monte-Carlo simulation utilizing significant unobservable inputs including the probability of achieving each of the potential milestones, future Euro-to-USD exchange rates,  revenue volatility and an estimated discount rate associated with the risks of the expected cash flows attributable to the various milestones.

We have identified management’s estimation of the contingent consideration liability as a critical audit matter. Due to the Company’s limited sales history, the inherent uncertainty involved in estimating long-range forecasts, and the complexity of the Monte-Carlo simluation utilized by management, auditing the contingent consideration liability required increased auditor effort including the use of valuation specialists.

The primary procedures we performed to address this critical audit matter included:

●

Evaluating the reasonableness of management’s forecast of future revenues by comparing against historical operating results, relevant market data, analyst expectations for the Company and discussions with the Company’s research and development personnel knowledgeable about changes in the Company’s product life cycles.

●

Utilizing professionals with specialized knowledge and skills in valuation to assist in evaluating the valuation methodology selected by management as well as assessing the reasonableness of key inputs including the discount rate and revenue volatility.

/s/ BDO USA, LLP

We have served as the Company's auditor since 2013.

Raleigh, North Carolina

February 28, 2022

48

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March 16, 2020

Table of Contents

Report of Independent Registered Public Accounting Firm

Stockholders

Shareholders and Board of Directors

TransEnterix,

Asensus Surgical, Inc.

Morrisville,

Durham, North Carolina

Opinion on Internal Control over Financial Reporting

We have audited TransEnterix,Asensus Surgical Inc.’s (the “Company’s”) internal control over financial reporting as of December 31, 2019,2021, based on criteria established in Internal Control -– Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”). In our opinion, the Company did not maintain,maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019,2021, based on the COSO criteria.

We do not express an opinion or any other form of assurance on management’s statements referring to any corrective actions taken by the Company after the date of management’s assessment.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of the Company as of December 31, 20192021 and 2018,2020, the related consolidated statements of operations and comprehensive loss, stockholders’ equity, and cash flows for each of the three years thenin the period ended December 31, 2021, and the related notes and our report dated March 16, 2020February 28, 2022 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’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 Item 9.A., “Management’s9A, Management’s Report on Internal Control over Financial Reporting”.Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit of internal control over financial reporting in accordance with the standards of the PCAOB. 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 material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. A material weakness regarding management’s failure to design and maintain controls over the Company’s income tax accounting and disclosures for the significant components of deferred tax assets and liabilities related to a foreign non-recurring transaction has been identified and described in management’s assessment. This material weakness was considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2019 financial statements, and this report does not affect our report dated March 16, 2020 on those financial statements.

Definition and Limitations of Internal Control over Financial Reporting

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.

/s/ BDO USA, LLP

Raleigh, North Carolina

February 28, 2022

49

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March 16, 2020

Table of Contents

TransEnterix,

Asensus Surgical, Inc.

Consolidated Balance Sheets

(in thousands, except share amounts)

		December 31, 2021				December 31, 2020
Assets
Current Assets:
Cash and cash equivalents		$	18,129			$	16,363
Short-term investments, available-for-sale			80,262				0
Accounts receivable, net			749				1,115
Inventories			8,634				10,034
Prepaid expenses			3,255				3,535
Employee retention tax credit receivable			1,311				0
Other current assets			957				2,966
Total Current Assets			113,297				34,013
Restricted cash			1,154				1,166
Long-term investments, available-for-sale			37,435				0
Inventories, net of current portion			7,074				8,813
Property and equipment, net			10,971				10,342
Intellectual property, net			9,892				22,267
Net deferred tax assets			288				307
Operating lease right-of-use assets, net			5,348				1,164
Other long-term assets			1,014				186
Total Assets		$	186,473			$	78,258
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable		$	3,448			$	1,965
Accrued expenses			5,176				5,615
Operating lease liabilities - current portion			683				686
Deferred revenue			543				789
Notes payable - current portion, net of debt discount			0				1,228
Total Current Liabilities			9,850				10,283
Long-Term Liabilities:
Contingent consideration			2,371				3,936
Noncurrent operating lease liabilities			5,006				628
Notes payable, less current portion			0				1,587
Warrant liabilities			0				255
Total Liabilities			17,227				16,689
Commitments and Contingencies (Note 20)
Stockholders' Equity:
Common stock $0.001 par value, 750,000,000 shares authorized at December 31, 2021 and December 31, 2020; 235,218,552 and 116,231,072 shares issued and outstanding at December 31, 2021 and December 31, 2020, respectively			235				116
Preferred stock, $0.01 par value, 25,000,000 shares authorized, no shares issued and outstanding at December 31, 2021 and December 31, 2020			0				0
Additional paid-in capital			954,649				781,397
Accumulated deficit			(785,374	)			(722,912	)
Accumulated other comprehensive income			(264	)			2,968
Total Stockholders' Equity			169,246				61,569
Total Liabilities and Stockholders' Equity		$	186,473			$	78,258

	December 31, 2019				December 31, 2018
Assets
Current Assets
Cash and cash equivalents	$	9,598			$	21,061
Short-term investments	—				51,790
Accounts receivable, net	620				8,560
Inventories	10,653				10,941
Interest receivable	—				26
Other current assets	7,084				9,205
Total Current Assets	27,955				101,583
Restricted cash	969				590
Inventories, net of current portion	7,594				—
Property and equipment, net	4,706				6,337
Intellectual property, net	28,596				39,716
In-process research and development	2,470				10,747
Goodwill	—				80,131
Other long term assets	2,489				203
Total Assets	$	74,779			$	239,307
Liabilities and Stockholders’ Equity
Current Liabilities
Accounts payable	$	3,579			$	4,433
Accrued expenses	8,553				9,619
Deferred revenue – current portion	818				1,733
Contingent consideration – current portion	73				72
Deferred consideration - MST Acquisition	—				5,962
Total Current Liabilities	13,023				21,819
Long Term Liabilities
Deferred revenue – less current portion	27				109
Contingent consideration – less current portion	1,011				10,565
Notes payable, net of debt discount	—				28,937
Warrant liabilities	2,388				4,636
Net deferred tax liabilities	1,392				4,720
Other long term liabilities	1,403				—
Total Liabilities	19,244				70,786
Commitments and Contingencies (Note 21)
Stockholders’ Equity
Common stock $0.001 par value, 750,000,000 shares authorized at December 31, 2019 and December 31, 2018; 20,691,301 and 16,641,999 shares issued and outstanding at December 31, 2019 and December 31, 2018, respectively	21				17
Additional paid-in capital	720,484				676,572
Accumulated deficit	(663,600		)		(509,406		)
Accumulated other comprehensive (loss) income	(1,370		)		1,338
Total Stockholders’ Equity	55,535				168,521
Total Liabilities and Stockholders’ Equity	$	74,779			$	239,307

See accompanying notes to consolidated financial statements.

50

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TransEnterix,

Asensus Surgical, Inc.

Consolidated Statements of Operations and Comprehensive Loss

(in thousands except per share amounts)

		Year ended
		December 31,
		2021				2020				2019
Revenue:
Product		$	6,712			$	1,612			$	7,104
Service			1,520				1,563				1,427
Total revenue			8,232				3,175				8,531
Cost of revenue:
Product			7,974				2,254				16,439
Service			3,122				2,912				4,292
Total cost of revenue			11,096				5,166				20,731
Gross loss			(2,864	)			(1,991	)			(12,200	)
Operating Expenses:
Research and development			19,348				16,621				22,468
Sales and marketing			13,395				13,064				28,014
General and administrative			19,323				14,137				18,758
Amortization of intangible assets			11,254				10,801				10,301
Change in fair value of contingent consideration			(1,565	)			2,924				(9,553	)
Restructuring and other charges			0				851				1,374
Goodwill impairment			0				0				78,969
Intangible assets impairment			0				0				7,912
Loss from sale of SurgiBot assets, net			0				0				97
Gain from sale of AutoLap assets, net			0				0				(15,965	)
Total Operating Expenses			61,755				58,398				142,375
Operating Loss			(64,619	)			(60,389	)			(154,575	)
Other Income (Expense)
Gain (loss) on extinguishment of debt			2,847				0				(1,006	)
Change in fair value of warrant liabilities			(1,981	)			(336	)			2,248
Interest income			590				35				582
Interest expense			(370	)			(19	)			(3,607	)
Employee retention tax credit			1,311				0				0
Other expense, net			(15	)			(119	)			(967	)
Total Other Income (Expense), net			2,382				(439	)			(2,750	)
Loss before income taxes			(62,237	)			(60,828	)			(157,325	)
Income tax (expense) benefit			(225	)			1,516				3,124
Net loss			(62,462	)			(59,312	)			(154,201	)
Deemed dividend related to beneficial conversion feature of preferred stock			0				(412	)			0
Deemed dividend related to conversion of preferred stock into common stock			0				(299	)			0
Net loss attributable to common stockholders			(62,462	)			(60,023	)			(154,201	)
Comprehensive loss:
Net loss			(62,462	)			(59,312	)			(154,201	)
Foreign currency translation (loss) gain			(2,985	)			4,338				(2,708	)
Unrealized loss on available-for-sale investments			(247	)			0				0
Comprehensive loss		$	(65,694	)		$	(54,974	)		$	(156,909	)
Net loss per common share attributable to common stockholders - basic and diluted		$	(0.28	)		$	(0.85	)		$	(8.69	)
Weighted average number of shares used in computing net loss per common share - basic and diluted			226,960				70,809				17,737

	Year ended December 31,
	2019				2018
Revenue:
Product	7,104				23,268
Service	1,427				834
Total revenue	8,531				24,102
Cost of revenue:
Product	16,439				14,162
Service	4,292				2,009
Total cost of revenue	20,731				16,171
Gross (loss) profit	(12,200		)		7,931
Operating Expenses (Income)
Research and development	22,468				21,823
Sales and marketing	28,014				25,736
General and administrative	18,758				13,854
Amortization of intangible assets	10,301				10,868
Change in fair value of contingent consideration	(9,553		)		(1,011		)
Restructuring and other charges	1,374				—
Goodwill impairment	78,969				—
In-process research and development impairment	7,912				—
Acquisition related costs	—				647
Loss (gain) from sale of SurgiBot assets, net	97				(11,840		)
Gain from sale of AutoLap assets, net	(15,965		)		—
Reversal of transfer fee accrual	—				(2,994		)
Total Operating Expenses	142,375				57,083
Operating Loss	(154,575		)		(49,152		)
Other Income (Expense)
Change in fair value of warrant liabilities	2,248				(14,320		)
Interest income	582				1,400
Interest expense	(4,613		)		(4,208		)
Other (expense) income	(967		)		1,126
Total Other Expense, net	(2,750		)		(16,002		)
Loss before income taxes	$	(157,325	)		$	(65,154	)
Income tax benefit	3,124				3,377
Net loss	$	(154,201	)		$	(61,777	)
Comprehensive loss
Foreign currency translation loss	(2,708		)		(3,690		)
Comprehensive loss	$	(156,909	)		$	(65,467	)
Net loss per common share - basic and diluted	$	(8.69	)		$	(3.88	)
Weighted average number of shares used in computing net loss per common share - basic and diluted	17,737				15,938

See accompanying notes to consolidated financial statements.

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TransEnterix,

Asensus Surgical, Inc.

Consolidated Statements of Stockholders’Stockholders’ Equity

(in thousands)

		Common Stock								Preferred Stock								Treasury Stock
		Shares				Amount				Shares				Amount				Shares				Amount				Additional Paid-in Capital				Accumulated Deficit				Accumulated Other Comprehensive Income (Loss)				Total Stockholders' Equity
Balance, December 31, 2018			16,642			$	17				0			$	0				0			$	0			$	676,572			$	(509,406	)		$	1,338			$	168,521
Stock-based compensation			-				0				-				0				-				0				11,508				0				0				11,508
Issuance of common stock, net of issuance costs			3,571				4				0				0				0				0				25,773				0				0				25,777
Issuance of common stock consideration of MST			370				0				0				0				0				0				6,599				0				0				6,599
Exercise of stock options and warrants			38				0				0				0				0				0				538				0				0				538
Award of restricted stock units			70				0				0				0				0				0				0				0				0				0
Return of common stock to pay withholding taxes on restricted stock			0				0				0				0				15				0				(499	)			0				0				(499	)
Cancellation of treasury stock			0				0				0				0				(15	)			0				0				0				0				0
Cumulative effect of change in accounting principle			-				0				-				0				-				0				(7	)			7				0				0
Other comprehensive loss			-				0				-				0				-				0				0				0				(2,708	)			(2,708	)
Net loss			-				0				-				0				-				0				0				(154,201	)			0				(154,201	)
Balance, December 31, 2019			20,691			$	21				0			$	0				0			$	0			$	720,484			$	(663,600	)		$	(1,370	)		$	55,535
Stock-based compensation							0								0								0				7,911				0				0				7,911
Issuance of common stock, preferred stock and warrants under 2020 financing, net of issuance costs			14,122				14				7,937				79				0				0				13,384				0				0				13,477
Issuance of common stock, net of issuance costs			66,241				66				0				0				0				0				33,780				0				0				33,846
Conversion of preferred stock to common stock			7,937				8				(7,937	)			(79	)			0				0				71				0				0				0
Exchange of shares for Series B Warrants			2,041				2				0				0				0				0				2,468				0				0				2,470
Exercise of stock options and warrants			4,913				5				0				0				0				0				3,335				0				0				3,340
Award of restricted stock units			286				0				0				0				0				0				0				0				0				0
Return of common stock to pay withholding taxes on restricted stock			0				0				0				0				28				0				(36	)			0				0				(36	)
Cancellation of treasury stock			0				0				0				0				(28	)			0				0				0				0				0
Other comprehensive income			-				0				-				0				-				0				0				0				4,338				4,338
Net loss			-				0				-				0				-				0				0				(59,312	)			0				(59,312	)
Balance, December 31, 2020			116,231			$	116				0			$	0				0			$	0			$	781,397			$	(722,912	)		$	2,968			$	61,569
Stock-based compensation			-				0				-				0				-				0				9,429				0				0				9,429
Issuance of common stock, net of issuance costs			71,787				72				0				0				0				0				131,857				0				0				131,929
Exercise of stock options and warrants			45,630				46				0				0				0				0				33,029				0				0				33,075
Award of restricted stock units			1,571				1				0				0				0				0				0				0				0				1
Return of common stock to pay withholding taxes on restricted stock			0				0				0				0				320				0				(1,063	)			0				0				(1,063	)
Cancellation of treasury stock			0				0				0				0				(320	)			0				0				0				0				0
Other comprehensive loss			-				0				-				0				-				0				0				0				(3,232	)			(3,232	)
Net loss			-				0				-				0				-				0				0				(62,462	)			0				(62,462	)
Balance, December 31, 2021			235,219			$	235				0			$	0				0			$	0			$	954,649			$	(785,374	)		$	(264	)		$	169,246

	Common Stock							Treasury Stock							Additional Paid-in Capital				Accumulated Deficit				Accumulated Other Comprehensive (Loss) Income				Total Stockholders’ Equity
	Shares			Amount				Shares			Amount
Balance, December 31, 2017	15,329			$	16			—			$	—			$	621,446			$	(447,640	)		$	5,028			$	178,850
Stock-based compensation	—			—				—			—				9,039				—				—				9,039
Issuance of common stock and warrants, net of issuance costs	—			—				—			—				279				—				—				279
Issuance of common stock for MST Acquisition	242			0				—			—				8,300				—				—				8,300
Exercise of stock options and warrants	889			1				—			—				36,171				—				—				36,172
Award of restricted stock units	82			0				—			—				—				—				—				—
Return of common stock to pay withholding taxes on restricted stock	—			—				41			1				(1,663		)		—				—				(1,662		)
Cancellation of treasury stock	—			—				(41	)		(1		)		—				—				—				(1		)
Issuance of common stock related to sale of SurgiBot assets	100			0				—							3,000				—				—				3,000
Cumulative effect of change in accounting principle (Note 2)	—			—				—			—				—				11				—				11
Other comprehensive loss	—			—				—			—				—				—				(3,690		)		(3,690		)
Net loss	—			—				—			—				—				(61,777		)		—				(61,777		)
Balance, December 31, 2018	16,642			$	17			—			$	—			$	676,572			$	(509,406	)		$	1,338			$	168,521
Stock-based compensation	—			—				—			—				11,508				—				—				11,508
Issuance of common stock, net of issuance costs	3,571			4				—			—				25,773				—				—				25,777
Issuance of common stock consideration to MST	370			0				—			—				6,599				—				—				6,599
Exercise of stock options and warrants	38			0				—			—				538				—				—				538
Award of restricted stock units	70			0				—			—				—				—				—				—
Return of common stock to pay withholding taxes on restricted stock	—			—				15			0				(499		)		—				—				(499		)
Cancellation of treasury stock	—			—				(15	)		0				—				—				—				—
Cumulative effect of change in accounting principle (Note 2)	—			—				—			—				(7		)		7				—				—
Other comprehensive loss	—			—				—			—				—				—				(2,708		)		(2,708		)
Net loss	—			—				—			—				—				(154,201		)		—				(154,201		)
Balance, December 31, 2019	20,691			$	21			—			$	—			$	720,484			$	(663,600	)		$	(1,370	)		$	55,535

See accompanying notes to consolidated financial statements.

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TransEnterix,

Asensus Surgical, Inc.

Consolidated Statements of Cash Flows

(in thousands)

		Year Ended December 31,
		2021				2020				2019
Operating Activities:
Net loss		$	(62,462	)		$	(59,312	)		$	(154,201	)
Adjustments to reconcile net loss to net cash and cash equivalents used in operating activities:
Gain from sale of AutoLap assets, net			0				0				(15,965	)
Loss from sale of SurgiBot assets, net			0				0				97
Goodwill and intangible assets impairment			0				0				86,881
Depreciation			2,857				2,898				2,166
Amortization of intangible assets			11,254				10,801				10,301
Amortization of debt discount and debt issuance costs			0				0				1,513
Amortization of discounts and premiums on investments, net			409				0				(327	)
Stock-based compensation			9,429				7,911				11,508
Interest expense on deferred consideration - MST acquisition			0				0				756
(Gain) loss on extinguishment of debt			(2,847	)			0				1,006
Deferred tax expense (benefit)			225				(1,516	)			(3,124	)
Bad debt expense			144				0				1,634
Change in inventory reserves			(492	)			(3,034	)			8,931
Change in fair value of warrant liabilities			1,981				336				(2,248	)
Change in fair value of contingent consideration			(1,565	)			2,924				(9,553	)
Changes in operating assets and liabilities:
Accounts receivable			174				(447	)			6,083
Inventories			(611	)			(4,164	)			(16,404	)
Operating lease right-of-use assets			(4,254	)			1,106				2,271
Prepaid expenses			146				824				2,541
Employee retention tax credit receivable			(1,311	)			0				0
Other current and long-term assets			902				366				(5,441	)
Accounts payable			1,614				(1,758	)			(668	)
Accrued expenses			(475	)			(2,219	)			(168	)
Deferred revenue			(229	)			(105	)			(959	)
Operating lease liabilities			4,452				(1,203	)			(2,515	)
Other long-term liabilities			0				(83	)			2,401
Net cash and cash equivalents used in operating activities			(40,659	)			(46,675	)			(73,484	)
Investing Activities:
Proceeds from sale of AutoLap assets			0				0				15,965
Purchase of available-for-sale investments			(122,330	)			0				(12,883	)
Proceeds from maturities of available-for-sale investments			4,030				0				65,000
Purchase of property and equipment			(1,368	)			(3	)			(437	)
Net cash and cash equivalents used in investing activities			(119,668	)			(3	)			67,645
Financing Activities:
Proceeds from issuance of common stock, preferred stock and warrants under 2020 financing, net of issuance costs			0				13,478				0
Proceeds from issuance of common stock, net of issuance costs			131,929				33,847				25,777
Proceeds from notes payable, net of issuance costs			0				2,815				0
Payment of note payable			0				0				(31,425	)
Taxes paid related to net share settlement of vesting of restricted stock units			(1,063	)			(36	)			(499	)
Payment of contingent consideration			0				(74	)			0
Proceeds from exercise of stock options and warrants			30,839				3,340				538
Net cash and cash equivalents provided by financing activities			161,705				53,370				(5,609	)
Effect of exchange rate changes on cash and cash equivalents			376				270				364
Net increase in cash, cash equivalents and restricted cash			1,754				6,962				(11,084	)
Cash, cash equivalents and restricted cash, beginning of period			17,529				10,567				21,651
Cash, cash equivalents and restricted cash, end of period		$	19,283			$	17,529			$	10,567

	Twelve Months Ended December 31,
	2019				2018
Operating Activities
Net loss	$	(154,201	)		$	(61,777	)
Adjustments to reconcile net loss to net cash and cash equivalents used in operating activities:
Gain from sale of AutoLap assets, net	(15,965		)		—
Loss (gain) from sale of SurgiBot assets, net	97				(11,840		)
Goodwill and in-process research and development impairment	86,881				—
Depreciation	2,166				2,420
Amortization of intangible assets	10,301				10,868
Amortization of debt discount and debt issuance costs	1,513				725
Amortization of short-term investment discount	(327		)		(351		)
Stock-based compensation	11,508				9,039
Inventory write-down related to restructuring	7,408				—
Inventory write-down	1,523				—
Bad debt expense	1,634				—
Interest expense on deferred consideration - MST acquisition	756				—
Deferred tax benefit	(3,224		)		(3,377		)
Loss on extinguishment of debt	1,006				1,400
Change in fair value of warrant liabilities	(2,248		)		14,320
Change in fair value of contingent consideration	(9,553		)		(1,011		)
Reversal of transfer fee accrual	—				(2,994		)
Changes in operating assets and liabilities, net of effect of acquisition:
Accounts receivable	6,083				(7,225		)
Interest receivable	26				54
Inventories	(16,404		)		(2,145		)
Other current and long term assets	(655		)		(325		)
Accounts payable	(668		)		767
Accrued expenses	(1,180		)		2,134
Deferred revenue	(959		)		825
Other long term liabilities	998				—
Net cash and cash equivalents used in operating activities	(73,484		)		(48,493		)
Investing Activities
Proceeds from sale of AutoLap assets	15,965				—
Purchase of short-term investments	(12,883		)		(55,439		)
Proceeds from maturities of short-term investments	65,000				4,000
Payment for acquisition of a business	—				(5,800		)
Proceeds related to sale of SurgiBot assets, net	—				4,496
Purchase of property and equipment	(437		)		(770		)
Proceeds from sale of property and equipment	—				32
Net cash and cash equivalents provided by (used in) investing activities	67,645				(53,481		)
Financing Activities
Payment of notes payable	(31,425		)		(15,305		)
Proceeds from issuance of debt and warrants, net of issuance costs	—				28,507
Payment of contingent consideration	—				(770		)
Proceeds from issuance of common stock and warrants, net of issuance costs	25,777				279
Taxes paid related to net share settlement of vesting of restricted stock units	(499		)		(1,662		)
Proceeds from issuance of common stock related to sale of SurgiBot assets	—				3,000
Proceeds from exercise of stock options and warrants	538				12,403
Net cash and cash equivalents (used in) provided by financing activities	(5,609		)		26,452
Effect of exchange rate changes on cash and cash equivalents	364				(433		)
Net (decrease) increase in cash, cash equivalents and restricted cash	(11,084		)		(75,955		)
Cash, cash equivalents and restricted cash, beginning of period	21,651				97,606
Cash, cash equivalents and restricted cash, end of period	$	10,567			$	21,651

TransEnterix, Inc.

Consolidated Statements of Cash Flows

(in thousands)

Supplemental Disclosure for Cash Flow Information
Interest paid	$	2,187			$	1,730
Supplemental Schedule of Non-cash Investing and Financing Activities
Transfer of inventories to property and equipment	$	486			$	2,160
Transfer of property and equipment to inventories	$	323			$	637
Reclass of warrant liability to common stock and additional paid-in capital	$	—			$	23,774
Cashless exercise of warrants	$	—			$	4,272
Issuance of common stock related to MST acquisition	$	6,600			$	8,300
Proceeds from sale of AutoLap assets exchanged for settlement of Company obligations	$	1,000			$	—
Deferred consideration - MST acquisition	$	—			$	5,962

See accompanying notes to consolidated financial statements.

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TransEnterix,

		Year Ended December 31,
		2021				2020				2019
Supplemental Disclosure for Cash Flow Information:
Interest paid		$	0			$	0			$	2,187
Cash paid for taxes		$	170			$	82			$	75
Supplemental Schedule of Non-cash Investing and Financing Activities:
Transfer of inventories to property and equipment		$	3,244			$	8,113			$	486
Right-of-use assets recognized related to new lease obligations		$	5,119			$	0			$	0
Reclass of warrant liability to common stock and additional paid-in capital		$	2,236			$	0			$	0
Exchange of common stock for Series B Warrants		$	0			$	2,470			$	0
Transfer of in-process research and development to intellectual property		$	0			$	2,425			$	0
Deemed dividend related to beneficial conversion feature of preferred stock		$	0			$	412			$	0
Deemed dividend related to conversion of preferred stock into common stock		$	0			$	299			$	0
Issuance of common stock - MST acquisition		$	0			$	0			$	6,600
Proceeds from sale of AutoLap assets exchanged for settlement of Company obligations		$	0			$	0			$	1,000
Transfer of property and equipment to inventories		$	0			$	0			$	323
Conversion of preferred stock to common stock		$	0			$	79			$	0

See accompanying notes to consolidated financial statements.

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Asensus Surgical, Inc.

Notes to Consolidated Financial Statements

1.	Organization and Capitalization

1.Organization and Capitalization

Asensus Surgical, Inc. (formerly known as TransEnterix, Inc.) (the "Company") is a medical device company that is digitizing the interface between the surgeon and the patient in laparoscopy to increase controlpioneer a new era of Performance-Guided Surgery™ by unlocking clinical intelligence for surgeons to enable consistently superior outcomes and reduce surgical variability in today’s value-based healthcare environment.a new standard of surgery. The Company is focused on the market development for and commercialization of the Senhance™Senhance® Surgical System, which digitizes laparoscopic minimally invasive surgery.surgery, or MIS. The Senhance System allows foris the first and only digital, multi-port laparoscopic platform designed to maintain laparoscopic MIS standards while providing digital benefits such as haptic feedback, robotic precision, haptic feedback, surgeoncomfortable ergonomics, advanced instrumentation including 3mm microlaparoscopic instruments, 5mm articulating instruments, eye-sensing camera control via eye sensing and improved ergonomics while offering responsible economics.

fully-reusable standard instruments to help maintain per-procedure costs similar to traditional laparoscopy.

The Senhance System is available for sale in Europe, the United States, Japan, Taiwan, Russia and select other countries.

