UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 20212022
OR
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ____________to
Commission File Number 0-19437
ASENSUSASENSUS SURGICAL, INC.
(Exact name of registrant as specified in its charter)
Delaware | ||
| 11-2962080 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
1 TW Alexander Drive, Suite 160, Durham, NC 27703
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (919) 765-8400
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
| Accelerated Filer | ☐ | |
Non-accelerated filer |
| Smaller reporting company |
| |
Emerging Growth Company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes ☐ No ☒
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading symbol | Name of each exchange on which registered | ||
Common Stock | ASXC | NYSE American |
The number of shares outstanding of the registrant’s common stock, as of May 7, 2021April 29, 2022 was 233,186,653.236,461,324.
TABLE OF CONTENTS FOR FORM 10-Q
PART I. | ||
Item 1. | ||
Condensed Consolidated Statements of Operations and Comprehensive Loss (unaudited) | 2 | |
3 | ||
Condensed Consolidated Statements of Stockholders’ Equity (unaudited) | 4 | |
5 | ||
Notes to Condensed Consolidated Financial Statements (unaudited) | 6 | |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 17 |
Item 3. | 22 | |
Item |
| |
|
| |
PART II. |
| |
Item 1. |
| |
Item 1A. |
| |
Item 2. |
| |
Item 3. |
| |
Item 4. |
| |
Item 5. |
| |
Item 6. |
| |
|
FORWARD-LOOKING STATEMENTS
In addition to historical financial information, this report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, that concern matters that involve risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements. These forward-looking statements are intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact contained in this report, including statements regarding future events, our future financial performance, our future business strategy and the plans and objectives of management for future operations, are forward-looking statements. We have attempted to identify forward-looking statements by terminology including “anticipates,” “believes,” “can,” “continue,” “could,” “estimates,” “expects,” “intends,” “in the event that,” “may,” “plans,” “potential,” “predicts,” “should” or “will” or the negative of these terms or other comparable terminology. Although we do not make forward-looking statements unless we believe we have a reasonable basis for doing so, we cannot guarantee their accuracy. Such forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements, including the impact of the coronavirus (COVID-19) pandemic on our operating results. Readers are urged to carefully review and consider the various disclosures made by us, which attempt to advise interested parties of the risks, uncertainties, and other factors that affect our business, operating results, financial condition and stock price, including without limitation the disclosures made under the captions “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Financial Statements,” “Notes to Condensed Consolidated Financial Statements “and “Risk Factors” in this report, as well as the disclosures made in the Asensus Surgical, Inc. Annual Report on Form 10-K for the year ended December 31, 20202021 (the “Fiscal 20202021 Form 10-K”), and other filings we make with the SEC. Furthermore, such forward-looking statements speak only as of the date of this report. We expressly disclaim any intent or obligation to update any forward-looking statements after the date hereof to conform such statements to actual results or to changes in our opinions or expectations except as required by applicable law. To the extent that our business is negatively impacted due to a variety of factors, including the impact of COVID-19 on our operating results, we may implement longer-term cost reduction efforts in order to mitigate such impact. References in this report to “we,” “our,” “us,” or the “Company” refer to Asensus Surgical, Inc., including its subsidiaries Asensus Surgical US, Inc., SafeStitch LLC, 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 Asensus Surgical Canada, Inc.
Any disclosure in this report regarding the receipt of CE Mark or Section 510(k) clearance for any of the Company’s products does not mean or infer any endorsement of the Company’s products by any government agency including, without limitation, the U.S. Food and Drug Administration, or FDA.
Item 1. Financial Statements
Condensed Consolidated Statements of Operations and Comprehensive Loss
(in thousands except per share amounts)
(Unaudited)
Three Months Ended | Three Months Ended | |||||||||||||||
March 31, | March 31, | |||||||||||||||
2021 | 2020 | 2022 | 2021 | |||||||||||||
Revenue: | ||||||||||||||||
Product | $ | 1,704 | $ | 242 | $ | 347 | $ | 1,363 | ||||||||
Service | 379 | 358 | 308 | 379 | ||||||||||||
Lease | 411 | 341 | ||||||||||||||
Total revenue | 2,083 | 600 | 1,066 | 2,083 | ||||||||||||
Cost of revenue: | ||||||||||||||||
Product | 2,380 | 913 | 375 | 1,675 | ||||||||||||
Service | 732 | 825 | 496 | 366 | ||||||||||||
Lease | 952 | 1,071 | ||||||||||||||
Total cost of revenue | 3,112 | 1,738 | 1,823 | 3,112 | ||||||||||||
