Note 21 - Commitments and Contingencies

12 Months Ended

Dec. 31, 2020

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

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.  The fair value of the contingent consideration was $3.9 million and $1.1 million as of December 31, 2020 and 2019, respectively.

Legal Proceedings 

No liability or related charge was recorded to earnings in the Company’s consolidated financial statements for legal contingencies for the years ended December 31, 2020 and 2019.

Operating Leases

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. 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 or cash flows as a result of the adoption of ASU 2016-02. 

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 was 8.2% and 7.8% as of December 31, 2020 and December 31, 2019, respectively. 

As of December 31, 2020, the right-of-use asset totaled $1.2 million and is included within other long-term assets on the consolidated balance sheet and the lease liability totaled $1.3 million, of which $0.7 million is classified as current within accrued expenses and $0.6 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, 2020 totaled $1.5 million and are included within operating expenses in the consolidated statement of operations and comprehensive loss. The weighted average remaining lease term for operating leases as of December 31, 2020 was 1.8 years. Total cash paid for operating leases during the year ended December 31, 2020 was $1.5 million and is included within cash flows from operating activities within the consolidated statement of cash flows.

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. 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 statement of cash flows.

The following table presents the minimum lease payments as of December 31, 2020 (in thousands):

Fiscal Year
2021	$	883
2022		404
2023		120
2024		5
2025		—
Thereafter		—
Total minimum lease payments	$	1,412
Less: Amount of lease payments representing interest		(151	)
Present value of future minimum lease payments	$	1,261

The following table presents the minimum lease payments as of December 31, 2019 (in thousands):

Fiscal Year
2020	$	1,372
2021		716
2022		454
2023		207
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

On November 2, 2009, Asensus Surgical US, Inc. (“Asensus Surgical US”) 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. The Company’s current North Carolina lease was extended for three months and expires on March 31, 2021.

In July 2020, Asensus Surgical US, entered into a lease agreement for new office, lab and warehouse space in Durham, North Carolina. The lease is expected to commence in the first quarter of 2021, has an initial lease term of 125 months following commencement, and includes tenant options to extend the lease term for up to two additional five-year periods. Monthly base rent payments begin five months after the commencement date and are subject to annual escalations. Total base rent payments over the initial 125-month term shall be approximately $5.0 million. A proportionate share of building operating costs and ad valorem property taxes are also due monthly. In conjunction with entering into the lease, Asensus Surgical US obtained a standby letter of credit issued by Silicon Valley Bank for approximately $0.5 million for the benefit of the landlord and has been required to increase restricted cash held with Silicon Valley Bank by $0.5 million. The Company has executed a guaranty for the payment and performance of obligations incurred under the lease.

On May 12, 2016, Asensus Surgical Italia S.r.l. 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, Asensus Surgical Israel Ltd 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 K.K. entered into an operating lease for office space for a period of five years commencing in April 2018. On July 1, 2018, Asensus Surgical 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 $1.5 million and $1.4 million for the years ended December 31, 2020 and 2019, 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 $3.5 million in 2021, $0.5 million in 2022, $0.5 million in 2023, $0.5 million in 2024, and $0.5 million thereafter until termination in 2027. Payments under these arrangements generally become due and payable only upon the achievement of certain milestones. For instances in which the achievement of these milestones is neither probable nor reasonably estimable, such contingencies are not included in the estimated amount.

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.