•   The Senhance System has a CE Mark in Europe for adult and pediatric laparoscopic abdominal and pelvic surgery, as well as limited thoracic surgeries excluding cardiac and vascular surgery.

•	In the United States, the Company has received 510(k) clearance from the FDA for use of the Senhance System in laparoscopic colorectal and gynecologic surgery in a total of 28 indicated procedures, including benign and oncologic procedures, laparoscopic inguinal hernia and laparoscopic cholecystectomy (gallbladder removal) surgery.

•   In the United States, the Company has received 510(k) clearance from the FDA for use of the Senhance System in general laparoscopic surgical procedures and laparoscopic gynecologic surgery in a total of 31 indicated procedures, including benign and oncologic procedures, laparoscopic inguinal, hiatal and paraesophageal hernia, sleeve gastrectomy and laparoscopic cholecystectomy (gallbladder removal) surgery.

•   In Japan, the Company has received regulatory approval and reimbursement for 98 laparoscopic procedures.

During 2018

•   The Senhance System has received its registration certificate by the Russian medical device regulatory agency, Roszdravnadzor, allowing for its sale and 2019,utilization throughout the Russian Federation.

In 2020, the Company successfully obtained FDAregulatory clearance and CE Mark for the Company's 3 millimeter diameter instruments, Senhance ultrasonic system 3 millimeterin Taiwan and 5 millimeter hooks, and Japan. On February 12, 2020, the Senhance articulating system. The 3 millimeter instruments enableCompany expanded its claims in the EU for the Senhance System to be used for microlaparoscopic surgeries,include pediatric patients, allowing for tiny incisions. The ultrasonic system is an advanced energy device usedaccessibility to deliver controlled energymore surgeons and patients, as well as expanding its potential market to ligate and divide tissue, while minimizing thermal injury to surrounding structures. The Senhance articulating system was launchedinclude pediatric hospitals in Europe in November 2019 and the Company is evaluating its pathway forward to launch such a system in the United States with a planned submission for U.S. clearance at the end of 2020.

The Senhance System is a multi-port robotic surgery system that allows multiple robotic arms to control instruments and a camera. The system features advanced technology to enable surgeons with haptic feedback and the ability to move the camera via eye movement.

On October 31, 2018, the Company acquired the assets, intellectual property and highly experienced multidisciplinary personnel of MST Medical Surgical Technologies, Inc., or MST, an Israeli-based medical technology company.  Through this acquisition the Company acquired MST’s AutoLap™ assets and technology, one of the only image-guided robotic scope positioning systems with FDA clearance and CE Mark.Europe. The Company believes MST’s image analytics technology will accelerate and drive meaningful Senhance System developments, and allowanticipates the Company to expandrobotic precision provided by the Senhance System, coupled with the already available 3mm diameter instruments, will prove to add augmented, intelligent vision capability. See Note 3 for a description of the acquisition transaction. The Company sold the AutoLap assets, while retaining the core technology,be an effective tool in October 2019. See Note 3 for a description of the asset sale. surgery with smaller patients.

On January 14,March 13, 2020, the Company announced that it had filed a 510(k) submission withreceived FDA clearance for the U.S. Food and Drug Administration for its Intelligent Surgical UnitUnit™ (ISU™) for use with the Senhance System. The Company believes it is the first such FDA submission seeking clearance for machine vision technology in abdominal robotic surgery. On March 13,September 23, 2020, the Company announced the first surgical procedures successfully completed using the ISU. On September 1, 2021, the Company announced that it has received FDA clearance for an expansion of machine vision capabilities. On January 19, 2021, the Intelligent Surgical Unit.

Company announced that it received CE Mark for the ISU. Lastly, on July 28, 2021, the Company announced that it received FDA clearance for 5mm diameter articulating instruments, offering better access to difficult-to-reach areas of the anatomy by providing two additional degrees of freedom. These instruments have previously received CE Mark for use in the EU.

The Company has also developed the SurgiBot System, a single-port, robotically enhanced laparoscopic surgical platform. In December 2017, the Company entered into an agreement with Great Belief International Limited, or GBIL, to advance the SurgiBot System towards global commercialization. The agreement transferred ownership of the SurgiBot System assets to GBIL, while the Company retained the option to distribute or co-distribute the SurgiBot System outside of China. GBIL intends to manufacture the SurgiBot System in China, obtain Chinese regulatory clearance from the National Medical Products Administration ("NMPA"), and commercialize in the Chinese market. The agreement provides the Company with proceeds of at least $29.0 million, of which $15.0 million has been received to date. The remaining $14.0 million represents future minimum royalties and will be paidpayable beginning at the earlier of receipt of Chinese regulatory approval or March 2023. In estimating the consideration in this transaction, the Company applied the guidance on constraining estimates of variable consideration. The Company recorded a gain duringreassesses the year ended December 31, 2018 based onestimate every reporting period and the cash proceeds (excluding future royalties) in excessvariable consideration will be adjusted when it is deemed no longer constrained.

2.Summary of the carrying value of the assets sold.

On September 18, 2015, the Company entered into a Membership Interest Purchase Agreement, (the “Purchase Agreement”) with Sofar S.p.A., (“Sofar”) as seller, Vulcanos S.r.l. (“Vulcanos”), as the acquired company, and TransEnterix International, Inc.

(“TransEnterix International”), a direct, wholly owned subsidiary of the Company that was incorporated in September 2015, as buyer. The closing of the transactions occurred on September 21, 2015 (the “Closing Date”) pursuant to which the Company acquired all of the membership interests of Vulcanos from Sofar (now known as the “Senhance Acquisition”), and changed the name of Vulcanos to TransEnterix Italia S.r.l (“TransEnterix Italia”). The Senhance Acquisition included all of the assets, employees and contracts related to the Senhance System. See Note 3 for a description of the related transactions.

On September 3, 2013, TransEnterix Surgical, Inc. a Delaware corporation (“TransEnterix Surgical”), and SafeStitch Medical, Inc., a Delaware corporation (“SafeStitch”) consummated a merger transaction whereby TransEnterix Surgical merged with a merger subsidiary of SafeStitch, with TransEnterix Surgical as the surviving entity in the merger (the “Merger”). As a result of the Merger, TransEnterix Surgical became a wholly owned subsidiary of SafeStitch. On December 6, 2013, SafeStitch changed its name to TransEnterix, Inc. and increased the authorized shares of common stock from 225,000,000 to 750,000,000, and authorized 25,000,000 shares of preferred stock, par value $0.01 per share.

As used herein, the term “Company” refers to the combination of SafeStitch and TransEnterix Surgical after giving effect to the Merger, and includes TransEnterix Surgical, Inc., SafeStitch LLC, TransEnterix International, Inc.; TransEnterix Italia S.r.l.; TransEnterix Europe S.à.R.L; TransEnterix Asia Pte. Ltd.; TransEnterix Taiwan Ltd.; TransEnterix Japan KK; TransEnterix Israel Ltd. and TransEnterix Netherlands B.V.

2.	Summary of Significant Accounting Policies

Significant Accounting Policies

Basis of Presentation

The accompanying Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and include the accounts of the Company and its direct and indirect wholly owned subsidiaries, SafeStitch LLC, TransEnterix Surgical, Inc., TransEnterix International, Inc., TransEnterix Italia S.r.l., TransEnterix Europe S.à.R.L; TransEnterix Asia Pte. Ltd.; TransEnterix Taiwan Ltd.; TransEnterix Japan KK; TransEnterix Israel Ltd. and TransEnterix Netherlands B.V.subsidiaries. All material inter-company accounts and transactions have been eliminated in consolidation.

On December 11, 2019, following receipt

Reclassifications

Certain amounts reported previously have been reclassified to conform to the current year presentation, with no effect on stockholders’ equity or net loss as previously reported. These reclassifications relate to the (gain) loss on extinguishment of approval from stockholders at a special meeting of stockholders helddebt which was historically included in interest expense on the same day,consolidated statements of operations for the Company filed an amendment to our Amended and Restated Certificateyear ended December 31, 2019.

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Table of Incorporation to effect a reverse stock split of the Company’s common stock at a ratio of one-for-thirteen, or the Reverse Stock Split. The Company’s common stock began trading on a split-adjusted basis on NYSE American on the morning of December 12, 2019. No fractional shares were issued in connection with the Reverse Stock Split. Instead, the Company rounded up each fractional share resulting from the reverse stock split to the nearest whole share. As a result of the Reverse Stock Split, the Company’s outstanding common stock decreased from approximately 261.9 million shares to approximately 20.2 million shares (without giving effect to the rounding up for each fractional share).Contents

Unless otherwise noted, all share and per share data referenced in the consolidated financial statements and the notes thereto have been retroactively adjusted to reflect the Reverse Stock Split. As a result of the Reverse Stock Split, certain amounts in the consolidated financial statements and the notes thereto may be slightly different than previously reported due to rounding of fractional shares, and certain amounts within the consolidated balance sheets were reclassified between common stock and additional paid-in capital.

Going Concern

The Company's consolidated financial statements are prepared using U.S. GAAP applicable to a going concern, which contemplate the realization of assets and liquidation of liabilities in the normal course of business.

Liquidity

The Company had an accumulated deficit of $663.6$785.4 million and working capital of $103.4 million as of December 31, 2019, and has working capital of $14.9 million as of December 31, 2019. 2021. The Company has not established sufficient sales revenues to cover its operating costs and requiresbelieves it may require additional capital in the future to proceed with its operating plan.

The Company believes the COVID-19 pandemic will continue to negatively impact its operations and ability ofto implement its market development efforts, which will have a negative effect on its financial condition.

In 2021, the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. In order to continue as a going concern, the Company will need, among other things, additional capital resources.

Traditionally, the Company has raised additional capital through equity offerings.offerings, including raising net proceeds of $73.4 million in a January 2021 public offering, $28.6 million in a January 2021 registered direct offering, and $27.3 million in an at-the-market offering launched in 2020 (the “2020 ATM Offering”). Additionally, in 2021, the Company launched the 2021 ATM Offering and raised proceeds, net of legal costs and commissions, of $2.8 million under this offering during the year ended December 31, 2021. Also, certain holders of our Series B, Series C, and D warrants to purchase shares of our common stock exercised such warrants in 2021 for aggregate proceeds to the Company of $30.6 million.

As of December 31, 2021, the Company had cash, cash equivalents, short-term and long-term investments, excluding restricted cash, of $135.8 million.

While the Company believes that its existing cash, cash equivalents, and short-term investments as of December 31, 2021 will be sufficient to sustain operations for at least the next 12 months from the issuance of these consolidated financial statements, the Company believes it may need to obtain additional financing in the future to proceed with its business plan. Management's plan to obtain suchadditional resources for the Company may include additional sales of equity under the 2021 ATM Offering or otherwise, traditional financing, such as loans, entry into a strategic collaboration, entry into an out-licensing arrangement or provision of additional distribution rights in some or all of our markets. In addition, the Company may consider fundamental business combination transactions. If the Company is unable to obtain adequate capital through one of these methods, or if expected capital from existing agreements is not received when due, or at all, it would need to reduce its sales and marketing and administrative expenses and delay research and development projects, including the purchase of equipment and supplies, until it is able to obtain sufficient funds. If such sufficient funds are not received on a timely basis, the

Company would then need to pursue a plan to license or sell its assets, seek to be acquired by another entity, cease operations and/or seek bankruptcy protection. However, management cannot provide any assurance that the Company will be successful in accomplishing any or all of its plans. plans and be able to secure additional funding when needed on terms acceptable to the Company, or at all. 

Risk and Uncertainties

The abilityCompany is subject to successfully resolve these factors raise substantial doubt aboutrisks similar to other similarly sized companies in the medical device industry. These risks include, without limitation: potential negative impacts on the Company's operations caused by the COVID-19 pandemic, including new variants of the virus; the historical lack of profitability; the Company’s ability to meetraise additional capital; the success of its existing obligations,market development efforts, the liquidity and capital resources of its partners; its ability to continue as a going concern within one year fromsuccessfully develop, clinically test and commercialize its products; the date that these financial statements are issued. The consolidated financial statementstiming and outcome of the regulatory review process for its products; changes in the health care and regulatory environments of the United States, the European Union, Japan, Taiwan, and other countries in which the Company do not include any adjustments that may resultoperates or intends to operate; its ability to attract and retain key management, marketing and scientific personnel; its ability to successfully prepare, file, prosecute, maintain, defend and enforce patent claims and other intellectual property rights; its ability to successfully transition from a research and development company to a marketing, sales and distribution company; competition in the outcomemarket for robotic surgical devices; and its ability to identify and pursue development of these aforementioned uncertainties.

additional products.

The COVID-19 pandemic had a significant impact on the Company in 2021 and continues to have a significant impact on its operations, primarily due to the continued repeated temporary cessation of elective surgical procedures in many markets, and the challenges and restrictions caused by stay-at-home orders, social distancing requirements and travel restrictions. The Company’s business and customers were negatively impacted by the COVID-19 pandemic, which suspended many elective surgical procedures globally, curtailed travel and necessarily diverted the attention of hospital customers. A variety of travel restrictions have caused delays in product installation and training activities. This has significantly impacted the Company’s ability to implement its market development activities to place Senhance Systems, provide training, and increase the use of the Senhance Systems in place. Given the dynamic nature of this health emergency, the full impact of the COVID-19 pandemic on ongoing business, results of operations and overall financial performance cannot be reasonably estimated at this time.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant items subject to such estimates and assumptions include identifiable intangibleimpairment considerations for long- term assets, and goodwill,fair value estimates related to contingent consideration, warrant liabilities, stock compensation expense, revenue recognition, accounts receivable reserves, short-term and long-term investments, excess and obsolete inventory reserves, inventory classification between current and non-current, measurement of lease liabilities and corresponding right-of-use (“ROU”) assets, and deferred tax asset valuation allowances.

Cash

Principles of Consolidation and Cash Equivalents and Restricted Cash

Foreign Currency Considerations

The Company considers all highly liquid investments with original maturities of 90 days or less ataccompanying consolidated financial statements include the time of purchase to be cash equivalents.

Restricted cash at December 31, 2019 and 2018 includes $1.0 million and $0.6 million, respectively, in cash accounts held as collateral primarily under the terms of an office operating lease, credit cards, automobile leases, and a performance guarantee required by the government of a country in which a Senhance System was sold in 2018.

Short-term Investments

Short-term investments are considered to be “held-to-maturity” and are carried at amortized cost using the effective interest method. As of December 31, 2018, short-term investments consisted of $51.8 million in U.S. government securities, all of which matured in less than a year. There were 0 short-term investments as of December 31, 2019.

The Company reassesses the appropriateness of the classification ofCompany and its investments at the end of each reporting period. The Company determined that its debt securities should be classified as held-to-maturity as of December 31, 2018. The Company had no debt securities as of December 31, 2019. This classification as of December 31, 2018 was based upon management’s determination that it has the positive intentdirect and ability to hold the securities until their maturity dates, as the investments mature within six monthsindirect wholly owned subsidiaries, Asensus Surgical US, Inc., Asensus International, Inc., Asensus Surgical Italia S.r.l., Asensus Surgical Europe S.à.r.l., Asensus Surgical Taiwan Ltd., Asensus Surgical Japan K.K., Asensus Surgical Israel Ltd., Asensus Surgical Netherlands B.V., and the underlying cash invested in these securities is not required prior to the investments maturity. Due to the short-term maturities of these instruments, the amortized cost approximated the related fair values, which was based on level 1 inputs as defined in Note 5. As of December 31, 2018, the gross holding gains and losses were immaterial.

The Company reviews its short-term investments for other-than-temporary impairment if the cost exceeds the fair value. NaN such impairment was recorded during the years ended December 31, 2019 or 2018.

Concentrations and Credit Risk

The Company’s principal financial instruments subject to potential concentration of credit risk are cash and cash equivalents, including amounts held in money market accounts. The Company places cash deposits with a federally insured financial institution. The Company maintains its cash at banks and financial institutions it considers to be of high credit quality; however, the Company’s domestic cash deposits may at times exceed the Federal Deposit Insurance Corporation’s insured limit. Balances in excess of federally insured limitations may not be insured. The Company has not experienced losses on theseAsensus Surgical Canada, Inc. All inter-company accounts and management believes that the Company is not exposed to significant risks on such accounts.

The Company’s accounts receivable are derived from sales to customers located throughout the world. The Company evaluates its customers’ financial condition and, generally, requires no collateral from its customers. The Company provides reserves for potential credit losses and recorded a bad debt charge totaling $1.6 million during the year ended December 31, 2019. The Company had eight customers who constituted 85% of the Company’s net accounts receivable at December 31, 2019. The Company had five customers who constituted 89% of the Company’s net accounts receivable at December 31, 2018. The Company had six customers who accounted for 82% of salestransactions have been eliminated in 2019 and twelve customers who accounted for 89% of sales in 2018.

Accounts Receivable

Accounts receivable are recorded at net realizable value, which includes an allowance for estimated uncollectible accounts. The allowance for uncollectible accounts was determined on a customer specific basis based on deemed collectability.

Inventories

Inventories are stated at the lower of cost (determined on a first-in, first-out basis) or net realizable value. Inventory costs include direct materials, direct labor, and normal manufacturing overhead. The Company records reserves, when necessary, to reduce the carrying value of inventory to its net realizable value. Management considers forecast demand in relation to the inventory on hand, competitiveness of product offerings, market conditions and product life cycles when determining excess and obsolescence and net realizable value adjustments. At the point of loss recognition, a new, lower-cost basis for that inventory is established, and any subsequent improvements in facts and circumstances do not result in the restoration or increase in that newly established cost basis.

Any inventory on hand at the measurement date in excess of the Company's current requirements based on anticipated levels of sales is classified as long-term on the Company's consolidated balance sheets. The Company's classification of long-term inventory requires it to estimate the portion of on hand inventory that can be realized over the upcoming twelve months.

Identifiable Intangible Assets and Goodwill

Identifiable intangible assets are recorded at cost, or when acquired as part of a business acquisition, at estimated fair value. Certain intangible assets are amortized over 5 to 10 years. Similar to tangible personal property and equipment, the Company periodically evaluates identifiable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

Intellectual property consists of purchased patent rights and developed technology acquired as part of a business acquisition. Amortization of the patent rights is recorded using the straight-line method over the estimated useful life of the patents of 10 years. Amortization of the developed technology is recorded using the straight-line method over the estimated useful life of 5 to 7 years.

The Company continues to operate in 1 segment, which is considered to be the sole reporting unit and therefore, goodwill is tested for impairment at the enterprise level. Indefinite-lived intangible assets, such as goodwill, are not amortized.

The Company typically tests goodwill for impairment annually, however, market conditions as well as reduced forecasts required that the Company test its goodwill carrying value as of September 30, 2019.

Subsequent to the adoption of Accounting Standards Update ("ASU") 2017-04 Intangibles - Goodwill and Other (Topic 350):Simplifying the Test for Goodwill Impairment , a company must record a goodwill impairment charge if a reporting unit’s carrying value exceeds its fair value. The Company generally determines the fair value of its reporting unit using two valuation methods: the “Income Approach — Discounted Cash Flow Analysis” method, and the “Market Approach — Guideline Public Company Method.”

Under the “Income Approach — Discounted Cash Flow Analysis” method the key assumptions consider projected sales, cost of sales, and operating expenses. These assumptions were determined by management utilizing the Company's internal operating plan, growth rates for revenues and operating expenses, and margin assumptions. An additional key assumption under this approach is the discount rate, which is determined by looking at current risk-free rates of capital, current market interest rates, and the evaluation of risk premium relevant to the business segment. If the Company's assumptions relative to growth rates were to change or were incorrect, the fair value calculation may change.

Under the “Market Approach — Guideline Public Company Method” the Company identified several publicly traded companies, which it believed had sufficiently relevant similarities. Similar to the income approach discussed above, sales, cost of sales, operating expenses, and their respective growth rates are key assumptions utilized. The market prices of the Company’s common stock and other guideline companies are additional key assumptions. If these market prices increase, the estimated market value would increase. If the market prices decrease, the estimated market value would decrease.

The results of these two methods were weighted based upon management’s evaluation of the relevance of the two approaches. In the 2019 evaluation, management determined that the income and market value approach should be weighted 50%-50%. In addition, management considered the decline in both the Company's stock price and market capitalization after the September 30, 2019 measurement date as relevant factors in the analysis.

The Company also performed a recoverability test on the intellectual property and concluded that there was 0 impairment as of September 30, 2019 or December 31, 2019.

During the third quarter of 2019, the Company determined that the goodwill associated with the business was impaired, and recorded impairment charges of $79.0 million. The impairment charge resulted from decreased sales and estimated cash flows and a significant decline in the Company's stock price. The Company also recognized a $7.9 million impairment charge to its IPR&D as it concluded that under the market value approach, the fair value of the IPR&D was lower than the carrying value.

No impairment existed at December 31, 2018.

In-Process Research and Development

In-process research and development (“IPR&D”) assets represent the fair value assigned to technologies that were acquired, which at the time of acquisition have not reached technological feasibility and have no alternative future use. IPR&D assets are considered to be indefinite-lived until the completion or abandonment of the associated research and development projects. During the period that the IPR&D assets are considered indefinite-lived, they are tested for impairment on an annual basis, or more frequently if the Company becomes aware of any events occurring or changes in circumstances that indicate that the fair value of the IPR&D assets are less than their carrying amounts. If and when development is complete, which generally occurs upon regulatory approval, and the Company is able to commercialize products associated with the IPR&D assets, these assets are then deemed definite-lived and are amortized based on their estimated useful lives at that point in time. If development is terminated or abandoned, the Company may have a full or partial impairment charge related to the IPR&D assets, calculated as the excess of carrying value of the IPR&D assets over fair value.

The IPR&D for the Senhance System was acquired on September 21, 2015. On October 13, 2017, upon receiving FDA clearance and the ability to commercialize the products associated with the IPR&D assets, the assets were deemed definite-lived, reclassified to intellectual property and are now amortized based on their estimated useful lives.

The IPR&D from MST was acquired on October 31, 2018.

The Company performed an impairment test of its IPR&D at the end of the third quarter 2019 as recent events and changes in market conditions indicated that the asset might be impaired.

The impairment test consisted of a comparison of the fair value of the IPR&D with its carrying amount. If the carrying amount of the IPR&D exceeds its fair value, an impairment loss is recognized in an amount equal to that excess.

Significant judgment is applied when testing for impairment. This judgment includes developing cash flow projections, selecting appropriate discount rates, identifying relevant market comparables, and incorporating general economic and market conditions.

During the third quarter of 2019, the Company concluded that the fair value determined by the market value approach, was lower than the carrying value. As a result, the Company recognized a $7.9 million impairment charge to its IPR&D. The company performed its annual impairment assessment at December 31, 2019 and no additional impairment was required.

Property and Equipment

Property and equipment consists primarily of machinery, manufacturing equipment, demonstration equipment, computer equipment, furniture, and leasehold improvements, which are recorded at cost.

Depreciation is recorded using the straight-line method over the estimated useful lives of the assets as follows:

Machinery, manufacturing and demonstration equipment	3-5 years
Computer equipment	3 years
Furniture	5 years
Leasehold improvements	Lesser of lease term or 3 to 10 years

Upon retirement or sale, the cost of assets disposed of and the related accumulated depreciation and amortization are removed from the accounts and any resulting gain or loss is credited or charged to operations. Repairs and maintenance costs are expensed as incurred.

Impairment of Long-Lived Assets

The Company reviews its long-lived assets for possible impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. To determine the recoverability of its long-lived assets, the Company

evaluates the probability that future estimated undiscounted net cash flows will be less than the carrying amount of the assets. If such estimated cash flows are less than the carrying amount of the long-lived assets, then such assets are written down to their fair value. The Company’s estimates of anticipated cash flows and the remaining estimated useful lives of long-lived assets could be reduced in the future, resulting in a reduction to the carrying amount of long-lived assets.

Contingent Consideration

Contingent consideration is recorded as a liability and is the estimate of the fair value of potential milestone payments related to business acquisitions. Contingent consideration is measured at fair value using a discounted cash flow model utilizing significant unobservable inputs including the probability of achieving each of the potential milestones, future Euro-to-USD exchange rates, and an estimated discount rate associated with the risks of the expected cash flows attributable to the various milestones. Significant increases or decreases in any of the probabilities of success or changes in expected achievement of any of these milestones would result in a significantly higher or lower fair value of these milestones, respectively, and commensurate changes to the associated liability. The contingent consideration is revalued at each reporting period and changes in fair value are recognized in the consolidated statements of operations and comprehensive loss.

Warrant Liabilities

The Company’s Series B Warrants (see Note 16) are measured at fair value using a simulation model which takes into account, as of the valuation date, factors including the current exercise price, the expected life of the warrant, the current price of the underlying stock, its expected volatility, holding cost and the risk-free interest rate for the term of the warrant (see Note 5). The warrant liability is revalued at each reporting period and changes in fair value are recognized in the consolidated statements of operations and comprehensive loss. The selection of the appropriate valuation model and the inputs and assumptions that are required to determine the valuation requires significant judgment and requires management to make estimates and assumptions that affect the reported amount of the related liability and reported amounts of the change in fair value. Actual results could differ from those estimates, and changes in these estimates are recorded when known. As the warrant liability is required to be measured at fair value at each reporting date, it is reasonably possible that these estimates and assumptions could change in the near term.

Translation of Foreign Currencies

consolidation.

The functional currency of the Company’s operational foreign subsidiaries is predominantly the Euro. The assets and liabilities of the Company’s foreign subsidiaries are translated into U.S. dollars at exchange rates in effect at the balance sheet date. Income and expense items are translated at the average exchange rates prevailing during the period. The cumulative translation effect for a subsidiary using a functional currency other than the U.S. dollar is included in accumulated other comprehensive income or loss as a separate component of stockholders’ equity.

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The Company’s intercompany accounts are denominated in the functional currency of the foreign subsidiary. Gains and losses resulting from the remeasurement of intercompany receivables that the Company considers to be of a long-term investment nature are recorded as a cumulative translation adjustment in accumulated other comprehensive income or loss as a separate component of stockholders’ equity, while gains and losses resulting from the remeasurement of intercompany receivables from a foreign subsidiary for which the Company anticipates settlement in the foreseeable future are recorded in the consolidated statements of operations and comprehensive loss. The net gains and losses included in net loss in the consolidated statements of operations and comprehensive loss for the years ended December 31, 2021, 2020, and 2019 were not significant.

Cash and Cash Equivalents, Restricted Cash, and Investments

The Company considers all highly liquid investments with original maturities of 90 days or less at the time of purchase to be cash equivalents.