Gross loss | (1,029 | ) | (1,138 | ) | (757 | ) | (1,029 | ) | ||||||||
Operating Expenses: | ||||||||||||||||
Research and development | 4,215 | 3,934 | 6,428 | 4,215 | ||||||||||||
Sales and marketing | 3,053 | 4,253 | 3,719 | 3,053 | ||||||||||||
General and administrative | 3,992 | 3,349 | 5,533 | 3,992 | ||||||||||||
Amortization of intangible assets | 2,867 | 2,564 | 2,670 | 2,867 | ||||||||||||
Change in fair value of contingent consideration | 257 | 1,056 | (154 | ) | 257 | |||||||||||
Restructuring and other charges | 0 | 858 | ||||||||||||||
Total Operating Expenses | 14,384 | 16,014 | 18,196 | 14,384 | ||||||||||||
Operating Loss | (15,413 | ) | (17,152 | ) | (18,953 | ) | (15,413 | ) | ||||||||
Other Expense, net | ||||||||||||||||
Change in fair value of warrant liabilities | (1,981 | ) | (155 | ) | 0 | (1,981 | ) | |||||||||
Interest income | 52 | 27 | 255 | 52 | ||||||||||||
Interest expense | (7 | ) | 0 | (200 | ) | (7 | ) | |||||||||
Other expense, net | (29 | ) | (15 | ) | (146 | ) | (29 | ) | ||||||||
Total Other Expense, net | (1,965 | ) | (143 | ) | (91 | ) | (1,965 | ) | ||||||||
Loss before income taxes | (17,378 | ) | (17,295 | ) | (19,044 | ) | (17,378 | ) | ||||||||
Income tax benefit | 38 | 697 | ||||||||||||||
Income tax (expense) benefit | (84 | ) | 38 | |||||||||||||
Net loss | (17,340 | ) | (16,598 | ) | (19,128 | ) | (17,340 | ) | ||||||||
Deemed dividend related to beneficial conversion feature of preferred stock | 0 | (412 | ) | |||||||||||||
Net loss attributable to common stockholders | (17,340 | ) | (17,010 | ) | ||||||||||||
Comprehensive loss: | ||||||||||||||||
Net loss | (17,340 | ) | (16,598 | ) | (19,128 | ) | (17,340 | ) | ||||||||
Foreign currency translation loss | (1,938 | ) | (872 | ) | (650 | ) | (1,938 | ) | ||||||||
Unrealized loss on available-for-sale investments | (552 | ) | 0 | |||||||||||||
Comprehensive loss | $ | (19,278 | ) | $ | (17,470 | ) | $ | (20,330 | ) | $ | (19,278 | ) | ||||
Net loss per common share attributable to common stockholders - basic and diluted | $ | (0.08 | ) | $ | (0.59 | ) | $ | (0.08 | ) | $ | (0.08 | ) | ||||
Weighted average number of shares used in computing net loss per common share - basic and diluted | $ | 204,992 | $ | 28,906 | 235,892 | 204,992 | ||||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
Condensed Consolidated Balance Sheets
(in thousands, except share amounts)
(Unaudited)
March 31, 2021 | December 31, 2020 | March 31, 2022 | December 31, 2021 | |||||||||||||
Assets | ||||||||||||||||
Current Assets: | ||||||||||||||||
Cash and cash equivalents | $ | 165,245 | $ | 16,363 | $ | 24,828 | $ | 18,129 | ||||||||
Short-term investments, available-for-sale | 78,913 | 80,262 | ||||||||||||||
Accounts receivable, net | 2,306 | 1,115 | 530 | 749 | ||||||||||||
Inventories | 11,181 | 10,034 | 9,141 | 8,634 | ||||||||||||
Prepaid expenses | 3,026 | 3,255 | ||||||||||||||
Employee retention tax credit receivable | 1,311 | 1,311 | ||||||||||||||
Other current assets | 3,593 | 6,501 | 935 | 957 | ||||||||||||
Total Current Assets | 182,325 | 34,013 | 118,684 | 113,297 | ||||||||||||
Restricted cash | 1,149 | 1,166 | 1,176 | 1,154 | ||||||||||||
Long-term investments, available-for-sale | 14,727 | 37,435 | ||||||||||||||
Inventories, net of current portion | 7,656 | 8,813 | 7,487 | 7,074 | ||||||||||||
Property and equipment, net | 9,179 | 10,342 | 10,427 | 10,971 | ||||||||||||
Intellectual property, net | 18,591 | 22,267 | 7,009 | 9,892 | ||||||||||||
Net deferred tax assets | 288 | 307 | 273 | 288 | ||||||||||||
Operating lease right-of-use assets, net | 4,234 | 1,164 | 5,096 | 5,348 | ||||||||||||
Other long term assets | 193 | 186 | ||||||||||||||
Other long-term assets | 1,681 | 1,014 | ||||||||||||||
Total Assets | $ | 223,615 | $ | 78,258 | $ | 166,560 | $ | 186,473 | ||||||||
Liabilities and Stockholders' Equity | ||||||||||||||||
Current Liabilities: | ||||||||||||||||
Accounts payable | $ | 2,327 | $ | 1,965 | $ | 3,521 | $ | 3,448 | ||||||||
Accrued expenses | 3,830 | 6,301 | ||||||||||||||
Deferred revenue - current portion | 892 | 789 | ||||||||||||||
Notes payable - current portion, net of debt discount | 2,459 | 1,228 | ||||||||||||||
Accrued employee compensation and benefits | 2,516 | 3,559 | ||||||||||||||
Accrued expenses and other current liabilities | 1,479 | 1,617 | ||||||||||||||
Operating lease liabilities - current portion | 604 | 683 | ||||||||||||||
Deferred revenue | 533 | 543 | ||||||||||||||
Total Current Liabilities | 9,508 | 10,283 | 8,653 | 9,850 | ||||||||||||
Long Term Liabilities: | ||||||||||||||||
Long-Term Liabilities: | ||||||||||||||||
Contingent consideration | 4,193 | 3,936 | 2,217 | 2,371 | ||||||||||||
Notes payable, less current portion | 356 | 1,587 | ||||||||||||||
Warrant liabilities | 0 | 255 | ||||||||||||||
Noncurrent operating lease liabilities | 3,640 | 628 | 4,865 | 5,006 | ||||||||||||
Total Liabilities | 17,697 | 16,689 | 15,735 | 17,227 | ||||||||||||
Commitments and Contingencies (Note 10) | ||||||||||||||||
Commitments and Contingencies (Note 13) | ||||||||||||||||
Stockholders' Equity: | ||||||||||||||||
