Note 10 - Commitments and Contingencies

3 Months Ended

Mar. 31, 2021

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

10. Commitments and Contingencies

Contingent Consideration

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.

Legal Proceedings 

No liability or related charge was recorded to earnings in the Company’s condensed consolidated financial statements for legal contingencies for the three months ended March 31, 2021 and 2020.

Operating Leases

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 operating lease right-of-use assets, net on the condensed 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 noncurrent operating lease liabilities on the condensed 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 7.9% and 8.2% as of March 31, 2021 and December 31, 2020, respectively. 

As of March 31, 2021, the right-of-use asset totaled $4.2 million and the lease liability totaled $4.4 million, of which $0.8 million is classified as current and $3.6 million is classified as non-current.  Operating lease costs for the three months ended March 31, 2021 and 2020 totaled $0.4 million and $0.4 million and are included within operating expenses in the condensed consolidated statement of operations and comprehensive loss. The weighted average remaining lease term for operating leases as of March 31, 2021 was 9.0 years. Total cash paid for operating leases during the three months ended March 31, 2021 and March 31, 2020 was $0.4 million and $0.4 million, respectively, and is included within cash flows from operating activities within the condensed consolidated statement of cash flows.

The following table presents the minimum lease payments as of March 31, 2021 (in thousands):

Fiscal Year
Remainder of 2021	$	677
2022		839
2023		576
2024		477
2025		484
Thereafter		2,931
Total minimum lease payments	$	5,984
Less: Amount of lease payments representing interest		(1,605	)
Present value of future minimum lease payments	$	4,379

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. Commitments under these agreements amount to approximately $3.3 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.