Restricted cash as of December 31, 2021 and 2020 includes $1.2 million and $1.2 million, respectively, in cash accounts held as collateral primarily under the terms of an office operating lease, credit cards, and automobile leases.

The Company’s investments as of December 31, 2021 consisted of commercial paper and corporate bonds and were classified as available-for-sale. Investments classified as available-for-sale are measured at fair value, and net unrealized gains and losses are recorded as a component of accumulated other comprehensive income (loss) on the consolidated balance sheets until realized. Realized gains and losses on sales of investment securities are determined based on the specific-identification method and are recorded in interest income, net. The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity computed under the effective interest method. Such amortization and accretion is included in interest expense, net. The Company held 0 investments as of December 31, 2020. The Company recognized an immaterial amount of gross realized losses for the year ending December 31, 2021. There were no gross realized gains for the year ended December 31, 2021. There were no gross realized gain or losses recorded for the years ended December 31, 2020 and 2019. The Company reclassified an immaterial amount of unrealized losses from accumulated other comprehensive income (loss) for the year ended December 31, 2021 with 0 related reclassification for the years ended December 31, 2020 and 2019. Investments with remaining maturities at date of purchase greater than 90 days and remaining maturities as of the reporting period less than one year are classified as short-term investments. Investments with remaining maturities greater than one year are classified as long-term investments. 

Concentrations and Credit Risk

The Company’s principal financial instruments subject to potential concentration of credit risk are cash and cash equivalents, and investments, including amounts held in money market funds, commercial paper, and corporate bonds. The Company places cash deposits with a federally insured financial institution. The Company maintains its cash at banks and financial institutions it considers to be of high credit quality; however, the Company’s domestic cash deposits may at times exceed the Federal Deposit Insurance Corporation’s insured limit. Balances in excess of federally insured limitations may not be insured. The Company has not experienced losses on these accounts, and management believes that the Company is not exposed to significant risks on such accounts. Investments are stated at their estimated fair values, based on quoted market prices for the same or similar instruments. The counterparties to the agreements relating to the Company’s investments consist of various major corporations, financial institutions, and government agencies of high credit standing.

The Company’s accounts receivable are derived from sales and leases to customers located throughout the world. The Company evaluates its customers’ financial condition and, generally, requires no collateral from its customers. The Company provided reserves for potential credit losses and recorded $0.1 million, $0 million, and $1.6 million in bad debt charges during the years ended December 31, 2021, 2020 and 2019, respectively. The Company had three customers who constituted 61% of the Company’s net accounts receivable as of December 31, 2021. The Company had seven customers who constituted 68% of the Company’s net accounts receivable at December 31, 2020. The Company had two customers who accounted for 52% of revenue in 2021,nine customers who accounted for 55% of revenue in 2020, and six customers who accounted for 82% of revenue in 2019.

Accounts Receivable

Accounts receivable are recorded at net realizable value, which includes an allowance for estimated uncollectible accounts. The allowance for uncollectible accounts was determined on a customer specific basis based on deemed collectability. The allowance for doubtful accounts was $1.7 million and $1.8 million as of December 31, 2021 and December 31, 2020, respectively.

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Inventories

Inventories are stated at the lower of cost (determined on a first-in, first-out basis) or net realizable value. Inventory costs include direct materials, direct labor, and normal manufacturing overhead. The Company records reserves, when necessary, to reduce the carrying value of inventory to its net realizable value. Management considers forecast demand in relation to the inventory on hand, competitiveness of product offerings, market conditions and product life cycles when determining excess and obsolescence and net realizable value adjustments. At the point of loss recognition, a new, lower-cost basis for that inventory is established, and any subsequent improvements in facts and circumstances do not result in the restoration or increase in that newly established cost basis.

Any inventory on hand at the measurement date in excess of the Company's current requirements based on anticipated levels of sales is classified as long-term on the Company's consolidated balance sheets. The Company's classification of long-term inventory requires it to estimate the portion of on hand inventory that can be realized over the upcoming twelve months.

Identifiable Intangible Assets

Definite-Lived Intangible Assets - Intellectual Property

Intellectual property consists of purchased patent rights and developed technology acquired as part of a business acquisition. Developed technology includes reclassified in-process research and development (“IPR&D”) assets related to (i) the Senhance System acquired in 2015 and reclassified in 2017 and (ii) the MST acquisition in 2018 and reclassified in 2020. Amortization of the patent rights is recorded using the straight-line method over the estimated useful life of the patents of 10 years. Amortization of the developed technology is recorded using the straight-line method over the estimated useful life of 5 to 7 years.

The Company periodically evaluates intellectual property for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. To determine the recoverability, the Company evaluates the probability that future estimated undiscounted net cash flows will be less than the carrying amount of the assets. If such estimated cash flows are less than the carrying amount of the assets, then such assets are written down to their fair value. NaN impairment of intellectual property was identified during the year ended December 31, 2021, 2020 and 2019.

Indefinite-Lived Intangible Assets

IPR&D assets represent the fair value assigned to technologies that were acquired, which at the time of acquisition have not reached technological feasibility and have no alternative future use. IPR&D assets are considered to be indefinite-lived until the completion or abandonment of the associated research and development projects. During the period that the IPR&D assets are considered indefinite-lived, they are tested for impairment on an annual basis, or more frequently if the Company becomes aware of any events occurring or changes in circumstances that indicate that the fair value of the IPR&D assets are less than their carrying amounts. To determine the recoverability, the Company evaluates the probability that future estimated discounted net cash flows will be less than the carrying amount of the assets. If such estimated cash flows are less than the carrying amount of the assets, then such assets are written down to their fair value.

The Company reclassifies IPR&D assets to intellectual property when development is complete, which generally occurs upon regulatory approval when the Company is able to commercialize products. The completed IPR&D assets are then classified as definite-lived intangible assets and are amortized based on their estimated useful lives at that point in time. If development is terminated or abandoned, the Company may have a full or partial impairment charge related to the IPR&D assets, calculated as the excess of carrying value of the IPR&D assets over fair value.

The Company performed an impairment test of its IPR&D at the end of the third quarter 2019 as events and changes in market conditions indicated that the asset might be impaired. During the third quarter of 2019, the Company concluded that the fair value determined by the market value approach was lower than the carrying value and recognized a $7.9 million impairment charge to its IPR&D. The Company performed its annual impairment assessment at December 31, 2019 and 2018 were not significant.

Business Acquisitions

Business acquisitionsno additional impairment was required. As of December 31, 2020, all IPR&D asset development was completed and reclassified to intellectual property.

Property and Equipment

Property and equipment consists primarily of operating lease Senhance System assets, machinery, manufacturing equipment, demonstration equipment, computer equipment, furniture, and leasehold improvements, and purchased software which are accounted forrecorded at cost less accumulated depreciation. Depreciation is recorded using the acquisitionstraight-line method over the estimated useful lives of accountingthe assets as follows:

	Years
Operating lease assets – Senhance System leasing			5
Machinery, manufacturing, and demonstration equipment		3	-	5
Computer equipment			3
Furniture			5
Leasehold improvements	Lesser of lease term or 3 to 10
Purchased Software			5

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The Company reviews its property and equipment assets for possible impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. To determine the recoverability of its long-lived assets, the Company evaluates the probability that future estimated undiscounted net cash flows will be less than the carrying amount of the assets. If such estimated cash flows are less than the carrying amount of the long-lived assets, then such assets are written down to their fair value. The Company did not identify any impairment during the years ended December 31, 2021, 2020, and 2019.

Operating Leases

We have operating leases for our corporate office buildings, vehicles, and machinery and equipment. At inception, we determine whether an agreement represents a lease and, at commencement, we evaluate each lease agreement to determine whether the lease constitutes an operating or financing lease.

On January 1, 2019, the Company adopted ASU No.2016-02, applying the package of practical expedients to leases that commenced before the effective date whereby the Company elected to not reassess the following: (i) whether any expired or existing contracts contain leases; (ii) the lease classification for any expired or existing leases; and (iii) initial direct costs for any existing leases. The Company also elected, for all classes of underlying assets, to not separate non-lease components from lease components and instead to account for them as a single component. Non-lease components consist of common area maintenance payments for most real estate leases, which are determined based on costs incurred by the lessor. Many of the Company’s leases include base rental periods coupled with options to renew or terminate the lease, generally at the Company’s discretion.  In evaluating the lease term, the Company considers whether renewal is reasonably certain.  To the extent a significant economic incentive exists to renew the lease, the option is included within the lease term.  Based on the Company’s leases, renewal options generally do not provide a significant economic incentive and are therefore excluded from the lease term.

Adoption of ASU No.2016-02 did not have a material impact on the Company’s cash flows from operations or the Company’s operating results. The most significant impact was the recognition of operating lease right-of-use assets and operating lease liabilities on our balance sheet. Lease liabilities and their corresponding right-of-use assets are recorded based on the present value of lease payments over the expected lease term. The interest rate implicit in lease contracts is typically not readily determinable. As such, we utilize the appropriate incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. Operating lease expense is recognized on a straight-line basis over the lease term, subject to any changes in the lease or expectations regarding the terms.

Employee Retention Tax Credit Receivable

The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) included an Employee Retention Tax Credit (“ERTC”) provision designed to encourage employers to keep employees on their payroll.  The ERTC is a refundable tax credit against certain payroll taxes paid by employers for eligible wages.  We assessed the government assistance in accordance with Topic 958-605,Not for Profit Entities-Revenue Recognition, and concluded it represents a conditional non-exchange transaction that is recognized when the conditions have been substantially met. During the year ended December 31, 2021, we submitted an ERTC refund for $1.3 million and recorded the amount into Other Income (Expense) on the consolidated statements of operations and comprehensive loss. The Company believes the relevant conditions of the employee retention credit provision of the CARES Act have been substantially met and that it will receive the credit.

Notes Payable – Payroll Protection Program

The Company’s policy is to account for forgivable loans received through the U.S. Small Business Administration (the “SBA”) under the CARES Act Payroll Protection Program (“PPP”), as debt in accordance with ASC 805, “Business Combinations.” ASC 805 requires, among470, Debt, and other things,related accounting pronouncements. The forgiveness of debt, in whole or part, is recognized once the debt is extinguished, which occurs when the Company is legally released from the liability by the SBA. Any portion of debt forgiven, adjusted for accrued interest forgiven and unamortized debt issuance costs, is recorded as a gain on extinguishment of debt, and presented in the consolidated statements of operations and comprehensive loss. On June 10, 2021, the Company received notification from the SBA that the principal amount of its PPP loan of $2.8 million and related interest had been forgiven.

Contingent Consideration

Contingent consideration is recorded as a liability and is the estimate of the fair value of potential milestone payments related to business acquisitions. Contingent consideration is measured at fair value using a Monte-Carlo simulation utilizing significant unobservable inputs including the probability of achieving each of the potential milestones, future Euro-to-USD exchange rates, revenue volatility and an estimated discount rate associated with the risks of the expected cash flows attributable to the various milestones. Significant increases or decreases in any of the probabilities of success or changes in expected achievement of any of these milestones would result in a significantly higher or lower fair value of these milestones, respectively, and commensurate changes to the associated liability. The contingent consideration is revalued at each reporting period and changes in fair value are recognized in the consolidated statements of operations and comprehensive loss.

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On September 21, 2015, the Company completed the strategic acquisition, through its wholly owned subsidiary TransEnterix International, from Sofar S.p.A., an Italian company (“Sofar”), of all of the assets, employees and contracts related to the advanced robotic system for minimally invasive laparoscopic surgery now known as the Senhance System. Under the terms of the Purchase Agreement, as amended in 2016, as of December 31, 2021, the Company has accrued $2.4 million of estimated fair value of remaining contingent consideration related to a milestone of €15.0 million which shall be payable upon achievement of trailing revenues from sales or services contracts of the Senhance System of at least €25.0 million over a calendar quarter or in the event that (i) the Company or Asensus International is acquired, and liabilities assumed be recognized(ii) the Company significantly reduces or suspends selling efforts of the Senhance System, or (iii) the Company acquires a business that offers alternative products that are directly competitive with the Senhance System.

Warrant Liabilities

The Company’s Series B Warrants (see Note 16) were measured at their fair values, as determined in accordance with ASC 820, “Fair Value Measurements,”value using a simulation model which took into account, as of the acquisition date. For certain assets and liabilities, book value approximates fair value. In addition, ASC 805 establishes that consideration transferred be measured atvaluation date, factors including the closing datecurrent exercise price, the expected life of the acquisitionwarrant, the current price of the underlying stock, its expected volatility, holding cost and the risk-free interest rate for the term of the warrant. The warrant liability was revalued at the then-current market price. Under ASC 805, acquisition-related costs (i.e., advisory, legal, valuationeach reporting period and other professional fees) and certain acquisition-related restructuring charges impacting the target company are expensedchanges in fair value were recognized in the period in which the costs are incurred.consolidated statements of operations and comprehensive loss. The applicationselection of the acquisition method of accountingappropriate valuation model and the inputs and assumptions that are required to determine the valuation requires the Companysignificant judgment and requires management to make estimates and assumptions that affect the reported amount of the related toliability and reported amounts of the estimatedchange in fair values of net assets acquired.

Significant judgmentsvalue. Actual results could differ from those estimates, and changes in these estimates are used during this process, particularly with respect to intangible assets. Therefore, the purchase price allocation to intangible assets and goodwill has a significant impact on future operating results.

Risk and Uncertainties

The Company is subject to a number of risks similar to other similarly-sized companiesrecorded when known. All remaining outstanding Series B Warrants were exercised in the medical device industry. These risks include, without limitation, the Company's ability to continue as a going concern, the historical lack of profitability; the Company’s ability to raise additional capital; the liquidity and capital resources of its partners; its ability to successfully develop, clinically test and commercialize its products; the timing and outcome of the regulatory review process for its products; changes in the health care and regulatory environments of the United States, the European Union, Japan, Taiwan and other countries in which the Company operates or intends to operate; its ability to attract and retain key management, marketing and scientific personnel; its ability to successfully prepare, file, prosecute, maintain, defend and enforce patent claims and other intellectual property rights; its ability to successfully transition from a research and development company to a marketing, sales and distribution concern; competition in the market for robotic surgical devices; and its ability to identify and pursue development of additional products.

first quarter 2021.

Revenue Recognition

The Company adopted ASC Topic 606, Revenue from Contracts with Customers (the “New Revenue Standard”), on January 1, 2018.

The Company’s revenue consists of product revenue resulting from the sale and lease of systems, systemSenhance Systems, Senhance System components, instruments and accessories, and service revenue. The Company accounts for a contract with a customer when there is a legally enforceable contract between the Company and the customer, the rights of the parties are identified, the contract has commercial substance, and collectability of the contract consideration is probable. The Company's revenues are measured based on consideration specified in the contract with each customer, net of any sales incentives and taxes collected from customers that are remitted to government authorities.

The Company's systemCompany’s Senhance System sale arrangements generally include a five-year service period; the first year of service is generally free and included in the Senhance System sale arrangement and the remaining four years are generally included at a stated service price.

The Company’s Senhance System sale arrangements generally contain multiple products and services. For these bundledconsolidated sale arrangements, the Company accounts for individual products and services as separate performance obligations if they are distinct, which is if a product or service is separately identifiable from other items in the bundledconsolidated package, and if a customer can benefit from it on its own or with other resources that are readily available to the customer. The Company’s systemSenhance System sale arrangements may include a combination of the following performance obligations: system(s), system components, instruments, accessories, and system service. The Company’s system saleservices.

For arrangements that contain multiple performance obligations, revenue is allocated to each performance obligation based on its relative estimated standalone selling price. When available, standalone selling prices are based on observable prices at which the Company separately sells the products or services; however due to limited sales to date, standalone selling prices generally include a five years period of service. The first year of service is generally free and included in the system sale arrangement and the remaining four years are generally included at a stated service price.not directly observable. The Company considersestimates the service terms instandalone selling price using the arrangements that are legally enforceablemarket assessment approach considering market conditions and entity-specific factors including, but not limited to, be performance obligations. Other than service, the Company generally satisfies allfeatures and functionality of the performance obligations up-front. System components, system accessories, instruments, accessories,products and service are also sold on aservices, geographies, type of customer, and market conditions. The Company regularly reviews estimated standalone basis.

selling prices and updates these estimates if necessary.

The Company recognizes revenues when or as the performance obligations are satisfied by transferring control of the product or service to a customer. The Company generally recognizes revenue for the performance obligations as follows:

•   System sales. For systemsSenhance Systems and systemSenhance System components sold directly to end customers (including those arising from Senhance System purchases under lease rights to purchase), revenue is recognized when the Company transfers control to the customer, which is generally at the point when acceptance occurs that indicates customer acknowledgment of delivery or installation, depending on the terms of the arrangement. For systemslease buyouts, where the customer has already acknowledged installation of the system, transfer of control occurs when the Company receives an executed contract for the lease buyout of the Senhance System. For Senhance Systems sold through distributors, for which distributors are responsible for installation, revenue is recognized generally at the time of shipment. The Company’s systemSenhance System arrangements generally do not provide a right of return. The systemsSenhance Systems are generally covered by a one-yearone-year warranty. Warranty costs were not material for the periods presented.

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•   Instruments and accessories. Revenue from sales of instruments and accessories is recognized when control is transferred to the customers, which generally occurs at the time of shipment, but also occurs at the time of delivery depending on the customer arrangement. Accessory products include sterile drapes used to help ensure a sterile field during surgery, vision products such as replacement endoscopes, camera heads, light guides, and other items that facilitate use of the Senhance System.

•   Service. Service revenue is recognized ratably over the term of the service period as the customers benefit from the service throughout the service period. Revenue related to services performed on a time-and-materials basis is recognized when performed.

For multiple-element arrangements, revenue is allocated to each performance obligation based on its relative standalone selling price. Standalone selling prices are based on observable prices at which the Company separately sells the products or services. Due to limited sales to date, standalone selling prices are not directly observable. The Company estimates the standalone selling price using the market assessment approach considering market conditions and entity-specific factors including, but not limited to, features and functionality of the products and services, geographies, type of customer, and market conditions. The Company regularly reviews standalone selling prices and updates these estimates if necessary.

The following table presents revenue disaggregated by type and geography:

	Year Ended December 31,
	2019				2018
	(in thousands)
U.S.
Systems	$	90			$	2,556
Instruments and accessories	108				967
Services	338				255
Total U.S. revenue	536				3,778
Outside of U.S. ("OUS")
Systems	5,459				16,193
Instruments and accessories	1,447				3,552
Services	1,089				579
Total OUS revenue	7,995				20,324
Total
Systems	5,549				18,749
Instruments and accessories	1,555				4,519
Services	1,427				834
Total revenue	$	8,531			$	24,102

		Years Ended December 31,
		2021				2020				2019
		(in thousands)
U.S.
Systems		$	380			$	282			$	90
Instruments and accessories			270				187				108
Services			383				380				338
Total U.S. revenue			1,033				849				536
Outside of U.S. ("OUS")
Systems			4,363				490				5,459
Instruments and accessories			1,699				653				1,447
Services			1,137				1,183				1,089
Total OUS revenue			7,199				2,326				7,995
Total
Systems			4,743				772				5,549
Instruments and accessories			1,969				840				1,555
Services			1,520				1,563				1,427
Total revenue		$	8,232			$	3,175			$	8,531

The Company recognizes sales by geographic area based on the country in which the customer is based.

Operating lease revenue from Senhance System leasing is included as Systems revenues in the above table and was approximately $1.3 million, $0.7 million, and $0 million in the years ended December 31, 2021, 2020 and 2019, respectively.

Transaction price allocated to remaining performance obligations relates to amounts allocated to products and services for which the revenue has not yet been recognized. A significant portion of this amount relates to service obligations performed under the Company's system sales contracts that will be invoiced and recognized as revenue in future periods. Transaction price allocated to remaining performance obligations was approximately $3.0 million, $3.1 million, and $3.7 million as of December 31, 2019.

2021, 2020, and 2019, respectively. The amounts as of December 31, 2021 are expected to be recognized as revenue over one to five years.

The Company invoices its customers based on the billing schedules in its sales arrangements. Payments are generally due 30 to 60 days from the date of invoice. Contract assets for the periods presented primarily represent the difference between the revenue that was recognized based on the relative selling price of the related performance obligations and the contractual billing terms in the arrangements. Contract assets are included in accounts receivable and totaled $0.2$0.1 million and $0.2$0.1 million as of December 31, 2019 2021 and 2018,2020, respectively. Deferred revenue for the periods presented was primarily related to service obligations, for which the service fees are billed up-front, generally annually. The associated deferred revenue is generally recognized ratably over the service period. The Company did not have any significant impairment losses on its contract assets for the periods presented. Revenue recognized fromfor the years ended December 31, 2021, 2020 and 2019 that was included in the deferred revenue attributable to warrantybalance at the beginning of each reporting period was $0.6 million, $0.6 million and maintenance agreements totaled $1.0 million, for the year ended December 31, 2019. The Company also recognized $1.3 million during the year ended December 31, 2019, half of which was deferred at December 31, 2018, related to a 2017 system sale where revenue was deferred until its first clinical use, which occurred in the second quarter of 2019. Revenue recognized from deferred revenue for the year ended December 31, 2018 totaled $0.4 million.

respectively.

In connection with assets recognized from the costs to obtain a contract with a customer, the Company determined that the sales incentive programs for its sales team do not meet the requirements to be capitalized as the Company does not expect to generate future economic benefits from the related revenue from the initial sales transaction. transaction and such costs are expensed as incurred.

Senhance System Leasing

The Company enters into lease arrangements with certain qualified customers. Revenue related to arrangements including lease elements are allocated to lease and non-lease elements based on their relative standalone selling prices. Lease elements generally include a Senhance System, while non-lease elements generally include instruments, accessories, and services. For some lease arrangements, the customers are provided with the right to purchase the leased Senhance System at some point during and/or at the end of the lease term. In some arrangements lease payments are based on the usage of the Senhance System.

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In determining whether a transaction should be classified as a sales-type, operating, or direct financing lease, the Company considers the following terms at lease commencement: (1) whether title of the Senhance System transfers automatically or for a nominal fee by the end of the lease term, (2) whether the present value of the minimum lease payments equals or exceeds substantially all of the fair value of the leased Senhance System, (3) whether the lease term is for the major part of the remaining economic life of the leased System, (4) whether the lease grants the lessee an option to purchase the leased Senhance System that the lessee is reasonably certain to exercise, and (5) whether the underlying Senhance System is of such a specialized nature that it is expected to have no alternative use to the Company at the end of the lease term. All such arrangements through December 31, 2021 are classified as operating leases.

Revenue related to lease elements from operating lease arrangements is generally recognized on a straight-line basis over the lease term or based upon Senhance System usage and is presented as product revenue. Revenue related to lease elements from operating lease arrangements was approximately $1.3 million, $0.7 million, $0 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Cost of Revenue

Cost of revenue consists of contract manufacturing, materials, labor and manufacturing overhead incurred internally to produce the products. Depreciation expense related to leased systems is included in the cost of revenue. Shipping and handling costs incurred by the Company are included in the cost of revenue.  During the year ended December 31, 2019, the Company recorded a $7.4 million inventory write-down as part of a restructuring plan and a $1.5 million charge forWe expense all inventory obsolescence related to certain system components.

provisions as cost of revenue.

Research and Development Costs

Research and development expenses primarily consist of engineering, product development and regulatory expenses, incurred in the design, development, testing and enhancement of our products. Research and development costs are expensed as incurred.

Reversal of Transfer Fee Accrual

In connection with the Senhance acquisition, the Company recorded an accrual of $3.0 million in the 2015 third quarter for the potential assessment of additional transfer fees that could be assessed during a three year period. In September 2018, the Company determined that the accrual was no longer required and reversed the accrual.

Stock-Based Compensation

The Company follows ASC 718 “Stock Compensation”, which provides guidance in accountingrecognizes expenses for share-based awards exchanged for services rendered and requires companiesequal to expense the estimated fair value of these awards over the requisite service period.

The Company recognizes as expense, the grant-date fair value of stock options and other stock-based compensation expense for stock-based awards based on estimated fair values onissued to employees and non-employee directors over the date of grant for awards.requisite service periods, which are typically the vesting periods. The Company uses the Black-Scholes-Merton option pricing model to determineestimate the fair value of stock options. The volatility assumption used in the Black-Scholes-Merton model is based on the Company’s historical volatility. The expected term of options granted has been determined based upon the simplified method, because the Company does not have sufficient historical information regarding its options to derive the expected term. Under this approach, the expected term is the mid-point between the weighted average of vesting period and the contractual term. The risk-free interest rate is based on U.S. Treasury rates whose term is consistent with the expected life of the stock options. The Company has not paid and does not anticipate paying cash dividends on its shares of common stock; therefore, the expected dividend yield is assumed to be zero. The Company estimates forfeitures based on its historical experience and adjust the estimated forfeiture rate based upon actual experience. For awards with performance conditions, we begin recognizing compensation expense when it becomes probable that the performance condition will be attained.

The fair value of restricted stock units is determined by the market price of the Company’s common stock on the date of grant. The expense associated with stock-based compensation is recognized on a straight-line basis over the requisite service period of each award.

The Company records as expense the fair value of stock-based compensation awards, including stock options and restricted stock units. Compensation expense for stock-based compensation was approximately $11,508,000$9.4 million, $7.9 million, and $9,039,000$11.5 million for the years ended December 31, 20192021,2020, and 2018,2019 respectively.

Income Taxes

The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets or liabilities for the temporary differences between financial reporting and tax basis of the Company’s assets and liabilities, and for tax carryforwards at enacted statutory rates in effect for the years in which the asset or liability is expected to be realized. The effect on deferred taxes of a change in tax rates is recognized in income during the period that includes the enactment date. In addition, valuation allowances are established when necessary to reduce deferred tax assets and liabilities to the amounts expected to be realized.

On December 22, 2017, the Tax Cuts and Jobs Act (“Tax Legislation”) was enacted into law, which reduced the U.S. federal corporate income tax rate to 21% for tax years beginning after December 31, 2018. As a result of the newly enacted tax rate, the Company adjusted its U.S. deferred tax assets as of December 31, 2018, by applying the new 21% rate, which resulted in a decrease to the deferred tax assets and a corresponding decrease to the valuation allowance of approximately $36.1 million, resulting in no impact to the consolidated statement of operations and comprehensive loss.

The Tax Legislation also implements a territorial tax system. Under the territorial tax system, in general, the Company's foreign earnings will no longer be subject to tax in the U.S. As part of transition to the territorial tax system the Tax Legislation includes a mandatory deemed repatriation of all undistributed foreign earnings that are subject to a U.S. income tax. The Company has determined that the deemed repatriation applicable to the year ended December 31, 2018 did not result in an additional U.S. income tax liability as it has no undistributed foreign earnings.