Common stock $0.001 par value, 750,000,000 shares authorized at March 31, 2021 and December 31, 2020; 232,716,797 and 116,231,072 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively | 233 | 116 | ||||||||||||||
Preferred stock, $0.01 par value, 25,000,000 shares authorized, no shares issued and outstanding at March 31, 2021 and December 31, 2020 | 0 | 0 | ||||||||||||||
Common stock $0.001 par value, 750,000,000 shares authorized at March 31, 2022 and December 31, 2021; 236,415,239 and 235,218,552 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively | 236 | 235 | ||||||||||||||
Preferred stock, $0.01 par value, 25,000,000 shares authorized, no shares issued and outstanding at March 31, 2022 and December 31, 2021 | 0 | 0 | ||||||||||||||
Additional paid-in capital | 944,907 | 781,397 | 956,557 | 954,649 | ||||||||||||
Accumulated deficit | (740,252 | ) | (722,912 | ) | (804,502 | ) | (785,374 | ) | ||||||||
Accumulated other comprehensive income | 1,030 | 2,968 | ||||||||||||||
Accumulated other comprehensive loss | (1,466 | ) | (264 | ) | ||||||||||||
Total Stockholders' Equity | 205,918 | 61,569 | 150,825 | 169,246 | ||||||||||||
Total Liabilities and Stockholders' Equity | $ | 223,615 | $ | 78,258 | $ | 166,560 | $ | 186,473 | ||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
Condensed Consolidated Statements of Changes in Stockholders’ Equity
(in thousands)
(Unaudited)
Common Stock | Preferred Stock | Treasury Stock | Common Stock | Treasury Stock | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Additional Paid- in Capital | Accumulated Deficit | Accumulated Other Comprehensive Income (Loss) | Total Stockholders' Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance, December 31, 2021 | 235,219 | $ | 235 | 0 | $ | 0 | $ | 954,649 | $ | (785,374 | ) | $ | (264 | ) | $ | 169,246 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation | - | 0 | - | - | 2,245 | 0 | 0 | 2,245 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Exercise of stock options | 30 | 0 | 0 | 0 | 12 | 0 | 0 | 12 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Award of restricted stock units | 1,166 | 1 | 0 | 0 | 0 | 0 | 0 | 1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Return of common stock to pay withholding taxes on restricted stock | 0 | 0 | 436 | 0 | (349 | ) | 0 | 0 | (349 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cancellation of treasury stock | 0 | 0 | (436 | ) | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive loss | - | 0 | - | 0 | 0 | 0 | (1,202 | ) | (1,202 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss | - | 0 | - | 0 | - | (19,128 | ) | 0 | (19,128 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance, March 31, 2022 | 236,415 | 236 | 0 | 0 | 956,557 | (804,502 | ) | (1,466 | ) | $ | 150,825 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive Income (Loss) | Total Stockholders' Equity | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance, December 31, 2020 | 116,231 | $ | 116 | 0 | $ | 0 | 0 | $ | 0 | $ | 781,397 | $ | (722,912 | ) | $ | 2,968 | $ | 61,569 | 116,231 | $ | 116 | 0 | $ | 0 | $ | 781,397 | $ | (722,912 | ) | $ | 2,968 | $ | 61,569 | |||||||||||||||||||||||||||||||||||||||
Stock-based compensation | - | 0 | - | 0 | - | 0 | 1,786 | 0 | 0 | 1,786 | - | 0 | - | - | 1,786 | 0 | 0 | 1,786 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock, net of issuance costs | 70,666 | 71 | 0 | 0 | 0 | 0 | 129,251 | 0 | 0 | 129,322 | 70,666 | 71 | 0 | 0 | 129,251 | 0 | 0 | 129,322 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Exercise of stock options and warrants | 45,114 | 45 | 0 | 0 | 0 | 0 | 32,687 | 0 | 0 | 32,732 | 45,114 | 45 | 0 | 0 | 32,687 | 0 | 0 | 32,732 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Award of restricted stock units | 706 | 1 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 1 | 706 | 1 | 0 | 0 | 0 | 0 | 0 | 1 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
Return of common stock to pay withholding taxes on restricted stock | 0 | 0 | 0 | 0 | 67 | 0 | (214 | ) | 0 | 0 | (214 | ) | 0 | 0 | 67 | 0 | (214 | ) | 0 | 0 | (214 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Cancellation of treasury stock | 0 | 0 | 0 | 0 | (67 | ) | 0 | 0 | 0 | 0 | 0 | 0 | 0 | (67 | ) | 0 | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive loss | - | 0 | - | 0 | - | 0 | 0 | 0 | (1,938 | ) | (1,938 | ) | - | 0 | - | - | - | 0 | (1,938 | ) | (1,938 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss | - | 0 | - | 0 | - | 0 | 0 | (17,340 | ) | 0 | (17,340 | ) | - | 0 | - | - | - | (17,340 | ) | 0 | (17,340 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||
Balance, March 31, 2021 | 232,717 | 233 | 0 | 0 | 0 | 0 | 944,907 | (740,252 | ) | 1,030 | $ | 205,918 | 232,717 | 233 | 0 | 0 | 944,907 | (740,252 | ) | 1,030 | $ | 205,918 | ||||||||||||||||||||||||||||||||||||||||||||||||||
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 | 1,923 | 0 | 0 | 1,923 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock, preferred stock and warrants under 2020 financing, net of issuance costs | 14,122 | 14 | 7,937 | 79 | 0 | 0 | 13,432 | 0 | 0 | 13,525 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock, net of issuance costs | 7,030 | 7 | 0 | 0 | 0 | 0 | 11,205 | 0 | 0 | 11,212 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Conversion of preferred stock to common stock | 3,053 | 3 | (3,053 | ) | (30 | ) | 0 | 0 | 27 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Exchange of shares for Series B Warrants | 2,041 | 2 | 0 | 0 | 0 | 0 | 2,468 | 0 | 0 | 2,470 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Award of restricted stock units | 141 | 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 | (33 | ) | 0 | 0 | (33 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cancellation of treasury stock | 0 | 0 | 0 | 0 | (28 | ) | 0 | 0 | 0 | 0 | 0 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive loss | - | 0 | - | 0 | - | 0 | 0 | 0 | (872 | ) | (872 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net loss | - | 0 | - | 0 | - | 0 | 0 | (16,598 | ) | 0 | (16,598 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance, March 31, 2020 | 47,078 | 47 | 4,884 | 49 | 0 | 0 | 749,506 | (680,198 | ) | (2,242 | ) | $ | 67,162 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
Three Months Ended March 31, | Three Months Ended March 31, | |||||||||||||||
2021 | 2020 | 2022 | 2021 | |||||||||||||
Operating Activities: | ||||||||||||||||
Net loss | $ | (17,340 | ) | $ | (16,598 | ) | $ | (19,128 | ) | $ | (17,340 | ) | ||||
Adjustments to reconcile net loss to net cash and cash equivalents used in operating activities: | ||||||||||||||||
Depreciation | 802 | 570 | 869 | 802 | ||||||||||||
Amortization of intangible assets | 2,867 | 2,564 | 2,670 | 2,867 | ||||||||||||
Amortization of discounts and premiums on investments, net | 215 | 0 | ||||||||||||||
Stock-based compensation | 1,786 | 1,923 | 2,245 | 1,786 | ||||||||||||
Deferred tax benefit | (38 | ) | (697 | ) | ||||||||||||
Write down of inventory | 122 | 0 | ||||||||||||||
Deferred tax expense (benefit) | 84 | (38 | ) | |||||||||||||
Bad debt expense | 177 | 0 | ||||||||||||||
Change in inventory reserves | (180 | ) | 122 | |||||||||||||
Change in fair value of warrant liabilities | 1,981 | 155 | 0 | 1,981 | ||||||||||||
Change in fair value of contingent consideration | 257 | 1,056 | (154 | ) | 257 | |||||||||||
Changes in operating assets and liabilities: | ||||||||||||||||
Accounts receivable | (1,608 | ) | (340 | ) | 25 | (1,608 | ) | |||||||||
Inventories | (162 | ) | (1,063 | ) | (1,440 | ) | (162 | ) | ||||||||
Other current and long term assets | (21 | ) | (76 | ) | ||||||||||||
Operating lease right-of-use assets | 197 | (3,071 | ) | |||||||||||||
Prepaid expenses | 201 | 295 | ||||||||||||||
Other current and long-term assets | (487 | ) | 2,755 | |||||||||||||
Accounts payable | 242 | 509 | 74 | 242 | ||||||||||||
Accrued expenses | (2,290 | ) | (433 | ) | (1,150 | ) | (2,312 | ) | ||||||||
Deferred revenue | 128 | 83 | (1 | ) | 128 | |||||||||||
Noncurrent operating lease liabilities | 3,037 | (130 | ) | |||||||||||||
Operating lease liabilities | (160 | ) | 3,059 | |||||||||||||
Net cash and cash equivalents used in operating activities | (10,237 | ) | (12,477 | ) | (15,943 | ) | (10,237 | ) | ||||||||
Investing Activities: | ||||||||||||||||
Purchase of available-for-sale investments | (5,967 | ) | 0 | |||||||||||||
Proceeds from maturities of available-for-sale investments | 29,258 | 0 | ||||||||||||||
Purchase of property and equipment | (395 | ) | (2 | ) | (246 | ) | (395 | ) | ||||||||
Net cash and cash equivalents used in investing activities | (395 | ) | (2 | ) | ||||||||||||
Net cash and cash equivalents provided by (used in) investing activities | 23,045 | (395 | ) | |||||||||||||
Financing Activities: | ||||||||||||||||
Proceeds from issuance of common stock, preferred stock and warrants under 2020 financing, net of issuance costs | 0 | 13,525 | ||||||||||||||
Proceeds from issuance of common stock, net of issuance costs | 129,322 | 11,212 | 0 | 129,322 | ||||||||||||
Taxes paid related to net share settlement of vesting of restricted stock units | (214 | ) | (33 | ) | (348 | ) | (214 | ) | ||||||||
Proceeds from exercise of stock options and warrants | 30,497 | 0 | 12 | 30,497 | ||||||||||||
Net cash and cash equivalents provided by financing activities | 159,605 | 24,704 | ||||||||||||||
Net cash and cash equivalents (used in) provided by financing activities | (336 | ) | 159,605 | |||||||||||||
Effect of exchange rate changes on cash and cash equivalents | (108 | ) | (51 | ) | (45 | ) | (108 | ) | ||||||||
Net increase in cash, cash equivalents and restricted cash | 148,865 | 12,174 | 6,721 | 148,865 | ||||||||||||
Cash, cash equivalents and restricted cash, beginning of period | 17,529 | 10,567 | 19,283 | 17,529 | ||||||||||||
Cash, cash equivalents and restricted cash, end of period | $ | 166,394 | $ | 22,741 | $ | 26,004 | $ | 166,394 | ||||||||
Supplemental Disclosure for Cash Flow Information | ||||||||||||||||
Cash paid for leases | $ | 300 | $ | 365 | ||||||||||||
Cash paid for taxes | $ | 29 | $ | 24 | ||||||||||||
Supplemental Schedule of Non-cash Investing and Financing Activities: | ||||||||||||||||
Transfer of inventories to property and equipment | $ | 0 | $ | 1,958 | $ | 160 | $ | 0 | ||||||||