The FASB Staff Q&A, Topic 740, No. 5, Accounting for Global Intangible Low-Taxed Income (“GILTI”), states that an entity can make an accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years or to provide for the tax expense related to GILTI in the year the tax is incurred as a period expense only. The Company has elected to account for GILTIglobal intangible low-taxed income (“GILTI”) as a period expense in the year the tax is incurred.

In a referendum held on May, 19 2019, Swiss voters adopted

The Company recognizes the Federal Act on Tax Reform and AVS Financing (TRAF). TRAF introduces major changesfinancial statement benefit of an income tax position only after determining that the relevant taxing authority would more likely than not sustain the position following audit. For tax positions meeting the more likely than not threshold, the amount recognized in the Swissfinancial statements is the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the relevant taxing authority. The Company recognizes interest accrued related to unrecognized tax system by abolishing certain current preferentialbenefits and penalties in the provision for income taxes.

Tax regulations within each jurisdiction are subject to the interpretation of the related tax regimeslaws and replacing them with new measures that are in line with international standards.regulations and require application of significant judgment. The referendum did not have a material impact onCompany is subject to U.S. federal and various state, local and foreign jurisdictions. Due to the Company’s 2019net operating loss carryforwards, the Company may be subject to examination by authorities for all previously filed income tax provision. Thereturns.

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Revision of Previously Disclosed Amounts

During the course of preparing the Company’s consolidated financial statements as of and for the year ended December 31 2021, the Company will continuecompleted an Internal Revenue Code Section 382 and 383 analysis of its historical net operating loss and tax credit carryforward amounts. As a result, a portion of the prior year net operating loss and tax credit carryforwards were determined to evaluate the impact of these provisions in future periods as the enactment process in completed.

be limited. See Note 11—Income Taxes, for further details. 

Comprehensive Loss

Comprehensive loss is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources.

Segments

The Company operates in 1one business segment—the research, development and sale of medical device robotics to improve minimally invasive surgery. The Company’s chief operating decision maker (determined to be the Chief Executive Officer) does not manage any part of the Company separately, and the allocation of resources and assessment of performance are based on the

Company’s consolidated operating results.

Approximately 19%77% and 54%27% of the Company’s total consolidated assets are located within the U.S. as of December 31, 20192021 and 2018,2020, respectively. The remaining assets are mostly located in Europe and are primarily related to the Company’s facility in Italy, and include goodwill (as of December 2018 only), intellectual property, in-process research and development, other current assets, property and equipment, cash, accounts receivable, other long-term assets and inventory of $60.5$43.2 million and $111.0$56.8 million at as of December 31, 2019 2021 and 2018.2020, respectively. Total assets outside of the U.S. excluding goodwillUnited States amounted to 81%23% and 34%73% of total consolidated assets at December 31, 2019 2021 and 2018,2020, respectively. Long-lived assets in the U.S. were 63% and 11%, Switzerland were 22% and 41%, and Italy were 13% and 48%, as of December 31, 2021 and 2020, respectively.

The Company recognizes sales by geographic area based on the country in which the customer is based. For the years ended December 31, 20192021, 2020 and 2018,2019, 13%, 27% and 6% and 16%, respectively, of net revenue werewas generated in the United States; 39%while 62%, 53% and 78% were39%, respectively, was generated in Europe; and 55%25%, 20%, and 6% were55%, respectively, was generated in Asia.

For the year ended December 31, 2021, 47% of net revenue was generated in Germany, 22% was generated in Japan, and 13% was generated in the United States. For the year ended December 31, 2020, 28% of net revenue was generated in Germany, 27% was generated in the Untied States, 10% was generated in Japan, and 10% was generated in Taiwan. For the year ended December 31, 2019, 53% of net revenue was generated in Taiwan, and 23% was generated in Germany.

Impact of Recently Issued Accounting Standards

In August 2018, December 2019, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes2019-12, Simplifying the Accounting for Income Taxes, which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the Disclosure Requirements for Fair Value Measurement.general principles in ASC 740, Income Tax and also clarifies and amends existing guidance to improve consistent application. The Company adopted ASU 2019-12 effective January 1, 2021; the adoption did not result in a material impact on the Company's financial statements and related disclosures.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which is designed to provide financial statement users with more information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. When determining such expected credit losses, the guidance requires companies to apply a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. This ASU eliminates, adds and modifies certain disclosure requirements for fair value measurements as part of its disclosure framework project. The standardguidance is effective for all entities for financial statements issuedon a modified retrospective basis for fiscal years beginning after December 15, 2019, and2022, including interim periods within those fiscal years. Early adoptionThe guidance is permitted. The adoption of this ASU should not expected to have a material impact on the consolidatedCompany's financial statements.

statements and related disclosures.

In June 2018, August 2020, the FASB issued ASU 2018-07, Compensation-Stock Compensation (Topic 718), Improvements to Nonemployee Share-based Payments. This ASU expands the scope of Topic 718 to include share-based payment transactions for acquiring goods2020-06 Debt – Debt with Conversion and services from non-employees. The Company adopted ASU 2018-07Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (subtopic 815-40) guidance on January 1, 2019, whereby the accounting for share-based paymentsconvertible debt instruments and contracts in an entity’s own equity. The guidance simplifies the accounting for non-employeesconvertible instruments by reducing the various accounting models that can require the instrument to be separated into a debt component and employees willequity component or derivative component. Additionally, the guidance eliminated certain settlement conditions previously required to be substantiallyable to classify a derivative in equity. The new guidance is effective on a modified or full retrospective basis for fiscal years beginning after December 15, 2021, including interim periods with those fiscal years. The Company is currently evaluating the same. Withimpact on the consolidated financial statements upon adoption.

The Company has evaluated all other issued and unadopted ASUs and believes the adoption of ASU 2018-07, the Company recorded a charge to accumulated deficit of $7 thousand.

In July 2017, the FASB issued ASU 2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception. The amendments in this update are intended to simplify the accounting for certain equity-linked financial instruments and embedded features with down round features that result in the strike price being reduced on the basis of the pricing of future equity offerings. Under the new guidance, a down round featurethese standards will no longer need to be considered when determining whether certain financial instruments or embedded features should be classified as liabilities or equity instruments. That is, a down round feature will no longer preclude equity classification when assessing whether an instrument or embedded feature is indexed to an entity's own stock. In addition, the amendments clarify existing disclosure requirements for equity-classified instruments. These amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2018, with early adoption permitted. The adoption of this ASU did not have a material impact on the consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic (842), which establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for most leases. In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842), Targeted Improvements, which amends the guidance to add a method of adoption whereby the issuer may elect to recognize a cumulative effect adjustment at the beginning of the period of adoption. ASU 2018-11 Leases (Topic 842), Targeted Improvements, does not require comparative period financial information to be adjusted. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement.

ASU 2016-02 defines a lease as a contract, or part of a contract, that conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration. To determine whether a contract conveys the right to control the use of the identified asset for a period of time, the customer has to have both (i)the right to obtain substantially all of the economic benefits from the use of the identified asset and (ii)the right to direct the use of the identified asset. A contract does not contain an identified asset if the supplier has a substantive right to substitute such asset ("the leasing criteria"). As part of the adoption of ASC 842, the Company performed an assessment of the impact that the new lease recognition standard will have on its consolidated financial statements. The Company’s leases relate to office equipment, company owned vehicles and corporate offices, all of which are classified as operating leases and include fixed payments. The Company does not have any material leases, individually or in the aggregate, classified as a finance leasing arrangement under the new lease recognition standard.

On January 1, 2019, the Company adopted ASU No. 2016-02, applying the package of practical expedients to leases that commenced before the effective date whereby the Company elected to not reassess the following: (i) whether any expired or existing contracts contain leases; (ii) the lease classification for any expired or existing leases; and (iii) initial direct costs for any existing leases. The Company also elected, for all classes of underlying assets, to not separate non-lease components from lease components and instead to account for them as a single component.  The Company elected to apply the transition provisions as of January 1, 2019, the date of adoption, using the effective date approach, and recorded lease ROU assets and related liabilities on its balance sheet

without restating prior periods.  Many of the Company’s leases include base rental periods coupled with options to renew or terminate the lease, generally at the Company’s discretion.  In evaluating the lease term, the Company considers whether renewal is reasonably certain.  To the extent a significant economic incentive exists to renew the lease, the option is included within the lease term.  Based on the Company’s leases, renewal options generally do not provide a significant economic incentive and are therefore excluded from the lease term. The ROU asset is included in other long-term assets on the consolidated balance sheets.  The current portion of operating lease liabilities are presented within accrued liabilities while the non-current portion of operating lease liabilities are presented within other long term liabilities on the consolidated balance sheets and represents the present value of the remaining lease payments, discounted using the Company’s incremental borrowing rate, which ranges between 6.1% and 8.5% based on the terms of the lease.  The weighted average discount rate as of December 31, 2019 was 7.8%. As a result of the adoption of ASU 2016-02, other long-term assets increased by $1.8 million, accrued expenses increased by $0.5 million, and other long-term liabilities increased by $1.2 million. There was no change to the Company’s consolidated statements of operations and comprehensive loss, balance sheets, or cash flows as a result of the adoption of ASU 2016-02.

As of December 31, 2019, the right-of-use asset totaled $2.3 million and is included within other long term assets on the consolidated balance sheet and the lease liability totaled $2.5 million, of which $1.1 million is classified as current within accrued expenses and $1.4 million is classified as non-current and makes up the full balance of other long term liabilities on the consolidated balance sheet.  Operating lease costs for the year ended December 31, 2019 totaled $1.4 million and are included within operating expenses in the consolidated statement of operations and comprehensive loss. Rent expense for the year ended December 31, 2018 was approximately $1.2 million. The weighted average remaining lease term for operating leases as of December 31, 2019 was 2.6 years. Total cash paid for operating leases during the year ended December 31, 2019 was $1.7 million and is included within cash flows from operating activities within the consolidated statementstatements of cash flows.

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The following table presents the minimum lease payments as

Table of December 31, 2019 (in thousands):

January 1, 2020 to December 31, 2020	$	1,372
January 1, 2021 to December 31, 2021	716
January 1, 2022 to December 31, 2022	454
January 1, 2023 to December 31, 2023	207
January 1, 2024 to December 31, 2024	28
Thereafter	—
Total minimum lease payments	$	2,778
Less: Amount of lease payments representing interest	(266		)
Present value of future minimum lease payments	$	2,512

The following table presents the minimum lease payments as of December 31, 2018 (in thousands):

January 1, 2019 to December 31, 2019	$	929
January 1, 2020 to December 31, 2020	399
January 1, 2021 to December 31, 2021	385
January 1, 2022 to December 31, 2022	175
January 1, 2023 to December 31, 2023	38
Thereafter	—
Total minimum lease payments	$	1,926

Contents

3.	Acquisitions

3.Acquisitions

MST Medical Surgery Technologies Ltd. Acquisition

On September 23,2018, the Company entered into an Asset Purchase Agreement (the “MST Purchase Agreement”) with MST Medical Surgery Technologies Ltd., an Israeli private company (the “Seller”), and two of the Company’s wholly owned subsidiaries, as purchasers of the assets of the Seller, (collectively, the “Buyers”). The closing of the transactions occurred on October 31, 2018, pursuant to which the Company acquired the Seller’s assets consisting of intellectual property and tangible assets related to surgical analytics with its core image analytics technology designed to empower and automate the surgical environment, with a focus on medical robotics and computer-assisted surgery. The core technology acquired under the MST Purchase Agreement is a software-

basedsoftware-based image analytics information platform powered by advanced visualization, scene recognition, artificial intelligence, machine learning and data analytics.

Under the terms of the MST Purchase Agreement, at the closing the Buyers purchased substantially all of the assets of the Seller.MST. The acquisition price consisted of two tranches. At or prior to the closing of the transaction the Buyers paid $5.8 million in cash and the Company issued approximately 242,310 shares of the Company’s common stock (the "Initial Shares"). A second tranche of $6.6$6.6 million in additional consideration was payable in cash, stock or cash and stock, at the discretion of the Company, within one year after the closing date. On August 7, 2019, the Company notified MST that the Company would satisfy the additional consideration payment of $6.6 million by issuing shares of TransEnterixthe Company’s common stock. The number of shares issued to MST was 370,423 (the “Additional Consideration Shares” and, together with the Initial Shares, the “Securities Consideration”).

The MST Purchase Agreement contains customary representations and warranties of the parties and the parties have customary indemnification obligations, which are subject to certain limitations described further in the MST Purchase Agreement.

In connection with the closing under the MST Purchase Agreement (the “MST Acquisition”), the Company and the Seller entered into a Lock-Up Agreement, dated October 31, 2018, pursuant to which the Seller agreed, subject to certain exceptions, not to sell, transfer or otherwise convey any of the Initial Shares for six months following the Closing Date.  As of the date of this report, 75% of the Initial Shares are free from the lock-up restrictions. For the remaining 25% of the Initial Shares, the Lock-Up Agreement provides that all of the Initial Shares will be released from the lock-up restrictions on May 1, 2020, or earlier upon certain other conditions.  The Additional Consideration Shares were released from the lock-up restrictions on February 7, 2020.  

In connection with the MST Acquisition, the Company also entered into a Registration Rights Agreement, dated as of October 31, 2018, with MST, pursuant to which the Company agreed to register the Securities Consideration such that such Securities Consideration is eligible for resale following the end of the lock-up periods described above. All of the Securities Consideration is eligible to be sold by the holders without restriction under Rule 144, therefore the Registration Rights Agreement has expired. The MST Purchase Agreement was accounted for as a business combination utilizing the methodology prescribed in ASC 805. The purchase price for the acquisition was allocated to the assets acquired and liabilities assumed based on their estimated fair values.

The following table summarizes the acquisition date fair value of the consideration (in thousands).

Stock consideration	$	8,300
Cash consideration	5,800
Present value of deferred consideration	5,900
Other consideration	314
Total consideration	$	20,314

The value of the stock consideration was determined based on the fair value of the stock on the closing date, adjusted for a lack of marketability discount related to the Lock-Up Agreement.  The value of the deferred consideration was determined based on the present value of the future payment using a market interest rate.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed on October 31, 2018, the date of acquisition (in thousands):

Property and equipment	$	43
In-process research and development	10,633
Goodwill	9,638
Net assets acquired	$	20,314

The Company allocated $10.6 million of the purchase price to identifiable intangible assets of in-process research and development that met the separability and contractual legal criterion of ASC 805. IPR&D is principally the estimated fair value of the MST technology which had not reached commercial technological feasibility nor had alternative future use at the time of the acquisition and therefore the Company considered IPR&D, with assigned values to be allocated to the IPR&D assets acquired.

Goodwill is calculated as the difference between the acquisition-date fair value of the consideration transferred and the fair values of the assets acquired and liabilities assumed. The goodwill resulting from this acquisition arises largely from synergies expected

from combining the intellectual property acquired from MST with the Company’s existing intellectual property as well as acquired employees. The goodwill is deductible for income tax purposes.

The following unaudited pro forma information presents the combined results of operations for the year ended December 31, 2018, as if the Company had completed the MST Acquisition at the beginning of fiscal 2018. The pro forma financial information is provided for comparative purposes only and is not necessarily indicative of what actual results would have been had the acquisition occurred on the date indicated, nor does it give effect to synergies, cost savings, fair market value adjustments, and other changes expected to result from the acquisition. Accordingly, the pro forma financial results do not purport to be indicative of consolidated results of operations as of the date hereof, for any period ended on the date hereof, or for any other future date or period. The pro forma consolidated financial information has been calculated after applying the Company’s accounting policies and includes adjustments for transaction-related costs.

	Year Ended December 31,
	2018
	(In thousands except per share amounts) (unaudited)
Revenue	$	24,170
Net loss	(64,365		)
Net loss per share	$	(0.31	)

During the year ended December 31, 2018 0 revenue and a net loss of $0.4 million associated with MST’s operations are included in the consolidated financial statements.

On July 3, 2019, the Company entered into a System Sale Agreement with GBIL to sell certain assets related to the AutoLap technology. On October 15, 2019, the Company amended the prior AutoLap Sale Agreement with GBIL. Pursuant to the amended agreement the Company sold the AutoLap laparoscopic vision system, or AutoLap, and related assets to GBIL. The assets include inventory, spare parts, production equipment, testing equipment and certain intellectual property specifically related to the AutoLap. The purchase price was $17.0 million, all of which was received in 2019 in the form of $16 million in cash and a commitment by GBIL to pay $1.0 million to settle certain Company obligations in China. GBIL subsequently paid the obligation. Under the amended AutoLap Agreement, the Company entered into a cross‑license agreement with GBIL to retain rights to use any AutoLap-related intellectual property sold to GBIL, and to non-exclusively license additional intellectual property to GBIL. The Company recorded a $16.0 million gain on the sale of the AutoLap assets during the year ended December 31, 2019, which represented the proceeds received in excess of the carrying value of the assets, less contract costs.

Senhance Surgical Robotic System

On September 21,2015, the Company completed the strategic acquisition, through its wholly owned subsidiary TransEnterix International, from Sofar, of all of the assets, employees and contracts related to the advanced robotic system for minimally invasive laparoscopic surgery now known as the Senhance System.

Under the terms of the Purchase Agreement, the consideration consisted of the issuance of (i) 1,195,647 shares of the Company’s common stock (the “Securities Consideration”) and (ii) approximately $25.0 million U.S. Dollars and €27.5 million Euro in cash consideration (the “Cash Consideration”).

On February 25, 2021, TransEnterix International changed its name to Asensus International.

On December 30,2016, the Company and Sofar entered into an Amendment to the Purchase Agreement (the “Amendment”) to restructure the terms of the second tranche of the Cash Consideration (the “Second Tranche”). The initial Securities Consideration was issued in full at the closing of the Senhance Acquisition; under the Amendment, the Second Tranche of the Cash Consideration was restructured, and an additional issuance of 286,360 shares of the Company’s common stock with an aggregate fair market value of €5.0 million occurred in January 2017.terms. Following the Amendment, the total Cash Consideration was $25.0 million U.S. Dollars and approximately €22.5 million Euro, of which all but €15.1 million Euro has been paid as of December 31, 2019.  The majority of the remaining Cash Consideration to be paid is the third tranche of the Cash Consideration (the “Third Tranche”) of €15.0€15.0 million which shall be payable upon achievement of trailing revenues from sales or services contracts of the Senhance System of at least €25.0€25.0 million over a calendar quarter.

The fourth tranche of the Cash Consideration of €2.5 million was payable in installments by December 31 of each year as reimbursement for certain debt payments made by Sofar under an existing Sofar loan agreement in such year, with payments beginning as of December 31, 2017. As of December 31, 2019, the Company had paid €2.4 million of the fourth tranche.

The Third Tranche payments will be accelerated in the event that (i) the Company or TransEnterixAsensus International is acquired, (ii) the Company significantly reduces or suspends selling efforts of the Senhance System, or (iii) the Company acquires a business that offers alternative products that are directly competitive with the Senhance System. The remaining amounts due to Sofar are included in contingent consideration as of December 31, 20192021 and 2018.2020 at their estimated fair value.

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4.Cash, Cash Equivalents, and warranties of the parties and the parties have customary indemnification obligations, which are subject to certain limitations described further in the Purchase Agreement.

4.	Cash, Cash Equivalents, and Restricted Cash

Restricted Cash

Cash, cash equivalents and restricted cash consist of the following:

	December 31, 2019				December 31, 2018
	(In thousands)
Cash	$	9,596			$	1,485
Money market	2				19,576
Total cash and cash equivalents	$	9,598			$	21,061
Restricted cash	969				590
Total	$	10,567			$	21,651

		December 31,				December 31,
		2021				2020
		(in thousands)
Cash		$	8,343			$	6,679
Money Market			5,287				9,684
Commerical Paper			4,499				0
Total cash and cash equivalents		$	18,129			$	16,363
Restricted Cash			1,154				1,166
Total		$	19,283			$	17,529

Restricted cash at December 31, 20192021 and 20182020 includes $1.0$1.2 million and $0.6$1.2 million, respectively, in cash accounts held as collateral primarily under the terms of an office operating lease, credit cards, automobile leases, and a performance guarantee required by the government of a country in which a Senhance System was sold in 2018.

5.Investments, available-for-sale

The aggregate fair values of investment securities along with unrealized gains and losses determined on an individual investment security basis and included in other comprehensive income are as follows:

		December 31, 2021
		(in thousands)
		Amortized Cost				Unrealized Gain				Unrealized Loss				Fair Value				Short-term investments				Long-term investments
Commerical Paper		$	50,705			$	0			$	(46	)		$	50,659			$	50,660			$	0
Corporate Bonds			67,239				1				(202	)			67,038				29,602				37,435
Total Investments		$	117,944			$	1			$	(248	)		$	117,697			$	80,262			$	37,435

The following table summarizes the contractual maturities of the Company’s available-for-sale investments, as of December 31, 2021:

		Amortized Cost				Fair Value
Mature in less than one year		$	80,336			$	80,262
Mature in one to two years			37,608				37,435
Total		$	117,944			$	117,697

Actual maturities may differ from contractual maturities because certain borrowers have the right to call or prepay certain obligations. There were 0 sales of investments or gross realized gains for the years ended December 31, 2021, 2020 and 2019, respectively. The Company recorded an immaterial amount of gross realized losses for the year ended December 31, 2021 related to the maturity of investments.

5.	Fair Value

6.Fair Value

The Company held certain assets and liabilities that are required to be measured at fair value on a recurring basis. These assets and liabilities include cash and cash equivalents, restricted cash, contingent consideration and warrant liabilities. ASC 820-10820-10 (“Fair Value Measurement Disclosure”) requires the valuation using a three-tieredthree-tiered approach, which requires that fair value measurements be classified and disclosed in one of three tiers. These tiers are: Level 1, defined as quoted prices in active markets for identical assets or liabilities; Level 2, defined as valuations based on observable inputs other than those included in Level 1, such as quoted prices for similar assets and liabilities in active markets, or other inputs that are observable or can be corroborated by observable input data; and Level 3, defined as valuations based on unobservable inputs reflecting the Company’s own assumptions, consistent with reasonably available assumptions made by other market participants. The Company did not have any transfers of assets and liabilities between Level 1, Level 2, and Level 3 of the fair value hierarchy during the years ended December 31, 20192021 and 2018.2020.

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For assets and liabilities recorded at fair value, it is the Company’s policy to maximize the use of observable inputs and minimize the use of unobservable inputs when developing fair value measurements, in accordance with the fair value hierarchy. Fair value measurements for assets and liabilities where there exists limited or no observable market data and therefore, are based primarily upon estimates, are often calculated based on the economic and competitive environment, the characteristics of the asset or liability and other factors. Therefore, the results cannot be determined with precision and may not be realized in an actual sale or immediate settlement of the asset or liability. Additionally, there may be inherent weaknesses in any calculation technique, and changes in the underlying assumptions used, including revenue volatility, discount rates and estimates of future cash flows, could significantly affect the results of current or future values. The Company utilizes fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures.

As prescribed by U.S. GAAP, the Company groups assets and liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. An adjustment to the pricing method used within either Level 1 or Level 2 inputs could generate a fair value measurement that effectively falls in a lower level in the hierarchy.

The determination of where an asset or liability falls in the hierarchy requires significant judgment. The Company evaluates its hierarchy disclosures and based on various factors, it is possible that an asset or liability may be classified differently from period to period. However, the Company expects changes in classifications between levels will be rare.

The carrying values of accounts receivable, short-term investments, interest receivable,other current assets, accounts payable, and certain accrued expenses at as of December 31, 2019 2021 and 2018,2020 approximate their fair values due to the short-term nature of these items. The Company’s notes payable balance also approximates fair value as of December 31, 2018, 2020, as the interest rate on the notes payable approximates the rates available to the Company as of this date.

The following are the major categories of assets and liabilities measured at fair value on a recurring basis as of December 31, 20192021 and 2018,2020, using quoted prices in active markets for identical assets (Level 1)1); significant other observable inputs (Level 2)2); and significant unobservable inputs (Level 3)3):

		December 31, 2021
		(in thousands)
Description		Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)				Total
Assets measured at fair value
Cash and cash equivalents (1)		$	18,129			$	0			$	0			$	18,129
Restricted cash			1,154				0				0			$	1,154
Short-term investments			0				80,262				0			$	80,262
Long-term investments			0				37,435				0			$	37,435
Total assets measured at fair value		$	19,283			$	117,697			$	0			$	136,980
Liabilities measured at fair value
Contingent consideration		$	0			$	0			$	2,371			$	2,371
Total liabilities measured at fair value		$	0			$	0			$	2,371			$	2,371

⁽¹⁾ Includes investments that are readily convertible to cash with original maturities of 90 days or less.

		December 31, 2020
		(in thousands)
Description		Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)				Total
Assets measured at fair value
Cash and cash equivalents		$	16,363			$	0			$	0			$	16,363
Restricted cash			1,166				0				0				1,166
Total assets measured at fair value		$	17,529			$	0			$	0			$	17,529
Liabilities measured at fair value
Contingent consideration		$	0			$	0			$	3,936			$	3,936
Warrant liabilities			0				0				255				255
Total liabilities measured at fair value		$	0			$	0			$	4,191			$	4,191

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	December 31, 2019
	(In thousands) (unaudited)
Description	Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)				Total
Assets measured at fair value
Cash and cash equivalents	$	9,598			$	—			$	—			$	9,598
Restricted cash	969				—				—				969
Total Assets measured at fair value	$	10,567			$	—			$	—			$	10,567
Liabilities measured at fair value
Contingent consideration	$	—			$	—			$	1,084			$	1,084
Warrant liabilities	—				—				2,388				2,388
Total liabilities measured at fair value	$	—			$	—			$	3,472			$	3,472

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	December 31, 2018
	(In thousands)
Description	Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)				Total
Assets measured at fair value
Cash and cash equivalents	$	21,061			$	—			$	—			$	21,061
Restricted cash	590				—				—				590
Total Assets measured at fair value	$	21,651			$	—			$	—			$	21,651
Liabilities measured at fair value
Contingent consideration	$	—			$	—			$	10,637			$	10,637
Warrant liabilities	—				—				4,636				4,636
Total liabilities measured at fair value	$	—			$	—			$	15,273			$	15,273

Table of Contents

The Company’s financial liabilities consisted of contingent consideration potentially payable to Sofar related to the Senhance Acquisition in September 2015 (Note 3)3). This liability is reported as Level 3 as estimated fair value of the contingent consideration related to the acquisition requires significant management judgment or estimation and is calculated using a Monte-Carlo simulation utilizing significant unobservable inputs including the income approach, usingprobability of achieving each of the potential milestones, future Euro-to-USD exchange rates, revenue volatility and an estimated discount rate associated with the risks of the expected cash flows attributable to the various revenue and cost assumptions and applying a probability to each outcome.milestones. The decrease in fair value of the contingent consideration of $1.6 million for the year ended December 31,2021 was primarily due to changes in the Company's forecast of future revenue. The increase in fair value of the contingent consideration of $2.9 million for the year ended December 31, 2020 was primarily due to lower discount rate, stronger Euro versus the U.S. dollar, and the passage of time. The decrease in the fair value of the contingent consideration of $9.6 million for the year ended December 31, 2019 was primarily due to a change in the Company's long-term forecast.  The decrease in fair value of the contingent consideration of $1.0 million for the year ended December 31, 2018 was primarily due to the impact of foreign currency exchange rates and changeschange in the Company's long-range forecast.Company’s forecast of future revenue. Adjustments associated with the change in fair value of contingent consideration are included in the Company’s consolidated statements of operations and comprehensive loss.