Acquisition of property and equipment in accounts payable | $ | 191 | $ | 0 | $ | 0 | $ | 191 | ||||||||
Reclass of warrant liability to common stock and additional paid-in-capital | $ | 2,236 | - | $ | 0 | $ | 2,236 | |||||||||
| Lease liabilities arising from obtaining right-of-use assets | $ | 3,427 | $ | 0 | $ | 0 | $ | 3,427 | ||||||||
Exchange of common stock for Series B Warrants | $ | 0 | $ | 2,470 | ||||||||||||
Transfer of in-process research and development to intellectual property | $ | 0 | $ | 2,425 | ||||||||||||
Conversion of preferred stock to common stock | $ | 0 | $ | 30 | ||||||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
Notes to Condensed Consolidated Financial Statements (Unaudited)
1. |
|
In February 2021, TransEnterix, Inc. changed the name of the company to Asensus Surgical, Inc. Asensus Surgical,(formerly known as TransEnterix, Inc.) (the "Company") is a medical device company that is digitizing the interface between the surgeon and the patient to pioneer a new era of Performance-Guided Surgery™ by unlocking clinical intelligence for surgeons to enable consistently superior outcomes and a new standard of surgery. The Company is focused on the market development for and commercialization of the 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 33mm mm microlaparoscopic instruments, 5mm articulating instruments, eye-sensing camera control and 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.
|
|
|
|
|
|
|
|
In 2020, the Company obtained regulatory clearance for the Senhance ultrasonic system in Taiwan and Japan. On March 13, 2020 the Company announced that it received FDA clearance for the Intelligent Surgical Unit™ (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 September 23, 2020, the Company announced the first surgical procedures successfully completed using the ISU. On January 19, 2021, the Company announced that it received CE Mark for the ISU. Finally, in the EU, the Company expanded its claims for the Senhance System to include pediatric patients, allowing accessibility to more surgeons and patients, as well as expanding its potential market to include pediatric hospitals in Europe. The Company anticipates the robotic precision provided by the Senhance System, coupled with the already available 3 mm instruments, will prove to be an effective tool in surgery with smaller patients.
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. The Company believes MST’s image analytics technology will accelerate and drive meaningful Senhance System developments and allow the Company to expand the Senhance System to add augmented, intelligent vision capability. The Company sold the AutoLap assets in October 2019, while retaining the core technology.
2. | Summary of Significant Accounting Policies |
Basis of Presentation
The accompanying unaudited interim condensed 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. The Company has prepared the accompanying unaudited interim condensed consolidated financial statementsAll inter-company accounts and transactions have been eliminated in accordance with the instructions to Form 10-Q and the standards of accounting measurement set forth in the Interim Reporting Topic of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”). Consequently, the Company has not necessarily included in this Form 10-Q all information and footnotes required for audited financial statements. In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements in this Form 10-Q contain all adjustments, consisting only of normal recurring adjustments, except as otherwise indicated, necessary for a fair statement of its financial position, results of operations, and cash flows of the Company for all periods presented.consolidation. The results reported in these unaudited interim condensed consolidated financial statements should not be regarded as necessarily indicative of results that may be expected for any subsequent period or for the entire year. These unaudited condensed consolidated financial statements and notes thereto should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto included in the Fiscal 20202021 Form 10-K. Certain information and footnote disclosures normally included in the annual consolidated financial statements prepared in accordance with generally accepted accounting principles in the U.S. (“U.S. GAAP”)GAAP have been condensed or omitted in the accompanying interim condensed consolidated financial statements. The year-endIn the opinion of the Company’s management, the accompanying unaudited condensed consolidated balance sheet data was derived from audited financial statements but does not includecontain all disclosures required by U.S. GAAP.
Liquidity
The Company had an accumulated deficitnormal recurring adjustments, except as otherwise indicated, necessary for a fair statement of $740.3 million and working capitalits financial position, results of $172.8 million as of March 31, 2021. The Company has not established sufficient sales revenues to cover its operating costs and believes 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 to implement its market development efforts, which will have a negative effect on its financial condition.