The following table presents quantitative information about the inputs and valuation methodologies used for the Company’s fair value measurements for contingent consideration as of December 31,2021 and 2020:

					December 31,
	Valuation Methodology		Significant Unobservable Input		2021				2020
Contingent consideration	Probability weighted income approach		Milestone dates			2031				2025
			Discount rate			9.5%				9.5%
			Revenue volatility			39.0%				71.0%

On April 28, 2017, the Company sold 24.9 million units (the “Units”), each consisting of approximately 0.077 shares of the Company's Common Stock, a Series A warrant to purchase approximately 0.077 shares of Common Stock with an exercise price of $13.00 per share (the “Series A Warrants”), and a Series B warrant to purchase approximately 0.058 shares of Common Stock with an exercise price of $13.00 per share (the “Series B Warrants,” together with the Series A Warrants, the “Warrants”), at an offering price of $1.00 per Unit. Each Series A Warrant was exercisable at any time beginning on the date of issuance, and from time to time thereafter, through and including the first anniversary of the issuance date, unless terminated earlier as provided in the Series A Warrant. Receipt of 510(k) clearance for the Senhance System on October 13, 2017 triggered the acceleration of the expiration date of the Series A Warrants to October 31, 2017 (see Note 16). As such, allAll of the Series A Warrants were exercised

prior to the expiration date. Eachdate of October 31, 2017. On February 24, 2020, the Company entered into a Series B Warrants Exchange Agreement (the “Exchange Agreement”) with certain holders of its unexercised Series B Warrants. Under the terms of the Exchange Agreement, each Series B Warrant may be exercised at any time beginning onwas canceled in exchange for 0.61 shares of common stock. The Warrant holders participating in the date of issuance and from time to time thereafter through and including the fifth anniversaryexchange held 3,373,900 of the issuance date.

The fair value of the Series A Warrants of $2.5 million at the date of issuance was estimated using the Black-Scholes Merton model which used the following inputs: term of 1 year, risk free rate of 1.07%, 0 dividends, volatility of 73.14%, and share price of $8.45 per share based on the trading price of the Company’s Common Stock. All Series A Warrants were exercised as of October 31, 2017.

The exercise prices and the number of shares issuable upon exercise of each of the3,638,780 Series B Warrants are subject to adjustment uponthen outstanding and received an aggregate of 2,040,757 shares of common stock. As a result, the occurrence of certain events, including, but not limited to, stock splits or dividends, business combinations, sale of assets, similar recapitalization transactions, or other similar transactions. The Series B warrants contain provisions, often referred to as “down-round protection,” that leads to adjustment ofwarrant liability decreased by $2.5 million and the exercise price and number of underlying warrant shares ifadditional paid in capital increased by the Company issues securities, including its common stock or convertible securities or debt securities, in the future at sale prices below the then-current exercise price.same amount. As a result of thisthe March 2020 Public Offering and adjustment feature, and after giving effect to the Company’s reverse stock split at a ratio of one-for-thirteen shares effective December 11, 2019, or the Reverse Stock Split, the exercise price of all outstanding Series B Warrants has been adjusted to $1.39$0.35 per share and the number of shares of common stock reserved for and issuable upon the exercise of outstanding Series B Warrants has been adjusted to 1,963,451567,660 underlying warrant shares as of December 31, 2019.

2020. The final remeasurement upon exercise of the Series B warrants was recorded during the first quarter of 2021 and all outstanding Series B Warrants were exercised.

The change in fair value of all outstanding Series B warrants for the years ended December 31, 20192021 and 2018 of a decrease of $2.2 million and2020 was an increase of $14.3$2.0 million and $0.3 million, respectively, was included in the Company’s consolidated statements of operations and comprehensive loss. loss and was primarily due to an increase in share price, a lower risk free rate, increased volatility, and the passage of time. The change in the fair value of all outstanding Series B warrants for the year ended December 31, 2019, was a decrease of $2.2 million.

The following table presents the inputs and valuation methodologies used for the Company’s fair value of the Series B warrants:

		December 31,				December 31,				December 31,
Series B Warrants		2021				2020				2019
Valuation methodology		Black-Scholes-Merton				Black-Scholes-Merton				Monte Carlo
Term (years)			1.22				1.32				2.32
Risk free rate			0.07	%			0.10	%			1.59	%
Dividends			0				0				0
Volatility			174.00	%			150.97	%			109.80	%
Share price		$	4.21			$	0.63			$	1.47

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Series B		December 31, 2019		December 31, 2018
Fair value		$2.4 million		$4.6 million
Valuation methodology		Monte Carlo		Monte Carlo
Term		2.32 years		3.32 years
Risk free rate		1.59%		2.47%
Dividends		—		—
Volatility		109.80%		87.60%
Share price		$1.47		$29.38
Probability of additional financing		100% in 2020		100% in 2019

The following table presents quantitative information about the inputs and valuation methodologies used for the Company’s fair value measurements for contingent consideration as

Table of December 31, 2019 and 2018:Contents

	Valuation Methodology		Significant Unobservable Input		Weighted Average (range, if applicable)
					December 31, 2019		December 31, 2018
Contingent  consideration	Probability  weighted income approach		Milestone dates		2020 to 2024		2019 to 2022
			Discount rate		10% to 11%		11.5% to 12%

The following table summarizes the change in fair value, as determined by Level 3 inputs for the warrants and the contingent consideration for the years ended December 31, 20192021,2020 and 2018:2019:

		Fair Value Measurement at Reporting Date (Level 3)
		(in thousands)
		Series B Warrants				Contingent consideration
Balance at December 31, 2018		$	4,636			$	10,637
Change in fair value			(2,248	)			(9,553	)
Balance at December 31, 2019		$	2,388			$	1,084
Exchange of warrants for common stock			(2,469	)			-
Payment for contingent consideration			-				(74	)
Change in fair value			336				2,924
Balance at December 31, 2020		$	255			$	3,936
Exercise of warrants		$	(2,236	)		$	0
Change in fair value			1,981			$	(1,565	)
Balanceat December 31, 2021		$	0			$	2,371
Current portion		$	0			$	0
Long-term portion			0				2,371
Balance at December 31, 2021		$	0			$	2,371

		Fair Value Measurement at Reporting Date (Level 3)
		(In thousands)
		Common stock warrants				Contingent consideration
Balance at December 31, 2017		$	14,090			$	12,418
Payment for contingent consideration		—				(770		)
Exercise of warrants		(23,774		)		—
Change in fair value		14,320				(1,011		)
Balance at December 31, 2018		4,636				10,637
Change in fair value		(2,248		)		(9,553		)
Balance at December 31, 2019		2,388				1,084
Current portion		—				73
Long-term portion		2,388				1,011
Balance at December 31, 2019		$	2,388			$	1,084

6.    

7.Accounts Receivable, Net

The following table presents the components of accounts receivable:

	December 31, 2019				December 31, 2018
	(In thousands)
Gross accounts receivable	$	2,274			$	8,640
Allowance for uncollectible accounts	(1,654		)		(80		)
Total accounts receivable, net	$	620			$	8,560

		December 31, 2021				December 31, 2020
		(In thousands)
Gross accounts receivable		$	2,426			$	2,917
Allowance for uncollectible accounts			(1,677	)			(1,802	)
Total accounts receivable, net		$	749			$	1,115

The Company recorded $0.1 million, $0 million, and $1.6 million in bad debt expense during the yearyears ended December 31, 2019.2021, 2020 and 2019, respectively.

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7.	Inventories

8.Inventories

The components of inventories are as follows:

	December 31, 2019				December 31, 2018
	(In thousands)
Finished goods	$	9,737			$	5,439
Raw materials	8,510				5,502
Total inventories	$	18,247			$	10,941
Current Portion	$	10,653			$	10,941
Long-term portion	7,594				—
Total inventories	$	18,247			$	10,941

		December 31, 2021
		(in thousands)
		Gross Carrying Amount				Reserve Balance				Net Carrying Amount
Finished goods		$	10,566			$	(2,987	)		$	7,579
Raw materials			10,824				(2,695	)			8,129
Total inventories		$	21,390			$	(5,682	)		$	15,708
Current Portion		$	9,931			$	(1,297	)		$	8,634
Long-term portion			11,459				(4,385	)			7,074
Total inventories		$	21,390			$	(5,682	)		$	15,708

		December 31, 2020
		(in thousands)
		Gross Carrying Amount				Reserve Balance				Net Carrying Amount
Finished goods		$	13,858			$	(3,109	)		$	10,749
Raw materials			11,163				(3,065	)			8,098
Total inventories		$	25,021			$	(6,174	)		$	18,847
Current Portion		$	11,444			$	(1,410	)		$	10,034
Long-term portion			13,577				(4,764	)			8,813
Total inventories		$	25,021			$	(6,174	)		$	18,847

The Company records an inventory reserve for estimated excess and obsolete inventory based upon historical consumption and assumptions about future demand for its products. The Company recorded a write-down of obsolete inventory for the year-ended December 31, 2019 totaling $7.4 million as part of a restructuring plan and a $1.5 million charge for inventory obsolescence related to certain system components. There were 0 such write-downs or chargesThe decrease in the inventory reserve balance was $0.5 million and $3.0 million for the yeartwelve months ended December 31, 2018.2021 and 2020, respectively.

8.    Other Current Assets

The following table presents the components of other current assets:

	December 31, 2019				December 31, 2018
	(In thousands)
Advances to vendors	$	2,534			$	5,427
Prepaid expenses	1,834				1,443
VAT receivable	2,716				2,335
Total	$	7,084			$	9,205

9.	Property and Equipment

9.Property and Equipment

Property and equipment consisted of the following:

	December 31, 2019				December 31, 2018
	(In thousands)
Machinery, manufacturing and demonstration equipment	$	10,421			$	12,320
Computer equipment	2,321				2,260
Furniture	637				639
Leasehold improvements	2,295				2,280
Total property and equipment	15,674				17,499
Accumulated depreciation and amortization	(10,968		)		(11,162		)
Property and equipment, net	$	4,706			$	6,337

		December 31, 2021				December 31, 2020
		(In thousands)
Machinery, manufacturing, and demonstration equipment		$	8,289			$	9,909
Operating lease assets - Senhance System leasing			10,143				8,906
Computer equipment			325				2,297
Furniture			644				640
Leasehold improvements			1,259				2,309
Total property and equipment			20,660				24,061
Accumulated depreciation and amortization			(9,689	)			(13,719	)
Property and equipment, net		$	10,971			$	10,342

Depreciation expense was approximately $2.2$2.9 million, $2.9 million and $2.4$2.2 million for the years ended December 31, 2021, 2020,2019, respectively. 

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10.Goodwill, In-Process Research and 2018, respectively.

10.	Goodwill, In-Process Research and Development and Intellectual Property

Development and Intellectual Property

Goodwill

Goodwill consisted of $93.8 million that was recorded in connection with the 2013 merger transaction with SafeStitch Medical, Inc., or the Merger, as described in Note 1, goodwill of $38.3 million that was recorded in connection with the Senhance Acquisition, as described in Note 3, and goodwill of $9.6 million that was recorded in connection with the MST Acquisition, as described in Note 3.3, before impairment of $61.7 million that was recorded in 2016. The carrying value of goodwill and the change in the balance for the yearsyear ended December 31,2019 and 2018 is as follows:

	Goodwill
	(In thousands)
Balance at December 31, 2017	71,368
Additions	9,638
Foreign currency translation impact	(875		)
Balance at December 31, 2018	$	80,131
Foreign currency translation impact	(1,162		)
Impairment	(78,969		)
Balance at December 31, 2019	$	—

Accumulated impairment of goodwill as of December 31, 2019 and 2018 was $140.8 million and $61.8 million, respectively.

		Goodwill
		(In thousands)
Balance at December 31, 2018		$	80,131
Foreign currency translation impact			(1,162	)
Impairment			(78,969	)
Balance at December 31, 2019		$	0

The Company performsperformed an annual impairment test of goodwill at December 31 of each year, or more frequently if events or changes in circumstances indicateindicated that the carrying value of the Company’s one reporting unit may not be recoverable. As of December 31, 2018, the Company calculated the fair value of the Company’s sole reporting unit, based on the Company’s market capitalization, which exceeded the carrying amount. Accordingly, 0 charge for goodwill impairment was required as of December 31, 2018. During the third quarter of 2019, the Company's stock price declined significantly as a result of decreased sales.significantly. As of September 30, 2019, goodwill was deemed to be fully impaired, and the Company recorded an impairment charge of $79.0 million.

In-Process Research and Development

As described in Note 3, on October 31, 2018, the Company acquired the MST assets, technology and business from MST and recorded $10.6 million of IPR&D. The estimated fair value of the IPR&D was determined using a probability-weighted income approach, which discounts expected future cash flows to present value. The projected cash flows were based on certain key assumptions, including estimates of future revenue and expenses, taking into account the stage of development of the technology at the acquisition date and the time and resources needed to complete development. The Company used a discount rate of 15% and cash flows that have been probability adjusted to reflect the risks of product integration, which the Company believes are appropriate and representative of market participant assumptions.

The Company performed an impairment test of its IPR&D at the end of the third quarter 2019 as recent events and changes in market conditions indicated that the asset might be impaired. The impairment test consisted of a comparison of the fair value of the IPR&D with its carrying amount. If the carrying amount of the IPR&D exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. Significant judgment is applied when testing for impairment. This judgment includes developing cash flow projections, selecting appropriate discount rates, identifying relevant market comparables, and incorporating general economic and market conditions. During the third quarter of 2019, the Company concluded that the fair value determined by the market value approach was lower than the carrying value. As a result, the Company recognized a $7.9 million impairment charge to its IPR&D. The companyCompany performed its annual impairment assessment at December 31, 2019 and no additional impairment was required.

As of December 31, 2020, all IPR&D asset development was completed and reclassified to intellectual property.

The carrying value of the Company’s IPR&D assets and the change in the balance for the years ended December 31, 20182020 and 2019 is as follows:

	In-Process Research and Development
	(In thousands)
Balance at December 31, 2017	$	—
Additions	10,633
Foreign currency translation impact	114
Balance at December 31, 2018	10,747
Impairment	(7,912		)
Foreign currency translation impact	(365		)
Balance at December 31, 2019	$	2,470

		In-Process Research and Development
		(In thousands)
Balance at December 31, 2018		$	10,747
Impairment			(7,912	)
Foreign currency translation impact			(365	)
Balance at December 31, 2019			2,470
Impairment			0
Foreign currency translation impact			(45	)
Transfer of in-process research and development to intellectual property			(2,425	)
Balance at December 31, 2020		$	0

Intellectual Property

As described in Note 3, on

On September 21,2015, the Company acquired all of the assets related to the Senhance System and recorded $17.1 million of IPR&D. The estimated fair value of the IPR&D was determined using a probability-weighted income approach, which discounts expected future cash flows to present value. The projected cash flows were based on certain key assumptions, including estimates of future revenue and expenses, taking into account the stage of development of the technology at the acquisition date and the time and resources needed to complete development. The Company used a discount rate of 45% and cash flows that have been probability adjusted to reflect the risks of product commercialization, which the Company believes are appropriate and representative of market participant assumptions. On October 13, 2017, upon regulatory approval and the ability to commercialize the products associated with the IPR&D assets, the assets were deemed definite-lived, reclassified to intellectual property and are now being amortized based on their estimated useful lives.

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On March 13, 2020, upon regulatory approval and the ability to commercialize the products associated with the IPR&D assets in the United States, the remaining MST assets were deemed definite-lived, reclassified to intellectual property and are now being amortized based on their estimated useful lives.

The components of gross intellectual property, accumulated amortization, and net intellectual property as of December 31, 20192021 and 20182020 are as follows:

	December 31, 2019																	December 31, 2018
	(In thousands)																	(In thousands)
	Gross Carrying Amount				Accumulated Amortization				Foreign currency translation impact				Net Carrying Amount					Gross Carrying Amount				Accumulated Amortization				Foreign currency translation impact				Net Carrying Amount
Developed technology	$	66,413			$	(36,918	)		$	(1,208	)		$	28,287				$	66,413			$	(27,174	)		$	119			$	39,358
Technology and patents purchased	400				(112		)		21				309					400				(72		)		30				358
Total intellectual property	$	66,813			$	(37,030	)		$	(1,187	)		$	28,596				$	66,813			$	(27,246	)		$	149			$	39,716

		December 31, 2021
		(in thousands)
		Gross Carrying Amount				Accumulated Amortization				Foreign Currency Translation Impact				Net Carrying Amount
Developed technology		$	68,838			$	(58,912	)		$	(262	)		$	9,664
Technology and patents purchased			400				(199	)			27				228
Total intellectual property		$	69,238			$	(59,111	)		$	(235	)		$	9,892

		December 31, 2020
		(in thousands)
		Gross Carrying Amount				Accumulated Amortization				Foreign Currency Translation Impact				Net Carrying Amount
Developed technology		$	68,838			$	(51,734	)		$	4,872			$	21,976
Technology and patents purchased			400				(168	)			59				291
Total intellectual property		$	69,238			$	(51,902	)		$	4,931			$	22,267

The weighted average remaining useful life of the developed technology and technology and patents purchased was 2.81.6 years and 7.35.3 years, respectively as of December 31, 2019.  

2021.

The estimated future amortization expense of intangible assets as of December 31, 20192021 is as follows:

		Year ending December 31, 2021
		(In thousands)
2022			8,218
2023			400
2024			400
2025			400
2026			400
Thereafter			74
Total		$	9,892

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	Year ending December 31, 2019
	(In thousands)
2020	$	10,328
2021	10,328
2022	7,757
2023	42
2024	42
Thereafter	99
Total	$	28,596

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11.	Income Taxes

11.Income Taxes

The components for the income tax expense (benefit) are as follows for the years ended December 31 (in thousands):

	2019				2018
Current income taxes
Federal	$	—			$	—
State	—				—
Foreign	100				—
Deferred income taxes
Federal	—				—
State	—				—
Foreign	(3,224		)		(3,377		)
Total income tax benefit	$	(3,124	)		$	(3,377	)

		2021				2020				2019
Current income taxes
Federal		$	0			$	0			$	0
State			0				0				0
Foreign			232				169				100
Deferred income taxes
Federal			0				0				0
State			0				0				0
Foreign			(7	)			(1,685	)			(3,224	)
Total income tax expense (benefit)		$	225			$	(1,516	)		$	(3,124	)

The United States and foreign components of loss from operations before taxes are as follows for the years ended December 31 (in thousands):

	2019				2018
United States	$	(91,935	)		$	(44,744	)
Foreign	(65,390		)		(20,410		)
Total loss from operations before taxes	$	(157,325	)		$	(65,154	)

		2021				2020				2019
United States		$	(32,094	)		$	(34,398	)		$	(91,935	)
Foreign			(30,143	)			(26,430	)			(65,390	)
Total loss from operations before taxes		$	(62,237	)		$	(60,828	)		$	(157,325	)

Significant components of the Company’s deferred tax assets consist of the following at December 31 (in thousands):

		2021				2020
Deferred Tax assets:
Stock-based compensation		$	2,440			$	4,253
Accrued expenses and other			2,423				906
Research credit carryforward			564				0
Fixed Assets			101				385
Capitalized start-up costs and other intangibles			1,109				2,686
Net operating loss carryforwards			75,237				63,786
			81,874				72,016
Valuation Allowance			(78,294	)			(67,312	)
Net deferred tax asset			3,580				4,704
Deferred tax liabilities
Fixed assets and other			(1,176	)			(1,590	)
Purchase accounting intangibles			(2,116	)			(2,807	)
Net deferred tax liability			(3,292	)			(4,397	)
Net deferred tax asset (liability)		$	288			$	307

During the current year, the Company completed an assessment of the available net operating loss and tax credit carryforwards under Section 382 and Section 383 of the Internal Revenue Code, respectively. The Company determined that it underwent multiple ownership changes throughout its history as defined under Section 382, including most recently in 2020. As a result of the identified ownership changes, the portion of net operating loss and tax credits carryforwards attributable to the pre-ownership change periods are subject to a substantial annual limitation under Sections 382 and 383 of the Internal Revenue Code. The Company has adjusted its net operating loss and tax credit carryforwards to address the impact of the 382 ownership changes. This resulted in a reduction of available Federal and State NOLs of $253 million and $204 million, respectively. The write down of the NOLs reduced the net operating loss carryforward line as previously disclosed for the year ended December 31, (in thousands):

	2019				2018
Noncurrent deferred tax assets:
Stock-based compensation	$	3,665			$	2,281
Accrued expenses and other	1,007				795
Research credit carryforward	6,776				6,182
Fixed assets	345				392
Capitalized start-up costs and other intangibles	3,618				1,859
Net operating loss carryforwards	113,410				74,566
	128,821				86,075
Valuation allowance	(123,108)				(81,337		)
Net noncurrent deferred tax asset	5,713				4,738
Noncurrent deferred tax liabilities
Fixed assets and other	(1,445		)		(686		)
Purchase accounting intangibles	(5,660		)		(8,772		)
Net noncurrent deferred tax liability	(7,105		)		(9,458		)
Net deferred tax liability	$	(1,392	)		$	(4,720	)

At 2020 by $58.4 million, with a corresponding decrease in the valuation allowance. The Company also reduced its research credit carryforwards for the year ended December 31, 20192020 by $7.2 million with a corresponding decrease in the valuation allowance. The $7.2 million reduction was net of the related unrecognized tax benefit in the amount of $1.6 million.

Since the limitation affected the prior period, the Company has determined that its December 31, 2020 tax footnote presentation overstated the gross deferred tax asset and 2018,corresponding valuation allowance by $65.6 million. However, there was no net impact to the net deferred tax asset and tax expense as the decrease in the net operating loss carryforward was offset completely by a corresponding adjustment to the Company’s overall valuation allowance. For comparative purposes, the Company’s prior year tax footnote has been revised to reflect the adjustment to the net operating losses and valuation allowance. The change had no effect on the previously reported balance sheets, statements of operations and comprehensive loss, cash flows and stockholders’ equity.

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At December 31, 2021 and 2020, the Company has provided a full valuation allowance against its net deferred tax assets in the U.S., Canada, Italy, Luxembourg, Swiss,Switzerland, and AsianTaiwan tax jurisdictions, since realization of these benefits is not more likely than not. The valuation allowance increased approximately $41.8$11.0 million from the prior year. At December 31, 2019, 2021, the Company had U.S. federal net operating loss carryforwards of $337.6 million.$397.2 million, of which $253 million are expected to expire unused under the limitations imposed by Internal Revenue Code Section 382 (as discussed above). Of thisthe total amount of Federal NOLs (notwithstanding the 382 limitation), $254.5 million begin to expire in 2027, while the remaining $83.1$142.7 million carry forward indefinitely. At December 31, 2019, 2021, the Company had U.S. state net operating loss carryforwards of $287.5 million.$309.2 million, of which $204 million are expected to expire unused under the state tax law equivalents of Internal Revenue Code Section 382. Of this amount $282.8(notwithstanding the 382 limitations), $299.9 million of state NOLs begin to expire in 2022, while the remaining $4.7$9.3 million carry forward indefinitely. At December 31, 2019, 2021, the Company had federal research credit carryforwards in the amount of $6.8$9.4 million. These carryforwards begin to expire in 2027.  However, under the limitations of Internal Revenue Code Section 383, it is expected that $8.8 million of this carryforward will expire unused. The utilization of the federal net operating loss carryforwards and credit carryforwards will depend on the Company’s ability to generate sufficient taxable income prior to the expiration of the carryforwards. In addition, the maximum annual use of net operating loss and research credit carryforwards is limited in certain situations where changes occur in stock ownership.

At December 31, 2019, 2021, the Company had foreign operating loss carryforwards in Italy of approximately $23.1$25.2 million, which can be carried forward indefinitely; foreign operating loss carryforwards in Luxembourg of approximately $95.1$96.6 million, which will begin to expire in 2035;2034; foreign operating loss carryforwards in Switzerland of approximately $42.3$90.6 million, which begin to expire in 2023;2023, and foreign operating loss carryforwards in JapanCanada of approximately $2.0$0.5 million, which begin to expire in 2028.

2040.

The Company has evaluated its tax positions to consider whether it has any unrecognized tax benefits. As of December 31, 2019, 2021, the Company had gross unrecognized tax benefits of approximately $1.5$0.1 million. Of the total, none would reduce the Company’s effective tax rate if recognized. The Company does not anticipate a significant change in total unrecognized tax benefits or the Company’s effective tax rate due to the settlement of audits or the expiration of statutes of limitations within the next twelve months. Furthermore, the Company does not expect any cash settlement with the taxing authorities as a result of these unrecognized tax benefits as the Company has sufficient unutilized carryforward attributes to offset the tax impact of these adjustments.

Note that the Company removed $1.6 million of the unrecognized tax benefits associated with R&D credit carryforwards that it expects to expire unused due to Section 383 limitations. This  adjustment is reflected in the table below as of December 31, 2020.

The following is a tabular reconciliation of the Company’s change in gross unrecognized tax positions at December 31 (in thousands):

	2019				2018
Beginning balance	$	1,363			$	1,202
Gross increases for tax positions related to current periods	149				161
Gross increases for tax positions related to prior periods	—				—
Ending balance	$	1,512			$	1,363

		2021				2020				2019
Beginning balance		$	0			$	1,512			$	1,363
Gross increases for tax positions related to current periods			141				108				149
Gross decreases related to 382 limitations			0				(1,620	)			0
Ending balance		$	141			$	0			$	1,512

The Company recognizes interest and penalties related to uncertain tax positions in the provision for income taxes. As of December 31, 20192021 and 2018,2020, the Company had 0 accrued interest or penalties related to uncertain tax positions.

The Company has analyzed its filing positions in all significant federal, state, and foreign jurisdictions where it is required to file income tax returns, as well as open tax years in these jurisdictions. With few exceptions, the Company is no longer subject to United States Federal, state, and local tax examinations by tax authorities for years before 2016,2018, although carryforward attributes that were generated prior to 2016 2018may still be adjusted upon examination by the taxing authorities if they either have been or will be used in a future period. No income tax returns are currently under examination by taxing authorities.

Taxes computed at the then-current statutory federal income tax rate of 21% are reconciled to the provision for income taxes as follows for the years ended December 31:

		2021								2020								2019
		Amount				Percent of Pretax Earnings				Amount				Percent of Pretax Earnings				Amount				Percent of Pretax Earnings
United States federal tax at statutory rate		$	(13,070	)			21.0	%		$	(12,774	)			21.0	%		$	(33,038	)			21.0	%
State taxes (net of deferred benefit)			(2,205	)			3.5	%			(1,768	)			2.9	%			(4,778	)			3.0	%
Nondeductible expenses			(440	)			0.7	%			719				(1.2	%)			709				(0.5	%)
Change in fair market value of contingent consideration			(397	)			0.6	%			717				(1.2	%)			(2,342	)			1.5	%
Warrant remeasurment and financing costs			502				(0.8	%)			82				(0.1	%)			(551	)			0.4	%
Research & Development			(705	)			1.1	%			(542	)			0.9	%			(743	)			0.5	%
Change in unrecognized tax benefits			141				(0.2	%)			(1,512	)			2.5	%			149				(0.1	%)
Foreign tax rate differential			1,911				(3.1	%)			1,589				-2.6	%			2,590				(1.6	%)
Goodwill and investment impairments			0				0				0				0				(6,638	)			4.2	%
Adjustment for 382 Limitations			0				0				67,255				(110.6	%)			0				0.0	%
True-up to Stock Compensation - Cancellations			2,832				(4.6	%)			0				0				0				0.0	%
Change in enacted tax rates and other, net			731				(1.0	%)			533				(0.9	%)			(253	)			0.2	%
Change in valuation allowance			10,925				(17.6	%)			(55,815	)			91.8	%			41,771				26.6	%
Income tax expense (benefit)		$	225				(0.4	%)		$	(1,516	)			2.5	%		$	(3,124	)			2.0	%

73

	2019							2018
	Amount				% of Pretax Earnings			Amount				% of Pretax Earnings
United States federal tax at statutory rate	$	(33,038	)		21.0	%		$	(13,682	)		21.0	%
State taxes (net of deferred benefit)	(4,778		)		3.0	%		(1,080		)		1.7	%
Nondeductible expenses	709				(0.5	)%		(1,320		)		2.0	%
Change in fair market value of contingent consideration	(2,342		)		1.5	%		(256		)		0.4	%
Warrant remeasurement and financing costs	(551		)		0.4	%		3,630				(5.6	)%
Research & Development credits	(743		)		0.5	%		(803		)		1.2	%
Change in unrecognized tax benefits	149				(0.1	)%		161				(0.2	)%
Foreign tax rate differential	2,590				(1.6	)%		(96		)		0.1	%
Goodwill impairment	(6,638		)		4.2	%		—				—
Change in enacted tax rates and other, net	(253		)		0.2	%		252				(0.3	)%
Change in valuation allowance	41,771				(26.6	)%		9,817				(15.1	)%
Income tax benefit	$	(3,124	)		2.0	%		$	(3,377	)		5.2	%

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12.OperatingLeases

We determine if an arrangement is a lease or service contract at inception. Where an arrangement is a lease, we determine if it is an operating lease or a finance lease.  Subsequently, if the arrangement is modified, we reevaluate our classification.  We have entered into operating leases for corporate office buildings, vehicles, and machinery and equipment.  Some of our lease agreements have renewal options, tenant improvement allowances, rent escalation clauses, and assignment and subletting clauses.  While our operating leases range from
one

U.S. shareholders are subject year to taxten years, some may include options to extend the lease generally between one year and six years, and some may include options to terminate the leases within one year. 

Operating lease liabilities presented on global intangible low-taxed income (GILTI) earned by certain foreign subsidiaries. The FASB Staff Q&A, Topic 740, No. 5, Accounting for Global Intangible Low-Taxed Income, states that an entity can make an accounting policy election to either recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years or to providethe consolidated balance sheets represents the present value of the remaining lease payments, discounted using the Company’s incremental borrowing rate, which ranges between 6.1% and 8.5% based on the terms of the lease. 

Operating lease costs for the tax expenseyear ended December 31, 2021, 2020 and 2019 were $1.8 million, $2.0 million and $2.1 million, respectively. Total cash paid for operating leases during the year ended December 31, 2021, 2020 and 2019 was $1.5 million, $1.5 million and $1.7 million, respectively, and is included in with cash flows from operating activities with the consolidated statement of cash flows.

Supplemental balance sheet information, as of December 31, 2021 and 2020, related to GILTIoperating leases was as follows:

		December 31,
		2021				2020
Weighted-average remaining lease term (in years)		7.8				1.8
Weighted-average discount rate			7.8	%			8.2	%

Maturities of operating lease obligations were as follows (in thousands):

Fiscal Year
2022		$	994
2023			1,008
2024			918
2025			920
2026			854
Thereafter			3,004
Total minimum lease payments		$	7,698
Less: Amount of lease payments representing interest			(2,009	)
Present value of future minimum lease payments		$	5,689

During 2021 we entered into three building leases; the first with a 125-month term beginning in the yearfirst quarter of 2021; the tax is incurred assecond with a period expense only. The Company has elected to account for GILTI60-month term beginning in the yearsecond month of the tax is incurred. As of December 31, 2019, 0 GILTI tax has been recorded.

In a referendum held on May, 19 2019, Swiss voters adoptedquarter; and the Federal Act on Tax Reform and AVS Financing (TRAF). TRAF introduces major changesthird with an 87-month term beginning in the Swiss tax system by abolishing certain current preferential tax regimes and replacing them with new measures that are in line with international standards.fourth quarter of 2021. The referendum did not have a material impact on the Company’s 2019 tax provision. The Company will continue to evaluate the impact oftotal lease commitment for these provisions in future periods as the enactment process in completed.three operating leases is approximately $7.1 million.

12.	Accrued Expenses

13.Accrued Expenses

The following table presents the components of accrued expenses:

		December 31, 2021				December 31, 2020
		(In thousands)
Compensation and benefits		$	3,682			$	4,541
Consulting and other vendors			128				66
Other			124				177
Royalties			247				147
Legal and professional fees			503				314
Taxes and other assessments			492				351
Interest			0				19
Total		$	5,176			$	5,615

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	December 31, 2019				December 31, 2018
	(In thousands)
Compensation and benefits	$	5,061			$	6,243
Restructuring costs	882				—
Consulting and other vendors	308				895
Other	242				539
Lease Liability	1,112				—
Royalties	148				498
Legal and professional fees	474				432
Deferred rent	—				391
Taxes and other assessments	326				365
Interest	—				256
Total	$	8,553			$	9,619

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13.	Notes Payable

14.Notes Payable

Paycheck Protection Program

On April 27, 2020, the Company received an unsecured non-recourse loan of $2.8 million under the Paycheck Protection Program (“PPP”) provisions of the CARES Act. The Company accounted for the PPP promissory note as debt within notes payable on the consolidated balance sheet. As of December 31, 2020, $1.6 million of the promissory note was classified as long-term and $1.2 million was classified as current.

On June 10, 2021, the Company received notification from the SBA that the principal amount of $2.8 million and related interest had been forgiven. Gain on extinguishment of debt of $2.8 million was recognized for the year ended December 31, 2021 on the consolidated statement of operations and comprehensive loss. There were 0 related amounts recorded for the year ended December, 31, 2020 and 2019, respectively.  

Hercules Loan Agreement

On May 23,2018, the Company and its domestic subsidiaries, as co-borrowers, entered into a Loan and Security Agreement (the “Hercules Loan Agreement”) with several banks and other financial institutions or entities from time to time party to the Loan Agreement (collectively, the “Lender”) and Hercules Capital, Inc., as administrative agent and collateral agent (the “Agent”). Under the Hercules Loan Agreement, the Lender agreed to make certain term loans to the Company in the aggregate principal amount of up to $40.0 million. Funding of the first $20.0 million tranche occurred on May 23, 2018 (the “Initial Funding Date”). On October 23, 2018, the Lender funded the second tranche of $10.0 million under the Hercules Loan Agreement. The Company was entitled to make interest-only payments until December 1, 2020, and at the end of the interest-only period, the Company would have been required to repay the term loans over an eighteen-month period based on an eighteen-month amortization schedule, with a final maturity date of June 1, 2022. The term loans were required to be repaid if the term loans were accelerated following an event of default.

Effective April 30, 2019, the Hercules Loan Agreement was amended (the “Hercules Amendment”) to eliminate the availability of the Tranche III Loan facility, add a new Tranche IV Loan facility of up to $20.0 million, revise certain financial covenants and make other changes.modified on two separate occasions in 2019. The availability of advances under the Tranche IV Loan was not milestone-based, rather the Company could request advances in minimum $5.0 million increments at any time during the period from July 1, 2019 through December 31, 2020, subject to the funding discretion of the Lender. The monthly trailing six month net revenue financial covenant was amended to be tested quarterly and to change the projected net revenue percentage to be met for the six months ending on the last day of each fiscal quarter.  If such quarterly financial covenant was not achieved as of the last day of any fiscal quarter, as tested on the thirtieth day after quarter end, the Company must have complied with the waiver conditions in the Hercules Amendment from such test date until the next quarterly test date.  The Hercules Amendment was executed by the parties on May 7, 2019. The Amendment wasAmendments were treated as a debt modification for accounting purposes.

In connection with the entry into the AutoLap Sale Agreement with respect to the AutoLap assets, the Company commenced discussions with the Agent in order to obtain the required consent of the Agent and the Lender with respect to the sale of the AutoLap assets. In connection with obtaining such consent, the Company entered into the Consent and Second Amendment to the Loan and Security Agreement on July 10, 2019 (the(the “Hercules Second Amendment”). Under the Hercules Second Amendment, in consideration for the consent to the sale of, and the release of the Lender’s security interest on, the AutoLap assets, the Company reduced its indebtedness under the Hercules Loan Agreement by repaying $15.0 million of the $30.0 million of outstanding indebtedness thereunder, without any prepayment penalties, amendment fee or acceleration of the end of term charges, and received adjustments to the quarterly financial covenants and related waiver conditions to reflect the decreased outstanding indebtedness. The Amendment was treated as a debt modification for accounting purposes. Under the Hercules Second Amendment, the applicable waiver condition for fiscal year 2019 was changed to maintenance of unrestricted cash equal to $7.0 million.

The term loans bore interest at a rate equal to the greater of (i) 9.55% per annum (the “Fixed Rate”) and (ii) the Fixed Rate plus the prime rate (as reported in The Wall Street Journal) minus 5.00%.

On the Initial Funding Date, the Company was obligated to pay a facility fee of $0.4 million, recorded as a debt discount. The Company also incurred other debt issuance costs totaling $1.1 million in conjunction with its entry into the Hercules Loan Agreement. In addition, the Company was permitted to prepay the term loans in full at any time, with a prepayment fee of 3.0% of the outstanding principal amount of the loan in the first year after the Initial Funding Date, 2.0% if the prepayment occurred in the second year after the Initial Funding Date and 1.0% thereafter. Upon prepayment of the term loans in full or repayment of the terms loans at the maturity date or upon acceleration, the Company

was required to pay a final fee of 6.95% of the aggregate principal amount of term loans funded. The final payment fee was accreted to interest expense over the life of the term loan and included within notes payable on the consolidated balance sheet.

The Company’s obligations under the Hercules Loan Agreement were guaranteed by all current and future material foreign subsidiaries of the Company and were secured by a security interest in all of the assets of the Company and their current and future domestic subsidiaries and all of the assets of their current and future material foreign subsidiaries, including a security interest in the intellectual property. The Hercules Loan Agreement contained customary representations and covenants that, subject to exceptions, restricted the Company’s and its subsidiaries’ ability to do the following, among other things: declare dividends or redeem or repurchase equity interests; incur additional indebtedness and liens; make loans and investments; engage in mergers, acquisitions, and asset sales; transact with affiliates; undergo a change in control; add or change business locations; and engage in businesses that were not related to its existing business. Under the terms of the Hercules Loan Agreement, the Company was required to maintain cash and/or investment property in accounts which perfected the Agent’s first priority security interest in such accounts in an amount equal to the lesser of (i) (x) 120% of the then-outstanding principal balance of the term loans, including accrued interest and any other fees payable under the agreement to the extent accrued and payable plus (y) an amount equal to the then-outstanding accounts payable of the Company on a consolidated basis that were more than 90 days past due and (ii) 80% of the aggregate cash of the Company and its consolidated subsidiaries. The Agent was granted the option to invest up to $2.0 million in any future equity offering broadly marketed by the Company to investors on the same terms as the offering to other investors.

On November 4, 2019, the Company entered into a payoff letter with the Agent pursuant to which the Company terminated the Hercules Loan Agreement, as amended. The Company determined it was in the best interests of the Company to pay down the debt and terminate the Hercules Agreement to simplify the Company's balance sheet and provide additional flexibility as the Board of Directors continues to explore strategic and financial alternatives for the Company. Under the payoff letter, the Company repaid all amounts owed under the Hercules Loan Agreement totaling approximately $16.4 million, which included end of term fees of $1.4 million, and Hercules released all security interests held on the assets of the Company and its subsidiaries, including, without limitation, on the intellectual property assets of the Company. The Company recognized a loss of $1.0 million on the extinguishment of notes payable which is included in interest expense on the consolidated statement of operations and comprehensive loss for the year ended December 31,2019.

In connection with its entrance into

15.Stock-Based Compensation

Overview

On July 22, 2021, at the Hercules Loan Agreement, the Company repaid its existing loan and security agreement (the “Innovatus Loan Agreement”) with Innovatus Life Sciences Lending Fund I, LP (“Innovatus”). The Company recognized a loss2021 Annual Meeting of $1.4 million on the extinguishment of notes payable which was included in interest expense on the consolidated statements of operations and comprehensive loss for the year ended December 31, 2018. The Company paid $0.7 million in final payment obligations and $0.3 million in prepayment fees under the Innovatus Loan Agreement upon repayment.

Under the Innovatus Loan Agreement, entered into on May 10, 2017, Innovatus agreedStockholders, stockholders voted to make certain term loans in the aggregate principal amount of up to $17.0 million. Funding of the first $14.0 million tranche occurred on May 10, 2017.

The Innovatus Loan Agreement allowed for interest-only payments for up to twenty-four months at a fixed rate equal to 11% per annum, of which 2.5% could be paid in-kind and added to the outstanding principal amount of the term loans until the earlier of (i) the first anniversary following the funding date and (ii)approve the Company’s failure to achieve an Interest-Only Milestone. At the end of the interest-only period, the Company would be required to repay the term loans over a two-year period, based on a twenty-four (24) month amortization schedule, with a final maturity date of May 10, 2021.

In connection with the Innovatus funding, the Company paid a facility fee of $0.2 million on the date of funding of the first tranche and incurred additional debt issuance costs of approximately $1.2 million, recorded as a debt discount.  In addition, the Company issued warrants to Innovatus to purchase shares of the Company’s common stock that will expire five years from such issue date. The warrants issued in connection with funding of the first tranche entitle Innovatus to purchase up to 95,750 shares of the Company’s common stock at an exercise price of $13.00 per share. The Company estimated the fair value of the warrants to be $0.3 million. The value of the warrants was classified as equity and recorded as a discount to the loan.  The debt discount was amortized as interest expense using the effective interest method over the life of the loan. As of December 31, 2018, the unamortized debt discount was $0.

14.	Stock-Based Compensation

The Company’s stock-based compensation plans include the TransEnterix, Inc. Amended and Restated Incentive Compensation Plan previously named the TransEnterix, Inc. 2007 Incentive Compensation Plan, or the Plan, as well as options outstanding under the TransEnterix, Inc. Stock Option Plan, or the 2006 Plan. As part of the Merger, options outstanding, whether vested or unvested, under the 2006 Plan were adjusted by the Exchange Ratio of approximately 0.0887, and assumed by the Company concurrent with the closing of the Merger.

The Plan was initially approved by the majority of the stockholders on November 13, 2007. The Plan was amended on June 19, 2012(the “Plan”) to increase the number of shares of common stock available for issuance to 76,923 and was amended on October 29, 2013 to (a) increase the number of shares of common stock authorized for issuance under the Plan from 76,923 shares of common stock to 380,000 shares of common stock, (b) increase the per-person award limitations for options or stock appreciation rights from 15,385 to 76,923 shares and for restricted stock, deferred stock, performance shares and/or other stock-based awards from 7,692 to 38,462 shares, and (c) change the name of the Plan to reflect the Merger-related change. The Plan was again amended on May 7, 2015 to (i) increase the number of shares reserved for issuance under the Plan to 918,462 shares; (ii) extend the termby 22,000,000 shares. As of the Plan until May 7, 2025;December 31, 2021, there were 32,072,308 shares authorized for issuance, and (iii) make other changes and updates to the Plan and was further amended in October 2015 to add French Sub-Plan amendments applicable to awards made to France-based employees. The Plan was further amended on June 8, 2016 to (a) approve an increase in the number of20,755,273 shares reservedavailable for future issuance under the Plan to 1,456,923 shares and (b) establish maximumPlan. To date all equity award limits for initial awards and annual awards to non-employee directors. The Plan was subsequently amended as of May 25, 2017, increasing the number of shares of Common Stock authorized under the Plan to 1,995,385. The Plan was again amended on May 24, 2018, increasing the numberhave consisted of shares of Common Stock authorized under the Plan to 3,149,231. The Plan was again amended in October 2018 to add an Israeli Sub-Plan applicable to awards made to Israel-based employees. The Plan was again amended on April 24, 2019, to increase the number of shares of Common Stock authorized under the Plan to 4,072,308nonqualified stock options, incentive stock options, and to make other changes.

The October 2013, May 2015, June 2016, May 2017, May 2018, and April 2019 amendments were approved by the Board of Directors and stockholders; the French Sub-Plan and Israeli Sub-Plan were approved by the Board of Directors. restricted stock units.

Under the Plan, which is administered by the Compensation Committee, the Company may grant stock options, stock appreciation rights, restricted stock and/or deferred stock to employees, officers, directors, consultants and vendors. The exercise price of stock options or stock appreciation rights may not be less than the fair market value of the Company’s shares at the date of grant. Additionally, no stock options or stock appreciation rights granted under the Plan may have a term exceeding ten years.

The 2006 Plan was adopted and approved by stockholders in September 2006 and provided for the granting of up to 6,154 stock options to employees, directors, and consultants. Under the 2006 Plan, both employees and non-employees were eligible for such stock options. In 2009, the 2006 Plan was amended to increase the total options pool to 85,389. In 2011, the 2006 Plan was amended to increase the total options pool to 259,861. The amendments were approved by the Board of Directors and stockholders. The Board of Directors had the authority to administer the plan and determine, among other things, the exercise price, term and dates of the exercise of all options at their grant date. Under the 2006 Plan, options become vested generally over four years, and expire not more than 10 years after the date of grant. As part of the Merger, options outstanding under the 2006 Plan were adjusted by the Conversion Ratio, and remain in existence as options of TransEnterix.

During the years ended December 31, 20192021,2020 and 2018,2019, the Company recognized approximately $11.5$9.4 million, $7.9 million, and $9.0$11.5 million, respectively, of stock-based compensation expense, including stock options and restricted stock units.

Stock Options

The Company recognizes as expense, the grant-date fair value of stock options and other stock basedstock-based compensation issued to employees and non-employee directors over the requisite service periods, which are typically the vesting periods. The Company uses the Black-Scholes-Merton model to estimate the fair value of its stock-based payments. The volatility assumption used in the Black-Scholes-Merton model is based on the calculated historical volatility based on an analysis of reported data for a peer group of companies as well as the Company’s historical volatility. The expected term of options granted by the Company has been determined based upon the simplified method, because the Company does not have sufficient historical information regarding its options to derive the expected term. Under this approach, the expected term is the mid-point between the weighted average of vesting period and the contractual term. The risk-free interest rate is based on U.S. Treasury rates whose term is consistent with the expected life of the stock options. The Company has not paid and does not anticipate paying cash dividends on its shares of common stock; therefore, the expected dividend yield is assumed to be 0.zero. The Company estimates forfeitures based on the historical experience of the Company and adjusts the estimated forfeiture rate based upon actual experience.

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The fair value of options granted were estimated using the Black-Scholes-Merton option pricing model based on the assumptions in the table below:

	Year ended December 31,
	2019		2018
Expected dividend yield	0%		0%
Expected volatility	81% - 92%		73% - 75%
Risk-free interest rate	1.39% - 2.66%		2.35% - 3.02%
Expected life (in years)	5.5 - 6.1		5.5 - 6.1

		Year Ended December 31,
		2021						2020						2019
Expected dividend yield				0%						0%						0%
Expected volatility			118%	-	139%				82%	-	126%				81%	-	92%
Risk-free interest rate			0.33%	-	1.11%				0.2%	-	1.69%				1.39%	-	2.66%
Expected life (in years)			3.8	-	4.5				3.8	-	6.1				5.5	-	6.1

The following table summarizes the Company’s stock option activity, including grants to non-employees, for the year ended December 31, 2019:

	Number of Shares			Weighted- Average Exercise Price				Weighted- Average Remaining Contractual Term (Years)
Options outstanding at December 31, 2018	1,529,964			$	31.45			7.82
Granted	623,272			29.79
Forfeited	(248,834	)		33.13
Cancelled	(43,525	)		38.67
Exercised	(29,919	)		18.00
Options Outstanding December 31, 2019	1,830,958			$	30.71			7.36

2021:

		Number of Shares				Weighted- Average Exercise Price				Weighted-Average Remaining Contractual Term (Years)
Options outstanding at December 31, 2020			4,361,872			$	10.49				6.05
Granted			1,490,266				4.06
Forfeited			(285,391	)			8.10
Cancelled			(610,287	)			30.32
Exercised			(315,800	)			0.67
Options outstanding at December 31, 2021			4,640,660			$	6.64				5.66

The following table summarizes information about stock options outstanding at December 31, 2019:

	Number of Shares			Weighted Average Exercise Price				Weighted Average Remaining Contractual Term (Years)
Exercisable at December 31, 2019	926,498			$	32.48			6.14
Vested or expected to vest at December 31, 2019	1,763,300			$	30.75			7.28

Stock options outstanding, exercisable, and vested or expected to vest at December 31, 2019 had no intrinsic value based on the closing market price of the Company’s common stock at December 31, 2019.

The total intrinsic value of options exercised during 2019 and 2018 was approximately $0.2 million and $9.3 million, respectively. Proceeds from options exercised during 2019 and 2018 were approximately $0.5 million and $7.1 million, respectively.

2021:

		Number of Shares				Weighted- Average Exercise Price				Weighted-Average Remaining Contractual Term (Years)				Aggregate Intrinsic Value (Millions)
Exercisable at December 31, 2021			1,887,155			$	11.50				5.40			$	0.7
Vested or expected to vest at December 31, 2021			4,498,953			$	6.75				5.65			$	1.4

The Company granted 623,2721,490,266, 3,005,964, and 669,662623,272 options to employees and non-employees during the years ended December 31, 20192021,2020, and 2018,2019, respectively, with a weighted-average grant date fair value of $2.40, $0.53, and $21.23, and $20.67, respectively.

As of December 31, 2019,2021, the Company had future employee stock-based compensation expense of approximately $19.6$4.0 million related to unvested share awards,stock options, which is expected to be recognized over an estimated weighted-average period of 2.51.5 years.

15.	Restricted Stock Units

In 2018

Restricted Stock Units

During 2021,2020, and 2019, the Company issued Restricted Stock Units (“RSUs”) to certain employees which vest over two years and three years. The RSUs vest on defined vesting dates and in certain circumstances subject to certain performance criteria, subject to the continuous service with the Company at the applicable vesting event. Vesting can be accelerated upon a change in control under the Plan if the RSUs are not assumed by the successor company, and will be accelerated for certain executive officers under existing employment agreements if any such executive officer has a termination of employment in connection with a change in control event.  When vested, the RSUs represent the right to be issued the number of shares of the Company’s common stock that is equal to the number of RSUs granted. The fair value of each RSU is estimated based upon the closing price of the Company’s common stock on the grant date. Share-based compensation expense related to RSUs is recognized over the requisite service period as adjusted for estimated forfeitures.

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The following is a summary of the RSU activity, including performance restricted stock units, for the years ended December 31,2021,2020, and 2019:

		Number of Restricted Stock Units Oustanding				Weighted- Average Grant Date Fair Value
Unvested December 31, 2018			382,098			$	20.24
Granted			192,987				31.42
Vested			(85,153	)			25.98
Forfeited			(46,005	)			21.38
Unvested December 31, 2019			443,927			$	23.88
Granted			3,112,382				0.67
Vested			(313,508	)			19.38
Forfeited			(245,402	)			6.54
Unvested December 31, 2020			2,997,399			$	1.41
Granted			3,133,753				2.77
Vested			(1,891,869	)			1.63
Forfeited			(400,253	)			1.86
Unvested December 31, 2021			3,839,030			$	2.36

As of December 31, 20192021, 2020, and 2018:

	Number of Restricted Stock Units Outstanding			Weighted Average Grant Date Fair Value
Unvested December 31, 2017	338,055			$	14.95
Granted	170,403			28.66
Vested	(123,539	)		17.44
Forfeited	(2,821	)		17.71
Unvested December 31, 2018	382,098			$	20.24
Granted	192,987			31.42
Vested	(85,153	)		25.98
Forfeited	(46,005	)		21.38
Unvested December 31, 2019	443,927			$	23.88

As of December 31, 2019, and 2018, the Company recorded approximately $3.2$4.8 million, $1.7 million, and $2.9$3.2 million, respectively, in compensation expense for the RSUs. As of December 31, 2019,2021, the unrecognized stock-based compensation expense related to unvested RSUs was approximately $5.5$4.3 million, which is expected to be recognized over a weighted average period of approximately 1.41.3 years.