In the first quartercash flows of2021, the Company has raised additional capital through equity 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, and $27.3 million in the 2020 ATM Offering. Also, Series B, C and D warrants have been exercised in the three months ended March 31, 2021 for aggregate proceeds to the Company of $30.5 million. As of March 31, 2021, the Company had cash and cash equivalents, excluding restricted cash, of approximately $165.2 million.
While the Company believes that its existing cash and cash equivalents as of March 31, 2021 will be sufficient to sustain operations for at least the next 12 months from the issuance of these 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 additional 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. However, management cannot provide any assurance that the Company will be successful in accomplishing any or all of its plans.periods presented
Principles of Consolidation
The accompanying condensed consolidated financial statements include the accounts of the Company and its direct and indirect 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 Asensus Surgical Canada, Inc. All inter-company accounts and transactions have been eliminated in consolidation.
Risk and Uncertainties
The Company is subject to risks 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; the historical lack of profitability; the Company’s ability to raise additional capital; the success of its market development efforts, 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 United Kingdom, 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;company; competition in the market for robotic surgical devices; and its ability to identify and pursue development of additional products.
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 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 impairment considerations for long- term intangible assets, 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.
The COVID-19 pandemic has caused significant social and economic restrictions that have been imposed in the United States and abroad, which has resulted in significant volatility in the global economy and led to reduced economic activity. In the preparation of these financial statements and related disclosures, the Company has assessed the impact that COVID-19 has had on its estimates, assumptions, forecasts, and accounting policies. The Company continues to monitor closely the COVID-19 pandemic impact on its estimates, assumptions and forecasts used in the preparation of its financial statements. As the COVID-19 situation is unprecedented and ever evolving, future events and effects related to COVID-19 cannot be determined with precision, and actual results could significantly differ from estimates or forecasts.
Significant Accounting Policies
There have been no new or material changes to the significant accounting policies discussed in the Company’s audited financial statements and the notes thereto included in the Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
Principles of Consolidation and Foreign Currency Considerations
The accompanying Condensed Consolidated Financial Statements include the accounts of the Company and its direct and indirect wholly owned subsidiaries, Asensus Surgical US, Inc., SafeStitch LLC, 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 Asensus Surgical Canada, Inc. All inter-company accounts and transactionsReclassifications
Certain amounts reported previously have been eliminated in consolidation.
The functional currencyreclassified to conform to current year presentation, with no effect on stockholders’ equity or net loss as previously reported. These reclassifications relate to revenue and cost 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 effectrevenue for a subsidiary using a functional currency other than the U.S. dollar isleases which historically was included in accumulated other comprehensive income or loss as a separate componentproduct and service revenue and corresponding cost of stockholders’ equity.
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 condensed consolidated statements of operations and comprehensive loss. The net gains and losses included in net loss inrevenue on the condensed consolidated statements of operations and comprehensive loss for the three months ended March 31, 2021 and 2020 were not significant.
Cash and Cash Equivalents and Restricted Cash
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 March 31, 2021 and December 31,2020 includes $1.1 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.
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 these 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 provided reserves for potential credit losses and recorded no bad debt charges during the three months ended March 31, 2021 and 2020. The Company had two customers who constituted 74% of the Company’s net accounts receivable as of March 31, 2021.The Company had seven customers who constituted 68% of the Company’s net accounts receivable at December 31,2020. The Company had one customer who accounted for 57% of revenue in the three months ended March 31, 2021 and eleven customers who accounted for 80% of revenue in the three months ended March 31, 2020.
Accounts ReceivableImpact of Recently Issued Accounting Standards
Accounts receivable are recordedIn June 2016, the Financial Accounting Standards Board (“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 net realizable value, which includes an allowance for estimated uncollectible accounts.each reporting date. 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 millionCompany adopted ASU 2016-13 as of March 31, 2021January 1, 2022, andon a modified retrospective basis. The cumulative-effect adjustment related to the adoption was December 31, 2020, notrespectively. material.
Inventories
Inventories are stated at In August 2020, the lower of cost (determinedFASB issued ASU 2020-06,Debt – Debt with Conversion and Other Options(Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40) guidance on the accounting for convertible debt instruments and contracts in an entity’s own equity. The guidance simplifies the accounting for convertible instruments by reducing the various accounting models that can require the instrument to be separated into a first-in, first-out basis)debt component and equity component or net realizable value. Inventory costs include direct materials, direct labor, and normal manufacturing overhead.derivative component. The Company records reserves, when necessary, to reduce the carrying valueadopted ASU 2020-06 as of inventory to its net realizable value. Management considers forecast demand in relationJanuary 1, 2022. The adoption did not have a material impact 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 condensed 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 previous business acquisitions. 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.financial statements.
The Company periodically evaluates intellectual property for impairment whenever events or changes in circumstances indicate that the carrying amount may has evaluated all other issued and ASUs not be recoverable. To determineyet adopted and believes the recoverability, the Company evaluates the probability that future estimated undiscounted net cash flowsadoption of these standards 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 three months ended March 31, 2021 and 2020.
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, which are recorded at cost. Depreciation is recorded using the straight-line method over the estimated useful lives of the assets as follows:
Operating lease assets – Senhance System leasing (in years) | 5 | |||||
Machinery, manufacturing and demonstration equipment (in years) | 3 | - | 5 | |||
Computer equipment (in years) | 3 | |||||
Furniture (in years) | 5 | |||||
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.
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, 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. The Company did not identify any impairment during the three months ended March 31, 2021 and 2020.