16.	Warrants

On March 22, 2013, SafeStitch entered into a

Performance Restricted Stock Units

In 2021 and 2020, the Company granted performance-based restricted stock purchase agreementunits with approximately 17 investors (the “2013 PIPE Investors”) pursuant to whichvesting terms based on our attainment of certain operational targets by October 1, 2023 and October 1, 2022, respectively. The number of shares earnable under the 2013 PIPE Investors purchased an aggregate2021 and 2020 awards were based on achieving designated corporate goals. As of approximately 186,092 shares of common stock at a price of $16.25 per share for aggregate consideration of approximately $3.0 million. Included in this private placement was the issuance of warrants to purchase approximately 93,046 common shares, representing one warrant for every two common shares purchased, with an exercise price of $21.45 per share and five years expiration. Among the 2013 PIPE Investors purchasing shares were related parties who purchased 98,462 shares and received 49,231 warrants. There were approximately 92,277 warrants outstanding that were assumed as of the Merger. During the years ended December 31, 2018 2021 and 2017, 61,538 and 18,462, respectively of these warrants were exercised. During the year ended December 31, 2018, the remaining 7,354 warrants expired.

On January 17, 2012, TransEnterix Surgical entered into an original Loan Agreement with Silicon Valley Bank ("SVB") and Oxford Financial LLC (the "Prior Lenders"). Pursuant to such agreement, TransEnterix Surgical issued preferred stock warrants to the Prior Lenders on January 17, 2012 and December 21, 2012, respectively, to purchase shares of TransEnterix Surgical preferred stock. The preferred stock warrants expire ten years from the issue date. The preferred stock warrants were remeasured immediately prior to the Merger. As of the Merger, the preferred stock warrants converted to common stock warrants, adjusted based on a Merger exchange ratio of approximately 0.0887, and the preferred stock warrant liability was reclassified to additional paid-in capital. These warrants are exercisable for an aggregate of approximately 21,506 shares of common stock, with an exercise price of $18.85 per share. During the year ended December 31, 2013, 10,753 of these warrants were exercised in a cashless transaction for 8,674 shares of common stock. During the year ended December 31, 2018, the remaining 10,753 of these warrants were exercised in a cashless transaction for 8,065 shares of common stock.

On September 26, 2014,2020, the Company entered into an amendment to the SVB Loan Agreement with the Prior Lenders. In connection with the first tranche borrowings under such amendment, the Company issued 2,948 commonrecorded approximately $0.9 million and $0.1 million, respectively, in compensation expense for these performance-based restricted stock warrants to the Prior Lenders to purchase shares of the Company’s common stock, with an exercise price of $52.20 per share. The warrants expire seven years from their respective issue date. The Company concluded that the warrants are considered equity instruments. The warrants were recognized at the relative fair value on the issuance date as a debt discount and were amortized using the effective interest method from issuance to the maturity of the term loans. NaN of these warrants were exercised during the years ended December 31, 2019. During the year ended December 31, 2018, 2,145 of these warrants were exercised in a cashless transaction for 660 shares of common stock.units.  

16.Warrants

On August 14,2015, in connection with an amendment to the SVB Loan Agreementa then-existing loan agreement with Silicon Valley Bank and first tranche borrowings thereunder, the Company issued 8,684 common stock warrants to the Prior Lenders to purchase shares of the Company’s common stock, with an exercise price of $40.30 per share. The warrants expire seven years from their respective issue date. The Company concluded that the warrants are considered equity instruments. The warrants were recognized at the relative fair value on the issuance date as a debt discount and were amortized using the effective interest method from issuance to the maturity of the note. NaNNone of these warrants were exercised during the years ended December 31,2021,2020, or 2019. During the year ended December 31, 2018, 5,211 of these warrants were exercised in a cashless transaction for 2,426 shares of common stock.

On April 28, 2017, the Company sold 24.9 million Units, each consisting of approximately 0.077 shares of the Company's Common Stock, a Series A Warrant to purchase approximately 0.077 shares of Common Stock with an exercise price of $13.00 per share, and a Series B Warrant to purchase approximately 0.058 shares of Common Stock with an exercise price of $13.00 per share at an offering price of $1.00 per Unit. Receipt of 510(k) clearance for the Senhance System on October 13, 2017, triggered the acceleration of the expiration date of the Series A Warrants to October 31, 2017. As such, all of the Series A Warrants were exercised prior to the expiration date. Each Series AB Warrant waswere exercisable at any time beginning on the date of issuance and from time to time thereafter through and including the firstfifth anniversary of the issuance date, unless terminated earlierand were liability classified. All Series B Warrants have been exercised as provided inof December 31, 2021.

On February 24, 2020, the Company entered into a Series A Warrant. ReceiptB Warrants Exchange Agreement (the “Exchange Agreement”) with certain holders of 510(k) clearance forits unexercised Series B Warrants. Under the Senhance System on October 13, 2017, triggered the accelerationterms of the expiration date of the Series A Warrants to October 31, 2017. As such, all of the Series A Warrants were exercised prior to the expiration date. EachExchange Agreement, each Series B Warrant may be exercised at any time beginning onwas canceled in exchange for 0.61 shares of common stock. The Warrant holders participating in the date of issuance and from time to time thereafter through and including the fifth anniversaryexchange held 3,373,900 of the issuance date.

The exercise prices and the number of shares issuable upon exercise of each of the3,638,780 Series B Warrants are subject to adjustment uponthen outstanding and received an aggregate of 2,040,757 shares of common stock. As a result, the occurrence of certain events, including, but not limited to, stock splits or dividends, business combinations, sale of assets, similar recapitalization transactions, or other similar transactions. The Series B warrants contain provisions, often referred to as “down-round protection,” that leads to adjustment ofwarrant liability decreased by $2.5 million and the exercise price and number of underlying warrant shares ifadditional paid in capital increased by the Company issues securities, including its common stock or convertible securities or debt securities, in the future at sale prices below the then-current exercise price.same amount.  As a result of thisthe March 2020 Public Offering and adjustment feature, and after giving effect to the Company’s reverse stock split at a ratio of one-for-thirteen shares effective December 11, 2019, or the Reverse Stock Split, the exercise price of all outstanding Series B Warrants has been adjusted to $1.39$0.35 per share and the number of shares of common stock reserved for and issuable upon the exercise of outstanding Series B Warrants has been adjusted to 1,963,451567,660 underlying warrant shares as of December 31, 2019.

2020.The exercisability of the Series B Warrants may be limited if, upon exercise, the holder or any of its affiliates would beneficially own more than 4.99% of the Common Stock. If, at any time Series B Warrants are outstanding, any fundamental transaction occurs, as described in the Series B Warrants and generally including any consolidation or merger into another corporation, the consummation of a transaction whereby another entity acquires more than 50% of the Company’s outstanding voting stock, or the sale of all or substantially all of its assets, the successor entity must assume in writing all of the obligations to the Series B Warrant holders. Additionally, in the event of a fundamental transaction, each Series B Warrant holder will have the right to require the Company, or its successor, to repurchase the Series B Warrants for an amount of cash equal to the Black-Scholes value of the remaining unexercised portion of such Series B Warrants. During the years ended December 31, 2018 and 2017, 542,478 and 684,131, respectively, Series B Warrants were exercised in full in February 2021.

On March 10, 2020, the Company closed an underwritten public offering under which it issued, as part of units and the exercise of an over-allotment option, 25,367,646 Series C Warrants, each to acquire one share of common stock at an exercise price of $0.68 per share, and 25,367,646 Series D Warrants, each to acquire one share of common stock at an exercise price of $0.68 per share. As of December 31, 2021, 25,306,942 Series C Warrants and 24,354,263 Series D Warrants have been exercised. ThereThe remaining Series C warrants expired on March 10, 2021.

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The Series C Warrants and Series D Warrants are equity classified. The fair value of the Series C Warrants and Series D Warrants on the issuance date was determined using a Black-Scholes Merton model. The unit proceeds were 0then allocated to the Common Stock, Series BA Preferred Stock, Series C Warrants, exercised duringand Series D Warrants, respectively, based on their relative fair values. As a result, the Company determined that a beneficial conversion feature was created by the difference between the effective conversion price of the preferred stock and the fair value of the Company's Common Stock as of the issuance date. The Company therefore recorded a beneficial conversion feature of $0.4 million as a deemed dividend included in additional paid-in capital and an immediate charge to earnings available to common stockholders for the year ended December 31, 2019.

2020.

On May 10, 2017, in connection with the entry into the Innovatus Loan Agreement, the Company issued warrants to Innovatus to purchase shares of the Company’s common stock.  The warrants are issued on the funding date of each tranche and will expire five (5) years from such issue date. The warrants issued in connection with funding of the first tranche will entitle Innovatus to purchase up to 95,750 shares of the Company’s common stock at an exercise price of $13.00 per share. NaNNone of these warrants were exercised as of December 31,2021,2020 or 2019.

On September 12,2017, the Company entered into a service agreement with a third party-party vendor. In connection with the service agreement, the Company issued 73,076 common stock warrants (“Service Warrants”) to purchase shares of the Company’s common stock, with an exercise price of $13.00 per share. The Service Warrants vest as follow: (a) twenty-five percent (25%) on the date of execution of the services agreement; (b) fifty percent (50%) upon completion of hiring the sales team; and (c) the remaining twenty-five percent (25%) upon achieving cumulative product revenue of $15.0 million. The Service Warrants expire ten years from their issue date. The Company concluded that the Service Warrants are considered equity instruments. The fair value of the Service Warrants on the issuance date was determined using a Black-Scholes Merton model. The fair value of the remaining Service Warrants was updated each reporting period and the expense was recorded over the service period. The initial expense of $0.6 million and additional expense of $0.3 million was recognized during the year ended December 31, 2017.  In February 2018, the Company terminated its relationship with the vendor and accelerated the full vesting of the Service Warrants in accordance with the service agreement. The remaining expense of $0.3 million was recognized during the year ended December 31, 2018. During the year ended December 31, 2019 and 2018, 15,385 and 50,000None of these warrants were exercised respectively.

	Number of Warrant Shares			Weighted Average Exercise Price				Weighted Average Remaining Contractual Life (in years)		Weighted Average Fair Value
Outstanding at Outstanding at December 31, 2017	1,012,513			$	14.04			4.5		$	5.07
Exercised	(672,125	)		14.17				0		—
Expired	(7,354	)		21.45				0		—
Outstanding at Outstanding at December 31, 2018	333,034			$	13.39			3.7		$	3.38
Exercised	(15,385	)		13.00				0		—
Reserved for future issuance	1,753,523			1.39				2.2		1.22
Outstanding at Outstanding at December 31, 2019	2,071,172			$	2.05			2.4		$	1.34

during the years ended December 31,2021,2020 or 2019.

		Number of Warrant Shares				Weighted- Average Exercise Price				Weighted- Average Remaining Contractual Life (in years)				Weighted- Average Fair Value
Outstanding at December 31, 2018			333,034				13.39				3.70				3.38
Exercised			(15,385	)			13.00				-				-
Reserve for future issuance			1,753,523				1.39				2.20				1.22
Outstanding at December 31, 2019			2,071,172			$	2.05				2.40			$	1.34
Granted			50,735,292				0.68				2.40				0.19
Exercised			(4,911,764	)			0.68				-				-
Exchanged			(2,040,757	)			1.24				-				-
Reserve for future issuance			644,966				0.35				1.30				0.45
Unvested December 31, 2020			46,498,909			$	0.71				2.40			$	0.20
Exercised			(45,317,101	)			0.68				-				-
Expired			(61,508	)			1.35				-				-
Outstanding at December 31, 2021			1,120,300			$	1.94				3.00			$	0.55

The aggregate intrinsic value of the common stock warrants in the above table was $0.4 million, $0.2 million, and $5.3$0.2 million at December 31, 20192021,2020, and 2018,2019, respectively. The aggregate intrinsic value is before applicable income taxes and is calculated based on the difference between the exercise price of the warrants and the estimated fair market value of the applicable stock as of the respective dates.

17.	Purchase Agreement and Offerings

17.Equity Offerings

At-the-Market Offerings

On August 12, 2019, the Company entered into a Controlled Equity Offering Sales Agreement (the “2019“2019 Sales Agreement”), with Cantor Fitzgerald & Co., (“Cantor”), and commenced an at-the-market offering (the “2019 ATM Offering”) pursuant to which the Company maycould sell from time to time, at its option, up to an aggregate of $25.0 million shares of the Company’s common stock, through Cantor, as sales agent (the “2019agent. The 2019 ATM Offering”). PursuantOffering was completed in February 2020.

On October 9, 2020, the Company filed a prospectus supplement relating to an at-the-market offering with Cantor pursuant to which the Sales Agreement, salesCompany could sell from time to time, at its option, up to an aggregate of the Common Stock were made under the Company’s previously filed and currently effective Registration Statement on Form S-3. The aggregate compensation payable to Cantor was 3.0%$40.0 million of the aggregate gross proceeds from each saleshares of the Company’s common stock.stock, through Cantor as sales agent, pursuant to the 2019 Sales Agreement (the “2020 ATM Offering”). The Company terminated this agreement in January 2021. 

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On May 19, 2021, the Company entered into a Controlled Equity OfferingSales Agreement (the “2021 Sales Agreement”) with Cantor, Robert W. Baird & Co. Incorporated (“Baird”) and Oppenheimer & Co. Inc. (“Oppenheimer”). The Company commenced an at-the-market offering (the “2021 ATM Offering”) pursuant to which the Company could sell from time to time, at its option, up to an aggregate of $100.0 million shares of the Company’s common stock.

The following table summarizes the total sales under the 2019,2020, and 2021 ATM Offerings during the years ended December 31, 2021, 2020 and 2019, respectively (in thousands except for share and per share amounts):

		December 31,
		2021				2020				2019
Total shares of common stock sold			20,237,045				23,008,639				1,374,685
Average price per share		$	1.53			$	0.90			$	5.23
Gross proceeds		$	30,943			$	20,822			$	7,193
Commissions		$	928			$	625			$	212
Net proceeds		$	30,015			$	20,197			$	6,981

Public Offerings of Securities

On March 10, 2020, the Company closed the March 2020 Public Offering and sold an aggregate of 14,121,766 Class A Units at a public offering price of $0.68 per Class A Unit and 7,937,057 Class B Units at a public offering price of $0.68 per Class B Unit. The underwriter for the public offering exercised an overallotment option and purchased 3,308,823 Series C Warrants and 3,308,823 Series D Warrants.

All of the shares of Series A Preferred Stock were converted to 7.9 million shares of common stock by the holders by June 30, 2020. Upon conversion, the Company recorded $0.3 million as a deemed dividend as an immediate charge to earnings available to common stockholders for the year ended December 31, 2020. In accordance with the Series A Preferred Stock Certificate of Designation, the shares of Series A Preferred Stock regained the status of authorized and unissued shares of preferred stock.

The net proceeds to the Company from the March 2020 Public Offering were approximately $13.5 million, after deducting underwriting discounts and commissions and estimated offering expenses payable by the Company. Approximately 4.9 million Series C Warrants were exercised during the year ended December 31, 2020, generating net proceeds of $3.3 million.

On July 6, 2020, the Company completed an underwritten public offering of 42,857,142 shares of its common stock, including the underwriter’s full exercise of an over-allotment option, at the public offering price per share of $0.35 per share, generating net proceeds of approximately $13.6 million. Following the offering, the exercise price of the outstanding Series B Warrants was adjusted to $0.35 per share and the number of shares of common stock underlying such warrants increased to 567,660 shares.

On January 12, 2021, the Company sold in a registered direct offering, 25,000,000 shares of common stock at a purchase price per share of $1.25 for aggregate gross proceeds of $31.25 million, and net proceeds of $28.6 million.

On January 29, 2021, the Company completed an underwritten public offering of 26,545,832 shares of its common stock, including the underwriter’s full exercise of an over-allotment option on February 1, 2021, at the public offering price of $3.00 per share, for aggregate gross proceeds of $79.6 million and net proceeds of approximately $73.4 million.

During the year ended December 31, 2021, the Company issued 45,317,101 shares of common stock upon the exercise of Series B, C, and D warrants for aggregate proceeds of $30.6 million. 

Firm Commitment Offering

On September 4, 2019, the Company entered into an Underwriting Agreement, (the “Underwriting Agreement”)or the Underwriting Agreement, with Cantor (the “Underwriter”).Cantor. Subject to the terms and conditions of the 2019Underwriting Agreement, the Company agreedsold to sell to the Underwriter,Cantor, in a firm commitment underwritten offering, 2,153,846 shares of the Company’s common stock (the “Firm Commitment Offering”).stock. In addition, the Company granted the UnderwriterCantor a 30-day30-day option to purchase 323,077 of additional shares of common stock. The 30-dayCompany raised $18.8 million in gross proceeds under this offering during the year ended December 31, 2019. The option was not exercised.

The following table summarizes the total sales under the ATM Offering and Firm Commitment Offering for the period indicated (in thousands except for share and per share amounts):

					Firm Commitment
	ATM Offering				Offering
	For the year ended				For the year ended				Total
	December 31, 2019				December 31, 2019				December 31, 2019
Total shares of common stock sold	1,374,686				2,153,846				3,528,532
Average price per share	$	5.23			$	8.73			$	7.37
Gross proceeds	$	7,193			$	18,796			$	25,989
Commissions earned by Cantor	212				—				212
Net Proceeds	$	6,981			$	18,796			$	25,777

On December 28, 2018, the Company entered into an At-the-Market Equity Offering Sales Agreement (the “2018 Sales Agreement”) with Stifel, Nicolaus & Company, Incorporated ("Stifel") as sales agent, pursuant to which the Company could sell through Stifel, from time to time, up to $75.0 million inpurchase additional shares of common stock in an at-the-market offering. The Company was not exercised.

18.Basic and Diluted Net Loss per Share

Basic net loss per common share is computed by dividing net loss attributable to pay Stifel a commissioncommon stockholders by the weighted average number of approximately 3%common shares outstanding during the period. Diluted net loss per common share is computed giving effect to all potential dilutive common shares that were outstanding during the period when the effect is dilutive. Potential dilutive common shares consist of incremental shares issuable upon exercise of stock options, restricted stock units, warrants and preferred stock. For the year ended December 31, 2020, the effects of the aggregate gross proceeds received from all sales of common stock under the 2018 Sales Agreement. Effective August 12, 2019, the Company terminated the 2018 Sales Agreement. The Company sold 0 shares of its common stock under the Stifel Sales Agreement.

On April 28, 2017, the Company sold 24.9 million units, each consisting of approximately 0.077 shares of the Company’s common stock, a Series A warrantPreferred Stock beneficial conversion charge and conversion are included in the calculation of net loss attributable to purchase approximately 0.077common stockholders. In computing diluted net loss per share for the years ended December 31, 2021, 2020, and 2019,no adjustments have been made to the weighted average outstanding common shares of Common Stock with an exercise price of $13.00 per share,

and a Series B warrant to purchase approximately 0.058 shares of common stock with an exercise price of $13.00 per Unit for aggregate gross proceeds of $24.9 million in an underwritten firm commitment public offering. Net proceeds after issuance costs were $23.2 million, assuming noas the assumed exercise of the warrants. The closingoutstanding options, warrants and restricted stock units would be anti-dilutive.

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Contents

Potential common shares not included in calculating diluted net loss per share are as follows:

		December 31,				December 31,				December 31,
		2021				2020				2019
Stock options			4,640,660				4,361,872				1,830,958
Stock warrants			1,120,300				46,498,909				2,071,172
Nonvested restricted stock units			3,839,030				2,959,099				443,927
Total			9,599,990				53,819,880				4,346,057

18.    

19.Restructuring

During the fourth quarter of 2019, the Company announced the implementation of a restructuring plan to reduce operating expenses as the Company continues the global market development of the Senhance platform. Under the restructuring plan, the Company reduced headcount primarily in the sales and marketing functions and determined that the carrying value of its inventory exceeded the net realizable value due to a decrease in expected sales. The restructuring charges amounted to $8.8 million, of which $7.4 million was an inventory write down and was included in cost of product revenue and $1.4 million related to employee severance costs and was included as restructuring and other charges in the consolidated statements of operations and comprehensive loss, for the year ended December 31, 2019. Future paymentsDuring the year ended December 31, 2020, the Company continued the restructuring efforts with additional headcount reductions which resulted in $0.9 million related to severance costs. Payments under the restructuring plan are expected to concludeconcluded in 2020 and total $0.9 million.2020. During the year ended December 31, 2019, 2020, the activity related to the Company's restructuring liability, which is included in accrued expenses in the consolidated balance sheet, was as follows:

		Restructuring Liability
		(In thousands)
Balance at December 31, 2019		$	882
Amount charged to operating expenses			851
Cash payments			(1,733	)
Balance at December 31, 2020		$	0

		Restructuring Liability
		(In thousands)
Balance at December 31, 2018		$	—
Amount charged to operating expenses		1,374
Cash payments		(492		)
Balance at December 31, 2019		$	882

19.    Basic

20.Commitments and Diluted Net Loss per Share

Basic net loss per common share is computed by dividing net loss attributableContingencies

Legal Proceedings

No liability or related charge was recorded to common stockholders byearnings in the weighted average number of common shares outstanding during the period. Diluted net loss per common share is computed giving effect to all dilutive potential common shares that were outstanding during the period. Diluted potential common shares consist of incremental shares issuable upon exercise of stock options, warrants and restricted stock units. No adjustments have been made to the weighted average outstanding common shares figuresCompany’s consolidated financial statements for legal contingencies for the years ended December 31, 2019 or 2018 as the assumed exercise of outstanding options, warrants2021, 2020 and restricted stock units would be anti-dilutive.

Potential common shares not included2019.

License and Supply Agreements

As discussed in calculating diluted net loss per share are as follows:

	December 31
	2019			2018
Stock options	1,830,958			1,529,964
Stock warrants	2,071,172			333,034
Nonvested restricted stock units	443,927			382,098
Total	4,346,057			2,245,096

20.	Related Person Transactions

A member of the Company’s Board of Directors is an executive officer of Synecor, LLC. Various research and development services were purchased by Note 3, in September 2015, the Company from Synecor, LLCcompleted the Senhance Acquisition. As part of this transaction, the Company assumed certain license and its wholly owned subsidiary Synchrony Labs LLC. These purchases were approved by the Audit Committee and totaled approximately $0 and $24,000supply agreements. The Company has placed orders with various suppliers for the years ended December 31, 2019purchase of certain tooling, supplies and 2018, respectively.

A member ofcontract engineering and research services. Commitments under these agreements amount to approximately $2.3 million in 2022, $0.1 million in 2023, and $0.2 million in 2024 when the Company's Board of Directors is an executive officer of Sofar S.p.A. Various equipment was purchased by the Company from Sofar S.p.A. and totaled approximately $26,000 and $0 for the years ended December 31, 2019 and 2018, respectively.agreements terminate.

21.Related Person Transactions

In March 2018, TransEnterixAsensus Surgical Europe S.à.r.l entered into a Service Supply Agreement with 1 Med S.A. for certain regulatory consulting services. Andrea Biffi, a current member of the Company’s Board of Directors, owns a non-controlling interest in 1 Med S.A. Expenses under the Service Supply Agreement were approximately $12,000$186,000, $110,000, and $71,000$12,000 for the years ended December 31, 20192021, 2020 and 2018,2019, respectively.

ITEM 9.
21.	Commitments and Contingencies

Contingent Consideration

As discussed in Note 3, in September 2015, the Company completed the Senhance Acquisition using a combination of cash, stock and potential post-acquisition milestone payments. These milestone payments may be payable in the future, depending on the achievement of certain commercial milestones. On December 30, 2016, the Company entered into an Amendment to restructure the terms of the Second Tranche of the Cash Consideration. Under the Amendment, the Second Tranche was restructured to reduce the contingent cash consideration by €5.0 million in exchange for the issuance of 286,360 shares of the Company’s common stock with an aggregate fair market value of €5.0 million.  As of December 31, 2019, the fair value of the contingent consideration was $1.1 million.

Legal Proceedings 

When determining the estimated probable loss or range of losses, significant judgment is required to be exercised in order to estimate the amount and timing of the loss to be recorded.  Estimating an amount or range of possible losses resulting from litigation proceedings is inherently difficult and requires an extensive degree of judgment, particularly where the matters involve indeterminate claims for monetary damages, are in the early stages of the proceedings, and are subject to appeal.  In addition, because most legal proceedings are resolved over extended periods of time, potential losses are subject to change due to, among other things, new developments, changes in legal strategy, the outcome of intermediate procedural and substantive rulings and other parties’ settlement posture and their evaluation of the strength or weakness of their case against the Company.  For these reasons, the Company is currently unable to predict the ultimate timing or outcome of, or reasonably estimate the possible losses or a range of possible losses resulting from, the matters described above. Based on information currently available, the Company does not believe that any reasonably possible losses arising from currently pending legal matters will be material to the Company’s results of operations or financial condition. However, in light of the inherent uncertainties involved in such matters, an adverse outcome in one or more of these matters could materially and adversely affect the Company’s financial condition, results of operations or cash flows in any particular reporting period.

NaN liability or related charge was recorded to earnings in the Company’s consolidated financial statements for legal contingencies for the years ended December 31, 2019 and 2018.

Operating Leases

On November 2, 2009, TransEnterix Surgical entered into an operating lease for its corporate offices for a period of five years commencing in April 2010. On June 12, 2014, the Company entered into a lease amendment extending the term of the lease for a period of 3 years and 2 months commencing on May 1, 2015 and expiring on June 30, 2018, with an option to renew for an additional three years. On January 8, 2018, the Company entered into a lease amendment extending the term of the lease for a period of eighteen months commencing on July 1, 2018 and expiring on December 31, 2019, with an option to renew for an additional five years. On June 10, 2019, the Company entered into a lease amendment extending the term of the lease for an additional twelve months commencing on January 1, 2020 and expiring on December 31, 2020, with no option to renew. On October 25, 2013, the Company entered into an operating lease for its warehouse for a period of four years and four months commencing in January 2014, with an option to renew for an additional six years. On December 27, 2017, the Company entered into an agreement to terminate this lease effective January 31, 2018. On May 12, 2016, TransEnterix Italia entered into an operating lease for research and development and demonstration facilities for a period of six years commencing in July 2016. On April 15, 2019, TransEnterix Israel entered into an operating lease for research and development facilities for a period of five years commencing in April 2019. On April 25, 2018, TransEnterix Japan entered into an operating lease for office space for a period of five years commencing in April 2018. On July 1, 2018, TransEnterix Europe S.à.R.L entered into an operating lease for office space for a period of five years commencing in July 2018. Rent expense was approximately $1.4 million and $1.2 million for the years ended December 31, 2019 and 2018, respectively.

License and Supply Agreements

As discussed in Note 3, in September 2015, the Company completed the Senhance Acquisition. As part of this transaction, the Company assumed certain license and supply agreements. Commitments under these agreements amount to approximately  $5.5 million in 2020, $0.6 million in 2021, $0.6 million in 2022, $0.6 million in 2023, $0.6 million in 2024, and $1.1 million thereafter until termination in 2027.

The Company has placed orders with various suppliers for the purchase of certain tooling, supplies and contract engineering and research services. Each of these orders has a duration or expected completion within the next twelve months.

22.     Subsequent Events

Series B Warrant Exchange

On February 24, 2020, the Company entered into a Series B Warrants Exchange Agreement (the “Exchange Agreement”) with holders of its Series B Warrants. Under the terms of the Exchange Agreement, each Series B Warrant was canceled in exchange for 0.61 shares of common stock. The Warrant holders participating in the exchange held 3,373,900 of the 3,638,780 Series B Warrants then outstanding, and received an aggregate of 2,040,757 shares of common stock, leaving 264,880 Series B Warrants outstanding to acquire 160,226 shares of common stock. The number of shares of common stock subject to the outstanding Series B Warrants increased to 292,178 shares as a result of the adjustment made following the 2020 Public Offering.

Lincoln Park Capital Purchase Agreement

On February 10, 2020, the Company entered into a Purchase Agreement with Lincoln Park Capital Fund, LLC, an Illinois limited liability company, pursuant to which the Company has the right to sell to Lincoln Park up to an aggregate of $25,000,000 in shares of common stock over the 36-month term of the Purchase Agreement, subject to certain limitations and conditions set forth in the Purchase Agreement. In consideration for entering into the Purchase Agreement, the Company issued to Lincoln Park 343,171 shares of common stock as commitment shares on February 10, 2020. No shares have been sold to Lincoln Park under the Purchase Agreement to date.

Public Offering of Securities

On March 10, 2020, the Company closed an underwritten public offering (the "2020 Public Offering") with Ladenburg Thalmann & Co. Inc. as underwriter and sold an aggregate of 14,121,766 Class A Units at a public offering price of $0.68 per Class A Unit and 7,937,057 Class B Units at a public offering price of $0.68 per Class B Unit. Each Class A Unit consists of one share of the Company’s common stock, one warrant to purchase one share of common stock that expires on the first anniversary of the date of issuance (collectively, the “Series C Warrants”), and one warrant to purchase one share of common stock that expires on the fifth anniversary of the date of issuance (collectively, the “Series D Warrants”). Each Class B Unit consists of one share of Series A Convertible Preferred Stock, par value $0.01 per share (the “Series A Preferred Stock”), convertible into one share of common stock, a Series C Warrant to purchase one share of Common Stock and a Series D Warrant to purchase one share of Common Stock. The Class A Units and Class B Units have no stand-alone rights and were not certificated or issued as stand-alone securities. The shares of common stock, Series A Preferred Stock, Series C Warrants and Series D Warrants are immediately separable. In addition, the underwriter for the public offering exercised an overallotment option allowing them to purchase 3,308,823 Series C Warrants and 3,308,823 Series D Warrants.

The net proceeds to the Company from the 2020 Public Offering were approximately $13.4 million, after deducting underwriting discounts and commissions and estimated offering expenses payable by the Company.

At-The-Market Offering

The following table summarizes the total sales under the 2019 Sales Agreement for the period commencing January 1, 2020 through the date of this filing (in thousands except for per share amounts):

Total shares of common stock sold	6,688
Average price per share	$	1.73
Gross proceeds	$	11,558
Commissions earned by Cantor	$	347
Net Proceeds	$	11,211

Restructuring

During March 2020, the Company continued the restructuring efforts with additional headcount reductions which resulted in $0.8 million related to severance costs. These 2020 severance costs are primarily expected to be paid in 2020 and 2021.

ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9.A.
ITEM 9.A.	CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2019.2021. We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow for timely decisions regarding required disclosure. Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2019, due to the material weakness in our internal control over financial reporting described below,2021, our disclosure controls and procedures were ineffective.effective at a reasonable assurance level.

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Management’s Report on Internal Control Over Financial Reporting

We are responsible for establishing and maintaining adequate internal control over financial reporting. As defined in the securities laws, internal control over financial reporting is a process designed by, or under the supervision of, our principal executive and principal financial officer and effected by our Board of Directors, management, and other personnel, 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 and includes those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the acquisitions 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 our receipts and expenditures are being made only in accordance with authorizations of 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 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.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

For the year ended December 31, 2019,2021, pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, management (with the participation of our principal executive officer and principal financial officer) conducted an evaluation of the effectiveness of our internal control over financial reporting, based on the original framework established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on that assessment,this evaluation, management concluded that, as of December 31, 2019,2021, our internal control over financial reporting was not effective because a material weakness existed in our internal controls related to the Company’s income tax process. Specifically, we did not maintain effective controls over the documentation and review relating to the income tax accounting and disclosures for the significant components of deferred tax assets and liabilities related to a foreign non-recurring transaction. The Company’s management has concluded that this control deficiency constitutes a material weakness as of December 31, 2019.

Based on this finding, management is implementing a remediation plan to address the control deficiency that led to the material weakness. The remediation plan includes enhancing specific review procedures over the income tax provision and related disclosures, including strengthening the Company’s documentation standards, technical oversight and training.

effective.

The Company’s independent registered public accounting firm, BDO USA, LLP, audited the effectiveness of the Company’s internal control over financial reporting as of December 31, 2019.2021. BDO USA, LLP’s report on the effectiveness of the Company’s internal control over financial reporting as of December 31, 20192021 is set forth herein and contains an adverse opinion.

herein.

Changes in Internal Controls Over Financial Reporting

Except for the material weakness identified above, there

There were no changes in the Company’s internal control over financial reporting during the quarter ended December 31, 20192021 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

ITEM 9.B.
ITEM 9.B.	OTHER INFORMATION

None.

ITEM 9.C.

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

As part of the Company’s restructuring program initiated in November 2019 and continued into the first quarter of 2020, the Company determined that it would eliminate the role of Chief Commercial Officer effective March 31, 2020. Eric Smith, the current Chief Commercial Officer is party to an Employment Agreement, dated August 15, 2018 with the Company (the “Employment Agreement”). The elimination by the Company of the Chief Commercial Officer role is a termination without cause by the Company under the Employment Agreement, entitling Mr. Smith to receive, for nine months following the date of termination a monthly amount equal to one-twelfth of his annual base salary in effect as of March 13, 2020, plus the target bonus for 2020, and continued provision of health care benefits for nine months. In addition, the short-term retention bonus awarded to Mr. Smith in November 2019 vested and was earned as of March 6, 2020 and will be paid to Mr. Smith by April 30, 2020. Mr. Smith is providing the Company a release of claims and will continue to be subject to the non-competition, non‑solicitation and confidentiality and inventions disclosure provisions of the Employment Agreement. The Company and Mr. Smith are entering into a Separation and Release Agreement to memorialize these understandings.

None.

PART III

ITEM 10.
ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE.

The information required by this item is incorporated by reference from the information contained in our Proxy Statement for the Annual Meeting of Shareholders expected to be filed with the SEC on or prior to April 29, 2020.

May 2, 2022.

ITEM 11.
ITEM 11.	EXECUTIVE COMPENSATION.

The information required by this item is incorporated by reference from the information contained in our Proxy Statement for the Annual Meeting of Shareholders expected to be filed with the SEC on or prior to April 29, 2020.

May 2, 2022.

ITEM 12.
ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

The information required by this item is incorporated by reference from the information contained in our Proxy Statement for the Annual Meeting of Shareholders expected to be filed with the SEC on or prior to April 29, 2020.May 2, 2022.

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Securities Authorized for Issuance Under Equity Compensation Plans.

The Company currently has one equity compensation plan under which it makes awards, the TransEnterix,Asensus Surgical, Inc. Amended and Restated Incentive Compensation Plan (the “Plan”). The Plan was originally approved by the Board of Directors of the Company, or the Board, and adopted by the majority of our stockholders on November 13, 2007. The Plan was subsequently amended, approved by the Board, and approved by stockholders as follows:

No.
No.	Amendment Purpose	Date of Stockholders’ approval
1	increase the number of shares of common stock authorized under the Plan to 918,462 shares, and to make other changes	May 7, 2015
2	increase the number of shares reserved for issuance under the Plan to 1,456,923 shares, and to make other changes	June 8, 2016
3	increase the number of shares reserved for issuance under the Plan to 1,995,385 shares	May 25, 2017
4	increase the number of shares reserved for issuance under the Plan to 3,149,231 shares	May 24, 2018
5	increase the number of shares reserved for issuance under the Plan to 4,072,308 shares, and to make other changes	April 24, 2019
6	increase the number of shares reserved for issuance under the Plan to 10,072,307 shares, and to make other changes	June 8, 2020
7	Increase the number of shares reserved for issuance under the Plan to 32,072,307 shares.	July 22, 2021

The Plan is used for plan-based awards for officers, other employees, consultants, advisors and non-employee directors. In connection with the 2013 merger transaction with SafeStitch Medical, Inc., or the Merger, we assumed all of the options that were issued and outstanding immediately prior to the Merger as issued by TransEnterixAsensus Surgical US, Inc., and adjusted based on the Merger at the exchange ratio, which are now exercisable for approximately 32,590 shares of common stock. Such options were granted under the TransEnterix, Inc. 2006 Stock Plan (the “2006 Plan”) which was assumed by the Company in the Merger. The 2006 Plan is maintained solely for the purpose of the stock options granted under such 2006 Plan that remain outstanding; no future awards are authorized to be made under the 2006 Plan.

The following table gives information about the Company’s common stock that may be issued upon the exercise of options and other equity awards as of December 31, 2019:

Plan Category	Number of securities to be issued upon exercise of outstanding options (1)			Weighted average exercise price of outstanding options			Number of securities remaining available for future issuance (2)
Equity compensation plans approved by security holders	2,242,295			30.84			1,340,527
Equity compensation plans not approved by security holders (3)	32,590			23.71			0
Total	2,274,885						1,340,527

2021:

Plan Category		Number of securities to be issued upon exercise of outstanding options and other equity awards (1)				Weighted average exercise price of outstanding options				Number of securities remaining available for future issuance (2)
Equity compensation plans approved by security holders			8,298,442				6.85				20,755,273
Equity compensation plans not approved by security holders (3)			186,058				0.49				0
Total			8,484,500								20,755,273

_____________________________

(1)
(1)	Includes 1,798,3684,488,795 shares underlying outstanding stock options awarded under the Plan and 443,9273,809,647 restricted stock units awarded under the Plan.

(2)
(2)	These shares are all available for future awards under the Plan.

(3)
(3)	Represents 32,5903,000 shares underlying outstanding stock options awarded prior to the Merger under the 2006 Plan and assumed in the Merger.Merger and 183,000 shares underlying outstanding stock options, restricted stock units, and performance-based restricted stock units issued as an employment inducement grant as an exception to the NYSE American stockholder approval rules.

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ITEM 13.
ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

The information required by this item is incorporated by reference from the information contained in our Proxy Statement for the Annual Meeting of Shareholders expected to be filed with the SEC on or prior to April 29, 2020.

May 2, 2022.

ITEM 14.
ITEM 14.	PRINCIPAL ACCOUNTING FEES AND SERVICES.

The information required by this item is incorporated by reference from the information contained in our Proxy Statement for the Annual Meeting of Shareholders expected to be filed with the SEC on or prior to April 29, 2020.

May 2, 2022.

PART IV

ITEM 15.
ITEM 15.	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a).

(a). (1)	(1) The following consolidated financial statements are filed as a part of this Annual Report:

	Page
Consolidated Financial Statements :
Reports of Independent Registered Public Accounting Firm	5055
Consolidated Balance Sheets as of December 31, 20192021 and 20182020	5350
Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 20192021, 2020 and 20182019	5451
Consolidated Statements of  Stockholders’ Equity for the years ended December 31, 20192021, 2020 and 20182019	5552
Consolidated Statements of Cash Flows for the years ended December 31, 20192021, 2020 and 20182019	5653

(2)	Consolidated Financial Statement Schedules: The information required by this item has been omitted in this report because they are not applicable, not required under these instructions, or included in the consolidated financial statements or related notes thereto contained in Item 8 of this Annual Report.

(3)	Exhibits: The following exhibits are filed as part of, or incorporated by reference into, this Annual Report.

Exhibit No.		Description
2.1		Membership Interest Purchase Agreement, dated September 18, 2015, by and among Sofar S.p.A., Vulcanos S.r.l., the Registrant and TransEnterix International, Inc. filed as Exhibit 2.1 to our Current Report on Form 8-K, filed with the SEC on September 21, 2015 and incorporated by reference herein).
2.1(a)		Amendment to Membership Interest Purchase Agreement by and among TransEnterix, Inc., TransEnterix International, Inc., and Sofar, S.p.A., dated December 30, 2016 (filed as Exhibit 10.1 to our Current Report on Form 8-K, filed with the SEC on January 5, 2017 and incorporated by reference herein).
3.1 3.1.1		Amended and Restated Certificate of Incorporation of TransEnterix,Asensus Surgical, Inc. (filed as Exhibit 3.1 to our Current Report on Form 8-K, filed with the SEC on December 9, 2013February 25, 2021 and incorporated by reference herein).
3.1.1 3.1.2		Certificate of Amendment to the Amended and Restated Certificate of Incorporation of TransEnterix, Inc. (filed as Exhibit 3.1 to our Current Report on Form 8-K filed with the SEC on April 1, 2014 and incorporated herein by reference).
3.1.2		Certificate of Amendment to the Amended and Restated Certificate of Incorporation of TransEnterix, Inc. (filed as Exhibit 3.1 to our Current Report on Form 8-K filed with the SEC on December 11, 2019 and incorporated herein by reference).
3.1.3		Form of Certificate of Designation of Preferences, Rights and Limitations of Series A Preferred Stock (filed as Exhibit 3.1 to our Current Report on Form 8-K filed with the SEC on March 6, 2020 and incorporated herein by reference).
3.2		Amended and Restated Bylaws of TransEnterix,Asensus Surgical, Inc. (filed as Exhibit 3.2 to our Current Report on Form 8-K,8‑K, filed with the SEC on December 9, 2013February 25, 2021 and incorporated by reference herein).
4.1		Specimen Certificate for Common Stock of TransEnterix,Asensus Surgical, Inc. (filed as(incorporated by reference to Exhibit 4.1 to the Registrant’s Registration Statementour Annual Report on Form S-3, File No. 333-236200, filed with10-K for the SEC on Januaryyear ended December 31, 2020 and incorporated by reference herein)2020).
4.2		Form of Warrant to Purchase Common Stock for warrants issued to Oxford Finance LLC and Silicon Valley Bank (filed as Exhibit 4.1 to our Current Report on Form 8-K, filed with the SEC on September 30, 2014 and incorporated by reference herein).
4.3		Form of Series B Warrant (filed as Exhibit 4.2 to our Current Report on Form 8-K, filed with the SEC on April 28, 2017 and incorporated by reference herein).
4.4		Form of Warrant to Purchase Stock for warrants issued to Innovatus Life Sciences Lending Fund I, LP (filed as Exhibit 4.1 to our Current Report on Form 8-K, filed with the SEC on May 10, 2017 and incorporated by reference herein).

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4.5		Form of Service Warrant to purchase common stock for warrants issued to third party vendor (filed as Exhibit 4.4 to our Quarterly Report on Form 10-Q, filed with the SEC on November 9, 2017 and incorporated by reference herein).
4.6		Form of Common Stock Purchase Warrant (Series C and Series D Warrants) (filed as Exhibit 4.1 to our Current Report on Form 8-K, filed with the SEC on March 6, 2020 and incorporated herein by reference).

Exhibit No. 4.7		Description
4.7		Form of Warrant Agency Agreement by and between the Registrant and Continental Stock Transfer & Trust Company (filed as Exhibit 4.2 to our Current Report on Form 8-K, filed with the SEC on March 6, 2020 and incorporated herein by reference).
4.8* 4.8		Description of Listed Securities (filed as Exhibit 4.8 to our Annual Report on Form 10-K, filed with the SEC on March 11, 2021 and incorporated herein by reference).
10.1 +		Employment Agreement, dated March 6, 2018, and effective as of March 1, 2018, by and between the Registrant and Anthony Fernando (filed as Exhibit 10.7 to our Annual Report on Form 10-K, filed with the SEC on March 8, 2018 and incorporated by reference herein).
10.2 + 10.2+		Employment Agreement, dated August 15, 2018, and effective as of August 31, 2018,14, 2020, by and between Asensus Canada, Inc., on behalf of the Registrant, and Eric Smith.
10.3.1 +		Amended and Restated Employment Agreement, dated March 6, 2018, and effective as of March 1, 2018, by and between the Registrant and Todd M. PopeShameze Rampertab (filed as Exhibit 10.510.1 to our AnnualCurrent Report on Form 10-K,8-K/A, filed with the SEC on March 8, 2018August 14, 2020 and incorporated by reference herein).
10.3.2 + 10.2.1+		SeparationAmendment to Employment Agreement, and General Release, dated November 8, 2019,September 16, 2020, by and between Asensus Canada, Inc., on behalf of the Registrant, and Todd M. PopeShameze Rampertab (filed as Exhibit 10.610.1.2 to our Quarterly ReportRegistration Statement on Form 10-Q,S-8, filed with the SEC on November 12, 2019 and incorporated herein by reference).
10.4.1 +		Employment Agreement, dated March 6, 2018, and effective as of March 1, 2018, by and between the Registrant and Joseph P. Slattery (filed as Exhibit 10.6 to our Annual Report on Form 10-K, filed with the SEC on March 8, 20182020 and incorporated by reference herein).
10.4.2+ 10.3 +		Transition Agreement, dated October 17, 2019, by and between the Registrant and Joseph P. Slattery (filed as Exhibit 10.5 to our Quarterly Report on Form 10-Q, filed with the SEC on November 12, 2019 and incorporated herein by reference).
10.5 +		TransEnterix, Inc. 2006 Stock Plan, as amended on November 29, 2011 (filed as Exhibit 4.4 to the Registrant’s Registration Statement on Form S-8 (File No. 333-191011), filed with the SEC on September 5, 2013 and incorporated by reference herein).
10.6 10.4 +		TransEnterix, Inc.Asensus Surgical Amended and Restated Incentive Compensation Plan, as amended and restated effective April 24, 2019 (filed asJuly 22, 2021 (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K, filed with the SEC on April 26, 2019 and incorporated by reference herein)July 23, 2021).
10.7 10.4.1 + *		Form of Employee Stock Option Award Notice
10.4.2 + *		Form of Employee Restricted Stock Unit/Performance Restricted Stock Unit Award Notice
10.4.3 +		Form of EmployeeNon-Employee Director Stock Option Agreement pursuant to the Plan (filed as Exhibit 10.1510.4.5 to our Annual Report on Form 10-K, for the year ended December 31, 2013, filed with the SEC on March 5, 201411, 2021 and incorporated herein by reference herein)reference).
10.8 10.4.4 +		Form of Employee Stock Option Agreement (performance stock options) pursuant to the Plan (filed as Exhibit 10.16 to our Annual Report on Form 10-K for the year ended December 31, 2013, filed with the SEC on March 5, 2014 and incorporated by reference herein).
10.9 +		Form of Non-Employee Stock Option Agreement pursuant to the Plan (filed as Exhibit 10.17 to our Annual Report on Form 10-K for the year ended December 31, 2013, filed with the SEC on March 5, 2014 and incorporated by reference herein).
10.10 +		Form ofDirector Restricted Stock Unit Agreement pursuant to the Plan (filed as Exhibit 10.1810.4.6 to our Annual Report on Form 10-K, for the year ended December 31, 2013, filed with the SEC on March 5, 201411, 2021 and incorporated herein by reference herein)reference).
10.11 ++ 10.4.5 +		Form of Non-Employee Director Other Stock Award Agreement (filed as Exhibit 10.4.5 to our Annual Report on Form 10-K, filed with the SEC on March 11, 2021 and incorporated herein by reference).
10.4.6 +		Form of Non-Employee Director Stock Option Grant in Lieu of Cash Retainer (filed as Exhibit 10.4.7 to our Annual Report on Form 10-K, filed with the SEC on March 11, 2021 and incorporated herein by reference).
10.5+ *		Non-Qualified Deferred Compensation Plan, adopted December 8, 2021
10.6 ++		License Contract between the European Union and Vulcanos S.r.l. (now known as TransEnterixAsensus Surgical Italia S.r.l.), dated September 18, 2015 (filed as Exhibit 10.5 to our Quarterly Report on Form 10-Q, filed with the SEC on November 9, 2015 and incorporated by reference herein).
10.12 10.6.1 +++*		Amendment to License Contract between the European Union and Asensus Surgical Italia S.r.l., effective July 2, 2021
10.6		Amended and Restated AutoLap System Sale Agreement, dated October 15, 2019, by and between the Registrant and Great Belief International Limited (filed as Exhibit 10.1 to our Current Report on Form 8-K, filed with the SEC on October 17, 2019)2019 and incorporated by reference herein).
10.13 10.7+++		Loan and Security Agreement, dated May 23, 2018, with the several banks and other financial institutions or entities from time to time party to the Loan Agreement as Lenders and Hercules Capital, Inc., as administrative agent and collateral agent (filed as Exhibit 10.1 to our Quarterly Report on Form 10-Q, filed with the SEC on August 7, 2018 and incorporated by reference herein).
10.13.1 10.7.1+++		First Amendment to Loan and Security Agreement, dated May 7, 2019, with the several banks and other financial institutions or entities from time to time party to the Loan Agreement as Lenders and Hercules Capital, Inc., as administrative agent and collateral agent (filed as Exhibit 10.2 to our Quarterly Report on Form 10-Q, filed with the SEC on May 9, 2019 and incorporated by reference herein).

Exhibit No. 10.7.2		Description
10.13.2		Consent and Second Amendment to Loan and Security Agreement, dated July 10, 2019, with the several banks and other financial institutions or entities from time to time party to the Loan Agreement as Lenders and Hercules Capital, Inc., as administrative agent and collateral agent ((filed as Exhibit 10.2 to our Quarterly Report on Form 10-Q, filed with the SEC on August 8, 2019 and incorporated by reference herein).
10.14 10.8 +		TransEnterix, Inc.Asensus Surgical Non-Employee Director Compensation Program,Plan effective May 24, 2018 (filed asJuly 1, 2021 (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K, filed with the SEC on May 29, 2018 and incorporated by reference herein)April 30, 2021).
10.15 10.9		Lock-UpForm of Series B Warrants Exchange Agreement dated October 31, 2018, by and betweenFebruary 28, 2020, among TransEnterix, Inc. and MST Medical Surgery Technologies Ltd.the Series B Warrant holders signatory thereto (filed as Exhibit 10.1 to our Current Report on Form 8-K filed with the SEC on November 1, 2018 and incorporated by reference herein).
10.16		Registration Rights Agreement, dated October 31, 2018, by and between TransEnterix, Inc. and MST Medical Surgery Technologies Ltd. (filed as Exhibit 10.2 to our Current Report on Form 8-K filed with the SEC on November 1, 2018 and incorporated by reference herein).
10.17		Purchase Agreement by and between TransEnterix, Inc. and Lincoln Park Capital, LLC dated February 10, 2020 (filed as Exhibit 10.1 to ourRegistrant’s Current Report on Form 8-K, filed with the SEC on February 10,25, 2020 and incorporated by reference herein).

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10.18 10.10		Offer Letter,Promissory Note, dated December 17, 2019, to Brett FarabaughApril 18, 2020, by and between TransEnterix, Inc. and City National Bank, a national banking association (filed as Exhibit 10.1 to ourthe Registrant’s Current Report on Form 8-K, filed with the SEC on April 28, 2020 and incorporated by reference).
10.11		Form of Securities Purchase Agreement dated January 12, 2021, by and among the Registrant and the Purchasers (filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K, filed with the SEC on January 3, 202014, 2021 and incorporated by reference herein)reference).
21.1 *		Subsidiaries of the Registrant.
23.1 *		Consent of BDO USA, LLP.
31.1 *		Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a).
31.2 *		Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a).
32.1 *		Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 *		Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS *		Inline XBRL Instance Document.
101.SCH *		Inline XBRL Taxonomy Extension Schema Document.
101.CAL *		Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF *		Inline XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB *		Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE *		Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104		The cover page from the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, formatted in Inline XBRL (included in Exhibit 101).

+	A management contract, compensatory plan or arrangement required to be separately identified.
++	Confidential treatment has been granted for certain portions of the agreement pursuant to a confidential treatment request filed with the Commission on November 9, 2015. Such provisions have been filed separately with the Commission.
* +++	Filed herewith.

	Portions of this exhibit have been omitted because the information is not material and would likely cause competitive harm if publicly disclosed.
*	Filed herewith.

ITEM 16.

FORM 10-K SUMMARY.

Registrants may voluntarily include a summary of information required by Form 10-K under this Item 16. The Company has elected not to include such summary information.

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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.

February 28, 2022
March 16, 2020	TransEnterix, Asensus Surgical, Inc.
	By:	/s/ Anthony Fernando
		Anthony Fernando
		President, Chief Executive Officer
		and a Director
		(principal executive officer)

POWER OF ATTORNEY

We, the undersigned officers and directors of TransEnterix,Asensus Surgical, Inc., hereby severally constitute and appoint Anthony Fernando and Brett Farabaugh,Shameze Rampertab, our true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution in him for him and in his name, place and stead, and in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as full to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, may lawfully 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 by the following persons on behalf of the Registrant in the capacities and on the dates indicated.

Signature		Title(s)		Date
/s/ Anthony Fernando		President, Chief Executive Officer and a Director		February 28, 2022
Anthony Fernando		(principal executive officer)		March 16, 2020
Anthony Fernando
/s/ Brett FarabaughShameze Rampertab		Interim Executive Vice President and Chief Financial Officer		February 28, 2022
Shameze Rampertab		(principal financial officer and principal accounting officer)		March 16, 2020
Brett Farabaugh
/s/ Paul A. LaVioletteDavid B. Milne		Chairman of the Board and a Director		March 16, 2020 February 28, 2022
Paul A. LaViolette David B. Milne
/s/ Andrea Biffi		Director		March 16, 2020 February 28, 2022
Andrea Biffi
/s/ Jane H. Hsaio		Director		March 16, 2020 February 28, 2022
Jane H. Hsaio, Ph.D.
/s/ William N. KelleyKevin Hobert		Director		March 16, 2020 February 28, 2022
William N. Kelley, M.D. Kevin Hobert
/s/ David B. MilneElizabeth Kwo, M.D.		Director		March 16, 2020February 28, 2022
David B. Milne Elizabeth Kwo, M.D.
/s/ Richard C. Pfenniger, Jr.		Director		February 28, 2022
Richard C. Pfenniger, Jr.
/s/ Richard C. Pfenniger,William N. Starling, Jr.		Director		March 16, 2020 February 28, 2022
Richard C. Pfenniger, William N. Starling, Jr.
/s/ William N. Starling, Jr.		Director		March 16, 2020
William N. Starling, Jr.

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