Contingent Consideration
Contingent consideration is recorded ashave 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 thematerial impact on its condensed consolidated statements of operations and comprehensive loss.loss, balance sheets, or statements of cash flows.
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, as amended in 2016, as of March 31, 2021 the Company has accrued $4.2 million of estimated fair value of remaining contingent consideration 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.
Warrant Liabilities
The Company’s Series B Warrants (see Note 10) were measured at fair value using a simulation model which took 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 3). The warrant liability was revalued at each reporting period and changes in fair value were recognized in the condensed 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. All outstanding Series B Warrants were exercised in the first quarter 2021.
3. | Revenue Recognition
The following table presents revenue disaggregated by type and geography:
7
Remaining Performance Obligations 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
Contract Assets and Liabilities The Company invoices its customers based on the billing schedules in its 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.
Senhance System Leasing The Company enters into operating 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
Trade Accounts Receivable
The
accounts receivable, other current assets, accounts payable, and accrued expenses as of March 21, 2022, and December 31, 2021, approximate their fair values due to the short-term nature of these items.
The Company’s financial liabilities consisted of contingent consideration payable to Sofar, S.p.A., the seller, related to the
The following table presents quantitative information about the inputs and valuation methodologies used for the Company’s fair value measurements for contingent consideration utilizing a Monte-Carlo simulation as of March
9 The following table summarizes the change in fair value, as determined by Level 3 inputs for the
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 loss are as follows:
The following table summarizes the contractual maturities of the Company’s available-for-sale investments:
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 or losses for the three months ended March 31, 2022, and 2021, respectively.
The components of inventories are as follows:
The components of gross intellectual property, accumulated amortization, and net intellectual property
The weighted average remaining useful life of the developed technology and technology and patents purchased was 11
Lessee Information The Company determines if an arrangement is a lease or service contract at inception. Where an arrangement is a lease, the Company determines if it is an operating lease or a finance lease. Subsequently, if the arrangement is modified, the Company reevaluates the classification. The Company has entered into operating leases for corporate office buildings, vehicles, and machinery and equipment. Some of the lease agreements have renewal options, tenant improvement allowances, rent escalation clauses, and assignment and subletting clauses. While the operating leases range from one year to ten years, some include options to extend the lease generally between one year and six years, and some include options to terminate the leases within one year. Components of operating lease expense are primarily recorded in general and administrative on the condensed consolidated statements of operations were as follows:
Supplemental balance sheet information related to operating leases was as follows:
Maturities of operating lease obligations as of March 31, 2022 were as follows (in thousands):
Income taxes have been accounted for using the asset and liability method in accordance with ASC 740,
The Company incurred losses for the three
12
At March 31,
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 GILTI as a period expense in the year the tax is incurred. The Company does not expect a GILTI inclusion for
Stock Options The following table summarizes the Company’s stock option activity, including grants to non-employees, for the three months ended March 31,2022:
The following table summarizes information about stock options outstanding at March 31,2022:
Restricted Stock Units The following is a summary of the RSU activity, including performance restricted stock units, for the three months ended March 31, 2022:
Performance Restricted Stock Units In 2022 and 2021, the Company granted performance-based restricted stock units with vesting 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 2022 and 2021 awards were based on achieving designated corporate goals. Share-based Compensation Expense The following table summarizes non-cash share-based compensation expense by award type for the three months ended March 31, 2022, and 2021:
As of March 31,2022, the Company had future employee stock-based compensation expense of approximately $4.4 million related to unvested stock options, which is expected to be recognized over an estimated weighted-average period of 1.9 years. As of March 31,2022, the unrecognized stock-based compensation expense related to unvested RSUs was approximately $6.7 million, which is expected to be recognized over a weighted average period of approximately 1.9 years. The fair value of options granted were estimated using the Black-Scholes-Merton option pricing model based on the assumptions in the table below:
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,
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 net proceeds of $28.6 million. Sales during the three months ended March 31, 2021, under the 2020 ATM Offering are as follows (in thousands except for share and per share amounts):
14 2021 Exercise of Warrants.During the three months ended March 31, 2021, On March 18, 2022, the Company entered a Controlled Equity OfferingSales Agreement (the “2022 Sales Agreement”), with Cantor Fitzgerald & Co., and Oppenheimer & Co. Inc. The Company commenced an at-the-market offering (the “2022 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. NaN sales of common stock were made under the 2022 ATM Offering during the three months ended March 31, 2022.
Basic net loss per common share is computed by dividing net loss attributable to common stockholders by the weighted average number of 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,
Potential common shares not included in calculating diluted net loss per share are as follows:
License and Supply Agreements As part of the Company’s acquisition of the Senhance System in 2015, the Company assumed certain license and supply agreements.
The Company operates in 1 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. The following table presents consolidated assets and long lived assets by geographic area, which includes property and equipment, intellectual property, and operating lease assets:
The Company recognizes sales by geographic area based on the country in which the customer is based. For the three months ended March 31, 2022 and 2021, 24% and 12%, respectively, of net revenue were generated in the United States; while 48% and 21%, respectively, were generated in Europe; and 28% and 67% were generated in Asia. 16
The following discussion of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and the related notes to our condensed consolidated financial statements included in this report. The following discussion contains forward-looking statements. See cautionary note regarding “Forward-Looking Statements” at the beginning of this report.
Overview Asensus Surgical is a medical device company that is digitizing the interface between the surgeon and the patient to pioneer a new era of Performance-Guided
The Senhance System is available for sale in Europe, the United States, Japan, Taiwan, Russia (to the extent lawful), and select other countries.
We also enter into lease arrangements with certain qualified customers. For some lease arrangements, the customers are provided with the right to purchase the leased Senhance System during or at the end of the lease term ("Lease Buyout").
We received FDA clearance in March 2020 for our
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 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 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 March 31, We operate in one business segment.
Recent Financing Transactions
On
Results of Operations - Comparison of Three Months Ended March 31,
Revenue In the first quarter of
Product revenue for the three months ended March 31,
Service revenue for the three months ended March
Lease revenue for the three months ended March 31, 2022 increased to $0.4 million compared to $0.3 million for the three months ended March 31, 2021. The $0.1 million increase was the result of an increase in the number of leased Senhance Systems in the current period. Cost of Revenue Cost of revenue consists of contract manufacturing, materials, labor, and manufacturing overhead incurred internally to produce the products. Shipping and handling costs incurred by the Company are included in cost of revenue. We expense all inventory obsolescence provisions 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
Product cost for the three months ended March 31,
Service cost for the three months ended March 31,
Lease cost for the three months ended March 31, 2022 decreased to $1.0 million as compared to $1.1 million for the three months ended March 31, 2021. The $0.1 million decrease primarily relates to a decrease in product cost related to leases. 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 continue to increase moderately 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 three months ended March 31,
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.
Sales and marketing expenses for the three months ended March 31,
General and Administrative General and administrative expenses consist of personnel costs related to the executive, finance, legal and human resource functions, as well as professional service fees, legal fees, accounting fees, insurance costs, and general corporate expenses.
General and administrative expenses for the three months ended March 31,
Amortization of Intangible Assets Amortization of intangible assets for the three months ended March 31,
Change in Fair Value of Contingent Consideration The change in fair value of contingent consideration in connection with the Senhance Acquisition was a $0.2 million decrease for the three months ended March 31, 2022 compared to a $0.3 million increase for the three months ended March 31, Other Expense Other Expense for the three months ended March 31,
Income Tax (Expense) Benefit The Company recognized
Liquidity and Capital Resources The Company had an accumulated deficit of
The Company believes the COVID-19 pandemic will continue to negatively impact its operations and ability to implement its market development efforts, which will have a negative effect on its financial condition.
While the Company believes that its existing cash,
The Company is subject to risks similar to other similarly sized companies in the medical device industry. These risks include, without limitation:
Sources of Liquidity Our principal sources of cash to date have been proceeds from public offerings of common stock, incurrence of debt, the sale of equity securities held as investments and asset sales.
Consolidated Cash Flow Data
Operating Activities For the three months ended March 31, 2022, cash used in operating activities of $15.9 million consisted of a net loss of $19.1 million, changes in operating assets and liabilities of $2.7 million, offset by non-cash items of $5.9 million. The non-cash items primarily consisted of $2.7 million of amortization of intangible assets, $2.2 million of stock-based compensation expense, $0.9 million of depreciation, $0.2 million of net amortization of discounts and premiums on investments, $0.2 million of bad debt expense, $0.1 million deferred tax expense, offset by $0.2 million change in inventory reserves and $0.2 million of change in fair value of contingent consideration. The decrease in cash from changes in operating assets and liabilities primarily relates to a $1.4 million increase in inventory net of transfers to property and equipment, $1.1 million decrease in accrued expenses, $0.5 million increase in other current and long-term assets, $0.2 million decrease in operating lease liabilities, offset by a $0.2 million decrease in prepaid expenses, $0.2 million decrease in operating lease right-of-use assets, and a $0.1 million increase in accounts payable. For the three months ended March 31, 2021, cash used in operating activities of $10.2 million consisted of a net loss of $17.3 million and cash used for working capital of $0.7 million, offset by non-cash items of $7.8 million. The non-cash items primarily consisted of $1.8 million of stock-based compensation expense, $2.9 million of amortization of intangible assets, $2.0 million change in fair value of warrant liabilities, $0.8 million of depreciation, $0.3 million change in fair value of contingent
Investing Activities For the three months ended March 31, 2022, net cash provided by investing activities was $23.0 million. This amount consists of $29.2 million of proceeds from maturities of available-for-sale investments, offset by $6.0 million of purchases of available-for-sale investments and $0.2 million purchases of property and equipment. For the three months ended March 31, 2021, net cash used in investing activities was $0.4
Financing Activities For the three months ended March 31, 2022, net cash used in financing activities was $0.3 million, related to taxes paid for the net share settlement of vesting of restricted stock units. For the three months ended March 31, 2021, net cash provided by financing activities was $159.6 million. The net change primarily related to $129.3 million in net proceeds from the issuance of common stock
Operating Capital and Capital Expenditure Requirements
We intend to spend substantial amounts on research and development activities, including product development, regulatory and compliance, clinical Cash and cash equivalents held by our foreign subsidiaries totaled
Off-Balance Sheet Arrangements
As of March 31,
Critical Accounting
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 financial statements and notes thereto appearing in this Form 10-Q and in the Fiscal
We are
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 March 31,
Changes in Internal Controls Over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the quarter ended March 31,
None.
Reference is made to the Risk Factors included in our Fiscal
We
None.
Not applicable.
None.
* Filed
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.
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||